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 quarterly period ended: March 31, 2001
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 _____
The number of issuer's shares of Common Stock outstanding as of March 31, 2001
was 63,323,881
Transitional Small Business Disclosure Format (check one): Yes _____ No __X__
FINANCIAL STATEMENTS AND REPORT
OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS'
ADVANCED OPTICS ELECTRONICS, INC.
(A DEVELOPMENT STAGE COMPANY)
March 31, 2001
C O N T E N T S
Page
REPORT OF INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS..................................................................1
FINANCIAL STATEMENTS
BALANCE SHEET.............................................................2
STATEMENTS OF OPERATIONS..................................................3
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY..............................4
STATEMENTS OF CASH FLOWS................................................5-6
NOTES TO FINANCIAL STATEMENTS..........................................7-20
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Advanced Optics Electronics, Inc.
We have reviewed the accompanying balance sheet of Advanced Optics Electronics,
Inc. (A Development Stage Company), as of March 31, 2001, and the related
statements of operations, changes in stockholders' equity and cash flows for the
three months then ended. These financial statements are the responsibility of
the Company's management. The financial statements of Advanced Optics
Electronics, Inc. for the three months ended March 31, 2000 were reviewed by
other auditors whose report dated April 20, 2000 stated that they were not aware
of any material modifications that should be made to those statements in order
for them to be in conformity with generally accepted accounting principles. The
financial statements for the 1996, 1997, 1998, and 1999 portions of the period
from May 22, 1996 (inception) through December 31, 1999 were audited by other
auditors, whose reports dated February 18, 2000 and February 5, 1998 expressed
unqualified opinions on those statements.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements in order for them to be in
conformity with generally accepted accounting principles.
Atkinson & Co., Ltd.
Albuquerque, New Mexico
May 12, 2001
-1-
Advanced Optics Electronics, Inc.
(A Development Stage Company)
BALANCE SHEET
(Unaudited)
March 31, 2001
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 225,018
Certificates of deposit 52,935
Costs and estimated earnings in excess of
billings on uncompleted contract 672,872
-----------
Total current assets 950,825
-----------
PROPERTY AND EQUIPMENT, net 244,508
-----------
DEFERRED TAX ASSET 643,200
-----------
OTHER ASSETS
Intangible assets, net 309,997
Investment in Bio Moda, Inc. 207,335
Other assets 64,292
Note receivable from officer and shareholder 44,493
-----------
Total other assets 626,117
-----------
Total assets $ 2,464,650
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 166,761
Accrued liabilities 32,487
Current portion of long-term
obligations 36,205
Allowance for loss on contract 119,315
-----------
Total current liabilities 354,768
-----------
LONG-TERM PORTION OF LONG-TERM
DEBT AND CAPITAL LEASE OBLIGATION 37,842
CONVERTIBLE DEBENTURES 1,290,677
STOCKHOLDERS' EQUITY
Capital stock - Preferred Series A, 7.5% cumulative, convertible into
common stock at a rate determined by dividing the purchase price of
the preferred shares by the conversion price of the common stock;
$.001 par value; authorized 10,000,000 shares, no shares
issued or outstanding --
Common stock - Authorized 150,000,000 shares, $.001
par value; 63,403,175 shares issued and 63,320,775
shares outstanding 63,403
Additional paid-in capital 8,314,681
Deficit accumulated during the development stage (7,345,513)
Treasury stock, at cost (57,781)
Notes receivable from officer for exercise of stock options (193,427)
-----------
Total stockholders' equity 781,363
-----------
Total liabilities and stockholders' equity $ 2,464,650
===========
The accompanying notes are an integral part of this financial statement.
-2-
Advanced Optics Electronics, Inc.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months ended March 31, 2001 and 2000
and the period from May 22, 1996 (Inception)
through March 31, 2001
May 22, 1996
(Inception)
Through
2001 2000 March 31, 2001
------------ ------------ ------------
Revenues
Contract revenue $ -- $ 34,039 $ 762,745
------------ ------------ ------------
Costs and expenses
General and administrative 313,859 1,206,669 5,226,773
Contract costs 125,000 111,886 1,452,744
Research and development 78,202 133,967 1,238,378
------------ ------------ ------------
Total costs and expenses 517,061 1,452,522 7,917,895
------------ ------------ ------------
Operating loss (517,061) (1,418,483) (7,155,150)
------------ ------------ ------------
Other income (expenses)
Interest income 7,195 2,293 37,525
Unrealized gain (loss) on marketable equity securities -- 7,655 (29,368)
Other investment gains -- -- 59,784
Loss on Bio Moda, Inc. -- (16,222) (176,510)
Gain (loss) on disposal of assets 6,000 -- (4,306)
Interest expense (2,205) (76,581) (657,668)
------------ ------------ ------------
Total other income (expenses) 10,990 (82,855) (770,543)
------------ ------------ ------------
Net loss before cumulative effect of
change in accounting principle (506,071) (1,501,338) (7,925,693)
Cumulative effect of change in
accounting principle -- -- (63,020)
Provision for income tax benefit -- -- 643,200
------------ ------------ ------------
Net loss $ (506,071) $ (1,501,338) $ (7,345,513)
============ ============ ============
Net loss per share before cumulative effect
of change in accounting principle $ (.008) $ (.031) $ (0.249)
Cumulative effect of change in accounting principle -- -- (.002)
------------ ------------ ------------
Net loss per share $ (.008) $ (.031) $ (0.249)
============ ============ ============
Weighted average shares outstanding 62,665,675 48,153,762 29,492,566
============ ============ ============
The accompanying notes are an integral part of this financial statement.
-3-
Advanced Optics Electronics, Inc.
(A Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
For the period from May 22, 1996 (inception) through March 31, 2001
Common Stock Preferred Stock
----------------------------- -------------------
Par Par
Shares Value Shares Value
----------- -------- ------ -----
Balance, May 22, 1996 -- $ -- -- $--
Stock issued to incorporators for cash 500,000 500 -- --
Stock issued for the net assets of PLZ Tech, Inc. 4,500,000 4,500 -- --
Net loss -- -- -- --
----------- -------- ---- ---
Balance, December 31, 1996 5,000,000 5,000 -- --
Stock issued in public offering 2,281,212 2,281 -- --
Net loss -- -- -- --
----------- -------- ---- ---
Balance, December 31, 1997 7,281,212 7,281 -- --
Stock issued for cash 10,979,275 10,979 -- --
Stock issued for services 2,751,000 2,751 -- --
Stock issued in exchange for note receivable 315,000 315 -- --
Purchase and retirement of treasury stock (472,200) (472) -- --
Net loss -- -- -- --
----------- -------- ---- ---
Balance, December 31, 1998 20,854,287 20,854 -- --
Stock issued for cash 8,681,624 8,682 -- --
Stock issued for services 17,094,313 17,094 -- --
Intrinsic value of beneficial conversion feature of notes
payable -- -- -- --
Fair value of warrants related to notes payable -- -- -- --
Purchase and retirement of treasury stock (489,251) (489) -- --
Purchase of treasury stock -- -- -- --
Sale of treasury stock -- -- -- --
Net loss -- -- -- --
----------- -------- ---- ---
Balance, December 31, 1999 46,140,973 46,141 -- --
Stock issued for cash 782,000 782 710 1
Stock issued for services 3,955,202 3,955 -- --
Purchase of treasury stock -- -- -- --
Sale of treasury stock -- -- -- --
Exercise of stock options for notes receivable 1,850,000 1,850 -- --
Amortization of discount on convertible preferred stock -- -- -- --
Exercise of preferred stock conversion feature 9,200,000 9,200 -- --
Issuance of convertible debentures -- -- -- --
Exchange of preferred stock for convertible debentures -- -- (710) (1)
----------- -------- ---- ---
Net loss -- -- -- --
----------- -------- ---- ---
Balance, December 31, 2000 61,928,175 61,928 -- --
Stock issued for services 1,475,000 1,475 -- --
Purchase of treasury stock -- -- -- --
Net loss -- -- -- --
----------- -------- ---- ---
Balance, March 31, 2001 63,403,175 $ 63,403 -- $--
=========== ======== ==== ===
Treasury Stock
-------------------------- Equity (Deficit) Notes
Additional During the Receivable Total
Paid-In Development From Stockholders'
Shares Cost Capital Stage Officer Equity
-------- -------- ----------- ----------- --------- -----------
-- $ -- $ -- $ -- $ -- $ 00
-- -- 24,500 -- -- 25,000
-- -- 281,096 -- -- 285,596
-- -- -- (76,902) -- (76,902)
-------- -------- ----------- ----------- --------- -----------
-- -- 305,596 (76,902) -- 233,694
-- -- 362,720 -- -- 365,001
-- -- -- (84,690) -- (84,690)
-------- -------- ----------- ----------- --------- -----------
-- -- 668,316 (161,592) -- 514,005
-- -- 1,281,728 -- -- 1,292,707
-- -- 293,719 -- -- 296,470
-- -- 28,685 -- -- 29,000
-- -- (39,913) -- -- (40,385)
-- -- -- (752,111) -- (752,111)
-------- -------- ----------- ----------- --------- -----------
-- -- 2,232,535 (913,703) -- 1,339,686
-- -- 855,101 -- -- 863,783
-- -- 1,469,320 -- -- 1,486,414
-- -- 174,610 -- -- 174,610
-- -- 125,000 -- -- 125,000
-- -- (10,643) -- -- (11,132)
(229,000) (41,760) -- -- -- (41,760)
85,000 11,130 24,334 -- -- 35,464
-- -- -- (2,725,804) -- (2,725,804)
-------- -------- ----------- ----------- --------- -----------
(144,000) (30,630) 4,870,257 (3,639,507) -- 1,246,261
-- -- 1,012,710 -- -- 1,013,493
-- -- 1,726,197 -- -- 1,730,152
(63,500) (46,486) -- -- -- (46,486)
142,400 22,542 54,771 -- -- 77,313
-- -- 220,150 -- (193,427) 28,573
-- -- 159,677 -- -- 159,677
-- -- 533,678 -- -- 542,878
-- -- 263,830 -- -- 263,830
-- -- (641,779) -- -- (641,780)
-- -- (59,583) -- -- (59,583)
-- -- -- (3,199,935) -- (3,199,935)
-------- -------- ----------- ----------- --------- -----------
(65,100) (54,574) 8,139,908 (6,839,442) (193,427) 1,114,393
-- -- 174,773 -- -- 176,248
(17,300) (3,207) -- -- -- (3,207)
-- -- -- (506,071) -- (506,071)
-------- -------- ----------- ----------- --------- -----------
(82,400) $ 57,781) $ 8,314,681 $(7,345,513) $(193,427) $ 781,363
======== ======== =========== =========== ========= ===========
The accompanying notes are an integral part of these financial statements.
-4-
Advanced Optics Electronics, Inc.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(Unaudited)
For the Three Months ended March 31, 2001 and 2000
and the Period from May 22, 1996 (Inception)
through March 31, 2001
May 22, 1996
(Inception)
Through
2001 2000 March 31, 2001
--------- ----------- -----------
Cash flows from operating activities
Net loss $(506,071) $(1,501,338) $(7,353,766)
Adjustments to reconcile net loss to net cash
provided by operating activities
Provision for deferred tax asset -- -- (643,200)
Intrinsic value of conversion features -- -- 466,728
Amortization and depreciation expense 28,373 27,630 330,218
Write off of organization costs -- -- 63,020
Amortization of discounts on convertible
notes -- 70,691 295,209
Unrealized (gain) loss on marketable securities -- (7,655) 29,368
Gain (loss) on disposal of assets (6,000) -- 4,306
Loss on Bio Moda, Inc. -- 16,222 176,510
Issuance of common stock for services 176,248 1,120,233 3,689,284
Issuance of notes for services -- -- 50,000
Increase in excess of costs and earnings over
billings on uncompleted contract -- (34,039) (672,872)
(Increase) decrease in other assets 9,750 (131) (70,124)
Increase (decrease) in inventory -- 6,000 (35,293)
Increase in allowance for loss on contract 26,933 18,039 119,315
Increase (decrease) in accrued liabilities
and accounts payable (16,978) (50,751) 207,501
Other non-cash expenses -- 31,030 33,447
Accrued interest -- -- 30,667
--------- ----------- -----------
Net cash provided by (used in)
operating activities (287,745) (304,069) (3,279,682)
--------- ----------- -----------
The accompanying notes are an integral part of these financial statements.
-5-
Advanced Optics Electronics, Inc.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS - CONTINUED
(Unaudited)
For the Three Months ended March 31, 2001 and 2000
and the Period from May 22, 1996 (Inception)
through March 31, 2001
May 22, 1996
(Inception)
Through
2001 2000 March 31, 2001
--------- ----------- -----------
Cash flows from investing activities
Purchase of equipment (22,126) (31,886) (374,369)
Investment in Bio Moda, Inc. -- -- (383,845)
Sale of marketable securities -- -- 40,665
Purchase of marketable securities -- (28,883) (70,034)
(Increase) decrease in certificate of deposits 54,491 (51,655) (52,935)
Proceeds from sale of equipment 23,800 -- 23,800
Purchase of other assets 650 -- (233,782)
Redemption of sale of Wizard Technologies, Inc. -- 65,000 --
--------- ----------- -----------
Net cash provided by (used in)
investing activities 55,515 (47,424) (1,050,500)
--------- ----------- -----------
Cash flows from financing activities
Additions to notes payable -- -- 622,776
Payments on notes payable and capital
lease obligations (23,832) (15,097) (195,940)
Issuance of capital stock -- 853,493 3,559,984
Collection of officer notes -- -- 28,573
Sale of treasury stock -- 49,770 112,777
Purchase of treasury stock (3,207) (7,683) (132,970)
Proceeds from issuance of convertible
debenture 75,000 -- 560,000
--------- ----------- -----------
Net cash provided by financing activities 47,961 880,483 4,555,200
--------- ----------- -----------
NET INCREASE (DECREASE) IN CASH (184,269) 528,990 225,018
Cash and cash equivalents, beginning of period 409,287 190,387 --
--------- ----------- -----------
Cash and cash equivalents, end of period $ 225,018 $ 719,377 $ 225,018
========= =========== ===========
The accompanying notes are an integral part of these financial statements.
-6-
Advanced Optics Electronics, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
March 31, 2001
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the Company's significant accounting policies consistently applied
in the preparation of the accompanying financial statements follows.
Notes to Interim Financial Statements
The interim financial data is unaudited, however in the opinion of management,
the interim data includes all adjustments, consisting of normal recurring
adjustments, necessary for a fair statement of the results for the interim
period. The financial statements included herein have been prepared by the
Company pursuant to the rules and regulations of the Securities and Exchange
Commission. The organization and business of the Company, accounting policies
followed by the Company and other information are contained in the notes to the
Company's financial statements filed as part of the Company's March 31, 2001
Form 10-QSB. This quarterly report should be read in conjunction with such
annual report.
Description of Business
Advanced Optics Electronics, Inc. (the Company) is a developmental stage
technology company with its principal focus on the development and production of
large-scale flat panel displays. The Company is currently continuing its
research and development of this product. Upon substantial completion of the
research and development of the large flat panel display, the Company plans to
make the transition from a developmental stage company to selling and producing
this product. The market for the large-scale flat panel displays will include
advertising billboards, flat panel computer monitors, and cockpit displays. The
Company plans to focus on producing and selling the large-scale flat panel
displays for outdoor advertising billboards.
The Company has obtained a contract to produce two outdoor advertising
billboards using its flat panel display technology. This is the first commercial
application of the Company's technology. The success of the Company will depend
on its ability to commercialize its technology and complete this contract. As of
March 31, 2001, completion of this contract was behind schedule.
While management believes the contract will ultimately be completed, there can
be no certainty that this will be accomplished because the technology has not
yet been used in a commercial application. In addition, the Company may be
required to obtain additional capital in order to fund the completion of the
contract.
-7-
Advanced Optics Electronics, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
March 31, 2001
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Cash and Cash Equivalents
Cash and cash equivalents include all cash balances and highly liquid
instruments with original maturities of three months or less. The Company's cash
deposits are maintained in local branches of national financial institutions and
are insured by the Federal Deposit Insurance Corporation up to $100,000 at each
institution. Cash balances may from time to time exceed these insurance limits,
but management believes the Company is not exposed to any risk of loss from
these deposits.
Revenue and Cost Recognition
The Company recognizes revenue on its contract in process using the
percentage-of-completion method of accounting, which is based on the proportion
of the contract cost incurred to the estimated total contract cost. Costs
incurred and estimated earnings in excess of billings represent the revenue
recognized that has not yet been billed.
Contract costs include all direct material and labor costs and those indirect
costs related to contract performance, such as indirect labor, supplies,
overhead, equipment depreciation, and interest.
The contract to produce two outdoor advertising billboards totals $1.7 million,
with $885,000 assigned to the first unit. An estimated loss of approximately
$690,000 from production of the first unit has been recognized through March 31,
2001. The Company's estimated cost to complete as of March 31, 2001 is $122,255
which is expected to be funded with cash, billings on the contract and
contributed capital.
In accordance with the contract, the Company will bill the customer when certain
milestones are met. Billings and collections through March 31, 2001 have totaled
$89,873.
Adjustments to the original estimates of total contract revenues, total contract
costs, and the extent of progress toward completion are often required as work
progresses under the contract, and as experience is gained, even though the
scope of the work may not change. The nature of accounting for contracts is such
that refinements of the estimating process for continuously changing conditions
and new developments are a characteristic of the process. Accordingly,
provisions for losses on contracts are made in the period in which they become
evident under the percentage-of-completion method. It is at least reasonably
possible that the estimate of completion costs for this contract will be further
revised in the near-term.
-8-
Advanced Optics Electronics, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
March 31, 2001
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Investment
As of March 31, 2001, the Company owned 16.4% of the outstanding common stock of
Bio Moda, Inc., an unconsolidated investment accounted for using the cost
method. Prior to December 31, 1999, the Company's ownership was sufficient for
the investment to be accounted for using the equity method.
The carrying value of the investment as of March 31, 2001 is the original
investment cost adjusted by the Company's proportionate interest in losses
reported by the investee through December 31, 1999.
Property, Plant and Equipment
Property, plant and equipment are carried at cost. Repair and maintenance costs
are charged against income as incurred. Asset additions, renewals and
betterments are capitalized at cost and depreciated using the straight-line
method over estimated useful lives ranging from 3 to 15 years.
Other Assets
Intangible assets are carried at historical cost, net of accumulated
amortization. Patents are amortized on a straight-line basis over their
estimated useful lives of 17 years. Goodwill is amortized over 40 years. Debt
origination costs are amortized over 3 years.
Certain assets previously classified as inventory are no longer used in the
Company's on-going production processes, and are held for sale. Management
estimates that the net realizable value of these items exceeds their carrying
value as of March 31, 2001.
Research and Development Costs
Research and development costs are expensed as incurred.
Income Taxes
The Company accounts for income taxes using the liability method, under which,
deferred tax liabilities and assets are determined based on the difference
between the financial statement carrying amounts and the tax bases of assets and
liabilities using enacted tax rates in effect in the years in which the
differences are expected to reverse. The Company has recorded a deferred tax
benefit relating to its incurrance of operating losses since inception. A
valuation allowance has been provided due to uncertainty regarding realizability
of the tax asset.
-9-
Advanced Optics Electronics, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
March 31, 2001
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Loss Per Share
Loss per share is computed on the basis of the weighted average number of common
shares outstanding during the period and did not include the effect of potential
common stock as their inclusion would reduce loss per share. The numerator for
the computation is the net loss and the denominator is the weighted average
shares of common stock outstanding. Certain options and warrants outstanding
were not included in the computation of loss per share because their inclusion
would reduce loss per share.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. The principal areas requiring
estimation are revenue recognition based on the percentage of completion method,
loss allowances and the valuation of common stock issued for services.
Stock-Based Compensation
The Company has elected to apply the provisions of Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to Employees, and to furnish the
proforma disclosures required by Statement on Financial Accounting Standards No.
123, Accounting for Stock Based Compensation. See note 10.
Reclassifications
Certain reclassifications have been made to 1999 information to conform to the
2000 presentation.
Comprehensive Income
In 2000 and 1999, the Company had no changes in equity which constituted
components of other comprehensive income.
-10-
Advanced Optics Electronics, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
March 31, 2001
NOTE 2. NOTES RECEIVABLE
Notes receivable at March 31, 2001, consist of the following:
Due from officer $29,493
Note receivable from former shareholder,
interest at 8% and due on demand 15,000
-------
$44,493
=======
The Company also has notes receivable from an officer totaling $193,427 which
bear interest at 10% per annum, and are due in 2003. These notes were received
as consideration upon exercise of stock options.
NOTE 3. INVESTMENTS
As of March 31, 2001, the Company owned 879,707 or 16.4% of the 5,373,858
outstanding shares of Bio Moda, Inc. The Company's interest in Bio Moda has
declined from 22% in 1998 to its present level, as Bio Moda has issued
additional shares in the course of its financing activities. As of March 31,
2001, the Company had options to purchase an additional 187,000 shares at .485
cents per share.
Bio Moda, Inc. is a development stage company involved primarily in the
development of technology for the early detection of lung cancer. As a
development stage company, Bio Moda, Inc. has not had any revenues and, as of
March 31, 2001, was in the process of conducting clinical trials.
There is currently no active market for the common stock of Bio Moda, Inc. The
ultimate value of the Company's investment in Bio Moda, Inc. will depend on its
ability to complete its research and either commercialize or sell its
proprietary technology.
The investment in Bio Moda, Inc. is accounted for using the cost method. A
summary of the investment is as follows:
Original cost $ 383,845
Share of net loss (134,010)
Amortization of excess of cost
over book value (42,500)
---------
Carrying value of investment in Bio Moda, Inc. $ 207,335
=========
-11-
Advanced Optics Electronics, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
March 31, 2001
NOTE 4. LONG-TERM OBLIGATIONS
As of March 31, 2001, the Company's long-term obligations were as follows:
Notes payable to a financial institution,
due in monthly payments aggregating
$3,221 through October 2003, bearing
interest at bank prime rate plus 1.5%,
collateralized by operating equipment
and a vehicle $ 71,056
Capital lease obligation 2,991
--------
74,047
Less: Current portion (36,205)
--------
$ 37,842
========
The Company is obligated under a long-term capital lease which requires monthly
minimum lease payments of $2,810 through May 2001. As of March 31, 2001, the
leased equipment has a net book value of $29,762.
Future principal payments on long-term obligations for the years ending March
31, are as follows:
2002 $36,205
2003 28,056
2004 9,786
-------
$74,047
=======
-12-
Advanced Optics Electronics, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
March 31, 2001
NOTE 5. CONVERTIBLE DEBENTURES
On June 3, 1999, the Company issued $500,000 in convertible notes which bear
interest at an annual rate of 8 percent and mature (principal and interest) on
May 31, 2001. Effective August 1, 1999, the notes were convertible into shares
of common stock at a 25 percent discount to the closing bid price of a share of
common stock at the time of conversion or the time of exercise. The notes were
issued in exchange for $430,000 in cash, $50,000 in legal services and $20,000
in commissions. The commissions have been capitalized as debt origination costs
and are being amortized over the life of the notes. The notes are unsecured.
The intrinsic value of the conversion feature of the principal and accrued
interest was estimated to be $174,610. This has been recorded as an increase in
paid-in capital and a discount to the convertible notes payable, with related
amortization being charged to interest expense. The discount is being amortized
over a one-year period, which is management's estimate of time before any
conversion will be exercised. The convertible notes also include detachable
warrants for the purchase of 12,500,000 shares of common stock at the lower of
75 percent of the closing bid price of a share of common stock at the time of
exercise or September 1, 1999. The warrants expire on June 3, 2002. Management
estimates that approximately half the warrants will be exercised prior to
expiration.
Management estimated the fair market value of these warrants at $125,000 and
recorded this amount as an increase in paid-in capital and a discount to the
convertible notes payable. The discount is being amortized over the two-year
life of the notes.
A significant contingency required by the aforementioned convertible note and
warrant agreements is the registration of the underlying shares with the
Securities and Exchange Commission. The Company is to use its best efforts to
register these shares and is in the process of preparing the registration
statement.
On June 12, 2000, the Company entered into an agreement that modified the
convertible notes agreement entered into on June 3, 1999. The result of the
modified agreement was the issuance of 9,200,000 shares of the Company's common
stock upon conversion of the convertible notes plus accrued interest through
June 12, 2000, which totaled $542,878. This transaction constituted a conversion
of the outstanding convertible notes, and as such, $40,058 of unamortized
intrinsic value of the conversion feature was charged to interest expense during
the quarter. In addition, the modified agreement voided the related 12,500,000
detachable warrants, and, as a result, the unamortized discount of $72,917 on
the estimated fair market value of $125,000 for the warrants was charged to
interest expense during the quarter.
-13-
Advanced Optics Electronics, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
March 31, 2001
NOTE 5. CONVERTIBLE DEBENTURES - CONTINUED
On September 15, 2000, the Company entered into an agreement to issue a total of
$10,000,000 in convertible notes which bear interest at an annual rate of 8
percent. The Company has authorized the initial sale of $2,000,000 of the
convertible notes, and has entered into a structured facility with purchasers in
which the purchasers shall be obligated to purchase the remaining $8,000,000 of
convertible notes. The Company's right to require the Purchasers to purchase
notes commences on the actual effective date of the registration of the
Company's securities in an amount equal to the securities that would be
convertible upon issuance of the notes. The related agreement provides for a
limit on the amount of obligation notes that the Company may require the
Purchasers to purchase in a given month.
On September 15, 2000, the Company issued $500,000 of the initial $2,000,000 in
convertible notes which bear interest at an annual rate of 8 percent and mature
(principal and interest) on September 15, 2003. Effective as of the issuance
date, the notes are convertible into shares of common stock at the lesser of a
25 percent discount to the average of the three lowest closing bid prices during
the thirty trading days prior to the issue date of this note and a 20 percent
discount to the average of the three lowest closing bid prices for the ninety
trading days prior to the conversion date. The notes were issued in exchange for
$430,000 in cash, $20,000 in legal services and $50,000 in commissions. The
commissions have been capitalized as debt origination costs and are being
amortized over the life of the notes. The notes are unsecured.
The intrinsic value of the conversion feature of the principal and accrued
interest was estimated to be $238,830. This has been recorded as an increase in
paid-in capital and a discount to the convertible notes payable, with related
amortization being charged to interest expense. The discount is being amortized
over a one-year period, which is management's estimate of time before any
conversion will be exercised. The convertible notes also include detachable
warrants for the purchase of 500,000 shares of common stock. Management has
estimated the fair market value of these warrants at $25,000 and recorded this
amount as an increase in paid-in capital and a discount to the convertible notes
payable. The discount is being amortized over the three-year life of the notes.
A significant contingency required by the aforementioned convertible notes is
the registration of the underlying shares with the Securities and Exchange
Commission. The Company is to use its best efforts to register these shares and
the registration statement has been filed.
-14-
Advanced Optics Electronics, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
March 31, 2001
NOTE 5. CONVERTIBLE DEBENTURES - CONTINUED
On November 7, 2000, the Company entered into an agreement that modified the
outstanding convertible preferred agreements entered into on March 8, 2000 and
August 2, 2000. The new agreement resulted in the exchange of outstanding
preferred stock plus additional consideration for the Company's 7.5 percent
convertible debentures due November 7, 2003. The total amount of the debentures
is $740,667, including accrued interest of $30,667. The debentures are
convertible into shares of common stock at the lesser of the stocks closing
price on March 8, 2000 and 77.5 percent of the average of the five lowest
closing bid prices for 20 days before November 2, 2000.
The intrinsic value of the conversion feature of the principal and accrued
interest was estimated to be $227,898. The convertible debentures also include
detachable warrants for the purchase of 71,000 shares of common stock.
Management has estimated the fair market value of these warrants at $3,550.
NOTE 6. FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's carrying values and methodologies for estimating the fair values
of its financial instruments are as follows:
Cash, cash equivalents, and certificates of deposit, costs and estimated
loss in excess of billings on uncompleted contract, and accounts payable.
The carrying amounts reported in the accompanying balance sheet approximate
fair values.
Notes receivable. Management estimates that the carrying amounts are
reasonable estimates of their fair values.
Long-term obligations. Notes payable to bank have variable rates that
reflect currently available terms for similar debt, and accordingly the
carrying values are reasonable estimates of their fair values. Due to the
short-term maturity of the capital lease, management estimates that the
carrying value approximates its fair value.
Convertible debentures. Management estimates the carrying values to
approximate their fair values.
Notes receivable from officer. Management estimates these notes to be fully
collectible, and that the carrying values are reasonable estimates of their
fair values.
-15-
Advanced Optics Electronics, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
March 31, 2001
NOTE 6. FAIR VALUE OF FINANCIAL INSTRUMENTS - CONTINUED
The carrying amounts and fair values of the Company's financial instruments as
of March 31, 2001 are as follows:
Estimated
Carrying Fair
Amount Value
---------- ----------
Cash and cash equivalents $ 225,018 $ 225,018
Certificates of deposit 52,935 52,935
Costs and estimated loss in excess
of billings on uncompleted contract 672,872 672,872
Notes receivable 44,493 44,493
Accounts payable 166,761 166,761
Long-term obligations 74,047 74,047
Convertible debentures 1,290,677 1,290,677
Notes receivable from officer 193,427 193,427
NOTE 7. INCOME TAXES
The Company has recorded a deferred tax asset in the amount of $643,200, net of
a valuation allowance on $2,316,800, reflecting the expected benefit of
approximately $7,400,000 in net operating loss carryforwards which expire in
varying amounts between 2016 through 2020. Realization of this asset is
dependent on generating sufficient taxable income prior to expiration of the
loss carryforwards. Although realization is not assured, management believes it
is more likely than not that the deferred tax asset will be realized. The amount
of the deferred tax asset considered realizable, however, could be reduced or
increased in the near term if estimates of future taxable income during the
carryforward period are revised.
NOTE 8. OPERATING LEASES
The Company occupies administrative, engineering, and manufacturing facilities
under operating leases which expire in February 2002. The leases call for
aggregate minimum monthly lease payments of $4,225. Lease expense totaled
$12,675 and $11,200 for the quarter ended March 31, 2001 and 2000, respectively,
and $109,884 in the period from May 22, 1996 (inception) through March 31, 2001.
Future minimum lease payments under the long-term operating lease are $46,475
through February 2002.
-16-
Advanced Optics Electronics, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
March 31, 2001
NOTE 9. EQUITY TRANSACTIONS
The Company was initially capitalized through the issuance of 500,000 shares for
$25,000 in cash. In November 1996, the Company issued 4,500,000 shares in
exchange for the outstanding shares of PLZ Tech, Inc. The transaction was
accounting for as a purchase, with assets acquired and liabilities assumed
recorded at their book values, determined in accordance with generally accepted
accounting principles. Intangible assets of PLZ Tech acquired in the purchase
transaction were carried at historical book values. Research and development
costs of PLZ Tech were expensed as incurred. In previous financial statements,
the Company did not present unclaimed shares resulting from the merger with PLZ
Tech, Inc. as outstanding shares. In the accompanying 1997 and prior financial
statements the number of shares outstanding has been restated to include these
shares.
During 1997, the Company issued 2,281,212 shares of stock in a public offering,
primarily for cash.
During 1998, the Company repurchased 472,200 of its outstanding stock in
exchange for $10,000 in notes receivable and $20,385 in cash in various
transactions. This stock was subsequently retired.
The Company also issued 9,274,811 shares of common stock in exchange for
$1,292,707 in cash, net of sales commissions and other direct costs. Certain of
these sales included price maintenance agreements resulting in the issuance of
an additional 1,704,464 shares of stock in 1998.
In 1998, the Company issued 2,751,000 shares of common stock in exchange for
services from contractors, officers and others. These shares were valued at the
estimated fair market value for similar issuances of stock and amounted to
$296,470. The Company also issued 315,000 shares to an officer in exchange for a
note receivable of $29,000. The note bears interest at the rate of 7 percent
with interest due semiannually and the principal due July 2001.
In 1999, the Company repurchased 489,251 shares of its outstanding stock for
$11,132 in cash. These shares were retired. The Company also repurchased 229,000
shares for $41,760 and resold 85,000 of these shares for $35,464. The remaining
144,000 treasury shares have been recorded at cost.
The Company also sold 8,681,624 shares for $863,782 in cash, and issued
17,094,313 shares for services from contractors, officers and others, which were
valued at $1,486,414.
During the quarter ending March 31, 2000, the Company sold 782,000 shares of its
common stock for $368,495 in cash, and issued 1,791,733 shares of its common
stock for services from contractors, officers and others, which were valued at
$1,120,233. The value of the services is included in the costs and expenses on
the Statements of Operations.
-17-
Advanced Optics Electronics, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
March 31, 2001
NOTE 9. EQUITY TRANSACTIONS - CONTINUED
Also during this quarter, the Company sold 25,000 shares of its treasury stock
for $49,770 and repurchased 6,500 shares for $7,683. The repurchased shares have
been recorded at cost.
On March 14, 2000, the Company issued 550 shares of its Series A convertible
preferred stock for $550,000. Related finders fees and attorney fees were
$65,000, and were netted against the proceeds for a net increase in cash and
equity of $485,000. Effective June 14, 2000, the shares were convertible into
shares of common stock at the lesser of 110 percent of the closing bid price of
a share of common stock on March 13, 2000 or 77.5 percent of the average of the
five lowest closing bid prices for the common stock for the twenty trading days
immediately preceding the conversion date.
Management estimated the intrinsic value of the conversion feature to be
$159,677. This has been recorded as an increase in paid-in capital and a
discount to the convertible preferred stock, with related amortization being
charged to retained earnings as constructive dividends. The discount is being
amortized over a 90-day period, which is the period from the date of issuance to
the point at which the preferred shares can be converted to common shares. The
convertible preferred stock also includes detachable warrants for the purchase
of 55,000 shares of common stock at a purchase price per share equal to 110
percent of the closing bid price for the common stock on the closing date (March
8, 2000). The warrants expire on March 8, 2005. The detachable warrants have not
been valued in the accompanying financial statements, as management estimates
their fair market value to be immaterial.
During the quarter ended June 30, 2000, the Company issued 1,247,970 shares of
its common stock for services from contractors, officers and others, which were
valued at $385,429. The value of the services is included in the costs and
expenses on the Statements of Operations. The Company also repurchased 44,000
shares of its outstanding common stock for $33,817 in cash. These shares
remained in treasury at June 30, 2000, and have been recorded at cost.
Also during this quarter, an officer of the Company exercised 1,000,000 stock
options at a price of $0.12 per share. The Company issued a note receivable to
the officer in the amount of $120,000 for the shares. Interest for the first
quarter was prepaid.
During the quarter ended September 30, 2000, the Company issued 300,000 shares
of its common stock for services from contractors, officers and others, which
were valued at $90,260. The value of the services is included in the costs and
expenses on the Statements of Operations. The Company also sold 45,000 shares of
its outstanding common stock for $27,543 in cash and repurchased 13,000 shares
of its outstanding common stock for $4,986. These shares remained in treasury at
September 30, 2000, and have been recorded at cost.
An officer of the Company exercised 850,000 stock options at a price of $0.12
per share. The Company issued notes receivable to the officer in the amount of
$102,000 for the shares.
-18-
Advanced Optics Electronics, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
March 31, 2001
NOTE 9. EQUITY TRANSACTIONS - CONTINUED
Also, during the quarter the Company issued 160 shares of preferred stock for
$160,000 in cash.
During the quarter ended December 31, 2001, the Company issued 615,500 shares of
common stock for services from contractors, officers, and others, valued at
$130,275.
During the quarter ended March 31, 2001, the Company issued 1,475,000 shares of
common stock for services from contractors, officers, and others, valued at
$176,248.
Also, during the quarter the Company repurchased 17,300 shares of its
outstanding stock for $3,207 in cash.
NOTE 10. STOCK PLANS
On January 4, 1999, the Company established the Incentive Stock Option Plan.
Pursuant to the Plan, up to 10,000,000 shares of the Company's common stock may
be granted as options to key employees. The shares issued upon exercise of the
options may be authorized and unissued shares or shares held by the Company in
its treasury. The exercise date of the options is based on the related agreement
as approved by the Board of Directors. The Incentive Stock Option Plan expires
on January 4, 2009. Options awarded under the Plan have four-year terms and vest
ratably over one to two year periods. As of March 31, 2001, there were 6,175,000
shares available under the Plan for future awards. No stock options were issued
during the three-month period ended March 31, 2001.
The Company applies APB Opinion No. 25 in its accounting for the Plan, and,
accordingly, no compensation cost has been recognized for its stock options in
the financial statements. Had the Company determined compensation cost based on
the fair value at the grant date for its stock options under Statement of
Financial Accounting Standards No. 123, the Company's net loss and loss per
share would have been increased to the proforma amounts indicated as follows:
Years ended December 31,
2000 1999 1998
----------- ----------- ---------
Net loss, as reported $(3,199,935) $(2,725,804) $(752,111)
Proforma net loss (3,575,534) (2,940,633) (752,111)
Loss per share, as reported (0.055) (0.072) (0.055)
Proforma loss per share (0.061) (0.078) (0.055)
-19-
Advanced Optics Electronics, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
March 31, 2001
NOTE 10. STOCK PLANS - CONTINUED
The fair value of each option grant for the above proforma disclosure is
estimated on the date of the grant using the Black-Scholes option-pricing model
with the following weighted-average assumptions: dividends of $0 per year;
expected volatility of 42.3 percent; risk-free interest rate of 6.0 percent; and
expected lives of four years.
Total stock options granted and unexercised were 3,825,000 as of March 31, 2001.
The shares issued upon exercise of the options may be authorized and unissued
shares or shares held by the Company in its treasury. The exercise date of
options granted is based upon the related agreement as approved by the Board of
Directors.
The Company also issued Stock Purchase Warrants to key employees. The total
number of "warrant shares" issued under these agreements was 3,425,000 shares,
exercisable at any time until they expire on June 15, 2004. The price
established for the shares ranges from $0.15 to $0.41 per share.
A summary of the common stock option and warrant activity for employees,
directors and officers is as follows:
Weighted
Warrants Average
and Exercise
Options Prices Exercisable
---------- ------ ----------
Balance, December 31, 1997 153,954 $ 0.58 153,954
Balance, December 31, 1998 153,954 0.58 153,954
Granted 6,900,000 0.16
Expired (153,954) 0.58
----------
Balance, December 31, 1999 6,900,000 0.16 6,185,000
==========
Cancelled (2,775,000) 0.72
Replacement 2,775,000 0.34
Granted 6,200,000 0.72
Exercised (2,000,000) 0.12
----------
Balance, December , 2000 11,100,000 0.27 9,517,500
==========
Balance, March 31, 2001 11,100,000 0.27 10,361,250
========== ==========
The option price established for the shares upon exercise ranges from $0.12 to
$0.34 per share, and expire through October 2004.
-20-
ADVANCED OPTICS ELECTRONICS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
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 21E of the Securities Exchange Act of 1934.
OVERVIEW
Advanced Optics Electronics, Inc. is a technology company whose primary focus is
the development, production and sales of its electronic flat panel displays. The
primary initial product will be marketed to users of outdoor advertising
billboards. We believe that our product line has the potential to create a new
segment of the outdoor advertising industry. Our systems software and electronic
displays represent an innovative approach to advertising that takes advantage of
the recent technological convergence of broadcast and billboard media and the
World Wide Web.
-21-
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 also plan the
development of a leasing program and an Owned & Operated group.
The major advantages and features of the Display are:
o Brightest display ever available (35,000 nits)
o Widest viewing angle available
o Smallest dot pitch available for outdoor large-scale displays (8 mm
dot pitch)
o High definition picture quality
o Modular assembly (1 meter increments) for scaleable and shapeable
architectures
o True Color (24 bit)
o Full motion video (up to 120 frames per second)
o Transportable for mobile operations
o Weather resistant for outdoor applications
o Modest power requirements
o Minimum 5 year continual use lifetime
o Real-time live video feeds
o Broadcast/simulcast applications
o Supports streaming video
o Uses industry standard DVI protocol for high speed data linking and
digital video interfacing
o Satellite linkable
Proprietary Billboard software capabilities are:
o Manage and update display content remotely
o Works with all image file formats and digital video editors
o Secure Internet or WAN communications
o WEB-based status monitoring
o Provides time, temperature and other dynamic content inserts
The Company 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. Our operating activities
have related primarily to the initial planning and development of our product
and building our operating infrastructure. We have completed, tested, and
measured the performance of, our prototype and are currently in the
manufacturing process of our production model.
-22-
We expect our principal source of revenue to be derived from sales of our
electronic display product. To date we have recognized limited revenue, but we
have developed a functioning prototype and we anticipate sales by the third
quarter 2001. The company has set the price for its units at $395,000 and
$1,490,000 respectively for its 2 meter x 3 meter and its 3 meter x 8 meter flat
panel displays.
The company has completed a marketing film that is being distributed on a
national and international basis. The recipients who receive this film are
institutional investors and qualified potential buyers of the flat panel
displays.
Our operating expenses have increased significantly since our inception, and the
rate of increase has risen since last year. 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, 2001, had an
accumulated deficit of $7,345,513.
RESULTS OF CONTINUING OPERATIONS
Due to our limited operating history, we believe that period-to-period
comparisons of our results of operations are not fully meaningful and should not
be relied upon as an indication of future performance.
Comparison of the Three-Month Periods Ended March 31, 2001 and 2000
Revenue. Since our inception, we have been in the development stage and have had
only limited revenue. Revenues decreased to $0 in the first quarter of 2001 from
$34,039 in the first quarter of 2000.
Product Development. Product development expenses consist primarily of personnel
expenses, consulting fees and depreciation of the equipment associated with the
development and enhancement of our flat panel displays. Research development and
technical costs decreased to $78,202 in the first quarter of 2001 from $133,967
in the first quarter of 2000. We believe that continued investment in product
development is critical to attaining our strategic objectives and, as a result,
expect product development expenses to increase significantly in future periods.
We expense product development costs as they are incurred.
General and Administrative. General and administrative expenses consist of
expenses for executive and administrative personnel, facilities, professional
services, travel, general corporate activities, and the depreciation and
amortization of office furniture and leasehold improvements. General and
administrative costs decreased to $313,859 in the first quarter of 2001 from
$1,206,669 in the first quarter of 2000. The decrease was primarily due to
increased duties handled by in-house personnel and a reduction in professional
service fees and expenses. Due to
-23-
the growth of our business and continuing expansion of our staff, we expect
general and administrative costs to increase in the future. The costs associated
with being a publicly traded company and future strategic acquisitions will also
be a contributing factor to increases in this expense.
Other Income (Expense). Other income (expense) consists of interest and other
income and expense. Interest income increased to $7,195 in the first quarter of
2001 from $2,293 in the first quarter of 2000. The increase in interest income
was due to an increase in our average net cash and cash equivalents balance.
Depreciation increased slightly to $28,373 in the first quarter of 2001 from
$27,630 in the first quarter of 2000 due to the additions of some equipment.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, we have funded our operations primarily through the private
placement of equity securities. As of March 31, 2001 we have raised net proceeds
of $4,555,200.
Advanced Optics Electronics, Inc. has filed a registration statement, and a
subsequent amendment, on form SB2 related to common shares underlying the
Company's convertible debenture financings.
We have also utilized equipment loans and capital lease financing. As of March
31, 2001 we have a balance of $55,668 on the equipment loans and $2,991 on the
capital lease.
In August 1998 Advanced Optics Electronics, Inc. entered into a lease agreement
for the financing of equipment for the development of its flat panel display
systems. The Company is required to repay the $101,000 in equal monthly payments
of the lease. Monthly payments on the lease are approximately $2,850. The term
of the lease is 3 years and is backed by the credit of the Company.
The Company's holding in BioModa, Inc will provide additional liquidity. BioModa
is a biomedical development company. The Company's ownership of BioModa, as of
March 31, 2001 was approximately 16%. No immediate family members of officers or
directors of Advanced Optics Electronics, Inc. are securities holders of BioModa
with the exception of Harold Herman, who is a director of Advanced Optics
Electronics, Inc. and a small minority shareholder in BioModa.
During the quarter ended March 31, 2001 $11,733 was spent for the purchase of
equipment. Product development expenditures were $78,202 for the quarter ended
March 31, 2001. Funds for operations, product development and capital
expenditures were provided from the sale of
-24-
securities and cash reserves. As of March 31, 2001, we had approximately
$277,953 of cash and cash equivalents.
Management believes that sales of securities, cash reserves and contract revenue
will provide adequate liquidity and capital resources to meet the anticipated
development stage requirements through the end of the third quarter 2001. At
that time it is anticipated that sales of flat panel displays will begin and
contribute to operating revenues. It is anticipated that these sales will
provide the additional capital resources to fund the proportionately higher
working capital requirements of production and sales initiatives. The Company
currently has no other significant commitments for capital expenditures in 2001.
PART II. OTHER INFORMATION
Item 1. Legal proceedings
The Company is not a party to any legal proceeding, the adverse outcome of
which, in management's opinion, would have a material adverse effect on the
Company's operating results.
Item 2. Changes in securities
During the first quarter of fiscal year 2001 there was a 1,395,705 increase in
shares of common stock.
Item 3. Defaults upon senior securities - Not applicable
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 fiscal year 2001.
Item 5. Other Information - Not applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27.1 Financial Data Schedule
(b) Reports on Form 8-K
A report was filed on Form 8-K related to the Company's Change of Certifying
Accountant. The date of the report was March 19, 2001.
-25-
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report on Form 10QSB to be signed on its behalf by the undersigned,
thereunto duly authorized.
Dated: May 14, 2001
ADVANCED OPTICS ELECTRONICS, INC.
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)
-26-