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, 1999
Commission file No.0-24511
ADVANCED OPTICS ELECTRONICS, INC.
(Name of small business issuer as specified in its charter)
Nevada 88-0365136
(State of incorporation) (IRS Employer Identification No.)
8301 Washington NE, Suite 4, Albuquerque, New Mexico 87113
(Address of principal executive offices including zip code)
Issuer's telephone number: (505) 797-7878
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes _X_ No ___
The number of issuer's shares of Common Stock outstanding as of March 31, 1999
was 25,678,550
Transitional Small Business Disclosure Format (check one): Yes ___ No _X_
<PAGE>
NEFF & RICCI
- ------------
LLP
Accountants' Report
Board of Directors
Advanced Optics Electronics, Inc.
We have compiled the accompanying balance sheet of Advanced Optics Electronics,
Inc. (a development stage company) as of March 31, 1999 and the related
statements of operations, changes in stockholders' equity and cash flows for the
quarter then ended, the quarter ended March 31, 1998, and the period from May
22, 1996 (inception) through March 31, 1999, in accordance with Statements on
Standards for Accounting and Review Services issued by the American Institute of
Certified Public Accountants.
A compilation is limited to presenting in the form of financial statements
information that is the representation of management. We have not audited or
reviewed the accompanying financial statements and, accordingly, do not express
an opinion or any other form of assurance on them.
Neff & Ricci LLP
Albuquerque, New Mexico
April 21, 1999
2
<PAGE>
BALANCE SHEET
March 31, 1999
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 66,666
Certificate of deposit 50,000
Marketable equity securities 53,191
Costs and estimated earnings
in excess of billings on
uncompleted contract 316,575
Raw materials inventory 41,324
Related party receivables 53,001
-----------
Total current assets 580,757
-----------
FIXED ASSETS, at cost
Furniture and fixtures 25,897
Computers 29,718
Technical equipment 98,598
Automobile 43,313
Equipment under capital lease 100,499
Leasehold improvements 8,595
Less accumulated depreciation (55,067)
-----------
Total fixed assets 251,553
-----------
OTHER ASSETS
Note receivable from officer 29,000
Investment in Bio Moda, Inc. 265,850
Goodwill, net of accumulated amortization
of $302 4,698
Patents, net of accumulated amortization
of $32,917 209,422
Other assets 30,350
-----------
Total other assets 539,320
-----------
Total assets $ 1,371,630
===========
See accompanying notes and accountant's report.
3
<PAGE>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 27,602
Notes payable 5,384
Accrued liabilities 8,927
Current portion of long-term debt
and capital lease obligation 33,331
-----------
Total current liabilities 75,244
-----------
Long-term portion of long-term debt
and capital lease obligation 58,828
-----------
COMMITMENTS
SHAREHOLDERS' EQUITY
Common stock, authorized 75,000,000 shares,
$.001 par value, 29,650,897 shares issued
and outstanding 29,651
Additional paid-in capital 2,394,913
Deficit accumulated during the development stage (1,187,006)
-----------
Total shareholders' equity 1,237,558
-----------
Total liabilities and shareholders' equity $ 1,371,630
===========
4
<PAGE>
STATEMENTS OF OPERATIONS
Quarters Ended March 31, 1999 and 1998,
and the Period from May 22, 1996 (Inception)
Through March 31, 1999
<TABLE>
<CAPTION>
5/22/96
(Inception)
Through
1999 1998 3/31/99
REVENUES
<S> <C> <C> <C>
Contract revenue $ 66,375 72,000 316,575
--------------------------------------------
COSTS AND EXPENSES
General and administrative 106,570 53,263 726,705
Contract costs 85,941 35,355 359,081
Research and development 48,273 6,690 237,391
--------------------------------------------
Total expenses 240,784 95,308 1,323,177
--------------------------------------------
Operating loss (174,409) (23,308) (1,006,602)
--------------------------------------------
OTHER INCOME AND (EXPENSES)
Interest income 1,964 -- 2,815
Unrealized gain (loss) on marketable
equity securities (9,968) -- (16,843)
Loss on Bio Moda, Inc. (24,571) -- (92,995)
Interest expense (3,299) (247) (10,361)
--------------------------------------------
Total other expenses (35,874) (247) (117,384)
--------------------------------------------
Net loss before cumulative effect
of change in accounting principle (210,283) (23,555) (1,123,986)
CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE (63,020) -- (63,020)
--------------------------------------------
Net loss (273,303) -- (1,187,006)
--------------------------------------------
Net loss per share before cumulative effect
of change in accounting principle (.008) (.002) (.117)
Cumulative effect of change in
accounting principle (.003) -- (.007)
--------------------------------------------
Net loss per share $ (.011) (.002) (.124)
============================================
Weighted average shares outstanding 25,252,592 9,728,600 9,569,549
============================================
</TABLE>
See accompanying notes and accountant's report.
5
<PAGE>
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the Period from May 22, 1996 (Inception) Through
March 31, 1999
Common Stock
------------------------
Par
Shares Value
Balance, May 22, 1996 -- $ --
Stock issued to incorporators for cash 500,000 500
Stock issued for the net assets of PLZ Tech, Inc. 4,500,000 4,500
Net loss -- --
-------------------------
Balance, December 31, 1996 5,000,000 5,000
Stock issued in public offering 2,281,212 2,281
Net loss -- --
-------------------------
Balance, December 31, 1997 7,281,212 7,281
Stock issued for cash 10,979,275 10,979
Stock issued for services 2,751,000 2,751
Stock issued in exchange for note receivable 315,000 315
Purchase and retirement of treasury stock (472,200) (472)
Net loss -- --
-------------------------
Balance, December 31, 1998 20,854,287 20,854
Stock issued for cash 3,259,180 3,259
Stock issued for services 6,026,681 6,027
Purchase and retirement of treasury stock (489,251) (489)
Net loss -- --
-------------------------
Balance, March 31, 1999 29,650,897 $ 29,651
=========================
See accompanying notes and accountant's report.
6
<PAGE>
Equity
(Deficit)
Accumulated
Additional During the Total
Paid-In Development Shareholders'
Capital Stage Equity
$ -- -- --
24,500 -- 25,000
281,096 -- 285,596
-- (76,902) (76,902)
---------------------------------------------
305,596 (76,902) 233,694
362,720 -- 365,001
-- (84,690) (84,690)
---------------------------------------------
668,316 (161,592) 514,005
1,281,728 -- 1,292,707
293,719 -- 296,470
28,685 -- 29,000
(39,913) -- (40,385)
-- (752,111) (752,111)
---------------------------------------------
2,232,535 (913,703) 1,339,686
151,361 -- 154,620
21,660 -- 27,687
(10,643) -- (11,132)
-- (273,303) (273,303)
---------------------------------------------
$ 2,394,913 (1,187,006) 1,237,558
=============================================
7
<PAGE>
STATEMENTS OF CASH FLOWS
Quarters Ended March 31, 1999 and 1998,
and the Period from May 22, 1996 (Inception) Through
March 31, 1999
<TABLE>
<CAPTION>
5/22/96
(Inception)
Through
1999 1998 12/31/98
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) $ (273,303) (23,555) (1,187,006)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Amortization and depreciation expense 23,529 9,470 130,300
Write off of organization costs 63,020 -- 63,020
Unrealized loss on marketable securities 9,968 -- 16,843
Loss on Bio Moda, Inc. 24,571 -- 92,995
Issuance of common stock for services 27,687 -- 324,157
Contract receivable (66,375) (72,000) (316,575)
Other receivables (5,954) (7,500) (63,351)
Inventory (41,324) -- (41,324)
Accrued liabilities and accounts payable 1,116 7,047 36,529
--------------------------------------
Net cash applied to operating
activities (237,065) (86,538) (944,412)
--------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment (27,605) (549) (206,121)
Investment in Bio Moda, Inc. -- -- (358,845)
Purchase of marketable securities -- (35,191) (70,034)
Purchase of certificate of deposit -- -- (50,000)
Purchase of other assets (10,000) -- (96,777)
--------------------------------------
Net cash applied to investing
activities (37,605) (35,740) (781,777)
--------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Additions to notes payable -- -- 94,726
Payments on notes payable and capital
lease obligation (6,764) (3,650) (97,682)
Issuance of common stock 154,620 791,000 1,837,328
Purchase of treasury stock (11,132) -- (41,517)
--------------------------------------
Net cash provided by financing
activities 136,724 787,350 1,792,855
--------------------------------------
Net increase (decrease) in cash (137,946) 665,072 66,666
Cash, beginning of period 204,612 74,421 --
--------------------------------------
Cash, end of period $ 66,666 739,493 66,666
======================================
</TABLE>
See accompanying notes and accountant's report.
8
<PAGE>
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business. Advanced Optics Electronics, Inc. (the Company) is a
developmental stage technology company with its principal focus on the
development and production of large-scale flat panel displays. The Company is
currently continuing its research and development of this product. Upon
substantial completion of the research and development of the large flat panel
display, the Company plans to make the transition from a developmental stage
company to selling and producing this product. The market for the large-scale
flat panel will include, but not be limited to, cockpit displays, flat panel
computer monitors, and advertising billboards. Advanced Optics Electronics, Inc.
plans to focus on producing and selling the large-scale flat panel displays for
outdoor advertising billboards.
The Company has obtained a contract to produce two outdoor advertising
billboards using its flat panel display technology. This is the first commercial
application of the Company's technology. The success of the Company will depend
on its ability to commercialize its technology and complete this contract. In
addition, the Company will be required to obtain additional capital in order to
fund the completion of the contract.
Cash and Cash Equivalents. Cash and cash equivalents include all cash balances
and highly liquid debt instruments with an original maturity of three months or
less. The Company's cash and certificates of deposit are deposited in financial
institutions and are insured only up to $100,000 by the Federal Deposit
Insurance Corporation at each institution.
Marketable Equity Securities. The Company classifies all of its marketable
equity securities as trading securities. Trading securities are carried at fair
value with the unrealized gains and losses reported in the income statement. As
of March 31, 1999, gross unrealized gains were $24,983 and gross unrealized
losses were $41,826. Realized gains and losses were not material.
Equity Investment. The investment in Bio Moda, Inc. is accounted for using the
equity method. Under this method, income and losses reported by the investee are
recorded by the Company in its proportionate interest at the time they are
recognized by the investee. The original cost of the Bio Moda, Inc. investment
exceeded the Company's proportionate interest in Bio Moda's book value. This
difference is being amortized over a 15 year period.
Depreciation. Depreciation of property, plant and equipment is provided over the
estimated useful lives of the respective assets ranging from 3 to 10 years using
declining balance methods.
9
<PAGE>
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Other Assets. Organization costs were amortized on a straight-line basis over
the period to be benefited of five years up until December 31, 1998. Patents are
amortized on a straight-line basis over the remaining estimated useful life of
15 years. Goodwill is amortized over the period to be benefited, or 40 years,
whichever is less. The Company continually reviews other assets to assess
recoverability from estimated future net cash flows. To date, these reviews have
not resulted in a reduction of other assets.
Research and Development Costs. Research and development costs are expensed as
incurred.
Advertising. Advertising costs are expensed as incurred and amounted to $538 in
1999 and $1,602 in 1998.
Income Taxes. The Company accounts for its income taxes using the liability
method. Under this method, deferred tax liabilities and assets are determined
based on the difference between the financial statement carrying amounts and tax
basis of assets and liabilities using enacted tax rates in effect in the years
in which the differences are expected to reverse. The Company has provided a
valuation allowance to offset the benefit of any net operating loss
carryforwards or deductible temporary differences
Loss per share. Loss per share is computed on the basis of the weighted average
number of common shares outstanding during the year and did not include the
effect of potential common stock as their effect would be antidilutive. The
numerator for the computation is the net loss and the denominator is the
weighted average shares of common stock outstanding.
Effect of New Accounting Pronouncements. Statement of Position 98-5 Reporting
the Costs of Start-up Activities requires that organization costs be expensed.
The Company applied this new accounting pronouncement effective January 1, 1999.
The impact of this change in accounting principle was to reduce assets and
increase the deficit accumulated during the development stage by $63,020 as of
December 31, 1998 and is presented as the cumulative effect of an accounting
change on the statement of operations. There are no related income tax amounts.
Use of Estimates. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. The
principal areas requiring estimation are revenue recognition based on the
percentage of completion method, loss reserves and the valuation of common stock
issued for services.
10
<PAGE>
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Revenue and Cost Recognition. The Company recognized revenue on its contract in
process using the percentage-of-completion method of accounting, which is based
on the proportion of the contract cost incurred to the estimated total contract
cost. Costs incurred and estimated earnings in excess of billings represent the
revenue recognized that has not yet been billed.
Contract costs include all direct material and labor costs and those indirect
costs related to contract performance, such as indirect labor, supplies,
overhead, and equipment depreciation.
The contract to produce two outdoor advertising billboards totals $1.7 million,
with $885,000 allocated to the first unit. An estimated total loss of
approximately $23,000 in the first unit has been recognized as of March 31,
1999. The Company's estimated cost to complete as of March 31, 1999 is $495,000
which it expects to fund with cash, billings on the contract and additional
capital.
In accordance with the contract, the Company will bill the customer when certain
milestones have been met. There were no billings as of March 31, 1999.
Adjustments to the original estimates of total contract revenue, total contract
cost, and extent of progress toward completion are often required as work
progresses under the contract and as experience is gained, even though the scope
of the work required under the contract may not change. The nature of accounting
for contracts is such that refinements of the estimating process for
continuously changing conditions and new developments are a characteristic of
the process. Accordingly, provisions for losses on contracts are made in the
period in which they become evident under the percentage-of-completion method.
Reclassifications. Certain amounts in 1998 financial statements have been
reclassified to conform with 1999 presentation.
NOTE 2. RELATED PARTY RECEIVABLES
Related party receivables at March 31, 1999, consist of the following:
Due from Bio Moda, Inc. $ 5,000
Due from officer 33,001
Note receivable from former shareholder bearing
interest at 8% and due in February, 1999 15,000
-------
$53,001
=======
The note receivable from former shareholder was issued for $10,000 in the
Company's common stock and $5,000 in cash.
11
<PAGE>
NOTE 3. INVESTMENT IN BIO MODA, INC.
During 1998 the Company increased its investment in Bio Moda, Inc. to 21.93
percent. Bio Moda, Inc. is a development stage company involved primarily in the
development of technology for the early detection of lung cancer. As a
development stage company, Bio Moda, Inc. has not had any revenues and, as of
March 31, 1999, was in the process of conducting clinical trials.
There is currently no active market for the common stock of Bio Moda, Inc. The
ultimate value of the Company's investment in Bio Moda, Inc. will depend on its
ability to complete its research and either commercialize or sell its
proprietary technology.
A summary of the financial data relative to Bio Moda, Inc. as of December 31,
1998 is as follows:
Assets:
Current assets $ 56,223
Other assets 17,000
---------
$ 73,223
=========
Liabilities and equity
Current liabilities $ 32,148
Notes payable to stockholders 84,884
Common stock 372,273
Deficit accumulated during the development stage (416,082)
---------
$ 73,223
=========
The investment in Bio Moda, Inc. is accounted for using the equity method. A
summary of the investment as of March 31, 1999 is as follows:
Original cost, all of which exceeded book value $ 358,845
Share of net loss (70,104)
Amortization of excess of cost
over book value (22,891)
---------
Net investment $ 265,850
=========
12
<PAGE>
NOTE 4. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATION
Capital Lease Obligation. In July, 1998, the Company entered into a capital
lease agreement for equipment valued at $100,499 (net book value of $82,073 at
March 31, 1999). The Company made a down payment of $20,170. The remaining
amount was financed on a lease with 36 monthly payments of $2,810. Future
minimum lease payments are as follows for the years ending March 31:
1999 $ 33,720
2000 33,720
2001 5,620
--------
73,060
Less amounts representing interest (12,475)
--------
$ 60,585
========
Long-Term Debt. In October 1998, the Company obtained a note payable from a bank
as part of the purchase of an automobile. The note is due in monthly
installments of principal and interest (fixed rate of 8 percent) of $817 until
October 2002. The note is secured by the automobile and the balance outstanding
at March 31, 1999 was $31,574.
Principal payments for the years ending March 31 are as follows:
2000 $ 7,475
2001 8,068
2002 8,738
2003 7,293
--------
$ 31,574
========
NOTE 5. EQUITY TRANSACTIONS
The Company was initially capitalized through the issuance of 500,000 shares for
$25,000 in cash. In November 1996, the Company issued 4,500,000 shares in
exchange for the outstanding shares of PLZ Tech, Inc. The transaction was
accounted for as a purchase and net assets of $285,596, consisting primarily of
patents and equipment were recorded. In previous financial statements, the
Company did not present unclaimed shares resulting from the merger with PLZ
Tech, Inc. as outstanding shares. In the accompanying 1997 and prior financial
statements the number of shares outstanding has been restated to include these
shares.
During 1997 the Company issued 2,281,212 shares of stock in a public offing,
primarily for cash.
13
<PAGE>
NOTE 5. EQUITY TRANSACTIONS (CONTINUED)
During 1998, the Company repurchased 472,200 of its outstanding stock in
exchange for $10,000 in notes receivable and $30,385 in cash in various
transactions. This stock was subsequently retired.
The Company also issued 9,274,811 shares of common stock in exchange for
$1,292,707 in cash, net of sales commissions and other direct costs. Certain of
these sales included price maintenance agreements resulting in the issuance of
an additional 1,704,464 shares of stock in 1998.
In 1998 the Company issued 2,751,000 shares of common stock in exchange for
services from contractors, officers and others. These shares were valued at the
estimated fair market value for similar issuances of stock and amounted to
$296,470. The Company also issued 315,000 shares to an officer in exchange for a
note receivable of $29,000. The notes bears interest at the rate of 7 percent
with interest due semiannually and the principal due July, 2001.
During the quarter ended March 31, 1999, the Company repurchased 489,251 shares
of its outstanding stock for $11,132 in cash. These shares were retired. The
Company also sold 3,259,180 shares for $154,620 in cash and issued 5,537,430
shares for services which were valued at $27,687.
NOTE 6. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following are the carrying amounts and methods used by the Company in
estimating its fair value of financial instruments.
Cash and Certificates of Deposit. The carrying amounts reported in the
balance sheet approximate fair value.
Marketable Equity Securities. The fair value reported in the balance sheet
was based on current market prices.
Notes Receivable. Management estimates the fair value of notes receivable
approximates the carrying value due to their short terms.
Notes Payable. Management estimates the fair value of notes payable
approximates the carrying value due to their short terms.
Capital Lease and Long-Term Debt. Management estimates the fair value of
capital lease obligations and notes payable approximates the carrying value
due to their short terms and the fact that they were entered into recently.
14
<PAGE>
NOTE 6. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The carrying amounts and fair values of the Company's financial instruments are
as follows at March 31, 1999:
Estimated
Carrying Fair
Amount Value
Cash and cash equivalents $66,666 66,666
Certificate of deposit 50,000 50,000
Marketable equity securities (with an
original cost of $70,034) 53,191 53,191
Notes receivable 82,001 82,001
Notes payable 5,384 5,384
Long-term debt and capital lease obligation 92,159 92,159
NOTE 7. INCOME TAXES
At March 31, 1999, the Company had deferred tax assets amounting to
approximately $400,000. The deferred tax assets consist primarily of the tax
benefit of net operating loss carryforwards and are fully offset by a valuation
allowance of the same amount.
The net change in the valuation allowance for deferred tax assets was an
increase of approximately $80,000 in the quarter ending March 31, 1999. The net
change is due primarily to the increase in net operating loss carryforwards.
At March 31, 1999, the Company had net operating loss carryforwards of
approximately $1,000,000 available to offset future state and federal taxable
income. These carryforwards will expire in 2016 to 2018 for federal tax purposes
and 2001 to 2003 for state tax purposes.
NOTE 8. COMMITMENTS
The Company has a non-cancelable operating lease agreement for its office and
production space. The agreement is through June 2000 with an option to renew for
one additional year.
Rent expense during 1998 and 1997 was $9,875 and $2,100, respectively.
Future minimum lease payments for the years ending March 31, are as follows:
2000 $32,400
2001 8,100
As of March 31, 1999, there was one stock option outstanding for the purchase of
153,954 shares at $.58 per share by an officer of the Company. The option
expires August 1, 1999. During the quarters ended March 31, 1998 and 1999, there
was no stock option activity.
15
<PAGE>
ADVANCED OPTICS ELECTRONICS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
Advanced Optics Electronics, Inc. (ADOT-NASDAQ BB) (the "Company") is a
development stage technology company based in Albuquerque, New Mexico. The
Company is primarily engaged in the development, production and sales of its
novel and innovative electronic flat panel displays. The result of research and
development activities will be the manufacturing of large-scale flat panel
displays utilizing its patented technology. These large-scale flat panel
displays will be marketed and sold to the outdoor advertising billboard market.
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.
Liquidity and Capital Resources
The Company relies upon the purchase of its securities by investors to provide
capital. Capital is required for the development of prototype units and
manufacturing operations. Operating revenues from initial contracts also
contribute to operating liquidity. The Company's holding of stock in BioModa,
Inc will provide additional liquidity.
16
<PAGE>
BioModa is a biomedical development company. The Company's ownership of
BioModa, as of March 31, 1999, was 21.93%. The Company holds options to increase
this position to 26.4%. No immediate family members of officers or directors of
Advanced Optics Electronics, Inc. are securities holders of BioModa.
During the quarter ended March 31, 1999 $75,878 was spent for the purchase of
equipment and product development costs. Funds for operation needs, product
development and capital expenditures were provided from the sale of securities
and cash reserves. Product development expenditures are expected to be
approximately $200,000 in fiscal 1999.
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 third quarter of fiscal year 1999. 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 1999.
Results of Continuing Operations
Comparison of the Three-Month Periods Ended March 31, 1999 and 1998
Revenues decreased to $66,375 in the first quarter of 1999 as compared to
$72,000 in the first quarter of 1998.
Research, development and technical costs increased to $48,273 in the first
quarter of 1999 from $6,690 in the first quarter of 1998. The increase in these
costs is due primarily to increased research and development efforts and
resources.
General and administrative costs increased to $106,570 in the first quarter of
1999 from $53,263 in the first quarter of 1998 due to increases in salaries
related to additional personnel and increases in professional fees.
Depreciation increased to $23,529 in the first quarter of 1999 from $9,470 in
the first quarter of 1998 due primarily to depreciation expense for equipment
acquired under capital leases.
17
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal proceedings
The Company is not a party to any legal proceeding, the adverse outcome of
which, in management's opinion, would have a material adverse effect on the
Company's operating results.
Item 2. Changes in securities
During the first quarter of fiscal year 1999 there was a 4,949,972 increase in
shares of common stock.
Item 3. Defaults upon senior securities - Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of the Company's security holders
during the first quarter of fiscal year 1999.
Item 5. Other Information - Not applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27.1 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the company during the three-month period
ending March 31, 1999
18
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) 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: April 23, 1999
ADVANCED OPTICS ELECTRONICS, INC.
BY: /s/Leslie S. Robins
----------------------------
Leslie S. Robins
Chief Accounting Officer
(Principal Accounting Officer)
BY: /s/Leslie S. Robins
----------------------------
Leslie S. Robins
Executive Vice President
(Principal Executive Officer)
19
<PAGE>
Appendix A to Item 601(c) of Regulation S-B
Commercial and Industrial Companies
Article 5 of Regulation S-X
<TABLE>
<CAPTION>
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Item Number Item Description Amount
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<S> <C> <C>
5-02(1) Cash and cash items $66,666
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5-02(2) Marketable securities $53,191
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5-02(3)(a)(1) Notes and accounts receivable-trade $53,001
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5-02(4) Allowances for doubtful accounts N/A
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5-02(6) Inventory $41,324
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5-02(9) Total current assets $580,757
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5-02(13) Property, plant and equipment $251,553
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5-02(14) Accumulated depreciation ($55,067)
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5-02(18) Total assets $1,371,630
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5-02(21) Total current liabilities $75,244
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5-02(22) Bonds, mortgages and similar debt $58,828
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5-02(28) Preferred stock-mandatory redemption N/A
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5-02(29) Preferred stock-no mandatory redemption N/A
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5-02(30) Common stock $1,237,558
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5-02(31) Other stockholder's equity N/A
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5-02(32) Total liabilities and stockholder's equity $1,371,630
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5-03(b)1(a) Net sales of tangible products $66,375
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5-03(b)1 Total revenues $66,375
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5-03(b)2(a) Cost of tangible goods sold $240,784
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5-03(b)2 Total costs and expenses applicable to sales and revenues $240,784
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5-03(b)3 Other costs and expenses $35,874
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5-03(b)5 Provision for doubtful accounts and notes N/A
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5-03(b)8 Interest and amortization of debt discount ($3,299)
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5-03(b)10 Income before taxes and other items ($273,303)
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5-03(b)11 Income tax expense N/A
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5-03(b)14 Income/loss continuing operations ($174,409)
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5-03(b)15 Discontinued operations N/A
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5-03(b)17 Extraordinary items N/A
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5-03(b)18 Cumulative effect-changes in accounting principals ($63,020)
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5-03(b)19 Net income or loss ($273,303)
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5-03(b)20 Earnings per share - primary ($0.011)
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5-03(b)20 Earnings per share - fully diluted N/A
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</TABLE>
