SECURITIES AND EXCHANGE COMMISSION
Washington D.C.
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2001
OR
[ ] TRANSITION REPORT PERSUANT TO SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from________to________
Commission file number 0-16341
ADVA International Inc.
(Name of small business issuer in its charter)
Delaware 16-1284228
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
454 South Anderson Road
Rock Hill, South Carolina 29730
803.327.6790
(Address and phone number of principal executive offices and place of business)
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the issuer filed all documents and reports required to be filed by
section q2, 13 or 15(d) of the Exchange Act after the distribution of securities
under a plan confirmed by a court. Yes X No __
APPLICABLE TO CORPORATE ISSUERS
The number of shares outstanding of the issuer's common stock as of February 28,
2002 is 13,185,194.
ADVA INTERNATIONAL INC. AND SUBSIDIARY
FORM 10-QSB
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheet as of September 30, 2001
and March 31, 2001...................................................... 3
Consolidated Statements of Operations for the Three
Months Ended September 30, 2001 and 2000, the Six
Months ended September 30, 2001 and 2000, and the
cumulative period April 2, 1998 (inception) through
September 30, 2001...................................................... 5
Consolidated Statements of Changes in Stockholders'
Equity (Deficiency)..................................................... 6
Consolidated Statements of Cash Flows for the Three
Months Ended September 30, 2001 and 2000 and the
cumulative period April 2, 1998 (inception) through
September 30, 2001...................................................... 7
Notes to Consolidated Financial Statements................................. 8
Item 2. Plan of Operation.................................................... 11
PART II. OTHER INFORMATION
Item 2. Changes in Securities................................................ 12
Item 6. Exhibits and Reports on Form 8-K..................................... 12
SIGNATURES................................................................... 12
Forward Looking Statements
When used in this Form 10-QSB, the words "may", "might", "will", "should",
"could", "expect(s)", "plan(s)", "intend(s)", "anticipate(s)", "believe(s)",
"estimate(s)", "predict(s)", "potential", or "continue(s)" or the negative of
such terms and other comparable terminology are intended to identify
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such statements are subject to certain risks and
uncertainties, including but not limited to economic conditions, changes in laws
or regulations, our history of operating losses, limited access to capital,
demand for our products and services, dilution from issuance of additional
shares, newly developing technologies, loss of permits, conflicts of interests
in related party transactions, regulatory matters, the occurrence of events not
covered by insurance, a substantial increase in interest rates, protection of
technology, lack of industrial standards, raw material commodity pricing, the
ability to receive bid awards, the inability to implement our growth strategy,
the inability to maintain key employees, the effects of competition and our
ability to obtain additional financing. Such factors, which are discussed in
"The Plan Of Operation" and the notes to condensed consolidated financial
statements, could affect the Company's financial performance and could cause the
Company's actual results for future periods to differ materially from any
opinions or statements expressed with undue reliance on any such forward-looking
statements, which speak only as of the date made. Although we believe the
expectations reflected in the forward-looking statements are reasonable, we
cannot and do not guarantee future results, levels of activity, performance or
achievements. See "Plan of Operation".
Item 1. Financial information
ADVA INTERNATIONAL AND SUBSIDIARY
(A Development Stage Enterprise)
Consolidated Balance Sheet
Sept. 30, March 31,
2001 2001
- --------------------------------------------------- ------------ ------------
(Unaudited)
Assets
Current assets
Cash and cash equivalents $ 123,180 $ 961,483
Accounts receivable, other 46 -
Prepaid expenses 39,417 56,500
- --------------------------------------------------- ------------ ------------
Total current assets 162,643 1,017,983
Furniture and equipment, net
of accumulated depreciation 23,814 -
of $1,863
Software 271,937 200,000
Deferred financing costs, net
of accumulated amortization
of $312,958 and $221,155 604,542 696,345
Deposit 2,979 2,979
- --------------------------------------------------- ------------ ------------
Total assets $ 1,065,915 $ 1,914,328
- --------------------------------------------------- ------------ ------------
-3-
ADVA INTERNATIONAL AND SUBSIDIARY
(A Development Stage Enterprise)
Consolidated Balance Sheet
Sept. 30, March 31,
2001 2001
- --------------------------------------------------- ------------ ------------
(Unaudited)
Liabilities and Stockholders' (Deficiency)
Current liabilities
Accrued transaction and creditor payables $ 560 $ 300,000
Accrued professional fees 270,490 147,267
Accrued interest 99,558 49,400
Accounts payable and accrued expenses, other 62,244 27,742
Due to officer 36,324 33,515
- --------------------------------------------------- ------------ ------------
Total current liabilities 469,179 557,924
Long-term debt 1,500,000 1,500,000
- --------------------------------------------------- ------------ ------------
Total liabilities 1,969,179 2,057,924
Commitments (Note 3, 4)
Stockholders' (deficiency)
Class A preferred stock, no par value
Authorized 4,000 shares, none issued - -
Class B preferred stock, no par value
Authorized 6,000 shares, none issued - -
Common stock, $.001 par value
Authorized 20,000,000 shares
Issued and outstanding 13,185,194 shares 13,185 13,185
Additional paid-in capital 1,937,815 1,937,815
(Deficit) accumulated during the
development stage (2,854,264) (2,094,596)
Total stockholders' (deficiency) (903,264) (143,596)
- --------------------------------------------------- ------------ ------------
Total liabilities and stockholders' (deficiency) $ 1,065,915 $ 1,914,328
- --------------------------------------------------- ------------ ------------
See accompanying notes to consolidated financial statements
-4-
ADVA INTERNATIONAL AND SUBSIDIARY
(A Development Stage Enterprise)
Consolidated Statement of Operations
Cumulative
Period
April 2,
1998
(Inception)
Three Months Ended Six Months Ended through
Sept. 30, Sept 30, Sept.30,
2001 2000 2001 2000 2001
- ---------------------------------- ------------ ------------ ------------ ------------ ------------
(Unaudited) (Unaudited) (Unaudited)
Sales, license fees $ - $ - $ - $ - $ 8,848
Operating expenses
Salary and employee related 64,723 27,537 115,334 55,062 463,064
General and administrative 221,858 65,699 481,682 82,123 1,017,839
Expenses related to merger 5,000 73,203 25,336 181,763 990,278
- ---------------------------------- ------------ ------------ ------------ ------------ ------------
Total operating expenses 291,581 166,441 622,352 318,948 2,471,181
- ---------------------------------- ------------ ------------ ------------ ------------ ------------
(Loss) from operations (291,581) (166,411) (622,352) (318,948) (2,462,697)
- ---------------------------------- ------------ ------------ ------------ ------------ ------------
Other income (expense)
Miscellaneous income - - - - 1,305
Interest (expense), Officer (1,558) - (2,808) - (11,029)
Interest (expense), debt (70,818) (57,276) (141,961) (108,905) (413,925)
Interest income 1,905 5,101 7,453 8,751 32,082
- ---------------------------------- ------------ ------------ ------------ ------------ ------------
Total other (expense) (70,471) (52,175) (137,316) (100,154) (391,567)
- ---------------------------------- ------------ ------------ ------------ ------------ ------------
Net (loss) (362,052) (218,616) (759,668) (419,102) (2,854,264)
- ---------------------------------- ------------ ------------ ------------ ------------ ------------
Basic and diluted loss per share (0.03) (0.02) (0.06) (0.04) (0.26)
- ---------------------------------- ------------ ------------ ------------ ------------ ------------
Weighted average shares
outstanding 13,185,194 12,468,750 13,185,194 11,959,622 11,010,073
- ---------------------------------- ------------ ------------ ------------ ------------ ------------
See accompanying notes to consolidated financial statements
-5-
ADVA INTERNATIONAL AND SUBSIDIARY
(A Development Stage Enterprise)
Consolidated Statements of Changes in Stockholders' Equity (Deficiency)
(Deficit) Total
Accumulated Stock
Additional During the Stock Holders'
Preferred Stock Common Stock Paid-In Development Subscription Equity
Shares Amount Shares Amount Capital Stage Receivable (Deficiency)
- ------------------------ -------- -------- ------------ ---------- ------------ ----------- ------------ ------------
Balance, April 2, 1998
(inception) - $ - - $ - $ - $ - $ - $ -
Common stock issued,
May 14, 1998 - - 1,000 10 300,990 - (1,000) 300,000
Net (loss) - - - - - (287,851) - (287,851)
- ------------------------ -------- -------- ------------ ---------- ------------ ----------- ------------ ------------
Balance, March 31, 1999 - - 1,000 10 300,990 (287,851) (1,000) 12,149
Original issue discount
arising from options
granted in connection
with debt, Jan. 14,
1998 - - - - 900,000 - - 900,000
2000
Net (loss) - - - - - (339,034) - (339,034)
- ------------------------ -------- -------- ------------ ---------- ------------ ----------- ------------ ------------
Balance, March 31, 2000 - - 1,000 10 1,200,990 (626,885) (1,000) 573,115
Common stock issued,
May 17, 2000 - - 13 - 300,000 - - 300,000
Stock options exercised,
May 17, 2000 - - 176 2 449,998 - - 450,000
Recapitalization,
March 2, 2001 - - 13,184,005 13,173 (13,173) - - -
Receipt of stock
subscription, March 2,
2001 - - - - - - 1,000 1,000
Net (loss) - - - - - (1,467,711) (1,467,711)
- ------------------------ -------- -------- ------------ ---------- ------------ ----------- ------------ ------------
Balance, March 31, 2001 - - 13,185,194 13,185 1,937,815 (2,094,596) - (143,596)
Net (loss) (unaudited) - - (759,668) (759,668)
- ------------------------ -------- -------- ------------ ---------- ------------ ----------- ------------ ------------
Balance, September 30,
2001 - $ - 13,185,194 $ 13,185 $ 1,937,815 (2,854,264) - (903,264)
- ------------------------ -------- -------- ------------ ---------- ------------ ----------- ------------ ------------
See accompanying notes to consolidated financial statements.
-6-
ADVA INTERNATIONAL AND SUBSIDIARY
(A Development Stage Enterprise)
Consolidated Statement of Cash Flows
Cumulative
Period
April 2,
1998
(Inception)
Six Months Ended through
Sept. 30, Sept. 30,
2001 2000 2001
- ------------------------------------------------ ------------ ------------- -------------
(Unaudited) (Unaudited)
Cash Flows from operating activities
Net (loss) $ (759,668) $ (419,102) $ (2,854,264)
Adjustments to reconcile net (loss)
to net cash (used in)
Operating activities
Amortization of deferred finance costs 91,802 91,539 312,957
Depreciation 1,863 - 1,863
Changes in assets and liabilities
Accounts receivable (46) - (46)
Prepaid expenses 17,083 (29,000) (39,417)
Deposits (2,979) - (2,979)
Accrued transaction and creditor (299,440) - 560
Accounts payable and accrued expenses 207,886 (168,138) 432,295
- ------------------------------------------------ ------------ ------------- -------------
Net cash (used in) operating expenses (743,499) (524,701) (2,149,031)
- ------------------------------------------------ ------------ ------------- -------------
Cash flows from investing activities
Software and related costs (71,936) - (271,936)
Purchase of furniture and equipment (25,677) - (25,677)
Replacement from (loan to) officer 2,809 (7,379) 36,324
- ------------------------------------------------ ------------ ------------- -------------
Net cash (used in) investing activities (94,804) (7,379) (261,289)
- ------------------------------------------------ ------------ ------------- -------------
Cash flows from financial activities
Proceeds from long-term debt, net of
finance fees - 390,000 1,482,500
Proceeds from stock issuance and subscription - 750,000 1,051,000
- ------------------------------------------------ ------------ ------------- -------------
Net cash provided by financing activities - 1,140,000 2,533,500
- ------------------------------------------------ ------------ ------------- -------------
Net (decrease) increase in cash and cash
equivalents (838,303) 607,920 123,180
Cash and cash equivalents at the beginning
of the period 961,483 183,492 -
- ------------------------------------------------ ------------ ------------- -------------
Cash and cash equivalents at the end of period 123,180 791,412 123,180
- ------------------------------------------------ ------------ ------------- -------------
Non cash activity
During the year ended March 31, 2000, the Company incurred $900,000 in
non-cash deferred finance charges from options for common stock issued
with debt. The amount was credited to additional paid-in capital.
- --------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements
-7-
ADVA INTERNATIONAL AND SUBSIDIARY
(A Development Stage Enterprise)
Notes to Consolidated Balance Sheets
1. Basis of The consolidated Financial statements are unaudited and
Presentation include the accounts of ADVA International Inc. ("ADVA")
and its wholly owned subsiderary Global Information Group
USA, Inc. ("GIG"). All significant inter-company accounts
and transactions have been eliminated in consolidation.
In the opinion of management, all adjustments (consisting
of normal recurring accruals) have been made which are
necessary to present fairly the financial position of the
company as of September 30, 2001, and the results of its
operations for the three months period ended September 30,
2001 and 2000. The results of operations experienced for
the three month period ended September 30, 2001 are not
necessarily indicative of the results to be experienced
for the fiscal year ending March 31, 2002.
The statements and related notes have been prepared
pursuant to the rules and regulations of the Securities
and Exchange Commission. Accordingly, certain information
and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted
accounting principles have been omitted pursuant to such
rules and regulations. The accompanying notes should
therefore be read in conjunction with the Company's March
31, 2001 annual financial statements. The Company may find
it necessary to amend certain information after auditing
of the consolidated Financial Statements is performed.
2. Business From April 2, 1998 (inception) to March 31, 2000, the
Operations Company maintained operations in the Netherlands and in
April 2000 moved all operations to the United States. The
Company is in the development stage and planned principle
operations have only commenced since June 30, 2001.
The Company develops and markets 3D graphics applications
software running on the Linux and UNIX operating systems.
The Company's present software product is believed to be
the only complete 3D solid modeling, animation and
rendering system currently available on the Linux OS. The
Company's software has been designed for use by digital
media professionals in the production of film and video
special effects, animation, computer-aided design and
scientific visualization, Internet web site and print
graphics, game development and virtual television. Since
acquiring the software and the underlying source code in
February 2000, the Company has been enhancing the
software, performing market research and developing
marketing plans for sales of the software to users in the
3D graphics applications market.
The Company's success will depend in part on its ability
to obtain patents and product license rights, maintain
trade secrets, and operate without infringing on the
proprietary rights of others, both in the United States
and other countries. There can be no assurance that
patents issued to or licensed by the Company will not be
challenged, invalidated, or circumvented, or that the
rights granted there under will provide proprietary
protection or competitive advantages to the Company.
The Company has no significant operating history and, from
April 2, 1998 (inception) to September 30, 2001, has
generated a net loss of $2,854,264. This loss has been
financed by proceeds from equity and debt issuances.
-8-
ADVA INTERNATIONAL AND SUBSIDIARY
(A Development Stage Enterprise)
Notes to Consolidated Balance Sheets
New debt and equity issuances are expected to provide near
term working capital until earnings from operations can
support the company. There can be no assurance that
management will be successful in its efforts to attract
such capital.
An interest payment to investors due in August 2001 was
not made. Negotiations to revise the terms of this loan
and future interest payments have been undertaken and are
currently ongoing. There is no assurance the Company will
be successful in these negotiations and failure to do so
may result in a default of the terms of the loan
agreements. For more details on the loan agreements,
please refer to the Form 8K filed on March 2, 2001.
3. Employment In January 2000, GIG entered into an employment agreement
and with the Chief Executive Officer that provides for
Consulting payments of $110,000 per year along with certain other
Agreements benefits in exchange for defined services to be performed
by the employee. The agreement is not for a specific term
and may be terminated by either party at any time.
On May 1, 2001, GIG entered into an employment agreement
with George Down to serve as President of GIG for a
minimum of one year, providing payments of $125,000 per
year along with certain other benefits.
On April 23, 2001, the Board of Directors granted an
Incentive Stock Option (see Note 4) to the President of
GIG who is also a Director of both ADVA and GIG to
purchase 100,000 shares of ADVA common stock in connection
with the employment agreement with GIG. ADVA's Board of
Directors approved the option on April 23, 2001. The
incentive stock option will vest annually in four equal
increments commencing April 23, 2001. The exercise price,
$1.75 per share, was set at the closing price of the
common stock on the grant date.
On May 1, 2001, the Company entered into a one-year
contractual agreement with a consultant to act as Chief
Financial Advisor to the Company. The agreement provides
for payment of $4,300 monthly, and is cancelable on thirty
days notice by the consultant or the Company. The Company
also granted an Incentive Stock Option (see note 4) to
acquire 25,000 shares of common stock which vests in equal
quarterly increments beginning August 1, 2001. This
agreement was ratified by the ADVA Board of Directors on
August 17, 2001
On December 1, 2001, the Chief Financial Advisor resigned
his position on thirty days notice as per his contract. As
of January 1, 2001 the Company has no formal CFO. The
former Chief Financial Advisor has remained available for
consultation and continues to work for the Company on a
limited basis.
On September 1, 2001 the Company entered into an agreement
with a consultant to become Director of Software
Development for GIG at an annual salary of $85,000. On
December 1, 2001, the employee terminated his employment
with the Company but he continues to work for GIG as a
consultant.
-9-
ADVA INTERNATIONAL AND SUBSIDIARY
(A Development Stage Enterprise)
Notes to Consolidated Balance Sheets
4. ADVA On August 17, 2001, the Board of Directors in
Outside consideration for advisory and consultant services
Director rendered to Global Information Group USA Inc., granted
Options Ruud A.M. Pruijm a Non-Qualified Stock Option for 10,000
shares for an option price of $1.25 per share.
Outside Directors of ADVA, in lieu of other compensation,
received stock option grants for Board Meeting attendance
as follows:
Ronald G Moyer 1,500
Ruud A.M. Pruijm 750
Philip L. van Wijngaarden 750
C. Roger Jones 750
Michael Tolson *2,000
* Options granted as newly elected board member.
5. ADVA The Company, at its August 17, 2001 Board of Directors
Stock Option meeting "authorized the 2001 Stock Option Plan and further
Plan authorized to set aside 1,400,000 shares of the common
stock of the Company for sale and issuance to the
executives and key employees of the Company and its
subsidiaries and affiliates in accordance with the terms
of the Plan".
Options granted under the plan are Incentive Stock Options
or Non-Qualified Stock Options and are granted at a price
equal to the fair market value of the Company's common
stock at the date of grant. In addition, no Incentive
Stock Option may be granted to an employee owning directly
or indirectly stock having more than 10% of the total
combined voting power of all classes of stock of the
Company unless the exercise price is set at not less than
110% of the fair market value of the shares subject to
such Incentive Stock Option on the date of the grant and
such Incentive Stock Option expires not later than five
years from the date of grant.
Generally, the Incentive Stock Options and Non-Qualified
Stock Options have terms of ten years from the date of
grant. On each anniversary date of grant, the options vest
in increments of 20%. The options become fully vested and
exercisable four years from the date of grant.
Notwithstanding the preceding, the board of directors
determines the terms of options granted on a case-by-case
basis. See Note 3, 4 for options granted during the
quarter ended September 30, 2001, and options subsequently
expected to be approved.
The 2001 ADVA Stock Option Plan was approved by a majority
of shareholders at the annual meeting on September 26,
2001.
6. Director On September 26, 2001, the slate of Directors proposed by
Changes management was approved by a majority of the shareholders
of ADVA International Inc. to include Anthony E. Mohr,
George L. Down, Ruud AM Pruijm, C. Roger Jones and Michael
Tolson. Earlier the same day, Philip van Wijngaarden
resigned as a Director of ADVA International citing a
lack of adequate time needed to devote to his
responsibilities as Director. The Board has not yet moved
to fill the vacancy left by his departure.
-10-
Item 2. Plan of Operations
The following information should be read in conjunction with the consolidated
financial statements and notes thereto appearing elsewhere in this Form 10-QSB.
Our short-term objectives are to raise additional operating funds through a
mixture of paid in capital and or loans. With anticipated additional funding,
the Company expects to continue further software development on Linux, Unix and
other software platforms. We further anticipate executing multiple software
license and joint venture agreements in the 3D graphics technology space.
Our long- term objectives are to generate increasing revenues in four areas: the
Linux end user market; the 3D animation and production markets through software
licensing and joint venture partnerships; the licensing of the Company's
technology to developers of Computer-Aided Design (CAD) tools and finally, sales
of 3D tools to CAD end users.
During the Quarter ended September 30, 2001, ADVA suffered a loss from
operations of $291,581. We funded our operating losses during this period
through a combination of long-term debt and the private sale of shares of our
common stock.
During the year ended March 31, 2001, we generated operating losses of
$1,253,445. We funded these operating losses during this period through a
combination of low interest long-term debt and the private sale of shares of our
common stock.
We do not have available credit, bank financing or other external sources of
funding. Due to historical operating losses, our operations have not generated
positive cash flow. In order to obtain capital we may need to sell additional
shares of common stock and/or borrow funds through loan agreements from private
lenders, some of which may take the form of a Convertible loan. There is no
assurance if we do receive a loan we will be able to pay this money back to the
lender prior to its due date, thus having to convert the loan to stock. The
Company is actively seeking fresh capital from a pool of accredited investors,
some of which are existing investors.
Based upon an anticipated infusion of capital via loans, paid in capital raised
via the sale of stock plus anticipated revenue from joint venture agreements
with hardware and software manufacturers in the 3D, Animation and CAD
marketplaces, we believe we will have adequate funds to meet our projected cash
needs through Fiscal Year 2003.
However, should we not receive the anticipated infusion of capital, and or not
execute anticipated agreements with hardware and software manufacturers, the
Company will incur additional revenue losses and may be forced to cease
operations. No assurances can be given at this time as to the availability of
the new funding, the terms thereof, or the execution of revenue generating
agreements.
Going forward, we have reduced our total number of employees to two, now relying
on outside vendors and consultants for many of the Company's operations. Should
new operating capital becomes available, the Company anticipates the immediate
re-hiring or contracting of certain former employees.
ADVA recently changed its fiscal year to March 31 to coincide with GIG.
ADVA and GIG recently relocated their corporate headquarters from Columbia,
South Carolina and New York, respectively, to Rock Hill, SC in order to reduce
costs.
-11-
PART II. OTHER INFORMATION
Item 2. Changes in Securities
The information required to be included in item 2 of Part II of this Form 10-QSB
was previously reported in ADVA's most current report on Form 10-QSB filed June
30, 2001
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
None.
(b) Reports on Form 8-K
No reports on 8-K have been filed during the quarter covered by this
report.
Signatures
In accordance with the requirements of the Exchange Act, the issuer caused this
report to be signed on its behalf by the undersigned, thereunto duly signed.
/s/ Anthony E. Mohr
---------------------
Anthony E. Mohr
CEO and President
Date: 03/01/02
-12-
