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EX-31.1 - ADVANCED TECHNOLOGIES GROUP LTDex31-1.txt
EX-31.2 - ADVANCED TECHNOLOGIES GROUP LTDex31-2.txt
EX-32.1 - ADVANCED TECHNOLOGIES GROUP LTDex32-1.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 October 31, 2012

                         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, 4 Fl. 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 October 31, 2012 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 October 31, 2012 and January 31, 2012 4 Statement of income (loss) for the three and nine months ended October 31, 2012 and 2011 5 Statement of cash flows for nine months ended October 31, 2012 and 2011 6 Statement of changes in shareholders equity for the nine months ended October 31, 2012 7 Notes to condensed consolidated financial statements 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 12 Item 3. Quantitative and Qualitative Disclosures About Market Risk 15 Item 4. Controls and Procedures 15 PART II. OTHER INFORMATION Item 1. Legal Proceedings 16 Item 1A. Risk Factors 17 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 18 Item 3. Defaults Upon Senior Securities 18 Item 4. Mine Safety Disclosures 18 Item 5. Other Information 18 Item 6. Exhibits 18 Signatures 19 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 October 31, 2012 and January 31, 2012 31-Oct-12 31-Jan-12 ------------ ------------ ASSETS CURRENT ASSETS: Cash $ 1,453,109 $ 1,185,519 Subordinated note receivable 0 956,218 ------------ ------------ TOTAL CURRENT ASSETS $ 1,453,109 $ 2,141,737 OTHER ASSETS: Investment in FX Direct Dealer 0 5,000 Trademark- net 4,994 5,449 Fixed assets- net 822 1,258 ------------ ------------ TOTAL ASSETS $ 1,458,925 $ 2,153,444 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) CURRENT LIABILITIES: Accounts payable & accrued expenses $ 202,760 $ 597,377 ------------ ------------ TOTAL CURRENT LIABILITIES 202,760 597,377 Shareholder advance payable 7,796 7,796 ------------ ------------ TOTAL LIABILITIES 210,556 605,173 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, 2012 and 18,948,966 at October 31, 2012 1,895 1,895 Additional paid in capital 32,823,815 32,823,815 Accumulated deficit (37,674,696) (37,374,794) ------------ ------------ TOTAL SHAREHOLDERS' EQUITY 1,248,369 1,548,271 ------------ ------------ TOTAL LIABILITIES & Shareholders' Equity $ 1,458,925 $ 2,153,444 ============ ============ See the notes to the financial statements. 4
Advanced Technologies Group, Ltd. Consolidated Statements of Operations For the Nine Months and Quarters Ended October 31, 2012 and October 31, 2011 9 Months 9 Months 3 Months 3 Months 31-Oct-12 31-Oct-11 31-Oct-12 31-Oct-11 ------------ ------------ ------------ ------------ GENERAL AND ADMINISTRATIVE EXPENSES: Salaries and benefits $ 162,000 $ 510,000 $ 54,001 $ 170,000 Consulting 11,325 0 11,325 0 General administration 126,595 56,500 46,160 7,016 ------------ ------------ ------------ ------------ TOTAL GENERAL & administrative expenses 299,920 566,500 111,486 177,016 ------------ ------------ ------------ ------------ Net loss from operations (299,920) (566,500) (111,486) (177,016) OTHER REVENUES AND EXPENSES: Interest income 18 56,149 3 1 ------------ ------------ ------------ ------------ Net income (loss) before provision for income taxes (299,902) (510,351) (111,483) (177,015) Provision for income taxes 0 0 0 0 ------------ ------------ ------------ ------------ NET INCOME (LOSS) $ (299,902) $ (510,351) $ (111,483) $ (177,015) ============ ============ ============ ============ Basic & fully diluted net income (loss) per common share: Net income (loss) per share $ (0.02) $ (0.03) $ (0.01) $ (0.01) Weighted average of common shares outstanding: Basic 18,948,966 18,948,966 18,948,966 18,948,966 Fully diluted 18,948,966 18,948,966 18,948,966 18,948,966 See the notes to the financial statements. 5
Advanced Technologies Group, Ltd. Consolidated Statements of Cash Flows For the Nine Months Ended October 31, 2012 and October 31, 2011 9 Months 9 Months 31-Oct-12 31-Oct-11 ----------- ----------- OPERATING ACTIVITIES: Net income (loss) $ (299,902) $ (510,351) Adjustments to reconcile net income (loss) items not requiring the use of cash: Amortization 455 453 Depreciation 436 435 Changes in other operating assets and liabilities: Accounts payable & accrued expenses (394,617) 744,928 ----------- ----------- NET CASH USED BY OPERATIONS (693,628) 235,465 INVESTING ACTIVITIES: Proceeds from note receivable 956,218 0 Investment in FXDD 5,000 0 ----------- ----------- NET CASH PROVIDED BY INVESTING ACTIVITIES 961,218 0 FINANCING ACTIVITIES: Advances received (paid) shareholders 0 0 ----------- ----------- NET CASH USED BY FINANCING ACTIVITIES 0 0 ----------- ----------- Net increase (decrease) in cash during the year 267,590 235,465 Cash balance at beginning of the year 1,185,519 12,576 ----------- ----------- CASH BALANCE AT OCTOBER 31ST $ 1,453,109 $ 248,041 =========== =========== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Interest paid during the period $ 0 $ 0 Income taxes paid during the period $ 0 $ 0 See the notes to the financial statements. 6
Advanced Technologies Group, Ltd. Consolidated Statement of Changes in Shareholders' Equity From February 1, 2011 to October 31, 2012 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 (1,453,137) (1,453,137) ---------- --------- --------- ---------- ----------- ------------ ----------- Balance at January 31, 2012 18,948,966 1,895 2,372,036 6,097,355 32,823,815 (37,374,794) 1,548,271 Net loss (299,902) (299,902) ---------- --------- --------- ---------- ----------- ------------ ----------- Balance at October 31, 2012 18,948,966 $ 1,895 2,372,036 $6,097,355 $32,823,815 $(37,674,696) $ 1,248,369 ========== ========= ========= ========== =========== ============ =========== See the notes to the financial statements. 7
Advanced Technologies Group, Ltd. Notes to the Consolidated Financial Statements For the Nine Months Ended October 31, 2012 and October 31, 2011 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, a spot foreign currency trading software platform. The FX3000 software program was a real time quote and money management platform used by independent spot 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. 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 approximately $15 million from 2001 to 2002 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. The balance was payable in nine monthly installments ending in October 2011. The funds collected by this judgment are to be distributed to the investors who participated in the unregistered offerings pursuant to a Plan of Distribution approved by the United States District Court for the Southern District of New York in March 2011. As of October 31, 2012, the holders of an aggregate of 700,916 shares of Series A preferred stock, 1,474,224 shares of Series B preferred stock and 3,944,629 shares of common stock had submitted approved claims under the Plan and the Company is in the process of cancelling such shares. The Company's current efforts are in the area of on-line property security through its subsidiary, MoveIdiot.com. In July 2009, the Company purchased the intellectual rights to MoveIdiot.com for $57,000 and 25,000 shares of common stock. MoveIdiot.com enables individuals and businesses to keep track of their property on-line. The software program enables users to manage their possessions on-line and print automatically generated labels that are sealable to be used in the event of moving from one location to another. The Company has no revenues 8
from MoveIdiot.com through the date of this report. The Company has no revenues from MoveIdiot.com through the date of this report. On or about August 1, 2012, the Company received a letter from the operator of the MoveIdiot.com website claiming that the Company owed it approximately $85,000 in unpaid service fees. The Company disputes that this amount is due. The MoveIdiot.com website is currently not being operated. The Company is currently evaluating whether or not to proceed with the development of MovieIdiot.com. 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. CASH- 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. FIXED ASSETS- Office equipment is stated at cost. Depreciation expense is computed using the straight-line method over the estimated useful life of the asset, which managements estimates to be three years. 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, accounting in interim periods, disclosure and transition. As of October 31, 2012 and October 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 2008 to 2011 are subject to IRS audit. 9
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 equivalents were excluded from the calculation of fully diluted loss per share since its inclusion would be anti-dilutive. The calculation for net income (loss) per share is as follows. 31-Oct-12 31-Oct-11 ------------ ------------ Net income (loss) $ (299,902) $ (510,351) ============ ============ Basic & fully diluted shares outstanding (weighted average) 18,948,966 18,948,966 Basic income (loss) per share $ (0.02) $ (0.03) 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-Oct-12 31-Oct-11 ----------- ----------- Net income (loss) before provision for income taxes $ (299,902) $ (510,351) =========== =========== Current tax expense: Federal $ 0 $ 0 State 0 0 ----------- ----------- Total 0 0 Less deferred tax benefit: Tax loss carryforwards (4,805,094) 0 Less allowance for tax recoverability 4,805,094 0 ----------- ----------- Provision for income taxes $ 0 $ 0 =========== =========== Deferred tax asset: Tax loss carry forwards $ 4,805,094 $ 7,486,441 Less valuation allowance (4,805,094) (6,286,441) ----------- ----------- Net deferred tax asset $ 0 $ 1,200,000 =========== =========== Note: The deferred tax benefits arising from the timing differences expires in fiscal years 2031 and 2032 and may not be recoverable upon the purchase of the Company under current IRS statutes. 5. CONCENTRATION OF CREDIT RISK The Company is substantially reliant on the efforts of the chief executive officer and the president of the Company. A withdrawal of these efforts would have a material adverse effect on the Company's future plans and operations. The Company keeps balances in banks that are in excess of insured amounts. 6. SUBSEQUENT EVENTS The Company has made a review of material subsequent events from October 31, 2012 through the date of this report and found no material subsequent events reportable during this period. 11
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, 2012. 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. 12
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 was paid in 36 equal monthly installments of $472,222.22, pursuant to a subordinated promissory note bearing interest at the rate of 10% per annum, that was issued pursuant to a Cash Subordinated Loan Agreement ("Loan Agreement"). 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. MoveIdiot.com enables individuals and businesses to keep track of their property on-line. The software program enables users to manage their possessions on-line and print automatically generated labels that are sealable to be used in the event of moving from one location to another. The Company has no revenues from MoveIdiot.com through the date of this report. On June 23, 2010, the Securities and Exchange Commission ("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 approved 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 was paid 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. As of October 31, 2012, the holders of an aggregate of 700,916 shares of Series A preferred stock, 1,474,224 shares of Series B preferred stock and 3,944,629 shares of common stock had submitted approved claims under the Plan and the Company is in the process of cancelling such shares. The Asset Freeze Order was lifted in November 2011. However, as a result of the Asset Freeze Order, the Company had limited access to its funds to support the growth of MoveIdiot.com while the Asset Freeze Order was in effect. On or about August 1, 2012, the Company received a letter from the operator of the MoveIdiot.com website claiming that the Company owed it approximately $85,000 in unpaid service fees. The Company disputes that this amount is due. The MoveIdiot.com website is currently not being operated. The Company is currently evaluating whether or not to proceed with the development of MovieIdiot.com. 13
RESULTS OF OPERATIONS The Company did not generate any revenues in the three and nine months ended October 31, 2012 or the three and nine months ended October 31, 2011 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 was restricted from June 2010 until November, 2011 by the Asset Freeze Order, which has delayed the commercialization of MoveIdiot.com. On or about August 1, 2012, the Company received a letter from the operator of the MoveIdiot.com website claiming that the Company owed it approximately $85,000 in unpaid service fees. The Company disputes that this amount is due. The MoveIdiot.com website is currently not being operated. The Company is currently evaluating whether or not to proceed with the development of MovieIdiot.com. Total general and administrative expenses were $111,486 and $299,920 in the three and nine months ended October 31, 2012, respectively, as compared to $177,016 and $566,500 in the three and nine months ended October 31, 2011, respectively. The decrease in general and administrative expenses in fiscal 2012 was primarily due to reductions in executive compensation and reductions in professional fees following the completion of the SEC Settlement. Other revenues and expenses in the three and nine months ended October 31, 2012 included interest income of $3.00, and $18.00, respectively, related to the Company's cash balances. Other revenues and expenses in the three and nine months ended October 31, 2011 included interest income of $1.00, and $56,149, respectively, related to the Company's cash balances and the Subordinated Note. The decrease in interest income in the three and nine months ended October 31, 2012 primarily reflects the decrease in the remaining principal balance of the Subordinated Note. As a result of the foregoing, the Company had a net loss of ($111,483) and ($299,902) in the three and nine months ended October 31, 2012, respectively, as compared to a net loss of ($177,015) and ($510,351) in the three and nine months ended October 31, 2011, respectively. LIQUIDITY AND CAPITAL RESOURCES At October 31, 2012, the Company had cash on hand of $1,453,109, compared with cash of $2,141,737 at January 31, 2012. 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 was paid in 36 equal monthly installments of $472,222.22, pursuant to a subordinated promissory note bearing interest at the rate of 10% per annum, that was issued pursuant to a Cash Subordinated Loan Agreement ("Loan Agreement"). 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. In May 2012, FX Direct exercised its right to repurchase the Company's remaining .01% interest in FX Direct for a purchase price of $5,600. 14
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 October 31, 2011, the full amount of the settlement had been delivered to the SEC. 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 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 nine months ended October 31, 2012 net cash used in operating activities was ($693,628) compared to net cash provided by operating activities of $235,465 in the nine months ended October 31, 2011. The increase in cash used in operating activities in the nine months ended October 31, 2012 was primarily due to a reduction in accounts payable and accrued expenses following the termination of the Asset Freeze. For the nine months ended October 31, 2012 net cash provided by investing activities increased to $956,218 as compared to net cash provided by investing activities of $0 in the nine months ended October 31, 2011, as a result of an increase in amounts on account of the Subordinated Note following the satisfaction of the SEC settlement. For the nine months ended October 31, 2012 and October 31, 2011, there were no cash amounts used in or provided by financing activities. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK At October 31, 2012, 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. 15
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. (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 October 31, 2012, 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. The Asset Freeze Order was lifted in November 2011 16
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, 2011, 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. 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 was paid 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 approved by the Court in September 2011. 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. As of October 31, 2012, the holders of an aggregate of 700,916 shares of Series A preferred stock, 1,474,224 shares of Series B preferred stock and 3,944,629 shares of common stock had submitted approved claims under the Plan and the Company is in the process of cancelling such shares. 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, 2012, 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. 17
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS Not Applicable ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not Applicable ITEM 4. MINE SAFETY DISCLOSURES Not Applicable 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 April 30, 2012 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. ---------- In accordance with Rule 406T of Regulation S-T, these interactive data files are deemed "not filed" for purposes of section 18 of the Exchange Act, and otherwise are not subject to liability under that section. ---------- * Filed herewith 18
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: December 3, 2012 By: /s/ Abel Raskas -------------------------------------- Abel Raskas President Date: December 3, 2012 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) 1