<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20548
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to __________________
Commission file number 0-23761
ADVANCED TECHNOLOGY INDUSTRIES, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 33-0751685
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
Taubenstrasse 20, Berlin, Germany, D-10117
(Address of principal executive offices)
(Issuer's telephone number): 011 49 30 201-7780
Kurchatov Research Holdings, Ltd.
(Former name of issuer)
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 outstanding shares of the issuer's only class of common stock as
of May 15, 2000 was 15,105,911.
Transitional Small Business Disclosure Format: Yes[ ] No[x]
<PAGE>
ADVANCED TECHNOLOGY INDUSTRIES, INC.
INDEX
----------
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements. F-1 through F-22
Item 2. Plan of Operation. 2
PART II - OTHER INFORMATION
Item 1. Legal Proceedings. 5
Item 2. Changes in Securities. 5
Item 3. Defaults Upon Senior Securities. 5
Item 4. Submission of Matters to a Vote of Security Holders. 5
Item 5. Other Information. 5
Item 6. Exhibits and Reports on Form 8-K. 6
SIGNATURES 7
1
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
ADVANCED TECHNOLOGY INDUSTRIES, INC.
(A Development Stage Company)
FINANCIAL REPORT
FOR THE THREE MONTHS ENDED
MARCH 31, 1999 AND 2000
<PAGE>
ADVANCED TECHNOLOGY INDUSTRIES, INC.
(A Development Stage Company)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page Nos.
---------
CONSOLIDATED BALANCE SHEET F-1
March 31, 2000
CONSOLIDATED STATEMENTS OF OPERATIONS F-2
For the Three Months Ended March 31, 1999 and 2000
For the Period from Inception (October 25, 1995) to
March 31, 2000
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY) F-3-F-6
For the Period from Inception (October 25, 1995) to
March 31,2000
CONSOLIDATED STATEMENTS OF CASH FLOWS F-7
For the Three Months Ended March 31, 1999 and 2000
For the Period from Inception (October 25, 1995) to
March 31, 2000
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-8-F-22
Page Nos.
<PAGE>
ADVANCED TECHNOLOGY INDUSTRIES, INC.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEET
MARCH 31, 2000
ASSETS
------
Current Assets:
Cash $ 43,485
Prepaid expenses 16,532
Securities available-for-sale 10,455,000
------------
Total Current Assets 10,515,017
Equipment, net of accumulated depreciation 59,938
------------
Total Assets $10,574,955
============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Accrued liabilities $ 2,082,058
Current portion of obligations under capital leases 11,269
Due to related parties 702,117
Deferred tax liability 3,147,000
------------
Total Current Liabilities 5,942,444
------------
Long-term portion of obligations under capital leases 17,971
------------
Total Liabilities 5,960,415
------------
Commitments and Other Matters (Notes 1,3,4,8,9,10 and 11)
Stockholders' Equity:
Preferred stock - $0.001 par value; 1,000,000 shares
authorized; -0- shares issued and outstanding -
Common stock - $0.0001 par value; 50,000,000 shares
authorized; 15,105,911 shares issued and outstanding 1,871
Additional paid-in capital 3,761,515
Accumulated other comprehensive income 5,395,358
Deficit accumulated during the development stage (4,544,204)
------------
Total Stockholders' Equity 4,614,540
------------
Total Liabilities and Stockholders' Equity $10,574,955
============
The accompanying notes are an integral part of these consolidated financial
statements.
F-1
<PAGE>
<TABLE>
ADVANCED TECHNOLOGY INDUSTRIES, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
FOR THE THREE MONTHS FOR THE PERIOD
ENDED MARCH 31, FROM INCEPTION
--------------------------- (OCTOBER 25,1995)
1999 2000 TO MARCH 31, 2000
------------ ------------ -----------------
<S> <C> <C> <C>
Revenues $ - $ - $ -
------------ ------------ ------------
Costs and Expenses:
Research and development 470,500 36,388 1,706,762
Stock-based compensation 1,070,411 - 2,125,411
Consulting fees 85,400 19,984 946,760
Other general and administrative
expenses 95,667 123,156 1,084,053
Depreciation expense 14,720 5,233 114,712
Interest and amortization of
debt issuance costs 124,691 12,103 1,266,194
------------ ------------ ------------
Total Costs and Expenses 1,861,389 196,864 7,243,892
------------ ------------ ------------
Other:
Acquisition of Aberdeen - 650,000 650,000
------------ ------------ ------------
Loss before extraordinary item (1,861,389) (846,864) (7,893,892)
Extraordinary item - gain on sale
of technology interest to former
affiliate, net of income taxes
of $-0- - - 3,349,688
------------ ------------ ------------
Net Loss $(1,861,389) $ (846,864) $(4,544,204)
============ ============ ============
Basic and diluted loss per share
Before extraordinary item $ (.09) $ (.06)
Extraordinary item - -
------------ ------------
Net Loss $ (.09) $ (.06)
============ ============
Weighted average shares used in
basic and diluted loss per share 20,797,970 14,962,578
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-2
<PAGE>
<TABLE>
ADVANCED TECHNOLOGY INDUSTRIES, INC.
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
FOR THE PERIOD FROM INCEPTION (OCTOBER 25, 1995) THROUGH MARCH 31, 2000
<CAPTION>
Common Stock Additional
Date of ------------------------- Paid-in
Transaction Shares Amount Capital
----------- ----------- ----------- -----------
Period from Inception (October 25, 1995)
through December 31, 1997:
- ----------------------------------------
<S> <C> <C> <C> <C>
Issuance of common stock to founders for
subscriptions ($0.0001 per share) 10/25/95 12,300,000 $ 1,230 $ -
Issuance of stock for legal fees
($0.04 per share) 10/25/95 500,000 50 19,950
Issuance of stock under consulting agreement
($0.04 per share) 10/25/95 1,375,000 138 54,862
Issuance of stock under consulting agreements
($1.00 per share) 12/02/96 230,000 23 229,977
Net loss - 1996 - - -
Issuance of stock under consulting agreements
($1.00 per share) 01/10/97 750,000 75 749,925
Issuance of stock for cash pursuant to
offering ($2.00 per share) 04/97-09/97 306,500 30 612,970
Offering costs 04/97 - - (50,000)
Comprehensive income:
Net loss - 1997 - - -
----------- --------- -----------
Balance - December 31, 1997 15,461,500 $ 1,546 $1,617,684
=========== ========= ===========
</TABLE>
<TABLE>
<CAPTION>
Deficit
Accumulated Accumulated Total
Other During the Stockholders'
Comprehensive Development Equity Comprehensive
Income (Loss) Stage (Deficiency) Income (Loss)
------------- ------------ ------------- -------------
Period from Inception (October 25, 1995)
through December 31, 1997:
- ----------------------------------------
<S> <C> <C> <C> <C>
Issuance of common stock to founders for
subscriptions ($0.0001 per share) $ - $ - $ 1,230
Issuance of stock for legal fees
($0.04 per share) - - 20,000
Issuance of stock under consulting agreement
($0.04 per share) - - 55,000
Issuance of stock under consulting agreements
($1.00 per share) - - 230,000
Net loss - 1996 - (372,500) (372,500)
Issuance of stock under consulting agreements
($1.00 per share) - - 750,000
Issuance of stock for cash pursuant to
offering ($2.00 per share) - - 613,000
Offering costs - - (50,000)
Comprehensive income:
Net loss - 1997 - (1,267,567) (1,267,567) $(1,267,567)
---------- ------------ ------------ ------------
Balance - December 31, 1997 $ - $(1,640,067) $ (20,837) $(1,267,567)
========== ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
<TABLE>
ADVANCED TECHNOLOGY INDUSTRIES, INC.
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
FOR THE PERIOD FROM INCEPTION (OCTOBER 25, 1995) THROUGH MARCH 31, 2000
<CAPTION>
Common Stock Additional
Date of ------------------------- Paid-in
Transaction Shares Amount Capital
----------- ----------- ----------- -----------
Year Ended December 31, 1998:
- ----------------------------
<S> <C> <C> <C> <C>
Balance - December 31, 1997, as
previously reported 15,461,500 $ 1,546 $1,617,684
Effect of Cetoni pooling-of-
interests 5,000,000 500 27,245
----------- --------- -----------
Balance - December 31, 1997,
restated 20,461,500 2,046 1,644,929
Comprehensive income:
Net loss, restated for Cetoni
pooling-of-interests - - -
Other comprehensive income,
net of tax:
Translation adjustments - - -
Unrealized gains - - -
----------- --------- -----------
Balance - December 31, 1998,
Restated 20,461,500 $ 2,046 $1,644,929
=========== ========= ===========
</TABLE>
<TABLE>
<CAPTION>
Deficit
Accumulated Accumulated Total
Other During the Stockholders'
Comprehensive Development Equity Comprehensive
Income (Loss) Stage (Deficiency) Income (Loss)
------------- ------------ ------------- -------------
Year Ended December 31, 1998:
- ----------------------------
<S> <C> <C> <C> <C>
Balance - December 31, 1997, as
previously reported $ - $(1,640,067) $ (20,837)
Effect of Cetoni pooling-of-
interests 36,122 (512,769) (448,902)
---------- ------------ ------------
Balance - December 31, 1997,
restated 36,122 (2,152,836) (469,739)
Comprehensive income:
Net loss, restated for Cetoni
pooling-of-interests - (795,568) (795,568) $ (795,568)
Other comprehensive income,
net of tax:
Translation adjustments (54,137) - (54,137) (54,137)
Unrealized gains - - - -
---------- ------------ ------------ -----------
Balance - December 31, 1998,
Restated $ (18,015) $(2,948,404) $(1,319,444) $ (849,705)
========== ============ ============ ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
<TABLE>
ADVANCED TECHNOLOGY INDUSTRIES, INC.
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
FOR THE PERIOD FROM INCEPTION (OCTOBER 25, 1995) THROUGH MARCH 31, 2000
<CAPTION>
Common Stock Additional
Date of ------------------------- Paid-in
Transaction Shares Amount Capital
----------- ----------- ----------- -----------
Year Ended December 31, 1999:
- ----------------------------
<S> <C> <C> <C> <C>
Balance - December 31, 1998,
Restated 20,461,500 $ 2,046 $1,644,929
Cancellation of shares issued to
founders 11/99 (6,795,000) (679) 679
Stock issued pursuant to
employment and consulting
agreements 01/99 1,009,411 101 1,009,310
Value assigned to stock options
issued in connection with
consulting agreement 01/99 - - 61,000
Value assigned to 770,000 warrants
issued in connection with
convertible debt 03/99 - - 531,000
Comprehensive income:
Net loss - - -
Other comprehensive income, net of tax:
Translation adjustments - - -
Unrealized gains - - -
----------- --------- -----------
Balance - December 31, 1999 14,675,911 $ 1,468 $3,246,918
=========== ========= ===========
</TABLE>
<TABLE>
<CAPTION>
Deficit
Accumulated Accumulated Total
Other During the Stockholders'
Comprehensive Development Equity Comprehensive
Income (Loss) Stage (Deficiency) Income (Loss)
------------- ------------ ------------- -------------
Year Ended December 31, 1999:
- ----------------------------
<S> <C> <C> <C> <C>
Balance - December 31, 1998,
Restated $ (18,015) $(2,948,404) $(1,319,444)
Cancellation of shares issued
to founders - - -
Stock issued pursuant to
employment and consulting
agreements - - 1,009,411
Value assigned to stock options
issued in connection with
consulting agreement - - 61,000
Value assigned to 770,000
warrants issued in connection
with convertible debt - - 531,000
Comprehensive income, net of tax:
Net loss - (748,936) (748,936) $ (748,936)
Other comprehensive income, net of
tax:
Translation adjustments 92,899 - 92,899 92,899
Unrealized gains 1,117,500 - 1,117,500 1,117,500
------------ ------------ ------------ -----------
Balance - December 31, 1999 $ 1,192,384 $(3,697,340) $ 743,430 $ 461,463
============ ============ ============ ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
<TABLE>
ADVANCED TECHNOLOGY INDUSTRIES, INC.
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
FOR THE PERIOD FROM INCEPTION (OCTOBER 25, 1995) THROUGH MARCH 31, 2000
<CAPTION>
Common Stock Additional
Date of ------------------------- Paid-in
Transaction Shares Amount Capital
----------- ----------- ----------- -----------
Three Months Ended March 31, 2000:
- ---------------------------------
<S> <C> <C> <C> <C>
Balance - December 31, 1999 14,675,911 $ 1,468 $ 3,246,918
Stock options exercised 01/00 30,000 3 14,997
Shares issued for acquisition of Aberdeen 01/00 400,000 400 499,600
Comprehensive income:
Net loss - - -
Other comprehensive income, net of
tax: - -
Translation adjustments -
Unrealized gains - - -
----------- ---------- ------------
Balance - March 31, 2000 15,105,911 $ 1,871 $ 3,761,515
=========== ========== ============
</TABLE>
<TABLE>
<CAPTION>
Deficit
Accumulated Accumulated Total
Other During the Stockholders'
Comprehensive Development Equity Comprehensive
Income (Loss) Stage (Deficiency) Income (Loss)
------------- ------------ ------------- -------------
Three Months Ended March 31, 2000:
- ---------------------------------
<S> <C> <C> <C> <C>
Balance - December 31, 1999 $ 1,192,384 $(3,697,340) $ 743,430
Stock options exercised - - 15,000
Shares issued for acquisition of
Aberdeen - - 500,000
Comprehensive income:
Net loss - (846,864) (846,864) $ (846,864)
Other comprehensive income, net of
tax:
Translation adjustments 149,974 - 149,974 149,974
Unrealized gains 4,053,000 - 4,053,000 4,053,000
------------- ------------ ------------ -------------
Balance - March 31, 2000 $ 5,395,358 $(4,544,204) $ 4,614,540 $ 3,356,110
============= ============ ============ =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
<TABLE>
ADVANCED TECHNOLOGY INDUSTRIES, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
FOR THE THREE MONTHS FOR THE PERIOD
ENDED MARCH 31, FROM INCEPTION
----------------------------- (OCTOBER 25, 1995)
1999 2000 TO MARCH 31, 2000
------------ ------------ -----------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(1,861,389) $ (846,864) $(4,544,204)
Adjustments to reconcile net loss to net cash
(used in) provided by operating activities:
Extraordinary gain - - (3,349,688)
Stock-based compensation 1,070,411 - 2,125,411
Acquisition of Aberdeen - 650,000 650,000
Interest and amortization of debt issuance
costs 124,691 - 1,068,191
Research and development costs 446,826 - 437,368
Depreciation (14,720) 5,233 114,713
Cash provided by (used in) the change in
assets and liabilities:
Decrease (increase) in prepaid expenses 2,359 10,248 (16,532)
Increase (decrease) in cumulative translation
adjustment 22,941 149,974 224,858
Increase in accrued liabilities 498,470 570,942 2,082,058
------------ ------------ ------------
Net Cash (Used in) Provided by Operating
Activities (289,589) 539,533 (1,207,825)
------------ ------------ ------------
CASH USED IN INVESTING ACTIVITIES
Capital expenditures (6,748) - (137,346)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock - 15,000 656,975
Offering costs - - (50,000)
Proceeds from convertible debentures 750,000 - 750,000
Financing costs (75,000) - (75,000)
Advances from related parties 1,628 (421,440) 114,746
Payments under capital lease obligations (1,420) (1,712) (8,065)
------------ ------------ ------------
Net Cash Provided by (Used in) Financing
Activities 675,208 (408,152) 1,388,656
------------ ------------ ------------
Increase in Cash 378,871 131,381 43,485
Cash Overdraft - Beginning of Period (85,202) (87,896) -
------------ ------------ ------------
Cash - End of Period $ 293,669 $ 43,485 $ 43,485
============ ============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ - $ - $ 72,898
============ ============ ============
Income taxes $ - $ - $ -
============ ============ ============
SUPPLEMENTAL SCHEDULE OF NON-CASH AND FINANCING ACTIVITIES:
Equipment purchased under capital
lease obligations $ - $ - $ 37,305
============ ============ ============
Convertible debentures and interest
assumed by Eurotech $ - $ - $ 1,212,188
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-7
<PAGE>
ADVANCED TECHNOLOGY INDUSTRIES, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BUSINESS AND CONTINUED OPERATIONS
Description of Business
- -----------------------
Advanced Technology Industries, Inc. (the "Company" or "ATI") was incorporated
under the laws of the State of Delaware on October 25, 1995. On February 1,
2000, the Company changed its name from Kurchatov Research Holdings, Ltd. to
Advanced Technology Industries, Inc. The Company was organized to identify,
assess and commercialize technologies introduced and developed by scientists
throughout the world with particular emphasis on technologies originating in
Israel, Germany and Russia.
The Company is in the development stage and its efforts, until recently,
included the appointment of Russian scientists to the Company's technical
advisory board, the negotiation of an agreement with ERBC Holdings, Ltd.
("ERBC") to manage the Company's operations in Russia (Note 11, the review of
certain technologies for commercialization, the negotiation of an agreement with
Eurotech, Ltd. ("Eurotech"), a development-stage technology transfer, holding,
marketing and management company, to undertake commercialization of the
technologies and products which may be identified by the technical advisory
board, including the introduction of a certain compound technology known as
"EKOR" to Eurotech (Note 3).
During April of 1999, the Company acquired a 20% equity interest in two Israeli
technology companies, Flexitech, Ltd. and Pirocat, Ltd. (Note 4). Further, in
December of 1999, the Company acquired all of the outstanding capital stock of
Cetoni Umwelttechnologie Entwicklungs GmbH ("Cetoni"), a German-based design and
engineering firm focused on developing and patenting technologies and products
for the consumer market.
In November of 1999, the Company sold its profit interest in the EKOR technology
to Eurotech (see Note 9).
Reorganization
- --------------
Pursuant to an Agreement and Plan of Reorganization, effective January 14, 2000,
the Company acquired all the outstanding shares of common stock of Aberdeen
Acquisition Corporation ("Aberdeen"), a Delaware corporation, from the
shareholders thereof, in an exchange for cash of $150,000, plus 400,000 shares
of common stock of the Company valued at $500,000. As a result of this
transaction, Aberdeen has become a wholly-owned subsidiary of ATI effective on
January 14, 2000. The costs of this transaction were charged to operations
during the three months ended March 31,2000.
To date, the Company and Cetoni have not generated any revenues from operations.
F-8
<PAGE>
ADVANCED TECHNOLOGY INDUSTRIES, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BUSINESS AND CONTINUED OPERATIONS (Continued)
Continued Existence
- -------------------
The accompanying consolidated financial statements have been prepared in
conformity with generally accepted accounting principles, which contemplate
continuation of the Company as a going concern. However, as shown in the
accompanying consolidated financial statements, the Company has incurred losses
from operations since inception. Management anticipates incurring substantial
additional losses in 2000. Further, the Company may incur additional losses
thereafter, depending on its ability to generate revenues from the licensing or
sale of its technologies and products, or enter into any or a sufficient number
of joint ventures. The Company has no revenue to date. There is no assurance
that the Company can successfully commercialize any of its technologies and
products and realize any revenues therefrom. The Company's technologies and
products have never been utilized on a large-scale commercial basis and there is
no assurance that any of its technologies or products will receive market
acceptance. There is no assurance that the Company can continue to identify and
acquire new technologies. As of March 31, 2000, the Company had an accumulated
deficit since inception of $4,544,204.
Management's business plan will require financing. To support its operations
during 1999, the Company completed a convertible debenture financing for
$750,000 (see Note 6). During November of 1999, the Company sold its profit
interest in the EKOR technology to Eurotech in exchange for 2,000,000 shares of
Eurotech's restricted common stock, approximately 5% of the outstanding common
stock of Eurotech, plus other consideration described in Note 9. These shares
are restricted, however, the Company has demand registration rights and
piggy-back registration rights. Eurotech's common shares trade in the
over-the-counter market and are quoted through the NASD OTC Bulletin Board. The
Company plans on either borrowing funds secured by these securities or selling
all or a portion of such securities to fund its operations. The market value of
the Eurotech securities approximated $10,455,000 at March 31, 2000.
While no assurance can be given, management believes the Company can raise
adequate capital to keep the Company functioning during 2000. No assurance can
be given that the Company can continue to obtain any working capital or sell all
or any of its Eurotech securities, or obtain a loan against its Eurotech
securities, or if obtained, that such funding will not cause substantial
dilution to shareholders of the Company. If the Company is unable to raise
additional funds, it may be forced to change or delay its contemplated marketing
and business plans.
Being a start-up stage entity, the Company is subject to all the risks inherent
in the establishment of a new enterprise and the marketing and manufacturing of
a new product, many of which risks are beyond the control of the Company. All of
the factors discussed above raise substantial doubt about the Company's ability
to continue as a going concern.
F-9
<PAGE>
ADVANCED TECHNOLOGY INDUSTRIES, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BUSINESS AND CONTINUED OPERATIONS (Continued)
Continued Existence (Continued)
- -------------------
These consolidated financial statements do not include any adjustments relating
to the recoverability of recorded asset amounts that might be necessary as a
result of the above uncertainty.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
- ---------------------------
The consolidated financial statements include the accounts of ATI and its
majority and wholly-owned subsidiary (collectively, the "Company"). All
significant intercompany accounts and transactions have been eliminated in
consolidation.
Equity Method of Accounting for Unconsolidated Foreign Affiliates
- -----------------------------------------------------------------
Investments in companies in which the Company has a 20% to 50% interest and has
the ability to exercise significant influence over operating and financial
policies are accounted for on the equity method. Accordingly, the Company's
proportionate share of their undistributed earnings or losses are included in
the statement of operations.
At March 31, 2000, investments in companies accounted for under the equity
method consist of the following foreign development-stage technology companies
which are located in Israel:
Flexitech, Ltd. ("Flexitech") 20%
Pirocat, Ltd. ("Pirocat") 20%
F-10
<PAGE>
ADVANCED TECHNOLOGY INDUSTRIES, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Comprehensive Income
- --------------------
Effective January 1, 1998, the Company adopted the provisions of SFAS No.
130, "Reporting Comprehensive Income". SFAS No. 130 establishes standards
for reporting comprehensive income, defined as all changes in equity from
non-owner sources. Adoption of SFAS No. 130 did not have a material effect
on the Company's financial position or results of operations. SFAS No. 130
requires foreign currency translation adjustments and unrealized gains or
losses on investments to be included in other comprehensive income. Prior
year financial statements have been reclassified to conform to the
requirements of SFAS No. 130. Accumulated other comprehensive income, at
March 31, 2000, consists of the following:
Foreign currency translation adjustments $ 224,858
Unrealized gains on investments, net of
taxes of $3,147,000 5,170,500
----------
$5,395,358
==========
NOTE 3 - RESEARCH AND DEVELOPMENT AGREEMENT
In 1996, the Company executed an agreement with Eurotech, a former affiliate,
pursuant to which Eurotech will remit to the Company 50% of the net profits
derived from the commercialization of, or other income generated from, any
technologies furnished to Eurotech by the Company's technical advisory board.
Under this agreement, the Company's technical advisory board will identify
technologies and forward such technologies to Eurotech which will seek avenues
for their commercialization.
Under the agreement with Eurotech, the Company has identified and introduced to
Eurotech a certain technology known as "EKOR" with potential uses in connection
with containing both solid and liquid radioactive materials, suppressing
radioactive dust and preventing such materials and dust from escaping into the
atmosphere and from leaching into and contaminating ground/water supplies. There
can be no assurance that this technology will be commercially saleable or
profitable.
On November 30, 1999, the Company sold its profit interest in the EKOR
technology to Eurotech (see Note 9).
F-11
<PAGE>
ADVANCED TECHNOLOGY INDUSTRIES, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - ACQUISITIONS
Investments in Israeli Technology Companies
- -------------------------------------------
During April of 1999, pursuant to agreements with Ofek Le-Oleh Foundation,
Ltd. (the "Foundation"), an Israeli incubator with authority from the Israeli
government, the Company has invested in two Israeli technology companies:
Flexitech, Ltd. and Pirocat, Ltd. Under those agreements, the Company
received 20% of each Israeli technology company's common equity in exchange
for its investment of $60,000 in each company.
The investment is payable in installments of $15,000, to each company, due in
April of 1999, October of 1999, April of 2000 and October of 2000. In connection
with these investments, the Company also has obtained an option to purchase an
additional 20% to 25% of the common equity for a sum to be determined in the
future, which options are exercisable for a period of 90 days commencing after
the first year of the development period (generally two years from registration
as an Israeli corporation). During the development period, the sale or other
transfer of 25% or more of the inventor's equity of each of Flexitech and
Pirocat requires the consent of the Chief Scientist of the Israeli Ministry of
Commerce and Technology. The Company's options to acquire additional common
equity of the Israeli technology companies are exercisable within such two-year
periods and any acquisition of the common equity purchasable thereunder will,
therefore, require the Chief Scientist's consent. The agreements require the
Company to pay royalties on future revenue generated from the commercialization
of the technologies developed by these Israeli companies.
The Company's share of losses incurred from these research companies has been
accounted for on the equity basis and is included in research and development
expenses. The amount charged to research and development expenses for the three
months ended March 31, 2000 was $30,000.
There can be no assurance that these development projects will result in useful
technologies or that the same will be commercially saleable or profitable.
F-12
<PAGE>
ADVANCED TECHNOLOGY INDUSTRIES, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - ACQUISITIONS (Continued)
Cetoni Umwelttechnologie-Entwicklungs GmbH - Pooling-of-Interests
- -----------------------------------------------------------------
On December 6, 1999, the Company completed the acquisition of all of the
outstanding shares of the capital stock of Cetoni Umwelttechnologie-
Entwicklungs GmbH ("Cetoni") for 5,000,000 shares of the Company's restricted
common stock. Cetoni is a German-based design and engineering firm focused on
developing and patenting technologies and products for the consumer market.
Since 1995, Cetoni has designed and patented products for the beverage,
automotive accessory, sport, healthcare, household, office and general consumer
markets. Cetoni has no revenues through May 19, 2000. Management of Cetoni
believes that the research and development stage has been completed on the
majority of its products and believes that they are ready for commercialization
in consumer markets.
The acquisition has been accounted for as a pooling-of-interests. Accordingly,
the Company's consolidated financial statements have been restated for all
periods prior to the business combination to include the combined results of ATI
and Cetoni.
Net sales, loss before extraordinary item and net loss for the individual
companies reported prior to the business combination were as follows:
Years Ended December 31,
--------------------------------
1998 1999
------------ ------------
Net Sales:
ATI $ - $ -
Cetoni - -
------------ ------------
Total $ - $ -
============ ============
Loss Before Extraordinary Item:
ATI $ (414,446) $(2,916,735)
Cetoni (381,122) (1,181,889)
------------ ------------
Total $ (795,568) $(4,098,624)
============ ============
Net Income (Loss):
ATI $ (414,446) $ 432,953
Cetoni (381,122) (1,181,889)
------------ ------------
Total $ (795,568) $ (748,936)
============ ============
F-13
<PAGE>
ADVANCED TECHNOLOGY INDUSTRIES, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - ACQUISITIONS (Continued)
Cetoni Umwelttechnologie-Entwicklungs GmbH - Pooling-of-Interests
- -----------------------------------------------------------------
(Continued)
- ----------
The conforming of the accounting practices of ATI and Cetoni resulted in no
adjustments to net loss or shareholders' equity. There have been no significant
intercompany transactions between ATI and Cetoni other than loans by ATI to
Cetoni.
NOTE 5 - SECURITIES AVAILABLE-FOR-SALE
Securities available-for-sale consist of 2,000,000 shares of Eurotech restricted
common stock, which trade in the over-the-counter market and are quoted through
the NASD OTC Bulletin Board. The fair value of such equity securities at March
31, 2000 was estimated at $10,455,000. The amortized cost basis was $2,137,500
and the unrealized gain was $8,317,500 at March 31, 2000.
NOTE 6 - CONVERTIBLE DEBENTURES
During March and April 1999, the Company completed a private placement of
$750,000 of 9% convertible debenture notes, due in March and April of 2001.
Interest on the debentures is payable in cash or in shares of common stock
calculated by dividing the interest accrued by the lesser of $1.05 or 60% of the
average closing bid price per share of common stock for the five trading days
preceding the interest payment date. As additional consideration, the Company
issued separate warrants to the purchasers to acquire an aggregate of 375,000
shares of the Company's common stock at $0.65 per share. The value of the
warrants issued to the purchasers was estimated at $259,000, as further
described in Note 8, and was charged to operations as interest expense over the
six-month period ended September 30, 1999. The warrants are exercisable over
five years. In addition, the Company issued warrants to the finders of the
transaction and its counsel to purchase an aggregate of 395,000 shares of common
stock at a price of $0.65 per share, exercisable for a five-year period after
the closing of the transaction. Further, the holders of the warrants were
granted piggy-back registration rights with respect to the shares of common
stock underlying the warrants.
The debenture agreement permits the holders of the debentures to convert the
debt into shares of common stock at beneficial conversion rates over the two-
year term of the debentures. The conversion price is the lower of $1.05, or the
average bid price per share of the Company's common stock for five trading days
immediately preceding the conversion date, multiplied by 60%. The Company, at
its option, may redeem the debentures at $1,162,500. The excess of the
redemption price of $1,162,500 over $750,000, or $412,500, was charged to
operations as interest expense over the six-month period ended September 30,
1999.
F-14
<PAGE>
ADVANCED TECHNOLOGY INDUSTRIES, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - CONVERTIBLE DEBENTURES (Continued)
Costs in connection with the $750,000 Convertible Debenture offering allocated
to the Convertible Debentures were comprised of: (I) a placement fee to an
unrelated party amounting to $75,000 and (ii) warrants issued to the placement
agent and its counsel to purchase 395,000 shares of the Company's common stock
at $0.65 per share, valued at $272,000, as further described in Note 8. The
Company amortized such costs as interest expense over the six-month period ended
September 30, 1999.
Proceeds of the offering were used to pay the first payment for the acquisition
of equity interests in two Israeli technology companies, past due legal fees,
and advances to Cetoni.
On November 30, 1999, as part of the sale of the Company's rights to the EKOR
technology, all outstanding principal, interest and other fees related to the
convertible debentures were assumed by Eurotech. The Company accounted for the
assumption of the debt by Eurotech as if the Company had redeemed the debt.
NOTE 7 - INCOME TAXES
The Company has not provided for income taxes for the three months ended March
31, 2000, as a result of net operating losses incurred since inception.
The components of deferred tax assets and liabilities at March 31, 2000 are as
follows:
Deferred Tax Assets:
Net operating loss carryforwards $ 180,000
Compensatory element of stock issuances 536,000
-----------
Total Gross Deferred Tax Assets 716,000
Less: Valuation allowance 536,000
-----------
Net Deferred Tax Assets $ 180,000
Deferred Tax Liability:
Unrealized gains on available-for-sale $3,327,000
securities ===========
$3,147,000
Net Deferred Tax Liability - Current ===========
F-15
<PAGE>
ADVANCED TECHNOLOGY INDUSTRIES, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 - INCOME TAXES (Continued)
The net change in the valuation allowance for deferred tax assets was an incease
of approximately $18,000 during the three months ended March 31, 2000. The
current deferred tax liability of approximately $3,147,000 was included in
accumulated other comprehensive income in stockholders' equity as of March 31,
2000.
As of March 31, 2000, the Company had available approximately $450,000 of net
operating losses ("NOL") for income tax purposes that may be carried forward to
offset future taxable income, if any. The NOL carryforwards from December 31,
1997 and prior years expire during the years 2010 through 2013, and the December
31, 1998, 1999 and 2000 NOL carryforwards expire in the years 2018, 2019 and
2020, respectively.
A reconciliation between the statutory federal income tax rate (34%) and the
Company's effective rate is as follows:
For the Three Months
Ended March 31,
1999 2000
-------- --------
Federal statutory rate (34.0)% (34.0)%
Non-deductible expenses and
unutilized foreign losses 54.0 32.0
Change in valuation allowance (20.0) 2.0
-------- --------
Effective rate -0- % -0- %
======== ========
NOTE 8 - STOCKHOLDERS' EQUITY
Common Stock
- ------------
In connection with the organization of the Company, in October 1995, the Company
issued 12,300,000 shares to its founders, CIS Development Corp. ("CIS") and
ERBC, for subscriptions totalling $1,230.
For the period from inception (October 25, 1995) through December 31, 1996, the
Company issued 2,105,000 shares of common stock as consideration for legal and
consulting services performed by various consultants, including related parties,
through December 31, 1996. Shares issued under these arrangements were valued at
$305,000, which was charged to operations for the year ended December 31, 1996.
F-16
<PAGE>
ADVANCED TECHNOLOGY INDUSTRIES, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 - STOCKHOLDERS' EQUITY (Continued)
Common Stock (Continued)
- ------------
During the year ended December 31, 1997, the Company issued 750,000 shares of
common stock pursuant to consulting arrangements with various consultants,
including related parties. Shares issued under these arrangements were valued at
$750,000, which was charged to operations during 1997.
Pursuant to an offering under Rule 504 of Regulation D of the Securities Act of
1933, the Company offered for sale 487,500 shares of its common stock at $2.00
per share. During 1997, the Company sold 306,500 shares of its common stock
under this offering, and derived aggregate proceeds of $613,000. Costs in
connection with this offering approximated $50,000 and were charged against
paid-in capital during the year ended December 31, 1997.
In January of 1999, the Company issued 1,009,411 shares of its common stock
pursuant to one-year consulting agreements with various consultants, including
related parties. Shares issued under these agreements were valued at $1,009,411,
which was charged to operations during 1999.
In December of 1999, in connection with the acquisition of the capital stock of
Cetoni, the Company issued 5,000,000 shares of its common stock to the
shareholders of Cetoni (Note 4).
In January of 2000, the Company issued 400,000 shares of common stock to the
shareholders of Aberdeen in connection with the acquisition of Aberdeen (see
Note 1).
Warrants
- --------
At March 31, 2000, there were warrants outstanding to purchase 770,000 shares of
the Company's common stock at $0.65 per share as described in Note 8. The
warrants were valued at $531,000 using the Black-Scholes pricing model with the
following assumptions:
Risk-free interest rate 5.0%
Expected life 2 years
Expected volatility 65.0%
Dividend yield 0%
F-17
<PAGE>
ADVANCED TECHNOLOGY INDUSTRIES, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 - STOCKHOLDERS' EQUITY (Continued)
Options - Outside the Stock Option Plan
- ---------------------------------------
Pursuant to a financial consulting agreement executed in January of 1999, the
Company issued to the consultant options to purchase 100,000 shares of its
common stock at prices ranging from $0.50 to $2.00 per share. The options expire
on December 31, 2000. 30,000 options were exercised in January of 2000 at $0.50
per share. These options were valued at $0.61 each on the grant date using the
Black-Scholes option-pricing model with the following assumptions:
Risk-free interest rate 5.0%
Expected life 2 years
Expected volatility 65.0%
Dividend yield 0%
Earnings Per Share
- ------------------
Securities that could potentially dilute basic earnings per share ("EPS") in the
future that were not included in the computation of diluted EPS because to do so
would have been anti-dilutive for the periods presented consist of the
following:
Options to purchase common stock 70,000
Warrants to purchase common stock 770,000
Letter of intent to acquire Bavaria Tech based
on estimate of exchange ratio 3,000,000
---------
Total as of March 31, 2000 3,840,000
=========
Preferred stock
- ---------------
The Company has authorized 1,000,000 shares of preferred stock, par value -
$.001 per share. The Board of Directors of the Company has broad discretion to
create one or more series of preferred stock and to determine the rights,
preferences and privileges of any such series.
F-18
<PAGE>
ADVANCED TECHNOLOGY INDUSTRIES, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 - STOCKHOLDERS' EQUITY (Continued)
Stock Option Plan
- -----------------
In 1996, the Company adopted an incentive stock option plan. Under the plan,
which authorizes the granting of incentive stock options or non-incentive stock
options, the maximum number of shares of common stock for which options may be
granted is 500,000 shares. Options may be granted for terms not exceeding ten
years from the date of grant, except for options granted to persons holding in
excess of 5% of the common stock, in which case the options may not be granted
for a term not to exceed five years from the date of grant. As of March 31,
2000, no options have been granted under this stock option plan.
NOTE 9 - EXTRAORDINARY GAIN ON SALE OF RIGHTS TO TECHNOLOGY
On November 30, 1999, the Company transferred to Eurotech its rights to receive
50% of the net revenues derived by Eurotech from the EKOR technology. In
consideration of ceding these rights, Eurotech (I) issued to the Company
2,000,000 restricted shares of its common stock valued at $2,137,500; (ii)
granted the Company a right to receive 2% of the gross revenues derived by
Eurotech from the sale, service and licensing of the EKOR technology; (iii)
returned to the Company for cancellation 6,795,000 shares of the Company's
common stock previously issued to one of its founders; (iv) assumed $1,212,188
of the Company's debt, which included $750,000 of debt, plus accrued interest,
incurred by the Company, pursuant to certain 9% Convertible Debentures issued by
the Company in 1999; and (v) transferred its royalty rights to a certain
resealable can technology, which the Company's German subsidiary had purchased
from Eurotech earlier in 1999. The Company recognized an extraordinary gain of
$3,349,688 related to the sale of its profit interest in the EKOR technology.
NOTE 10 - RELATED PARTY TRANSACTIONS
Amounts due to related parties represent various demand notes, including
interest at 10%, payable to certain shareholders, relatives of shareholders and
companies affiliated with shareholders. Interest expense accrued on these demand
notes approximated $10,000 during the three months ended March 31, 2000.
F-19
<PAGE>
ADVANCED TECHNOLOGY INDUSTRIES, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11 - COMMITMENTS AND OTHER MATTERS
Consulting Agreement - ERBC
- ---------------------------
By letter dated June 1, 1996, the Company engaged ERBC, an affiliate of the
Company by virtue of common shareholders, as a consultant for a one-year period
to undertake all aspects of the Company's operations in Russia. Pursuant to the
letter agreement, the Company agreed to pay ERBC a fee of $115,000 for the year
during which it has been engaged. During June 1997, the Company renewed the
agreement with ERBC for an additional one year period on like terms. During June
1998, the Company renewed the agreement with ERBC for an additional one year
term and agreed to pay ERBC a fee of $168,577 for the year during which it has
been engaged. This agreement was extended under the same terms for one-year
period commencing June 1, 1999.
Consulting Agreement - CIS
- --------------------------
By letter dated January 1, 1997, the Company engaged CIS, an affiliate of the
Company by virtue of common shareholders, and common management, as a consultant
for a three-year period to review technologies developed by the Russian
researchers and scientists and to identify commercial outlets for such
technology. The agreement automatically renews for a two-year period upon
expiration of the initial term. Under the terms of the agreement, CIS will
receive $125,000 per year. The agreement was cancelled effective December 31,
1999.
F-20
<PAGE>
ADVANCED TECHNOLOGY INDUSTRIES, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11 - COMMITMENTS AND OTHER MATTERS (Continued)
International Operations
- ------------------------
The Company has strategic alliances, collaboration agreements, licensing
agreements with entities which are based and/or have operations in Russia and
Ukraine. Both of these countries have experienced volatile and frequently
unfavorable economic, political and social conditions. The Russian economy and
the Ukrainian economy are characterized by declining gross domestic production,
significant inflation, increasing rates of unemployment and underemployment,
unstable currencies, and high levels of governmental debt as compared to gross
domestic production. The prospects of wide-spread insolvencies and the collapse
of various economic sectors exist in both countries.
In view of the foregoing, the Company's business, earnings, asset values and
prospects may be materially and adversely affected by developments with respect
to inflation, interest rates, currency fluctuations, government policies, price
and wage controls, exchange control regulations, taxation, expropriation, social
instability, and other political, economic or diplomatic developments in or
affecting Russia and Ukraine. The Company has no control over such conditions
and developments, and can provide no assurance that such conditions and
developments will not adversely affect the Company's operations.
Letter of Intent
- ----------------
On May 26, 1999, the Company entered into a non-binding letter of intent with
Bavaria Tech, Ltd., formerly known as Arbat American Autopark, Ltd. and
hereinafter referred to as "Bavaria Tech", an affiliate of the Company by virtue
of common principal shareholders. The letter of intent contemplates that the
Company will acquire all Bavaria Tech's outstanding common shares for common
shares of ATI based upon a valuation of the assets of Bavaria Tech. The Company
estimates that the number of shares which the Company would issue under this
letter of intent would approximate 3 million shares.
The letter of intent is subject to the completion of a definitive agreement,
Bavaria Tech completing its acquisition of certain technology developed by
scientists in Israel, satisfactory due diligence review, satisfactory technology
appraisal, approval of the transaction by the board of directors of ATI and
Bavaria Tech, approval of the transaction by shareholders of ATI and Bavaria
Tech, and satisfactory confirmation from an investment banker that the
transaction is fair to the ATI's shareholders and Bavaria Tech's shareholders.
F-21
<PAGE>
ADVANCED TECHNOLOGY INDUSTRIES, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 - SEGMENT REPORTING
The Company's business is organized on a geographic basis, and the Company's
Chief Operating Decision Maker assesses performance and allocates resources on
this basis. The information provided in the following section is representative
of the information used by the Chief Operating Decision Maker in deciding how to
allocate resources and in assessing performance.
The Company has two geographic reportable segments: U.S.A. and Germany. The
accounting policies of the segments are the same as described in the summary
of significant accounting policies. The Company evaluates segment
performance based on income (loss) before interest, other costs and
extraordinary items. Segment results for are as follows:
<TABLE>
<CAPTION>
U.S.A. Germany Consolidated
----------- ----------- ------------
Three Months Ended
March 31, 1999:
- ------------------
<S> <C> <C> <C>
Loss before interest, other
costs and extraordinary items $ 1,459,401 $ 277,297 $ 1,736,698
============ ============ ============
Depreciation and
amortization $ - $ 14,720 $ 14,720
============ ============ ============
Identifiable Assets $ 4,216,784 $ 79,632 $ 4,296,416
============ ============ ============
Three Months Ended
March 31, 2000:
- ------------------
Loss before interest, other
costs and extraordinary items $ (131,800) $ (52,961) $ (184,761)
============ ============ ============
Depreciation and
amortization $ - $ 5,233 $ 5,233
============ ============ ============
Identifiable Assets $10,504,684 $ 70,271 $10,574,955
============ ============ ============
</TABLE>
F-22
<PAGE>
Item 2. Plan of Operation
Forward Looking Statements.
- ---------------------------
This report on Form 10-QSB contains certain statements that are
"Forward Looking Statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. Those statements, among other things, include the discussions of the
Company's expectations contained in the discussion by management of the
Company's Plan of Operation set forth below. Although the Company believes that
the expectations reflected in the Forward Looking Statements are reasonable,
management can give no assurance that such expectations will prove to have been
correct. Generally, these statements relate to business plans or strategies,
projected or anticipated benefits or other consequences of such plans or
strategies, or projections involving anticipated revenues, expenses, earnings,
levels of capital expenditures, liquidity or indebtedness, ability to raise
working capital, or other aspects of operating results or financial position.
All phases of the operations of the Company are subject to a number of
uncertainties, risks and other influences, many of which are outside the control
of the Company and any one of which, or a combination of which, could materially
affect the results of the Company's operations and whether the Forward Looking
Statements made by the Company ultimately prove to be accurate. Although not
always the case, Forward Looking Statements can be identified by the use of
words such as "believes", "expects", "intends", "projects", "anticipates",
"contemplates", or "estimates".
Plan of Operation
- -----------------
The following discussion and analysis should be read in conjunction
with the financial statements and notes thereto included elsewhere in this
Quarterly Report on Form 10-QSB and with (i) the Company's Current Report on
Form 8K dated January 14, 2000 filed by Company under its former name Kurchatov
Research Holdings, LTD., (ii) the Company's Annual Report on Form 10-KSB for the
fiscal year ended December 31, 1999 dated April 14, 2000, and (iii) the
Company's Amendment No. 1 to Current Report on Form 8K filed May 15, 2000.
The Company is a development stage company and its efforts have been
primarily devoted to technology identification and acquisition, research and
development, organizational efforts and raising capital. This discussion
provides an analysis of the plan of operation for the Company for the next
twelve months.
The Company was formed to acquire and commercialize new or previously
existing but non-commercialized technologies particularly those developed by
scientists and engineers in Israel, Russia, and Germany. It may acquire a direct
interest in the technology, a right to use the technology, and/or an ownership
interest in the entity owning the technology. The acquisition of technologies by
the Company may be made by the issuance of stock or securities of the Company,
cash, or other consideration or a combination thereof.
2
<PAGE>
During the next twelve months the Company intends to concentrate on (i)
the commercialization of certain products of Cetoni GmbH, its wholly owned
subsidiary, (ii) completion of evaluation of technologies being presently
considered and the acquisition thereof if appropriate, and (iii) identification,
evaluation, and possible acquisition of additional technologies. It is
anticipated that the main emphasis for Cetoni in the next twelve months will be
on the successful commercialization of its beverage packaging products
(resealable aluminum beverage can and resealable tetra pak carton), automotive
accessory products, office products, and consumer products.
The Company will seek out product wholesalers with which to enter into
distribution agreements. Cetoni has entered into manufacturing agreements for
certain of its products and will attempt to locate manufacturers for other
products. It will attempt to locate manufacturers in low cost countries in order
to obtain the manufacture of the products at the least cost possible in order to
maximize the competitiveness of its products. There is no assurance that it will
be able to locate distributors or manufacturers for some or all of the products
upon favorable terms, or at all.
During the period of the plan, Cetoni will be required to purchase the
tooling and equipment required to manufacture its products. It is anticipated
that this will amount to approximately $650,000. Cetoni believes that it can
obtain financing upon favorable terms for a substantial portion of this amount
from the manufacturers of the tooling and equipment. However, if financing is
not available, management believes that it will have the necessary funds to pay
for the tooling and equipment. The Company does not anticipate any additional
significant purchases or sales of plant or equipment during the period of the
plan.
During the period of the plan, the Company does not anticipate any
significant changes in the numbers of employees employed by itself or Cetoni,
its subsidiary.
Although the Company incurred significant research and development
expenses in 1999, these were attributable to one time charges for the most part
and the Company does not anticipate incurring significant research and
development costs for the period of the plan.
The Company may incur substantial expenses associated with performing
due diligence incident to the investigation of technologies suitable for
acquisition. The amount and type of expenses incurred will vary depending on the
technology being investigated and it is not possible to project what these
expenses might be during the period of the plan.
The Company has not generated any revenue from operations since its
inception and has not been profitable since its inception. Although management
believes that the Company may recognize revenues during the next twelve months
based on expressions of interest from third parties to acquire licenses to use
its technologies and purchase its products, there can be no assurances as to
when and whether the Company will be able to commercialize its products and
technologies and realize any revenues therefrom. The Company's products and
technologies have never been utilized on a large-scale commercial basis.
3
<PAGE>
The Company expects that it will continue to generate losses until at
least such time as it can commercialize its technologies, if ever. No assurance
can be given that the Company can complete the development of any technology or
that, if any technology is fully developed, it can be manufactured and marketed
on a commercially viable basis. Furthermore, no assurance can be given that any
technology will receive market acceptance. Being a development stage company,
the Company is subject to all risks inherent in the establishment of a
developing or new business.
As of March 31, 2000 the Company had working capital of $4,572,573,
shareholders' equity of $4,614,540 and an accumulated deficit of ($4,544,204).
The Company anticipates that it will continue to incur significant operating
losses for the next twelve months. The Company may incur additional losses
thereafter, depending upon its ability to generate revenues from the license or
sale of technologies or products.
The Company will require additional financing to continue to fund
research and development efforts, operating costs and to complete additional
technology acquisitions. Management anticipates that it will be able to raise
the needed funds for continuing operations.
The Company will attempt to raise this additional capital through the
public or private placement of its securities, debt or equity financing, joint
ventures, or the licensing or sale of its technologies and products. However,
the Company has not entered into any definitive agreements or arrangements to
obtain any such sources of capital and no assurance can be given that it can
successfully obtain additional capital.
In addition, the Company owns 2,000,000 shares of the common stock of
Eurotech, Ltd. (approximately 5% of the company) with a market value of
approximately $10,455,000 as of March 31, 2000, which the Company plans to
either sell or use for collateral for a loan to provide funds for operations.
Said securities are restricted; however, the Company has piggy-back and demand
registration rights. The common stock of Eurotech, Ltd. is traded in the
over-the- counter market and is quoted through the NASD OTC Bulletin Board.
There can be no assurance that the Company can sell said securities or any
portion thereof. Moreover, if the Company is able to sell said securities, the
value thereof at the time of sale may be less than the present value of said
securities.
The Company anticipates that it will be able to raise the needed funds
for operations from one or more of the aforementioned sources. However, if the
Company is not able to raise the needed capital it will be required to curtail
and possibly discontinue operations. There is no assurance that the Company will
be able to continue to operate if additional capital is not obtained.
Furthermore, if the Company is required to curtail its operations this could
have a serious negative impact on its ability to proceed with its business plan
and to commercialize and/or develop existing technologies and products or to
identify and acquire new technologies.
4
<PAGE>
Year 2000 Issues
- ----------------
The Company took such steps as it believed to be appropriate to prevent
any problems in its computer-dependent systems concerning problems associated
with the Year 2000 issues. To date, the Company has not experienced any problems
with its systems nor have any of its suppliers, companies owning technologies in
which it has an interest, or other parties with which it deals, experienced any
significant problems which have effected the Company. The Company does not
anticipate any significant problems concerning this issue to occur in the
future. However, the Company will continue to monitor this issue as it may
effect the Company's operations and will take whatever steps are appropriate if
any issues do arise.
PART II- OTHER INFORMATION
Item 1. Legal Proceedings.
There are no legal proceedings against the Company and the Company is
unaware of any such proceedings contemplated against it.
Item 2. Changes in Securities.
On January 7, 2000 a consultant, who had been issued options to
purchase shares of the common stock of the Company in consideration for services
performed, exercised options to purchase 30,000 shares of the Company's common
stock at $0.50 per share.
On January 14, 2000, pursuant to a Plan and Agreement of
Reorganization, the Company acquired all of the outstanding shares of common
stock of Aberdeen Acquisition Corporation, a Delaware corporation, from the
shareholders thereof, in exchange for cash of $150,000, plus 400,000 shares of
common stock of the Company valued at $500,000.
Both of the above transactions were exempt from registration pursuant
to the provisions of Section 4(2) of the Securities Act of 1933 as not involving
any public offering. The shares issued thereunder are restricted and cannot be
transferred except in accordance with the rules and regulations of the
Securities and Exchange Commission including, but not limited to, Rule 144 of
the Securities Act of 1933.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submissions of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
None.
5
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit
Number Exhibit
------ -------
2.1. Agreement and Plan of Reorganization between
Kurchatov Research Holdings, Ltd. and Aberdeen
Acquisition Corporation, dated December 24, 1999.
(1).
3.1. Articles of Incorporation of registrant as
amended. (2).
3.2. By-laws of registrant. (2).
4.1. Specimen certificate of registrant's common stock.
(2).
4.2. Specimen Warrant Certificate issued in connection
with an offering of Debentures. (2).
10.1. Agreement with Eurotech, Ltd. to Acquire
Resealable Can Technology. (2).
10.2. Flexitech, Ltd. Acquisition Agreement. (2).
10.3. Pirocat, Ltd. Acquisition Agreement. (2).
10.4. Agreement with the Holder of All Outstanding
Equity of Cetoni Umwelttechnologies-Entwicklungs.
(2).
10.5. Agreement with Eurotech, Ltd. Relating to Silicon
(EKOR) Compound. (2).
10.6. Lease Agreement for Office Space in Berlin,
Germany. (2).
21. List of Subsidiaries.
27. Financial Data Schedule.
(1) Filed as the same numbered Exhibit to registrant's Form 8-K dated
January 14, 2000.
(2) Filed as the same numbered Exhibit to registrant's Amendment No. 1 to
Form 8-K filed May 15, 2000.
(b) Reports on Form 8-K. A report on Form 8-K dated January 14, 2000
was filed by Company under the Company's prior name, Kurchatov Research
Holdings, LTD. under Item 1 and 2 of the Form. The event reported was the
acquisition by Company of all of the outstanding shares of Aberdeen Acquisition
Corporation. No financial statements were filed with the report. Amendment No. 1
to the Form 8-K filed May 15, 2000 was filed by the Company under its present
name Advanced Technology Industries, Inc. This report contained the audited
consolidated balance sheet of the Company as of December 31, 1999 and the
related consolidated statements of operations, stockholders' equity
(deficiency), and cash flows for the years ended December 31, 1998 and 1999 and
the period from inception (October 25, 1995) to December 31, 1999.
6
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ADVANCED TECHNOLOGY INDUSTRIES, INC.,
Registrant
Dated: May 22, 2000 By: /S/ Hans Joachim Skrobanek
--------------------------------
Hans Joachim Skrobanek
President
Dated: May 22, 2000 By: /S/ James Samuelsom
--------------------------------
James Samuelson,
Chief Financial Officer
7
<TABLE>
Exhibit 21- List of Subsidiaries
<CAPTION>
Name State (Country) of Incorporation Business Name
- ---- -------------------------------- -------------
<S> <C> <C>
Aberdeen Acquisition Aberdeen Acquisition
Corporation Delaware Corporation
Cetoni Unwelttechnologie-
Entwicklungs GmbH Germany Cetoni
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ADVANCED
TECHNOLOGY INDUSTRIES, INC. AS OF MARCH 31, 2000 AND STATEMENT OF OPERATIONS FOR
THE THREE MONTHS ENDED MARCH 31, 2000, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 43,485
<SECURITIES> 10,455,000
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 10,515,017
<PP&E> 149,259
<DEPRECIATION> 89,321
<TOTAL-ASSETS> 10,574,955
<CURRENT-LIABILITIES> 5,942,444
<BONDS> 0
0
0
<COMMON> 1,871
<OTHER-SE> 4,612,669
<TOTAL-LIABILITY-AND-EQUITY> 10,574,955
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 36,388
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,103
<INCOME-PRETAX> (846,864)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (846,864)
<EPS-BASIC> (.06)
<EPS-DILUTED> (.06)
</TABLE>
