[Disclosure Company Logo] ADVANCE TECHNOLOGIES INC Filing Type: 10-QSBA Amendment: Number 2 Description: N/A Filing Date: 12/31/02 Ticker: AVTX CUSIP: 00750Y State: CA Country: US Primary SIC: 3812 Primary Exchange: OTH Billing Cross Reference: Date Printed: 01/28/03 TABLE OF CONTENTS CREATED BY DISCLOSURE Filing Sections TO JUMP TO SECTION, CLICK ON HYPERTEXT PAGE NUMBER Document......................................................................1 Base..........................................................................1 Cover Page....................................................................1 Financial Statement Item......................................................2 Financial Statements..........................................................2 Balance Sheet.................................................................3 Income Statement..............................................................4 Cash Flow Statement...........................................................5 Financial Footnotes...........................................................6 Management Discussion.........................................................7 Signatures....................................................................9 Certifications...............................................................10 FORM 10 QSB/A Amendment No. 2 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) {X} Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended December 31, 2002 Or { } Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period____________to_______________ Commission file number 0-27175 ADVANCE TECHNOLOGIES, INC. ______________________________________________________ (Exact name or registrant as specified in its charter) Nevada 95-4755369 ______________________________ ___________________ (State or other jurisdiction (I.R.S. Employer Incorporation or organization) Identification No.) 716 Yarmouth Rd Suite 215 Palos Verdes Estates, CA 90274 ________________________________________ (Address of principal executive offices) Registrant's telephone number, including area code: (310) 265-7776 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 that the registrant was Required to file such reports), and (2) has shorter period been subject to Such filing requirements for the past 90 days. Yes {X} No { } APPLICABLE ONLY TO ISSUES INVOLVED IN BANKRUPTCY. Indicate by check whether the registrant has filed all documents And report required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities Under a plan confirmed by a court. Yes { } No { } APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. As of December 31, 2001, approximately 17,218,967 shares of the Registrant's Common Stock, $0.001 par value were outstanding. As of December 31, 2001, approximately 38,858,057 shares of the Registrant's Class A Preferred Non-voting Stock par value $0.001 were outstanding. 1 ITEM 1. FINANCIAL STATEMENTS ADVANCE TECHNOLOGIES, INC. (A Development Stage Company) Consolidated Financial Statements December 31, 2002 Chisholm & Associates, CPA PO Box 540216 North Salt Lake, UT 84054 Tel: (801) 292-8756 2 ADVANCE TECHNOLOGIES, INC. (a Development Stage Company) Consolidated Balance Sheets ASSETS December 31, September 30, 2002 2002 ---------------- ---------------- (Unaudited) Current Assets Cash $ 3,262 $ 1,719 ---------------- ---------------- Total Current Assets 3,262 1,719 ---------------- ---------------- Property & Equipment, Net 20,403 22,367 ---------------- ---------------- Total Assets $ 23,665 $ 24,086 ================ ================ LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accrued Interest $ 25,832 $ 23,267 Note Payable - Officer 25,000 25,000 Advance Royalties 36,300 36,300 ---------------- ---------------- Total Current Liabilities 87,132 84,567 ---------------- ---------------- Long Term Liabilities Line of Credit 90,000 85,500 ---------------- ---------------- Total Long Term Liabilities 90,000 85,500 ---------------- ---------------- Total Liabilities 177,132 170,067 ---------------- ---------------- Stockholders' Equity Common Stock, Authorized 100,000,000 Shares of $.001 Par Value, Issued and Outstanding 17,218,967 shares 17,219 17,219 Preferred Stock, Series A Authorized 100,000,000 Shares of $.001 Par Value, Issued and Outstanding 38,858,057 Shares 38,858 38,858 Additional Paid in Capital 446,446 446,446 Deficit Accumulated During the Development Stage (655,990) (648,504) ---------------- ---------------- Total Stockholders' Equity (153,467) (145,981) ---------------- ---------------- Total Liabilities and Stockholders' Equity $ 23,665 $ 24,086 ================ ================ 3 ADVANCE TECHNOLOGIES, INC. (a Development Stage Company) Consolidated Statements of Operations (Unaudited) For the three For the three From inception on months ended months ended October 1, 1985 December 31, December 31, thru December 31, 2002 2001 2002 ----------------- ------------------ ---------------------- Revenues $ 1,648 $ 17,447 $ 61,672 Operating Expenses Depreciation & Amortization 1,964 - 31,483.00 Oranization Costs - - 11,331.00 Research & Development - - 72,750 General & Administrative 4,605 14,795 613,567 ----------------- ------------------ ---------------------- Total Operating Expenses 6,569 14,795 729,131 ----------------- ------------------ ---------------------- Operating Income (Loss) (4,921) 2,652 (667,459) ----------------- ------------------ ---------------------- Other Income (Expense) Miscellaneous Income - - 98,000 Interest Expense (2,565) (10,565) (25,832) ----------------- ------------------ ---------------------- Total Other Income (Expense) (2,565) (10,565) 72,168 ----------------- ------------------ ---------------------- Net Income (Loss) $ (7,486) $ (7,913) $ (595,291) ================= ================== ====================== Net Income (Loss) Per Share $ (0.00) $ (0.00) $ (0.46) ================= ================== ====================== Weighted Average Shares Outstanding 17,218,967 2,572,923 1,294,131 ================= ================== ====================== 4 ADVANCE TECHNOLOGIES, INC. (a Development Stage Company) Consolidated Statements of Cash Flows (Unaudited) From inception For the three months ended inception on December 31, October 1, 1985 ------------------------------ thru December 31, 2002 2001 2002 ------------ ------------- ---------------- Cash Flows from Operating Activities Net Income (Loss) $ (7,486) $ (7,913) $ (595,291) Adjustments to Reconcile Net Loss to Net Cash Provided by Operations: Depreciation & Amortization 1,964 1,833 31,483 Stock Issued for Services - - 403,025 Organization Costs - - 11,331 Decrease in Prepaids - - 14,680 Change in Assets and Liabilities Increase in Deferred Income - - - Increase (Decrease) in Accounts Payable and Accrued Expenses 2,565 2,565 25,834 ------------ ------------- ---------------- Net Cash Provided(Used) by Operating Activities (2,957) (3,515) (108,938) ------------ ------------- ---------------- Cash Flows from Investing Activities Investment in Subsidiary - - 286 Purchase of Equipment - - (39,386) ------------ ------------- ---------------- Net Cash Provided (Used) by Investing Activities - - (39,100) ------------ ------------- ---------------- Cash Flows from Financing Activities Payments for Officer Loan - - (41,200) Proceeds from Officer Loan - - 77,500 Proceeds from Line of Credit 4,500 - 90,000 Proceeds from Issuance of Stock - - 25,000 ------------ ------------- ---------------- Net Cash Provided(Used) by Financing Activities 4,500 - 151,300 ------------ ------------- ---------------- Increase (Decrease) in Cash 1,543 (3,515) 3,262 ------------ ------------- ---------------- Cash and Cash Equivalents at Beginning of Period 1,719 3,515 - ------------ ------------- ---------------- Cash and Cash Equivalents at End of Period $ 3,262 $ - $ 3,262 ============ ============= ================ Cash Paid For: Interest $ - $ 8,000 $ - ============ ============= ================ Income Taxes $ - $ - $ - ============ ============= ================ 5 Notes to the Consolidated Financial Statements December 31, 2002 GENERAL Advance Technologies, Inc.(the Company) has elected to omit substantially all footnotes to the financial statements for the three months ended December 31, 2002 since there have been no material changes (other than indicated in other footnotes) to the information previously reported by the Company in their Annual Report filed on Form 10-KSB for the fiscal year ended September 30, 2002. UNAUDITED INFORMATION The information furnished herein was taken from the books and records of the Company without audit. However, such information reflects all adjustments which are, in the opinion of management, necessary to properly reflect the results of the interim period presented. The information presented is not necessarily indicative of the results from operations expected for the full fiscal year. 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN 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. Advance Technologies has entered into a licensing agreement with Kollsman, Inc., which has incorporated the Company's technology into an Enhanced Vision System ("EVS") for use with Gulfstream Aerospace(R) aircraft. Business Overview The tragic events of September 11, 2001 has produced economic and bureaucratic shock waves that has had a direct effected on AVTX and our strategic plans. 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 governments restrictions have had little effect on the scope and direction of our strategic plans. Thus, our plans for future products has not materially changed. 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). ATI entered into an agreement with an off-shore 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. In October 2002, We were notified our second export license for 35 systems was approved. Telesis has been notified, and we are waiting for instruction from Telesis on the business mechanics of payment, scheduling, and compliance information. Enhanced Vision Activities Enhance Vision System, our first project; has entered production. Advance Technologies benefits through a license agreement with Kollsman Inc. Kollsman has issued the quarterly report required under the License Agreement to ATI stating eleven (11) EVS have been delivered to their customer. UNITS DELIVERED & SOLD VERSUS 2002 (QUARTERLY) INITIAL DELIVERY UNITS SOLD TOTAL 1ST QT. 2002 2 0 0 2ND QT 2002 7 5 5 3RD QT. 2002 14 6 11 4TH QR. 2002 23 17 28 TOTAL 2002 45 28 7 The delivery rates are increasing as Kollsman ramps up production. 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. 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. Kollsman has not released any additional information with regard to application, host platforms, or future sales. As this information become available, or creditable projections are made by independent sources, Advance Technologies will make appropriate announcements. ATI and Telesis Technologies signed an EVS agreement, which designates Telesis Technologies as our EVS representative for Far East opportunities. This agreement gives Telesis the right to present limited information on EVS and the benefit that EVS can provide to civil aviation. Discussions by Telesis in the Far East has provided no specific opportunity to date. Honeywell Technology License Honeywell provided ATI initial terms for a "field application" and/or "market use" of their Micro-bolometer technology. The terms and conditions have been evaluation by ATI and our partner Telesis. It appears the terms are reasonable based upon assumptions on the price and availability of a low cost import from Taiwan. This product will not be available until first quarter of 2003, therefore the need to finalize an agreement with Honeywell has been delayed until first or second quarter of 2003. NITEAGLETM Telesis Technologies had provided two preproduction units for market evaluation and product finalization. Tests have been completed and detailed technical specifications of the production product completed. This process included the review and incorporation of technical advancements that have occurred in the last 18 months. The baseline configuration is up to date with the latest advancements to ensure that our economic base is solid and will not be obsolete with near term improvements. The rapid pace of these improvements has been an impediment to finalizing the system and coming to market. Meetings in September were conducted with the ATI-Telesis team meeting with our potential launch customer (OEM RV supplier) and a key IR supplier in the USA. With the present ITAR restriction levied by the Department of State, ATI & Telesis concluded the initial production of the restricted IR technology should be performed in the USA, while the balance of the unrestricted hardware would be imported from the Far East. The meetings exceeded our expectations, and the product near term viability received a strong boost. Our business model was validated and our cost model is meeting our expectations. As always we retain back up and contingency plans to cover the unknown to the extent the unknown can be anticipated. 8 The preliminary plan to launch the Niteagle project has been prepared and submitted to Telesis Electronics Board of Directors for approval. ATI has preciously approved the initial plan. We had expected approval prior to the end of this year and to initiate the most next and most critical phase, a broad agreement that includes ATI, Telesis, The exclusive launch customer, and our USA IR supplier. Delays with our US supplier has delayed the decision to proceed. It is unclear at this time, when we will be able to resolve present business issues.. 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 2003, 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. SIGNATURES Pursuant to the requirement of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: February 25, 2003 Advance Technologies, Inc. (Registrant) By: /s/ GARY E. BALL ---------------------------- Gary E. Ball President and Director 9 CERTIFICATIONS I, Gary E. Ball, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Advance Technologies Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: February 27, 2003 /s/ GARY E. BALL __________________________________ Gary E. Ball President 10