U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the three month period ended: March 31, 2007
Commission file No. 0-24511
ADVANCED OPTICS ELECTRONICS, INC.
(Name of small business issuer as specified in its charter)
Nevada | 88-0365136 | |
(State of incorporation) | (IRS Employer Identification No.) |
8301 Washington NE, Suite 5, Albuquerque, New Mexico 87113
(Address of principal executive offices including zip code)
Issuer's telephone number: (505) 797-7878
Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non−accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b−2 of the Exchange Act. (Check one):
Large Accelerated filer o Accelerated filer o Non-accelerated filer x
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b−2 of the Exchange Act). Yes o No x
The registrant had 16,618,836,349 shares of common stock, $.01 par value, outstanding at May 18, 2007.
PART I: FINANCIAL INFORMATION
ITEM 1: Financial Statements
ADVANCED OPTICS ELECTRONICS, INC. | |||||
(A Development Stage Company) | |||||
CONSOLIDATED BALANCE SHEETS | |||||
(Unaudited) |
March 31, 2007 | December 31, 2006 | ||||||
ASSETS | |||||||
Current Assets | |||||||
Cash | $ | 20,322 | $ | 81,140 | |||
Marketable securities | 14,238 | 78,086 | |||||
Other current assets | 21,057 | 21,057 | |||||
Total current assets | 55,617 | 180,283 | |||||
Intangibles, net of accumulated amortization of $93,168 and $88,717 | 199,170 | 201,822 | |||||
Property and Equipment, net of accumulated depreciation of $475,215 and $468,214 | 83,493 | 90,495 | |||||
Notes receivable and deposits | 59,283 | 58,298 | |||||
$ | 397,563 | $ | 530,898 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | |||||||
Current Liabilities | |||||||
Accounts payable | $ | 242,420 | $ | 231,910 | |||
Accrued expenses | 523,487 | 553,849 | |||||
Common stock subscribed | 20,250 | 45,750 | |||||
Advances from shareholders | 188,997 | 164,842 | |||||
Convertible debentures | 96,878 | 95,218 | |||||
Total current liabilities | 1,072,032 | 1,091,569 | |||||
Commitments and Contingencies | |||||||
Stockholders' Equity (Deficit) | |||||||
Preferred stock, $0.001 par value, 10,000,000 shares authorized; | |||||||
no shares issued and outstanding | - | - | |||||
Common stock, $0.001 par value, 16,000,000,000 and 13,000,000,000 shares | |||||||
authorized; 15,643,836,349 and 12,198,836,349 shares issued and outstanding | 15,643,836 | 12,198,836 | |||||
Treasury stock, at cost | (27,388 | ) | (27,269 | ) | |||
Additional paid in capital | 8,899,158 | 11,444,751 | |||||
Accumulated other comprehensive income (loss) | (24,105 | ) | (54,042 | ) | |||
Deficit accumulated during the development stage | (25,165,970 | ) | (24,122,947 | ) | |||
Total stockholders' equity (deficit) | (674,469 | ) | (560,671 | ) | |||
$ | 397,563 | $ | 530,898 | ||||
See accompanying notes to these consolidated financial statements |
2
ADVANCED OPTICS ELECTRONICS, INC. | |||||||
(A Development Stage Company) | |||||||
CONSOLIDATED STATEMENTS OF EXPENSES | |||||||
(Unaudited) |
For the three months ended March 31, | May 22, 1996 (Inception) Thorugh March 31, | |||||||||||
2007 | 2006 | 2007 | ||||||||||
OPERATING EXPENSES | ||||||||||||
General and administrative | $ | 1,239,983 | $ | 447,967 | $ | 16,757,199 | ||||||
Research and development | 471,807 | 128,093 | 3,498,385 | |||||||||
Professional fees | 139,661 | 65,379 | 725,891 | |||||||||
Depreciation & amortization | 11,453 | 12,187 | 236,311 | |||||||||
Licensing fees | 50 | - | 84,026 | |||||||||
Inventory write-off | - | - | 29,293 | |||||||||
Asset impairment | - | - | 592,884 | |||||||||
Operating expense | 1,862,954 | 653,626 | 21,923,989 | |||||||||
Loss on contract | - | - | (2,255,944 | ) | ||||||||
OPERATING LOSS | (1,862,954 | ) | (653,626 | ) | (24,179,933 | ) | ||||||
OTHER INCOME (EXPENSES) | ||||||||||||
Interest income | 1,007 | 922 | 90,002 | |||||||||
Realized gain (loss) on marketable equity securities | (74,019 | ) | 38,710 | (250,211 | ) | |||||||
Other investment gains | - | - | 59,784 | |||||||||
Loss from investment in Biomoda, Inc. | - | - | (289,750 | ) | ||||||||
Gain (loss) on disposal of assets | - | - | (3,520 | ) | ||||||||
Gain (loss) on settlement of debts | - | - | (540,024 | ) | ||||||||
Interest expense | (5,816 | ) | (8,627 | ) | (1,370,803 | ) | ||||||
Gain on issuance of stock in subsidiary | 898,759 | 1,570,234 | ||||||||||
Other income | - | - | 551 | |||||||||
Total other income (expenses) | 819,931 | 31,005 | (733,737 | ) | ||||||||
NET LOSS BEFORE CUMULATIVE EFFECT OF CHANGE | ||||||||||||
IN ACCOUNTING PRINCIPLE & EXTRAORDINARY LOSS | (1,043,023 | ) | (622,621 | ) | (24,913,670 | ) | ||||||
EXTRAORDINARY LOSS | - | - | (189,280 | ) | ||||||||
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING | ||||||||||||
PRINCIPLE | - | - | (63,020 | ) | ||||||||
NET LOSS | (1,043,023 | ) | (622,621 | ) | (25,165,970 | ) | ||||||
OTHER COMPREHENSIVE GAIN (LOSS) | ||||||||||||
Unrealized gain (loss) on marketable securities | 29,937 | (1,072 | ) | (24,105 | ) | |||||||
COMPREHENSIVE LOSS | $ | (1,013,086 | ) | $ | (623,693 | ) | $ | (25,190,075 | ) | |||
Basic and diluted net loss available to common shareholder | $ | (0.00 | ) | $ | (0.00 | ) | ||||||
per common share | ||||||||||||
Basic and diluted weighted average common shares | ||||||||||||
outstanding | 14,058,558,571 | 6,755,780,793 | ||||||||||
See accompanying notes to these consolidated financial statements |
3
ADVANCED OPTICS ELECTRONICS, INC. | |||||||||||||||||||||
(A Development Stage Company) | |||||||||||||||||||||
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) AND COMPREHENSIVE INCOME (LOSS) | |||||||||||||||||||||
For The Period From May 22, 1996 (Inception) Through March 31, 2007 | |||||||||||||||||||||
(Unaudited) |
Preferred Stock | Common Stock | Treasury Stock | Deficit | ||||||||||||||||||||||||||||
Additional | Other | Accumulated | Total | ||||||||||||||||||||||||||||
Paid In | N/R | Comprehensive | During the | Stockholders' | |||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Capital | Stockholder | Income | Development Stage | equity (deficit) | |||||||||||||||||||||
Balance at May 22, 1996 (Inception) | - | $ | - | - | $ | - | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||
Stock issued to incorporators for cash | - | - | 500,000 | 500 | - | - | 24,500 | - | - | - | 25,000 | ||||||||||||||||||||
Stock issued for the net assets of PLZ Tech, Inc. | - | - | 4,500,000 | 4,500 | - | - | 281,096 | - | - | - | 285,596 | ||||||||||||||||||||
Net loss | - | - | - | - | - | - | - | - | - | (76,902 | ) | (76,902 | ) | ||||||||||||||||||
Balance, December 31, 1996 | - | - | 5,000,000 | 5,000 | - | - | 305,596 | - | - | (76,902 | ) | 233,694 | |||||||||||||||||||
Stock issued for cash and services | - | - | 2,281,212 | 2,281 | - | - | 362,720 | - | - | - | 365,001 | ||||||||||||||||||||
Net loss | - | - | - | - | - | - | - | - | - | (84,690 | ) | (84,690 | ) | ||||||||||||||||||
Balance, December 31, 1997 | - | - | 7,281,212 | 7,281 | - | - | 668,316 | - | - | (161,592 | ) | 514,005 | |||||||||||||||||||
Stock issued for cash | - | - | 10,979,275 | 10,979 | - | - | 1,281,728 | - | - | - | 1,292,707 | ||||||||||||||||||||
Stock issued for services | - | - | 2,751,000 | 2,751 | - | - | 293,719 | - | - | - | 296,470 | ||||||||||||||||||||
Stock issued in exchange for note receivable | - | - | 315,000 | 315 | - | - | 28,685 | - | - | - | 29,000 | ||||||||||||||||||||
Purchase and retirement of treasury stock | - | - | (472,200 | ) | (472 | ) | - | - | (39,913 | ) | - | - | - | (40,385 | ) | ||||||||||||||||
Net loss | - | - | - | - | - | - | - | - | - | (752,111 | ) | (752,111 | ) | ||||||||||||||||||
Balance, December 31, 1998 | - | - | 20,854,287 | 20,854 | - | - | 2,232,535 | - | - | (913,703 | ) | 1,339,686 |
4
Stock issued for cash | - | - | 8,681,624 | 8,682 | - | - | 855,101 | - | - | - | 863,783 | ||||||||||||||||||||
Stock issued for services | - | - | 17,094,313 | 17,094 | - | - | 1,469,320 | - | - | - | 1,486,414 | ||||||||||||||||||||
Intrinsic value of beneficial conversion feature of notes payable | - | - | - | - | - | - | 174,610 | - | - | - | 174,610 | ||||||||||||||||||||
Fair value of warrants related to notes payable | - | - | - | - | - | - | 125,000 | - | - | - | 125,000 | ||||||||||||||||||||
Purchase and retirement of treasury stock | - | - | (489,251 | ) | (489 | ) | - | - | (10,643 | ) | - | - | - | (11,132 | ) | ||||||||||||||||
Purchase of treasury stock | - | - | - | - | (229,000 | ) | (41,760 | ) | - | - | - | - | (41,760 | ) | |||||||||||||||||
Sale of treasury stock | - | - | - | - | 85,000 | 11,130 | 24,334 | - | - | - | 35,464 | ||||||||||||||||||||
Net loss | - | - | - | - | - | - | - | - | - | (2,765,862 | ) | (2,765,862 | ) | ||||||||||||||||||
Balance, December 31, 1999 | - | - | 46,140,973 | 46,141 | (144,000 | ) | (30,630 | ) | 4,870,257 | - | - | (3,679,565 | ) | 1,206,203 | |||||||||||||||||
Stock issued for cash | 710 | 1 | 782,000 | 782 | - | - | 1,012,710 | - | - | - | 1,013,493 | ||||||||||||||||||||
Stock issued for services | - | - | 3,955,202 | 3,955 | - | - | 1,726,197 | - | - | - | 1,730,152 | ||||||||||||||||||||
Purchase of treasury stock | - | - | - | - | (63,500 | ) | (46,486 | ) | - | - | - | - | (46,486 | ) | |||||||||||||||||
Sale of treasury stock | - | - | - | - | 142,400 | 22,542 | 54,771 | - | - | - | 77,313 | ||||||||||||||||||||
Exercise of stock options for notes receivable | - | - | 1,850,000 | 1,850 | - | - | 220,150 | - | - | - | 222,000 | ||||||||||||||||||||
Amortization of discount of convertible preferred stock | - | - | - | - | - | - | 159,677 | (193,427 | ) | - | - | (33,750 | ) | ||||||||||||||||||
Exercise of preferred stock conversion feature | - | - | 9,200,000 | 9,200 | - | - | 533,678 | - | - | - | 542,878 | ||||||||||||||||||||
Issuance of convertible debentures | - | - | - | - | - | - | 263,830 | - | - | - | 263,830 | ||||||||||||||||||||
Exchange of preferred stock for convertible debentures | (710 | ) | (1 | ) | - | - | - | - | (869,678 | ) | - | - | - | (869,679 | ) | ||||||||||||||||
Intrinsic value of convertible debenture | - | - | - | - | - | - | 227,898 | - | - | - | 227,898 | ||||||||||||||||||||
De-investment in Wizard Technologies | - | - | - | - | - | - | (59,583 | ) | - | - | - | (59,583 | ) | ||||||||||||||||||
Net loss | - | - | - | - | - | - | - | - | - | (3,827,873 | ) | (3,827,873 | ) | ||||||||||||||||||
Balance, December 31, 2000 | - | - | 61,928,175 | 61,928 | (65,100 | ) | (54,574 | ) | 8,139,907 | (193,427 | ) | - | (7,507,438 | ) | 446,396 |
5
Stock issued for cash | - | - | 1,382,778 | 1,383 | - | - | 66,844 | - | - | - | 68,227 | ||||||||||||||||||||
Stock issued for services | - | - | 10,461,498 | 10,461 | - | - | 412,284 | - | - | - | 422,745 | ||||||||||||||||||||
Purchase of treasury stock | - | - | - | - | (251,700 | ) | (16,215 | ) | - | - | - | - | (16,215 | ) | |||||||||||||||||
Amortization of discount on convertible debentures | - | - | - | - | - | - | 143,875 | - | - | - | 143,875 | ||||||||||||||||||||
Stock issued upon debt conversion | - | - | 7,064,886 | 7,065 | - | - | 147,008 | - | - | - | 154,073 | ||||||||||||||||||||
Net loss | - | - | - | - | - | - | - | - | - | (1,985,142 | ) | (1,985,142 | ) | ||||||||||||||||||
Balance, December 31, 2001 | - | - | 80,837,337 | 80,837 | (316,800 | ) | (70,789 | ) | 8,909,918 | (193,427 | ) | - | (9,492,580 | ) | (766,041 | ) | |||||||||||||||
Stock issued for cash | - | - | 315,845,000 | 315,845 | - | - | 229,816 | - | - | - | 545,661 | ||||||||||||||||||||
Stock issued for services | - | - | 115,768,000 | 115,768 | - | - | 366,301 | - | - | - | 482,069 | ||||||||||||||||||||
Purchase of treasury stock | - | - | - | - | (1,400,000 | ) | (8,732 | ) | - | - | - | - | (8,732 | ) | |||||||||||||||||
Sale of treasury stock | - | - | - | - | 507,800 | 72,887 | (65,058 | ) | - | - | - | 7,829 | |||||||||||||||||||
Exercise of stock options for notes receivable | - | - | 1,100,000 | 1,100 | - | - | 20,900 | (22,000 | ) | - | - | - | |||||||||||||||||||
Advances to officer | - | - | - | - | - | - | - | (34,300 | ) | - | - | (34,300 | ) | ||||||||||||||||||
Reclass of accrued interest with note receivable | - | - | - | - | - | - | - | (59,175 | ) | - | - | (59,175 | ) | ||||||||||||||||||
Stock issued upon debt conversion | - | - | 78,695,566 | 78,696 | - | - | 348,324 | - | - | - | 427,020 | ||||||||||||||||||||
Retroactive application of equity method for investment | - | - | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||
in Biomoda, Inc. | - | - | - | - | - | - | - | - | - | (97,674 | ) | (97,674 | ) | ||||||||||||||||||
Net loss | - | - | - | - | - | - | - | - | - | (1,285,830 | ) | (1,285,830 | ) | ||||||||||||||||||
Balance, December 31, 2002 | - | - | 592,245,903 | 592,246 | (1,209,000 | ) | (6,634 | ) | 9,810,201 | (308,902 | ) | - | (10,876,084 | ) | (789,173 | ) | |||||||||||||||
Stock issued for cash | - | - | 1,477,760,000 | 1,477,760 | - | - | 4,553,055 | - | - | - | 6,030,815 | ||||||||||||||||||||
Stock issued for services | - | - | 367,249,994 | 367,250 | - | - | 1,464,845 | - | - | - | 1,832,095 | ||||||||||||||||||||
Purchase of treasury stock | - | - | - | - | (13,250,000 | ) | (61,943 | ) | - | - | - | - | (61,943 | ) | |||||||||||||||||
Sale of treasury stock | - | - | - | - | 9,950,000 | 24,846 | 31,707 | - | - | - | 56,553 | ||||||||||||||||||||
Accrued interest on advances to officer | - | - | - | - | - | - | - | (2,397 | ) | - | - | (2,397 | ) | ||||||||||||||||||
Cancellation of stock issued for note receivable | - | - | (2,950,000 | ) | (2,950 | ) | - | - | (241,050 | ) | 244,000 | - | - | - | |||||||||||||||||
Stock issued upon debt conversion, including $67,000 of interest | - | - | 320,830,452 | 320,830 | - | - | 337,563 | - | - | - | 658,393 | ||||||||||||||||||||
Gain on sale of available for sale securities | - | - | - | - | - | - | - | - | 17,449 | - | 17,449 | ||||||||||||||||||||
Net loss | - | - | - | - | - | - | - | - | - | (3,900,959 | ) | (3,900,959 | ) | ||||||||||||||||||
Comprenhesive loss | (3,883,510 | ) | |||||||||||||||||||||||||||||
Balance, December 31, 2003 | - | - | 2,755,136,349 | 2,755,136 | (4,509,000 | ) | (43,731 | ) | 15,956,321 | (67,299 | ) | 17,449 | (14,777,043 | ) | 3,840,833 |
6
Stock issued for cash | - | - | 462,800,000 | 462,800 | - | - | 656,231 | - | - | - | 1,119,031 | ||||||||||||||||||||
Stock issued for services | - | - | 47,200,000 | 47,200 | - | - | 207,580 | - | - | - | 254,780 | ||||||||||||||||||||
Purchase of treasury stock | - | - | - | - | (9,800,000 | ) | (41,724 | ) | - | - | - | - | (41,724 | ) | |||||||||||||||||
Sale of treasury stock | - | - | - | - | 14,100,000 | 48,260 | - | - | - | - | 48,260 | ||||||||||||||||||||
Stock issued upon debt conversion, including $166,240 of interest | - | - | 103,000,000 | 103,000 | - | - | 1,022,790 | - | - | - | 1,125,790 | ||||||||||||||||||||
Unrealized gain (loss) on marketable securities | - | - | - | - | - | - | - | - | (27,140 | ) | - | (27,140 | ) | ||||||||||||||||||
Net loss | - | - | - | - | - | - | - | - | - | (5,048,067 | ) | (5,048,067 | ) | ||||||||||||||||||
Comprenhesive loss | (5,075,207 | ) | |||||||||||||||||||||||||||||
Balance, December 31, 2004 | - | - | 3,368,136,349 | 3,368,136 | (209,000 | ) | (37,195 | ) | 17,842,922 | (67,299 | ) | (9,691 | ) | (19,825,110 | ) | 1,271,763 | |||||||||||||||
Stock issued for cash | - | - | 2,634,700,000 | 2,634,700 | - | - | (1,487,526 | ) | - | - | - | 1,147,174 | |||||||||||||||||||
Purchase of treasury stock | - | - | - | - | (22,205,000 | ) | (15,926 | ) | - | - | - | - | (15,926 | ) | |||||||||||||||||
Sale of treasury stock | - | - | - | - | 1,804,000 | 40,461 | (39,267 | ) | - | - | - | 1,194 | |||||||||||||||||||
Expense advances to officer, net of accrued interest | - | - | - | - | - | - | - | 67,299 | - | - | 67,299 | ||||||||||||||||||||
Stock issued upon debt conversion | - | - | 21,000,000 | 21,000 | - | - | 10,122 | - | - | - | 31,122 | ||||||||||||||||||||
Unrealized gain (loss) on marketable securities | - | - | - | - | - | - | - | - | 174,480 | - | 174,480 | ||||||||||||||||||||
Net loss | - | - | - | - | - | - | - | - | - | (2,055,779 | ) | (2,055,779 | ) | ||||||||||||||||||
Comprenhesive loss | (1,881,299 | ) | |||||||||||||||||||||||||||||
Balance, December 31, 2005 | - | - | 6,023,836,349 | 6,023,836 | (20,610,000 | ) | (12,660 | ) | 16,326,251 | - | 164,789 | (21,880,889 | ) | 621,327 | |||||||||||||||||
Stock issued for cash | - | - | 6,110,000,000 | 6,110,000 | (4,829,500 | ) | - | 1,280,500 | |||||||||||||||||||||||
Stock issued for services | - | - | 65,000,000 | 65,000 | (52,000 | ) | - | 13,000 | |||||||||||||||||||||||
Purchase of treasury stock | - | - | (41,375,000 | ) | (14,609 | ) | - | (14,609 | ) | ||||||||||||||||||||||
Unrealized gain (loss) on marketable securities | - | - | (218,831 | ) | - | (218,831 | ) | ||||||||||||||||||||||||
Net loss | - | - | (2,242,058 | ) | (2,242,058 | ) | |||||||||||||||||||||||||
Comprenhesive loss | (2,460,889 | ) | |||||||||||||||||||||||||||||
Balance, December 31, 2006 | - | - | 12,198,836,349 | 12,198,836 | (61,985,000 | ) | (27,269 | ) | 11,444,751 | - | (54,042 | ) | (24,122,947 | ) | (560,671 | ) | |||||||||||||||
Stock issued for cash | 3,445,000,000 | 3,445,000 | (3,206,500 | ) | 238,500 | ||||||||||||||||||||||||||
Purchase of treasury stock | (400,000 | ) | (119 | ) | (119 | ) | |||||||||||||||||||||||||
660,907 | 660,907 | ||||||||||||||||||||||||||||||
Unrealized gain (loss) on marketable securities | 29,937 | 29,937 | |||||||||||||||||||||||||||||
Net loss | (1,043,023 | ) | (1,043,023 | ) | |||||||||||||||||||||||||||
Balance, March 31, 2007 | - | $ | - | 15,643,836,349 | $ | 15,643,836 | (62,385,000 | ) | $ | (27,388 | ) | $ | 8,899,158 | $ | - | $ | (24,105 | ) | $ | (25,165,970 | ) | $ | (674,469 | ) |
See accompanying notes to these consolidated financial statements
7
ADVANCED OPTICS ELECTRONICS, INC. | |||||||||
(A Development Stage Company) | |||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||
(Unaudited) |
For the three months ended March 31, | May 22, 1996 (Inception) Through March 31, | ||||||||||
2007 | 2006 | 2007 | |||||||||
Cash flows from operating activities: | |||||||||||
Net loss | $ | (1,043,023 | ) | $ | (622,621 | ) | $ | (25,165,970 | ) | ||
Adjustments to reconcile net loss to net cash | |||||||||||
used in operating activities: | |||||||||||
Intrinsic value of conversion features | - | - | 610,603 | ||||||||
Write off of organization costs/goodwill | - | - | 63,020 | ||||||||
Extraordinary loss | - | - | 189,280 | ||||||||
Inventory write off | - | - | 29,293 | ||||||||
Amortization of discount on convertible notes and | |||||||||||
preferred stock | - | - | 295,209 | ||||||||
Gain on Genomed shares for services | (28,325 | ) | (28,325 | ) | |||||||
(Gain) loss on marketable securities | 74,019 | (38,710 | ) | 249,069 | |||||||
Loss on disposal of assets | - | - | 3,520 | ||||||||
Loss on investment in Biomoda, Inc. | - | - | 289,750 | ||||||||
Issuance of common stock for services | - | 13,000 | 6,517,726 | ||||||||
Issuance of Biomoda common stock and options for services | - | 3,250 | 165,000 | ||||||||
Issuance of notes payable for services | - | - | 50,000 | ||||||||
Exchange of investment securities for services | - | 163,350 | 316,778 | ||||||||
Increase in excess of costs and earnings over billings | |||||||||||
on uncompleted contract | - | - | (2,050,000 | ) | |||||||
Increase in allowance for loss on contract | - | - | 2,050,000 | ||||||||
Loss (Gain) on extinguishment of debt | - | - | 556,088 | ||||||||
Interest accrued on convertible debentures | - | - | 317,985 | ||||||||
Interest earned on note receivable from stockholder and | |||||||||||
related parties | - | - | (17,823 | ) | |||||||
Depreciation and amortization | 11,453 | 12,187 | 774,271 | ||||||||
Bad debt expense | - | - | 15,000 | ||||||||
Asset impairment | - | - | 592,884 | ||||||||
Other non-cash expenses | - | - | 34,923 | ||||||||
Expense advances to officer | - | - | 67,299 | ||||||||
Gain on forgiveness of debt to officer | - | - | (51,351 | ) | |||||||
Gain on stock held in subsidiary: | 660,907 | - | 660,907 | ||||||||
Decrease (Increase) in other current assets | - | 3,195 | (15,824 | ) | |||||||
Decrease in inventory | - | - | (35,293 | ) | |||||||
Bank overdraft | - | 14,961 | - | ||||||||
(Decrease) Increase in accounts payable and accrued expenses | (18,192 | ) | 87,034 | 482,167 | |||||||
Net cash used in operating activities | (343,161 | ) | (364,354 | ) | (13,033,814 | ) | |||||
Cash flows from investing activities: | |||||||||||
Purchases of property and equipment | - | - | (521,860 | ) | |||||||
Additions to Patent, trademark and license fee, net of extraordinary gain | (1,799 | ) | - | (140,741 | ) | ||||||
Investment in restricted cash | - | (30,000 | ) | - | |||||||
Investment in GenoMed | - | (115 | ) | (921,478 | ) | ||||||
Proceeds from sale of GenoMed | 48,091 | 62,401 | 547,529 | ||||||||
Investment in Biomoda, Inc. | - | - | (383,845 | ) | |||||||
Proceeds from sale of Biomoda, Inc. stock | - | - | 28,930 | ||||||||
Advances to Biomoda, Inc. | - | - | (38,432 | ) | |||||||
Advances from shareholders | - | - | 14,009 | ||||||||
Sale of marketable securities | - | - | 192,787 | ||||||||
Purchases of marketable securities | - | - | (650,187 | ) | |||||||
Cash of variable entity on consolidation | - | - | 155 | ||||||||
Increase in notes receivable | (985 | ) | (920 | ) | (59,283 | ) | |||||
Purchase of other assets | - | - | (245,579 | ) | |||||||
Net cash provided by (used in) investing activities | 45,307 | 31,366 | (2,177,995 | ) | |||||||
Cash flows from financing activities: | |||||||||||
Principal repayments on notes payable and capital leases | - | - | (308,346 | ) | |||||||
Proceeds from notes payable | - | - | 622,776 | ||||||||
Issuance of common stock for cash | 238,500 | 448,600 | 13,989,891 | ||||||||
Issuance of Biomoda common stock for cash | - | - | 60,000 | ||||||||
Advances from Biomoda stockholders | 24,155 | 3,756 | 39,995 | ||||||||
(Increase) decrease in note receivable stockholder | - | - | (5,422 | ) | |||||||
Proceeds from sale of treasury stock | - | - | 226,613 | ||||||||
Purchase of treasury stock | (119 | ) | (673 | ) | (289,031 | ) | |||||
Proceeds from issuance of convertible debt | - | - | 1,270,965 | ||||||||
Principal repayments on convertible debt | - | - | (395,560 | ) | |||||||
Incease in common stock subscribed | 25,500 | - | 20,250 | ||||||||
Net cash provided by financing activities | 237,036 | 451,683 | 15,232,131 | ||||||||
Net (decrease) increase in cash | (60,818 | ) | 118,695 | 20,322 | |||||||
Cash at beginning of period | 81,140 | 92,518 | - | ||||||||
Cash at end of period | $ | 20,322 | $ | 211,213 | $ | 20,322 | |||||
Supplemental disclosure of cash flow information - | |||||||||||
Cash paid during the year for: | |||||||||||
Interest | $ | - | $ | - | |||||||
Income taxes | $ | - | $ | - | |||||||
Non-cash transactions: | |||||||||||
Unrealized gain (loss) on marketable securities | $ | 29,937 | $ | 1,072 | |||||||
Common stock issued for stock payable | $ | 30,000 | $ | - |
See accompanying notes to these consolidated financial statements
8
_________________________________________________________
ADVANCED OPTICS ELECTRONICS, INC.
(A Development Stage Company)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
_________________________________________________________
1. BASIS OF PRESENTATION:
The accompanying unaudited interim consolidated financial statements of Advanced Optics Electronics, Inc. (“ADOT”) have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-QSB. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for complete consolidated financial statements and should be read in conjunction with the Management’s Discussion and Analysis and the audited financial statements and notes thereto contained in ADOT’s 2006 Annual Report filed with the Securities and Exchange Commission on Form 10-KSB. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosure contained in the audited financial statements for 2006 as reported in the 10-KSB have been omitted. In order to timely file this form 10-QSB, the completed consolidated financial statements which are a part of this form 10-QSB have not yet been reviewed by auditors for the Company, and the Company does not believe there will be any material changes thereafter.
Sale of stock by subsidiary - When a subsidiary sells unissued shares, and in certain other situations issues shares, to parties other than its parent at a value in excess of the parent's carrying value, a gain is reflected in the consolidated income statement of the parent. During 2006, Biomoda issued 844,786 shares of common stock for services valued at $897,268 and granted stock options valued at $1,491. Advanced Optics recognized a gain of $898,759, which represents the value of the issuances in excess of the carrying value.
2. DEVELOPMENTAL STAGE AND GOING CONCERN
ADOT has been in the development stage since it began operations on May 22, 1996 and has not generated any revenues from operations and there is no assurance of any future revenues. As shown in the accompanying financial statements, Advanced Optics incurred a net loss of $1,043,023 for the three months ended March 31, 2007. In addition, the Company has an accumulated deficit of $25,165,970 and a working capital deficit of $1,016,415 as of March 31, 2007. These conditions raise substantial doubt as to Advanced Optics ability to continue as a going concern. Management plans to obtain revenues from product sales, but there are no significant commitments for purchases of any of the proposed products. In the absence of significant sales and profits, ADOT may seek to raise additional funds to match its working capital requirements through the additional sales of debt and equity securities.. The financial statements do not include any adjustments that might be necessary if Advanced Optics is unable to continue as a going concern.
3. MARKETABLE SECURITIES
ADOT classifies its investments in marketable securities as "available-for sale" in accordance with the provisions of Statement of Financial Accounting Standards No. 115, “Accounting for Certain Investments in Debt and Equity Securities" (SFAS 115). ADOT does not have any investments classified as "trading" or "held to maturity".
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_________________________________________________________
ADVANCED OPTICS ELECTRONICS, INC.
(A Development Stage Company)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
_________________________________________________________
Following is a summary of marketable securities classified as available for sale as of March 31, 2007 and December 31, 2006:
Cost Basis | Fair Value | Unrealized Gain (Loss) | |||||||
At March 31, 2007: | |||||||||
Marketable securities - Common stock | $ | 38,305 | $ | 14,200 | $ | (24,105 | ) | ||
At December 31, 2006: | |||||||||
Marketable securities - Common stock | $ | 132,090 | $ | 78,048 | $ | (54,042 | ) |
Available-for-sale securities consist of securities in GenoMed and are carried at fair value with the unrealized gain or loss, net of tax, reported in accumulated other comprehensive income. The fair value of marketable securities was determined based on available market information.
4. VARIABLE INTEREST ENTITY - BIOMODA, INC.
At March 31, 2007 ADOT owned 1,995,742 or 20.10% of the 9,931,039 outstanding shares of Biomoda, Inc. ("Biomoda"), a development stage company involved in the development of technology for the early detection of lung cancer. In addition, two of ADOT’s officers own approximately 9.6%, collectively, of Biomoda’s outstanding shares. Further, ADOT subleases office space and lab equipment to Biomoda and two of ADOT’s officers are also officers of Biomoda. Finally, ADOT has been the sole source of funding to Biomoda since 2002 through advances made under a line of credit agreement. Such advances totaled $1,899,251 at March 31, 2007 and ADOT has recorded interest income on advances of $192,676. These amounts have been eliminated in consolidation. ADOT is considered the primary beneficiary as it stands to absorb the majority of the VIE's expected losses. Since Biomoda and ADOT are considered entities under common control, ADOT measures the assets and liabilities of Biomoda at their carrying amounts in consolidation.
As of March 31, 2007, ADOT has consolidated Biomoda’s balance sheet and its results of the operations for the quarter then ended in the accompanying financial statements. Biomoda has a stockholders' deficit at March 31, 2007. General creditors of Biomoda have no recourse against ADOT. From inception through March 31, 2007, Biomoda has generated no revenues.
In 2007, Biomoda anticipates being able to raise its own funds in the public equity market. In this case, Biomoda may be able to sustain its own operations, repay its obligation to ADOT, and hire its own officers. In such case, ADOT may no longer be considered the primary beneficiary and the results of Biomoda may be deconsolidated. There can be no assurance that Biomoda will be able to raise sufficient funds to repay its obligation to ADOT and become self-sustaining in its operations.
5. STOCKHOLDERS' EQUITY
During the three months ended March 31, 2007:
ADOT issued 3,445,000,000 shares of common stock for cash of $238,500. There were no stock options granted during the three month periods ended March 31, 2007 and 2006.
On behalf of Biomoda, ADOT exchanged 785,000 shares of Biomoda common stock, valued at $660,907, in payment of certain services provided to Biomoda. As a result of this transaction, ADOT recorded additional paid-in capital of $660,907.
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_________________________________________________________
ADVANCED OPTICS ELECTRONICS, INC.
(A Development Stage Company)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
_________________________________________________________
6. SEGMENTS
ADOT has two reportable segments consisting of (1) producing and selling large-scale flat panel displays for outdoor advertising billboards and its color identifier for the vision impaired; (2) early cancer detection technology. The accounting policies of the segments are the same as those described in the summary of significant accounting policies.
The following is information for ADOT's reportable segments for the three months ended March 31, (in thousands):
2007 | 2006 | ||||||||||||||||
ADOT | Biomoda | Total | ADOT | Biomoda | Total | ||||||||||||
Revenue | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | |||||
Loss on operations | 187 | 1,676 | 1,863 | 381 | 244 | 624 | |||||||||||
Depreciation and amortization | 6 | 5 | 11 | 7 | 5 | 12 | |||||||||||
Interest expense | 2 | 4 | 6 | 2 | 7 | 9 | |||||||||||
Capital expenditure | - | - | - | - | - | - | |||||||||||
Net (income) loss | $ | (652 | ) | $ | 1,695 | $ | 1,043 | $ | 373 | $ | 250 | $ | 623 |
7. SUBSEQUENT EVENTS
On April 9, 2007, ADOT increased the number of authorized common shares to 18,000,000,000 shares.
From April 1, 2007 through May 18, 2007, 975,000,000 shares were issued for cash in the amount of approximately $67,500.
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ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
Forward - Looking Statements
This Quarterly Report contains forward-looking statements about the business, financial condition and prospects of the Company that reflect assumptions made by management and management's beliefs based on information currently available to it. The Company can give no assurance that the expectations indicated by such forward-looking statements will be realized. If any of management's assumptions should prove incorrect, or if any of the risks and uncertainties underlying such expectations should materialize, the Company’s actual results may differ materially from those indicated by the forward-looking statements.
The key factors that are not within the Company's control and that may have a direct bearing on operating results include, but are not limited to, the acceptance by customers of the Company's products, the Company's ability to develop new products cost-effectively, the ability of the Company to raise capital in the future, the development by competitors of products using improved or alternative technology, the retention of key employees and general economic conditions.
There may be other risks and circumstances that management is unable to predict. When used in this Quarterly Report, words such as, "believes," "expects," "intends," "plans," "anticipates" "estimates" and similar expressions are intended to identify forward-looking statements, although there may be certain forward-looking statements not accompanied by such expressions. All forward-looking statements are intended to be covered by the safe harbor created by Section 27A of the Securities Act of 1933, as amended and by Section 21E of the Securities Exchange Act of 1934, as amended.
OVERVIEW
General
Advanced Optics Electronics, Inc. (the “Company", “us", “we", or "ADOT") (ADOT-OTC BB) was organized as a Nevada corporation on May 22, 1996. On November 7, 1996, the Company acquired the business and patents of PLZTech, a company involved in the development of flat panel displays.
Company Overview
We are a developmental stage technology company with our primary focus on the development, production and sales of our large-scale flat panel displays, which utilize our technology. We are currently continuing our research, development, prototyping, and manufacturing of our products and the underlying technology. We are in the process of making the transition from a developmental stage company to producing and selling our product line. We plan to focus on producing and selling our large-scale flat panel displays for the outdoor advertising billboard industry. In addition, there are other markets and applications that represent opportunities for additional sources of business, and we are beginning to explore these markets and applications, such as e-cinema, lighting sources, stadium and sports applications and systems, control and status monitoring.
Our goal is to create a product line based on technology that is scalable both in terms of size and resolution to meet a wide range of requirements related to site, economics and use from our potential customers. We are also planning to develop a leasing program and an Owned & Operated group.
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THE MAJOR ADVANTAGES AND FEATURES OF THE DISPLAY ARE:
· | Brightest display ever available (35,000 nits) |
· | Widest viewing angle available |
· | Smallest dot pitch available for outdoor large-scale displays (8 mm dot pitch) |
· | High definition picture quality |
· | Modular assembly (1 meter increments) for scaleable and shapeable architectures |
· | True Color (24 bit) |
· | Full motion video (up to 120 frames per second) |
· | Transportable for mobile operations |
· | Weather resistant for outdoor applications |
· | Modest power requirements |
· | Minimum 5 year continual use lifetime |
· | Real-time live video feeds |
· | Broadcast/simulcast applications |
· | Supports streaming video |
· | Uses industry standard DVI protocol for high speed data linking and digital video interfacing |
· | Satellite linkable |
PROPRIETARY BILLBOARD SOFTWARE CAPABILITIES ARE:
· | Manage and update display content remotely |
· | Works with all image file formats and digital video editors |
· | Secure Internet or WAN communications |
· | WEB-based status monitoring |
· | Provides time, temperature and other dynamic content inserts |
Our operating activities have related primarily to the initial planning and development of our product. We have completed, tested, and measured the performance of our prototype and are in the development of our production model.
Our operating expenses have increased significantly since our inception. This is due to increased engineering and management staff and investments in operating infrastructure. Since our inception we have incurred significant losses and, as of March 31, 2007, had a deficit accumulated during the development stage of $25,165,970.
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Biomoda, Inc.
Beginning with the 2004 10-KSB, the Company has consolidated the financial statements of Advanced Optics Electronics, Inc. with the financial statements of Biomoda, Inc. This has been done in order to comply with FIN 46, a pronouncement by Financial Accounting Standards Board that became effective December 15, 2004. The nature of Biomoda’s business is substantially different from that of Advanced Optics Electronics, Inc. The following is a discussion of Biomoda's results of operations, financial condition and liquidity. More information about Biomoda is available in Biomoda’s 2006 10-KSB which is accessible from the SEC website. The SEC website (http://www.sec.gov) contains reports and information statements and other information regarding Biomoda and other companies that file materials with the SEC electronically.
Biomoda’s initial product is a diagnostic test for lung cancer that will be performed by using a sputum sample from the patient. This test does not require any invasive sample taking. The sample will be sent to a clinical lab where a procedure will be performed to determine the presence, or lack, of lung cancer or precancerous cells. This diagnostic test can be used for other cell samples and Biomoda intends to create and market products to diagnose and screen for other prevalent cancers such as cervical, bladder, and colorectal. This has been determined on the basis of available healthcare delivery and payer infrastructure. Japan is leading the world in this area and has instituted a nationwide lung cancer-screening program.
Management of Biomoda expects to continue assay validation work and seek to register its product with the FDA in 2007. There are several business models, product types and regulatory routes that Biomoda is evaluating including: ASR, 510K, PMA and IVD kits: ASR: This is the FDA designation for Analyte Specific Reagent. There are generally two classes: Class I & Class II. Class I is considered to the lowest risk. Biomoda’s ASR product is a Class I and only requires registration and meeting the FDA standards. This product is viewed as a component for an assay developed in-house by Medical Reference Laboratories.
510K: This is the FDA designation for approvals that are based on "Substantial Equivalence” with previously approved products and does require approval prior to marketing. There are generally three classes: Class I, Class II, & Class III. Depending on the indication established with the FDA, Biomoda’s product will either be Class I or Class II, if Biomoda proceeds with this product approval route. This product will be a kit developed to determine the presence of abnormal cells in a body fluid sample.
PMA: This is the FDA designation for approvals for new product indications (no Substantial Equivalence) and does require approval prior to marketing. There are generally two classes: Class II, & Class III. If Biomoda proceeds with this approval route, Biomoda's expects this product to be Class III due to indication of diagnostic for a specific cancer.
IVD: This is an industry designation for In Vitro Diagnostic. Products in the industry are either reagents or kits. Kits would include the key components required to conduct the assay for the specific indication stated in the package insert. Reagents are single components used in assays developed by a Reference Labs. The lab will be required to have met the FDA CLIA (current Clinical Laboratory Improvement Act) regulations to market a diagnostic. Biomoda is evaluating several cancers with a focus on large markets that are in need of the most immediate diagnostic support. These include: lung, bladder and cervical. Our products are subject to FDA registration or approval and to post-approval FDA reporting requirements.
Costs in complying with regulatory and legislative matters such as the Clinical Laboratory Improvement Amendment of 1988 (CLIA), which regulates the quality and reliability of medical testing in the U.S., adverse changes in zoning laws, tax laws, or other laws affecting the medical and diagnostic industry may prove to be a major obstacle, both in respect of time and costs, in our research and development.
14
The timing of regulatory filings and approvals, if any, for the Company's products are made less certain by the Company's strategy of seeking one or more collaborative arrangements with development and marketing partners, which may require that a collaborative partner be responsible for seeking and obtaining regulatory approvals either in foreign countries or in the U.S. Biomoda intends to market its products throughout the world. There are numerous regulatory agencies that regulate the sale of diagnostic and therapeutic products, and these agencies may be affected or influenced by criteria materially different than those of the FDA. The sale of Biomoda's products may be materially affected by the policies of these regulatory agencies or the domestic politics of the countries involved. Biomoda has not applied for and does not now have the approval of any foreign country to sell its products for diagnostic or therapeutic use.
Class I/II 510K can be completed as judged appropriate for the business and will require approximately 6 to 9 months effort to prepare documentation and receive FDA approval. During that time kit manufacturing can be initiated. Partial funding will be provided from reagent sales revenue.
PMA will require clinical studies to be completed and will be initiated when it is viewed as appropriate for the business. This will require on the order of 18 months planning, executing, and documenting. During that time kit manufacturing can be initiated.
Biomoda's current intention regarding regulatory strategy is to initiate product introductions via an ASR registration and potentially migrate up the regulatory spectrum as markets dictate.
RESULTS OF OPERATIONS
There are no explicit plans to hire additional personnel at this time but, from time to time, the Company expects to hire additional personnel in order to carry out its business strategy.
Comparison of the Periods Ended March 31, 2007 and 2006
Research and development expenses consist primarily of consulting fees associated with the development and enhancement of our flat panel displays. These expenses increased to $471,807 in the three month period ended March 31, 2007 from $128,093 in the first quarter of 2006. This significant change is the result of increased outside consulting costs for Biomoda.
Continued investment in product development is critical to attaining our strategic objectives and, as such, we expect product development expenses to increase significantly in future periods. We expense product development costs as they are incurred.
General and administrative expenses consist of expenses for facilities, professional services, travel, general corporate activities, and depreciation and amortization of equipment and leasehold improvements. General and administrative costs increased to $1,239,983 in the first quarter of 2007 from $447,967 in the prior year. The primary reason for the increase is significantly lower shareholder relations expense. The costs associated with being a publicly traded company and potential future strategic acquisitions will also be a contributing factor to increases in this expense.
15
Biomoda, Inc.
Biomoda, Inc. is relying on a bridge financing arrangement with Advanced Optics Electronics, Inc. Biomoda is currently leasing Laboratory equipment from Advanced Optics Electronics, Inc. On a month to month basis and intends to purchase this equipment when adequate funds are raised.
Biomoda has recorded no revenue from its inception through March 31, 2007. The accumulated deficit is $6,603,987. In 2007, the net loss for the three month period ended March 31 was $1,695,430 compared to $268,763 in 2006. The loss from operations was $1,676,234 in 2007 and $244,207 in 2006. Most of its expense was attributable to general and administrative costs.
Research development and technical costs increased to $471,807 in the three months ended March 31, 2007 from $112,278 in the three months ended March 31, 2006 due to higher personnel costs. Biomoda believes,that continued investment in product development is critical to attaining its strategic objectives and, as a result, we expect product development expenses to increase significantly in future periods. Biomoda expenses product development costs as they are incurred.
General and administrative expenses consist of expenses for executive and administrative personnel, facilities, professional services, travel and general corporate activities. General and administrative costs, taken together with professional fees, increased to $1,199,188 in the three months ended March 31, 2007 and $127,082 in the three months ended March 31, 2006, due to increased financial consulting costs.
Biomoda expects general and administrative costs to increase in the future as its business matures and develops.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, we have funded our operations primarily through the private placement of equity securities and the issuance of convertible debentures. As of March 31, 2007 we have raised such net proceeds of approximately $23,000,000.
The Company's holding in Biomoda may provide additional liquidity. The Company's direct ownership of Biomoda, as of March 31, 2007 was approximately 20.10%. Two officers of ADOT are also securities holders of Biomoda in addition to the ADOT ownership. It is anticipated that a public market for Biomoda's securities will be established in the current year. Because a market for Biomoda's shares has not been established, the potential value of the Company’s investment cannot be measured. Consequently, there can be no assurance that if the Company were to sell such investment that it would be able to on terms favorable to the Company or for the initial offering price. Factors such as dilution and a lack of a market may be encountered.
The Company’s relationship to its investment in Biomoda changed during the second quarter of 2002. There is now an active leadership role in Biomoda being provided by John Cousins and Leslie Robins, officers of the Company. The consolidated financial statements include the accounts of Biomoda and its wholly owned subsidiary, Biomoda Holdings, Inc. All significant inter-company accounts and transactions have been eliminated in consolidation.
During the first nine months of 2004, we purchased 33,300,000 restricted shares under Rule 144 of GenoMed, Inc., which represented approximately 17.6% of the outstanding shares of GenoMed, Inc. At March 31, 2007 the Company held 1,420,000 shares. GenoMed is a publicly traded biotech company working in genomics based disease management.
The investment in GenoMed was made as an interim cash management decision. Management's opinion is that the investment represented the potential to increase the resources the Company has to fund ongoing operations. The Company made this decision based on its determination that GenoMed has very promising technology and prospects. The company intends to liquidate its investment over time in order to fund its core operations.
GenoMed uses medical genomics to improve patient outcomes. GenoMed is working to translate knowledge of medical genomics--the study of which genes cause disease--into clinical practice.
Research and development expenditures were approximately $472,000 in the first three months of 2007. Funds for operations, research and development and capital expenditures were provided from the sale of securities and cash reserves.
16
Marketable Securities Portfolio
As of March 31, 2007 the Company had a marketable securities portfolio valued at $14,238. The Company is actively pursuing potential financing options as it looks to secure additional funds to both stabilize and grow its business operations. Management will review any financing options at its disposal and will judge each potential source of funds on its individual merits. There can be no assurance that the Company will be able to secure additional funds from debt or equity financing, or if it can, that it will be on terms favorable to the Company or existing stockholders.
There are no expected purchases or sales of significant equipment.
Management believes that inflation has not had a material effect on the Company's results of operations.
Biomoda, Inc.
Biomoda's total assets are $241,396 at March 31, 2007. Of this, $231,490 is patent costs, net of accumulated amortization of $93,168. Its liabilities of $2,903,411 primarily consist of its debt to Advanced Optics of $2,091,928 and payables and accrued liabilities of $626,736. Total stockholders' deficit as of March 31, 2007 is $2,662,015.
Since inception, Biomoda has funded operations primarily through private placement of equity securities to third parties and to ADOT and loans from Advanced Optics Electronics, Inc. As of March 31, 2007 it had raised net proceeds of approximately $6,043,000, of which approximately $2,092,000 was loaned by ADOT. On May 1, 2002, Biomoda entered into a line of credit agreement (the "Agreement") with Advanced Optics Electronics, Inc., an affiliated entity, ("Advanced Optics") with an annual interest rate of 5%. On May 1, 2003 the agreement was extended.
Biomoda had cash flows of $865 for the three months ended March 31, 2007 resulting from $849,562 used in Biomoda's operating activities, $1,801 used in investing activities and $852,228 provided by financing activities. Cash used in operating activities for the three months ended March 31, 2007 was primarily due to $1,676,234 in operating expenses, of which $1,109,888 is General and Administrative, $471,807 is Research and Development and $89,300 is professional fees. Cash provided by financing activities for the three months was due primarily to the proceeds from a line of credit from Advanced Optics
Biomoda has been in the development stage since it began operations on January 3, 1990 and has not generated any revenues from operations and there is no assurance of any future revenues. As of March 31, 2007, Biomoda had accumulated deficit of approximately $2,662,000 and a working capital deficit of approximately $2,899,000. In addition, Biomoda did not generate any cash from operations and had no cash reserve dedicated to fund expenditures. These factors create an uncertainty as to Biomoda's ability to continue as a going concern.
ITEM 3. CONTROLS AND PROCEDURES
EVALUATION OF CONTROLS AND PROCEDURES
Under the supervision and with the participation of our management, including our Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Exchange Act as of the end of the period covered by this report). Based upon that evaluation, the CEO and CFO concluded that the Company's disclosure controls and procedures were effective.
17
Changes in Controls and Procedures
There were no significant changes made in our internal controls over financial reporting during the three months ended March 31, 2007 that have materially affected or are reasonably likely to materially affect these controls. The Company, however, is evaluating changes to its existing controls or adding controls to improve the design effectiveness of its system.
Limitations on the Effectiveness of Internal Control
The Company's management, including the CEO, does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all fraud and material errors. An internal 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. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations on all internal control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, and/or by management override of the control. The design of any system of internal control is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in circumstances, and/or the degree of compliance with the policies and procedures may deteriorate.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company may on occasion be a party to litigation involving claims made by or against the company arising in the ordinary course of business. The officers and directors know of no legal proceedings pending or contemplated by any person, entity or governmental authority which would have a material adverse effect on the Company.
ITEM 2. CHANGES IN SECURITIES
Common Stock
As of March 31, 2007, the status of the common stock of the Company was 16,000,000,000 shares authorized and 15,643,836,349 shares issued and outstanding.
During the three month period ended March 31, 2007, the Company issued 3,445,000,000 shares for cash of $238,500.
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ITEM 3. Defaults upon senior securities - None
ITEM 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of the Company's security holders during the first quarter of 2007.
ITEM 5. Other Information - Not applicable
ITEM 6. Exhibits
31.1 Certification of CEO pursuant to Securities Exchange Act rules 13a-15 and 15d-15(c) as adopted pursuant to section 302 of the Sarbanes-Oxley act of 2002.
31.2 Certification of CFO pursuant to Securities Exchange Act rules 13a-15 and 15d-15(c) as adopted pursuant to section 302 of the Sarbanes-Oxley act of 2002.
32.1 Certification of Leslie S. Robins, Chief Executive Officer pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley act of 2002.
32.2 Certification of John J. Cousins, Chief Financial Officer (Principal Accounting Officer) pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley act of 2002.
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SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report on Form 10QSB to be signed on its behalf by the undersigned, thereunto duly authorized.
ADVANCED OPTICS ELECTRONICS, INC. | ||
| | |
Dated: May 21, 2007 | By: | /s/ John J. Cousins |
John J. Cousins | ||
Vice President of Finance (Principal Accounting Officer) |
| | |
By: | /s/ Leslie S. Robins | |
Leslie S. Robins | ||
Executive Vice President (Principal Executive Officer) |
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