U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 2003
Commission file No.0-24511
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ADVANCED OPTICS ELECTRONICS, INC.
---------------------------------
(Name of small business issuer as specified in its charter)
Nevada 88-0365136
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(State of incorporation) (IRS Employer Identification No.)
8301 Washington NE, Suite 5, Albuquerque, New Mexico 87113
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(Address of principal executive offices including zip code)
Issuer's telephone number: (505) 797-7878
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
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The number of issuer's shares of Common Stock outstanding as of March 31, 2003
was 936,802,960
Transitional Small Business Disclosure Format (check one): Yes No X
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PART I: FINANCIAL INFORMATION
ITEM 1: Financial Statements
ADVANCED OPTICS ELECTRONICS, INC.
(A Development Stage Company)
CONDENSED BALANCE SHEET
March 31, 2003
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ASSETS
Current Assets
Cash $ 138,203
------------
Costs and estimated earnings in excess
of billings on uncompleted contract 1,990,852
Allowance for loss on contract (1,255,000)
------------
735,852
Other current assets 36,833
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Total current assets 910,888
Property and Equipment, net 107,582
Other Assets
Intangible assets, net 11,242
Investment in Biomoda, Inc. 63,531
Notes receivable from related parties 49,890
------------
124,663
$ 1,143,133
============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Accounts payable $ 132,817
Accrued expenses 277,547
Notes payable 10,152
Convertible debentures 1,192,676
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Total current liabilities 1,613,192
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Commitments and Contingencies
Stockholders' Deficit
Preferred stock, $0.001 par value,
10,000,000 shares authorized;
no shares issued and outstanding -
Common stock, $0.001 par value,
1,500,000,000 shares authorized;
936,802,960 shares issued and outstanding 936,803
Treasury stock, at cost (6,634)
Notes receivable officer (313,022)
Additional paid in capital 10,188,086
Deficit accumulated during the development stage (11,275,292)
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Total stockholders' deficit (470,059)
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$ 1,143,133
============
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Page 2 See accompanying notes to these condensed financial statements.
ADVANCED OPTICS ELECTRONICS, INC.
(A Development Stage Company)
CONDENSED STATEMENTS OF OPERATIONS
For the Three Month Periods Ended March 31, 2003 and 2002 and For The Period
From May 22, 1996 (Inception) Through March 31, 2003
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May 22, 1996
(Inception)
Through
March 31,
2003 2002 2003
------------- ------------- -------------
CONTRACT REVENUES $ - $ - $ -
OPERATING EXPENSES
General and administrative (335,919) (365,114) (7,148,013)
Research and development (13,549) (23,601) (1,345,622)
Asset impairment - - (227,570)
------------- ------------- -------------
(349,468) (388,715) (8,721,205)
ESTIMATED LOSS ON CONTRACT (50,000) - (1,255,000)
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OPERATING LOSS (399,468) (388,715) (9,976,205)
------------- ------------- -------------
OTHER (EXPENSE) INCOME
Interest income 4,120 4,704 75,502
Gain (loss) on marketable equity securities - - (29,368)
Other investment gains - - 59,784
Loss from investment in Biomoda, Inc. (1,634) - (291,384)
Gain (loss) on disposal of assets - 10,000 (4,306)
Interest expense (2,226) (34,050) (1,046,295)
------------- ------------- -------------
260 (19,346) (1,236,067)
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NET LOSS BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE (399,208) (408,061) (11,212,272)
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE - - (63,020)
------------- ------------- -------------
NET LOSS $ (399,208) $ (408,061) $(11,275,292)
============= ============= =============
Basic and diluted net loss before cumulative effect
of change in accounting principle available to
common shareholder per common share $ (0.001) $ (0.004) $ (0.04)
Cumulative effect of change in accounting principle - - -
------------- ------------- -------------
Basic and diluted net loss available to common
shareholder per common share $ (0.001) $ (0.004) $ (0.04)
============= ============= =============
Basic and diluted weighted average common shares
outstanding 788,678,586 103,737,280 297,914,265
============= ============= =============
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Page 3 See accompanying notes to these condensed financial statements.
ADVANCED OPTICS ELECTRONICS, INC.
(A Development Stage Company)
CONDENSED STATEMENTS OF CASH FLOWS
For The Three Month Periods Ended March 31, 2003 and 2002 and For the Period
From May 22, 1996 (Inception) Through March 31, 2003
- --------------------------------------------------------------------------------------------------------------------
May 22, 1996
(Inception)
Through
March 31,
2003 2002 2003
------------- ------------- -------------
Cash flows from operating activities:
Net loss $ (399,208) $ (408,061) $(11,275,292)
Adjustments to reconcile net loss to net cash
used in operating activities:
Intrinsic value of conversion features - - 610,603
Write off of organization costs - - 63,020
Amortization of discount on convertible
notes and preferred stock - - 295,209
Loss on marketable securities - - 29,368
Loss (gain) on disposal of assets - (10,000) 4,306
Loss on investment in Biomoda, Inc. 1,634 - 291,384
Issuance of common stock for services 211,371 263,650 4,738,702
Issuance of notes payable for services - - 50,000
Increase in excess of costs and earnings
over billings on uncompleted contract (110,503) (85,811) (1,990,852)
Increase in allowance for loss on contract 50,000 - 1,255,000
Interest accrued on convertible debentures - 30,167 228,446
Interest earned on note receivable from
stockholder and related parties (4,120) - (19,546)
Depreciation and amortization 21,835 23,446 559,795
Bad debt expense - - 15,000
Asset impairment - - 227,570
Other non-cash expenses - - 33,447
Accrued interest - - 30,667
Changes in operating assets and liabilities:
Increase in other current assets - (4,702) (36,833)
Increase in accounts payable and accrued expenses (102,478) 50,747 410,364
------------- ------------- -------------
Net cash used in operating activities (331,469) (140,564) (4,479,642)
------------- ------------- -------------
Cash flows from investing activities:
Purchases of property and equipment - - (389,832)
Proceeds from sale of property and equipment - 10,000 23,800
Investment in Biomoda, Inc. - - (383,845)
Proceeds from sale of Biomoda, Inc. stock - 11,250 28,930
Advances to Biomoda, Inc. (11,458) - (49,890)
Sale of marketable securities - - 40,665
Purchases of marketable securities - - (70,034)
Decrease in certificates of deposit - - -
Purchase of other assets - - (245,579)
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Net cash used in investing activities (11,458) 21,250 (1,045,785)
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Page 4 See accompanying notes to these condensed financial statements.
ADVANCED OPTICS ELECTRONICS, INC.
(A Development Stage Company)
CONDENSED STATEMENTS OF CASH FLOWS (CONTINUED)
For The Three Month Periods Ended March 31, 2003 and 2002 and For the Period
From May 22, 1996 (Inception) Through March 31, 2003
- --------------------------------------------------------------------------------------------------------------------
May 22, 1996
(Inception)
Through
March 31,
2003 2002 2003
------------- ------------- -------------
Cash flows from financing activities:
Principal repayments on notes payable
and capital leases (27,958) (1,889) (259,835)
Proceeds from notes payable - 622,776
Issuance of common stock for cash 468,230 48,041 4,642,102
Increase in note receivable stockholder - (49,890)
Proceeds from sale of treasury stock - 6,679 120,606
Purchase of treasury stock - (170) (154,710)
Proceeds from issuance of convertible debt - 1,060,000
Principal repayments on convertible debt (9,000) - (22,451)
------------- ------------- -------------
Net cash provided by financing activities 431,272 52,661 5,958,598
------------- ------------- -------------
Net increase (decrease) in cash 88,345 (66,653) 433,171
Cash at beginning of period 49,858 90,863 -
------------- ------------- -------------
Cash at end of period $ 138,203 $ 24,210 $ 433,171
============= ============= =============
See accompanying notes to the condensed financial statements for additional information relating to non-cash
investing and financing activities during the three months ended March 31, 2003 and 2002.
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Page 5 See accompanying notes to these condensed financial statements.
MANAGEMENTS REPRESENTATION:
The management of Advanced Optics Electronics, Inc. (the "Company") without
audit has prepared the condensed financial statements included herein. The
accompanying unaudited condensed financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of
America for interim financial information. Certain information and note
disclosures normally included in the condensed financial statements prepared in
accordance with accounting principles generally accepted in the United States of
America have been omitted. In the opinion of the management of the Company, all
adjustments considered necessary for fair presentation of the condensed
financial statements have been included and were of a normal recurring nature,
and the accompanying condensed financial statements present fairly the financial
position as of March 31, 2003, and the results of operations for the three
months ended March 31, 2003 and 2002 and cash flows for the three months ended
March 31, 2003 and 2002.
It is suggested that these financial statements be read in conjunction with the
audited financial statements and notes for the year ended December 31, 2002,
included in the Company's Form 10-KSB filed with the Securities and Exchange
Commission on March 31, 2003. The interim results are not necessarily indicative
of the results for a full year.
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization and Nature of Operations
- -------------------------------------
Advanced Optics Electronics, Inc. (the "Company") is a development stage
technology company with its principal focus on the development and production of
large-scale flat panel displays and trades on the OTC Bulletin Board under the
symbol "ADOT" The market for the large-scale flat panel displays will include
advertising billboards, flat panel computer monitors and cockpit displays. The
Company plans to focus on producing and selling the large-scale flat panel
displays for outdoor advertising billboards.
The Company has obtained a contract to produce two outdoor advertising
billboards using its flat panel display technology. This is the first commercial
application of the Company's technology. The success of the Company will depend
on its ability to commercialize its technology, complete this contract and
obtain additional contracts. As of March 31, 2003, completion of this contract
was behind schedule.
While management believes the contract will ultimately be completed, there can
be no certainty that this will be accomplished because the technology has not
yet been used in a commercial application. In addition, the Company may be
required to obtain additional capital in order to fund the completion of the
contract.
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Page 6
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)
Organization and Nature of Operations (continued)
- -------------------------------------------------
Since inception, the Company has primarily been engaged in the research and
development of its product. Once the research and development is complete, the
Company will begin to manufacture and obtain new contracts. The Company is in
the development stage and has not generated revenues from any product sales. The
Company believes that its planned products will produce sufficient revenues in
the future. There are no assurances, however, that the Company will be able to
produce such products, or if produced, that they will be accepted in the market
place.
Development Stage and Going Concern
- -----------------------------------
The Company has been in the development stage since its inception on May 22,
1996, and has not generated any revenues from operations and there is no
assurance of any future revenues.
The Company will require substantial additional funding for continuing research
and development, obtaining acceptance in the market place and for the
commercialization of its product. There can be no assurance that the Company
will be able to obtain sufficient additional funds when needed, or that such
funds, if available, will be obtainable on terms satisfactory to the Company.
Management has taken action to address these matters. They include:
o Retention of experienced management personnel with particular skills in
the development and commercialization of such product.
o The Company is aggressively seeking new contracts.
o The Company has an equity method investment in a start-up company
(Biomoda), which management hopes will be profitable. Biomoda, Inc.
has filed an SB2 registration statement with the SEC, which is not yet
effective.
o The Company is seeking investment capital through the public markets.
Management plans to obtain revenues from product sales, but there is no
commitment by any persons for purchases of any of the proposed products. In the
absence of significant sales and profits, the Company may seek to raise
additional funds to match its working capital requirements through the
additional sales of debt and equity securities, there is no assurance that the
Company will be able to obtain sufficient additional funds when needed, although
such funds, if available, will be obtainable on terms satisfactory to the
Company. The successful outcome of future activities cannot be determined at
this time and there is no assurance that if achieved, the Company will have
sufficient funds to execute its intended business plan or generate positive
operating results.
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Page 7
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)
Development Stage and Going Concern (continued)
- -----------------------------------------------
As a result, the accompanying financial statements have been prepared assuming
the Company will continue as a going concern, which contemplates, among other
things, the realization of assets and satisfaction of liabilities in the normal
course of business. As of March 31, 2003, the Company has negative working
capital of $702,304, an accumulated deficit of $11,275,292, losses from
operations and lack of operational history, among other matters, which raise
substantial doubt about its ability to continue as a going concern.
The condensed financial statements do not include any adjustments related to
recoverability and classification of assets carrying amounts or the amount and
classification of liabilities that might result should the Company be unable to
continue as a going concern.
Earnings Per Share
- ------------------
The Company has adopted Statement of Financial Accounting Standards No. 128
("SFAS 128"), "Earnings Per Share." Under SFAS 128, basic earnings per share is
computed by dividing income available to common stockholders by the weighted
average number of shares assumed to be outstanding during the period of
computation. Diluted earnings per share is computed similar to basic earnings
per share except that the denominator is increased to include the number of
additional common shares that would have been outstanding if the potential
common shares had been issued and if the additional common shares were dilutive
(no shares as of March 31, 2003 and 2002). Because the Company has incurred a
net loss in the three month periods ended March 31, 2003 and 2002, basic and
diluted loss per share are the same as additional potential common shares would
be anti-dilutive.
Stock Based Compensation
- ------------------------
At March 31, 2003, the Company has one stock-based employee compensation plan
(the "Plan"). The Company accounts for the Plan under the recognition and
measurement principles of APB 25, and related interpretation. No stock-based
compensation cost is recognized in net loss. Stock options granted under the
Plan have exercise prices equal to the market value of the underlying common
stock on the dates of grant. The following table illustrates the effect on net
income and loss per share if the Company had applied the fair value recognition
provisions of SFAS 123 to stock-based employee compensation.
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Page 8
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)
Stock Based Compensation (continued)
- ------------------------------------
2003 2002
-------------- --------------
Net loss:
As reported $ (399,208) $ (408,061)
Deduct: Total stock-based employee
compensation expense determined
under fair value based method
for all awards - (30,000)
-------------- --------------
Pro forma $ (401,691) $ (438,061)
============== ==============
Basic and diluted net loss per share:
As reported $ (0.001) $ (0.004)
============== ==============
Pro forma $ (0.001) $ (0.004)
============== ==============
The above pro forma effects of applying SFAS 123 are not necessarily
representative of the impact on reported net loss for future years.
Recent Accounting Standards
- ---------------------------
Recent accounting pronouncements discussed in the notes to the December 31, 2002
audited financial statements, filed previously with the Securities and Exchange
Commission in form 10-KSB, that were required to be adopted during the year
ending December 31, 2003 did not have a significant impact on the Company's
financial statements.
2. STOCKHOLDERS' EQUITY
Common Stock
- ------------
On March 17, 2003, the Company's Board of Directors authorized the change in the
total number of common shares which the Company is authorized to issue from the
current authorized of 800,000,000 to 1,500,000,000 common shares.
During the period ended March 31, 2003, the Company sold 213,030,000 shares of
common stock for $468,230 in cash; all shares were sold for less than $0.01.
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Page 9
2. STOCKHOLDERS' EQUITY (continued)
Common Stock (continued)
- ------------------------
During the period ended March 31, 2003, the Company issued 70,649,994 shares of
common stock for services, which were valued at $211,371 (based on the closing
market price on the date of grant, which was less than $0.01). The Company
recorded such amounts in the accompanying statement of operations.
During the period ended March 31, 2003, in accordance with the applicable
convertible note payable agreement, the Company issued 60,877,063 shares of
common stock at conversion prices of less than $0.01 in connection with the
conversion of notes payable of approximately $42,841, plus approximately $5,463
of accrued interest.
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Page 10
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
Forward - Looking Statements
- ----------------------------
This Quarterly Report contains forward-looking statements about the business,
financial condition and prospects of the Company that reflect assumptions made
by management and management's beliefs based on information currently available
to it. The Company can give no assurance that the expectations indicated by such
forward-looking statements will be realized. If any of management's assumptions
should prove incorrect, or if any of the risks and uncertainties underlying such
expectations should materialize, the Company's actual results may differ
materially from those indicated by the forward-looking statements.
The key factors that are not within the Company's control and that may have a
direct bearing on operating results include, but are not limited to, the
acceptance by customers of the Company's products, the Company's ability to
develop new products cost-effectively, the ability of the Company to raise
capital in the future, the development by competitors of products using improved
or alternative technology, the retention of key employees and general economic
conditions.
There may be other risks and circumstances that management is unable to predict.
When used in this Quarterly Report, words such as, "believes," "expects,"
"intends," "plans," "anticipates" "estimates" and similar expressions are
intended to identify forward-looking statements, although there may be certain
forward-looking statements not accompanied by such expressions. All
forward-looking statements are intended to be covered by the safe harbor created
by Section 21E of the Securities Exchange Act of 1934.
OVERVIEW
Advanced Optics Electronics, Inc. is a technology company whose primary focus is
the development, production and sales of its electronic flat panel displays. The
primary initial product will be marketed to users of outdoor advertising
billboards. We believe that our product line has the potential to create a new
segment of the outdoor advertising industry. Our systems software and electronic
displays represent an innovative approach to advertising that takes advantage of
the recent technological convergence of broadcast and billboard media and the
World Wide Web.
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Page 11
Our goal is to create a product line based on technology that is scalable both
in terms of size and resolution to meet a wide range of requirements related to
site, economics and use from our potential customers. We are also planning to
develop a leasing program and an Owned & Operated group.
The major advantages and features of the Display are:
o Brightest display ever available (35,000 nits)
o Widest viewing angle available
o Smallest dot pitch available for outdoor large-scale displays (8 mm dot
pitch)
o High definition picture quality
o Modular assembly (1 meter increments) for scaleable and shapeable
architectures
o True Color (24 bit)
o Full motion video (up to 120 frames per second)
o Transportable for mobile operations
o Weather resistant for outdoor applications
o Modest power requirements
o Minimum 5 year continual use lifetime
o Real-time live video feeds
o Broadcast/simulcast applications
o Supports streaming video
o Uses industry standard DVI protocol for high speed data linking and
digital video interfacing
o Satellite linkable
Proprietary Billboard software capabilities are:
o Manage and update display content remotely
o Works with all image file formats and digital video editors
o Secure Internet or WAN communications o WEB-based status monitoring
o Provides time, temperature and other dynamic content inserts
The Company was organized as a Nevada corporation on May 22, 1996. On November
7, 1996, the Company acquired the business and patents of PLZTech, a company
involved in the development of flat panel displays. Our operating activities
have related primarily to the initial planning and development of our product
and building our operating infrastructure. We have completed, tested, and
measured the performance of, our prototype and are currently in the
manufacturing process of our production model.
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Page 12
We expect our principal source of revenue to be derived from sales of our
electronic display product. To date we have recognized limited revenue, but we
have developed a functioning prototype and we anticipate sales by the third
quarter 2003. The company has set the price for its units at $395,000 and
$1,490,000 respectively for its 2 meter x 3 meter and its 3 meter x 8 meter flat
panel displays.
The company has completed a marketing film that is being distributed on a
national and international basis. The recipients who receive this film are
institutional investors and qualified potential buyers of the flat panel
displays.
Our operating expenses have increased significantly since our inception, and the
rate of increase has risen since last year. This is due to increased engineering
and management staff and investments in operating infrastructure. Since our
inception we have incurred significant losses and, as of March 31, 2003, had a
deficit accumulated during the development stage of $11,275,292.
RESULTS OF OPERATIONS OF THE COMPANY
Due to our limited operating history, we believe that period-to-period
comparisons of our results of operations are not fully meaningful and should not
be relied upon as an indication of future performance.
Comparison of the Three-Month Periods Ended March 31, 2003 and 2002
- -------------------------------------------------------------------
REVENUE. During the quarter ended March 31, 2001, the Company changed the
accounting for our contract to the completed contract method. According to this
way of accounting for contracts, we are booking no revenue until the completion
of the contract. Please note that the revenue for the period "May 22, 1996
(Inception) Through March 31, 2003" has been restated and is now $0. Billings
and collections through March 31, 2003 have totaled $89,873.
PRODUCT DEVELOPMENT. Product development expenses consist primarily of personnel
expenses, consulting fees and depreciation of the equipment associated with the
development and enhancement of our flat panel displays. Research development and
technical costs decreased to $13,549 in the first quarter of 2003 from $23,601
in the first quarter of 2002. These costs have been reduced in an effort to
conserve cash and meet the challenges of being a development stage company.
However, we believe that continued investment in product development is critical
to attaining our strategic objectives and, as a result, expect product
development expenses to increase significantly in future periods. We expense
product development costs as they are incurred.
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Page 13
GENERAL AND ADMINISTRATIVE. General and administrative expenses consist of
expenses for executive and administrative personnel, facilities, professional
services, travel, general corporate activities, and the depreciation and
amortization of office furniture and leasehold improvements. General and
administrative costs decreased to $335,919 in the first quarter of 2003 from
$365,114 in the first quarter of 2002. We expect general and administrative
costs to increase in the future as our business prospects develop and we will
require more staff. The costs associated with being a publicly traded company
and future strategic acquisitions will also be a contributing factor to
increases in this expense.
OTHER INCOME (EXPENSE). Other income (expense) consists of interest and other
income and expense. Other income (expense) increased to ($260) in the first
quarter of 2003 from ($19,346) in the first quarter of 2002 due primarily to
less interest expensed related to convertible debentures.
Depreciation remained relatively constant at $17,668 in the first quarter of
2003 and $23,446 in the first quarter of 2002.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, we have funded our operations primarily through the private
placement of equity securities and the issuance of convertible debentures. As of
March 31, 2003 we have raised net proceeds of approximately $5,500,000.
The cash balance at the end the end of the quarter of $138,203 represents
approximately two months of cash operating expenses.
We have also utilized equipment loans and capital lease financing. As of March
31, 2003 we have a balance of approximately $10,000 on the equipment loans.
The Company's holding in Biomoda, Inc may provide additional liquidity. Biomoda
is a biomedical development company. The Company's ownership of Biomoda, as of
March 31, 2003 was approximately 18.6%.
The Company's relationship to its investment in Biomoda changed during the
second quarter of 2002. There is now an active leadership role in Biomoda being
provided by John Cousins and Leslie Robins. Biomoda is currently in the process
of registering securities under an SB2 that has been filed with the Securities
and Exchange Commission but has not yet been declared effective. The Company has
gone to the equity method of reporting its investment in Biomoda because of
these recent changes in the management relationship between the two companies.
Product development expenditures were $13,549 for the quarter ended March 31,
2003. Funds for operations, product development and capital expenditures were
provided from the sale of securities and cash reserves.
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Page 14
Management believes that sales of securities, cash reserves and contract revenue
will provide adequate liquidity and capital resources to meet the anticipated
development stage requirements through the end of the fourth quarter 2003. At
that time it is anticipated that sales of flat panel displays will begin and
contribute to operating revenues. It is anticipated that these sales will
provide the additional capital resources to fund the proportionately higher
working capital requirements of production and sales initiatives. The Company
currently has no other significant commitments for capital expenditures in 2003.
Going Concern
- -------------
The Company's independent certified public accountants have stated in their
report included in the Company's 2002 Form 10-KSB, that the Company has incurred
operating losses in the last two years, has a working capital deficit and a
significant stockholders' deficit. These conditions raise substantial doubt
about the Company's ability to continue as a going concern.
Inflation
- ---------
Management believes that inflation has not had a material effect on the
Company's results of operations.
Critical Accounting Policies
- ----------------------------
In December 2001, the SEC requested that all registrants list their three to
five most "critical accounting policies" in the MD&A. The SEC indicated that a
"critical accounting policy" is one which is both important to the portrayal of
the Company's financial condition and results, and requires management's most
difficult, subjective or complex judgments, often as a result of the need to
make estimates about the effect of matters that are inherently uncertain. We
believe that our following accounting policies fit this definition:
REVENUE RECOGNITION - In accordance with Statement of Position 81-1, "Accounting
for Performance of Construction-Type and Certain Production-Type Contracts," the
Company accounts for revenue and costs related to its long-term contract in
process by the completed-contract method, whereas during the period from May 22,
1996 (inception) to December 31, 1999, revenue and costs were determined by the
percentage-of-completion method. The completed-contract method of accounting was
adopted in 2000 due to the Company's uncertainty regarding contract cost
estimates. The financial statements of the period from May 22, 1996 (inception)
to December 31, 1999, were restated to apply the completed contract method
retroactively. The effect of the accounting change had no effect on net loss or
loss per share previously reported for 1999 or for the period from May 22, 1996
(inception) to December 31, 1999.
Under the completed contract method of accounting, contract revenues and costs
are recognized when the contract is completed, with estimated losses recognized
when it becomes evident that contract costs will exceed contract revenues.
Contract costs include all direct material and labor costs and those indirect
costs related to contract performance, such as indirect labor, supplies,
overhead, equipment depreciation and interest.
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Page 15
Costs in excess of amounts billed are classified as current assets under costs
and estimated earnings in excess of billings on uncompleted contract.
ESTIMATES - Critical estimates made by management are, among others, estimates
for current and deferred taxes, recoverability of intangible assets,
collectibility of contract receivable, estimation of costs for long-term
contracts, allowance for loss on contracts, recoverability of investment in
Biomoda, Inc. and the valuation of other assets. Actual results could materially
differ from those estimates.
ITEM 3. CONTROLS AND PROCEDURES
Within 90 days prior to this report, Management carried out an evaluation of the
effectiveness of the design and operation of the Company's disclosure controls
and procedures, pursuant to Exchange Act Rule 13a-14 and 15d-14. Based on the
foregoing, the Principal Executive Officer and Principal Financial Officer
concluded that the Company's disclosure controls and procedures are effective to
timely alert them to any material information relating to the Company that must
be included in the Company's periodic SEC filings. In addition, there have been
no significant changes in the Company's internal controls or in other factors
that could significantly affect internal controls subsequent to the date of the
most recent evaluation.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The company may on occasion be a party to litigation involving claims made by or
against the Company arising in the ordinary course of business. The officers and
directors know of no legal proceedings pending or contemplated by any person,
entity or governmental authority which would have a material adverse effect on
the Company.
ITEM 2. CHANGES IN SECURITIES
Common Stock
- ------------
As of March 31, 2003, the status of the common stock of the Company was:
1,500,000,000 shares authorized and 936,802,960 shares issued and outstanding.
During the period ended March 31, 2003, the Company sold 213,030,000 shares of
common stock for $468,230 in cash; all shares were sold for less than $0.01.
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Page 16
During the period ended March 31, 2003, the Company issued 70,649,994 shares of
common stock for services, which were valued at $211,371 (based on the closing
market price on the date of grant, which was less than $0.01). The Company
recorded such amounts in the accompanying statement of operations.
During the period ended March 31, 2003, in accordance with the applicable
convertible note payable agreement, the Company issued 60,877,063 shares of
common stock at conversion prices of less than $0.01 in connection with the
conversion of notes payable of approximately $42,841, plus approximately $5,463
of accrued interest.
These transactions were exempt under Section 4(2) of the Securities Act of 1933,
as amended. The purchasers were well known to an executive officer of Advanced
Optics Electronics, Inc. and each had a net worth or income level to qualify as
accredited investors, were experienced in financial and business matters, and no
general solicitation was involved in the transaction.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES - Not applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of the Company's security holders
during the first quarter of fiscal year 2003.
ITEM 5. OTHER INFORMATION - Not applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
99.1 Certification of Leslie S. Robins, Chief Executive Officer
pursuant to 18 U.S.C. section 1350, as adopted pursuant to section
906 of the Sarbanes-Oxley act of 2002.
99.2 Certification of John J. Cousins, Chief Financial Officer (Principal
Accounting Officer) pursuant to 18 U.S.C. section 1350, as adopted
pursuant to section 906 of the Sarbanes-Oxley act of 2002.
(a) Reports on Form 8-K
No reports on Form 8-K was filed during the first quarter of 2003.
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Page 17
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report on Form 10QSB to be signed on its behalf by the undersigned,
thereunto duly authorized.
Dated: May 14, 2003
ADVANCED OPTICS ELECTRONICS, INC.
BY:/s/John J. Cousins
------------------
John J. Cousins
Vice President of Finance
(Principal Accounting Officer)
BY:/s/Leslie S. Robins
-------------------
Leslie S. Robins
Executive Vice President
(Principal Executive Officer)
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Page 18
CERTIFICATIONS
I, Leslie S. Robins, certify that:
1. I have reviewed this report on Form 10-QSB of Advanced Optics Electronics,
Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report.
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) designed
such disclosure controls and procedures to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in
which this quarterly report is being prepared; b) evaluated the effectiveness of
the registrant's disclosure controls and procedures as of a date within 90 days
prior to the filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions): a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and b) any
fraud, whether or not material, that involves management or other employees who
have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: May 14, 2003
/s/ Leslie S. Robins
- --------------------
Leslie S. Robins
Chief Executive Officer
(Principal Executive Officer)
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Page 19
I, John J. Cousins, certify that:
1. I have reviewed this report on Form 10-QSB of Advanced Optics Electronics,
Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report.
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) designed
such disclosure controls and procedures to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in
which this quarterly report is being prepared; b) evaluated the effectiveness of
the registrant's disclosure controls and procedures as of a date within 90 days
prior to the filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions): a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and b) any
fraud, whether or not material, that involves management or other employees who
have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: May 14, 2003
/s/ John J. Cousins
- -------------------
John J. Cousins
Chief Financial Officer
(Principal Accounting Officer)
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Page 20
EXHIBIT 99.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Advanced Optics Electronics, Inc. Quarterly Report on
Form 10-QSB for the quarter ended March 31, 2003 as filed with the Securities
and Exchange Commission on the date hereof (the "Report"), I, Leslie S. Robins,
Chairman and Chief Executive Officer of the Company, certify, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that, to the best of my knowledge:
(1) Fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934, as amended, and
(2) The information contained in such Quarterly Report on Form 10-QSB
fairly presents in all material respects the financial condition and
results of operations of the Company.
A signed original of this written statement required by Section 906 has been
provided to Advanced Optics Electronics, Inc. and will be retained by Advanced
Optics Electronics, Inc. and furnished to the Securities and Exchange Commission
or its staff upon request.
/s/ Leslie S. Robins
- --------------------
Leslie S. Robins
Chief Executive Officer
(Principal Executive Officer)
May 14, 2003
EXHIBIT 99.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Advanced Optics Electronics, Inc. Quarterly Report on
Form 10-QSB for the quarter ended March 31, 2003 as filed with the Securities
and Exchange Commission on the date hereof (the "Report"), I, John J. Cousins,
Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
that, to the best of my knowledge:
(1) Fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934, as amended, and
(2) The information contained in such Quarterly Report on Form 10-QSB
fairly presents in all material respects the financial condition and
results of operations of the Company.
A signed original of this written statement required by Section 906 has been
provided to Advanced Optics Electronics, Inc. and will be retained by Advanced
Optics Electronics, Inc. and furnished to the Securities and Exchange Commission
or its staff upon request.
/s/ John J. Cousins
- -------------------
John J. Cousins
Chief Financial Officer
(Principal Accounting Officer)
May 14, 2003