SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the Period ended July 31, 2011
Commission File Number 0-30987
ADVANCED TECHNOLOGIES GROUP, LTD.
(Exact name of Registrant as specified in its Charter)
Nevada 80-0987213
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
331 Newman Springs Rd., Bld. 1, 4Fl. Suite 143,
Red Bank, NJ 07701
732-784-2801
(Address and telephone number of principal executive offices)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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 [ ]
Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T during the
preceding 12 months (or for such shorter period that the registrant was required
to submit and post such files). YES [X] NO [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company.
Large accelerated filer [ ] Accelerated Filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
(Do Not Check if a Smaller Reporting Company)
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
As of July 31, 2011 the registrant had 18,948,966 shares of common stock $0.0001
par value, issued and outstanding.
TABLE OF CONTENTS
Item Page
---- ----
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements 3
Balance sheet as of July 31, 2011 and January 31, 2011 4
Statement of operations for three months and six months ended
July 31, 2011 and 2010 5
Statement of cash flows for six months ended July 31, 2011 and 2010 6
Statement of changes in shareholders equity for the six months ended
July 31, 2011 7
Notes to condensed consolidated financial statements 8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 13
Item 3. Quantitative and Qualitative Disclosures About Market Risk 16
Item 4. Controls and Procedures 16
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 17
Item 1A. Risk Factors 18
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 18
Item 3. Defaults Upon Senior Securities 18
Item 4. Reserved 18
Item 5. Other Information 19
Item 6. Exhibits 19
Signatures 20
2
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The following unaudited consolidated financial statements have been prepared by
Advanced Technologies Group, Ltd. (the "Company" or "ATG") pursuant to the rules
and regulations of the Securities and Exchange Commission promulgated under the
Securities Exchange Act of 1934 as amended. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principals have been condensed or omitted
pursuant to such rules and regulations. In the opinion of the Company's
management, the consolidated financial statements include all adjustments
(consisting only of adjustments of a normal, recurring nature) necessary to
present fairly the financial information set forth herein.
3
Advanced Technologies Group, Ltd.
Consolidated Balance Sheets
As of July 31, 2011 and January 31, 2011
31-Jul-11 31-Jan-11
------------ ------------
ASSETS
Current assets:
Cash & cash equivalents $ 254,755 $ 12,576
Subordinated note receivable 4,250,000 5,666,668
Deferred tax asset 1,200,000 1,200,000
Prepaid taxes 197,500 488,575
------------ ------------
Total current assets 5,902,255 7,367,819
Other assets:
Subordinated note receivable- non current portion 0 944,444
Investment in FX Direct Dealer 5,000 5,000
Trademark- net 5,754 6,054
Fixed assets- net 1,551 1,839
------------ ------------
Total assets $ 5,914,560 $ 8,325,156
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable & accrued expenses $ 3,236,616 $ 5,313,876
------------ ------------
Total current liabilities 3,236,616 5,313,876
Shareholder advance payable 9,872 9,872
------------ ------------
Total liabilities 3,246,488 5,323,748
Shareholders' equity:
Series A preferred stock, one share convertible to one share of common;
non-participating, authorized 1,000,000 shares at
stated value of $3 per share, issued and outstanding 762,081 shares 1,712,601 1,712,601
Series B preferred stock, one share convertible to one share of common;
non-participating, authorized 7,000,000 shares at
stated value of $3 per share, issued and outstanding 1,609,955 shares 4,384,754 4,384,754
Common stock- $.0001 par value, authorized 100,000,000 shares,
issued and outstanding, 18,948,966 shares at January 31, 2011 and
18,948,966 at July 31, 2011 1,895 1,895
Additional paid in capital 32,823,815 32,823,815
Accumulated deficit (36,254,993) (35,921,657)
------------ ------------
Total shareholders' equity 2,668,072 3,001,408
------------ ------------
Total Liabilities & Shareholders' Equity $ 5,914,560 $ 8,325,156
============ ============
See the notes to the financial statements.
4
Advanced Technologies Group, Ltd.
Consolidated Statements of Operations
For the Six months and Quarters Ended July 31, 2011 and July 31, 2010
6 Months 6 Months 3 Months 3 Months
31-Jul-11 31-Jul-10 31-Jul-11 31-Jul-10
------------ ------------ ------------ ------------
General and administrative expenses:
Salaries and benefits $ 340,000 $ 508,205 $ 170,000 $ 364,724
Consulting 0 85,600 0 (9,850)
General administration 49,484 268,539 42,414 88,348
------------ ------------ ------------ ------------
Total general & administrative expenses 389,484 862,344 212,414 443,222
------------ ------------ ------------ ------------
Net loss from operations (389,484) (862,344) (212,414) (443,222)
Other revenues and expenses:
Interest income 56,148 558,079 242 261,452
Gain on short term investments 0 371,359 0 264,639
------------ ------------ ------------ ------------
Net income (loss) before provision for income taxes (333,336) 67,094 (212,172) 82,869
Provision for income taxes 0 (19,962) 0 (24,071)
------------ ------------ ------------ ------------
Net income (loss) $ (333,336) $ 47,132 $ (212,172) $ 58,798
============ ============ ============ ============
Basic & fully diluted net income (loss) per common share:
Basic income (loss) per share $ (0.02) $ 0.00 $ (0.01) $ 0.00
Fully diluted income (loss) per share $ (0.02) $ 0.00 $ (0.01) $ 0.00
Weighted average of common shares outstanding:
Basic 18,948,966 18,486,535 18,948,966 18,486,535
Fully diluted 18,948,966 20,858,571 18,948,966 20,858,571
See the notes to the financial statements.
5
Advanced Technologies Group, Ltd.
Consolidated Statements of Cash Flows
For the Six Months Ended July 31, 2011 and July 31, 2010
31-Jul-11 31-Jul-10
----------- -----------
Operating Activities:
Net income (loss) $ (333,336) $ 47,132
Adjustments to reconcile net income (loss) items
not requiring the use of cash:
Amortization 300 300
Depreciation 288 288
Changes in other operating assets and liabilities:
Accounts payable & accrued expenses 283,852 (2,261,526)
Prepaid taxes 291,075 471,742
Income taxes payable 0 (136,614)
Deferred income taxes payable 0 (489,136)
----------- -----------
Net cash provided by (used in) operations 242,179 (2,367,814)
Investing activities:
Purchase of securities 0 (3,685,502)
Proceeds from note receivable 0 3,305,554
----------- -----------
Net cash used in investing activities 0 (379,948)
Financing Activities:
Advances received (paid) shareholders 0 0
----------- -----------
Net cash provided (used in) by financing activities 0 0
----------- -----------
Net increase (decrease) in cash during the year 242,179 (2,747,762)
Cash balance at January 31st 12,576 2,747,762
----------- -----------
Cash balance at July 31st $ 254,755 $ 0
=========== ===========
Supplemental disclosures of cash flow information:
Interest paid during the period $ 0 $ 0
Income taxes paid during the period $ 0 $ 99,000
See the notes to the financial statements.
6
Advanced Technologies Group, Ltd.
Consolidated Statement of Changes in Shareholders' Equity (Deficit)
For the Six Months Ended July 31, 2011 and July 31, 2010
Common Common Preferred Preferred Paid in Accumulated
Shares Par Value Shares Value Capital Deficit Total
------ --------- ------ ----- ------- ------- -----
Balance at January 31, 2011 18,948,966 $ 1,895 2,372,036 $6,097,355 $32,823,815 $(35,921,657) $ 3,001,408
Net loss (333,336) (333,336)
---------- -------- --------- ---------- ----------- ------------ -----------
Balance at July 31, 2011 18,948,966 $ 1,895 2,372,036 $6,097,355 $32,823,815 $(36,254,993) $ 2,668,072
========== ======== ========= ========== =========== ============ ===========
Balance at January 31, 2010 18,486,535 $ 1,849 2,372,036 $6,097,355 $32,715,950 $(22,684,245) $16,130,909
Net income 47,132 47,132
---------- -------- --------- ---------- ----------- ------------ -----------
Balance at July 31, 2010 18,486,535 $ 1,849 2,372,036 $6,097,355 $32,715,950 $(22,637,113) $16,178,041
========== ======== ========= ========== =========== ============ ===========
See the notes to the financial statements.
7
Advanced Technologies Group, Ltd.
Notes to the Consolidated Financial Statements
For the Quarters Ended April 30, 2011 and April 30, 2010
1. ORGANIZATION OF THE COMPANY AND SIGNIFICANT ACCOUNTING PRINCIPLES
Advanced Technologies Group, Ltd. (the Company) was incorporated in the State of
Nevada in February 2000. In January 2001, the Company purchased 100% of the
issued and outstanding shares of FX3000, Inc., a Delaware corporation, which
owned the rights to the FX3000 currency trading software platform. The FX3000
software program is a financial real time quote and money management platform
used by independent foreign currency traders.
In March 2002, the Company sold the FX3000 software program, for a 25% interest
in a joint venture with Tradition NA, a subsidiary of Compagnie Financiere
Tradition, a publicly held Swiss corporation. The Company and Tradition formed
FX Direct Dealer LLC (FXDD), a Delaware company that marketed the FX3000
software to independent foreign currency traders.
In March 2009, the Company sold its 25% interest in the joint venture to FXDD
for $26 million.
The Company's principal current business activity is the development of the
MoveIdiot.com website, which the Company acquired in July 2009. In addition, the
Company has been seeking to acquire and/or develop other new technologies and
business opportunities and will also consider investing in commercial real
estate opportunities.
In June 2010, the United States District Court of the Southern District of New
York granted an asset freeze to the Securities and Exchange Commission (SEC)
freezing most of the Company's assets. The asset freeze was granted based upon
allegations by the SEC that the Company had raised $14,741,761 by improperly
selling shares of its common stock. The SEC action sought disgorgement of all
Company profits earned from the sale of the FXDD interest.
In October 2010, the Company reached an agreement with the SEC to settle the
action in its entirety, which received the final approval of the SEC on December
30, 2010. Under the settlement agreement, the Company consented to a judgment in
the total amount of $19,186,536, of which $14,883,400 was paid in January 2011
and the balance payable in nine monthly installments following the entry of the
judgment with the court. Such funds are to be distributed to investors who
participated in the unregistered offerings pursuant to a Plan of Distribution
yet to be approved by the United States District Court for the Southern District
of New York.
The Company is due funds from the sale of the FXDD interest in excess of the
balance due and at this time expects all payments due under the settlement
agreement to be timely made.
USE OF ESTIMATES- The preparation of the consolidated financial statements in
conformity with generally accepted accounting principles requires management to
make reasonable estimates and assumptions that affect the reported amounts of
the assets and liabilities and disclosure of contingent assets and liabilities
and the reported amounts of revenues and expenses at the date of the financial
statements and for the period they include. Actual results may differ from these
estimates.
8
CASH AND CASH EQUIVALENTS- For the purpose of calculating changes in cash flows,
cash includes all cash balances and highly liquid short-term investments with an
original maturity of three months or less.
SUBORDINATED NOTE RECEIVABLE- The subordinated loan receivable from FXDD results
from the sale of the Company's interest in the joint venture in 2009. The
estimated fair value of the subordinated loan receivable from FXDD is based upon
the discounting of the future cash flows from the asset using a risk adjusted
lending rate form loans of similar in risk and duration. At July 31, 2011 and
January 31, 2011, the fair value of the subordinated loan receivable was
$4,325,000 and $6,775,000, respectively
FIXED ASSETS- Office and computer equipment are stated at cost. Depreciation
expense is computed using the straight-line method over the estimated useful
life of the asset. The following is a summary of the estimated useful lives used
in computing depreciation expense:
Furniture & lease improvements 7 years
Office equipment 3 years
Computer hardware 3 years
Software 3 years
Expenditures for major repairs and renewals that extend the useful life of the
asset are capitalized. Minor repair expenditures are charged to expense as
incurred.
LONG LIVED ASSETS- The Company reviews for the impairment of long-lived assets
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. An impairment loss would be recognized when
estimated future cash flows expected to result from the use of the asset and its
eventual disposition is less than its carrying amount.
INCOME TAXES- The Company accounts for income taxes in accordance with generally
accepted accounting principles which require an asset and liability approach to
financial accounting and reporting for income taxes. Deferred income tax assets
and liabilities are computed annually for differences between financial
statement and income tax bases of assets and liabilities that will result in
taxable income or deductible expenses in the future based on enacted tax laws
and rates applicable to the periods in which the differences are expected to
affect taxable income. Valuation allowances are established when necessary to
reduce deferred tax assets and liabilities to the amount expected to be
realized. Income tax expense is the tax payable or refundable for the period
adjusted for the change during the period in deferred tax assets and
liabilities.
The Company follows the accounting requirements associated with uncertainty in
income taxes using the provisions of Financial Accounting Standards Board (FASB)
ASC 740, INCOME TAXES. Using that guidance, tax positions initially need to be
recognized in the financial statements when it is more likely than not the
positions will be sustained upon examination by the tax authorities. It also
provides guidance for derecognition, classification, interest and penalties,
9
accounting in interim periods, disclosure and transition. As of July 31, 2011,
the Company has no uncertain tax positions that qualify for either recognition
or disclosure in the financial statements. All tax returns from fiscal years
2007 to 2010 are subject to IRS audit.
2. NET INCOME (LOSS) PER SHARE
Basic net income (loss) per share has been computed based on the weighted
average of common shares outstanding during the years. Diluted net income (loss)
per share gives the effect of outstanding preferred stock which is convertible
into common stock (see Note 3). The effects of the convertible preferred stock
were excluded from the calculation of diluted net loss per share since its
inclusion would be anti-dilutive.
The calculation for net income (loss) per share is as follows.
31-Jul-11 31-Jul-10
----------- -----------
Net income (loss) $ (333,336) $ 47,132
=========== ===========
Basic shares outstanding (weighted average) 18,948,966 18,486,535
Fully diluted shares outstanding (weighted average) 18,948,966 20,858,571
Basic income (loss) per share $ (0.02) $ 0.00
Fully diluted income (loss) per share $ (0.02) $ 0.00
3. PREFERRED STOCK
CLASS A PREFERRED STOCK: Class A preferred stock has a stated value of $3 per
share. Holders of the Class A preferred stock are entitled to receive a common
stock dividend of 13% of the outstanding Class A shares on an annual basis based
on a value of $3 per share. The Class A preferred stock is convertible into
common stock at a conversion ratio of one preferred share for one common share.
CLASS B PREFERRED STOCK: Class B preferred stock has a stated value of $3 per
share. Holders of the Class B preferred stock are entitled to receive a common
stock dividend of 6% of the outstanding Class B shares on an annual basis based
on a value of $3 per share. The Class B preferred stock is convertible into
common stock at a conversion ratio of one preferred share for one common share.
10
4. INCOME TAXES
Provision for income taxes is comprised of the following:
31-Jul-11 31-Jul-10
----------- -----------
Net income (loss) before provision for income taxes $ (333,336) $ 67,094
=========== ===========
Current tax expense:
Federal $ 0 $ 11,774
State 0 10,783
----------- -----------
Total 0 22,557
Less deferred tax benefit:
Tax loss carryforward 0 0
Less allowance for tax recoverability 0 0
----------- -----------
Provision for income taxes $ 0 $ 22,557
=========== ===========
A reconciliation of provision for income taxes at the statutory rate to
provision for income taxes at the Company's effective tax rate is as follows:
Statutory U.S. federal rate 39% 39%
Statutory state and local income tax 13% 13%
----------- -----------
Effective rate 52% 52%
=========== ===========
Deferred tax asset:
Loss carry forward $ 7,486,441 $ 0
Less valuation allowance (6,286,441) 0
----------- -----------
Net deferred tax asset $ 1,200,000 $ 0
=========== ===========
Note: The deferred tax benefits arising from the timing differences expires in
fiscal years 2030 and may not be recoverable upon the purchase of the Company
under current IRS statutes.
11
5. COMMITMENTS AND CONTINGENCIES
The Company has executed employment contracts with the chief executive officer
and the president of the Company in April 2002. Under the terms of the
contracts, the two officers are to be paid $250,000 per year each through April
2011.
6. CONCENTRATION OF CREDIT RISK
The Company has substantially all of its assets in cash and the subordinated
note receivable from FXDD. In the event that payments due from the sales of the
FXDD interest, the Company would be unable to meet its obligations and its
financial position would be adversely affected.
12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FORWARD LOOKING STATEMENTS
Some of the information contained in this Quarterly Report may constitute
forward-looking statements or statements within the meaning of the Private
Securities Litigation Reform Act of 1995. These forward-looking statements are
based on current expectations and projections about future events. The words
"estimate", "plan", "intend", "expect", "anticipate" and similar expressions are
intended to identify forward-looking statements which involve, and are subject
to, known and unknown risks, uncertainties and other factors which could cause
the Company's actual results, financial or operating performance, or
achievements to differ from future results, financial or operating performance,
or achievements expressed or implied by such forward-looking statements.
Projections and assumptions contained and expressed herein were reasonably based
on information available to the Company at the time so furnished and as of the
date of this filing. All such projections and assumptions are subject to
significant uncertainties and contingencies, many of which are beyond the
Company's control, and no assurance can be given that the projections will be
realized. Potential investors are cautioned not to place undue reliance on any
such forward-looking statements, which speak only as of the date hereof. Unless
otherwise required by law, the Company undertakes no obligation to publicly
release any revisions to these forward-looking statements to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events. Important factors that could cause actual results to
differ materially from our expectations ("Cautionary Statements") include, but
are not limited to, those set forth under the heading "Risk Factors" in this
Quarterly Report as well as in Item 1A of the Company's Annual Report on Form
10-K for the fiscal year ended January 31, 2011.
BACKGROUND
The Company was incorporated in the State of Nevada in February 2000. In
January 2001, the Company purchased 100% of the issued and outstanding shares of
FX3000, Inc. (formerly Oxford Global Network, Ltd.), a Delaware corporation, the
designer of the FX3000 currency trading software platform. The FX3000 software
program is a financial real time quote and money management platform for use by
independent foreign currency traders.
In March 2002, the Company transferred its FX3000 software program to FX
Direct Dealer, LLC ("FX Direct") a joint venture company that markets the FX3000
software program. The Company received a 25% interest in the joint venture in
return for the transfer. On January 26, 2009, the Company entered into a
purchase and sale agreement (the "Purchase Agreement"), pursuant to which the
Company agreed to sell (the "Sale") its approximate 25% membership interest (the
"Membership Interest") in FX Direct to FX Direct. The Agreement provided that it
was effective as of December 31, 2008, as a result of which the Company was not
entitled to receive any allocations of profit, loss or distributions from FX on
account of its Membership Interest after such date. On March 17, 2009, the
Company completed the Sale of the Membership Interest to FX Direct.
13
The aggregate purchase price of the Membership Interest was approximately
$26,000,000, of which $9,000,000 was paid in cash at the closing of the Sale and
the remaining $17,000,000 is payable in 36 equal monthly installments of
$472,222.22, bearing interest at the rate of 10% per annum and evidenced by a
subordinated promissory note that was issued pursuant to a Cash Subordinated
Loan Agreement ("Loan Agreement").
The Company intends to seek to acquire and/or develop new technologies and
other business opportunities. In this regard, effective as of July 20, 2009, the
Company entered into an Asset Purchase Agreement with Dan Khasis, LLC
("Seller"), pursuant to which the Company acquired all of the rights to Seller's
website "moveidiot.com" and the related software for a purchase price of $57,000
plus the issuance to Seller of 25,000 restricted shares of Common Stock. In
addition, Seller may receive up to an additional 50,000 restricted shares of
Common Stock if certain membership goals for the moveidiot.com website are met
in the 12 months following the closing. MoveIdiot.com is an online website which
helps people and businesses expedite their move from place to another.
On June 23, 2010, the SEC filed the SEC Action against ATG, and its
officers in the United States District Court for the Southern District of New
York. The SEC secured provisional relief in the form of an order (the "Asset
Freeze Order") freezing the defendants' assets and prohibiting destruction,
concealment or alteration of records pending final disposition of the action, to
which the defendants consented, with certain carve outs for payments of
necessary corporate and personal expenses. In October 2010, the defendants
reached an agreement in principle with the SEC to settle the action in its
entirety, which was prepared by the Court in January 2011. Under the SEC
Settlement, defendants consented to judgment in the total amount of
$19,186,536.32, of which approximately $14.8 million was paid within 14 days
following entry of the judgment and the balance is due in nine monthly
installments following the entry of judgment. The defendants also agreed to pay
$500,000 to satisfy the costs of the administration of the Plan of Distribution
under the SEC Settlement. See "Item 1. Legal Proceedings."
As a result of the Asset Freeze Order, the Company has had limited access
to its funds to support the growth of MoveIdiot.com. The Company will continue
to have limited access to its funds until it completes the funding of the SEC
Settlement, which will require most of the Company's cash resources. See
"Liquidity and Capital Resources."
RESULTS OF OPERATIONS
The Company did not generate any revenues in the three and nine month
periods ended July 31, 2011 or the three and nine month periods ended July 31,
2010 as the Company's Moveidiot.com website commenced operations in January 2010
and has not yet generated any revenues. We believe that the Company will need to
expend substantial amounts in advertising and web site placement fees to attract
users to our website in order to generate revenues, but our access to our cash
resources has been restricted since June 2011 by the Asset Freeze Order, which
has delayed the commercialization of MoveIdiot.com.
Total general and administrative expenses were $212,414 and $389,484,
respectively, in the three and six months ended July 31, 2011 as compared to
14
$443,222 and $862,344, respectively, in the three and six months ended July 31,
2010. The decrease in general and administrative expenses in the three and six
months ended July 31, 2011 was primarily due to a curtailment of the Company's
business activities in light of the Asset Freeze Order.
Other revenues and expenses in the three and six months ended July 31, 2011
included interest income of $242 and $56,148, respectively, related to the
Company's cash balances and the Subordinated Note. Other revenues and expenses
in the three and six months ended July 31, 2010 included interest income of
$261,452 and $558,079, respectively, and gain on short term investments of
$264,638 and $371,359, respectively. The decrease in interest income in the
three and six months ended July 31, 2011 and the absence of gain on short-term
investments reflects the decrease in the remaining principal balance of the
Subordinated Note and the decline in the Company's cash balances and short-term
investments in order to comply with the terms of the SEC Settlement.
As a result of the foregoing, the Company had a net loss of ($212,172) and
($333,336), respectively, in the three and six months ended July 31, 2011 as
compared to net income of $58,798 and $47,132, respectively, in the three and
six months ended July 31, 2010.
LIQUIDITY AND CAPITAL RESOURCES
At July 31, 2011, the Company had cash on hand of $254,755 as compared with
cash of $12,576 at January 31, 2011.
On March 17, 2009, the Company completed the Sale of its Membership
Interest to FX Direct. The aggregate purchase price of the Membership Interest
was approximately $26,000,000, of which $9,000,000 was paid in cash at the
closing of the Sale and the remaining $17,000,000 is payable in 36 equal monthly
installments of $472,222.22, bearing interest at the rate of 10% per annum and
evidenced by a subordinated promissory note that was issued pursuant to a Cash
Subordinated Loan Agreement ("Loan Agreement"). The Loan Agreement provides the
Company with an increased interest rate in the event of late payments by the
Purchaser and with the remedy of liquidation in the event of a default. The
Company also received approximately $250,000 from the Purchaser in full
satisfaction of amounts owed to the Company for providing certain services to
the Purchaser.
Under the terms of the SEC Settlement, the Company has consented to a
judgment against it in the amount of $19,186,536.32 and has agreed to pay
$500,000 to satisfy the costs of administering the Plan of Distribution under
the Settlement Agreement. As of January 31, 2001, approximately $14.8 million of
the settlement had already been delivered to the SEC, with the remaining $4.9
million to be funded from collections under the Subordinated Note.
As a result of the Asset Freeze Order, the Company has had limited access
to its funds to support the growth of MoveIdiot.com. The Company will continue
to have limited access to its funds until it completes the funding of the SEC
Settlement, which will require most of the Company's cash resources.
In addition, the SEC Settlement prohibits the Company and one of its
officers from participating in any unregistered sales of securities for a five
year period with the officer being further prohibited from participating in any
"penny stock offering," which in general means an offering where the price per
15
share is less than $5.00. These restrictions will make it more difficult for the
Company to raise funds to support its ongoing business operations.
CASH FLOWS
For the six months ended July 31, 2011 net cash provided by operating
activities was $242,179 as compared to net cash used in operating activities of
($2,367,814) in the six months ended July 31, 2010. The increase in cash
provided by operating activities in the six months ended July 31, 2011 was
primarily due to the receipt of an income tax refund payable in connection with
the SEC Settlement and a decrease in cash used to fund the SEC Settlement.
For the six months ended July 31, 2011, there was no net cash provided by
investing activities. For the six months ended July 31, 2010, net cash used in
investing activities was ($379,948) representing collections on the Subordinated
Note, offset by the purchase of short-term investments.
For the six months ended July 31, 2011 and the six months ended July 31,
2010, there was no cash provided by or used in financing activities.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
At July 31, 2011, the Company had no outstanding borrowings under loan
facilities.
ITEM 4. CONTROLS AND PROCEDURES
(a) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES.
Our principal executive officer and our principal financial officer
evaluated the effectiveness of our disclosure controls and procedures (as
defined in Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934
as amended) as of the end of the period covered by this report. Based on that
evaluation, such principal executive officer and principal financial officer
concluded that, the Company's disclosure control and procedures were not
effective as of the end of the period covered by this report because of the
material weakness described below.
At present, due to its limited scope of operations, the Company only has
two full time employees, only one of whom, our chief financial officer, is
involved in overseeing our financial reporting process. We have determined that
this deficiency caused by the limited staffing constitutes a material weakness
in the area of segregation of duties and adequacy of personnel.
16
(b) CHANGE IN INTERNAL CONTROL OVER FINANCIAL REPORTING.
No change in our internal control over financial reporting occurred during
our most recent fiscal quarter that has materially affected, or is reasonably
likely to materially affect our internal control over financial reporting.
(c) OTHER.
We believe that a controls system, no matter how well designed and
operated, can not provide absolute assurance that the objectives of the controls
system are met, and no evaluation of controls can provide absolute assurance
that all control issues and instances of fraud, if any, within a company have
been detected. Therefore, a control system, no matter how well conceived and
operated, can provide only reasonable, not absolute, assurance that the
objectives of the control system are met. Our disclosure controls and procedures
are designed to provide such reasonable assurances of achieving our desired
control objectives, and, for the reasons described above, our principal
executive officer and principal financial officer have concluded, as of July 31,
2011, that our disclosure controls and procedures were not effective.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On June 23, 2010, the SEC filed a civil enforcement action (the "SEC
Action") against ATG, and its officers Alexander Stelmak and Abelis Raskas in
the United States District Court for the Southern District of New York ("the
Court"). The SEC's Complaint alleged that between 1997 and 2006 the defendants
raised $14,741,760.76 from investors through a series of illegal unregistered
offerings of the securities of ATG and its predecessor companies, Oxford Global
Network, Ltd., and Luxury Lounge, Inc. The SEC alleged that, in connection with
these offerings, the defendants violated the securities registration
requirements of Sections 5(a) and 5(c) of the Securities Act. The SEC sought
disgorgement of all alleged ill-gotten gains, plus prejudgment interest thereon,
for a total of $24,990,124 as well as additional relief. ATG, Stelmak and Raskas
each served Answers to the Complaint in which they denied liability and asserted
affirmative defenses.
The SEC secured provisional relief in the form of an order (the "Asset
Freeze Order" freezing the defendants' assets and prohibiting destruction,
concealment or alteration of records pending final disposition of the action, to
which the defendants consented, with certain carve outs for payments of
necessary corporate and personal expenses.
In October 2010, the defendants reached an agreement in principle with the
SEC to settle (the "SEC Settlement") the action in its entirety, which received
the final approval of the Commission on December 30, 2010. On January 13, 2010,
the Court issued an Order setting a schedule to effectuate the settlement and
approve a Plan of Distribution. The Court also entered, as part of the SEC
Settlement, final judgments and consents for ATG, and the individual defendants.
17
Under the SEC Settlement, defendants consented to judgment in the total
amount of $19,186,536.32, of which approximately $14.8 million was paid within
14 days following entry of the judgment and the balance is due in nine monthly
installments following the entry of judgment. Such funds are to be distributed
to investors who participated in the unregistered offerings at issue pursuant to
a Plan of Distribution that was submitted to the Court by the SEC in March 2011
and which is subject to the Court's approval. The SEC has agreed that the Plan
of Distribution will require the surrender and cancellation of shares of any
investor who participates in the SEC Settlement and who continues to own shares
in ATG. ATG has agreed to pay $500,000 to satisfy the costs of the
administration of the Plan.
ATG and Stelmak consented to judgment against them in the full amount of
$19,186,536.32, and have agreed to certain prohibitions, including for Stelmak
and ATG, a permanent injunction against future violations of Section 5(a) and
5(c) of the Securities Act, and for Stelmak a five year ban from participating
in any offering of penny stock. Stelmak and ATG also have accepted civil
penalties of $6,500 and $65,000, respectively. Raskas, for his part, consented
to judgment of $4,749,948.03 of the total $19,186,536.32 judgment at issue. As
no penalties or restrictions were sought against Raskas, none are contained in
his proposed judgment.
The SEC has agreed that all settlement funds (except the civil penalty for
Stelmak) will be paid by ATG, with Raskas (only to the limited extent of his
liability) and Stelmak responsible for any shortfall.
ITEM 1A. RISK FACTORS
An investment in the Company involves a high degree of risk. In addition to
the other information set forth in this Report, you should carefully consider
the factors discussed in Part I, "Item 1A. Risk Factors" in our Annual Report on
Form 10-K for the fiscal year ended January 31, 2011, which could materially
affect our business, financial condition or future results. The risks described
in our Annual Report on Form 10-K are not the only risks facing the Company.
Other unknown or unpredictable factors could also have material adverse effects
on future results.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Not Applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
ITEM 4. RESERVED
Not Applicable
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ITEM 5. OTHER INFORMATION
Not Applicable
ITEM 6. EXHIBITS
(a) Exhibits
Incorp by
Exhibit Ref. to
Number Exh. Description
------ ---- -----------
31.1 * Certification pursuant to 18 U.S.C. Section 1350 as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by
Alex Stelmak, as Chief Executive Officer
31.2 * Certification pursuant to 18 U.S.C. Section 1350 as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by
Alex Stelmak, as Chief Financial Officer
32.1 * Certification pursuant to 18 U.S.C. Section 1350 as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
by Alex Stelmak, as Chief Executive Officer and Chief
Financial Officer
101 * The following materials from the Advanced Technologies
Group, Inc. Quarterly Report on Form 10-Q for the quarter
ended July 31, 2011 formatted in Extensible Business
Reporting Language (XBRL): (i) the Statements of Operations,
(ii) the Balance Sheets, (iii) the Statements of Cash Flows,
(iv) Statement of Stockholders' (Deficit) and (v) related
notes.
#101.INS XBRL Instance Document.
#101.SCH XBRL Taxonomy Extension Schema Document.
#101.CAL XBRL Taxonomy Extension Calculation Linkbase
Document.
#101.LAB XBRL Taxonomy Extension Label Linkbase Document.
#101.PRE XBRL Taxonomy Extension Presentation Linkbase
Document.
#101.DEF XBRL Taxonomy Extension Definition Linkbase
Document.
----------
* Filed herewith
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SIGNATURES
In accordance with the requirements of Section 13 of 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed in
its behalf by the undersigned, thereunto duly authorized.
Date: September 14, 2011 By: /s/ Abel Raskas
---------------------------------------
Abel Raskas
President
Date: September 14, 2011 By: /s/ Alex Stelmak
---------------------------------------
Alex Stelmak
Chairman of the Board of Directors and
Chief Executive Officer and
Chief Financial Officer
(Principal Executive Officer,
Principal Financial Officer and
Principal Accounting Officer)
20