SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended September 30, 2003
Commission File No. 0-27175
ADVANCE TECHNOLOGIES, INC.
______________________________________________________
(Exact name of registrant as specified in its charter)
Nevada 95-4755369
_______________________________ ____________________________________
(State or other jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or organization)
716 Yarmouth Road # 215
Palos Verdes Estates, CA 90275
________________________________________
(Address of principal executive offices)
Registrant's telephone number, including area code: (310) 265-7776
Securities Registered Pursuant to Section 12(b) of the Act:
Title of each class
Common Name of Each exchange on which registered
National Association of Securities Dealers Securities
registered pursuant to Section 12(g) of the Act:
_________________________________
Indicate by check mark whether the
Registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the
Registrant was required to file such reports), and (2)
has been subject to such filing requirements for the
past 90 days.
Yes {X} No { }
Indicate by check mark if disclosure of
delinquent filers pursuant to item 405 of Regulation
S-K is not contained herein, and will not be
contained, to the best of registrants's knowledge, in
definitive proxy or information statements
incorporated by reference in part III of this Form
10-KSB or any amendment to this Form 10-KSB. {X}
Issuer's revenues for its most recent fiscal year were $0.00
The aggregate market value of voting stock 38,748,857 held by
non-affiliates of the Registrant as of September 30,
2003 was approximately $ 1,549,954.20
On October 1, 2003, approximately 22,766,517
Shares of the Registrant's Common Stock, $0.001 par
value, were outstanding, 910,660.68.
Documents Incorporated by Reference
Exhibit A & Exhibit B
ADVANCE TECHNOLOGIES, INC.
TABLE OF CONTENTS
Page
PART I
Item 1. BUSINESS......................................................... 3
Item 2. PROPERTIES....................................................... 4
Item 3. LEGAL PROCEEDINGS................................................ 5
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.............. 5
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS............................................ 5
Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS............................ 5
Item 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA...................... 6
Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE............................ 6
PART III
Item 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT................ 6
Item 10. EXECUTIVE COMPENSATION........................................... 7
Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT................................................. 7
Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................... 7
PART IV
Item 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORT.............. 8
Item 14. EXHIBITS, MANAGEMENT DISCUSSIONS AND OPERATIONS.................. 8
SIGNATURES....................................................... 9
PART I
ITEM 1. BUSINESS
Overview
Advance Technologies Inc. is a developer of Infrared Enhanced Vision
Technology and commercial solutions. The company has a worldwide license from
Hughes Aircraft company, Los Angeles, California for a patented advanced
infrared imaging system. Advance Technologies licenses and develops applied
infrared enhanced vision solutions for use in diverse industries including
aviation, recreational vehicles, commercial trucking, marine, security, and fire
fighting applications. The Company is currently engaged in the development of
night vision systems with applications in the commercial sector.
Advance Technologies has entered into a licensing agreement with Kollsman
Inc., which has incorporated the company's technology and intellectual property
into an Enhanced Vision System for use on the Gulfstream series of Aircraft. The
system entered production in early 2002. Kollsman has announced a new enhanced
vision product in late 2002 for use at the low-end private aviation market. This
product is expected to enjoy the same success as the Gulfstream product but with
a far larger market.
Background
Advance Technologies, Inc. ("the Company") The Company was organized under
the laws of the State of Delaware under the name PWB Industries, Inc.; the
articles of incorporation were issued June 16, 1969. The name was changed to Sun
Energy, Inc. ("The Company"), which merged with Sto Med, Inc. on February 22,
1996 changing its name to Sto Med, Inc. ("The Company") and domicile to the
State of Nevada. On February 23, 1996, Sto Med, Inc.,a privately held California
corporation, was acquired by Sto Med, Inc. ("The Company") the California
Corporation acquisition was rescinded on August 23rd 1997. Sto Med Inc. ("The
Company") the Nevada Corporation changed its name to Advance Technologies, Inc.,
("The Company") on August 23rd 1997. On September 27, 1999 the "Company"
acquired Seacrest Industries of Nevada, also known as Infrared Systems
International.
The Company
The Registrant through its wholly owned subsidiary SEACREST INDUSTRIES,
INC., and through its president and director Mr. Gary Ball was granted an
exclusive world-wide license agreement for the use of US patent number 5,534,694
by Hughes Aircraft Company, for a key optical element of the Infrared Aircraft
Landing System. Gary Ball founder and CEO of Infrared Systems International
(ISI) a/k/a Seacrest Industries International, Inc. in 1992 formed the company
for the singular purpose of providing manufacturing and sales support for the
unique Infrared System called Enhanced Vision System (EVS). While employed by
Electro-Optical Systems, a segment of Hughes Aircraft Company, as senior Program
Manager and engineer, he led the research and development team responsible for
the development of the Enhanced Vision System (EVS).
This technology was designed to allow aircraft pilots to actually "see" the
airport environment through cloud ceiling or surface fog. The factor of enhanced
safety, alone, is generating an enormous demand for this type of system.
Significant Corporate Milestones
The aerospace industry honored its own "best of the best" on June 16, 2003
at a glittering ceremony in Paris's Pavilion D'Armenonville. Advance
Technologies Inc. was a finalist in the AVIONICS & ELECTRONICS category for our
achievement: Infrared Commercial Landing Aid System.
3
Advance Technologies Inc. entry was an Advanced Optical controller, a
device that greatly expands the optical dynamic range of EVS, a capability that
will be required for EVS to fulfill its full potential for the aviation market.
On June 3, 2003, Mr. Gary E. Ball, President of Advance Technologies Inc.
was presented the prestigious National Leadership Award. Mr. Ball will serve as
an Honorary Chairman on the Business Advisory Council (BAC) for the National
Republican Congressional Committee.
In February of 2003 the Federal Aviation Administration submitted a
proposed change for operating rules that if adopted would greatly expand the EVS
market opportunities. These changes deal with the operating rules for flight
operations under low or reduced visibility conditions. Advance Technologies Inc.
is looking forward to the finalization and the introduction of these needed
changes.
Gulfstream Aerospace announced at the NBAA show that EVS is available as
optional equipment on the G500, G-V, G-400, G-IVSP, and G300 business jets. The
optional equipment is available on new aircraft or retrofit to in service
aircraft. In addition, EVS will be standard equipment on the new G550 and the
newly announced G450.
At the NBAA show in Orlando, it was announced that Kollsman and FedEx have
reached an agreement whereby Kollsman will provide EVS systems for FedEx's fleet
of wide body aircraft. This market is estimated at 200 aircraft. The aircraft
types involved are Boeing MD-10 & MD-11, and the Airbus A300 & A310. These
additional aircraft types represent a major accomplishment for EVS.
Employees
The Company employs a total of three (3) employees, One of, which is full
time, the other two are used on a reduced hour work week on an as required
basis. This staff reduction is the result of economic conditions discussed in
the Management Discussion Section in depth.
ITEM 2. PROPERTIES
The Company's executive offices are located in Palos Verdes Estates,
California.
ITEM 3. LEGAL PROCEEDINGS
There are no legal proceedings known or pending against the Registrant or
its subsidiary
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's Security holders
through the solicitation of proxies or Otherwise, during the fiscal year ended
September 30, 2003.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company is currently trading, OTC, on the Nationals Association of
Securities Dealers "Pink Sheets" with the high bid at $0.20 per share and the
low bid of $0.04 per share during the last year. Additional information required
by this item may be found in the Company's 2002 Financial Statements.
4
On September 30, 2002 there was 22,766,517 shares outstanding of
registrant's common stock, at $0.001 par value. There was an additional
38,748,857 shares of Class B restricted stock.
The increase of common stock from 17,218,967 to 22,766,517 Resulted from
conversion of 144 restricted stock to free trading stock. The conversion was
authorized by the board of directors of Advance Technologies on January 1, 2002.
The increase in preferred shares was the result of the issuing of 5,438,350
shares to retire the outstanding short term loan of $108,767.00 and the further
conversion of preferred shares into common stock.
Effective January 1, 2004 the board of directors has authorized the
conversion of an additional 35% of preferred shares into common provided the
holding period has been satisfied. This will increase the converted percentage
to 65% once minimum holding periods have been satisfied.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND REPORTS
OF OPERATION
From time to time, we may publish forward-looking statements relating to
matters, including anticipated financial performance business projects, the
progress and goals for our research and development programs, marketing
strategies, and other similar matters. The Private Securities Litigation Reform
Act of 1995 provides a safe harbor; a variety of factors could cause Our actual
results and experience to differ materially from the Anticipated results or
other expectations expressed in our Forward-looking statements. In addition, we
disclaim any Intent or obligation to update those forwarding-looking statements.
When used in this discussion, the words "believes," "anticipates" "expected",
"assumes", "and similar expressions are intended to identify forward looking
statements. Such statements are subject to risks and uncertainties that could
cause actual results to differ materially from those projected. Readers are
cautioned not to place undue reliance on these forward-looking statements that
speak only as of the date of this report. We undertake no obligation to publicly
release the results of any Revisions to these forward-looking statements that
may be made To reflect events or circumstances after the date of this report or
to Reflect the occurrence of unanticipated events.
For a more detailed description of our operations for 2003 see Item 14
Management Discussion for 2003.
ITEM 7. FINANCIAL STATEMENTS.
The financial statements required by this item are included in the Company's
2003 Financial Statements and are presented in Part IV, Item 13.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTS ON ACCOUNTING FINANCIAL
DISCLOSURE:
None
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
GARY E. BALL Age 65, residing in Manhattan Beach, California is married. He
attended California State University at Long Beach graduating in 1968 with a
BSEE and MSEE, went on to perform Graduate Studies at University of Southern
California. He has specialized in product design, development, and management
for North American Aviation, Autonetics Division. Technical Manager in charge of
the Pave Track program for Ford Aerospace. Program Manager for Northrop
Electro-Mechanical in charge of business development on several classified DOD
programs, including the AMRAAM effort. Program Manager for Hughes Aircraft where
he developed the Infrared Enhanced Vision System, reporting to the President of
EDSG as directed by General Motors and directed all non-core business. He is a
member of NATO NIAG study group on Aircraft Integration. He has authored several
articles for trade publications, the last 4 years he has provided consulting
services to 10 U.S. and foreign corporations in the field of IR technology.
GARY L. BANE has resigned from the board of directors effective August 1,
2003. Advance Technologies is currently evaluating candidates to fill this
position.
6
WENDY BALL Age 56, residing in Manhattan Beach, California is married. She
graduated from University of Southern California, BS cum Laude. Her career has
been focused on retail merchandising, where she has demonstrated exceptional
skills in management, team building and communications. She is National Sales
Director for Christian Lacroix New York, a wholly owned subsidiary of Louis
Vitton Moet Hennessey (LVNH). She was an account executive for Carolee Jewelry
for Southern California, Arizona and Utah. She was co-owner Brava Specialty
Clothing Store in Redondo Beach, California.
ITEM 10. EXECUTIVE COMPENSATION
Other than information provided in the Company's 2003 Financial Statements
incorporated herein, executive officers and directors have received no other
compensation.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(1) Name and Address of (2) Amount and Nature of Percent of
Title of Class Beneficial Owner Beneficial Ownership Class
______________ ___________________ ____________________ ___________
Preferred Gary E. Ball 9,240,000 Issued Shares 15.0
28 Santa Cruz Court
Manhattan Beach, CA 90266
Preferred Wendy Ball 9,240,000 Issued Shares 15.0
28 Santa Cruz Court
Manhattan Beach, CA 90266
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Gary E. Ball and Wendy Ball are married.
PART IV
ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
The following documents are filed as part of this Form 10-KSB Annual
Report:
See Attached Financial Statements: Exhibit A (15 pages)
ITEM 14. EXHIBITS, MANAGEMENT DISCUSSIONS AND OPERATIONS
The following document is filed as part of this Form 10-KSB Annual Report:
See Attached Exhibit A - Financial Statements (15 pages)
See Attached Exhibit B - Management Discussion and Analysis (6 pages)
Exhibit 31 - Section 302 Certification
Exhibit 32 - Section 906 Certification
7
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: January 14, 2004 Advance Technologies, Inc.
(Registrant)
By:/s/ GARY E. BALL
__________________________
Gary E. Ball
President and Director
8
EXHIBIT A
ADVANCE TECHNOLOGIES, INC.
(A Development Stage Company)
Consolidated Financial Statements
September 30, 2003 and 2002
C O N T E N T S
Independent Auditor's Report................................................F-3
Balance Sheets..............................................................F-4
Statements of Operations....................................................F-5
Statements of Stockholders' Equity..........................................F-6
Statements of Cash Flows....................................................F-9
Notes to the Financial Statements...........................................F-10
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders of
Advance Technologies, Inc.
(A Development Stage Company)
We have audited the accompanying consolidated balance sheets of Advance
Technologies, Inc. (a development stage company) as of September 30, 2003 and
2002 and the related statements of operations, stockholders' equity and cash
flows for the years ended September 30, 2003 and 2002 and from inception on
October 1, 1985 through September 30, 2003. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Advance
Technologies, Inc. (a development stage company) as of September 30, 2003 and
2002 and the results of its operations and cash flows for the years ended
September 30, 2003 and 2002 and from inception on October 1, 1985 through
September 30, 2003 in conformity with accounting principles generally accepted
in the United States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has minimal assets and is dependent upon
financing to continue operations. These factors raise substantial doubt about
its ability to continue as a going concern. Management's plans in regard to
these matters are also described in the Note 2. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
Chisholm & Associates
North Salt Lake, Utah
December 24, 2003
F-3
ADVANCE TECHNOLOGIES, INC.
(A Development Stage Company)
Consolidated Balance Sheets
ASSETS
September 30,
2003 2002
------------------ -------------------
CURRENT ASSETS
Cash $ - $ 1,719
------------------ -------------------
Total Current Assets - 1,719
------------------ -------------------
PROPERTY & EQUIPMENT, net 14,440 22,367
------------------ -------------------
TOTAL ASSETS $ 14,440 $ 24,086
================== ===================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Bank Overdraft $ 2,029 $ -
Accounts payable 9,637 -
Accrued Interest - 23,267
Advance Royalties 25,000 25,000
Notes payable-officer 46,800 36,300
------------------ -------------------
Total Current Liabilities 83,466 84,567
------------------ -------------------
LONG-TERM DEBT
Line of Credit - 85,500
------------------ -------------------
TOTAL LIABILITIES 83,466 170,067
------------------ -------------------
STOCKHOLDERS' EQUITY
Common stock, authorized 100,000,000 shares of
$0.001 par value, issued and outstanding 22,766,517
and 17,218,967 shares, respectively 22,766 17,219
Preferred Stock, Series A authorized 100,000,000
shares of $0.001 par value, issued and outstanding
38,748,857 and 38,858,057 shares, respectively 38,749 38,858
Additional paid-in capital 549,780 446,446
Retained earnings (deficit) (680,321) (648,504)
------------------ -------------------
Total Stockholders' Equity ( 69,026) (145,981)
------------------ -------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 14,440 $ 24,086
================== ===================
The accompanying notes are an integral part of these financial statements.
F-4
ADVANCE TECHNOLOGIES, INC.
(A Development Stage Company)
Consolidated Statements of Operations
For the period
of entering
Development
Stage on
October 1,
For the Year Ended 1985 Through
September 30, September 30,
--------------------------------------
2003 2002 2003
------------ ------------ -------------
REVENUES $ - $ 29,039 $ 60,024
------------------ -------------- ------------------
EXPENSES:
Depreciation & Amortization 7,927 7,854 37,446
Organization Costs - - 11,331
Research & Development - - 72,750
General and administrative 23,890 38,699 632,852
------------------ ------------------ ------------------
Total Expenses 31,817 46,553 754,379
------------------ ------------------ ------------------
INCOME (LOSS) FROM OPERATIONS: (31,817) (17,514) (694,355)
------------------ ------------------ ------------------
OTHER INCOME (EXPENSE):
Interest Expense ( -) (10,260) (23,267)
Miscellaneous Income - - 98,000
------------------ ------------------ ------------------
Total Other Income (Expense): - (10,260) 74,733
------------------ ------------------ ------------------
NET INCOME (LOSS) $ (31,817) $ (27,774) $ (619,622)
================== ================== ==================
NET LOSS PER SHARE:
Loss Per Share $ (0.00) $ (0.00) $ (0.29)
------------------ ------------------ ------------------
Weighted average shares outstanding 20,249,214 10,796,656 2,120,735
================== ================== ==================
The accompanying notes are an integral part of these financial statements.
F-5
ADVANCE TECHNOLOGIES, INC.
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity
(For the period of entering development stage on October 1, 1985
through September 30, 2002)
Deficit
Accumulated
Common Stock Additional Preferred Stock During the
------------------------ Paid-In ----------------------------- Development
Shares Amount Capital Shares Amount Stage
--------- ------------- ------------- -------------- ------------- --------------
Balance, October 1,
1985 (beginning of
the development
stage) 6,487 $ 7 $ 58,161 - $ - $ (60,701)
Shares issued for coal
royalties at $0.01 4,369 4 1,525 - - -
Shares issued for
services at $0.25 554 1 4,849 - - -
Shares issued for
services at $0.03 1,601 2 1,680 - - -
Shares issued for
services at $0.25 1,274 1 11,145 - - -
Shares issued for
services at $0.01 2,290 2 798 - - -
Shares issued for
services at $0.25 37,203 37 325,487 - - -
Preferred shares
issued for services - - - 10,048 1,004 -
Preferred shares expire - - 1,004 (10,048) (1,004) -
Net loss since the
beginning of the
development stage
at October 1, 1985 - - - - - (344,001)
--------- ------------- ------------- -------------- ------------- --------------
Balance, September
30, 1995 53,778 54 404,649 - - (404,702)
Shares issued for
services at $0.25 5,714 6 49,994 - - -
Share round up (6) (1) - - - -
Net loss for
the year ended
September 30, 1996 - - - - - (50,000)
--------- ------------- ------------- -------------- ------------- --------------
Balance, September
30, 1996 59,486 59 454,643 - - (454,702)
The accompanying notes are an integral part of these financial statements.
F-6
ADVANCE TECHNOLOGIES, INC.
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity
(For the period of entering development stage on October 1, 1985
through September 30, 2002)
(Continued)
Deficit
Accumulated
Common Stock Additional Preferred Stock During the
------------------------ Paid-In ----------------------------- Development
Shares Amount Capital Shares Amount Stage
--------- ------------- ------------- -------------- ------------- --------------
Balance Forward 59,486 59 454,643 - - (454,702)
Shares issued for
services at $0.25 608 1 5,324 - - -
Net loss for
the year ended
September 30, 1997 - - - - - (5,325)
--------- ------------- ------------- -------------- ------------- --------------
Balance, September
30, 1997 60,094 60 459,967 - - (460,027)
Shares issued for
services at $0.001 12,828 13 436 - - -
Net loss for
the year ended
September 30, 1998 - - - - - (447)
--------- ------------- ------------- -------------- ------------- --------------
Balance September
30, 1998 72,922 73 460,403 - - (460,474)
Shares issued for
cash at $0.01 2,500,000 2,500 22,500 - - -
Shares issued for
common stock of
SeaCrest Industries
Corp. at $0.001 - - (36,457) 50,254,102 50,254 -
Net loss for
the year ended
September 30, 1999 - - - - - (90,126)
--------- ------------- ------------- -------------- ------------- --------------
Balance, September
30, 1999 2,572,922 2,573 446,446 50,254,102 50,254 (550,600)
Net loss for
the year ended
September 30, 2000 - - - - - (101,799)
--------- ------------- ------------- -------------- ------------- --------------
Balance, September
30, 2000 2,572,922 2,573 446,496 50,254,102 50,254 (652,399)
The accompanying notes are an integral part of these financial statements.
F-7
ADVANCE TECHNOLOGIES, INC.
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity
(For the period of entering development stage on October 1, 1985
through September 30, 2002)
(Continued)
Deficit
Accumulated
Common Stock Additional Preferred Stock During the
------------------------ Paid-In ----------------------------- Development
Shares Amount Capital Shares Amount Stage
--------- ------------- ------------- -------------- ------------- --------------
Balance Forward 2,572,922 2,573 446,446 50,254,102 50,254 (652,399)
Net income (loss)
for the year ended
September 30, 2001 - - - - - 31,669
--------- ------------- ------------- -------------- ------------- --------------
Balance, September
30, 2001 2,572,922 2,573 446,446 50,254,102 50,254 (620,730)
Shares issued for
services at $0.001 3,250,000 3,250 - - - -
Shares converted to
common stock 11,396,045 11,396 - (11,396,045) (11,396) -
Net income (loss)
for the year ended
September 30, 2002 - - - - - (27,774)
--------- ------------- ------------- -------------- ------------- --------------
Balance, September
30, 2002 17,218,967 17,219 446,446 38,858,057 38,858 (648,504)
Shares issued for
conversion of debt 5,438,350 5,438 103,334 - - -
Shares issued for
conversion of
Preferred stock 109,200 109 - (109,200) (109) -
Net income (loss)
for the year ended
September 30, 2003 - - - - - (31,817)
--------- ------------- ------------- -------------- ------------- --------------
Balance, September
30, 2002 22,766,517 $ 22,766 $ 549,780 38,748,857 $ 38,749 $ (680,321)
============= ============= ============= ============== ============= ==============
The accompanying notes are an integral part of these financial statements.
F-8
ADVANCE TECHNOLOGIES, INC.
(A Development Stage Company)
Consolidated Statements of Cash Flows
(For the period of
entering Development
Stage on October 1,
For the Year Ended 1985 Through
September 30, September 30,
-----------------------------------
2003 2002 2003
------------ ------------ -------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (31,817) $ (27,774) $ (619,622)
Adjustments to reconcile net loss to net cash,
provided by operations:
Stock issued for services - 3,250 403,025
Depreciation & Amortization 7,927 7,854 37,446
Organization Costs - - 11,331
Decrease in prepaids - - 14,680
Increase (Decrease) in accrued liabilities 11,671 10 260 34,940
------------------ ------------------ -----------------
Net Cash Flows Used in Operating Activities (12,219) (6,410) (118,200)
------------------ ------------------ -----------------
CASH FLOWS USED IN INVESTMENT ACTIVITIES(39
Purchase of Equipment - (3,386) (39,386)
Investment in Subsidiary - - 286
------------------ ------------------ -----------------
Net Cash Used in Investment Activities - (3,386) (39,100)
------------------ ------------------ -----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Cash paid on Loan from Officer - (8,000) (41,200)
Proceeds from Loan from Officer 10,500 16,000 88,000
Proceeds from Line of Credit - - 85,500
Proceeds from Issuance of Stock - - 25,000
------------------ ------------------ -----------------
Net Cash Flows from Financing Activities 10,500 8,000 157,300
------------------ ------------------ -----------------
NET INCREASE (DECREASE) IN CASH (1,719) (1,796) -
CASH, BEGINNING OF YEAR 1,719 3,515 -
------------------ ------------------ -----------------
CASH, END OF YEAR $ - $ 1,719 $ -
================== ================== =================
The accompanying notes are an integral part of these financial statements.
F-9
ADVANCE TECHNOLOGIES, INC.
(A Development Stage Company)
Consolidated Statements of Cash Flows
(Continued)
(For the period of
entering Development
Stage on October 1,
For the Year Ended 1985 Through
September 30, September 30,
-----------------------------------
2003 2002 2003
------------ ------------ -------------
SUPPLEMENTAL CASH FLOW INFORMATION
Cash Paid for:
Interest $ - $ - $ -
Taxes $ - $ - $ -
SUPPLEMENTAL NON-CASH INFORMATION
In March 2003, the Company issued 5,438,350 shares for the satisfaction of a
line of credit and accrued interest in the amount of $108,772.
During the year ending September 30, 2003, a total of 109,200 shares of
preferred stock were converted to common stock.
During December 2001, the Company issued 3,250,000 shares of common stock for
services valued at $3,250 (or $.001 per share).
During the year ending September 30, 2002, a total of 11,396,045 shares of
preferred stock were converted to common stock.
The accompanying notes are an integral part of these financial statements.
F-10
ADVANCE TECHNOLOGIES, INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
September 30, 2003 and 2002
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Organization
The Company was organized under the laws of the state of Delaware
on June 16, 1969 as PWB Industries, Inc. On November 10, 1975, the
Company changed its name to Sun Energy, Inc. At that time, the
Company began operations in the oil and gas lease industry. By
1985, the Company discontinued its operations and became dormant.
On March 6, 1996, the Company attempted a merger which failed. On
August 23, 1997, the Company changed its name to Advance
Technologies, Inc. and changed its place of domicile to from
Delaware to Nevada.
On September 27, 1999, pursuant to a plan of acquisition, the
Company exchanged 50,254,102 shares of its Seris "A" preferred
stock for 50,254,102 shares of SeaCrest Industries Corporation's
common stock. This acquisition has been accounted for using the
purchase method of a business combination.
The Company is currently engaged in the development of a night
vision system with applications in the military as well as civil.
The Company has an agreement with a Taiwan company wherein they
are jointly developing the night vision system for use in Class A
coaches. The Company is also involved in the development of other
Electro-optical mechanical devices.
b. Accounting Method
The Company recognizes income and expenses on the accrual basis of
accounting.
c. Consolidation
The consolidated financial statement include the accounts of
Advanced Technologies, Inc. and SeaCrest Industries Corporation, a
wholly owned subsidiary. Intercompany transactions have been
eliminated.
d. Cash and Cash Equivalents
The Company considers all highly liquid investments with
maturities of three months or less to be cash equivalents.
F-11
ADVANCE TECHNOLOGIES, INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
September 30, 2003 and 2002
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
e. Earnings (Loss) Per Share
The computation of earnings per share of common stock is based on
the weighted average number of shares outstanding at the date of
the financial statements. From Inception on October 1,
For the Years Ended 1985 Through
September 30, September 30,
--------------------------------------
2003 2002 2003
------------- ------------- -------------
Numerator - net loss $ (31,817) $ (27,774) $ (619,622)
Denominator - weighted
average number of shares
outstanding 20,249,214 10,796,656 2,120,735
================== ================== ==================
Loss per share $ (0.00) $ (0.00) $ (0.29)
================== ================== ==================
f. Provision for Income Taxes
No provision for income taxes has been recorded due to net
operating loss carryforwards totaling approximately $680,000 that
will be offset against future taxable income. These NOL
carryforwards begin to expire in the year 2004. No tax benefit has
been reported in the financial statements because the Company
believes there is a 50% or greater chance the carryforward will
expire unused.
Accordingly, per FASB 109, the potential tax benefits of the loss
carryforwards are offset by the valuation of the same amount.
Deferred tax assets and the valuation account is as follows at
September 30, 2003 and 2002.
September 30,
2003 2002
------------- -------------
Deferred tax asset:
NOL carryforward $ 231,200 $ 214,700
Valuation allowance (231,200) (214,700)
------------------ ------------------
Total $ - $ -
================== ==================
F-12
ADVANCE TECHNOLOGIES, INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
September 30, 2003 and 2002
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
g. Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect reported amounts of
assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements and revenues
and expenses during the reporting period. In these financial
statements assets and liabilities involve extensive reliance on
management's estimates. Actual results could differ from those
estimates.
h. Revenue Recognition
The Company has received revenue pursuant to an agent agreement
which allows the Company to receive fixed monthly service fees,
and to bill for additional services provided. The Company records
revenues when the services are performed. The Company has
recognized $-0-, and $29,039 in revenues for services performed in
connection with this agreement for the years ended September 30,
2003 and 2002.
The Company is also entitled to reimbursement for various expenses
associated with the development fo its night vision technology
pursuant to the joint venture agreement with the Taiwan company.
These reimbursements are recorded as miscellaneous income when
received. The Company recognized miscellaneous income of $ -0-
during the fiscal years 2003 and 2002 from reimbursement received
from the joint venture partner.
NOTE 2 - GOING CONCERN
The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. The Company is
dependent upon raising capital to continue operations. The
financial statements do not include any adjustments that might
result from the outcome of this uncertainty. It is management's
plan to raise capital in order to define expand their business
operations, thus creating necessary operating revenue.
NOTE 3 - DEVELOPMENT STAGE COMPANY
The Company is a development stage company as defined in Financial
Accounting Standards Board Statement No. 7. It is concentrating
substantially all of its efforts in raising capital and developing
its business operations in order to generate significant revenues.
F-13
ADVANCE TECHNOLOGIES, INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
September 30, 2003 and 2002
NOTE 4 - PROPERTY & EQUIPMENT
Property & Equipment consists of the following at September 30,
2002 and 2001:
September 30,
2003 2002
------------- -------------
Equipment $ 39,386 $ 39,386
Less: Accumulated Depreciation (24,946) (17,019)
------------------ ------------------
Net Property & Equipment $ 14,440 $ 22,367
================== ==================
Expenditures for property and equipment and for renewals and
betterments, which extend the originally estimated economic life
of assets or convert the assets to a new use, are capitalized at
cost. Expenditures for maintenance, repairs and other renewals of
items are charged to expense. When items are disposed of the cost
and accumulated depreciation are eliminated from the accounts, and
a gain or loss is included in the results of operations.
The provision for depreciation is calculated using the
straight-line method over the estimated useful lives of the
assets. The useful lives of equipment are 5 years. Depreciation
expense for the years ended September 30, 2003 and 2002 are $7,927
and $7,854, respectively.
NOTE 5 - ADVANCED ROYALTIES
SeaCrest Industries Corporation, formerly Infrared Systems
International, Inc., entered into a licensing agreement for
marketing and distributing of infrared aircraft landing systems.
Seacrest received $25,000 in advances. These royalty revenues have
been deferred until future revenue streams occur, if any actually
do occur, and these royalty revenues have been recorded as a
liability.
NOTE 6 - RELATED PARTY TRANSACTIONS
As of September 30, 2003 and 2002, the Company owes an officer the
Company $46,800 and $36,300 for loans made. This note
payable-officer is considered a current liability with no
provision for interest.
NOTE 7 - LINE OF CREDIT
The Company has negotiated a Line of Credit with a corporation,
wherein the Company has a credit limit of $125,000. This line
accrues 12.0% interest annually and is due January 1, 2004. As of
September 30, 2002, the Company has borrowed a total of $85,500.
For the year ended September 30, 2002, the Company recorded
$10,260 in interest expense. As of September 30, 2002, the Company
has accrued interest totaling $23,267.
F-14
ADVANCE TECHNOLOGIES, INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
September 30, 2003 and 2002
NOTE 7 - LINE OF CREDIT (Continued)
In December 2002, the Company authorized the issuance of 5,438,350
shares of common stock in satisfaction of the $85,500 debt and
accrued interest of $23,267. As of September 30, 2003, no
obligation exists.
NOTE 8- COMMON STOCK
During December 2001, the Company issued 3,250,000 shares of
previously authorized but unissued common stock for consulting
services for $3,250 (or $.001 per share).
During the year ended September 30, 2002, 11,396,045 shares of
preferred stock were converted to common stock.
In December 2002, the Company issued 5,438,350 shares of common
stock in satisfaction of $85,500 in debt and $23,267 of accrued
interest.
During the year ended September 30, 2003, preferred shareholders
converted 109,200 shares of preferred stock for 109,200 shares of
common stock.
F-15
EXHIBIT B
Advance Technologies Inc.
Management Discussion and Analysis
Year End, September 2003
MANAGEMENT DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF
OPERATIONS
Advance Technologies Inc. ("AVTX") is a developer of infrared (IR)
Enhanced Vision technology for commercial solutions and applications. The
Company engages in advance development activities and through strategic business
arrangements AVTX utilizes OEM suppliers and major system corporations to form
strategic business associations. This unique business model combines the
strength of our organization with the prior capital investment of the OEMs and
the in place established marketing and sales organization of the System
Integrator. Our ability to bridge advance IR technology into application
specific markets shortens the development-to-market cycle and associated high
investment risks of this enterprise.
Highlights of the Year
The aerospace industry honored its own "best of the best" on June 16, 2003
at a glittering ceremony in Paris's Pavilion D'Armenonville when 11 winners of
the coveted Flight International Aerospace Industry Awards 2003 were announced.
Their peers applauded more than 500 top executives from all parts of the
industry for their achievements.
Advance Technologies Inc. was a finalist in the AVIONICS & ELECTRONICS
category for our achievement: Infrared Commercial Landing Aid System. Their
President represented advance Technologies Inc., Mr. GARY BALL. Mr. Ball was
delighted with the recognition of "our fine work that continues to be on the
cutting edge of technology for Enhanced Vision Systems."
Advance Technologies Inc. entry was an Advanced Optical controller, a
device that greatly expands the optical dynamic range of EVS, a capability that
will be required for EVS to fulfill its full potential for the aviation market.
On June 3, 2003, Mr. Gary E. Ball, President of Advance Technologies Inc.
was presented the prestigious National Leadership Award. Mr. Ball will serve as
an Honorary Chairman on the Business Advisory Council (BAC) for the National
Republican Congressional Committee. Mr. Ball will represent the State of
California on this advisory committee. In this capacity he will advise and
assist in critical issues that affect business and promote a pro-business
agenda.
Mr. Ball is honored to participate in this illustrious group, and believes
the small cap, high technology sector is the basis for economic growth and
stimulus to grow the economy. We believe that government assistance in the
economic sector should be focused at stimulating innovation and simplification
of regulatory and oversight functions. By becoming actively involved in the BAC
Mr. Ball believes he can provide a voice and guidance to effect needed changes.
In February of 2003 the Federal Aviation Administration submitted a
proposed change for operating rules that if adopted would greatly expand the EVS
market opportunities. These changes deal with the operating rules for flight
operations under low or reduced visibility conditions. Advance Technologies Inc.
has responded to the Federal Registrar notice of proposed changes. These changes
if adopted will make the certification process for EVS easier. Advance
Technologies Inc. is looking forward to the finalization and the introduction of
these needed changes.
Business Overview
The tragic events of September 11, 2001 continue to effect are operation.
The effect has been most notable in the decline of the price of our common stock
in recent months reflecting the general slow down that has effected our markets.
The aftermath of 9-11 has effected Corporations such as Advance
Technologies Inc. through our significant involvement in Infrared Technology,
which is a controlled and regulated technology by the US Government. Since AVTX
is exclusively involved in commercial applications, and all of the technologies
we employ are considered "dual use technology" (military and commercial), the
Government's restrictions have had little effect on the scope and direction of
our strategic plans. Thus, our plans for future products have not changed
materially. But, the government has imposed new requirements on Corporation like
AVTX to prove our system applications meet the commodity juristition regulations
(commercial non-military end-use) to the Department of State through compliance
to the International Traffic in Arms Regulation (ITAR), 22 CFR 120-130. This
burden of compliance has both lengthen and complicated the approval process.
This has contributed to a slow down thus effecting our rate of progress.
ATI entered into an agreement with an offshore OEM strategic partner
Telesis Electronics September of 2000, a Taiwanese privately held corporation.
Under the terms of this agreement ATI is developing IR systems in conjunction
with Telesis for sale in the USA as well as other foreign markets. Export
licenses are required to provide critical components for this work. Approval for
these licenses are taking more than a year to obtain. Furthermore additional
end-user restrictions are being imposed complicating and lengthening them
process. This same activity in the past took less than 6 months prior to 9-11,
with far less paper work and disclosure documents. In spite of these delays ATI
continues to provide support to Telesis through the application and delivery of
an additional 30 detector units.
Telesis Technologies Inc. a privately held corporation has been acquired by
United Integrated Services, a Taiwanese public corporation in early 2003. The
new ownership has retained the principals in Telesis, and except for a small
start-up interruptions are work with the Taiwan Corporation has continued.
The second event that has had an impact on AVTX stock has been the
authorization of a 30% of conversion of Advance Technology Preferred stock into
AVTX common stock by the shareholder of record provided the holding period has
been met.
The resulting action has been to increase the number of shares of common
stock in the market (float), which under normal circumstances produces some
degree of pressure on the stock. This process of moving from a development
Corporation with restricted 144 stock to a fully free trading corporation is a
common but necessary growing pain of the maturation process.
Enhanced Vision Activities
Enhance Vision System, our first project; has entered production. Advance
Technologies benefits through a license agreement with Kollsman Inc.
The License Agreement between Advance Technologies and Kollsman Instruments
covers the transfer of proprietary intellectual property owned by Advance
Technology. The data package consisted of technical, industrial, marketing, and
FAA regulatory knowledge to facilitate the development of the IR EVS and
subsequent FAA certification. Included as part of, but specifically partition
within the Agreement is an option for Kollsman to use a Hughes Aircraft patent
that was licensed to Advance Technologies in 1996. Kollsman elected to proceed
forward with an IR EVS system based upon the content of the License Agreement,
but without incorporating the Hughes Aircraft patent. There has been concerns
expressed that the lack of inclusion of the Hughes Patent could in some way
effect ATI our future revenue.
Kollsman has issued the quarterly report (9/30/03) required under the
License Agreement. The following report by Kollsman has been verified.
ANNUAL NUMBER OF UNITS DELIVERED & SOLD
INITIAL DELIVERY UNITS SOLD
CALENDER YEAR 2002 47 29
CALENDER YEAR 2003, TO DATE 79 78
___ ___
TOTAL 126 107
Kollsman has released no information on their future production plans.
Their end user continues to expand the application to additional aircraft
through certification activity with the FAA. This will serve to increase the EVS
market.
At the NBAA show in Orlando, it was announced that Kollsman and FedEx have
reached an agreement whereby Kollsman will provide EVS systems for FedEx's fleet
of wide body aircraft. This market is estimated at 200 aircraft. The delivery of
EVS to this market will result in four additional aircraft types receiving
certification for EVS. This is a significant milestone in the EVS program.
The completion of the FedEx certification will addition several additional
aircraft types to be authorized for EVS equipment. The aircraft types involved
are Boeing MD-10 & MD-11, and the Airbus A300 & A310. These additional aircraft
certification will facilitate the operators of these aircraft types to
incorporate EVS into their fleet operations. The cost and time associated with
certifying each aircraft type for EVS remains the largest hurdle for full
industry acceptance. These additional aircraft types represent a major
accomplishment for EVS.
The License Agreement (July 1997) between Kollsman and ATI has a royalty
schedule that was specifically tailored to achieve two key elements (1) for
rapid recovery of the development investment and (2) maximize long term profits
to ATI predicated upon a large EVS market. Under the provisions that implement
this strategy the initial production units are royalty free. The royalty per
unit increases in four discrete steps to a maximum value per unit.
Kollsman Instruments released a PRESS RELEASE in September 2002, titled,
KOLLMAN'S ENHANCED VISION SYSTEM PRODUCTLINE EXPAND. The Press Release announced
the introduction of a "new reduced performance EVS version" called Night Window
TM, a low cost derivative of the high performance Kollsman's "All-weather
Window" system. The expansion of Kollsman into the higher volume, lower cost EVS
market has been anticipated by Advance Technologies. This market is larger and
is more accessible from an FAA certification standpoint.
Gulfstream Aerospace announced at the NBAA show that EVS is available as
optional equipment on the G500, G-V, G-400, G-IVSP, and G300 business jets. The
optional equipment is available on new aircraft or retrofit to in service
aircraft. In addition, EVS will be standard equipment on the new G550 and the
newly announced G450. Gulfstream Aerospace has received worldwide acclaim for
the EVS, and as a result GAC is aggressive marketing EVS for sales in both the
new and after market sectors.
Spectrum 9000, Medical Equipment
ATI continues to provide export license support under a time & service
reimbursement agreement with Telesis Technologies. Telesis has not announced a
date for introduction of the Spectrum 9000 into the US market. Additional
discussions and meeting with medical equipment experts in the USA. ATI believes
that Telesis will become activity in the US market in 2004, and what role ATI
will play in that activity has not been determined.
Development Projects
Advance Technologies Inc. continues development activities on new Infrared
systems for commercial markets. These projects cannot be forecast with any
degree of certainty and all strategic partnerships or business arrangements
remain confidential until such time as a formal announcement is appropriate
without compromising the development plan and/or the application market.
CAPITAL RESOURCES
No commitment for capital resources has been made during this reporting
period.
FINANCIAL ANALYSIS
The results on the operation represent projects of likely future events
that cannot be guaranteed. Therefore, the financial analysis does not include
projects, and no quantitative assessment has been provided based upon the future
discussion of potential events in section 3.
No material changes have been provided; therefore impact of unforeseeable
events cannot be assessed.
Present financial plans are adequate to meet our cash flow needs with our
current project schedule.
BOARD OF DIRECTOR ACTIONS
The maturity of the Enhanced Vision Project has provided the need to take
action and make adjustments to prepare for our transition from a "development
company" to a mature self-sustaining corporation. We anticipate a full
transition by mid-2004. Accordingly, the following actions have been authorized
by the Board of Directors. The following descriptions are provided as a summary
of these actions.
1. 5,438,350 shares of AVTX preferred Class B stock was authorized and
transferred to Equi-share Financial in consideration for the
cancellation and debt nullification of AVTX's short-term loan. The loan
balance, including interest, was $108,767.00 at the time of transfer.
This action was necessary to satisfy the terms and conditions of the line
of credit AVTX had with Equi-share Financial. This action resolves this
due-on-demand note without the need to raise additional short-term capital.
2. The Board of Directors of AVTX has authorized that all shares of AVTX
shall be eligible to receive dividends from AVTX. Prior to this action
only preferred shares were eligible to receive dividends.
This action will serve to give all of the equity owners of AVTX equal
participation in future benefits. This resolution is effective 9/1/03.
3. The Board of Directors has authorized that all shares of AVTX, common
and preferred be granted voting rights on a one vote for one share
basis. Previously, only Common AVTX shareholders had voting privileges.
This resolution is effective 9/1/03.
This action will serve to give all equity owners of AVTX equal rights in
determining AVTX's future directions in those matters that warrant shareholder
participation.
4. The Board of Directors has authorized the conversion of additional
shares of preferred stock to common stock for those shareholders that
have or will meet holding period requirements. The authorization for
conversion increases the past conversion percentage from 30% to 65%.
This resolution is effective on January 1, 2004.
This action represents an additional step towards full conversion of all
preferred shares to common shares.