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EX-32.1 - SECTION 906 CERTIFICATION - ADVANCED TECHNOLOGIES GROUP LTDex32-1.txt
EX-31.1 - CEO SECTION 302 CERTIFICATION - ADVANCED TECHNOLOGIES GROUP LTDex31-1.txt
EX-31.2 - CFO SECTION 302 CERTIFICATION - ADVANCED TECHNOLOGIES GROUP LTDex31-2.txt

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

                 Quarterly Report Under Section 13 or 15(d) of
                      The Securities Exchange Act of 1934

                       For the Period ended July 31, 2011

                         Commission File Number 0-30987


                        ADVANCED TECHNOLOGIES GROUP, LTD.
             (Exact name of Registrant as specified in its Charter)

           Nevada                                               80-0987213
(State or other jurisdiction of                              (I.R.S. Employer
 incorporation or organization)                           Identification Number)

                 331 Newman Springs Rd., Bld. 1, 4Fl. Suite 143,
                               Red Bank, NJ 07701
                                  732-784-2801
          (Address and telephone number of principal executive offices)

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 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 [X] NO [ ]

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]
(Do Not Check if a Smaller Reporting Company)

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

As of July 31, 2011 the registrant had 18,948,966 shares of common stock $0.0001
par value, issued and outstanding.

TABLE OF CONTENTS Item Page ---- ---- PART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements 3 Balance sheet as of July 31, 2011 and January 31, 2011 4 Statement of operations for three months and six months ended July 31, 2011 and 2010 5 Statement of cash flows for six months ended July 31, 2011 and 2010 6 Statement of changes in shareholders equity for the six months ended July 31, 2011 7 Notes to condensed consolidated financial statements 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 13 Item 3. Quantitative and Qualitative Disclosures About Market Risk 16 Item 4. Controls and Procedures 16 PART II. OTHER INFORMATION Item 1. Legal Proceedings 17 Item 1A. Risk Factors 18 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 18 Item 3. Defaults Upon Senior Securities 18 Item 4. Reserved 18 Item 5. Other Information 19 Item 6. Exhibits 19 Signatures 20 2
PART I: FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS The following unaudited consolidated financial statements have been prepared by Advanced Technologies Group, Ltd. (the "Company" or "ATG") pursuant to the rules and regulations of the Securities and Exchange Commission promulgated under the Securities Exchange Act of 1934 as amended. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principals have been condensed or omitted pursuant to such rules and regulations. In the opinion of the Company's management, the consolidated financial statements include all adjustments (consisting only of adjustments of a normal, recurring nature) necessary to present fairly the financial information set forth herein. 3
Advanced Technologies Group, Ltd. Consolidated Balance Sheets As of July 31, 2011 and January 31, 2011 31-Jul-11 31-Jan-11 ------------ ------------ ASSETS Current assets: Cash & cash equivalents $ 254,755 $ 12,576 Subordinated note receivable 4,250,000 5,666,668 Deferred tax asset 1,200,000 1,200,000 Prepaid taxes 197,500 488,575 ------------ ------------ Total current assets 5,902,255 7,367,819 Other assets: Subordinated note receivable- non current portion 0 944,444 Investment in FX Direct Dealer 5,000 5,000 Trademark- net 5,754 6,054 Fixed assets- net 1,551 1,839 ------------ ------------ Total assets $ 5,914,560 $ 8,325,156 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) Current liabilities: Accounts payable & accrued expenses $ 3,236,616 $ 5,313,876 ------------ ------------ Total current liabilities 3,236,616 5,313,876 Shareholder advance payable 9,872 9,872 ------------ ------------ Total liabilities 3,246,488 5,323,748 Shareholders' equity: Series A preferred stock, one share convertible to one share of common; 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; 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, 18,948,966 shares at January 31, 2011 and 18,948,966 at July 31, 2011 1,895 1,895 Additional paid in capital 32,823,815 32,823,815 Accumulated deficit (36,254,993) (35,921,657) ------------ ------------ Total shareholders' equity 2,668,072 3,001,408 ------------ ------------ Total Liabilities & Shareholders' Equity $ 5,914,560 $ 8,325,156 ============ ============ See the notes to the financial statements. 4
Advanced Technologies Group, Ltd. Consolidated Statements of Operations For the Six months and Quarters Ended July 31, 2011 and July 31, 2010 6 Months 6 Months 3 Months 3 Months 31-Jul-11 31-Jul-10 31-Jul-11 31-Jul-10 ------------ ------------ ------------ ------------ General and administrative expenses: Salaries and benefits $ 340,000 $ 508,205 $ 170,000 $ 364,724 Consulting 0 85,600 0 (9,850) General administration 49,484 268,539 42,414 88,348 ------------ ------------ ------------ ------------ Total general & administrative expenses 389,484 862,344 212,414 443,222 ------------ ------------ ------------ ------------ Net loss from operations (389,484) (862,344) (212,414) (443,222) Other revenues and expenses: Interest income 56,148 558,079 242 261,452 Gain on short term investments 0 371,359 0 264,639 ------------ ------------ ------------ ------------ Net income (loss) before provision for income taxes (333,336) 67,094 (212,172) 82,869 Provision for income taxes 0 (19,962) 0 (24,071) ------------ ------------ ------------ ------------ Net income (loss) $ (333,336) $ 47,132 $ (212,172) $ 58,798 ============ ============ ============ ============ Basic & fully diluted net income (loss) per common share: Basic income (loss) per share $ (0.02) $ 0.00 $ (0.01) $ 0.00 Fully diluted income (loss) per share $ (0.02) $ 0.00 $ (0.01) $ 0.00 Weighted average of common shares outstanding: Basic 18,948,966 18,486,535 18,948,966 18,486,535 Fully diluted 18,948,966 20,858,571 18,948,966 20,858,571 See the notes to the financial statements. 5
Advanced Technologies Group, Ltd. Consolidated Statements of Cash Flows For the Six Months Ended July 31, 2011 and July 31, 2010 31-Jul-11 31-Jul-10 ----------- ----------- Operating Activities: Net income (loss) $ (333,336) $ 47,132 Adjustments to reconcile net income (loss) items not requiring the use of cash: Amortization 300 300 Depreciation 288 288 Changes in other operating assets and liabilities: Accounts payable & accrued expenses 283,852 (2,261,526) Prepaid taxes 291,075 471,742 Income taxes payable 0 (136,614) Deferred income taxes payable 0 (489,136) ----------- ----------- Net cash provided by (used in) operations 242,179 (2,367,814) Investing activities: Purchase of securities 0 (3,685,502) Proceeds from note receivable 0 3,305,554 ----------- ----------- Net cash used in investing activities 0 (379,948) Financing Activities: Advances received (paid) shareholders 0 0 ----------- ----------- Net cash provided (used in) by financing activities 0 0 ----------- ----------- Net increase (decrease) in cash during the year 242,179 (2,747,762) Cash balance at January 31st 12,576 2,747,762 ----------- ----------- Cash balance at July 31st $ 254,755 $ 0 =========== =========== Supplemental disclosures of cash flow information: Interest paid during the period $ 0 $ 0 Income taxes paid during the period $ 0 $ 99,000 See the notes to the financial statements. 6
Advanced Technologies Group, Ltd. Consolidated Statement of Changes in Shareholders' Equity (Deficit) For the Six Months Ended July 31, 2011 and July 31, 2010 Common Common Preferred Preferred Paid in Accumulated Shares Par Value Shares Value Capital Deficit Total ------ --------- ------ ----- ------- ------- ----- Balance at January 31, 2011 18,948,966 $ 1,895 2,372,036 $6,097,355 $32,823,815 $(35,921,657) $ 3,001,408 Net loss (333,336) (333,336) ---------- -------- --------- ---------- ----------- ------------ ----------- Balance at July 31, 2011 18,948,966 $ 1,895 2,372,036 $6,097,355 $32,823,815 $(36,254,993) $ 2,668,072 ========== ======== ========= ========== =========== ============ =========== Balance at January 31, 2010 18,486,535 $ 1,849 2,372,036 $6,097,355 $32,715,950 $(22,684,245) $16,130,909 Net income 47,132 47,132 ---------- -------- --------- ---------- ----------- ------------ ----------- Balance at July 31, 2010 18,486,535 $ 1,849 2,372,036 $6,097,355 $32,715,950 $(22,637,113) $16,178,041 ========== ======== ========= ========== =========== ============ =========== See the notes to the financial statements. 7
Advanced Technologies Group, Ltd. Notes to the Consolidated Financial Statements For the Quarters Ended April 30, 2011 and April 30, 2010 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 (FXDD), a Delaware company that marketed the FX3000 software to independent foreign currency traders. In March 2009, the Company sold its 25% interest in the joint venture to FXDD for $26 million. The Company's principal current business activity is the development of the MoveIdiot.com website, which the Company acquired in July 2009. In addition, the Company has been seeking to acquire and/or develop other new technologies and business opportunities and will also consider investing in commercial real estate opportunities. In June 2010, the United States District Court of the Southern District of New York granted an asset freeze to the Securities and Exchange Commission (SEC) freezing most of the Company's assets. The asset freeze was granted based upon allegations by the SEC that the Company had raised $14,741,761 by improperly selling shares of its common stock. The SEC action sought disgorgement of all Company profits earned from the sale of the FXDD interest. In October 2010, the Company reached an agreement with the SEC to settle the action in its entirety, which received the final approval of the SEC on December 30, 2010. Under the settlement agreement, the Company consented to a judgment in the total amount of $19,186,536, of which $14,883,400 was paid in January 2011 and the balance payable in nine monthly installments following the entry of the judgment with the court. Such funds are to be distributed to investors who participated in the unregistered offerings pursuant to a Plan of Distribution yet to be approved by the United States District Court for the Southern District of New York. The Company is due funds from the sale of the FXDD interest in excess of the balance due and at this time expects all payments due under the settlement agreement to be timely made. 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. 8
CASH AND CASH EQUIVALENTS- 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. SUBORDINATED NOTE RECEIVABLE- The subordinated loan receivable from FXDD results from the sale of the Company's interest in the joint venture in 2009. The estimated fair value of the subordinated loan receivable from FXDD is based upon the discounting of the future cash flows from the asset using a risk adjusted lending rate form loans of similar in risk and duration. At July 31, 2011 and January 31, 2011, the fair value of the subordinated loan receivable was $4,325,000 and $6,775,000, respectively 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 generally accepted accounting principles which require 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. The Company follows the accounting requirements associated with uncertainty in income taxes using the provisions of Financial Accounting Standards Board (FASB) ASC 740, INCOME TAXES. Using that guidance, tax positions initially need to be recognized in the financial statements when it is more likely than not the positions will be sustained upon examination by the tax authorities. It also provides guidance for derecognition, classification, interest and penalties, 9
accounting in interim periods, disclosure and transition. As of July 31, 2011, the Company has no uncertain tax positions that qualify for either recognition or disclosure in the financial statements. All tax returns from fiscal years 2007 to 2010 are subject to IRS audit. 2. NET INCOME (LOSS) PER SHARE Basic net income (loss) per share has been computed based on the weighted average of common shares outstanding during the years. Diluted net income (loss) per share gives the effect of outstanding preferred stock which is convertible into common stock (see Note 3). The effects of the convertible preferred stock were excluded from the calculation of diluted net loss per share since its inclusion would be anti-dilutive. The calculation for net income (loss) per share is as follows. 31-Jul-11 31-Jul-10 ----------- ----------- Net income (loss) $ (333,336) $ 47,132 =========== =========== Basic shares outstanding (weighted average) 18,948,966 18,486,535 Fully diluted shares outstanding (weighted average) 18,948,966 20,858,571 Basic income (loss) per share $ (0.02) $ 0.00 Fully diluted income (loss) per share $ (0.02) $ 0.00 3. PREFERRED STOCK CLASS A PREFERRED STOCK: Class A preferred stock has a stated value of $3 per share. Holders of the Class A preferred stock are entitled to receive a common stock dividend of 13% of the outstanding Class A shares on an annual basis based on a value of $3 per share. 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. Holders of the Class B preferred stock are entitled to receive a common stock dividend of 6% of the outstanding Class B shares on an annual basis based on a value of $3 per share. The Class B preferred stock is convertible into common stock at a conversion ratio of one preferred share for one common share. 10
4. INCOME TAXES Provision for income taxes is comprised of the following: 31-Jul-11 31-Jul-10 ----------- ----------- Net income (loss) before provision for income taxes $ (333,336) $ 67,094 =========== =========== Current tax expense: Federal $ 0 $ 11,774 State 0 10,783 ----------- ----------- Total 0 22,557 Less deferred tax benefit: Tax loss carryforward 0 0 Less allowance for tax recoverability 0 0 ----------- ----------- Provision for income taxes $ 0 $ 22,557 =========== =========== 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 39% 39% Statutory state and local income tax 13% 13% ----------- ----------- Effective rate 52% 52% =========== =========== Deferred tax asset: Loss carry forward $ 7,486,441 $ 0 Less valuation allowance (6,286,441) 0 ----------- ----------- Net deferred tax asset $ 1,200,000 $ 0 =========== =========== Note: The deferred tax benefits arising from the timing differences expires in fiscal years 2030 and may not be recoverable upon the purchase of the Company under current IRS statutes. 11
5. COMMITMENTS AND CONTINGENCIES The Company has executed employment contracts with the chief executive officer and the president of the Company in April 2002. Under the terms of the contracts, the two officers are to be paid $250,000 per year each through April 2011. 6. CONCENTRATION OF CREDIT RISK The Company has substantially all of its assets in cash and the subordinated note receivable from FXDD. In the event that payments due from the sales of the FXDD interest, the Company would be unable to meet its obligations and its financial position would be adversely affected. 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORWARD LOOKING STATEMENTS Some of the information contained in this Quarterly 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 Quarterly Report as well as in Item 1A of the Company's Annual Report on Form 10-K for the fiscal year ended January 31, 2011. 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. 13
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 Company intends to seek to acquire and/or develop new technologies and other business opportunities. In this regard, effective as of July 20, 2009, the Company entered into an Asset Purchase Agreement with Dan Khasis, LLC ("Seller"), pursuant to which the Company acquired all of the rights to Seller's website "moveidiot.com" and the related software for a purchase price of $57,000 plus the issuance to Seller of 25,000 restricted shares of Common Stock. In addition, Seller may receive up to an additional 50,000 restricted shares of Common Stock if certain membership goals for the moveidiot.com website are met in the 12 months following the closing. MoveIdiot.com is an online website which helps people and businesses expedite their move from place to another. On June 23, 2010, the SEC filed the SEC Action against ATG, and its officers in the United States District Court for the Southern District of New York. The SEC secured provisional relief in the form of an order (the "Asset Freeze Order") freezing the defendants' assets and prohibiting destruction, concealment or alteration of records pending final disposition of the action, to which the defendants consented, with certain carve outs for payments of necessary corporate and personal expenses. In October 2010, the defendants reached an agreement in principle with the SEC to settle the action in its entirety, which was prepared by the Court in January 2011. Under the SEC Settlement, defendants consented to judgment in the total amount of $19,186,536.32, of which approximately $14.8 million was paid within 14 days following entry of the judgment and the balance is due in nine monthly installments following the entry of judgment. The defendants also agreed to pay $500,000 to satisfy the costs of the administration of the Plan of Distribution under the SEC Settlement. See "Item 1. Legal Proceedings." As a result of the Asset Freeze Order, the Company has had limited access to its funds to support the growth of MoveIdiot.com. The Company will continue to have limited access to its funds until it completes the funding of the SEC Settlement, which will require most of the Company's cash resources. See "Liquidity and Capital Resources." RESULTS OF OPERATIONS The Company did not generate any revenues in the three and nine month periods ended July 31, 2011 or the three and nine month periods ended July 31, 2010 as the Company's Moveidiot.com website commenced operations in January 2010 and has not yet generated any revenues. We believe that the Company will need to expend substantial amounts in advertising and web site placement fees to attract users to our website in order to generate revenues, but our access to our cash resources has been restricted since June 2011 by the Asset Freeze Order, which has delayed the commercialization of MoveIdiot.com. Total general and administrative expenses were $212,414 and $389,484, respectively, in the three and six months ended July 31, 2011 as compared to 14
$443,222 and $862,344, respectively, in the three and six months ended July 31, 2010. The decrease in general and administrative expenses in the three and six months ended July 31, 2011 was primarily due to a curtailment of the Company's business activities in light of the Asset Freeze Order. Other revenues and expenses in the three and six months ended July 31, 2011 included interest income of $242 and $56,148, respectively, related to the Company's cash balances and the Subordinated Note. Other revenues and expenses in the three and six months ended July 31, 2010 included interest income of $261,452 and $558,079, respectively, and gain on short term investments of $264,638 and $371,359, respectively. The decrease in interest income in the three and six months ended July 31, 2011 and the absence of gain on short-term investments reflects the decrease in the remaining principal balance of the Subordinated Note and the decline in the Company's cash balances and short-term investments in order to comply with the terms of the SEC Settlement. As a result of the foregoing, the Company had a net loss of ($212,172) and ($333,336), respectively, in the three and six months ended July 31, 2011 as compared to net income of $58,798 and $47,132, respectively, in the three and six months ended July 31, 2010. LIQUIDITY AND CAPITAL RESOURCES At July 31, 2011, the Company had cash on hand of $254,755 as compared with cash of $12,576 at January 31, 2011. 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. Under the terms of the SEC Settlement, the Company has consented to a judgment against it in the amount of $19,186,536.32 and has agreed to pay $500,000 to satisfy the costs of administering the Plan of Distribution under the Settlement Agreement. As of January 31, 2001, approximately $14.8 million of the settlement had already been delivered to the SEC, with the remaining $4.9 million to be funded from collections under the Subordinated Note. As a result of the Asset Freeze Order, the Company has had limited access to its funds to support the growth of MoveIdiot.com. The Company will continue to have limited access to its funds until it completes the funding of the SEC Settlement, which will require most of the Company's cash resources. In addition, the SEC Settlement prohibits the Company and one of its officers from participating in any unregistered sales of securities for a five year period with the officer being further prohibited from participating in any "penny stock offering," which in general means an offering where the price per 15
share is less than $5.00. These restrictions will make it more difficult for the Company to raise funds to support its ongoing business operations. CASH FLOWS For the six months ended July 31, 2011 net cash provided by operating activities was $242,179 as compared to net cash used in operating activities of ($2,367,814) in the six months ended July 31, 2010. The increase in cash provided by operating activities in the six months ended July 31, 2011 was primarily due to the receipt of an income tax refund payable in connection with the SEC Settlement and a decrease in cash used to fund the SEC Settlement. For the six months ended July 31, 2011, there was no net cash provided by investing activities. For the six months ended July 31, 2010, net cash used in investing activities was ($379,948) representing collections on the Subordinated Note, offset by the purchase of short-term investments. For the six months ended July 31, 2011 and the six months ended July 31, 2010, there was no cash provided by or used in financing activities. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK At July 31, 2011, the Company had no outstanding borrowings under loan facilities. ITEM 4. 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, 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 because of the material weakness described below. At present, due to its limited scope of operations, the Company only has two full time employees, only one of whom, our chief financial officer, is involved in overseeing our financial reporting process. We have determined that this deficiency caused by the limited staffing constitutes a material weakness in the area of segregation of duties and adequacy of personnel. 16
(b) 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. (c) 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, for the reasons described above, our principal executive officer and principal financial officer have concluded, as of July 31, 2011, that our disclosure controls and procedures were not effective. PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS On June 23, 2010, the SEC filed a civil enforcement action (the "SEC Action") against ATG, and its officers Alexander Stelmak and Abelis Raskas in the United States District Court for the Southern District of New York ("the Court"). The SEC's Complaint alleged that between 1997 and 2006 the defendants raised $14,741,760.76 from investors through a series of illegal unregistered offerings of the securities of ATG and its predecessor companies, Oxford Global Network, Ltd., and Luxury Lounge, Inc. The SEC alleged that, in connection with these offerings, the defendants violated the securities registration requirements of Sections 5(a) and 5(c) of the Securities Act. The SEC sought disgorgement of all alleged ill-gotten gains, plus prejudgment interest thereon, for a total of $24,990,124 as well as additional relief. ATG, Stelmak and Raskas each served Answers to the Complaint in which they denied liability and asserted affirmative defenses. The SEC secured provisional relief in the form of an order (the "Asset Freeze Order" freezing the defendants' assets and prohibiting destruction, concealment or alteration of records pending final disposition of the action, to which the defendants consented, with certain carve outs for payments of necessary corporate and personal expenses. In October 2010, the defendants reached an agreement in principle with the SEC to settle (the "SEC Settlement") the action in its entirety, which received the final approval of the Commission on December 30, 2010. On January 13, 2010, the Court issued an Order setting a schedule to effectuate the settlement and approve a Plan of Distribution. The Court also entered, as part of the SEC Settlement, final judgments and consents for ATG, and the individual defendants. 17
Under the SEC Settlement, defendants consented to judgment in the total amount of $19,186,536.32, of which approximately $14.8 million was paid within 14 days following entry of the judgment and the balance is due in nine monthly installments following the entry of judgment. Such funds are to be distributed to investors who participated in the unregistered offerings at issue pursuant to a Plan of Distribution that was submitted to the Court by the SEC in March 2011 and which is subject to the Court's approval. The SEC has agreed that the Plan of Distribution will require the surrender and cancellation of shares of any investor who participates in the SEC Settlement and who continues to own shares in ATG. ATG has agreed to pay $500,000 to satisfy the costs of the administration of the Plan. ATG and Stelmak consented to judgment against them in the full amount of $19,186,536.32, and have agreed to certain prohibitions, including for Stelmak and ATG, a permanent injunction against future violations of Section 5(a) and 5(c) of the Securities Act, and for Stelmak a five year ban from participating in any offering of penny stock. Stelmak and ATG also have accepted civil penalties of $6,500 and $65,000, respectively. Raskas, for his part, consented to judgment of $4,749,948.03 of the total $19,186,536.32 judgment at issue. As no penalties or restrictions were sought against Raskas, none are contained in his proposed judgment. The SEC has agreed that all settlement funds (except the civil penalty for Stelmak) will be paid by ATG, with Raskas (only to the limited extent of his liability) and Stelmak responsible for any shortfall. ITEM 1A. RISK FACTORS An investment in the Company involves a high degree of risk. In addition to the other information set forth in this Report, you should carefully consider the factors discussed in Part I, "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended January 31, 2011, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing the Company. Other unknown or unpredictable factors could also have material adverse effects on future results. ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS Not Applicable ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not Applicable ITEM 4. RESERVED Not Applicable 18
ITEM 5. OTHER INFORMATION Not Applicable ITEM 6. EXHIBITS (a) Exhibits Incorp by Exhibit Ref. to Number Exh. Description ------ ---- ----------- 31.1 * Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Alex Stelmak, as Chief Executive Officer 31.2 * Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Alex Stelmak, as Chief Financial Officer 32.1 * Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Alex Stelmak, as Chief Executive Officer and Chief Financial Officer 101 * The following materials from the Advanced Technologies Group, Inc. Quarterly Report on Form 10-Q for the quarter ended July 31, 2011 formatted in Extensible Business Reporting Language (XBRL): (i) the Statements of Operations, (ii) the Balance Sheets, (iii) the Statements of Cash Flows, (iv) Statement of Stockholders' (Deficit) and (v) related notes. #101.INS XBRL Instance Document. #101.SCH XBRL Taxonomy Extension Schema Document. #101.CAL XBRL Taxonomy Extension Calculation Linkbase Document. #101.LAB XBRL Taxonomy Extension Label Linkbase Document. #101.PRE XBRL Taxonomy Extension Presentation Linkbase Document. #101.DEF XBRL Taxonomy Extension Definition Linkbase Document. ---------- * Filed herewith 19
SIGNATURES In accordance with the requirements of Section 13 of 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed in its behalf by the undersigned, thereunto duly authorized. Date: September 14, 2011 By: /s/ Abel Raskas --------------------------------------- Abel Raskas President Date: September 14, 2011 By: /s/ Alex Stelmak --------------------------------------- Alex Stelmak Chairman of the Board of Directors and Chief Executive Officer and Chief Financial Officer (Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer) 2