UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT FOR THE
TRANSITION PERIOD FROM _________ TO _____________.
COMMISSION FILE NUMBER: 000-31171
ADVANCED PRECISION TECHNOLOGY, INC.
____________________________________________________
(Exact name of small business issuer as specified in its charter)
NEVADA 87-0455378
______________________________ _______________________________
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
2271-D South Vasco Road, Livermore, CA 94550
______________________________________________
(Address of principal executive offices)
(925) 447-6900
________________________________
(Issuer's telephone number)
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
As of November 13, 2000, the issuer had outstanding 54,361,977 shares of
Common Stock, par value $0.001 per share.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
<PAGE>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements.
The unaudited financial statements of Advanced Precision Technology, Inc., a
Nevada corporation (the "Company"), as of September 30, 2000, were prepared
by Management and commence on the following page. In the opinion of
Management, the financial statements fairly present the financial condition of
the Company.
<PAGE> 2
ADVANCED PRECISION TECHNOLOGY, INC.
INDEX TO FINANCIAL STATEMENTS
Balance Sheet
September 30, 2000 F-2
Statement of Operations -
Nine Months Ended September 30, 2000
and 1999 and Cumulative During
Development Stage F-3
Statement of Cash Flows -
Nine Months Ended September 30, 2000
and 1999 and Cumulative During
Development Stage F-4
Note to Financial Statements F-5
F-1
<PAGE> 3
ADVANCED PRECISION TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED BALANCE SHEET
SEPTEMBER 30, 2000
ASSETS
------
CURRENT ASSETS:
Cash $ 1,681,101
Inventory (lower of cost or market) 28,627
Prepaid expenses 6,125
----------------
Total Current Assets 1,715,853
----------------
FIXED ASSETS, AT COST:
Equipment 240,668
Furniture and fixtures 70,134
Leasehold improvements 36,635
----------------
347,437
Accumulated depreciation and amortization 125,367
----------------
222,070
----------------
OTHER ASSETS:
Patents, at cost - net of accumulated
amortization of $284,836 1,074,177
Deposits 3,685
----------------
1,077,862
----------------
$ 3,015,785
================
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 63,645
Notes payable 10,000
Loans payable - stockholder 10,762
----------------
Total Current Liabilities 84,407
----------------
STOCKHOLDERS' EQUITY:
Preferred stock, $100 par value; authorized 25,000,000
shares; 1,250 shares issued and outstanding 125,000
Common stock, $.001 par value; authorized 100,000,000
shares, 54,071,077 issued and outstanding 54,071
Additional paid-in capital 6,541,649
Accumulated deficit - December 31, 1992 (258,205)
Deficit accumulated during development stage (3,531,137)
----------------
2,931,278
----------------
$ 3,015,785
================
F-2
<PAGE> 4
ADVANCED PRECISION TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED STATEMENT OF OPERATIONS
Cumulative
During
9 Months Ended September 30, Development
2000 1999 Stage
------------- -------------- -------------
REVENUES $ 82,478
-------------
EXPENSES:
Cost of goods sold 28,049
Research and development $ 193,700 $ 8,420 1,350,999
Marketing 98,375 41,586 572,219
Administrative 222,444 82,490 909,718
Officer salaries 114,500 90,000 354,500
Depreciation and amortization 67,855 76,886 398,130
------------- -------------- -------------
Total Expenses 696,874 299,382 3,613,615
NET LOSS $ (696,874) $ 299,382 $ (3,613,615)
============= ============== =============
BASIC AND DILUTED LOSS PER SHARE $ (.01) $ (.01)
============= ==============
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 53,910,660 35,974,000
============= ==============
F-3
<PAGE> 5
ADVANCED PRECISION TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED STATEMENT OF CASH FLOWS
Cumulative
During
9 Months Ended September 30, Development
2000 1999 Stage
------------- -------------- ------------
CASH USED IN OPERATIONS:
Net Loss $ (696,874) $ (299,382) $(3,531,137)
Accumulated deficit of
acquired company (258,205)
Depreciation and amortization 85,525 76,886
Increase in inventory (16,289) (4,000) (28,627)
Increase in prepaid expenses (3,525) (6,125)
Increase (decrease) in accounts
payable (105,030) (77,253) 63,645
Increase (decrease) in accrued
expenses (11,932) 7,406
Increase (decrease) in due
stockholder (87,993) 67,705 10,762
------------- -------------- ------------
Net cash used in operations (836,118) (228,638) (3,339,484)
CASH USED IN INVESTING ACTIVITIES:
Investment in patents (111,611) (37,000) (1,359,013)
Investment in fixed assets (218,322) (208) (347,437)
Deposit (3,605) (3,685)
------------- -------------- ------------
Net cash used in investing
activities (333,618) (37,208) (1,710,135)
CASH PROVIDED BY FINANCING ACTIVITIES:
Sale of preferred and common stock 2,965,466 205,002 6,720,720
Contributed capital
Notes payable (185,000) 76,000 10,000
------------- -------------- ------------
Net cash provided by financial
activities 2,780,466 281,002 6,720,720
------------- -------------- ------------
INCREASE IN CASH AND EQUIVALENTS 1,610,730 15,156 1,681,101
CASH AND EQUIVALENTS BEGINNING
OF PERIOD 70,371 3,254
CASH AND EQUIVALENTS END OF PERIOD $ 1,681,101 $ 18,410 $ 1,681,101
============= ============== ============
F-4
<PAGE> 6
ADVANCED PRECISION TECHNOLOGY, INC.
(A DEVELOPMENT COMPANY)
NOTE TO FINANCIAL STATEMENTS
Note 1. In the opinion of the management of Advanced Precision Technology,
Inc., the unaudited financial statements of Advanced Precision Technology,
Inc., for the interim periods shown include all adjustments, consisting only
of normal recurring accruals, necessary for a fair presentation of the
financial position at September 30, 2000, and the results of operations and
cash flows for the periods then ended. The results of operations for the
interim periods shown may not be indicative of the results that may be
expected for the fiscal year.
Note 2. During the year 2000, the Company issued 12,568,930 shares of its
common stock for $2,371,666 of cash, to pay off loans of $379,000 and loan
fees of $50,400, the cost of patents of $109,500 and consulting services of
$54,900.
F-5
<PAGE> 7
Item 2. Management's Discussion and Analysis or Plan of Operation.
Plan of Operation.
Over the next 12 months, the Company plans to enter the identity
verification market through manufacturing and directly distributing the
Company's high quality fingerprint capture product to established vendors
selling fingerprint capture to major government agencies and other large-scale
identification programs. In support of this strategic plan, the Company has
developed ongoing relationships by demonstrating in person and providing
product to test, with leading industry experts, integrators, end users and
consultants. Over the past 24 months, the Company has expended approximately
$500,000 on research and development.
The Company has established new corporate offices and is in the process
of establishing production capabilities in a 5,000 square foot facility it has
leased in Livermore, California. The Company has an option on an additional
5,000 square feet for expansion that will run coterminius with its existing
3-year lease. The Company believes that its location, access to trained
scientific and manufacturing personnel, and proximity to affordable housing
will assist in achieving the Company's business plan.
The Company has and will continue to invest significant capital
expenditures in equipment, internal systems, and personnel to meet these
anticipated demands. The Company is setting up clean room facilities with
extensive optical equipment including lasers, optical tables, and film
processing workstations for the manufacture of the HOE's. The Company is
installing computer networks, desks, phone systems, and workstations for the
internal operations. The Company is setting up manufacturing cells with
fixtures, tools and related equipment and ordering parts for an initial 2000
unit build. The Company is hiring a Chief Financial Officer, Office Manager,
Production Manager, Holographers, Quality Control Specialists and Assemblers
to build the team to assist in achieving the Company's business plan.
Major Markets of Interest
-------------------------
The Company is currently seeking or intends to seek sales contracts to
the following general categories of potential customers and applications: (1)
Law Enforcement Agencies, including the FBI, state, county and municipal
jurisdictions; (2) Civil Markets, including United States Immigration,
passport, military, state driver
<PAGE> 8
licenses, welfare fraud deterrence and benefit entitlement; (3) Commercial
Markets, including access control of physical sites, access control of
computers and databases, and security in support of card based financial
systems; and (4) International Markets, including countries with national ID
programs, border control, voter registration, social benefits, and national
health.
Market Entry Strategy
----------------------
Over the next 12 months, the Company's plan includes establishing
strategic partnerships with established vendors including Value Added
Resellers/Distributors (VARs), Original Equipment Manufacturers (OEMs), and
System Integrators (SIs). Relationships with VARs would include nonexclusive
arrangements for target markets of interest wherein selected channel partners
have established relationships with large potential segments or higher margin
"niche" markets. Relationships with OEMs would involve ATMs, point of sale,
time clocks, transit turnstiles, access control, and healthcare information
system vendors. SIs would include large scale system providers such as IBM,
EDS, NEC, Unisys and similar companies.
The Company developed its APrinT HoloPass" fingerprint capture devices,
which utilize high image quality by design and multi-channel distribution
system based upon the marketing experience and insights gained from over five
years of industry participation and internal market research. The Company's
products have been engineered to provide high quality, consistent images, and
to achieve compliance with the strictest government and industry standards at
relatively low cost. Government standards include "FBI IQS EFTS" and
"ANSI/NIST".
By licensing and/or marketing under non-exclusive strategic agreements
with major corporations that are serving diverse target market segments, the
Company expects to reduce the higher business risks associated with
over-dependence on a single industry, or a single large customer, or a
specific geographic region. In addition, the Company plans to work with
established security vendors in the access control/physical security
application markets in an effort to better access major corporations,
colleges, airports, hospitals, laboratories, government facilities, and
computer networks.
These strategic relationships will not only provide the Company with
distribution outlets and generate demand for the Company's product, but will
also allow the Company to integrate software, hardware, and services provided
by the Company into its offerings to others, possible creating additional
opportunities for revenues and profits.
The Company is continuing to ship no charge test units to major
fingerprint software algorithm vendors, integrators, and vendors with existing
government contracts. The Company is doing extensive travel to meet with
major federal agencies, participate in major trade events and standards
committees, and discuss potential distribution arrangements for the soon to be
built units. The Company is seeking purchase orders for delivery starting in
the first quarter of 2001.
<PAGE> 9
The Company believes this strategy will complement the Company's product
marketing efforts with end users and system integrators for large scale
fingerprint capture/verification applications such as law enforcement,
military ID, driver licenses, passports, voter registration programs, computer
security/commerce and proposed electronic benefits transfer programs by state
and federal agencies.
The Company has integrated its proprietary fingerprint capture devices
with complementary software for enrollment and verification. Separately, it
also developed proprietary technology for transfer of captured fingerprints
into "smart" cards, for subsequent verification of the user's fingerprint at
the time the "smart" card is used. By meeting high government standards and by
initially focusing on market segments that are currently purchasing
fingerprint identity verification products, the Company expects to
conclusively establish its technology as one of the standards for the
industry.
The Company's primary focus is existing government, industrial, and
commercial market segments requiring rapid, high-quality fingerprint
enrollment and identity verification in one-to-one and one-to-many
applications. One-to-one applications include security access systems that
use an individual's unique fingerprint pattern to enter restricted access
locations, to access a specific computer or data, or "smart cards".
One-to-many applications include fingerprint identity verification database
comparisons for corporate employees, military personnel, suspected criminals,
prospective handgun purchasers, recipients of government welfare or
entitlement benefits, state licensed drivers, and foreign countries'
fingerprint identification programs.
The Company's marketing strategy consists of market penetration through
price performance leadership. The Company anticipates that it will be selling
direct or through current market suppliers, system integrators, value-added
resellers, and international agents. The Company intends to support its
marketing strategy with quality collateral material, targeted advertising, and
publicity campaigns.
The Company is establishing its corporate office and production
facility to meet the anticipated demands of these marketing efforts. The
Company is investing over $150,000 in capital equipment and facilities to
enable this effort. The Company intends to significantly increase the number
of its employees by adding quality personnel in the areas of operations,
assembly, testing, engineering, and administration.
The Company plans to do additional research and development into
improving and reducing the cost of all key components in the HoloPass device.
Additional projects are planned to add digital output, internal logic, and
wireless operations to the HoloPass product.
The Company anticipates that its current funding will last for 12
months, and hopes to be operating profitably by the end of such 12 month
period. The Company has placed funds into relative term certificates of
deposit and secured lines of credit.
<PAGE> 10
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Change in Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Securities Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
None.
<PAGE> 11
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Dated: November 13, 2000 ADVANCED PRECISION TECHNOLOGY, INC.
/S/ BRUCE A. PASTORIUS
By:__________________________________
BRUCE A. PASTORIUS
Chairman, Chief Executive Officer
and President
/S/ JAMES D. HOMER
By:__________________________________
JAMES D. HOMER
Secretary and Director
