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 October 31, 2012
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, 4 Fl. 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 October 31, 2012 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 October 31, 2012 and January 31, 2012 4
Statement of income (loss) for the three and nine months ended
October 31, 2012 and 2011 5
Statement of cash flows for nine months ended October 31, 2012
and 2011 6
Statement of changes in shareholders equity for the nine months
ended October 31, 2012 7
Notes to condensed consolidated financial statements 8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 12
Item 3. Quantitative and Qualitative Disclosures About Market Risk 15
Item 4. Controls and Procedures 15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 1A. Risk Factors 17
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 18
Item 3. Defaults Upon Senior Securities 18
Item 4. Mine Safety Disclosures 18
Item 5. Other Information 18
Item 6. Exhibits 18
Signatures 19
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 October 31, 2012 and January 31, 2012
31-Oct-12 31-Jan-12
------------ ------------
ASSETS
CURRENT ASSETS:
Cash $ 1,453,109 $ 1,185,519
Subordinated note receivable 0 956,218
------------ ------------
TOTAL CURRENT ASSETS $ 1,453,109 $ 2,141,737
OTHER ASSETS:
Investment in FX Direct Dealer 0 5,000
Trademark- net 4,994 5,449
Fixed assets- net 822 1,258
------------ ------------
TOTAL ASSETS $ 1,458,925 $ 2,153,444
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable & accrued expenses $ 202,760 $ 597,377
------------ ------------
TOTAL CURRENT LIABILITIES 202,760 597,377
Shareholder advance payable 7,796 7,796
------------ ------------
TOTAL LIABILITIES 210,556 605,173
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, 2012
and 18,948,966 at October 31, 2012 1,895 1,895
Additional paid in capital 32,823,815 32,823,815
Accumulated deficit (37,674,696) (37,374,794)
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 1,248,369 1,548,271
------------ ------------
TOTAL LIABILITIES & Shareholders' Equity $ 1,458,925 $ 2,153,444
============ ============
See the notes to the financial statements.
4
Advanced Technologies Group, Ltd.
Consolidated Statements of Operations
For the Nine Months and Quarters Ended October 31, 2012 and October 31, 2011
9 Months 9 Months 3 Months 3 Months
31-Oct-12 31-Oct-11 31-Oct-12 31-Oct-11
------------ ------------ ------------ ------------
GENERAL AND ADMINISTRATIVE EXPENSES:
Salaries and benefits $ 162,000 $ 510,000 $ 54,001 $ 170,000
Consulting 11,325 0 11,325 0
General administration 126,595 56,500 46,160 7,016
------------ ------------ ------------ ------------
TOTAL GENERAL & administrative expenses 299,920 566,500 111,486 177,016
------------ ------------ ------------ ------------
Net loss from operations (299,920) (566,500) (111,486) (177,016)
OTHER REVENUES AND EXPENSES:
Interest income 18 56,149 3 1
------------ ------------ ------------ ------------
Net income (loss) before provision for income taxes (299,902) (510,351) (111,483) (177,015)
Provision for income taxes 0 0 0 0
------------ ------------ ------------ ------------
NET INCOME (LOSS) $ (299,902) $ (510,351) $ (111,483) $ (177,015)
============ ============ ============ ============
Basic & fully diluted net income (loss) per common share:
Net income (loss) per share $ (0.02) $ (0.03) $ (0.01) $ (0.01)
Weighted average of common shares outstanding:
Basic 18,948,966 18,948,966 18,948,966 18,948,966
Fully diluted 18,948,966 18,948,966 18,948,966 18,948,966
See the notes to the financial statements.
5
Advanced Technologies Group, Ltd.
Consolidated Statements of Cash Flows
For the Nine Months Ended October 31, 2012 and October 31, 2011
9 Months 9 Months
31-Oct-12 31-Oct-11
----------- -----------
OPERATING ACTIVITIES:
Net income (loss) $ (299,902) $ (510,351)
Adjustments to reconcile net income (loss) items
not requiring the use of cash:
Amortization 455 453
Depreciation 436 435
Changes in other operating assets and liabilities:
Accounts payable & accrued expenses (394,617) 744,928
----------- -----------
NET CASH USED BY OPERATIONS (693,628) 235,465
INVESTING ACTIVITIES:
Proceeds from note receivable 956,218 0
Investment in FXDD 5,000 0
----------- -----------
NET CASH PROVIDED BY INVESTING ACTIVITIES 961,218 0
FINANCING ACTIVITIES:
Advances received (paid) shareholders 0 0
----------- -----------
NET CASH USED BY FINANCING ACTIVITIES 0 0
----------- -----------
Net increase (decrease) in cash during the year 267,590 235,465
Cash balance at beginning of the year 1,185,519 12,576
----------- -----------
CASH BALANCE AT OCTOBER 31ST $ 1,453,109 $ 248,041
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid during the period $ 0 $ 0
Income taxes paid during the period $ 0 $ 0
See the notes to the financial statements.
6
Advanced Technologies Group, Ltd.
Consolidated Statement of Changes in Shareholders' Equity
From February 1, 2011 to October 31, 2012
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 (1,453,137) (1,453,137)
---------- --------- --------- ---------- ----------- ------------ -----------
Balance at January 31, 2012 18,948,966 1,895 2,372,036 6,097,355 32,823,815 (37,374,794) 1,548,271
Net loss (299,902) (299,902)
---------- --------- --------- ---------- ----------- ------------ -----------
Balance at October 31, 2012 18,948,966 $ 1,895 2,372,036 $6,097,355 $32,823,815 $(37,674,696) $ 1,248,369
========== ========= ========= ========== =========== ============ ===========
See the notes to the financial statements.
7
Advanced Technologies Group, Ltd.
Notes to the Consolidated Financial Statements
For the Nine Months Ended October 31, 2012 and October 31, 2011
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, a spot foreign currency trading software
platform. The FX3000 software program was a real time quote and money management
platform used by independent spot 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.
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 approximately $15 million
from 2001 to 2002 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.
The balance was payable in nine monthly installments ending in October 2011. The
funds collected by this judgment are to be distributed to the investors who
participated in the unregistered offerings pursuant to a Plan of Distribution
approved by the United States District Court for the Southern District of New
York in March 2011.
As of October 31, 2012, the holders of an aggregate of 700,916 shares of Series
A preferred stock, 1,474,224 shares of Series B preferred stock and 3,944,629
shares of common stock had submitted approved claims under the Plan and the
Company is in the process of cancelling such shares.
The Company's current efforts are in the area of on-line property security
through its subsidiary, MoveIdiot.com. In July 2009, the Company purchased the
intellectual rights to MoveIdiot.com for $57,000 and 25,000 shares of common
stock. MoveIdiot.com enables individuals and businesses to keep track of their
property on-line. The software program enables users to manage their possessions
on-line and print automatically generated labels that are sealable to be used in
the event of moving from one location to another. The Company has no revenues
8
from MoveIdiot.com through the date of this report. The Company has no revenues
from MoveIdiot.com through the date of this report. On or about August 1, 2012,
the Company received a letter from the operator of the MoveIdiot.com website
claiming that the Company owed it approximately $85,000 in unpaid service fees.
The Company disputes that this amount is due. The MoveIdiot.com website is
currently not being operated. The Company is currently evaluating whether or not
to proceed with the development of MovieIdiot.com.
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.
CASH- 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.
FIXED ASSETS- Office equipment is stated at cost. Depreciation expense is
computed using the straight-line method over the estimated useful life of the
asset, which managements estimates to be three years.
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,
accounting in interim periods, disclosure and transition. As of October 31, 2012
and October 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 2008 to 2011 are subject to IRS audit.
9
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
equivalents were excluded from the calculation of fully diluted loss per share
since its inclusion would be anti-dilutive.
The calculation for net income (loss) per share is as follows.
31-Oct-12 31-Oct-11
------------ ------------
Net income (loss) $ (299,902) $ (510,351)
============ ============
Basic & fully diluted shares
outstanding (weighted average) 18,948,966 18,948,966
Basic income (loss) per share $ (0.02) $ (0.03)
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-Oct-12 31-Oct-11
----------- -----------
Net income (loss) before provision for income taxes $ (299,902) $ (510,351)
=========== ===========
Current tax expense:
Federal $ 0 $ 0
State 0 0
----------- -----------
Total 0 0
Less deferred tax benefit:
Tax loss carryforwards (4,805,094) 0
Less allowance for tax recoverability 4,805,094 0
----------- -----------
Provision for income taxes $ 0 $ 0
=========== ===========
Deferred tax asset:
Tax loss carry forwards $ 4,805,094 $ 7,486,441
Less valuation allowance (4,805,094) (6,286,441)
----------- -----------
Net deferred tax asset $ 0 $ 1,200,000
=========== ===========
Note: The deferred tax benefits arising from the timing differences expires in
fiscal years 2031 and 2032 and may not be recoverable upon the purchase of the
Company under current IRS statutes.
5. CONCENTRATION OF CREDIT RISK
The Company is substantially reliant on the efforts of the chief executive
officer and the president of the Company. A withdrawal of these efforts would
have a material adverse effect on the Company's future plans and operations.
The Company keeps balances in banks that are in excess of insured amounts.
6. SUBSEQUENT EVENTS
The Company has made a review of material subsequent events from October 31,
2012 through the date of this report and found no material subsequent events
reportable during this period.
11
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, 2012.
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.
12
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 was paid in 36 equal monthly installments of
$472,222.22, pursuant to a subordinated promissory note bearing interest at the
rate of 10% per annum, that was issued pursuant to a Cash Subordinated Loan
Agreement ("Loan Agreement").
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. MoveIdiot.com enables individuals and
businesses to keep track of their property on-line. The software program enables
users to manage their possessions on-line and print automatically generated
labels that are sealable to be used in the event of moving from one location to
another. The Company has no revenues from MoveIdiot.com through the date of this
report.
On June 23, 2010, the Securities and Exchange Commission ("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 approved 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 was paid 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.
As of October 31, 2012, the holders of an aggregate of 700,916 shares of Series
A preferred stock, 1,474,224 shares of Series B preferred stock and 3,944,629
shares of common stock had submitted approved claims under the Plan and the
Company is in the process of cancelling such shares.
The Asset Freeze Order was lifted in November 2011. However, as a result of the
Asset Freeze Order, the Company had limited access to its funds to support the
growth of MoveIdiot.com while the Asset Freeze Order was in effect. On or about
August 1, 2012, the Company received a letter from the operator of the
MoveIdiot.com website claiming that the Company owed it approximately $85,000 in
unpaid service fees. The Company disputes that this amount is due. The
MoveIdiot.com website is currently not being operated. The Company is currently
evaluating whether or not to proceed with the development of MovieIdiot.com.
13
RESULTS OF OPERATIONS
The Company did not generate any revenues in the three and nine months ended
October 31, 2012 or the three and nine months ended October 31, 2011 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 was restricted from June 2010 until November, 2011 by the Asset Freeze
Order, which has delayed the commercialization of MoveIdiot.com. On or about
August 1, 2012, the Company received a letter from the operator of the
MoveIdiot.com website claiming that the Company owed it approximately $85,000 in
unpaid service fees. The Company disputes that this amount is due. The
MoveIdiot.com website is currently not being operated. The Company is currently
evaluating whether or not to proceed with the development of MovieIdiot.com.
Total general and administrative expenses were $111,486 and $299,920 in the
three and nine months ended October 31, 2012, respectively, as compared to
$177,016 and $566,500 in the three and nine months ended October 31, 2011,
respectively. The decrease in general and administrative expenses in fiscal 2012
was primarily due to reductions in executive compensation and reductions in
professional fees following the completion of the SEC Settlement.
Other revenues and expenses in the three and nine months ended October 31, 2012
included interest income of $3.00, and $18.00, respectively, related to the
Company's cash balances. Other revenues and expenses in the three and nine
months ended October 31, 2011 included interest income of $1.00, and $56,149,
respectively, related to the Company's cash balances and the Subordinated Note.
The decrease in interest income in the three and nine months ended October 31,
2012 primarily reflects the decrease in the remaining principal balance of the
Subordinated Note.
As a result of the foregoing, the Company had a net loss of ($111,483) and
($299,902) in the three and nine months ended October 31, 2012, respectively, as
compared to a net loss of ($177,015) and ($510,351) in the three and nine months
ended October 31, 2011, respectively.
LIQUIDITY AND CAPITAL RESOURCES
At October 31, 2012, the Company had cash on hand of $1,453,109, compared with
cash of $2,141,737 at January 31, 2012.
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 was paid in 36 equal monthly
installments of $472,222.22, pursuant to a subordinated promissory note bearing
interest at the rate of 10% per annum, that was issued pursuant to a Cash
Subordinated Loan Agreement ("Loan Agreement"). 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. In May 2012, FX
Direct exercised its right to repurchase the Company's remaining .01% interest
in FX Direct for a purchase price of $5,600.
14
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 October 31, 2011, the full amount of the settlement had been
delivered to the SEC.
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 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 nine months ended October 31, 2012 net cash used in operating activities
was ($693,628) compared to net cash provided by operating activities of $235,465
in the nine months ended October 31, 2011. The increase in cash used in
operating activities in the nine months ended October 31, 2012 was primarily due
to a reduction in accounts payable and accrued expenses following the
termination of the Asset Freeze.
For the nine months ended October 31, 2012 net cash provided by investing
activities increased to $956,218 as compared to net cash provided by investing
activities of $0 in the nine months ended October 31, 2011, as a result of an
increase in amounts on account of the Subordinated Note following the
satisfaction of the SEC settlement.
For the nine months ended October 31, 2012 and October 31, 2011, there were no
cash amounts used in or provided by financing activities.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
At October 31, 2012, 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.
15
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.
(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 October
31, 2012, 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. The Asset Freeze Order was lifted in November
2011
16
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, 2011, 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.
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 was paid 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 approved by the Court in September 2011. 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.
As of October 31, 2012, the holders of an aggregate of 700,916 shares of Series
A preferred stock, 1,474,224 shares of Series B preferred stock and 3,944,629
shares of common stock had submitted approved claims under the Plan and the
Company is in the process of cancelling such shares.
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, 2012, 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.
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Not Applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable
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 April 30, 2012 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.
----------
In accordance with Rule 406T of Regulation S-T, these
interactive data files are deemed "not filed" for purposes
of section 18 of the Exchange Act, and otherwise are not
subject to liability under that section.
----------
* 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: December 3, 2012 By: /s/ Abel Raskas
--------------------------------------
Abel Raskas
President
Date: December 3, 2012 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)
19