UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF
SECURITIES OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of The Securities Exchange Act of 1934
ADVANCED PRECISION TECHNOLOGY, INC.
___________________________________________________________________
(Name of Small Business Issuer in its charter)
NEVADA
_________________________________
(State or other jurisdiction of incorporation or organization)
87-0455378
_______________________________________
I.R.S. Employer Identification Number
2271-D South Vasco Road, Livermore, CA 94550
______________________________________________
(Address of principal executive offices)
(925) 447-6900
______________________________________________
(Issuer's Telephone Number, Including Area Code)
Securities to be registered pursuant to Section 12(b) of the Act.
None
Securities to be registered pursuant to Section 12(g) of the Act.
Common Stock, par value $0.001 per share
__________________________________________
(Title of Class)
__________________________________________
(Title of Class)
<PAGE> 1
Part I
Item 1. Description of Business.
Company Overview
----------------
Advanced Precision Technology, Inc. (formerly UV Color Corporation), a
Nevada corporation (the "Company"), is a San Francisco area developer of
innovative identity verification systems using biometrics. "Biometric" is
defined in Webster's Dictionary as "the statistical measurement and analysis
of biological observations and phenomena." A more technically accurate
definition is: any automated technique of measuring a physical characteristic
or personal trait of an individual and comparing that characteristic to a
database of one or many records in order to recognize the identity of that
individual. Even more simply stated, biometrics is the use of some part of
the human body (such as a fingerprint) as a unique "password" to achieve
identity verification.
The Company holds a total of six United States Patents covering various
aspects of its cutting edge technology and has two United States Patent
applications pending. The Company's business plan calls for the Company to
produce cost-effective, reliable fingerprint identity verification solutions.
Biometric Industry Overview
---------------------------
The analysis of unique biological characteristics of an individual, also
known as biometrics, is being used increasingly for identification and
verification purposes. Examples of unique biological characteristics that can
be used to identify an individual include fingerprints, retinal blood vessel
or iris patterns of the eye, hand geometry, voice and facial structure. Among
these, fingerprint analysis has gained the most widespread use for biometric
identification and verification purposes. Fingerprint analysis is an accurate
and reliable method to distinguish one individual from another, employs
well-developed and proven technology and processes and is viewed as less
intrusive relative to certain other biometric identification methods. The
process of capturing, storing, retrieving and comparing fingerprints has
become increasingly automated as a result of advances in optics, electronics
and computing. These advances have enabled fingerprint verification
technology to be used to confirm an individual's identity for a variety of
commercial and governmental applications.
Biometric Security
------------------
The costs of fraud are estimated to be in the billions of dollars each
year in the United States alone. In addition, damages resulting from security
breaches, such as unauthorized persons gaining improper access to confidential
information, may not be quantifiable, but can be equally as problematic.
Accordingly, the ability to verify the identity of a specific individual is of
critical importance in reducing acts of fraud and increasing security. Each
day an individual is required to identify himself numerous times with
something the individual has in his possession or with the knowledge of
<PAGE> 2
certain information, such as: magnetic stripe cards and PINs to transact
business at ATMs or point-of-sale terminals; passwords to log-on to a computer
or a computer network; keys, cards or passwords to enter the workplace; PINs,
passwords and account numbers to complete a commercial transaction on-line;
credit cards to make a credit purchase; time cards to begin work; and a
driver's license to write a check or transact business at a bank.
However, these common verification methods generally cannot provide
positive identification. Keys, credit cards, ATM cards and card keys can be
lost or stolen. Passwords, account numbers or other information used for
identity verification can be divulged to or intercepted by unauthorized users
through electronic means and otherwise. In the workplace, time-and-attendance
information can be improperly altered by an employee punching a time card for
a tardy or absent co-worker. The analysis of unique biological characteristics
offers a more accurate method of verifying an individual's identity.
Over the last decade, technological advances, including significant
advances in two-dimensional imagers, high performance microprocessors and
computer memory, have enabled the commercial development of equipment to read,
record and analyze unique biological data. Potential applications of biometric
identification and verification systems span a broad range and include
computer database and network access and security, computer software, intranet
and Internet security, electronic commerce, communications devices,
point-of-sale terminals, bank transaction authorization, facility access and
security, ATMs, time-and-attendance, home security and automobiles.
However, implementation of biometric equipment for these diverse
applications may require network management software, customer-specific
applications software and interfaces that allow integration with the
customer's existing computer systems to provide complete biometric solutions.
Biometric Imaging Fingerprint images have emerged as an important means of
identification and verification in both government and civilian markets. In
law enforcement in particular, fingerprint identification is widely utilized
and has been accepted by courts around the world.
Historically, fingerprints have been collected using the traditional
"ink-and-roll" process. Typically, this process starts at the local law
enforcement agency where usually three or more complete sets of ink-and-roll
prints are taken, one for the local agency, one for the state and one for the
Federal Bureau of Investigation ("FBI"). The FBI reports that it currently
receives over 34,000 fingerprint cards each work day. The fingerprint is then
compared at the local agency, state and/or FBI with a database of fingerprints
by means of an Automated Fingerprint Identification Systems("AFIS"), a
computer system developed in the 1970s which uses minutiae-based recognition
algorithms which detect fingerprint characteristics to accomplish fingerprint
matching. Before the AFIS can make the comparison, an ink-and-roll card is
run through a scanner that creates a digital image of the fingerprint. The
AFIS then compares the digital image with an existing database of fingerprints
to identify an individual if that individual's fingerprint is in the database
and, at the same time, updates the database with that fingerprint image.
<PAGE> 3
While the advent of computerized AFIS systems significantly improved the
ability to compare fingerprints against large databases of fingerprints, the
manual process of collecting and mailing ink-and-roll cards to the agency that
maintains the AFIS and scanning the fingerprint image into the AFIS has led to
significant bottlenecks. In addition, the fingerprinting process can be
complicated by a lack of cooperation of the person being fingerprinted, the
need to take multiple sets of prints and operator error. Various agencies have
reported that in excess of 30% of such cards are rejected because prints are
smudged or applied incorrectly. If the FBI or state agency rejects the card,
the local agency is often required to locate the individual, if possible, and
have another set of fingerprints taken. As a result, the time between taking
a set of fingerprints and receiving the results of the search may take several
days, several weeks or longer.
Live-scan biometric imaging systems, which electronically capture and
digitize an image of the fingerprint directly from a person's finger, were
developed to replace the manual ink-and-roll process. The digitized
fingerprint image captured by the live-scan system can then be compared with a
database of stored fingerprint images by an AFIS. If a state or federal agency
can receive electronic fingerprint cards, then the image can be electronically
relayed to that agency for comparison and the results can be returned to the
local agency within minutes or hours. In addition, because the fingerprint
images are captured electronically, multiple cards can be printed from one set
of images, eliminating the need to roll the fingerprint numerous times.
Live-scan systems also generally have quality assurance features that help
reduce the chance of operator error during the fingerprinting process.
A number of domestic and certain international law enforcement
communities are in the process of converting from manual ink-and-roll
fingerprint capture to live-scan fingerprint capture. In the United States,
the FBI has undertaken a major program to upgrade its Identification Division
and in July 1999 announced that it has officially activated its new
identification facility in West Virginia to receive a majority of fingerprint
submissions electronically. This announcement by the FBI, coupled with
increased automation at the federal and state levels, has prompted other
federal, state and local agencies to adopt live-scan systems as their primary
method for conducting background and identification checks. Other federal
agencies, including immigration and Naturalization Service ("INS"), Internal
Revenue Service, U.S. Drug Enforcement Agency, U.S. Marshals Service and the
U.S. Secret Service use live-scan systems to perform identification and
background checks.
The ability to capture a forensic quality fingerprint image
electronically and compare that fingerprint with a database of fingerprint
images also has important civilian (non-law enforcement) applications, such as
conducting employee background checks (for jobs in federal or state
government, banking, airport, child care, stock brokers and other securities
professionals or gaming) or screening potential foster parents. Millions of
fingerprint cards are taken each year in the United States for civilian
purposes. Traditionally, local police stations have performed this service,
with completed fingerprint cards submitted to state authorities or the FBI to
perform a background
<PAGE> 4
investigation. This process usually takes several weeks to complete. In
addition, if an ink-and-roll fingerprint card is rejected, an applicant must
go through the process again, which can delay further an applicant's start
date. In some cases, employers or agencies find themselves with such a
backlog of applicants awaiting fingerprinting or results of the background
check that they allow applicants to start the job without the background check
being complete, placing the employer at risk if an applicant has a criminal
record. The need for reliable and convenient fingerprint capture in a non-law
enforcement environment and the need to streamline the background checking
process have created a demand for live-scan products and fingerprinting
services.
The Company's Position
----------------------
In the mid-1990's, the Company worked with leading experts at San Jose
State University, Department of Modern Optics, to establish proof of concept
for its holographic fingerprint identity verification technology and also
developed its fingerprint capture technology. In 1997, the Company
established its own facility for design, pre-production and replication of
holographic optical elements (HOE's) and for long-term holographic technology
research and development.
In 1997 and 1998, the Company also worked with SRI International
(formerly known as Stanford Research Institute) of Menlo Park, CA, for
advanced development of APT's proprietary holographic fingerprint verification
and capture devices. SRI International assembled a highly-qualified team of
product design, mechanical, electrical, and optical engineers who collaborated
with the Company's technical team and in 1998 and 1999 the Company completed
development of engineering prototypes for sub-contractor manufacture of the
Company's APrinT" and APrinT" HoloPass" Multi-Function Fingerprint
Capture/Verification Devices. The Company is now preparing for mass production
of these fingerprint identity verification products.
The Company is currently bringing to market its AprinT HoloPass, a high
quality, interoperable multi-function fingerprint capture/verification device.
This device looks similar to a 35 millimeter camera. This device is designed
to be plug compatible to Identix's Touchview II, Identicator's DFR-90, and
CrossMatch's Verifier 200. This compatibility allows a user of a competing
system to replace it with the Company's device, which functions with fewer
errors, and is more cost effective.
The Company raised $2,365,000 of investment capital in the second
quarter of 2000. This capital will allow the Company the opportunity to
execute its business plan.
The Company plans to integrate its devices into large federal and state
law enforcement and civil projects, as well as commercial applications such as
banking and finance and computer security, in conjunction with personal
identification, photo-ID cards and access control. The Company has
demonstrated the successful implementation of fingerprints as unique "PIN"
codes to protect smart cards at major trade conferences.
<PAGE> 5
The identity verification marketplace is rapidly emerging. The Company
believes that because the Company has spent the last six years developing
innovative solutions that will be more reliable and available at a lower cost
than solutions provided by the Company's competitors, the Company will have a
significant strategic advantage in relation to its major competitors. See
"Risk Factors Competition".
Patents
-------
The Company holds six United States Patents and has two United States
Patent Applications Pending. The Company's six United States Patents are
described below.
U.S. Patent No. 6,002,499 granted December 14, 1999 for Realtime
Fingerprint Sensor and Verification System. This patent offers a laser-based
optical correlation technology to verify fingerprints with those stored as a
hologram within the "matched filter" system. The Company also has two
divisional patent applications pending for "Jitter" system, and "Matched
Filter" system.
U.S. Patent No. 6,038,043 granted March 14, 2000 for Method for
Recording a Holographic Optical Element. This process patent covers the
method for making the holographic optical element ("HOE").
U.S. Patent No. 5,892,599 granted April 6, 1999 for Miniature
Fingerprint Sensor Using a Trapezoidal Prism and a Holographic Optical
Element. This patent uses an HOE to converge the output, thereby shortening
the focal length and allowing significant dimensional miniaturization of the
fingerprint capture device.
U.S. Patent No. 5,629,764 granted May 13, 1997 for Prism Fingerprint
Sensor Using a Holographic Optical Element. This patent uses a HOE to
eliminate optical distortion in "live" fingerprint capture technology.
U.S. Patent No. 5,095,194 granted March 10, 1992 for Holographic Credit
Card with Automatical Authentication and Approval. This patent offers a
laser-based technology to verify fingerprints with those stored as a hologram
on a credit card.
U.S. Patent No. 5,138,468 granted August 11, 1992 for Keyless
Holographic Lock. This patent offers a laser-based technology to verify
fingerprints with those stored as a hologram in a computer mouse or comparable
device.
Risk Factors
-------------
Lack of Operating History
--------------------------
The Company has no history of operations, making it difficult to assess
the Company's future operating performance or future financial results or
condition.
<PAGE>
Unpredictability of Biometric Identity Verification Industry
-------------------------------------------------------------
The Company's success will depend on the growth of the Biometric
Identity Verification Industry. Without the acceptance of the public and
vendors, the Company may be unable to achieve and sustain profitability. The
Biometric Identity Verification Industry is a new and rapidly evolving
industry whose demand and market acceptance has yet come to full fruition.
Biometric products have not gained widespread commercial acceptance. The
Company's business will most likely not grow unless the market for biometric
products expands both domestically and internationally.
Key Personnel
-------------
The Company's success depends on its executive officers and their
staying with the Company or, in the event they do not, retaining replacement
personnel with the commensurate experience and acumen. The loss of services
of the Company's executive officers could adversely affect the Company. In
addition, as the Company grows, it will need to attract additional key
personnel to sustain growth. There is no assurance that the Company will be
able to attract sufficiently qualified personnel to fulfill the Company's plan
of operation. The inability of the Company to attract qualified personnel
could adversely affect the Company.
Competition
-----------
There are currently four major competing firms in the post research and
development manufacturing stage that offer "open system", single digit
scanners in the market. One of these four firms, Identix, Inc., controls
approximately 85% of the market. There can be no assurance that the Company
will be able to capture any significant portion of such market share. In
addition, the biometrics market is in its very early stages and growing
rapidly. There can therefor also be no assurance that new competitors will
not enter the market or that such new competitors will not have superior
technology to that of the Company. Biometric security products also compete
with non-biometric technologies such as traditional key, card, surveillance
systems and passwords.
Uncertainty Over the Company's Ability to Guard its Proprietary Rights
---------------------------------------------------------------------
Although the key components and systems of the Company's devices are
protected by patents, there can be no assurance that others will not infringe
on those rights. The Company currently has limited resources and, therefore,
may not be able to adequately protect its intellectual property rights from
commercial piracy, both in the United States and internationally.
Technological Changes
----------------------
The Biometric Identity Verification Industry is a highly technical field
with numerous and frequent changes taking place at a rapid pace. The Company
is attempting to keep in step with such changes. However, the Company's
business may be adversely
<PAGE> 7
affected by its competitors' development of enhanced or improved technology.
The Company may lack sufficient financial resources to undertake the revamping
of its existing technology and equipment to stay in competition with others.
Privacy Issues
--------------
Certain groups have publicly objected to the use of biometric products
for some applications on civil liberties grounds. Legislation has bee
proposed to regulate the use of biometric security products. In the event
that legislation is passed prohibiting or restricting certain uses of
biometrics, such legislation could have a material adverse effect on the
Company's business.
Timing of Orders
-----------------
The Company's revenues and operating results will likely vary
significantly from quarter to quarter. Most of the Company's revenues will
most likely be derived from a relatively small number of large orders.
Accordingly, revenues in a particular quarter will depend on the timing and
size of major orders.
Sales Cycle
-----------
Products in the biometric industry often have a lengthy sales cycle
while potential customers evaluate and receive approvals for purchase. The
Company could suffer a severe negative impact if the Company fails to receive
an order for a product after expending significant funds and effort in an
attempt to secure an order. If the Company fails to ship one or more large
orders as forecasted for a fiscal quarter, the Company's total revenues and
operating results for that quarter could be materially and adversely affected.
Lead - Time
-----------
The lead-time for ordering parts and materials and building the
Company's products can be several months. If demand for the Company's
products lags significantly behind what the Company has anticipated or
forecasted, the Company may produce more products than it can sell, which
could result in cash flow problems and write-offs or write-downs of obsolete
inventory.
Government and Public Agency Contracts
--------------------------------------
The Company anticipates deriving substantial revenue from government
contracts, which are often non-standard, involve competitive bidding and may
be subject to cancellation without penalty. Government contracts frequently
include provisions that are not standard in private commercial transactions,
including bonding requirements. Public agency contracts are frequently
awarded only after formal competitive bidding processes, which have been and
may continue to be protracted, and typically impose provisions that permit
cancellation in the event that funds are unavailable to the public
<PAGE> 8
agency. In addition, local government agency contracts may be contingent upon
availability of matching funds from state or federal entities. Revenues
generated from government contracts are subject to audit and subsequent
adjustment by negotiation with representatives of the government agencies.
Suppliers
---------
The Company obtains certain components and complete products from a
limited group of suppliers. The Company does not have long-term agreements
with any suppliers. Any delays resulting from suppliers failing to deliver
components on a timely basis in sufficient quantities and of sufficient
quality or any significant increase in the price of components from existing
or alternative suppliers could have a material adverse effect on the Company's
business.
International
-------------
The Company's growth will be dependent to some extent on the Company's
ability to make international sales. There are certain risks inherent in
international commerce including regional economic conditions; export
restrictions; fluctuations in foreign currencies and the United States dollar;
loss of revenue, property and equipment from expropriation, nationalization,
war, insurrection, terrorism and other political risks; the overlap of
different tax structures; seasonal reductions in business activity; risks of
increases in taxes and other government fees; involuntary renegotiation of
contracts with foreign governments.
Performance Failure
-------------------
The Company's products are complex and may contain undetected or
unresolved defects when sold or may not meet customer's performance criteria.
Performance failure may cause loss of market share, delay in or loss of market
acceptance, additional warranty expense or product recall. The negative
effects of any failure could result in a material adverse effect on the
Company's business.
History of the Company
----------------------
The Company was organized as a Nevada corporation as "Global
Technology, Ltd." in 1985. In 1988 the Company changed its name to "Advanced
Precision Technology, Ltd." and merged with "Ximberley Corp.", a Utah
corporation. Neither the Company nor Ximberley Corp. had engaged in any
business prior to this merger. In 1989 and 1990, the Company was engaged in
the business of environmental underground testing, which it abandoned after
1990.
In November 1992 the Company acquired UV Color Corporation, a Minnesota
corporation, as a wholly owned subsidiary. Pursuant to this acquisition, the
Company issued 2,200,000 shares of its common stock in exchange for all of the
issued and
<PAGE> 9
outstanding shares of UV Color Corporation. The Company then changed its name
to "UV Color Corporation."
In January 1993 the acquisition of UV Color Corporation was rescinded by
mutual agreement. In June 1994 the Company filed a Certificate of Amendment
to its Amended and Restated Articles of Incorporation changing the Company's
name back to Advanced Precision Technology, Inc.
The origins of the Company's fingerprint identity verification business
began in June 1993, when Bruce A. Pastorius and Dr. Joseph Barbanell founded
Holographics, Inc., a Nevada corporation. On June 17, 1994, the Company
effected a one-for-four reverse split of its Common Stock and subsequently
issued 16,000,000 shares of Common Stock to acquire all of the issued and
outstanding shares of Holographics, Inc.
Item 2. Plan of Operation.
The Company plans to produce and market superior Real Time Fingerprint
Recognition solutions for the Personalized Identification and Secured
Verification system markets. These markets rely on machine readable cards and
card reader devices. With increasing demand and technological advances in
Smart Card and Optical Memory technologies, the market for machine readable
cards and card reader devices is in a period of revolution. The Company is
uniquely positioned to capture market share with patented Holographic Image
Processing technology that provides significantly better reliability than
available competitive solutions, with lower manufacturing and operational
costs.
Many companies have attempted to obtain reliable personal
identification, credit card user validation, and access control with
signatures, PIN codes, Photo-Ids, and encrypted magnetic stripes. These have
so far proved only partially effective, as demonstrated by massive losses by
credit card companies and others from fraud and theft.
Over the last 20 years, several biometric (physical characteristics
unique to an individual, e.g. fingerprint, retina) solutions have come
forward, but as of yet have not produced the high reliability and low unit
cost the market demands. The Company's patented biometric fingerprint
technology compares a real-time scan of an individual's actual fingerprint to
a fingerprint previously stored in their personal card. This innovative
solution provides highly reliable verification of an individual's identity and
at a very competitive price. The Company provides the ultimate solution to
the demands of the Personalized Access and Secured Verification system
markets.
The universe of personal ID and secured verification markets is
estimated to be $5 billion/year. Industry reports estimate that the 1997
worldwide market for machine-readable plastic cards was approximately $1.5
billion, and the market for card reader devices was approximately $500 million
in 1997. Dreifus Associates, Ltd., projects that the number of
machine-readable cards will increase from 3 billion cards in 1995 to 6 billion
cards in the year 2000, and to 10 billion cards by 2010. The high end of this
market will serve the emerging widespread use of "smart" cards for banking,
access,
<PAGE> 10
government ID, passport and other personal/business services. In a related
market, the growth of access approval devices is expected to increase from 3
million in 1995 to 30 million devices by the year 2000, and to 100 million by
2010.
The single-digit (one-finger) fingerprint capture device market is
currently estimated by industry sources to be $50 million, constituting only
5% of the potential market. The single-digit fingerprint capture device
industry is expected to have annual growth rates of 50% or more for each of
the next several years because: government-mandated law enforcement,
immigration, National ID, health, voter registration, passport, and border
control applications; the proliferation of "smart" cards for loyalty,
financial services, and "stored-value" applications; increasing demand for
secured access to government, commercial and industrial facilities and
computer networks; and other market drivers.
Primary market research has revealed significant interest in the
Company's technology. Discussions are underway with principals and
integrators for secured access control; national health programs in Germany,
China, Canada and the United States; electronic benefit transfer programs for
government payments of Welfare, AFDC and Social Security; national
ID/Passport/border programs from around the world; access authorization
programs for the Internet and telephones; and electronic fund transfer
approval systems.
For several years the Company's management has participated in major
industry trade shows and has developed ongoing relationships with leading
industry experts, integrators, and consultants. The Company developed its
APrinT HoloPass" fingerprint capture devices, which utilize a modular design
and multi-channel distribution system, based upon the marketing experience and
insights gained from this industry participation. The Company has completed
extensive beta testing and is now ready for product manufacture. These two
unique fingerprint identity verification devices are expected to be the first
to market of the Company's growing family of holographic single-digit
fingerprint scanning devices.
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, it 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. The company also plans for near-term entry into the significant
emerging markets for health, welfare, and other social benefit entitlement
programs; also, Point-of-Sale (POS) systems for check cashing, debit, and
credit cards; national ID, passport, and border patrol; access control to
government
<PAGE> 11
and industrial facilities; and the growing Internet, network, computer
security and electronic funds transfer/electronic commerce markets.
The Company's long-range strategy is based upon a commitment to new
product development, "open-system" architecture, modular designs, and scaleable
cell manufacturing.
The Company's marketing strategy consists of market penetration through
price-performance leadership. The Company will be selling direct or through
current market suppliers, system integrators, value-added resellers, and
international agents. The Company will support its marketing strategy with
quality collateral material, targeted advertising, and publicity campaigns.
The most successful biometric vendors have products on the market that
are producing lower reliability than the Company's devices but acceptable
results at a unit cost of $900 to $2500.
In addition to being less costly than competitors' devices, the
Company's devices require no attendant. This obviously reduces operational
costs and can virtually eliminate human error from approval decisions. The
Company's devices can also be battery powered and portable, requiring no
communication lines or computer connections. The Optical Enrollment Process
is customizable and can easily be modified to allow immediate compatibility
with current approval and security systems.
Item 3. Description of Property.
The Company occupies approximately 5,186 square feet of office and
industrial space located at 2271-D South Vasco Road, Livermore, California
94550. The Company pays rent of $3,525 per month. The Company's lease
expires on May 31, 2003.
Item 4. Security Ownership of Certain Beneficial Owners.
The following table sets forth information relating to the beneficial
ownership of the Company's Common Stock by all persons beneficially holding
more than 5% of the Company's Common Stock, by each of the Company's executive
officers and directors, and by all of the Company's executive officers and
directors as a group. The addresses of each of the executive officers and
directors are in care of the Company. All of the persons listed below have
sole investment and voting power unless otherwise noted.
Percentage
Name of Number of of Outstanding
Stockholder Shares Owned Common Stock
------------- ------------- ------------
Bruce A. Pastorius 13,100,000 (1) 24.2%
Chairman, Chief Executive
Officer and President
<PAGE> 12
James D. Homer 485,000 0.9%
Secretary and Director
B. Eugene Waite 10,000 (2) 0.1%
Director
Glenn Fishbine 75,000 0.1%
Director
James P. Roake 1,524,288 (3) 2.8%
Director
All Executive Officers and 15,194,288 28.1%
Directors as a Group
___________________________________________________________________________
(1) Includes 5,285,000 shares held by BAP Technologies, and 100,000 shares
held by Holographics, Inc., each of which is controlled by Mr. Pastorius.
Also includes 1,050,000 shares for which Mr. Pastorius is the custodian
and maintains voting control.
(2) Mr. Waite owns these shares jointly with his wife Dolly.
(3) Mr. Roake owns these shares jointly with his wife Ruth.
Item 5. Directors, Executive Officers, Promoters and Control Persons.
The members of the Board of Directors of the Company serve until the
next annual meeting of stockholders, or until their successors have been duly
elected. The executive officers serve at the pleasure of the Board of
Directors. Information as to the executive officers and directors of the
Company is set forth below.
Name Title
---- -----
Bruce A. Pastorius Chairman, Chief Executive Officer and President
James D. Homer Secretary and Director
B. Eugene Waite Director
Glenn Fishbine Director
James P. Roake Director
Bruce A. Pastorius. Mr. Pastorius has been the Chairman of the Company's
Board of Directors, the Chief Executive Officer and President of the Company
since
<PAGE> 13
1994. Mr. Pastorius has approximately 20 years experience in direct sales,
sales management, product management, and marketing to commercial and
government agencies. From 1993 to 1994, he was the President of Holographic
Credit Card, the assets of which were acquired by the Company in 1994. From
1980 to 1993, he worked for SDI USA, Inc. of San Mateo, California, a producer
of system software for IBM Mainframes in various management positions with
responsibilities for marketing, sales, training, regional and national
accounts. Mr. Pastorius received his Bachelor of Science degree in Business
Administration from the University of Minnesota. Mr. Pastorius is 43 years of
age.
James D. Homer. Mr. Homer is the Secretary and a Director of the
Company. Mr. Homer has worked at the Western Area Channel Operations of IBM
since 1993, where he is responsible for developing the area's Channel Business
Unit, and leading the development, recognition, and quality assurance
functions for value-added resellers. Mr. Homer received his Masters of
Business Administration degree with emphasis in Finance from the University of
Minnesota. Mr. Homer is 42 years of age.
B. Eugene Waite. Mr. Waite is a Director of the Company. Mr. Waite has
served as the Director of Finance for the City of Rio Rancho, New Mexico since
1992. From 1990 to 1992 Mr. Waite worked as a Management Consultant. From
1980 to 1989 he worked for Honeywell Avionics Systems Division as Director of
Contract Management and Director of Finance and Controller. Mr. Waite
received his Bachelor of Science degree in Business Administration from
Duquesne University. Mr. Waite is 69 years of age.
Glenn Fishbine. Mr. Fishbine has been a Director of the Company since
June 2000. Mr. Fishbine has served as the Director of Information Systems for
Lake Region Manufacturing, Inc. since 1998. From 1997 to 1998 he was a Senior
Consultant for Biometric Design, LLC where he developed a manufacturing plan
for holographic camera systems. From 1985 to 1997 he was Senior Vice
President for Digital Biometrics, Inc., a company for which he was a
Co-Founder. Mr. Fishbine received his Bachelor of Arts degree in Political
Science and Economics from the University of New Mexico, and his Masters of
Arts degree in Political Science from the University of Minnesota. Mr.
Fishbine is 48 years of age.
James P. Roake. Mr. Roake has been a Director of the Company since June
2000. Mr. Roake founded Roake Development in 1994, a construction and
development company. In 1976, he founded Roake International, Inc., a small
fast food chain. Mr. Roake remains the active head of both companies. Mr.
Roake received his Bachelor of Science degree in Business Administration from
Portland State University. Mr. Roake is 53 years of age.
Item 6. Executive Compensation.
The Company paid a salary to Bruce A. Pastorius, the Company's Chairman,
Chief Executive Officer and President, of $120,000 per year for each of 1998,
1999 and
<PAGE> 14
through May 2000. In June 2000, Mr. Pastorius' salary was increased to
$150,000 per year. Mr. Pastorius also has the beneficial use of a Company
owned automobile.
The Company currently has no full-time employees other than Mr.
Pastorius. The Company uses sub-contractors to conduct its day to day
operations.
Item 7. Certain Relationships and Related Transactions.
In June 2000, Bruce A. Pastorius, the Company's Chairman, Chief
Executive Officer and President, received a total of 5,265,000 shares of
Common Stock in exchange for the forgiveness of certain loans in the total
amount of $785,000. The notes stem from Mr. Pastorius' acquisition on the
Company's behalf of certain patent rights.
Item 8. Description of Securities
The Company's Articles of Incorporation, as amended, authorize the
issuance of one hundred million shares of Common Stock, par value $0.001 per
share, of which 54,081,977 were issued and outstanding as of June 30, 2000.
Holders of shares of the Company's Common Stock are entitled to one vote for
each share on all matters to be voted on by the stockholders of the Company.
Holders of shares of the Company's Common Stock have no cumulative voting
rights. Holders of shares of the Company's Common Stock are entitled to share
ratably in dividends, if any, as may be declared, from time to time by the
Board of Directors in its discretion, from funds legally available therefor.
In the event of a liquidation, dissolution or winding up of the Company, the
holders of shares of the Company's Common Stock are entitled to share pro rata
all assets remaining after payment in full of all liabilities. Holders of
shares of the Company's Common Stock have no preemptive rights to purchase the
Company's Common Stock. There are no conversion rights or redemption or
sinking fund provisions with respect to the Common Stock. All of the
outstanding shares of the Company's Common Stock are fully paid and
non-assessable.
The Company's Articles of Incorporation, as amended, authorize the
issuance of 25,000,000 shares of Preferred Class A Capital Stock, no par
value. The Company has 1,250 shares of Preferred Stock outstanding. The
outstanding preferred stock is non-voting and pays a 12% cumulative dividend
payable in additional shares of preferred stock. The Company has the right,
in its sole discretion, to redeem the shares of preferred stock at any time at
110% of its face value ($110 per share). Each share of preferred stock is
convertible, at the sole discretion of the holders thereof, into 200 shares of
the Company's Common Stock.
Part II
Item 1. Market Price of and Dividends on the Registrant's Common Equity and
Related Stockholder Matters.
<PAGE> 15
The Company's Common Stock has been traded over-the-counter and quoted
on the OTC NASDAQ Electronic Bulletin Board under the symbol "APRE". The
Company's Common Stock currently trades in the "pink sheets" because the
Company is not a full reporting company under the Securities Exchange Act of
1934, as amended. The following table represents the range of the high and
low bid prices of the Company's Common Stock each calendar quarter of 1998 and
1999 and the first, second and third calendar quarters of 2000, through July
17, 2000. Such quotations represent prices between dealers and may not
include retail markups, markdowns, or commissions and may not necessarily
represent actual transactions.
High Low
1998 ---------- ---------
----
First Quarter $ 1.875 $ 1.125
Second Quarter $ 1.75 $ 0.625
Third Quarter $ 0.6875 $ 0.34375
Fourth Quarter $ 0.50 $ 0.25
1999
----
First Quarter $ 0.50 $ 0.19
Second Quarter $ 0.27 $ 0.18
Third Quarter $ 0.51 $ 0.05
Fourth Quarter $ 0.40 $ 0.15
2000
----
First Quarter $ 1.06 $ 0.25
Second Quarter $ 1.05 $ 0.59
Third Quarter (through July 17, 2000) $ 0.65 $ 0.43
As of June 30, 2000, there were 513 record holders of the Company's
Common Stock.
The Company has not paid any dividends on its Common Stock and does not
intend to do so for the foreseeable future.
Item 2. Legal Proceedings.
The Company is not currently involved in any legal proceedings, the
outcome of which, in the view of the Company's management, would materially
affect the Company's operations.
Item 3. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
<PAGE> 16
Item 4. Recent Sales of Unregistered Securities.
1997
----
During the calendar year ending December 31, 1997, the Company issued
shares of Common Stock and Series A 12% Convertible Callable Preferred Stock
(the "Preferred Stock") as described below. Each issuance was pursuant to
exemptions provided by Sections 3(b) and 4(2) of the Securities Act of 1933,
as amended (the "Securities Act"), and Regulation D promulgated thereunder.
499,000 shares of Common Stock for services rendered on behalf of the Company.
2,450,000 shares of Common Stock as fees and repayment of collateral for loans
to the Company in the amount of $230,000.
400,000 shares of Common Stock at a price of $0.25 per share, with warrants
attached thereto to purchase 600,000 shares of Common Stock at $0.25 per share
expiring on June 30, 1997.
500,000 shares of Common Stock at a price of $0.25 per share.
2,250 shares of Preferred Stock at $100 per share with warrants attached
thereto, none of which were ever exercised.
1998
----
During the calendar year ending December 31, 1998, the Company issued
shares of Common Stock and Preferred Stock as described below. Each issuance
was pursuant to exemptions provided by Sections 3(b) and 4(2) of the
Securities Act and Regulation D promulgated thereunder.
1,864,000 shares of Common Stock for services rendered on behalf of the
Company.
7,440,000 shares of Common Stock as fees and repayment of collateral for loans
to the Company in the amount of $1,077,560.
100 shares of Preferred Stock at $100 per share.
1999
----
During the calendar year ending December 31, 1999, the Company issued
shares of Common Stock as described below. Each issuance was pursuant to
exemptions provided by Sections 3(b) and 4(2) of the Securities Act and
Regulation D promulgated thereunder.
1,740,000 shares of Common Stock for services rendered on behalf of the
Company.
<PAGE> 17
5,477,000 shares of Common Stock as fees and repayment of collateral for loans
to the Company in the amount of $443,023.
250,000 shares of Common Stock in exchange for the waiver of certain patent
rights.
2000
----
From January 1, 2000 to July 17, 2000, the Company issued shares of
Common Stock as described below. Each issuance was pursuant to exemptions
provided by Sections 3(b) and 4(2) of the Securities Act and Regulation D
promulgated thereunder.
7,166,666 shares of Common Stock sold to accredited investors only in a
private placement at $0.33 per share, raising total gross proceeds of
$2,365,000.
1,224,000 shares of Common Stock for services rendered on behalf of the Company.
3,852,000 shares of Common Stock as fees and repayment of collateral for loans
to the Company.
Item 5. Indemnification of Directors and Officers.
The Company indemnifies its officers and directors to the fullest extent
accorded under Nevada law, as set forth in the Nevada Revised Statutes
("NRS"), Sections 78.7502, 78.751 and 78.752, as amended. In accordance with
NRS Section 78.7502, the Company may indemnify its officers and directors
against expenses they incur in connection with any threatened, pending or
completed legal action or proceeding involving Company, whether civil,
criminal, administrative or otherwise, involving such persons in their
capacities as officers and/or directors, so long as they acted in good faith
and in a manner which they reasonably believed to be in the Company's best
interests. In accordance with NRS Section 78-7502(2), the Company does not
indemnify its officers or directors against expenses resulting from suits or
proceedings brought by or to assert a right of the Company in which the
officer and/or director is adjudged liable to the Company, unless a court
determines otherwise.
NRS Section 78.752 allows corporations to purchase and maintain
insurance policies or to make other financial arrangements on behalf of any
current or past officer and/or director for any liability asserted against
him, and any liability or expense incurred, arising out of his status as an
officer and/or director. These financial arrangements may include trust
funds, self-insurance programs, guarantees and insurance policies.
<PAGE> 18
Part F/S
The following financial statements are included herein:
The Company's unaudited financial statements for the six months ended
June 30, 2000 and June 30, 1999
Unaudited balance sheet for the six months ended June 30, 2000 and
1999
Unaudited statement of operations for the six months ended June 30,
2000 and 1999, and cumulative during development stage
Unaudited statement of cash flows for the six months ended June 30,
2000 and 1999, and cumulative during development stage
Unaudited statment of changes in stockholders' equity
Notes to unaudited financial statements for June 30, 2000
The Company's audited financial statements as of December 31, 1999 and
1998
Balance sheet for December 31, 1999 and 1998 (audited)
Statement of operations for the years ended December 31, 1999, 1998
and 1997, and cumulative during development stage (audited)
Statement of changes in stockholders' equity (audited)
Statement of cash flows for the years ended December 31, 1999, 1998
and 1997, and cumulative during development stage (audited)
Notes to financial statements for December 31, 1999 and 1998
<PAGE> 19
ADVANCED PRECISION TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED BALANCE SHEET
6 Months Ended June 30,
2000 1999
------------- -------------
ASSETS
------
CURRENT ASSETS:
CASH $ 2,006,486 $ 23,517
Accounts Receivable - -
Inventory 18,968 11,457
Prepaid Expenses 2,600 -
------------- -------------
TOTAL CURRENT ASSETS 2,028,054 34,974
------------- -------------
FIXED ASSETS:
Leasehold Improvements 10,100 -
Equipment 203,490 126,827
Accumulated Depreciation (115,117) (79,874)
------------- -------------
TOTAL FIXED ASSETS 98,473 46,953
------------- -------------
OTHER ASSETS:
Patents 1,276,513 1,194,469
Accumulated Amortization (264,840) (193,547)
------------- -------------
TOTAL OTHER ASSETS 1,011,673 1,000,922
------------- -------------
TOTAL ASSETS $ 3,138,200 $ 1,082,849
============= =============
LIABILITIES AND
STOCKHOLDERS' EQUITY
--------------------
CURRENT LIABILITIES:
Accounts payable $ 1,190 $ 220,784
Accrued Expenses 11,932 7,526
Loans Payable - stockholder 60,000 344,841
Notes Payable - 20,000
------------- -------------
TOTAL CURRENT LIABILITIES $ 73,122 $ 593,151
------------- -------------
STOCKHOLDERS' EQUITY:
Preferred stock, $100 par value; authorized
25,000,000 shares, issued & outstanding $ 125,000 $ 125,000
Common stock, $.001 par value; authorized
100,000,000 shares issued and outstanding:
2000 - 53,770,660 shares
1999 - 35,659,147 shares 53,770 35,659
Additional paid-in capital 6,449,549 3,088,094
Accumulated deficit - December 31, 1992 (258,205) (258,205)
Deficit accumulated during development stage (3,305,036) (2,500,850)
------------- -------------
TOTAL STOCKHOLDERS' EQUITY 3,065,078 489,698
------------- -------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 3,138,200 $ 1,082,849
============= =============
See accompanying notes.
<PAGE> 20
ADVANCED PRECISION TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED STATEMENT OF OPERATIONS
CUMULATIVE
6 Months Ended June 30, DURING
---------------------------- DEVELOPMENT
2000 1999 STAGE
------------- -------------- -------------
REVENUES: $ - $ - $ 82,478
------------- -------------- -------------
EXPENSES:
Cost of Goods Sold - - 28,049
Research and Development 90,349 6,405 1,247,648
Marketing 76,513 16,077 550,357
Administrative 173,632 30,492 860,906
President's Salary 75,000 60,000 315,000
Depreciation& Amortization 55,279 51,257 385,554
------------- -------------- -------------
TOTAL EXPENSES 470,773 164,231 3,387,514
------------- -------------- -------------
NET LOSS $ (470,773) $ (164,231) $ 3,305,036
============= ============== =============
LOSS PER SHARE $ ( .01) $ (.005)
============= ==============
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 43,288,458 34,165,750
============= ==============
See accompanying notes.
<PAGE> 21
ADVANCED PRECISION TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
CUMULATIVE
6 Months Ended June 30, DURING
---------------------------- DEVELOPMENT
2000 1999 STAGE
------------- -------------- -------------
<S> <C> <C> <C>
CASH PROVIDED (USED IN) OPERATIONS:
Net loss $ (470,773) $ (164,231) $ (3,305,036)
Adjustments to reconcile net loss
to cash used in operations:
Depreciation & amortization 55,279 51,257 379,957
Expenses paid by common stock 122,400 79,308 790,151
Increase (decrease) in:
Accounts Receivable - - (63,072)
Inventory 6,631 3,999 11,256
Prepaid expenses - 2,600 2,600
Accrued Expenses - (5,202) 2,234
Due Stockholder (38,755) 61,214 (80,897)
Accounts payable (167,485) (21,182) 1,190
------------- -------------- -------------
NET CASH PROVIDED BY (USED IN) OPERATIONS (492,703) (7,763) (2,261,617)
------------- -------------- -------------
CASH USED IN INVESTMENT ACTIVITIES:
Investments in patents (29,111) (25,000) (196,732)
Organization expense - - (5,597)
Equipment (74,374) - (194,989)
------------- -------------- -------------
NET CASH USED IN INVESTMENT ACTIVITIES (103,485) (25,000) (397,318)
------------- -------------- -------------
CASH PROVIDED BY FINANCING ACTIVITIES:
Proceeds from issuance of preferred
and common stock 2,271,665 - 3,159,502
Contribution to capital - - 176,180
Notes Payable (931,854) 37,500 1,329,695
------------- -------------- -------------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 1,339,811 37,500 4,665,305
------------- -------------- -------------
NET INCREASE (DECREASE) IN
CASH & EQUIVALENTS 1,935,999 20,263 2,006,370
CASH & EQUIVALENTS, BEGINNING OF PERIOD 70,371 3,254 -
------------- -------------- -------------
CASH & EQUIVALENTS, END OF PERIOD $ 2,006,370 $ 23,517 $ 2,006,370
============= ============== =============
See accompanying notes.
</TABLE>
<PAGE> 22
<TABLE>
<CAPTION>
ADVANCED PRECISION TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Deficit
Accumulated Accumulated
Additional Deficit During
Preferred Common Paid-In December 31, Development
Stock Stock Capital 1992 Stage
----------- --------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
BALANCE DECEMBER 31,1998 $ 125,000 $ 34,035 $ 2,947,716 $ (258,205) $(2,336,619)
Shares issued in payment of
expenses and equipment - 884 78,618 - -
Shares issued in payment of
notes payable - 740 61,760 - -
Net loss - - - - (164,231)
----------- --------- ------------ ------------ ------------
BALANCE JUNE 30,1999 $ 125,000 $ 35,659 $ 3,088,094 $ (258,205) $(2,500,850)
=========== ========= ============ ============ ============
BALANCE DECEMBER 31,1999 $ 125,000 $ 41,502 $ 3,558,752 $ (258,205) $(2,834,263)
Proceeds from the Sale of
Common Stock - 7,193 2,364,473 - -
Shares issued in payment of
expenses, equipment and patents - 1,224 121,176 - -
Shares issued in payment of
notes payable - 3,852 375,148 - -
Net loss - - - - ( 470,773)
----------- --------- ------------ ------------ ------------
BALANCE JUNE 30,2000 $ 125,000 $ 53,771 $ 6,449,549 $ (258,205) $(3,305,036)
=========== ========= ============ ============ ============
See accompanying notes.
</TABLE>
<PAGE> 23
ADVANCED PRECISION TECHNOLOGY, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
JUNE 30, 2000
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
DEVELOPMENT STAGE COMPANY:
The Company is in the development stage and is engaged in developing
the business of producing and marketing its patent pending fingerprint
capture device and its patented personalized identification cards,
optical approval devices, and optical enrollment device for real time
fingerprint verification.
BUSINESS COMBINATIONS:
On June 17, 1994, the Company issued 16,000,000 shares of common stock,
after a 1 for 4 reverse split, for all of the common stock of
Holographics, Inc. This transaction was accounted for as a pooling of
interests, and accordingly, the financial statements include the
accounts and operations of Holographics, Inc. for all periods prior to
the merger.
PATENTS:
The cost to acquire patents is capitalized and amortized on a straight-
line basis over 17 years.
DEPRECIATION:
Depreciation is computed on a straight-line basis over the estimated
useful life of the assets.
RESEARCH AND DEVELOPMENT:
Research and Development costs are expensed as incurred.
CASH FLOWS STATEMENT:
The Company considers investments purchased with the maturity of three
months or less to be cash equivalents. There were no cash payments for
interest or taxes during the periods presented.
NOTE 2 - INCOME TAX:
The Company has approximately $3,500,000 of Federal operating loss
carryforwards with expiration dates through the year 2015.
NOTE 3 - LEASE COMMITMENT:
The Company leases its office under a 36-month lease expiring 5/31/2003,
with minimum lease payments as follows:
Year Ending December 31, Amount
----------------------- --------
2000 $25,200
2001 43,200
2002 43,200
2003 18,000
<PAGE> 24
ADVANCED PRECISION TECHNOLOGY, INC.
FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
ARTHUR KORN
Certified Public Accountant
<PAGE> 25
<Letterhead of:
ARTHUR KORN, CPA
402 Hummingbird Place
Clayton, CA 94517
TEL (925)672-5200
FAX (925) 672-5201>
REPORT OF INDEPENDENT AUDITOR
Board of Directors
Advanced Precision Technology, Inc.
I have audited the accompanying balance sheet of Advanced Precision
Technology, Inc. (a development stage company) as of December 31, 1999 and
1998 and the related statements of operations, changes in stockholders' equity
and cash flows for each of the three years in the period ended December 31,
1999 and for the period January 1, 1993 (inception of development stage
activities) to December 31, 1999. These financial statements are the
responsibility of the Company's management. My responsibility is to express
an opinion on these financial statements based on my audit.
I conducted my audits in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amount and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. I believe that my audit provides a reasonable basis
for my opinion.
In my opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Advanced Precision
Technology, Inc. at December 31, 1999 and 1998 and the results of operation,
and cash flows for each of the three years in the period ended December 31,
1999 and for the period January 1, 1993 (inception of development stage
activities) to December 31, 1999, in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2, the Company
has been in the development stage since its inception and has sustained
recurring losses, has negative working capital and has not as yet commenced
operations. These conditions raise substantial doubt about the Company's
ability to continue as a going concern. Continuation as a going concern is
dependent upon the Company's ability to meet future financing requirements and
the success of its future operations, the outcome of which cannot be
determined at this time. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Management's plan regarding future operations is also described in Note 2.
/s/ Arthur Korn CPA
Clayton, California
June 6, 2000
<PAGE> 26
ADVANCED PRECISION TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
December 31,
1999 1998
------------- -------------
ASSETS
------
CURRENT ASSETS:
Cash $ 70,371 $ 3,254
Inventory 12,338 7,458
Prepaid expenses 2,600 -
------------- -------------
Total Current Assets 85,309 10,712
------------- -------------
FIXED ASSETS:
Equipment 129,115 126,827
Accumulated depreciation 97,447 62,301
------------- -------------
31,668 64,526
------------- -------------
OTHER ASSETS:
Patents 1,247,402 1,169,469
Accumulated amortization 227,231 159,863
------------- -------------
1,020,171 1,009,606
------------- -------------
$ 1,137,148 $ 1,084,844
============= =============
LIABILITIES AND
STOCKHOLDERS' EQUITY
--------------------
CURRENT LIABILITIES:
Accounts payable $ 168,675 $ 241,966
Notes payable 195,000 45,000
Accrued expenses 11,932 2,324
Loans payable - stockholder 98,755 283,627
------------- -------------
Total Current Liabilities 474,362 572,917
------------- -------------
STOCKHOLDERS' EQUITY:
Preferred stock, $100 par value;
authorized 25,000,000 shares;
1,250 shares issued and outstanding 125,000 125,000
Common stock, $.001 par value;
authorized 100,000,000 shares,
issued and outstanding:
1999 - 41,502,147 shares
1998 - 34,035,125 shares 41,502 34,035
Additional paid-in capital 3,588,752 2,947,716
Accumulated deficit December 31, 1992 (258,205) (258,205)
Deficit accumulated during
development stage (2,834,263) (2,336,619)
------------- -------------
662,786 511,927
------------- -------------
$ 1,137,148 $ 1,084,844
============= =============
See accompanying notes.
-2-
<PAGE> 27
ADVANCED PRECISION TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
Cumulative
During
Development Year Ended December 31,
Stage 1999 1998 1997
------------ ------------ ------------ ------------
REVENUES $ 82,478 $ - $ - $ 82,478
------------ ------------ ------------ ------------
EXPENSES:
Cost of goods sold 28,049 - - 28,049
Research and development 1,157,299 68,179 352,801 507,884
Marketing 473,844 78,037 135,594 153,980
Administrative 687,274 128,914 274,651 216,111
President's salary 240,000 120,000 120,000 -
Depreciation and
amortization 330,275 102,514 101,838 84,916
------------ ------------ ------------ ------------
2,916,741 497,644 984,884 990,940
------------ ------------ ------------ ------------
NET LOSS $(2,834,263) $ (497,644) $ (984,844) $ (908,462)
============ ============ ============ ============
LOSS PER SHARE $ (.01) $ (.04) $ (.04)
============ ============ ============
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 34,759,821 27,144,821 22,786,625
============ ============ ============
See accompanying notes.
-3-
<PAGE> 28
ADVANCED PRECISION TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Deficit
Accumulated Accumulated
Additional Deficit During
Preferred Common Paid-In December 31, Development
Stock Stock Capital 1992 Stage
----------- --------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
BALANCE DECEMBER 31, 1996 $ - $ 20,862 $ 826,139 $ (258,205) $ (443,273)
Proceeds from sale of stock 245,000 1,500 373,500 - -
Shares issued as prepaid
compensation - 285 70,965 - -
Shares issued in payment of
expenses, equipment and patents - 584 151,416 - -
Shares issued in payment
of notes payable - 1,200 118,800 - -
Preferred shares converted
to common (140,000) 280 139,720 - -
Net loss - - - - (908,462)
----------- --------- ------------ ------------ ------------
BALANCE DECEMBER 31, 1997 105,000 24,711 1,680,540 (258,205) (1,351,735)
Proceeds from sale of stock 20,000 20 9,980 - -
Shares issued in payment of
expenses, equipment and patents - 1,864 179,636 - -
Shares issued in payment
of notes payable - 7,440 1,077,560 - -
Net loss - - - - (984,884)
----------- --------- ------------ ------------ ------------
BALANCE DECEMBER 31, 1998 125,000 34,035 2,947,716 (258,205) (2,336,619)
Shares issued in payment of
expenses, equipment and patents - 1,990 198,013 - -
Shares issued in payment of
notes payable - 5,477 443,023 - -
Net loss - - - - (497,644)
----------- --------- ------------ ------------ ------------
BALANCE DECEMBER 31, 1999 $ 125,000 $ 41,502 $ 3,558,752 $ (258,205) $(2,834,263)
=========== ========= ============ ============ ============
See accompanying notes.
-4-
</TABLE>
<PAGE> 29
<TABLE>
<CAPTION>
ADVANCED PRECISION TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
CUMULATIVE
DURING
DEVELOPMENT Year Ended December 31,
STAGE 1999 1998 1997
------------ ------------- ------------- -------------
<S> <C> <C> <C> <C>
CASH USED IN OPERATIONS
Net loss $(2,834,263) $ (497,644) $ (984,884) $ (904,462)
Adjustments to reconcile net loss
to cash used in operations:
Depreciation and amortization 324,678 102,514 101,838 84,916
Expenses paid with common stock 667,751 82,379 441,872 143,500
Increase (decrease) in:
Accounts receivable - - 31,536 (31,536)
Inventory 12,338 18,266 765 (6,693)
Prepaid expenses 2,600 (68,650) 71,250 -
Accounts payable 168,675 (73,291) 98,824 72,180
Accrued expenses 2,324 (9,608) (2,324) -
Due stockholder 283,627 184,872 283,627 -
------------ ------------- ------------- -------------
NET CASH USED IN OPERATIONS (1,768,908) (261,162) (524,750) (642,095)
------------ ------------- ------------- -------------
CASH USED IN INVESTING ACTIVITIES
Investments in patents (167,621) (17,932) (3,207) (28,270)
Equipment (120,615) (2,288) (31,602) (66,960)
------------ ------------- ------------- -------------
NET CASH USED IN INVESTING ACTIVITIES (288,236) (20,220) (34,809) (95,230)
------------ ------------- ------------- -------------
CASH PROVIDED BY FINANCING ACTIVITIES
Proceeds from issuance of common
and preferred stock 887,836 - 30,000 620,000
Contributions to capital 176,180 - - -
Short term notes payable 1,063,499 348,499 495,000 138,000
------------ ------------- ------------- -------------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 2,127,515 348,499 525,000 758,000
------------ ------------- ------------- -------------
NET INCREASE (DECREASE) IN CASH
AND EQUIVALENTS 70,371 67,117 (34,559) 16,675
CASH AND EQUIVALENTS,
BEGINNING OF PERIOD - 3,254 37,813 21,138
------------ ------------- ------------- -------------
CASH AND EQUIVALENTS, END OF PERIOD $ 70,371 $ 70,371 $ 3,254 $ 37,813
============ ============= ============= =============
See accompanying notes.
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</TABLE>
<PAGE> 30
ADVANCED PRECISION TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
DEVELOPMENT STAGE COMPANY:
The Company is in the development stage and is engaged in developing the
business of producing and marketing its patented fingerprint capture device
and its patented personalized identification cards, optical approval devices
and optical enrollment device for real time fingerprint verification and
authentication.
BUSINESS COMBINATIONS:
On June 17, 1994, the Company issued 16,000,000 shares of common stock, after
a 1 for 4 reverse split, for all of the common stock of Holographics, Inc.
This transaction was accounted for as a recapitalization, and, accordingly,
the financial statements include the accounts and operations of Holographics,
Inc. for all periods prior to the merger.
INVENTORY:
Inventory is stated at the lower of cost, determined on a first-in, first-out
method, or market.
EQUIPMENT:
Equipment is stated at cost. Depreciation is computed on a straight-line
basis over the estimated useful lives of the assets. Depreciation expense of
$35,146 in 1999, $34,829 in 1998, $18,432 in 1997 and $97,447 cumulative
during development stage has been charged to operations.
PATENTS:
The cost to acquire patents is capitalized and amortized on a straight-line
basis over 17 years. Amortization expense of $67,368 in 1999, $67,009 in
1998, $64,244 in 1997 and $227,231 cumulative during development stage has
been charged to operations.
RESEARCH AND DEVELOPMENT:
Research and development costs are expensed as incurred.
CASH FLOWS STATEMENT:
The Company considers investments purchased with a maturity of three months or
less to be cash equivalents.
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<PAGE> 31
ADVANCED PRECISION TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
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.
LOSS PER SHARE:
As of December 31, 1997, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 128, Earnings Per Share (SFAS 128). SFAS
128 provides for the calculation of basic and diluted earnings per share.
Basic earnings per share includes no dilution and is computed by dividing
income available to common stockholders by the weighted average number of
common shares outstanding for the period. Diluted earnings per share reflects
the potential dilution of securities, including stock option and warrants,
that could share in the earnings of an entity. Because the Company has a net
loss, dilutive earnings per share are the same as basic earnings per share.
As required by SFAS 128, all prior earnings have been restated to reflect the
retroactive application of this accounting pronouncement. Adoption of SFAS
128 had no effect on previously reported earnings per share.
FAIR VALUE OF FINANCIAL INSTRUMENTS:
Statement of Financial Accounting Standards No. 107, Disclosures about Fair
Value of Financial Instruments, requires that the Company disclose the
estimated fair value for its financial instruments for which it is practicable
to estimate their values. The Company's financial instruments include cash,
stockholder advances, notes payable and accounts payable. The carrying value
of cash approximates fair value due to the short maturities of these
instruments. The fair value of other financial instruments is not practical
to estimate because of the current financial condition of the Company.
NOTE 2 - FINANCIAL STATEMENT PRESENTATION
The financial statements have been prepared assuming the Company will continue
as a going concern. Although the Company is still in the development stage,
management is currently negotiating to raise adequate financing to begin
production of its products. The Company's ability to continue as a going
concern is dependent on management's success in obtaining financing and the
commencement of operations. See Note 8 for subsequent financing.
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<PAGE> 32
ADVANCED PRECISION TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
The Company's recurring losses and negative working capital raise substantial
doubt about the ability of the Company to continue as a going concern. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
NOTE 3 - INCOME TAX:
The Company has approximately $3,083,000 of Federal operating loss
carryforwards with expiration dates through the year 2014.
NOTE 4 - CASH FLOW STATEMENT:
There were no cash payments for interest or taxes during the periods
presented.
NOTE 5 - LEASE COMMITMENT:
The Company leases its office under a lease of less than one year.
Rent expense was $21,382 in 1999, $26,162 in 1998, and $2,394 in 1997.
NOTE 6 - PREFERRED STOCK:
The Company's preferred stock is non-voting and pays a 12% cumulative dividend
payable in additional preferred stock. The Company has the right to redeem
the preferred stock at 110% of the face value. In addition, each preferred
share is convertible into 200 shares of the Company's common stock.
NOTE 7 - STOCK WARRANTS:
Each shareholder of preferred stock received Class A and Class B Common Stock
Purchase Warrants, 200 Class A and 200 Class B for each preferred share. Each
A Warrant entitles the holder to purchase one share of common stock at $1.00
per share to February 28, 1998. Each B Warrant entitles the holder to
purchase one share of common stock at $2.00 per share until August 31, 1998.
NOTE 8 - SUBSEQUENT EVENT:
On May 16, 2000 completed a private placement to accredited individuals for
$2,200,000.
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<PAGE> 33
Part III
Item 1. Index to Exhibits.
The following exhibits required by Item 601 of Regulation S-B are filed
herewith:
Exhibit No. Document Description
----------- ---------------------
1.1.1 Articles of Incorporation of Global Technology, Ltd., dated
February 6, 1985
1.1.2 Articles of Amendment of Global Technology, Ltd., changing the
name to "Advanced Precision Technology, Inc." dated April 11,
1988
1.1.3 Amendment and Revised Articles of Incorporation of Advanced
Precision Technology, Inc. changing the name to "UV Color
Corporation" dated December 1, 1992
1.1.4 Certificate of Amendment of UV Color Corporation changing the
name to "Advanced Precision Technology, Inc." dated June 9, 1994
1.2 Bylaws
6.1 Agreement and Assignment of Patents
6.2 Lease for 2271-D South Vasco Road, Livermore, CA 94550 dated May
8, 2000
8.1 Agreement and Plan of Reorganization by and between Ximberley
Corporation, Advanced Precision Technology, Inc. and Precision
Tank Testing, dated March 21, 1988
8.2 Agreement and Plan of Reorganization by and between Advanced
Precision Technology, Inc. and Holographics, Inc., dated May 27,
1994, as amended
27.1 Financial Data Schedule
<PAGE> 34
Signatures
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the Registrant caused this Registration Statement to be signed on
its behalf by the undersigned thereunto duly authorized.
Dated: July 26, 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
