Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K/A
(Amendment No. 2)
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended January 31, 2009
ADVANCED TECHNOLOGIES GROUP, LTD.
(Exact name of registrant as specified in its charter)
Nevada 0-30987 80-0987213
(State of Incorporation) (Commission (I.R.S. Employer
File Number) Identification Number)
331 Newman Springs Road, Suite 143, Red Bank, NJ 07701
(Address of principal executive offices) (Zip Code)
732-784-2801
(Registrant's Telephone Number)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock $.0001 par value
(Title of Class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. [ ] Yes [X] No
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. [ ] Yes [X] No
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. [X] Yes [ ] No
Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T during the
preceding 12 months (or for such shorter period that the registrant was required
to submit and post such files).* [ ] Yes [ ] No
----------
* The registrant has not yet been phased into the interactive data requirements
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (ss.229.405 of this chapter) is not contained herein, and will
not be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [X]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company.
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Act). [ ] Yes [X] No
State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was last sold, or the average bid and asked price of such common equity, as of
the last business day of the registrant's most recently completed second fiscal
quarter.
The aggregate market value based on the average bid and asked price on the
over-the-counter market of the Registrant's Common Stock, ("Common Stock") held
by non-affiliates of the Company was $726,137 as at July 31, 2008.
There were 18,268,104 outstanding shares of Common Stock as of January 31, 2009.
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 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
DOCUMENTS INCORPORATED BY REFERENCE
Not Applicable
AMENDMENT NO. 2 TO
FORM 10-K
ADVANCED TECHNOLOGIES GROUP, LTD.
TABLE OF CONTENTS
PART I
Explanatory Note 3
Forward Looking Statements 3
PART II
Item 6. Selected Financial Data 4
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operation 5
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 6
Item 8. Financial Statements and Supplementary Data 6
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure 6
Item 9A. Controls and Procedures 7
Item 9B. Other Information 8
Signatures 9
2
EXPLANATORY NOTE
We are amending our Annual Report on Form 10-K for the fiscal year ended
January 31, 2009 (the "Form 10-K"), as originally filed with the Securities and
Exchange Commission ("SEC") on May 10, 2009, as previously amended by Amendment
No. 1 thereto ("Form 10-K/A-1") filed on November 19, 2009, regarding certain of
the disclosures which appeared therein.
We are filing this amendment No. 2 to the Form 10-K ("Form 10-K/A-2") in
response to a comment received from the SEC in connection with its review of the
Form 10-K/A-1 to (1) evaluate the effectiveness of our disclosure controls and
internal controls in light of the restatement of our fiscal 2009 financial
statements that was set forth in the 10-K/A-1, and (2) revise the presentation
of the activity of our investment in FX Direct Dealer, LLC ("FX Direct") from
discontinued operations to part of continuing operations.
Following such evaluation, we have determined that the failure of the
Company to properly account for the sale of its membership interest in FX
Direct, was a material weakness in its internal control over financial reporting
as a result of which the Company has amended Item 9A of this Form 10-K/A-2 to
indicate that its disclosure controls and its internal control over financial
reporting were not effective as of January 31, 2009.
This Form 10-K/A-2 also reflects changes to Item 8 Financial Statements in
response to additional comments from the SEC thereon. Corresponding changes have
been made to Item 6 (Selected Financial Data) and Item 7 (Management's
Discussion and Analysis of Financial Condition and Results of Operations) of the
Form 10-K. All restatements to the financial statements affected are non-cash in
nature.
Finally, we are including currently dated officer certifications which
appear as Exhibits 31.1, 31.2 and 32.1 to this amended report. Other than these
changes, all other information concerning our company remains as contained in
the Form 10-K/A-1.
FORWARD LOOKING STATEMENTS
Some of the information contained in this Annual Report may constitute
forward-looking statements or statements within the meaning of the Private
Securities Litigation Reform Act of 1995. These forward-looking statements are
based on current expectations and projections about future events. The words
"estimate", "plan", "intend", "expect", "anticipate" and similar expressions are
intended to identify forward-looking statements which involve, and are subject
to, known and unknown risks, uncertainties and other factors which could cause
the Company's actual results, financial or operating performance, or
achievements to differ from future results, financial or operating performance,
or achievements expressed or implied by such forward-looking statements.
Projections and assumptions contained and expressed herein were reasonably based
on information available to the Company at the time so furnished and as of the
date of this filing. All such projections and assumptions are subject to
significant uncertainties and contingencies, many of which are beyond the
Company's control, and no assurance can be given that the projections will be
realized. Potential investors are cautioned not to place undue reliance on any
such forward-looking statements, which speak only as of the date hereof. Unless
otherwise required by law, the Company undertakes no obligation to publicly
release any revisions to these forward-looking statements to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events. Important factors that could cause actual results to
differ materially from our expectations ("Cautionary Statements") include, but
are not limited to, those set forth under the heading "Risk Factors" in this
Annual Report.
3
PART II
ITEM 6. SELECTED FINANCIAL DATA
Our selected consolidated financial data presented below for each of the
years in the two-year period ended January 31, 2009, and the balance sheet data
at January 31, 2009 and 2008 have been derived from consolidated financial
statements, which have been audited by Donahue Associates, L.L.C. The selected
financial data should be read in conjunction with our consolidated financial
statements for each of the years in the two-year period ended January 31, 2009,
and Notes thereto, which are included elsewhere in this Annual Report.
STATEMENT OF OPERATIONS DATA:
As Restated
31-Jan-09 31-Jan-08
------------ ------------
Revenues:
Revenues from software maintenance $ 0 $ 919,000
Software maintenance costs 0 (591,000)
------------ ------------
Net revenues 0 328,000
General and administrative expenses: 515,398 3,160,071
Salaries and benefits 17,690 37,501
Promotion & investor relations 12,823 5,594
Consulting 277,577 405,646
General administration 0 19,079
------------ ------------
Total general and administrative expenses 823,488 3,627,891
------------ ------------
Net loss from operations (823,488) (3,299,891)
Other revenues and expenses:
Gain on investment in FX Direct Dealer 0 2,407,058
Interest income 71 1,734
Software consulting 254,451 100,000
Sub-lease income 30,892 129,610
------------ ------------
Net (loss) (538,074) (661,489)
============ ============
Net (loss) per common share:
Basic $ (0.03) $ (0.04)
Fully diluted $ (0.03) $ (0.04)
Weighted average of common shares outstanding:
Basic 18,268,104 18,085,135
Fully diluted 18,268,104 18,085,135
BALANCE SHEET DATA
As at January 31,
2009 2008
----------- ------------
Total assets $ 2,549,394 $ 2,527,218
Total liabilities 3,498,970 2,938,720
----------- ------------
Stockholders' equity (deficit) $ (949,576) $ (411,502)
----------- ------------
4
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
BACKGROUND
The Company was incorporated in the State of Nevada in February 2000. In
January 2001, the Company purchased 100% of the issued and outstanding shares of
FX3000, Inc. (formerly Oxford Global Network, Ltd.), a Delaware corporation, the
designer of the FX3000 currency trading software platform. The FX3000 software
program is a financial real time quote and money management platform for use by
independent foreign currency traders.
In March 2002, the Company transferred its FX3000 software program to FX
Direct Dealer, LLC ("FX Direct") a joint venture company that markets the FX3000
software program. The Company received a 25% interest in the joint venture in
return for the transfer. On January 26, 2009, the Company entered into a
purchase and sale agreement (the "Purchase Agreement"), pursuant to which the
Company agreed to sell (the "Sale") its approximate 25% membership interest (the
"Membership Interest") in FX Direct to FX Direct. The Agreement provided that it
was effective as of December 31, 2008, as a result of which the Company was not
entitled to receive any allocations of profit, loss or distributions from FX on
account of its Membership Interest after such date. On March 17, 2009, the
Company completed the Sale of the Membership Interest to FX Direct.
The aggregate purchase price of the Membership Interest was approximately
$26,000,000, of which $9,000,000 was paid in cash at the closing of the Sale and
the remaining $17,000,000 is payable in 36 equal monthly installments of
$472,222.22, bearing interest at the rate of 10% per annum and evidenced by a
subordinated promissory note that was issued pursuant to a Cash Subordinated
Loan Agreement ("Loan Agreement").
In addition to the development and marketing of our PromotionStat and
Cyber-Fence software platforms, the Company intends to seek to acquire and/or
develop other new technologies and other business opportunities. In this regard,
management is reviewing the possibility of entering into the aircraft recovery
and used aircraft parts business. Preliminary research by management has shown
the existence of a substantial shortage of used aircraft parts and that healthy
profit margins can be made with respect to that environmentally friendly
business. Management will also consider investing in commercial real estate
ventures.
RESULTS OF OPERATIONS
The Company did not generate any revenues from software maintenance in the
fiscal year ended January 31, 2009 as compared to $919,000 in revenues from
software maintenance in the fiscal year ended January 31, 2008 as the Company's
software servicing and maintenance services for FX Direct were terminated in
fiscal 2008.
General and administrative expenses in fiscal 2009 decreased to $823,488 as
compared to $3,627,891 in fiscal 2008, primarily as a result of a decrease in
salaries and benefits in connection with the termination of the Company's
software servicing and maintenance operations for FX Direct.
5
The Company experienced a loss from operations of $823,488 in fiscal 2009
as compared to $3,299,891 in 2008.
The Company had other revenues of $285,414 in fiscal 2009, principally
software consulting fees, as compared to other revenues of $2,638,402 in fiscal
2008, principally gains on the Company's investment in FX Direct.
As a result of the foregoing, the Company had a net loss of $538,074 in
fiscal 2009 as compared to a net loss of $661,489 in fiscal 2008.
FINANCIAL CONDITION: LIQUIDITY AND CAPITAL RESOURCES
At January 31, 2009 cash on hand was $134,918 as compared with $67,287 at
January 31, 2008.
On March 17, 2009, the Company completed the Sale of its Membership
Interest to FX Direct. The aggregate purchase price of the Membership Interest
was approximately $26,000,000, of which $9,000,000 was paid in cash at the
closing of the Sale and the remaining $17,000,000 is payable in 36 equal monthly
installments of $472,222.22, bearing interest at the rate of 10% per annum and
evidenced by a subordinated promissory note that was issued pursuant to a Cash
Subordinated Loan Agreement ("Loan Agreement"). The Loan Agreement provides the
Company with an increased interest rate in the event of late payments by the
Purchaser and with the remedy of liquidation in the event of a default. The
Company also received approximately $250,000 from the Purchaser in full
satisfaction of amounts owed to the Company for providing certain services to
the Purchaser.
The Company intends to retain the proceeds of the Sale for general working
capital purposes and to engage in new business opportunities. The Company
believes that the proceeds of the sale of its interest in FX Direct will be
sufficient to fund its operations during fiscal 2010.
The Company issued a stock dividend of 211,431 shares of Common Stock to
the holders of the preferred stock in fiscal 2008.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
At January 31, 2009, the Company had no outstanding borrowings under loan
facilities.
ITEM 8. FINANCIAL STATEMENTS
See F Pages
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no changes in accountants or any disagreements with
accountants on any matter of accounting principles or practices or financial
statement disclosures during the two years ended January 31, 2009.
6
ITEM 9A. CONTROLS AND PROCEDURES
(a) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES.
Our principal executive officer and our principal financial officer
evaluated the effectiveness of our disclosure controls and procedures (as
defined in Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934
as amended) as of the end of the period covered by this report. Based on that
evaluation, and in light of the material weakness in our internal controls
described below, such principal executive officer and principal financial
officer concluded that, the Company's disclosure control and procedures were not
effective as of the end of the period covered by this report.
(b) MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING.
Our management is responsible for establishing and maintaining adequate
internal control over financial reporting, as such term is defined in Exchange
act Rules 13a-15(f) under the Securities Exchange Act of 1934, as amended. under
the supervision of management and with the participation of our management,
including our principal executive officer and principal financial officer, we
conducted an evaluation of the effectiveness of our internal control over
financial reporting based on the framework in Internal Control-Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission.
As indicated in the Company's Form 8-K filed with the SEC on November 17,
2009, the Chief Financial Officer of the Company in consultation with the Board
of Directors and Donohue Associates, L.L.C., its independent registered public
accounting firm determined that it was necessary to amend and restate the
Company's financial statements for the fiscal year ended January 31, 2009
included in the Form 10-K as well as the Company's quarterly reports for the
periods ended April 30, 2009 and July 31, 2009 with respect to the timing of the
sale of the Company's approximately 25% joint venture interest (the "Membership
Interest") in FX Direct.
On January 26, 2009, the Company entered into a purchase and sale agreement
(the "Purchase Agreement"), by and among the Company, FX Direct as purchaser
(the "Purchaser"), MaxQ Investments, LLC ("MaxQ") which is the majority member
of the Purchaser and Tradition N.A. ("Tradition"), the remaining member of the
Purchaser, pursuant to which the Company agreed to sell (the "Sale") its
Membership Interest in FX Direct to FX Direct. On March 17, 2009, the Company
completed the Sale of the Membership Interest to FX Direct. The Agreement
provided that it was effective as of December 31, 2008, as a result of which the
Company was not entitled to receive any allocations of profit, loss or
distributions from FX Direct on account of its Membership Interest following
such date.
The Company originally accounted for the Sale as being effective in the
fiscal year ended January 31, 2009. However, following review of comments from
the Staff of the SEC, the Company determined that the closing of the Sale should
have been recorded in the first quarter of fiscal 2010.
The Company's management has assessed the effect of the restatement on the
Company's disclosure controls and procedures and internal control over financial
reporting, and has determined that a material weakness exists with respect to
our reporting of complex and non-routine transactions.
7
A "material weakness" is a deficiency, or a combination of deficiencies, in
internal control over financial reporting, such that there is a reasonable
possibility that a material misstatement of the Company's annual or interim
financial statements will not be prevented or detected on a timely basis. The
material weakness in our internal control over financial reporting as of January
31, 2009 existed as we had limited staff that did not allow us to maintain
effective processes and controls over the accounting for and reporting of
complex and non-routine transactions.
During fiscal 2010, the Company hired a part-time accountant to prepare the
Company's financial statements under the supervision of the Company's chief
financial officer. In addition, to address the material weakness, the Company
intends to engage outside experts to provide counsel and guidance in areas where
it cannot economically maintain the required expertise internally (e.g., with
the appropriate classifications and treatments of complex and non-routine
transactions).
Based on our evaluation of internal control over financial reporting, and
in light of the determination concerning the material weakness, our management
concluded that our internal control over financial reporting was not effective
as of January 31, 2009.
This annual report does not include an attestation report of the company's
independent registered public accounting firm regarding internal control over
financial reporting. Management's report was not subject to attestation by the
company's independent registered public accounting firm pursuant to temporary
rules of the Securities and Exchange Commission that permit the company to
provide only management's report in this annual report.
(c) CHANGE IN INTERNAL CONTROL OVER FINANCIAL REPORTING.
No change in our internal control over financial reporting occurred during
our most recent fiscal quarter that has materially affected, or is reasonably
likely to materially affect our internal control over financial reporting.
(d) OTHER.
We believe that a controls system, no matter how well designed and
operated, can not provide absolute assurance that the objectives of the controls
system are met, and no evaluation of controls can provide absolute assurance
that all control issues and instances of fraud, if any, within a company have
been detected. Therefore, a control system, no matter how well conceived and
operated, can provide only reasonable, not absolute, assurance that the
objectives of the control system are met. Our disclosure controls and procedures
are designed to provide such reasonable assurances of achieving our desired
control objectives, and our principal executive officer and principal financial
officer have concluded, as of January 31, 2009, that our disclosure controls and
procedures were not effective in achieving that level of reasonable assurance.
ITEM 9B. OTHER INFORMATION
None.
8
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Amendment to the Report to be
signed on its behalf by the undersigned, thereunto duly authorized.
ADVANCED TECHNOLOGIES GROUP, LTD.
Dated: January 26, 2010 By: /s/ Alex Stelmak
-------------------------------------------------
Alex Stelmak
Chief Executive Officer and Director
(Principal Executive Officer, Principal Financial
Officer and Principal Accounting Officer)
Dated: January 26, 2010 By: /s/ Abel Raskas
-------------------------------------------------
Abel Raskas
President and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Amendment to the Report has been signed below by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated.
Dated: January 26, 2010 By: /s/ Alex Stelmak
-------------------------------------------------
Alex Stelmak
Director
Dated: January 26, 2010 By: /s/ Abel Raskas
-------------------------------------------------
Abel Raskas
Director
Dated: January 26, 2010 By: /s/ Stan Mashov
-------------------------------------------------
Stan Mashov
Director
9
ADVANCED TECHNOLOGIES GROUP, LTD. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
----
Report of Independent Registered Public Accounting Firm F-1
Consolidated Balance Sheets as of January 31, 2009 and January 31, 2008 F-2
Consolidated Statements of Operations for the years ended January 31, 2009
and January 31, 2008 F-3
Consolidated Statements of Cash Flows for the years ended January 31, 2009
and January 31, 2008 F-4
Consolidated Statements of Stockholders' Equity for the years ended
January 31, 2009 and January 31, 2008 F-5
Notes to Consolidated Financial Statements F-6
10
DONAHUE ASSOCIATES, L.L.C.
27 BEACH ROAD, SUITE CO5-A
MONMOUTH BEACH, NJ. 07750
PHONE: (732) 229-7723
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Advanced Technologies Group, Ltd.
We have audited the accompanying consolidated balance sheets of Advanced
Technologies Group, Ltd as of January 31, 2009 and January 31, 2008 and the
related consolidated statements of operations and changes in shareholders'
equity, and cash flows for the years then ended. These financial statements are
the responsibility of management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. The Company
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audits included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Company's internal control
over financial reporting. Accordingly, we express no such opinion. An audit also
includes, examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements, 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 present fairly, in all
material respects, the consolidated financial position of Advanced Technologies
Group, Ltd as of January 31, 2009 and January 31, 2008, and the consolidated
results of its operations and cash flows for the years then ended in conformity
with accounting principles generally accepted in the United States of America.
As discussed in Note 12, the consolidated financial statements as of January 31,
2009 have been restated.
/s/ Donahue Associates, LLC.
--------------------------------------
Donahue Associates, LLC.
January 22, 2010
Monmouth Beach, NJ
F-1
Advanced Technologies Group, Ltd.
Consolidated Balance Sheets
As of January 31, 2009 and January 31, 2008
As Restated
31-Jan-09 31-Jan-08
------------ ------------
ASSETS
Current assets:
Cash & short term deposits $ 134,918 $ 67,287
------------ ------------
Total current assets 134,918 67,287
Other assets:
Investment in FX Direct Dealer 2,407,058 2,407,058
Trademark- net 7,418 7,873
Security deposit 0 45,000
------------ ------------
Total assets $ 2,549,394 $ 2,527,218
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable & accrued expenses $ 3,450,547 $ 2,934,120
------------ ------------
Total current liabilities 3,450,547 2,934,120
Shareholder advance payable 48,423 4,600
------------ ------------
Total liabilities 3,498,970 2,938,720
Shareholders' equity:
Series A preferred stock, one share convertible to one share of common;
13% cumulative non-participating, authorized 1,000,000 shares at
stated value of $3 per share, issued and outstanding 762,081 shares 1,712,601 1,712,601
Series B preferred stock, one share convertible to one share of common;
6% cumulative non-participating, authorized 7,000,000 shares at
stated value of $3 per share, issued and outstanding 1,609,955 shares 4,384,754 4,384,754
Common stock - $.0001 par value, authorized 100,000,000 shares, issued and
outstanding, 18,268,104 at January 31, 2009 and January 31, 2008 1,827 1,827
Additional paid in capital 32,664,364 32,664,364
Accumulated deficit (39,713,122) (39,175,048)
------------ ------------
Total shareholders' equity (deficit) (949,576) (411,502)
------------ ------------
Total Liabilities & Shareholders' Equity $ 2,549,394 $ 2,527,218
============ ============
See the notes to the financial statements.
F-2
Advanced Technologies Group, Ltd.
Consolidated Statements of Cash Flows
For the Years Ended January 31, 2009 and January 31, 2008
As Restated
31-Jan-09 31-Jan-08
------------ ------------
Revenues:
Revenues from software maintenance $ 0 $ 919,000
Software maintenance costs 0 (591,000)
------------ ------------
Net revenues 0 328,000
General and administrative expenses:
Salaries and benefits 515,398 3,160,071
Promotion & investor relations 17,690 37,501
Consulting 12,823 5,594
General administration 277,577 405,646
Depreciation 0 19,079
------------ ------------
Total general and administrative expenses 823,488 3,627,891
------------ ------------
Net loss from operations (823,488) (3,299,891)
Other revenues and expenses:
Gain on investment in FX Direct Dealer 0 2,407,058
Interest income 71 1,734
Software consulting 254,451 100,000
Sub-lease income 30,892 129,610
------------ ------------
Net (loss) $ (538,074) $ (661,489)
============ ============
Net (loss) per common share:
Basic $ (0.03) $ (0.04)
Fully diluted $ (0.03) $ (0.04)
Weighted average of common shares outstanding:
Basic 18,268,104 18,085,135
Fully diluted 18,268,104 18,085,135
See the notes to the financial statements.
F-3
Advanced Technologies Group, Ltd.
Consolidated Statements of Cash Flows
For the Years Ended January 31, 2009 and January 31, 2008
As Restated
31-Jan-09 31-Jan-08
----------- -----------
Operating Activities:
Net income (loss) $ (538,074) $ (661,489)
Adjustments to reconcile net loss items
not requiring the use of cash:
Amortization 455 606
Depreciation 0 19,080
Salary expense 515,398 2,907,740
Gain on investment in FX Direct Dealer 0 (2,407,058)
Impairment expense 0 32,377
Rent expense 45,000 0
Changes in other operating assets and liabilities:
Accounts payable 1,029 (90,650)
----------- -----------
Net cash provided (used by) operations 23,808 (199,394)
Financing Activities:
Advances from shareholders 43,823 4,600
----------- -----------
Net cash provided by financing activities 43,823 4,600
----------- -----------
Net increase (decrease) in cash during the year 67,631 (194,794)
Cash balance at February 1st 67,287 262,081
----------- -----------
Cash balance at January 31st $ 134,918 $ 67,287
=========== ===========
Supplemental disclosures of cash flow information:
Interest paid during the year $ 0 $ 0
Income taxes paid during the year $ 0 $ 0
See the notes to the financial statements.
F-4
Advanced Technologies Group, Ltd.
Consolidated Statement of Changes in Shareholders' Equity
From January 31, 2007 to January 31, 2009
(As Restated)
Common Common Preferred Preferred Paid in Accumulated
Shares Par Value Shares Value Capital Deficit Total
------ --------- ------ ----- ------- ------- -----
Balance at January 31, 2007 18,056,673 $ 1,806 2,372,036 $6,097,355 $32,639,013 $(38,488,187) $ 249,987
Stock dividend paid 211,431 21 25,351 (25,372) 0
Net loss for the fiscal year (661,489) (661,489)
---------- ------- --------- ---------- ----------- ------------ ---------
Balance at January 31, 2008 18,268,104 $ 1,827 2,372,036 $6,097,355 $32,664,364 $(39,175,048) $(411,502)
Net loss for the fiscal year (538,074) (538,074)
---------- ------- --------- ---------- ----------- ------------ ---------
Balance at January 31, 2009 18,268,104 $ 1,827 2,372,036 $6,097,355 $32,664,364 $(39,713,122) $(949,576)
========== ======= ========= ========== =========== ============ =========
See the notes to the financial statements.
F-5
Advanced Technologies Group, Ltd.
Notes to the Consolidated Financial Statements
For the Years Ended January 31, 2009 and January 31, 2008
1. ORGANIZATION OF THE COMPANY AND SIGNIFICANT ACCOUNTING PRINCIPLES
Advanced Technologies Group, Ltd. (the Company) was incorporated in the State of
Nevada in February 2000. In January 2001, the Company purchased 100% of the
issued and outstanding shares of FX3000, Inc., a Delaware corporation, which
owned the rights to the FX3000 currency trading software platform. The FX3000
software program is a financial real time quote and money management platform
used by independent foreign currency traders.
In March 2002, the Company sold the FX3000 software program, for a 25% interest
in a joint venture with Tradition NA, a subsidiary of Compagnie Financiere
Tradition, a publicly held Swiss corporation. The Company and Tradition formed
FX Direct Dealer LLC, a Delaware company that markets the FX3000 software to
independent foreign currency traders.
The Company sold its interest in the joint venture in the first quarter of
fiscal year 2010 (see Note 11).
Currently the Company has no business operations; however, it is pursuing
various business opportunities in the areas of software development.
CONSOLIDATION- the accompanying consolidated financial statements include the
accounts of the company and its wholly owned subsidiaries. All significant
inter-company balances have been eliminated.
USE OF ESTIMATES - The preparation of the consolidated financial statements in
conformity with generally accepted accounting principles requires management to
make reasonable estimates and assumptions that affect the reported amounts of
the assets and liabilities and disclosure of contingent assets and liabilities
and the reported amounts of revenues and expenses at the date of the financial
statements and for the period they include. Actual results may differ from these
estimates.
REVENUE RECOGNITION- The Company provided software maintenance and support
services for the users of the FX3000 program. In fiscal 2008, the Company
received a monthly fee from the joint venture for these services. Revenues
received for the maintenance and support services were recognized by the Company
when they were earned.
INVESTMENT IN FX DIRECT DEALER- The Company's interest in the joint venture is
accounted for at cost basis and adjusted for the Company's share in any net
F-6
profits or losses of the joint venture. The Company has received no cash
distributions since its investment in the joint venture in March 2002.
CASH AND INTEREST BEARING DEPOSITS- For the purpose of calculating changes in
cash flows, cash includes all cash balances and highly liquid short-term
investments with an original maturity of three months or less.
BAD DEBT EXPENSE- The Company provides, through charges to income, a charge for
bad debt expense, which is based upon management's evaluation of numerous
factors in regards to the account receivable. These factors include economic
conditions, the paying performance of the account receivable, and an analysis of
the credit worthiness of the payee.
FIXED ASSETS- Office and computer equipment are stated at cost. Depreciation
expense is computed using the straight-line method over the estimated useful
life of the asset. The following is a summary of the estimated useful lives used
in computing depreciation expense:
Furniture & lease improvements 7 years
Office equipment 3 years
Computer hardware 3 years
Software 3 years
Expenditures for major repairs and renewals that extend the useful life of the
asset are capitalized. Minor repair expenditures are charged to expense as
incurred.
LONG LIVED ASSETS- The Company reviews for the impairment of long-lived assets
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. An impairment loss would be recognized when
estimated future cash flows expected to result from the use of the asset and its
eventual disposition is less than its carrying amount.
INCOME TAXES- The Company accounts for income taxes in accordance with the
Statement of Accounting Standards No. 109 (SFAS No. 109), "ACCOUNTING FOR INCOME
TAXES". SFAS No. 109 requires an asset and liability approach to financial
accounting and reporting for income taxes. Deferred income tax assets and
liabilities are computed annually for differences between financial statement
and income tax bases of assets and liabilities that will result in taxable
income or deductible expenses in the future based on enacted tax laws and rates
applicable to the periods in which the differences are expected to affect
taxable income. Valuation allowances are established when necessary to reduce
deferred tax assets and liabilities to the amount expected to be realized.
Income tax expense is the tax payable or refundable for the period adjusted for
the change during the period in deferred tax assets and liabilities.
F-7
RECENT ACCOUNTING PRONOUNCEMENTS:
In September 2006, the FASB issued SFAS No. 157, "FAIR VALUE MEASUREMENTS"
("SFAS 157"). SFAS 157 provides guidance for using fair value to measure assets
and liabilities. It also responds to investors' requests for expanded
information about the extent to which companies measure assets and liabilities
at fair value, the information used to measure fair value and the effect of fair
value measurements on earnings. SFAS 157 applies whenever other standards
require (or permit) assets or liabilities to be measured at fair value. The
standard does not expand the use of fair value in any new circumstances, but
provides clarification on acceptable fair valuation methods and applications.
SFAS 157 was effective for financial statements issued for fiscal years
beginning after November 15, 2007, and interim periods within those fiscal
years. The adoption of SFAS 157 did not have a material affect on the Company's
consolidated financial statements.
In February 2007, the FASB issued SFAS No. 159, "THE FAIR VALUE OPTION FOR
FINANCIAL ASSETS AND FINANCIAL LIABILITIES" ("SFAS 159"). SFAS 159 permits
entities to choose to measure many financial assets and financial liabilities at
fair value. Unrealized gains and losses on items for which the fair value option
has been elected are reported in earnings. SFAS 159 is effective for fiscal
years beginning after November 15, 2007. The adoption of SFAS 159 did not have a
material affect on the Company's consolidated financial statements.
In December 2007, the FASB issued SFAS No. 141(R), "BUSINESS COMBINATIONS"
("SFAS 141(R)"). SFAS 141(R) establishes principles and requirements for how the
acquirer of a business recognizes and measures in its financial statements the
identifiable assets acquired, the liabilities assumed, and any noncontrolling
interest in the acquiree. The statement also provides guidance for recognizing
and measuring the goodwill acquired in the business combination or a gain from a
bargain purchase and determines what information to disclose to enable users of
financial statements to evaluate the nature and financial effects of the
business combination. SFAS 141(R) is effective for financial statements issued
for fiscal years beginning after December 15, 2008. The adoption of SFAS 141(R)
will not have a material affect on the Company's consolidated financial
statements.
In March 2008, the FASB issued SFAS No. 161, "DISCLOSURES ABOUT DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES-AN AMENDMENT OF FASB STATEMENT NO. 133"
("SFAS 161"). SFAS 161 updates guidance regarding disclosure requirements for
derivative instruments and hedging activities. It responds to constituents'
concerns that FASB Statement No. 133 does not provide adequate information about
how derivative and hedging activities affect an entity's financial position,
financial performance, and cash flows. SFAS 161 is effective for financial
statements issued for fiscal years and interim period beginning after November
15, 2008. The adoption of SFAS 161 will not have a material affect on the
Company's consolidated financial statements.
F-8
2. FAIR VALUES OF FINANCIAL INSTRUMENTS
The carrying amounts of cash and short term deposits, account receivable,
shareholder advances, and accounts payable and accrued expenses reported in the
consolidated balance sheets are estimated by management to approximate fair
value at January 31, 2009 and January 31, 2008.
3. NET INCOME (LOSS) PER SHARE
The Company applies SFAS No. 128, EARNINGS PER SHARE to compute net loss per
share. In accordance with SFAS No. 128, basic net loss per share has been
computed based on the weighted average of common shares outstanding during the
years. Diluted net loss per share gives the effect of outstanding common stock
equivalents which are convertible into common stock. The effects on net loss per
share for fiscal year of the common stock equivalents are not included in the
calculation of net loss per share since their inclusion would be anti-dilutive.
4. IMPAIRMENT EXPENSE
At the end of fiscal year 2008, the income stream from software maintenance
revenues on the FX3000 was cancelled by Tradition. At that time, management
decided to impair the balance of the net fixed assets of the Company because the
discounted future cash flows form the assets could not be assured. Accordingly,
the Company recognized an impairment expense of $32,277 in fiscal year 2008 in
the statement of operations.
5. OPTIONS
The Company applies SFAS No. 123, "ACCOUNTING FOR STOCK-BASED COMPENSATION" to
account for option issues. Accordingly, all options granted are recorded at fair
value using a generally accepted option pricing model at the date of the grant.
There is no formal stock option plan for employees.
F-9
A listing of options outstanding at January 31, 2009 is as follows.
Wgtd Avg
Wgtd Avg Years to
Amount Exercise Price Maturity
------ -------------- --------
Outstanding at January 31, 2007 3,835,690 $5 2.52
Issued 0
Expired 0
Exercised 0
---------
Outstanding at January 31, 2008 3,835,690 $5 1.52
Issued 0
Expired 0
Exercised 0
---------
Outstanding at January 31, 2009 3,835,690 $5 0.51
=========
6. PREFERRED STOCK
CLASS A PREFERRED STOCK: Class A preferred stock has a stated value of $3 per
share and a cumulative non-participating dividend of 13%. The Class A preferred
stock is convertible into common stock at a conversion ratio of one preferred
share for one common share.
CLASS B PREFERRED STOCK: Class B preferred stock has a stated value of $3 per
share and a cumulative non-participating dividend of 6%. The Class B preferred
stock is convertible into common stock at a conversion ratio of one preferred
share for one common share.
F-10
7. INCOME TAXES
Provision for income taxes is comprised of the following:
2009 2008
----------- -----------
Net (loss) before provision for income taxes $ (538,074) $ (661,489)
=========== ===========
Current tax expense:
Federal $ 0 $ 0
State 0 0
----------- -----------
Total $ 0 $ 0
Add deferred tax payable (benefit):
Timing differences (4,466,066) (3,135,104)
Allowance for recoverability 4,466,066 3,135,104
----------- -----------
Provision for income taxes $ 0 $ 0
=========== ===========
A reconciliation of provision for income taxes at the statutory rate to
provision for income taxes at the Company's effective tax rate is as follows:
Statutory U.S. federal rate 34% 34%
Statutory state and local income tax 13% 9%
Timing differences -47% -43%
----------- -----------
Effective rate 0% 0%
=========== ===========
Deferred income taxes are comprised of the following:
Timing differences $ 4,466,066 $ 3,135,104
Allowance for recoverability (4,466,066) (3,135,104)
----------- -----------
Deferred tax benefit $ 0 $ 0
=========== ===========
Note: The deferred tax benefits arising from the timing differences expires in
fiscal years 2028 and 2029 and may not be recoverable upon the purchase of the
Company under current IRS statutes.
8. ISSUANCES OF COMMON STOCK
During fiscal year 2008, the company issued a stock dividend of 211,431 shares
to the preferred stockholders.
9. RELATED PARTY TRANSACTIONS
During fiscal year 2008, the Company paid $29,488 to a consulting firm that is
owned by the chief executive officer.
F-11
10. COMMITMENTS AND CONTINGENCIES
During fiscal 2008, the Company was committed to a non-cancelable lease for
office space in New York City, expiring in 2012. In July 2006, the Company
entered into a sub-leasing agreement with a company for the bulk of its office
space in New York City, also expiring in 2012. In July 2008, the Company
assigned its rights and responsibilities under the lease to the sub-tenant;
however, the Company remains liable on the original lease in the event of a
default by the subtenant. The minimum required base rent on the lease is as
follows:
2009 $135,245
2010 139,302
2011 143,481
2012 24,448
--------
Total $442,475
========
Rent expense for the fiscal years 2009 and 2008 was $61,218 and $111,853,
respectively.
The firm had executed employment contracts with the president and vice president
of the Company since April 2002. Under the terms of the contracts, the two
officers are to be paid $250,000 per year each, retroactive to April 2002, in
the event the Company receives profit distributions from its 25% investment in
FX Direct Dealer, LLC. In fiscal year 2008, the Company's investment in FX
Direct Dealer became profitable and. As a result, the Company recognized a
salary expense in fiscal year 2008 of $3,160,071.
11. SUBSEQUENT EVENT- SALE OF THE INVESTMENT IN FX DIRECT DEALER
In March 2009, the Company sold its 25% interest in the joint venture to FX
Direct Dealer for $26 million. The Company received a subordinated note from FX
Direct for $17 million and $9 million in cash. The subordinated note receivable
is unsecured and subordinated to the claims of the general creditors of FX
Direct. The note carries an interest rate of 10% and the principal is payable in
36 equal monthly installments for the next three years, with interest. The
payment of the $9 million cash is due in March 2009 and the monthly payments on
the subordinated note begin in April 2009.
In March 2009, the Company received $9 million in cash from FX Direct as per the
terms of the sale.
In April 2009, the first installment on the subordinated note receivable was
received from FX Direct Dealer, LLC.
F-12
12. RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS
2009 RESTATEMENT
Subsequent to the issuance of the financial statements for the years ended
January 31, 2009 and January 31, 2008, management determined that the effective
date of the sale of its interest in FX Direct Dealer, as discussed in Note 11,
occurred in March 2009 and not in January 2009. Accordingly, the result of the
sale of the interest has been adjusted to a sale date of March 9, 2009. The sale
of this investment and resulting gain have been reflected in the financial
statements for the quarter ended April 30, 2009.
The restatement affected the previously issued consolidated balance sheets,
consolidated statements of operations, consolidated statement of cash flows, and
the consolidated statement of changes in shareholders equity. A highlight of the
changes to specific accounts and earnings (loss) per share calculations for
fiscal year 2009 is as follows:
As Reported As Restated
31-Jan-09 31-Jan-09
----------- -----------
Total assets $26,147,336 $ 2,549,394
Total liabilities $ 9,941,209 $ 3,498,970
Shareholders' equity (deficit) $16,206,127 $ (949,576)
Gain on disposal of discontinued component $17,155,703 $ 0
Net income (loss) $16,617,629 $ (538,074)
Fully diluted earnings (loss) per share $ 0.80 $ (0.03)
In the initial amendment to the Company's financial statements, as described
above, we had previously reported the activity from our investment in FX Direct
as a "discontinued operation." Management has now determined that the
disposition of this investment did not meet the requirements of a "discontinued
operation" and as such , has restated its 2009, and comparative 2008, financial
statements as a second amendment to the Company's financial statements, to
reflect the activity of the FX Direct investment as part of continuing
operations. The effects of this restatement are as follows:
As Reported As Restated As Reported As Restated
2009 2009 2008 2008
----------- ----------- ----------- -----------
Total Revenue $ 0 $ 0 $ 0 $ 328,000
Loss from continuing
operations $ (792,525) $ (538,074) $(3,396,547) $ (661,489)
Discontinued Operations $ 254,451 $ 0 $ 2,735,058 $ 0
Net Loss $ (538,074) $ (538,074) $ (661,489) $ (661,489)
Loss per share from
Continuing operations $ (0.04) $ (0.03) $ (0.19) $ (0.04)
Income per share from
discontinued operations $ 0.01 $ 0 $ 0.15 $ 0
Loss per share $ (0.03) $ (0.03) $ (0.04) $ (0.04)
F-13
2008 RESTATEMENT
Subsequent to the issuance of the financial statements for the years ended
January 31, 2008 and January 31, 2007, the Company received financial
information from FX Direct regarding its joint venture investment in FX Direct
Dealer, LLC pertaining to fiscal year 2008. This new information required the
restatement of the financial statements previously issued for gains on its
investment in FX Direct Dealer and also the accrual of salaries to the Company's
officers discussed in Note 10.
The restatement affected the previously issued consolidated balance sheets,
consolidated statements of operations, consolidated statement of cash flows, and
the consolidated statement of changes in shareholders equity. A highlight of the
changes to specific accounts and earning (loss) per share calculations for
fiscal year 2008 is as follows:
As Reported As Restated
31-Jan-08 31-Jan-08
----------- -----------
Net income (loss) $ (160,807) $ (661,489)
Total assets $ 120,160 $ 2,527,218
Total liabilities $ 30,980 $ 2,938,720
Shareholders' equity $ 89,180 $ (411,502)
Earnings (loss) per share -
basic & fully diluted $ (0.01) $ (0.04)
F-14