UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2005
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number: 033-55254-27
ADVANCED LUMITECH, INC.
----------------------------------------------
(Name of small business issuer in its charter)
Nevada 87-0438637
------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
8C Pleasant Street, First Floor, South Natick, MA 01760
-------------------------------------------------------
(Address of principal executive offices, Zip code)
(508) 647-9710
---------------------------
(Issuer's telephone number)
Securities registered pursuant to Section 12(b) of the Exchange Act: None
Securities registered pursuant to Section 12(g) of the Exchange Act:
Common Stock, $.001 par value
-------------------------------------------------------------------------
(Title of class)
Check whether the Company (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
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of Company's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ ]
The Company had 100,000,000 shares of Common Stock, $0.001 par value, issued and
outstanding as of March 31, 2005.
Transitional Small Business Disclosure Format: [ ] Yes [X] No
STATEMENT REGARDING THIS AMENDMENT
The Company is amending its Form 10-QSB for the period March 31, 2005, as
previously filed on August 17, 2005.
A. Subsequent to the original issuance of the Company's March 31, 2005
consolidated financial statements, and based upon a further evaluation of the
factors utilized in determining the accounting and presentation of a December
2004 redemption of certain stockholder's common stock to permit the Company to
issue a like number of shares to other investors that held subscriptions for
shares of common stock, the Company determined that the redemption should have
been accounted for as a liability; not as a component of stockholders' deficit.
At December 31, 2004, the Company recognized the liability of $13,195.
B. The Company determined that subscriptions received for the purchase of the
Company's common stock totaling $1,262,000 and $850,000, were improperly
classified as a component of stockholders' deficit as of March 31, 2005 and
December 31, 2004, respectively, and should have been classified as a liability.
C. At December 31, 2004, the Company revalued certain options issued to a
former consultant in satisfaction of claims made against the Company. The
Company determined that the measurement date and volatility factor used to value
the options under the Black/Sholes method were incorrect. The revaluation
resulted in an increase of additional paid-in capital in the amount of $90,524
and an increase in accumulated deficit of $90,524.
D. The Company determined that warrants issued for the purchase of the Company
common stock should have been accounted for as a liability; not as a component
of stockholders' deficit. The Company recorded an initial liability of $82,341.
During the three months ended March 31, 2005, warrants valued at $27,106 were
exercised. The Company is required to revalue the liability at the end of each
reporting period. Accordingly, the Company increased the value of the liability
by $107,069 and recognized a loss on value of derivative liabilities of
$107,069.
E. The Company determined that the liability for shares to be issued to various
vendors and creditors was improperly classified as a long-term liability and
should have been classified as short term. The liability represents amounts due
to vendors for their respective services used in the ordinary course of business
and such vendors could demand payment at any time. The reclassification had no
effect on the net loss or stockholders' deficit as of March 31, 2005 and
December 31, 2004 and for the three-months and year then ended, respectively.
The effect of these restatements was to increase the net loss of the Company by
$107,069 (less than $0.01 per share) and increase stockholders' deficit by
$1,437,499.
Our stockholders should refer to the financial statements and accompanying notes
for a detailed explanation of the adjustments to the financial results of the
Company that are contained in this amended Form 10-QSB/A.
In all other material respects, this amended Quarterly Report on Form 10-QSB/A
is unchanged from the Quarterly Report on Form 10-QSB previously filed by the
Company on August 17, 2005. This amendment should also be read in conjunction
with our amended Quarterly Reports on Form 10-QSB/A for the quarters ended June
30, 2005, September 30, 2005 and March 31, 2006 as well as our amended Annual
Reports on Form 10-KSB/A for the years ended December 31, 2004 and December 31,
2005.
2
INDEX
Page Number
Restatement of March 31, 2005 Consolidated
Financial Statements 4
Introductory Statement 4 - 5
Part I. Financial Information
---------------------
Item 1. Financial Statements
Consolidated Balance Sheets at March 31, 2005 and
December 31, 2004 6
Consolidated Statements of Operations for the Three
Months Ended March 31, 2005 and 2004 7
Consolidated Statements of Cash Flows for the Three
Months Ended March 31, 2005 and 2004 8
Notes to Consolidated Financial Statements 9 - 13
Item 2. Management's Discussion and Analysis of Financial
Condition And Results of Operations 14 - 19
Item 3. Quantitative and Qualitative Disclosures about
Market Risk 20
Item 4. Controls and Procedures 21
Part II. Other Information
-----------------
Item 1. Legal Proceedings 22
Item 2. Unregistered Sales of Equity and Use of Proceeds 22
Item 6. Exhibits and Reports on Form 8-K 23
Signatures 24
Exhibit Index 25
Exhibits
31 Certification of Chief Executive Officer and
Chief Financial Officer Pursuant to Section 203 E-1
32 Certification of Chief Executive Officer Pursuant
to 18 U.S.C. Section 1350, As Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002 E-2
3
Restatement of March 31, 2005 Consolidated Financial Statements
The Company is restating its March 31, 2005 consolidated financial statements
for the following matters:
A. Subsequent to the original issuance of the Company's March 31, 2005
consolidated financial statements, and based upon a further evaluation of the
factors utilized in determining the accounting and presentation of a December
2004 redemption of certain stockholder's common stock to permit the Company to
issue a like number of shares to other investors that held subscriptions for
shares of common stock, the Company determined that the redemption should have
been accounted for as a liability; not as a component of stockholders' deficit.
At December 31, 2004, the Company recognized the liability of $13,195. See Note
12 - Liability to Stockholder for Redeemed Shares.
B. The Company determined that subscriptions received for the purchase of the
Company's common stock totaling $1,262,000 and $850,000, were improperly
classified as a component of stockholders' deficit as of March 31, 2005 and
December 31, 2004, respectively, and should have been classified as a liability.
See Note 11 - Liability for Stock Subscriptions Received.
C. At December 31, 2004, the Company revalued certain options issued to a
former consultant in satisfaction of claims made against the Company. The
Company determined that the measurement date and volatility factor used to value
the options under the Black/Sholes method were incorrect. The revaluation
resulted in an increase of additional paid-in capital in the amount of $90,524
and an increase in accumulated deficit of $90,524.
D. The Company determined that warrants issued for the purchase of the Company
common stock should have been accounted for as a liability; not as a component
of stockholders' deficit. The Company recorded an initial liability of $82,341.
During the three months ended March 31, 2005, warrants valued at $27,106 were
exercised. The Company is required to revalue the liability at the end of each
reporting period. Accordingly, the Company increased the value of the liability
by $107,069 and recognized a loss on value of derivative liabilities of
$107,069. See Note 10 - Warrant Liability.
E. The Company determined that the liability for shares to be issued to various
vendors and creditors was improperly classified as a long-term liability and
should have been classified as short term. The liability represents amounts due
to vendors for their respective services used in the ordinary course of business
and such vendors could demand payment at any time. The reclassification had no
effect on the net loss or stockholders' deficit as of March 31, 2005 and
December 31, 2004 and for the three-months and year then ended, respectively.
See Note 9 - Liability for Shares to be Issued.
The effect of these restatements was to increase the net loss of the Company by
$107,069 (less than $0.01 per share) and increase stockholders' deficit by
$1,437,499.
Introductory Statement
Note Regarding Forward Looking Statements:
This Form 10-QSB/A and other reports filed by the Company from time to time with
the Securities and Exchange Commission, as well as the Company's press releases,
contain or may contain forward-looking statements, within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. The information provided is based upon beliefs of, and information
currently available to, the Company's management, as well as estimates and
assumptions made by the Company's management. The Company is including this
cautionary statement in this Form 10-QSB/A to make applicable and to take
advantage of the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995 for any forward-looking statements made by or on behalf of
us. Statements that are not statements of historical fact may be deemed to be
forward-looking statements. Forward-looking statements can be identified by the
use of forward-looking terminology such as "believes", "may", "should",
"anticipates", "estimates", "expects", "future", "intends", "hopes", "plans" or
the negative thereof. Such forward-looking statements involve known and unknown
risks, uncertainties and other factors that could cause actual results of the
Company to vary materially from historical results or from any future results
expressed or implied in such forward-looking statements.
Any statements contained in this Form 10-QSB/A that do not describe historical
facts, including without
4
Introductory Statement - continued
limitation statements concerning expected revenues, earnings, product
introductions and general market conditions, may constitute forward-looking
statements as that term is defined in the Private Securities Litigation Reform
Act of 1995. Any such forward-looking statements contained herein are based on
current expectations, but are subject to a number of risks and uncertainties
that may cause actual results to differ materially from expectations. The
factors that could cause actual future results to differ materially from current
expectations
include the following: the Company's ability to raise the financing required to
support the Company's operations; the Company's ability to establish its
intended operations; fluctuations in demand for the Company's products and
services; the Company's ability to manage its growth; the Company's ability to
develop, market and introduce new and enhanced products on a timely basis; the
Company's lack of customers; and the ability of the Company to compete
successfully in the future. Further information on factors that could cause
actual results to differ from those anticipated is detailed herein in Item 3,
Quantitative and Qualitative Disclosures About Market Risk, and in various
filings made by the Company from time to time with the Securities and Exchange
Commission. Any forward-looking statements should be considered in light of
those factors.
The Company will provide copies of its quarterly and annual reports, including
interim unaudited and audited financial statements to its security holders. We
also file periodic reports with the Securities and Exchange Commission as well
as reports on Form 8-K, proxy or information statements and other reports
required of publicly held reporting companies. The public may read and copy any
materials the Company files with the SEC at the SEC's Public Reference Room at
450 Fifth Street, N.W., Washington, D.C. 20549. The public may obtain
information on the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330. The SEC also maintains an Internet site that contains the
reports, proxy and information statements, and other information that the
Company files electronically with the SEC, which is available on the Internet at
www.sec.gov. Further information about the Company and its subsidiaries may be
found at www.brightec.com.
5
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Advanced Lumitech, Inc. and Subsidiary
Consolidated Balance Sheets
(Unaudited) (Audited)
March 31, 2005 December 31, 2004
----------------- -----------------
(As Restated) (As Restated)
ASSETS
Current assets
Cash $ 73,357 $ 4,310
Accounts receivable 31,912 --
Interest receivable, related party 40,266 38,750
Inventory 32,524 31,348
----------------- -----------------
TOTAL CURRENT ASSETS 178,059 74,408
----------------- -----------------
Office and photographic equipment 23,511 23,511
Less accumulated depreciation (23,511) (23,511)
----------------- -----------------
-- --
----------------- -----------------
Note receivable from related party 250,000 250,000
----------------- -----------------
TOTAL ASSETS $ 428,059 $ 324,408
================= =================
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Current maturities of long-term debt $ 3,487 $ 3,505
Accounts payable 256,039 367,329
Accrued liabilities 266,680 243,219
Advances from related party 32,196 64,196
Liability for shares to be issued 497,000 467,000
Warrant liability 162,304 --
Liability for stock subscriptions received 1,262,000 850,000
Liability to stockholder for shares redeemed 13,195 13,195
Notes payable to related party 50,000 100,000
----------------- -----------------
TOTAL CURRENT LIABILITIES 2,542,901 2,108,444
----------------- -----------------
Long-term liabilities
Long-term debt, net of current maturities 160,411 162,986
----------------- -----------------
TOTAL LIABILITIES 2,703,312 2,271,430
----------------- -----------------
Stockholders' deficit
Common stock 100,000 100,000
Additional paid-in capital 7,753,497 7,808,732
Accumulated deficit (10,269,428) (9,999,219)
Accumulated other comprehensive income 140,678 143,465
----------------- -----------------
(2,275,253) (1,947,022)
----------------- -----------------
TOTAL LIABILITIES AND
STOCKHOLDERS' DEFICIT $ 428,059 $ 324,408
================= =================
The accompanying notes are an integral part of these financial statements.
6
Advanced Lumitech, Inc. and Subsidiary
Consolidated Statements of Operations
(Unaudited)
For the Three Months Ending
March 31,
------------------------------
2005 2004
------------- -------------
(As Restated)
Sales to third parties $ 35,442 $ 176,216
Cost of sales 34,103 169,273
------------- -------------
Gross profit 1,339 6,943
------------- -------------
Operating expenses
Research and development 18,594 62,687
Selling and marketing 33,452 168,399
General and administrative 112,295 138,175
------------- -------------
164,341 369,261
------------- -------------
Operating loss (163,002) (362,318)
Other income (expense)
Loss on value of derivative liabilities (107,069) --
Other (138) (2,087)
------------- -------------
(107,207) (2,087)
------------- -------------
Net loss (270,209) (364,405)
Accumulated deficit - beginning (9,999,219) (8,355,390)
------------- -------------
Accumulated deficit - ending $ (10,269,428) $ (8,719,795)
============= =============
Basic and diluted net loss per share $ (0.00) $ (0.00)
============= =============
Weighted average number of shares used in
computation of basic and diluted net loss per share 100,000,000 98,283,620
============= =============
The accompanying notes are an integral part of these financial statements.
7
Advanced Lumitech, Inc. and Subsidiary
Consolidated Statements of Cash Flows
(Unaudited)
For the Three Months Ended
March 31,
---------------------------
2005 2004
------------ ------------
(As Restated)
Cash flows from operating activities
Net loss $ (270,209) $ (364,405)
Adjustments to reconcile net loss to net cash used for
operating activities:
Accrued interest on note receivable - related party (1,516) (3,406)
Loss on value of derivative liabilities 107,069 --
Depreciation -- 677
Foreign exchange loss -- (9,422)
General and administrative expense associated
with stock based transactions 30,000 72,000
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable (31,912) (235,087)
Inventory (1,176) 38,011
Increase (decrease) in:
Accounts payable (111,290) 136,785
Accrued liabilities 23,461 (39,858)
------------ ------------
Net cash used for operating activities (255,573) (404,705)
------------ ------------
Cash flows from financing activities
Principal payments on long-term debt (2,593) (1,679)
Principal payments on note payable - related party (50,000) --
Repayment of advances from related party (32,000) (50,000)
Cash received for sale of common stock, exercise of
warrants and stock subscribed 412,000 350,000
------------ ------------
Net cash provided by financing activities 327,407 298,321
------------ ------------
Effects of changes in foreign exchange rates (2,787) 15,467
------------ ------------
Net increase (decrease) in cash 69,047 (90,917)
Cash - beginning 4,310 335,803
------------ ------------
Cash - ending $ 73,357 $ 244,886
============ ============
Supplemental disclosures of cash flows information
Cash paid during the period for interest $ 9,766 $ 5,493
============ ============
Schedule of non-cash activities
Issuance of warrants relating to private placements $ 82,341 $ --
============ ============
Exercise of warrants classified as liabilities $ (27,106) $ --
============ ============
The accompanying notes are an integral part of these financial statements.
8
Advanced Lumitech, Inc. and Subsidiary
Notes to Consolidated Financial Statements
(Unaudited)
1. Operations
Advanced Lumitech, Inc. d/b/a Brightec ("ADLU" or "Company") develops and
markets luminescent films incorporating luminescent or phosphorescent pigments
(the "Luminescent Product"). These pigments absorb and reemit visible light
producing a "glow" which accounts for the common terminology "glow in the dark."
The Company's Luminescent Product will be sold primarily as a printable
luminescent film designed to add luminescence to existing or new products. The
Company manufactures through third-party manufacturers, markets and sells
graphic quality printable luminescent films (the "Luminescent Product"). These
films are based on the Company's proprietary and patented technology, which
enables prints to be of photographic quality by day and luminescent under low
light or night conditions. The Company expects that its Luminescent Product will
be available for sale in a number of versions appropriate for commonly used
commercial and personal printing technology, including offset printing, laser or
inkjet printing, plus a variety of "print on demand" digital technologies. The
Company expects to offer its products in sheets and rolls.
Restatement of March 31, 2005 Interim Consolidated Financial Statements
The Company is amending its Form 10-QSB for the period March 31, 2005 for the
following matters:
A. Subsequent to the original issuance of the Company's March 31, 2005
consolidated financial statements, and based upon a further evaluation of the
factors utilized in determining the accounting and presentation of a December
2004 redemption of certain stockholder's common stock to permit the Company to
issue a like number of shares to other investors that held subscriptions for
shares of common stock, the Company determined that the redemption should have
been accounted for as a liability; not as a component of stockholders' deficit.
At December 31, 2004, the Company recognized the liability of $13,195. See Note
12 - Liability to Stockholder for Redeemed Shares.
B. The Company determined that subscriptions received for the purchase of the
Company's common stock totaling $1,262,000 and $ 850,000, were improperly
classified as a component of stockholders' deficit as of March 31, 2005 and
December 31, 2004, respectively, and should have been classified as a liability.
See Note 11 - Liability for Stock Subscriptions Received.
C. At December 31, 2004, the Company revalued certain options issued to a
former consultant in satisfaction of claims made against the Company. The
Company determined that the measurement date and volatility factor used to value
the options under the Black/Sholes method were incorrect. The revaluation
resulted in an increase of additional paid-in capital in the amount of $90,524
and an increase in accumulated deficit of $90,524.
D. The Company determined that warrants issued for the purchase of the Company
common stock should have been accounted for as a liability; not as a component
of stockholders' deficit. The Company recorded an initial liability of $82,341.
During the three months ended March 31, 2005, warrants valued at $27,106 were
exercised. The Company is required to revalue the liability at the end of each
reporting period. Accordingly, the Company increased the value of the liability
by $107,069 and recognized a loss on value of derivative liabilities of
$107,069. See Note 10 - Warrant Liability.
E. The Company determined that the liability for shares to be issued to various
vendors and creditors was improperly classified as a long-term liability and
should have been classified as short term. The liability represents amounts due
to vendors for their respective services used in the ordinary course of business
and such vendors could demand payment at any time. The reclassification had no
effect on the net loss or stockholders' deficit as of March 31, 2005 and
December 31, 2004 and for the three-months and year then ended, respectively.
See Note 9 - Liability for Shares to be Issued.
The effect of these restatements was to increase the net loss of the Company by
$107,069 (less than $0.01 per share) and increase stockholders' deficit by
$1,437,499.
9
Advanced Lumitech, Inc. and Subsidiary
Notes to Consolidated Financial Statements
(Unaudited)
2. Interim Financial Statements
The accompanying unaudited consolidated financial statements at March 31, 2005
and for the three-month periods ended March 31, 2005 and 2004 include the
accounts of the Company and its wholly-owned subsidiary.
All inter-company transactions and balances have been eliminated in
consolidation. In our opinion, these unaudited consolidated financial statements
have been prepared on the same basis as the audited consolidated financial
statements included in our Annual Report on Form 10-KSB for the year ended
December 31, 2004, and include all adjustments, consisting of only normal
recurring adjustments, necessary for a fair presentation of the results for such
interim periods. These financial statements should be read in conjunction with
the audited consolidated financial statements included in our Annual Report on
Form 10-KSB for the year ended December 31, 2004. The results of operations for
the three-month period ended March 31, 2005 are necessarily indicative of the
results expected for the fiscal year ending December 31, 2005.
Certain footnote disclosures normally included in financial statements prepared
in accordance with generally accepted accounting principles have been condensed
or omitted pursuant to such rules and regulations, although we believe that the
disclosures in these financial statements are adequate to make the information
presented not misleading.
3. Going Concern Consideration
The Company has a working capital deficit of $2,364,842 and an accumulated
deficit of $10,269,428 at March 31, 2005, and recurring net losses since
inception.
The ability of the Company to continue as a going concern is primarily dependent
on the ability of the Company to raise the necessary financing, to effectively
produce and market Brightec products at competitive prices, to establish
profitable operations and to generate positive operating cash flows. If the
Company fails to raise funds, or the Company is unable to generate operating
profits and positive cash flows, there are no assurances that the Company will
be able to continue as a going concern and it may be unable to recover the
carrying value of its assets.
Management believes that it will continue to be successful in raising the
necessary financing to fund the Company's operations through the 2005 calendar
year; however, there can be no assurances that such financing can be obtained.
4. Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market
value and consist of the following:
(Unaudited) (Audited)
March 31, 2005 December 31, 2004
----------------- -----------------
(As Restated) (As Restated)
Raw materials $ 5,437 $ 19,867
Work in process 22,765 7,181
Finished goods 4,322 4,300
----------------- -----------------
$ 32,524 $ 31,348
================= =================
5. Income Taxes
The Company has not calculated the tax benefits of its net operating losses as
of March 31, 2005 and December 31, 2004 since it does not have the required
information. The Company has not filed its federal and state corporate tax
returns for years ended December 31, 2004, 2003, 2002 and 2000. The tax return
filed for 2001 will need to be amended. Due to the uncertainty over the
Company's ability to utilize these operating losses, any deferred tax assets,
when determined, would be fully offset by a valuation allowance.
10
Advanced Lumitech, Inc. and Subsidiary
Notes to Consolidated Financial Statements
(Unaudited)
6. Related Party Transactions
As of March 31, 2005 and December 31, 2004, a note of $250,000 was receivable
from the Company's president, who is also a director and stockholder. This
full-recourse loan bears interest at a fixed rate of 5.05% and is due no later
than December 31, 2011. Interest is on the loan is accrued quarterly and due
annually. No interest payments on such loan have been made to date.
At March 31, 2005 and December 31, 2004, the Company owed the president $32,196
and $55,196, respectively, in connection with advances made by him to the
Company in prior years. During the three months ended March 31, 2005, the
Company made advances to this shareholder of $ 37,500 and repaid $60,500 of the
outstanding advances due. All such advances bear interest at the Internal
Revenue Service short term "Applicable Federal Rate," calculated and accrued
monthly.
During the quarter ended March 31, 2005 and the year ended December 31, 2004,
the Company recognized net interest income of $2,926 and $13,627, respectively,
on the above note receivable and advances. As of March 31, 2005 and December 31,
2004, net accrued interest was receivable from the president of $40,266 and
$38,750, respectively.
OTHER NOTES
Other related party debt is described in Notes 7 and 8.
7. Notes Payable to Related Party
In December 2002, the Company borrowed $50,000 from its largest stockholder
under a convertible demand promissory note, which bears interest at 8.00% and is
payable in full on demand within one year. The principal, if not paid within
thirty days of when due, bears interest at the rate of 10.00%. The note is
convertible into that number of shares of the Company's common stock determined
by dividing the unpaid principal amount, together with all accrued but unpaid
interest on the note, at the conversion date by $0.10, subject to certain
adjustments. At March 31, 2005 and December 31, 2004, accrued interest of $555
and $3,575, respectively, was due on the note.
In early 2003, the Company issued a second convertible demand promissory note to
this stockholder to borrow up to an additional $55,000 with the same terms as
the $50,000 note, except that the interest rate on the note is a fixed 8.00%. At
March 31, 2005 and December 31, 2004, $50,000 was outstanding under this note
and accrued interest of $4,478 and $2,997, respectively, was due.
8. Long-Term Debt
As of March 31, 2005 and December 31, 2004, $163,898 and $166,491, respectively,
was outstanding in
11
Advanced Lumitech, Inc. and Subsidiary
Notes to Consolidated Financial Statements
(Unaudited)
8. Long-Term Debt - continued
connection with an agreement entered into in 2002 with the mother-in-law of the
Company's president. This agreement provides for the repayment of 2,000 Swiss
francs of principal each January 1 and July 1, together with accrued interest on
the unpaid balance payable quarterly at the rate of 4.25% per annum. The Company
recorded interest expense with respect to this obligation for the three-months
ended March 31, 2005 and the year ended December 31, 2004 of $1,727 and $7,562,
respectively. At each balance sheet date the outstanding debt is translated to
U.S. dollars and any required adjustment is recorded in the cumulative
translation adjustment account within the equity section of the balance sheet.
The maturities of long-term debt for the next five years and in the aggregate
are as follows:
Years Ended Amount
----------------- ------------
December 31, 2006 $ 3,487
December 31, 2007 3,487
December 31, 2008 3,487
December 31, 2009 3,487
December 31, 2010 3,487
Thereafter 146,463
------------
$ 163,898
============
9. Liability for Shares to be Issued
Liability for shares to be issued represents commitments to issue shares of
common stock in exchange for services provided or the settlement of debt. Such
shares remain unissued at March 31, 2005
As of December 31, 2004, 3,210,000 shares with an aggregate value of $467,000
were committed but uniussued.
During the first quarter of 2005, the Company agreed to issue 120,000 shares of
common stock valued at $0.25 per share in exchange for public relations services
received with an aggregate value of $30,000.
As a result of the aforementioned transaction, 3,330,000 shares with an
aggregate value of $497,000 were are committed but unissued as of March 31,
2005.
The Company determined that the liability for shares to be issued to various
vendors and creditors was improperly classified as a long-term liability and
should have been classified as short term. The liability represents amounts due
to vendors for their respective services used in the ordinary course of business
and such vendors could demand payment at any time. The reclassification had no
effect on the net loss or stockholders' deficit as of March 31, 2005 and
December 31, 2004 and for the three-months and year then ended, respectively.
10. Warrant Liability
During the quarter ended March 31, 2005, the Company issued warrants initially
valued at $82,341. As the Company had already issued all of its shares of
authorized common stock, the value of the warrants had to be recognized as a
liability pursuant to EITF 00-19, Accounting for Derivative Financial
Instruments Indexed to, and Potentially Settled in, a Company's Own Stock. Of
that amount, $27,106 of the outstanding warrants was exercised. In addition, the
Company is required to revalue the warrants at the end of each reporting period
with the change in value reported on the statement of operations as "Gain (Loss)
on Value of Derivative Liabilities" in the period in which the change occurred.
As of March 31, 2005, the value of the remaining balance of outstanding warrants
was $162,304. For the three months ended March 31, 2005, the Company recognized
a loss on value of derivative liabilities of $107,069.
12
Advanced Lumitech, Inc. and Subsidiary
Notes to Consolidated Financial Statements
(Unaudited)
10. Warrant Liability - continued
The fair value of these warrants was estimated at the date of grant using the
Black/Sholes option pricing model with the following assumptions for the three
month period ended March 31, 2005: risk-free interest rate of 2.34% to 2.79%; no
dividend yield; an expected life of 2 to 5 months; and a volatility factor of
41.8%.
11. Liability for Stock Subscriptions Received
Liability for stock subscriptions received represents the obligation of the
Company to various investors who have paid the Company to purchase shares of
common stock. As discussed in Note 1, the Company has determined that
subscriptions received for the purchase of the Company's common stock should be
classified as a liability. When the Company received the stock subscriptions, it
had already issued all of its common shares authorized under its charter. Under
generally accepted accounting principles, when a contract (the subscription
agreement) is to be settled in shares of stock and the share settlement is not
within the control of the Company as a result of the Company requiring
shareholder approval to increase the number of authorized shares in order to
settle the contract, liability classification is required.
As of December 31, 2004, the Company had outstanding liabilities for stock
subscriptions received of $850,000 for the purchase of 10,107,145 shares of the
Company's common stock. During the period ending March 31, 2005, the Company
received an additional $412,000 to purchase 4,120,000 shares of common stock. As
of March 31, 2005, the Company had outstanding liabilities for stock
subscriptions received of $1,262,000 for the purchase of 14,227,145 shares of
the Company's common stock.
12. Liability to Stockholder for Redeemed Shares
In December 2004, the Company's president agreed to allow the Company to redeem
77,620 shares of his common stock in order to allow the Company to fulfill its
obligations to certain consultants and investors. This was as a result of the
Company having already issued all of its shares of authorized common stock. The
agreement states that the Company will reissue to its president/stockholder the
same number of shares redeemed as soon as is reasonable practical and that the
president/stockholder will receive no additional compensation beyond the
re-issuance of the number of shares of common stock redeemed.
On the date of the redemption, the value of the shares of common stock redeemed
was $13,195.
As of March 31, 2005 and December 31, 2004, the value of the shares redeemed was
$13,195.
13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion of the financial condition and results of operation of
the Company should be read in conjunction with the Consolidated Financial
Statements and Notes thereto included elsewhere in this Quarterly Report on Form
10-QSB/A and our Annual Report on Form 10-KSB and 10-KSB/A for the year ended
December 31, 2004. This Quarterly Report on Form 10-QSB/A contains
forward-looking statements based on our current expectations, assumptions,
estimates and projections about the Company and our industry. These
forward-looking statements are usually accompanied by words such as "believes",
"anticipates", "plans", "expects" and similar expressions. Forward-looking
statements involve risks and uncertainties and our actual results may differ
materially from the results anticipated in these forward-looking statements as a
result of certain factors, as more fully described in this section under the
caption "Risk Factors".
CRITICAL ACCOUNTING POLICIES
Certain of the Company's accounting policies are particularly important to the
portrayal and understanding of its financial position and results of operations
and require the application of significant judgment by management. As a result,
these policies are subject to an inherent degree of uncertainty. In applying
these policies, the Company uses its judgment in making certain assumption and
estimates. The Company's critical accounting policies, which consist of revenue
recognition, account receivable reserves and inventories, are described in the
Annual Report on Form 10-KSB and 10-KSB/A for the year ended December 31, 2004.
There have been no material changes to the Company's critical accounting
policies as of March 31, 2005.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2005 COMPARED WITH THREE MONTHS ENDED MARCH 31,
2004
Revenues:
In January 2005, the Company made its fourth commercial sale of its Luminescent
Product, which was sold to a major poster board marketer that introduced a
"Garage Sale Kit" that includes a sheet of Brightec's glow-in-the dark paper in
an 11"x14" poster board format. This "Garage Sale Kit" was test marketed by a
major mass-retailer in approximately 1,000 of its stores. The Company's revenue,
net of returns, allowances and discounts, for the three months ended March 31,
2005 was $35,442 compared to $176,216 for the comparable three months of 2004.
Gross Profit:
The Company's gross profit percentage was 3.78% for the three month period ended
March 31, 2005, which was primarily due to the requirement of reducing its
Luminescent product sale price to compete favorably in the poster board
mass-retail market. In order to increase its gross profit percentage and compete
favorably in the marketplace, the Company will need to lower its manufacturing
costs.
Research and Development Expenses:
Research and development expenses decreased by $44,093 for the three months
ended March 31, 2005 to $18,594 from $62,687 for the comparable three months of
2004. The decrease in research and development expenses was primarily due to a
decrease in the number of manufacturing trial runs in the first quarter of 2005.
Selling and Marketing Expenses:
Selling and marketing expenses decreased by $134,947 for the three months ended
March 31, 2005 to $33,452 from $168,399 for the comparable three months of 2004.
The decrease in selling and marketing expenses was primarily due to a decrease
in professional fees and consulting services, which consisted primarily of
ending services for a marketing consultant and a marketing and corporate
branding consultant. The decrease in selling and marketing expenses included
non-cash charges relating to commitments to issue shares of the Company's Common
Stock in exchange for consulting services of $30,000 for the three months ended
March 31, 2005, compared to $72,000 for the comparable three months of 2004.
14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - continued
RESULTS OF OPERATIONS - continued
THREE MONTHS ENDED MARCH 31, 2005 COMPARED WITH THREE MONTHS ENDED MARCH 31,
2004 - continued
General and Administrative:
General and administrative expenses consisted primarily of the compensation of
the executive officer, and payments for rent and consultants, as well as legal
and accounting costs. General and administrative expenses decreased by $25,880
for the three months ended March 31, 2005 to $112,295 from $138,175 for the
comparable three months of 2004. This decrease was primarily due to a decrease
in consulting fees and accounting fees.
Other Income (Expense)
For the three months ended March 31, 2005, the net of interest expense and
interest income was $267 compared to the $2,087 for the comparable period in
2004. Interest expense and interest income are dependent on the level of loans
due to and from affiliated parties. Other Income (Expense) also includes $129
from foreign currency translation gains relating to the amount of US Dollars
required to purchase Swiss francs in order to pay its interest obligation on
long-term debt versus the amount accrued, in US Dollars, when the interest was
due.
Loss on Value of Derivative Liabilities
Loss on value of derivative liabilities of $107,069 in 2005 relates to the
warrant liability. Such derivative liabilities are required to be
marked-to-market under generally accepted accounting principles. See a further
discussion in Note 10 - Warrant Liability.
Income Taxes
The Company has not calculated the tax benefits of its net operating losses,
since it does not have the required information. Due to the uncertainty over the
Company's ability to utilize these operating losses, any deferred tax assets,
when determined, would be fully offset by a valuation allowance.
Liquidity and Capital Resources as of March 31, 2005:
Since inception, the Company's operations have not generated sufficient cash
flow to satisfy the Company's capital needs. The Company has financed its
operations primarily through the private sale of shares of its Common Stock,
warrants to purchase shares of the Company's Common Stock and debt securities.
The Company has generated, from inception through March 31, 2005, cumulative net
cash proceeds from the sale of its equity of approximately $4.3 million. The
Company's net working capital deficit at March 31, 2005 was $2,364,842 compared
to a deficit of $2,034,036 at December 31, 2004. The Company's authorized
capital stock consists of 100,000,000 shares of Common Stock, of which
100,000,000 were issued and outstanding at March 31, 2005. As of March 31, 2005,
the Company had also made commitments to issue an additional 17,634,765 shares
of Common Stock, none of which the Company can issue. The 17,634,765 additional
shares of Common Stock can be issued at such time as the Company is able to
increase the number of authorized shares of its Common Stock.
The number of shares committed excludes shares of Common Stock to be issued upon
the exercise of outstanding options and warrants. Amounts received for these
additional committed shares, which were purchased for cash have been received by
the Company and are reflected in the Company's financial statements as Common
Stock subscribed.
Amounts received for additional committed shares that are to be issued in
exchange for consulting services or in exchange for settlement of obligations
owed by the Company, are reflected in the Company's financial statements as
liability for shares to be issued.
In December 2004, the Company's president agreed to allow the Company to redeem
77,620 shares of his
15
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - continued
RESULTS OF OPERATIONS - continued
Liquidity and Capital Resources as of March 31, 2005 - continued:
common stock, valued at $13,195, in order to allow the Company to fulfill its
commitments to issue shares to certain consultants and investors in the Company.
Upon the increase in the number of authorized shares of its Common Stock, the
Company will issue 77,620 replacement shares (adjusted for any re-capitalization
transactions) for no additional consideration.
Cash and cash equivalents increased to $73,357 at March 31, 2005 from $4,310 at
December 31, 2004. Net cash used for operating activities for the three months
ended March 31, 2005 was $255,573.
Net cash provided by financing activities for the three months ended March 31,
2005 was $327,407. The net cash provided was the result of cash received of
$412,000 from the sale and subscription of common stock and the exercise of
warrants, net of principal payments on long-term debt ($2,593), principal
payments on a note payable to a related party ($50,000) and re-payment of
advances to a related party of ($32,000).
Ability to Continue as a Going Concern:
At March 31, 2005, the Company has generated minimal revenues from commercial
sales of the Company's products. To date, the Company's operations have
generated accumulated losses of approximately $10,269,000. At March 31, 2005,
the Company's current liabilities exceed its current assets by approximately
$2,365,000. The Company's ability to remedy this condition is uncertain due to
the Company's current financial condition. These conditions raise substantial
doubt about the Company's ability to continue as a going concern. The Company
believes it has the ability to obtain additional funds from its principal
stockholders or by raising additional debt or equity securities as described
below. The Company is continuing discussions with investors in its effort to
obtain additional financing. However, there can be no assurances that the
Company will be able to raise the funds it requires, or that if such funds are
available, that they will be available on commercially reasonable terms.
The ability of the Company to continue to operate as a going concern is
primarily dependent upon the ability of the Company to generate the necessary
financing to effectively market and produce Brightec products, to establish
profitable operations and to generate positive operating cash flows. If the
Company fails to raise funds or the Company is unable to generate operating
profits and positive cash flows, there are no assurances that the Company will
be able to continue as a going concern and it may be unable to recover the
carrying value of its assets. Management believes that it will be successful in
generating the necessary financing to fund the Company's operations through the
2005 calendar year. Accordingly, management believes that no adjustments or
reclassifications of recorded assets and liabilities are necessary at this time.
Credit Availability:
The Company had no line-of-credit facilities as of March 31, 2005.
Commitments:
The Company had no material capital expenditure commitments as of March 31,
2005.
Effects of Inflation:
Management believes that financial results have not been significantly impacted
by inflation and price changes.
16
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - continued
RISK FACTORS
The Company has a limited operating history upon which an investor can
evaluate its potential for future success.
The Company has had four commercial sales of its Luminescent Products
aggregating a total of approximately $300,000. Therefore, there is limited
historical financial information about the Company upon which to base an
evaluation of the Company's performance or to make a decision regarding an
investment in shares of the Company's Common Stock. The Company has generated an
accumulated deficit of approximately $10.27 million through March 31, 2005. To
date, the Company's operations have largely been limited to its effort to
develop the manufacturing process for its Luminescent Product. Sales of the
Company's products may fail to achieve significant levels of market acceptance.
The Company's business will be subject to all the problems, expenses, delays and
risks inherent in the establishment of an early stage business enterprise,
including limited capital, delays in product development, manufacturing, costs
overruns, price increases in raw materials and unforeseen difficulties in
manufacturing, uncertain market acceptance and the absence of an operating
history. Therefore, the Company may never achieve or maintain profitable
operations, and the Company may encounter unforeseen difficulties that may
deplete its limited capital more rapidly than anticipated.
The Company will require additional capital, and if additional capital
is not available, the Company may have to curtail or cease operations.
To become and remain competitive, the Company will be required to make
significant investments in the Company's infrastructure, including hiring
employees to provide sales, marketing, product development and financial
reporting services on an ongoing basis. The Company does not at this time have
any committed sources of financing. There can be no assurance that additional
necessary financing will be attainable on terms acceptable to the Company in the
future or at all. If financing is not available on satisfactory terms, the
Company may be unable to operate at its present level, market or sell its
products, establish or maintain a system of financial controls or develop and
expand its business, develop new products or develop new markets, and its
operating results may be adversely affected. Debt financing, if available,
increases expenses and must be repaid regardless of operating results. The
availability of debt or equity financing is uncertain, and successful equity
financing would result in additional dilution to existing stockholders. The
losses incurred to date, the uncertainty regarding the ability to raise
additional capital and questions concerning the Company's ability to generate
net income and positive cash flows from operations indicate that the Company may
be unable to continue as a going concern for a reasonable period of time. The
Company's report of independent registered public accounting firm, as of and for
the year ended December 31, 2004, also indicates that there is substantial doubt
about the Company's ability to continue as a going concern.
The Company has a limited number of employees to carry on its
operations.
As of March 31, 2005, the Company had only three full-time employees
and several part-time consultants. The Company has not had sufficient resources
to hire additional employees and the Company's continued inability to hire
additional employees will have a material adverse effect on the Company's
ability to carry on and expand its business operations.
The Company has limited financial and operational controls.
The Company has been unable to attract additional directors and has no
audit or compensation committees. In addition, the Company's sole employee has
limited financial experience and the Company currently lacks an adequate system
of internal financial or management controls. The Company does not have an
accounting department but relies on outside bookkeeping services to record
financial activity and consultants to assist in the preparation with financial
statements. The Company has received a letter from its independent registered
public accountants indicating that the Company has material weaknesses with
respect to (1) accurately recording day-to-day transactions, (2) the lack of
segregation of duties, (3) the approval of significant transactions in a timely
manner by the Company's board of directors and (4) the preparation of its
financial statements in an accurate and timely fashion. If the Company is unable
to raise additional capital, it will not have sufficient resources to implement
an adequate system of internal management and financial controls and will be
unable to
17
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - continued
RISK FACTORS - continued
The Company has limited financial and operational controls. - continued
hire employees with adequate financial and accounting experience.
A significant concentration of ownership of the Company's Common Stock
exists.
One of the Company's stockholders, David Geffen, owns a significant
percentage of the Company's outstanding Common Stock. As a result, this
stockholder may be able to influence the outcome of matters requiring
stockholder approval, including the election of directors and approval of
significant corporate transactions. This concentration of ownership of the
Company's Common Stock may have the effect of impacting the probability and
timing of a change in control of the Company. This could deprive the Company's
stockholders of an opportunity to receive a premium for their Common Stock as
part of a sale of the Company and might otherwise affect the market price of the
Company's Common Stock.
The Company's products may not be accepted by the market and the
Company has had limited product sales to date.
The Company relies on a single product and has had limited product
sales to date. Because the Company has only commenced limited marketing of its
Luminescent Product, it can give no assurance that this product will be
commercially accepted in the marketplace or that the market for its product will
be as large as expected by the Company.
The Company relies on third-party manufacturers to produce its
products.
The Company currently has no manufacturing facilities and relies on
several third party manufacturers to produce the Company's Luminescent Product.
Loss of these manufacturing facilities would have a significant adverse effect
on the Company's operations. There can be no assurance that the Company's third
party manufacturers will continue to manufacture the Company's products.
The Company relies on patents, licenses and intellectual property
rights to protect its proprietary interests.
The Company's future success depends in part on its ability to maintain
patents and other intellectual property rights covering its Luminescent
Products. There can be no assurance that the Company's patents and patent
applications are sufficiently comprehensive to protect the Company's products.
The process of seeking further patent protection can be long and expensive and
there can be no assurance that the Company will have sufficient capital
resources to cover the expense of patent prosecution or maintenance for its
applications or existing patents or that all or even any patents will issue from
currently pending or any future patent applications or if any of the patents
when issued will be of sufficient scope or strength, provide meaningful
protection or any commercial advantage to the Company. The Company's limited
financial resources may limit the Company's ability to bring any action to
enforce its current patents.
The Company is dependent upon a sole source for raw materials to
manufacture it products.
The principal raw materials used by the Company, in connection with the
manufacturing of its Luminescent Product, are purchased from a sole source
supplier. The unavailability of such raw material or significant price increases
of such raw material would have a material adverse effect on the Company's
business. The Company currently has no secondary source for such raw material.
Rights to acquire shares of the Company's Common Stock will result in
significant dilution to other holders of shares of the Company's Common Stock.
As of March 31, 2005, warrants and options to acquire a total of
9,297,911 shares of the Company's Common Stock were outstanding. As of such
date, the Company had also made commitments to issue an
18
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - continued
RISK FACTORS - continued
Rights to acquire shares of the Company's Common Stock will result in
significant dilution to other holders of shares of the Company's Common Stock. -
continued
additional 17,634,765 shares of Common Stock to investors in the Company at such
time as the Company is able to increase the number of shares of the Company's
authorized Common Stock, which require the approval of the Company's
stockholders. The existence of such stock options, warrants, and commitments
could adversely affect the price at which shares of the Company's Common Stock
may be sold or the ability of the market to absorb such additional shares of
Common Stock if such investors decide to sell such shares and the terms on which
the Company can obtain additional financing.
A limited market exists for the Company Common Stock.
The Company's Common Stock is thinly traded and may experience price
volatility, which could affect a stockholders ability to sell the Company's
Common Stock or the price at which it may be sold. There has been and may
continue to be a limited public market for the Common Stock of the Company. The
shares of the Company's Common Stock are not traded on any established market
and the Company's Common Stock was de-listed from the NASDAQ small cap market in
2001 due to non-compliance with certain continuing listing requirements. The
Company's Common Stock is currently quoted on the "pink sheets" under the symbol
"ADLU.PK".
The Company's failure to compete effectively may limit its ability to
achieve profitability.
Competition in the area in which the Company expects to market the
Luminescent Products is intense, and the Company's competitors have
substantially greater resources than the Company.
The Company is dependent on its founder and key employee.
The success of the Company is dependent upon the continued availability
of its founder, Patrick Planche. The unavailability of Patrick Planche or the
Company's inability to attract and retain other key employees could severely
affect the ability of the Company's current and proposed conduct of its
business.
19
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As of March 31, 2005 and December 31, 2004, the Company did not participate in
any derivative financial instruments or other financial and commodity
instruments for which fair value disclosure would be required under SFAS No.
107, Disclosures about Fair Value of Financial Instruments. Our investments are
primarily cash in financial institutions and short-term money market accounts
that are carried on the Company's books at cost.
The functional currency of the Company is the U.S. dollar, with the Swiss franc
being the functional currency of Brightec SA. Foreign currency denominated
assets and liabilities are translated into U.S. dollar equivalents based on
exchange rates prevailing at the end of each period. Revenues and expenses are
translated at average exchange rates during the period. Aggregate foreign
exchange gains and losses arising from the translation of foreign currency
denominated assets and liabilities are included as a component of comprehensive
loss. Foreign exchanges gains and losses arising from transactions are included
in the current year net loss.
20
ITEM 4. CONTROLS AND PROCEDURES
During the last five years, the Company did not have an accounting department,
but instead relied on outside bookkeeping services to record financial activity
and consultants to assist in the preparation of its financial statements. Upon
the completion of audit of the December 31, 2004 financial statements, the
Company received a letter from its independent registered public accounting firm
indicating that the Company has material weaknesses with respect to (1)
accurately recording day-to-day transactions, (2) the lack of segregation of
duties, (3) the approval of significant transactions in a timely manner by the
Company's Board of Directors and (4) the preparation of its financial
statements, in an accurate and timely fashion. The Company's management agrees
with the assessment of the Company's independent registered public accounting
firm and is developing a plan to address these material weaknesses.
As of June 30, 2006, the Company carried out an evaluation, under the
supervision and with the participation of the Company's management, including
the Company's Chief Executive Officer, Chief Financial Officer and Treasurer, of
the effectiveness of the design and operation of the Company's disclosure
controls and procedures pursuant to Rule 13a-14 under the Securities and
Exchange of 1934, as amended.
During the calendar years ended December 31, 2004 and 2005, as well as during
the three months ended March 31, 2005, the Company had insufficient numbers of
internal personnel possessing the appropriate knowledge, experience and training
in applying accounting principles generally accepted in the United States and
reporting financial information in accordance with the requirements of the
Commission. The evaluation found insufficient controls over dissemination of
information regarding non-routine and complex transactions, which resulted in
incorrect treatment and lack of proper analysis of such transactions by
accounting staff. This weakness resulted in material adjustments proposed by our
independent registered accountants with respect to our financial statements for
our calendar years ended December 31, 2005 and 2004. As a result, the figures
for the three ended March 31, 2005, which are presented in this document,
required restatement from their previous filing. Management believes this issue
to be material and therefore, deemed the design and operation of internal
control in place at December 31, 2004 and 2005 and for the three month period
ended March 31, 2005, to be ineffective.
In late 2005, the Company hired a CPA to oversee the accounting department and
coordinate the efforts of analysis and dissemination. These efforts include
design changes and related monitoring of the internal control system. While
there has been a tremendous improvement in the internal control system in the
first six months of 2006, the system is still undergoing change in order to
satisfy the requirements of appropriate internal controls. It is management's
intention to address accounting issues on a timely basis, and prevent
misstatement based on errors and/or lack of understanding.
The Company's management and board of directors are fully committed to the
review and evaluation of the procedures and policies designed to assure
effective internal control over financial reporting. It is management's opinion
that this new addition to the internal accounting staff will assist in the
establishment of an effective design and operation of the internal control
system and therefore, improve the quality of future period financial reporting.
21
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no material legal proceedings pending to which the Company is a party
or to which any of its properties are subject.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The following securities were sold by the Company during the period January 1,
2005 to March 31, 2005 and were not registered under the Securities Act of 1933,
as amended (the "Securities Act").
On January 3, 2005, the Company sold 250,000 shares of Common Stock to Thomas
and Mary McGagh at a purchase price of $0.10 per share for an aggregate purchase
price of $25,000.
On January 11, 2005, the Company sold 100,000 shares of Common Stock to Francis
T. Steverman at a purchase price of $0.10 per share for an aggregate purchase
price of $10,000.
On February 4, 2005, the Company sold 2,500,000 shares of Common Stock and a
warrant to purchase 2,500,000 shares of Common Stock, at an exercise price of
$0.10 per share, expiring on April 1, 2005 to Jeffrey Stern Revocable Trust,
together with a second warrant to purchase 2,085,000 shares of Common Stock at
an exercise price of $0.12 per share, expiring on July 1, 2005, for an aggregate
purchase price of $250,000. On March 29, 2005, Jeffrey Stern Revocable Trust
exercised warrants to purchase 1,250,000 shares of the Company's Common Stock
for an aggregate exercise price of $125,000.
On February 24, 2005, the Company sold 20,000 shares of Common Stock to Stephen
and Marcella Elios at a purchase price of $0.10 per share for an aggregate of
$2,000.
In February 2005, the Company agreed to issue 120,000 shares of Common Stock, at
an agreed-upon value of $0.25 per share, to Schwartz Communications in exchange
for consulting services of $30,000 provided in January and February 2005.
On February 4, 2005, the Company agreed to issue 1,000,000 shares of Common
Stock, at an agreed-upon value of $0.075 per share, to Harry Schult in exchange
for consulting services of $75,000 provided from late 2004 to July 2005. In
addition, Harry Schult received a stock option in connection with such
consulting services to purchase an additional 500,000 shares of Common Stock, at
an exercise price of $0.001 per share for a period of ten years, but vesting
only upon a change of control of the Company.
All shares of Common Stock issued by the Company were issued without
registration pursuant to the exemption from registration contained in Section
4(2) of the Securities Act of 1933, as amended. All purchasers of shares of the
Company's Common Stock who purchased such shares of Common Stock for cash
represented that they were acquiring the securities for investment and for their
own account. All purchasers of the Company's Common Stock who are United States
residents and purchased such securities for cash also represented to the Company
that they were accredited investors as of the date of such investment. A legend
was placed on the stock certificates representing all securities purchased
stating that the securities have not been registered under the Securities Act
and cannot be sold or otherwise transferred without an effective registration or
an exemption there from.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
ITEM 5. OTHER INFORMATION
Not Applicable
22
ITEM 6. EXHIBITS
Number Description of Exhibit
- ------ ----------------------
31 Certification of Patrick Planche, President and Chief Executive
Officer, pursuant to Rule 13a-14(a) of the Securities Exchange Act of
1934, as amended.
32 Certification of Patrick Planche, President and Chief Executive
Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
23
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ADVANCED LUMITECH, INC.
Date: February 28, 2007 By: /s/ PATRICK PLANCHE
-------------------------------------
Patrick Planche
President and Chief Executive Officer
24
EXHIBIT INDEX
Number Description of Exhibit
- ------ ----------------------
31 Certification of Chief Executive and Financial Officer
Pursuant to 18 U.S.C Section 1850, As Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002. (filed
herewith) E-1
32 Certification of Chief Executive and Financial Officer
Pursuant to Rule 13a-14(b) of the Exchange Act and 18
U.S.C. Section 1850, as Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002. (filed herewith) E-2
25