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 December 31, 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 December 31, 2001 and March 31, 2001..................................................... 3 Consolidated Statements of Operations for the Three Months Ended September 30, 2001 and 2000, the Nine Months ended December 31, 2001 and 2000, and the cumulative period April 2, 1998 (inception) through December 31, 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 December 31, 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)", "predicts", "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 Dec. 31, March 31, 2001 2001 - --------------------------------------------------- ------------ ------------ (Unaudited) Assets Current assets Cash and cash equivalents $ 18,664 $ 961,483 Accounts receivable, other 46 - Prepaid expenses 33,167 56,500 - --------------------------------------------------- ------------ ------------ Total current assets 51,877 1,017,983 Furniture and equipment, net of accumulated depreciation of $1,863 22,099 - Software 320,436 200,000 Deferred financing costs, net of accumulated amortization of $312,958 and $221,155 558,641 696,345 Deposit 2,979 2,979 - --------------------------------------------------- ------------ ------------ Total assets $ 956,032 $ 1,914,328 - --------------------------------------------------- ------------ ------------ -3- ADVA INTERNATIONAL AND SUBSIDIARY (A Development Stage Enterprise) Consolidated Balance Sheet Dec. 31, March 31, 2001 2001 - --------------------------------------------------- ------------ ------------ (Unaudited) Liabilities and Stockholders' (Deficiency) Current liabilities Accrued transaction and creditor payables $ 560 $ 300,000 Accrued professional fees 312,234 147,267 Accrued interest 125,086 49,400 Accounts payable and accrued expenses, other 50,537 27,742 Due to officer 37,882 33,515 - --------------------------------------------------- ------------ ------------ Total current liabilities 526,299 557,924 Long-term debt 1,585,000 1,500,000 - --------------------------------------------------- ------------ ------------ Total liabilities 2,111,299 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 (3,106,267) (2,094,596) Total stockholders' (deficiency) (1,155,267) (143,596) - --------------------------------------------------- ------------ ------------ Total liabilities and stockholders' (deficiency) $ 956,032 $ 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 Dec. 31, Dec. 31, Dec. 31, 2001 2000 2001 2000 2001 - ---------------------------------- ------------ ------------ ------------ ------------ ------------ (Unaudited) (Unaudited) (Unaudited) Sales, license fees $ - $ - $ - $ - $ 8,484 Operating expenses Salary and employee related 63,995 29,998 179,329 85,060 527,059 General and administrative 110,027 88,540 591,709 170,663 1,127,866 Expenses related to merger 5,000 84,411 30,336 266,174 995,278 - ---------------------------------- ------------ ------------ ------------ ------------ ------------ Total operating expenses 179,022 202,949 801,374 521,897 2,650,203 - ---------------------------------- ------------ ------------ ------------ ------------ ------------ (Loss) from operations (179,022) (202,949) (801,374) (521,897) (2,641,719) - ---------------------------------- ------------ ------------ ------------ ------------ ------------ Other income (expense) Miscellaneous income - - - - 1,305 Interest (expense), Officer (1,558) - (4,366) - (12,587) Interest (expense), debt (71,429) (57,276) (213,390) (166,181) (485,355) Interest income 7 6,139 7,460 14,840 32,089 - ---------------------------------- ------------ ------------ ------------ ------------ ------------ Total other (expense) (72,980) (51,137) (210,296) (151,291) (464,547) - ---------------------------------- ------------ ------------ ------------ ------------ ------------ Net (loss) (252,002) (254,086) (1,011,670) (673,188) (3,106,267) - ---------------------------------- ------------ ------------ ------------ ------------ ------------ Basic and diluted loss per share (0.02) (0.02) (0.08) (0.05) (0.28) - ---------------------------------- ------------ ------------ ------------ ------------ ------------ Weighted average shares outstanding 13,185,194 12,468,750 13,185,194 12,376,266 11,155,081 - ---------------------------------- ------------ ------------ ------------ ------------ ------------ 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) - - (1,011,671) (1,011,671) - ------------------------ -------- -------- ------------ ---------- ------------ ----------- ------------ ------------ Balance, September 30, 2001 - $ - 13,185,194 $ 13,185 $ 1,937,815 (3,106,267) - (1,115,267) - ------------------------ -------- -------- ------------ ---------- ------------ ----------- ------------ ------------ 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) Nine Months Ended through Dec. 31, Dec. 31, 2001 2000 2001 - ------------------------------------------------ ------------ ------------- ------------- (Unaudited) (Unaudited) Cash Flows from operating activities Net (loss) $ (1,011,671) $ (673,188) $ (3,106,267) Adjustments to reconcile net (loss) to net cash (used in) Operating activities Amortization of deferred finance costs 137,703 137,441 358,859 Depreciation 3,578 - 3,578 Changes in assets and liabilities Accounts receivable (46) - (46) Prepaid expenses 23,333 (29,000) (33,167) Deposits (2,979) - (2,979) Accrued transaction and creditor (299,440) - 560 Accounts payable and accrued expenses 263,449 (272,850) 487,857 - ------------------------------------------------ ------------ ------------- ------------- Net cash (used in) operating expenses (886,073) (837,597) (2,291,605) - ------------------------------------------------ ------------ ------------- ------------- Cash flows from investing activities Software and related costs (120,436) - (320,436) Purchase of furniture and equipment (25,677) - (25,677) Replacement from (loan to) officer 4,367 (7,379) 37,882 - ------------------------------------------------ ------------ ------------- ------------- Net cash (used in) investing activities (141,746) (7,379) (308,231) - ------------------------------------------------ ------------ ------------- ------------- Cash flows from financial activities Proceeds from long-term debt, net of finance fees 85,000 390,000 1,567,500 Proceeds from stock issuance and subscription - 750,000 1,051,000 - ------------------------------------------------ ------------ ------------- ------------- Net cash provided by financing activities 85,000 1,140,000 2,618,500 - ------------------------------------------------ ------------ ------------- ------------- Net (decrease) increase in cash and cash equivalents (942,819) 295,024 18,664 Cash and cash equivalents at the beginning of the period 961,483 183,492 - - ------------------------------------------------ ------------ ------------- ------------- Cash and cash equivalents at the end of period 18,664 478,516 18,664 - ------------------------------------------------ ------------ ------------- ------------- 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 December 31, 2001, and the results of its operations for the three months period ended December 31, 2001 and 2000. The results of operations experienced for the three month period ended December 31, 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 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 December 31, 2001, has generated a net loss of $3,106,267. 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. On November 27, 2001, an aggregate total of $85,000 was advanced to the Company in the form of a simple loan by private lenders. The instrument bears an interest rate of 7.5% compounded annually. The Board of Directors approved the terms of the loan on February 23, 2002. 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 on 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 forma 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 and 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 ADVA Stock Option Plan and Plan further 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 loans. With anticipated additional funding we expect to continue further software development on Linux, Unix and other software platforms. We further anticipate executing multiple software licensing 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 December 31, 2001, ADVA suffered a loss from operations of $179,022. 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 convertible 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 the anticipated combination of an infusion of capital through low interest loans, convertible to stock after one year, paid in capital raised through the sale of additional 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 2003. However, should we not receive an 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-
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10QSB Filing
Adva International (ADII) Inactive 10QSB2002 Q3 Quarterly report (small business)
Filed: 6 Mar 02, 12:00am