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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended January 31, 2013
Advanced Technologies Group, Ltd.
(Exact name of registrant as specified in its charter)
Nevada 0-30987 80-0987213
(State of (Commission (I.R.S. Employer
Incorporation) File Number) Identification Number)
331 Newman Springs Road, Suite 143, Red Bank, NJ 07701
(Address of principal executive offices) (Zip Code)
732-784-2801
(Registrant's Telephone Number)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock $.0001 par value
(Title of Class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. [ ] Yes [X] No
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. [ ] Yes [X] No
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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. [X] Yes [ ] No
Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T during the
preceding 12 months (or for such shorter period that the registrant was required
to submit and post such files). [X] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (ss.229.405 of this chapter) is not contained herein, and will
not be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [X]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company.
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Act). [ ] Yes [X] No
State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was last sold, or the average bid and asked price of such common equity, as of
the last business day of the registrant's most recently completed second fiscal
quarter.
The aggregate market value based on the average bid and asked price on the
over-the-counter market of the Registrant's Common Stock, ("Common Stock") held
by non-affiliates of the Company was $183,244 as at July 31, 2012.
There were 14,415,735 outstanding shares of Common Stock as of January 31, 2013.
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. [ ] Yes [ ] No
DOCUMENTS INCORPORATED BY REFERENCE
Not Applicable
FORM 10-K
ADVANCED TECHNOLOGIES GROUP, LTD.
TABLE OF CONTENTS
PART I
Forward Looking Statements 3
Item 1. Business 3
Item 1A. Risk Factors 7
Item 1B. Unresolved Staff Comments 10
Item 2. Properties 10
Item 3. Legal Proceedings 10
PART II
Item 4. Mine Safety Disclosures 12
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities 12
Item 6. Selected Financial Data 13
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operation 14
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 16
Item 8. Financial Statements and Supplementary Data 16
Changes in and Disagreements With Accountants on Accounting and
Item 9. Financial Disclosure 16
Item 9A. Controls and Procedures 17
Item 9B. Other Information 18
PART III
Item 10. Directors, Executive Officers and Corporate Governance 18
Item 11. Executive Compensation 20
Item 12. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters 22
Item 13. Certain Relationships and Related Transactions, and Director
Independence 22
Item 14. Principal Accounting Fees and Services 23
PART IV
Item 15. Exhibits and Financial Statement Schedules 24
Signatures 25
2
FORWARD LOOKING STATEMENTS
Some of the information contained in this Annual Report may constitute
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. These forward-looking statements are based on
current expectations and projections about future events. The words "estimate,"
"plan," "intend," "expect," "anticipate" and similar expressions are intended to
identify forward-looking statements which involve, and are subject to, known and
unknown risks, uncertainties and other factors which could cause the Company's
actual results, financial or operating performance, or achievements to differ
from future results, financial or operating performance, or achievements
expressed or implied by such forward-looking statements. Projections and
assumptions contained and expressed herein were reasonably based on information
available to the Company at the time so furnished and as of the date of this
filing. All such projections and assumptions are subject to significant
uncertainties and contingencies, many of which are beyond the Company's control,
and no assurance can be given that the projections will be realized. Potential
investors are cautioned not to place undue reliance on any such forward-looking
statements, which speak only as of the date hereof. Unless otherwise required by
law, the Company undertakes no obligation to publicly release any revisions to
these forward-looking statements to reflect events or circumstances after the
date hereof or to reflect the occurrence of unanticipated events. Important
factors that could cause actual results to differ materially from our
expectations ("Cautionary Statements") include, but are not limited to, those
set forth under the heading "Risk Factors" in this Annual Report.
ITEM 1. BUSINESS
CORPORATE HISTORY
FXDIRECT
Advanced Technologies Group, Ltd. (the "Company," "ATG," "we," "us" or
"our") was incorporated in the State of Nevada in February 2000. In January
2001, the Company purchased 100% of the issued and outstanding shares of FX3000,
Inc. (formerly Oxford Global Network, Ltd.), a Delaware corporation, the
designer of the FX3000 currency trading software platform. The FX3000 software
program is a financial real time quote and money management platform for use by
independent foreign currency traders.
In March 2002, the Company transferred its FX3000 software program to FX
Direct Dealer, LLC ("FX Direct") a joint venture company that markets the FX3000
software program. The Company received a 25% interest in the joint venture in
return for the transfer. The remaining 75% of the joint venture was owned by
Tradition, N.A. ("Tradition"), a subsidiary of Compagnie Financiere Tradition, a
major Swiss-based financial company. On December 29, 2006, Tradition sold 80% of
its 75% membership interest in the joint venture to the Chairman of the Board of
Directors of Tradition. Tradition NA retained a 15% membership interest.
3
On January 26, 2009, the Company entered into a purchase and sale agreement
(the "Purchase Agreement"), by and among the Company, FX Direct as purchaser
(the "Purchaser"), MaxQ Investments, LLC ("MaxQ") which was the majority member
of the Purchaser and Tradition, the remaining member of the Purchaser, pursuant
to which the Company agreed to sell (the "Sale") its approximate 25% membership
interest (the "Membership Interest") in FX Direct to FX Direct. The Agreement
provided that it was effective as of December 31, 2008, as a result of which the
Company was not entitled to receive any allocations of profit, loss or
distributions from FX on account of its Membership Interest after such date. On
March 17, 2009, the Company completed the Sale of the Membership Interest to FX
Direct.
The aggregate purchase price of the Membership Interest was approximately
$26,000,000, of which $9,000,000 was paid in cash at the closing of the Sale and
the remaining $17,000,000 was paid in 36 equal monthly installments of
$472,222.22, bearing interest at the rate of 10% per annum and evidenced by a
subordinated promissory note (the "Subordinated Note") that was issued pursuant
to a Cash Subordinated Loan Agreement ("Loan Agreement"). The Company previously
received approximately $250,000 from the Purchaser in full satisfaction of
amounts owed to the Company for providing certain services to the Purchaser.
MOVEIDIOT.COM
Effective as of July 20, 2009, the Company entered into an Asset Purchase
Agreement with Dan Khasis, LLC ("Seller"), pursuant to which ATG acquired all of
the rights to Seller's website "MoveIdiot.com" and the related software for a
purchase price of $57,000 plus the issuance to Seller of 25,000 restricted
shares of Common Stock. In addition, Seller was entitled to receive up to an
additional 50,000 restricted shares of Common Stock if certain membership goals
for the MoveIdiot.com website were met in the 12 months following the closing;
however, the goals were not met.
MoveIdiot.com was designed to enable individuals and businesses to keep
track of their property on-line. The software program enables users to manage
their possessions on-line and print automatically generated labels that are
sealable to be used in the event of moving from one location to another. The
Company had not received any revenues from MoveIdiot.com through the date of
this report. On or about August 1, 2012, the Company received a letter from the
operator of the MoveIdiot.com website claiming that the Company owed it
approximately $85,000 in unpaid service fees, which claim was subsequently
settled for $46,525. At present, the MoveIdiot.com website is not in operation
and the Company is evaluating whether or not to continue the development of this
website.
SEC CIVIL ACTION AND SETTLEMENT
On June 23, 2010, the SEC filed the SEC Action against ATG, and its
officers in the United States District Court for the Southern District of New
York. The SEC secured provisional relief in the form of an order (the "Asset
Freeze Order") freezing the defendants' assets and prohibiting destruction,
concealment or alteration of records pending final disposition of the action, to
which the defendants consented, with certain carve outs for payments of
4
necessary corporate and personal expenses. In October 2010, the defendants
reached an agreement in principle with the SEC to settle the action in its
entirety, which was approved by the Court in January 2011. Under the SEC
Settlement, defendants consented to judgment in the total amount of
$19,186,536.32, of which approximately $14.8 million was paid within 14 days
following entry of the judgment and the balance was paid in nine monthly
installments following the entry of judgment. The defendants also agreed to pay
$500,000 to satisfy the costs of the administration of the Plan of Distribution
under the SEC Settlement. The Asset Freeze Order was lifted in November 2011.
As of January 31, 2013, the holders of an aggregate of 711,916 shares of
Series A preferred stock, 1,474,459 shares of Series B preferred stock and
4,533,231 shares of common stock had submitted approved claims under the Plan
and the Company's transfer agent is in the process of cancelling such shares.
Neither the Company nor its predecessor has been involved in a bankruptcy,
receivership or similar proceeding.
DESCRIPTION OF BUSINESS
GENERAL
The Company's business centers around the development and/or acquisition of
new technologies that in management's opinion provide a novel or significantly
improved methodology to solve existing problems, meet current demands among
business and which have the potential for commercialization.
MOVEIDIOT.COM
Effective a of July 20, 2009, the Company entered into an Asset Purchase
Agreement with Dan Khasis, LLC ("Seller"), pursuant to which the Company
acquired all of the rights to Seller's website "MoveIdiot.com" and the related
software for a purchase price of $57,000 plus the issuance to Seller of 25,000
restricted shares of Common Stock.
MoveIdiot.com was designed to enable individuals and businesses to keep
track of their property on-line. The software program enables users to manage
their possessions on-line and print automatically generated labels that are
sealable to be used in the event of moving from one location to another. The
Company had not received any revenues from the operation of the MoveIdiot.com
website through the date of this report. On or about August 1, 2012, the Company
received a letter from the operator of the MoveIdiot.com website claiming that
the Company owed it approximately $85,000 in unpaid service fees, which claim
was subsequently settled for $46,525. At present, the MoveIdiot.com website is
not in operation and the Company is evaluating whether or not to continue the
development of this website.
5
COMPETITION
The market for new, Internet-based technologies is evolving rapidly, and
will be intensely competitive reacting quickly to the accelerating pace of
technological change. The Company faces competition in this market sector from a
broad sector of companies in many diverse fields whose primary focus is to
identify problems and to create new technological solutions for these problems.
Further, the search to acquire new technology developed by other for
commercialization is also an intensely competitive area. In its efforts to
acquire new technology the Company will be competing with many companies in a
wide range of industries, most of whom have greater financial resources than the
Company and greater market recognition.
GOVERNMENT REGULATION
We are not currently subject to direct regulation by any domestic or
foreign governmental agency, other than regulations applicable to businesses
generally, and laws or regulations directly applicable to access to online
commerce. However, due to the increasing popularity and use of the Internet and
other online services, it is possible that a number of laws and regulations may
be adopted with respect to the Internet or other online services covering issues
such as user privacy, pricing, content, copyrights, distribution, and
characteristics and quality of products and services. Furthermore, the growth
and development of the market for online commerce may prompt more stringent
consumer protection laws that may impose additional burdens on those companies
conducting business online. The adoption of any additional laws or regulations
may decrease the growth of the Internet or other online services, which could,
in turn, decrease the demand for our products and services and increase our cost
applicability to the Internet and other online services of existing laws in
various jurisdictions governing issues such as property ownership, sales and
other taxes and personal privacy is uncertain and may take years to resolve.
INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS
We regard our current and future copyrights, service marks, trademarks,
trade dress, trade secrets and similar intellectual property as critical to our
success. We intend to rely on trademark and copyright law, trade secret
protection and confidentiality and/or license agreements with our employees,
users, partners and others to protect our proprietary rights. Effective
trademark, service mark, copyright and trade secret protection may not be
available in every country in which we may operate to provide services online.
Therefore, the steps we take to protect our proprietary rights may be
inadequate.
We currently hold various web domain names relating to our products and
services, including the "MoveIdiot.com" domain name in the United States.
Governmental agencies and their designees generally regulate the acquisition and
maintenance of domain names and this regulation is subject to change. Governing
bodies may establish additional top-level domains, appoint additional domain
name registrars or modify the requirements for holding domain names. As a
result, we may be unable to acquire or maintain relevant domain names in all
countries in which we intend to conduct business.
6
There has been substantial litigation in the software and Internet
industries regarding intellectual property rights. It is possible that, in the
future, third parties can claim that we, or our current or potential future
products, infringe on their intellectual property. We expect that software
product developers will increasingly be subject to infringement claims as the
number of products and competitors in our industry segment grows and the
functionality of products in industry segments overlaps. Any claims, with or
without merit, could be time-consuming, result in costly litigation, cause
product licensing delays, require us to license or pay royalties for certain
products in order to continue to sell our products, or pay substantial damages.
Licensing or royalty agreements, if required, may not be available on terms
acceptable to us or at all. As a result, our business could be harmed.
EMPLOYEES
As of January 31, 2013, we had two employees. In addition, the Company
utilizes the services of consultants to provide technology, marketing and other
services to the company on a project or as needed basis.
SEC REPORTS
We file annual, quarterly, current and other reports and information with
the SEC. These filings can be viewed and downloaded from the Internet at the
SEC's website at www.sec.gov. These reports are also available to be read and
copied at the SEC's public reference room located at Judiciary Plaza, 100 F
Street, N.E., Washington, D.C. 20549. The public may obtain information on the
operation of the public reference room by calling the SEC at 1-800-SEC-0330.
ITEM 1A. RISK FACTORS
The following factors, in addition to other information contained on
incorporated by reference in this Form 10-K, should be considered carefully. Our
business, financial condition or results of operations could be materially
adversely affected by any of these risks. The risks described below are not the
only risks facing our company. Additional risks and uncertainties that we are
not aware of or that we currently believe are immaterial may also adversely
affect our business, financial condition, results of operation and liquidity.
The trading price of our shares of Common Stock could decline due to any of
these risks, and you may lose all or part of your investment.
THE COMPANY HAS A LIMITED HISTORY OF OPERATIONS ON WHICH TO JUDGE ITS FUTURE
PERFORMANCE.
Since July 2009, the Company's principal business activity has been the
development of the MoveIdiot.com website. However, the Company had not received
any revenues from the operation of MoveIdiot.com through the date of this
report. At present, the MoveIdiot.com website is not in operation and the
Company is evaluating whether or not to continue the development of this
website.
7
The Company is subject to all of the risks inherent in the establishment of
a new business, including the absence of a significant operating history, lack
of market recognition and limited banking and financial relationships.
A SUBSTANTIAL PORTION OF THE COMPANY'S CASH RESOURCES WERE REQUIRED FOR THE
PAYMENT OF THE SEC SETTLEMENT.
Under the terms of the SEC Settlement, the Company consented to a judgment
against it in the amount of $19,186,536.32 and has agreed to pay $500,000 to
satisfy the costs of administering the Plan of Distribution under the Settlement
Agreement. As of January 31, 2012, the Company had fully funded its obligations
under the SEC Settlement thereby substantially reducing the Company's cash
resources.
The SEC Settlement prohibits ATG and one of its officers from participating
in any unregistered sales of securities for a five year period with the officer
being further prohibited from participating in any "penny stock offering," which
in general means an offering where the price per share is less than $5.00. These
restrictions will make it more difficult for ATG to raise funds to support its
ongoing business operations.
THE COMPANY IS LARGELY DEPENDENT ON ITS MANAGEMENT.
The Company is largely dependent upon the personal efforts of its current
management, the loss of any of which could have a material adverse effect upon
the Company's business and prospects. The Company does not have key-man life
insurance upon the life of any of its officers or directors. Additionally, as
the Company implements its commercial operations, it will require the services
of additional skilled personnel. There can be no assurance that the Company can
attract persons with the requisite skills and training to meet its future needs
or, even if such persons are available, that they can be hired on terms
favorable to the Company.
MANAGEMENT MAY NOT BE ABLE TO CONTROL THE COMPANY'S COSTS AND EXPENSES.
With respect to the Company's development of its technologies and the
implementation of commercial operations, the Company cannot accurately project
or give any assurance, with respect to management's ability to control the
Company's development and operating costs and/or expenses. Consequently, if
management is not able to adequately control costs and expenses, such operations
may not generate any profit or may result in operating losses.
THE COMPANY MAY BE ADVERSELY AFFECTED BY REGULATORY CHANGES.
At present, none of the business segments where the Company plans to
operate have significant government regulation that could be expected to
adversely affect the commercialization of the Company's technologies. However,
all of the Company's present technology is related to the Internet and it is
possible that the current federal, state or local laws and regulations which
apply to the Internet and which relate to services the Company plans to offer
8
its customers, may change in the future. Although it is not possible to predict
the extent of any such changes, and although management is not aware of any
pending adverse changes in the regulations applicable to its planned business
operations, it is possible that future or unforeseen changes may have an adverse
impact upon the Company's ability to continue or expand operations as presently
planned.
THE COMPANY MAY NOT BE ABLE TO PROTECT ITS INTELLECTUAL PROPERTY RIGHTS.
The Company's success will depend in significant part on certain
methodologies it plans to utilize in connection with the commercial applications
for its newly acquired technology and on proprietary intellectual property
rights it has and may in the future develop. The Company plans to rely on a
combination of nondisclosure and other contractual arrangements and trade
secrets, copyright, patent and trademark laws to protect its proprietary rights
and the proprietary rights of third parties from whom the Company may licenses
intellectual property. The Company also plans to enter into confidentiality
agreements with its employees and consultants and limits access to, and
distribution of, proprietary information. There can be no assurance that the
steps planned by the Company in this regard will be adequate to deter
misappropriation of proprietary information or that the Company will be able to
detect unauthorized use and take appropriate steps to enforce its intellectual
property rights.
SUBSTANTIAL LITIGATION REGARDING INTELLECTUAL PROPERTY RIGHTS EXISTS IN THE
SOFTWARE INDUSTRY. WE EXPECT THAT SOFTWARE PRODUCTS MAY BE INCREASINGLY SUBJECT
TO THIRD-PARTY INFRINGEMENT CLAIMS AS THE NUMBER OF COMPETITORS IN OUR INDUSTRY
SEGMENTS GROWS AND THE FUNCTIONALITY OF PRODUCTS IN DIFFERENT INDUSTRY SEGMENTS
OVERLAPS.
Third parties may make a claim of infringement against us with respect to
our products and technology or claims that our intellectual property rights are
invalid. Any claims, with or without merit, could:
* be time-consuming to defend;
* result in costly litigation;
* divert management's attention and resources;
* delay product delivery, or
* result in substantial damage awards.
In addition, if our products were found to infringe a third party's
proprietary rights, we could be required to enter into royalty or licensing
agreements in order to continue to be able to sell our products. Royalty or
licensing agreements, if required, may not be available on terms acceptable to
us or at all. A successful claim of product infringement against us and our
failure or inability to license the infringed or similar technology could have a
material adverse effect on our business.
9
THE COMPANY DOES NOT ANTICIPATE PAYING DIVIDENDS ON ITS COMMON STOCK.
The Company has not paid any dividends on its Common Stock nor, by reason
of its contemplated financial requirements, does it anticipate paying any
dividends upon its Common Stock in the foreseeable future.
A LOW MARKET PRICE MAY SEVERELY LIMIT THE POTENTIAL MARKET FOR OUR COMMON STOCK.
Our Common Stock is currently trading at a price substantially below $5.00
per share, subjecting trading in the stock to certain SEC rules requiring
additional disclosures by broker-dealers. These rules generally apply to any
equity security that has a market price of less than $5.00 per share, subject to
certain exceptions (a "penny stock"). Such rules require the delivery, prior to
any penny stock transaction, of a disclosure schedule explaining the penny stock
market and the risks associated therewith and impose various sales practice
requirements on broker-dealers who sell penny stocks to persons other than
established customers and institutional or wealthy investors. For these types of
transactions, the broker-dealer must make a special suitability determination
for the purchaser and have received the purchaser's written consent to the
transaction prior to the sale. The broker-dealer also must disclose the
commissions payable to the broker-dealer, current bid and offer quotations for
the penny stock and, if the broker-dealer is the sole market maker, the
broker-dealer must disclose this fact and the broker-dealer's presumed control
over the market. Such information must be provided to the customer orally or in
writing before or with the written confirmation of trade sent to the customer.
Monthly statements must be sent disclosing recent price information for the
penny stock held in the account and information on the limited market in penny
stock. The additional burdens imposed upon broker-dealers by such requirements
could discourage broker-dealers from effecting transactions in our Common Stock.
THE MARKET PRICE OF YOUR SHARES WILL BE VOLATILE.
The stock market price of technology companies like the Company has been
volatile. Securities markets may experience price and volume volatility. The
market price of our stock may experience wide fluctuations that could be
unrelated to our financial and operating results. Such volatility or
fluctuations could adversely affect your ability to sell your shares and the
value you might receive for those shares.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not Applicable.
ITEM 2. DESCRIPTION OF PROPERTY
Since August 2008, the Company's office has been located at 331 Newman
Springs Road, Suite 143, Red Bank, NJ, and its telephone number is 732-784-2801.
This is a shared office facility that provides the Company with access to office
services on an as needed basis at a monthly fee of $150 to $250 per month,
depending upon our level of usage of the services provided by the facility
operator.
ITEM 3. LEGAL PROCEEDINGS
On June 23, 2010, the SEC filed a civil enforcement action (the "SEC
Action") against ATG, and its officers Alexander Stelmak and Abelis Raskas in
the United States District Court for the Southern District of New York ("the
Court"). The SEC's Complaint alleged that between 1997 and 2006 the defendants
raised $14,741,760.76 from investors through a series of illegal unregistered
offerings of the securities of ATG and its predecessor companies, Oxford Global
Network, Ltd., and Luxury Lounge, Inc. The SEC alleged that, in connection with
10
these offerings, the defendants violated the securities registration
requirements of Sections 5(a) and 5(c) of the Securities Act. The SEC sought
disgorgement of all alleged ill-gotten gains, plus prejudgment interest thereon,
for a total of $24,990,124 as well as additional relief. ATG, Stelmak and Raskas
each served Answers to the Complaint in which they denied liability and asserted
affirmative defenses.
The SEC secured provisional relief in the form of an order (the "Asset
Freeze Order") freezing the defendants' assets and prohibiting destruction,
concealment or alteration of records pending final disposition of the action, to
which the defendants consented, with certain carve outs for payments of
necessary corporate and personal expenses. The Asset Freeze Order was lifted in
November 2011
In October 2010, the defendants reached an agreement in principle with the
SEC to settle (the "SEC Settlement") the action in its entirety, which received
the final approval of the Commission on December 30, 2010. On January 13, 2011,
the Court issued an Order setting a schedule to effectuate the settlement and
approve a Plan of Distribution. The Court also entered, as part of the SEC
Settlement, final judgments and consents for ATG, and the individual defendants.
Under the SEC Settlement, defendants consented to judgment in the total
amount of $19,186,536.32, of which approximately $14.8 million was paid within
14 days following entry of the judgment and the balance was paid in nine monthly
installments following the entry of judgment. Such funds are to be distributed
to investors who participated in the unregistered offerings at issue pursuant to
a Plan of Distribution that was submitted to the Court by the SEC in March 2011
and approved by the Court in September 2011. The SEC has agreed that the Plan of
Distribution will require the surrender and cancellation of shares of any
investor who participates in the SEC Settlement and who continues to own shares
in ATG. ATG has agreed to pay $500,000 to satisfy the costs of the
administration of the Plan.
As of January 31, 2013, the holders of an aggregate of 711,916 shares of
Series A preferred stock, 1,474,459 shares of Series B preferred stock and
4,533,237 shares of common stock had submitted approved claims under the Plan
and the Company's transfer agent is in the process of cancelling such shares.
ATG and Stelmak consented to judgment against them in the full amount of
$19,186,536.32, and have agreed to certain prohibitions, including for Stelmak
and ATG, a permanent injunction against future violations of Section 5(a) and
5(c) of the Securities Act, and for Stelmak a five year ban from participating
in any offering of penny stock. Stelmak and ATG also have accepted civil
penalties of $6,500 and $65,000, respectively. Raskas, for his part, consented
to judgment of $4,749,948.03 of the total $19,186,536.32 judgment at issue. As
no penalties or restrictions were sought against Raskas, none are contained in
his proposed judgment.
The SEC has agreed that all settlement funds (except the civil penalty for
Stelmak) will be paid by ATG, with Raskas (only to the limited extent of his
liability) and Stelmak responsible for any shortfall.
11
PART II
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable.
ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our Common Stock is traded in the over-the-counter market and quoted on the
OTC-Bulletin Board under the symbol "AVGG." The trading for the Common Stock has
been sporadic and the market for the Common Stock cannot be classified as an
established trading market.
The following table sets out the high and low bid information for the
Common Stock as reported by the OTC Bulletin Board for each period/quarter
indicated in US$:
Calendar Period High Bid(1) Low Bid(1)
--------------- ----------- ----------
2011
First Quarter $0.05 $0.04
Second Quarter 0.04 0.02
Third Quarter 0.02 0.03
Fourth Quarter 0.01 0.01
2012
First Quarter $0.03 $0.01
Second Quarter 0.03 0.01
Third Quarter 0.03 0.01
Fourth Quarter 0.01 0.01
(1) The quotations set out herein reflect inter-dealer prices without retail
mark-up, mark-down or commission and may not necessarily reflect actual
transactions.
(b) As of January 31, 2013, there were 130 holders of record of the Common
Stock.
(c) There have been no cash dividends declared to date on the Common Stock and
there are no plans to do so. There are no restrictions that limit the
ability to pay dividends on common equity other than the dependency on the
Company's revenues, earnings and financial condition.
2010 EQUITY INCENTIVE PLAN
On March 5, 2010, the Board of Directors adopted the Company's 2010 Equity
Incentive Plan (the "Plan"). The Plan is administered by the Board of Directors
and provides for the grant of stock options, stock appreciation rights and
restricted stock grants. The Plan includes an initial reserve of 3,000,000
shares of our common stock that will be available for issuance under the Plan,
subject to adjustment to reflect stock splits and similar events. Shares that
are subject to issuance upon exercise of an option but cease to be subject to
such option for any reason (other than exercise of such option), and shares that
are subject to an award that is granted but is subsequently forfeited, or that
are subject to an award that terminates without shares being issued, will again
be available for grant and issuance under the Plan. The Plan is further
described in Item 5 of the Company's Annual Report on Form 10-K for the fiscal
year ended January 31, 2011.
12
PART III
ITEM 6. SELECTED FINANCIAL DATA
Our selected consolidated financial data presented below for each of the
fiscal years in the two-year period ended January 31, 2013, and the balance
sheet data at January 31, 2013 and 2012 have been derived from consolidated
financial statements, which have been audited by Donahue Associates, L.L.C. The
selected financial data should be read in conjunction with our consolidated
financial statements for each of the years in the two-year period ended January
31, 2013, and Notes thereto, which are included elsewhere in this Annual Report.
STATEMENT OF OPERATIONS DATA:
31-Jan-13 31-Jan-12
------------ ------------
General and administrative expenses:
Salaries and benefits $ 193,000 $ 170,000
Consulting 57,850 20,000
General administration 202,292 90,693
------------ ------------
Total general and administrative expenses 0 280,693
------------ ------------
Net loss from operations (453,242) 280,693
------------ ------------
Other revenues and expenses:
Interest income 20 27,556
Net loss before provision for income taxes (453,222) (253,137)
------------ ------------
Provision for income taxes 0 (1,200,000)
------------ ------------
Net income (loss) before extraordinary item (453,222) (1,453,137)
------------ ------------
Net loss $ (453,222) $ (1,453,137)
============ ============
Basic & fully diluted net income (loss) per common share:
Net income (loss) per share before extraordinary item $ (0.03) $ (0.08)
Weighted average of common shares outstanding:
Basic 16,663,718 18,948,966
Fully diluted 16,663,718 18,948,966
BALANCE SHEET DATA
2013 2012
------------ ------------
Total assets $ 1,353,029 $ 2,153,444
Total liabilities $ 257,980 $ 605,173
Total Shareholders' equity $ 1,095,049 $ 1,548,271
13
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
BACKGROUND
The Company was incorporated in the State of Nevada in February 2000. In
January 2001, the Company purchased 100% of the issued and outstanding shares of
FX3000, Inc. (formerly Oxford Global Network, Ltd.), a Delaware corporation, the
designer of the FX3000 currency trading software platform. The FX3000 software
program is a financial real time quote and money management platform for use by
independent foreign currency traders.
In March 2002, the Company transferred its FX3000 software program to FX
Direct Dealer, LLC ("FX Direct") a joint venture company that markets the FX3000
software program. The Company received a 25% interest in the joint venture in
return for the transfer. On January 26, 2009, the Company entered into a
purchase and sale agreement (the "Purchase Agreement"), pursuant to which the
Company agreed to sell (the "Sale") its approximate 25% membership interest (the
"Membership Interest") in FX Direct to FX Direct. The Agreement provided that it
was effective as of December 31, 2008, as a result of which the Company was not
entitled to receive any allocations of profit, loss or distributions from FX on
account of its Membership Interest after such date. On March 17, 2009, the
Company completed the Sale of the Membership Interest to FX Direct.
The aggregate purchase price of the Membership Interest was approximately
$26,000,000, of which $9,000,000 was paid in cash at the closing of the Sale and
the remaining $17,000,000 was paid in 36 equal monthly installments of
$472,222.22, pursuant to a subordinated promissory note bearing interest at the
rate of 10% per annum, that was issued pursuant to a Cash Subordinated Loan
Agreement ("Loan Agreement").
Effective as of July 20, 2009, the Company entered into an Asset Purchase
Agreement with Dan Khasis, LLC ("Seller"), pursuant to which the Company
acquired all of the rights to Seller's website "Moveidiot.com" and the related
software for a purchase price of $57,000 plus the issuance to Seller of 25,000
restricted shares of Common Stock.
On June 23, 2010, the SEC filed the SEC Action against ATG, and its
officers in the United States District Court for the Southern District of New
York. The SEC secured provisional relief in the form of an order (the "Asset
Freeze Order") freezing the defendants' assets and prohibiting destruction,
concealment or alteration of records pending final disposition of the action, to
which the defendants consented, with certain carve outs for payments of
necessary corporate and personal expenses. In October 2010, the defendants
reached an agreement in principle with the SEC to settle the action in its
entirety, which was approved by the Court in January 2011. Under the SEC
Settlement, defendants consented to judgment in the total amount of
$19,186,536.32, of which approximately $14.8 million was paid within 14 days
following entry of the judgment and the balance was paid in nine monthly
installments following the entry of judgment. The defendants also agreed to pay
$500,000 to satisfy the costs of the administration of the Plan of Distribution
under the SEC Settlement. The Asset Freeze Order was lifted in November 2011.
14
The Company had not received any revenues from the operation of the
MoveIdiot.com website through the date of this report. On or about August 1,
2012, the Company received a letter from the operator of the MoveIdiot.com
website claiming that the Company owed it approximately $85,000 in unpaid
service fees, which claim was subsequently settled for $46,525. At present, the
MoveIdiot.com website is not in operation and the Company is evaluating whether
or not to continue the development of this website.
RESULTS OF OPERATIONS
For the reasons discussed above under Background, the Company did not
generate any revenues in the fiscal year ended January 31, 2013 ("Fiscal 2013")
or the fiscal year ended January 31, 2012 ("Fiscal 2012").
Total general and administrative expenses were $453,242 in Fiscal 2013, as
compared to $280,693 in Fiscal 2012. The increase in general and administrative
expenses in Fiscal 2013 was primarily due to an increase in professional fees
and administrative expenses related to the implementation of the SEC Settlement.
Other revenues and expenses in Fiscal 2013 included interest income of $20,
related to the Company's cash balances. Other revenues and expenses in the
Fiscal 2012 included interest income of $27,556 related to the Company's cash
balances and the Subordinated Note. The decrease in interest income in the
Fiscal 2013 primarily reflects the decrease in the remaining principal balance
of the Subordinated Note.
In Fiscal 2012, the Company recorded a reversal of a deferred tax asset in
the amount of $1,200,000 and there was no similar charge recorded in fiscal
2013.
As a result of the foregoing, the Company had a net loss of ($453,222) in
Fiscal 2013, as compared to a net loss of ($1,453,137) in Fiscal 2012.
LIQUIDITY AND CAPITAL RESOURCES
At January 31, 2013, the Company had cash on hand of $1,342,513, compared
with cash on hand of $1,185,519 at January 31, 2012.
On March 17, 2009, the Company completed the Sale of its Membership
Interest to FX Direct. The aggregate purchase price of the Membership Interest
was approximately $26,000,000, of which $9,000,000 was paid in cash at the
closing of the Sale and the remaining $17,000,000 was paid in 36 equal monthly
installments of $472,222.22, pursuant to a subordinated promissory note bearing
interest at the rate of 10% per annum, that was issued pursuant to a Cash
Subordinated Loan Agreement ("Loan Agreement"). The Company also received
approximately $250,000 from the Purchaser in full satisfaction of amounts owed
to the Company for providing certain services to the Purchaser. In May 2012, FX
Direct exercised its right to repurchase the Company's remaining .01% interest
in FX Direct for a purchase price of $5,000.
15
Under the terms of the SEC Settlement, the Company has consented to a
judgment against it in the amount of $19,186,536.32 and has agreed to pay
$500,000 to satisfy the costs of administering the Plan of Distribution under
the Settlement Agreement. As of October 31, 2011, the full amount of the
settlement had been delivered to the SEC.
The SEC Settlement prohibits the Company and one of its officers from
participating in any unregistered sales of securities for a five year period
with the officer being further prohibited from participating in any "penny stock
offering," which in general means an offering where the price per share is less
than $5.00. These restrictions will make it more difficult for the Company to
raise funds to support its ongoing business operations.
CASH FLOWS
For Fiscal 2013, net cash used in operating activities was $799,224
compared to net cash used in operation activities $702,096 in Fiscal 2012, with
the increase relating primarily to an increase in the Company's general and
administrative expenses.
For Fiscal 2013, net cash provided by investing activities decreased to
$956,218 as compared to net cash provided by investing activities of $1,877,115
in Fiscal 2012, with the decrease resulting primarily from the reduction in
payments under the Subordinated Note as the remaining balance was fully paid in
Fiscal 2013.
For the fiscal years ended January 31, 2013 and 2012, there were no
material cash amounts used in or provided by financing activities.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
At January 31, 2013, the Company had no outstanding borrowings under loan
facilities.
ITEM 8. FINANCIAL STATEMENTS
See F Pages
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no changes in accountants or any disagreements with
accountants on any matter of accounting principles or practices or financial
statement disclosures during the two years ended January 31, 2013.
16
ITEM 9A. CONTROLS AND PROCEDURES
(a) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES.
Our principal executive officer and our principal financial officer
evaluated the effectiveness of our disclosure controls and procedures (as
defined in Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of
1934 as amended) as of the end of the period covered by this report. Based
on that evaluation, such principal executive officer and principal
financial officer concluded that, the Company's disclosure control and
procedures were not effective as of the end of the period covered by this
report because of the material weakness described below.
(b) MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING.
Our management is responsible for establishing and maintaining adequate
internal control over financial reporting, as such term is defined in
Exchange act Rules 13a-15(f) under the Securities Exchange Act of 1934, as
amended. Under the supervision of management and with the participation of
our management, including our principal executive officer and principal
financial officer, we conducted an evaluation of the effectiveness of our
internal control over financial reporting based on the framework in
Internal Control-Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission.
At present, due to its limited scope of operations, the Company only has
two full time employees, only one of whom, our chief financial officer, is
involved in overseeing our financial reporting process. We have determined
that this deficiency caused by the limited staffing constitutes a material
weakness in the area of segregation of duties and adequacy of personnel.
Based on our evaluation of internal control over financial reporting, our
management concluded that our internal control over financial reporting was
not effective as of January 31, 2013.
This annual report does not include an attestation report of the Company's
registered public accounting firm regarding internal control over financial
reporting. Management's report was not subject to attestation by the
Company's registered public accounting firm pursuant to an exemption for
smaller reporting companies under Section 989G of the Dodd-Frank Wall
Street Reform and Consumer Protection Act.
(c) CHANGE IN INTERNAL CONTROL OVER FINANCIAL REPORTING.
No change in our internal control over financial reporting occurred during
our most recent fiscal quarter that has materially affected, or is
reasonably likely to materially affect our internal control over financial
reporting.
17
(d) OTHER.
We believe that a controls system, no matter how well designed and
operated, can not provide absolute assurance that the objectives of the
controls system are met, and no evaluation of controls can provide absolute
assurance that all control issues and instances of fraud, if any, within a
company have been detected. Therefore, a control system, no matter how well
conceived and operated, can provide only reasonable, not absolute,
assurance that the objectives of the control system are met. Our disclosure
controls and procedures are designed to provide such reasonable assurances
of achieving our desired control objectives, and, for the reasons described
above, our principal executive officer and principal financial officer have
concluded, as of January 31, 2013, that our disclosure controls and
procedures were not effective.
ITEM 9B. OTHER INFORMATION
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The following table sets forth as of the date hereof, with respect to each
of the Company's directors and executive officers their position and their ages:
Name Age Position
---- --- --------
Alex Stelmak 64 Chief Executive Officer, Chairman of the Board and
Chief Financial Officer
Stan Mashov 44 Vice President, Chief Technology Officer and
Director
Dr. Abel Raskas 72 President, Senior Marketing Director and Director
The following is a brief summary of the Directors and Officers including
their business experiences for the past five years.
ALEX J. STELMAK, CHAIRMAN AND CHIEF EXECUTIVE OFFICER
Mr. Stelmak has been Chief Executive Officer, Chairman of the Board and
Chief Financial Officer of the Company since 2001 and was a founder of the
Company's subsidiary FX3000, Inc. He has over twenty years of experience in
operation and management, building highly successful financial services firms.
Mr. Stelmak has served as President of Commonwealth Capital Group, Ltd., a
financial advisory and investment-banking firm that has been engaged as a
consultant to the Company. From 1996 to 1998, he served as the President of
Oxford Holdings - a Registered Commodities Broker/Dealer principally engaged in
providing managed currency-trading programs for Institutional and private
clients. Mr. Stelmak holds a BS degree in Business Administration with a major
in accounting. He also holds the U.S. Equivalent of Master Degree in Economics.
18
Mr. Stelmak's experience in founding and managing several business
enterprises provides our Board with executive leadership and management
experience.
STAN MASHOV, VICE PRESIDENT AND CHIEF TECHNOLOGY OFFICER
Mr. Mashov has been Vice President, Chief Technology Officer and a Director
of the Company since 2001 and was a founder of the Company's subsidiary FX3000,
Inc. He has also served in the same capacity for Oxford since its formation in
September 1997. Mr. Mashov has been mainly responsible for the design,
development and implementation of the FX3000 on-line currency trading software
platform. Mr. Mashov has been employed by FX Direct since 2006. Prior to joining
the Company, Mr. Mashov served as Chief Analyst and Currency Trader for Oxford
Holdings, a company principally engaged in providing managed currency trading
programs for individual investors. Mr. Mashov received his Degree in Accounting
from Berkeley College.
Mr. Mashov's experience in software development provides our Board with
technical expertise in connection with the evaluation and development of
software and internet-based business opportunities.
DR. ABEL RASKAS, PRESIDENT/SENIOR MARKETING DIRECTOR
Dr. Raskas has been President, Senior Marketing Director and a Director of
the Company since 2001. He is also Founder and President of Luxury Lounge, Inc.
- an Internet wholesaler and retailer of luxury and premium quality goods and
services which is a subsidiary of the Company. Prior to establishing Luxury
Lounge, Inc. Dr Raskas served as Vice President of Trimol Group, Ltd., a
Publicly Held company engaged in the business of producing specialized documents
through patented software. As a Principal of Trimol Group, Ltd, Dr. Raskas was
instrumental in bringing the Company to the Public Market. Prior to joining
Trimol, from 1991 to 1998, he was a Principal and Vice President of Ocean Bridge
International, Ltd., a company principally engaged in commercial finance and
International trade with Eastern European countries. From 1980 to 1986 Dr.
Raskas was the Founder and Principal of ABDATA Independence, Inc., a computer
service bureau that was acquired in 1986 by Sandata Corp. Following the sale of
ABDATA, Dr. Raskas remained a director of Marketing for Sandata Corp. until
1991. During this same period Dr. Raskas managed a data processing school and
was one of the founders of CAIS Systems, a computer advertising information
system. From 1966 through 1979 Dr. Raskas was an independent consultant in the
design and implementation of management information systems ("MIS") to different
industries. Dr. Raskas holds the equivalent of a Doctorate Degree in business
management and computer science from St. Petersburg University (received in
1973). He has authored 20 articles and one book all in the field of business
management and computer science.
Dr. Raskas' experience as a corporate executive and his business and
academic background in computer science provides our Board with business and
technical expertise.
19
LEGAL MATTERS
Messrs. Stelmak and Raskas were defendants in the SEC Action. See Item 3
"Legal Matters."
BOARD OF DIRECTORS
Our Board of Directors consists of three members. Directors serve until the
next annual meeting of stockholders and until their successors are qualified and
elected. The officers serve at the will of the Board of Directors. There are no
family relationships among the officers and directors of the Company. There are
at present no committees of the Board of Directors. In lieu of an audit
committee, the Company's Board of Directors assumes the responsibilities that
would normally be those of an audit committee. Given the limited scope of the
Company's operations to date, the Board of Directors does not at present have a
director that would qualify as an audit committee financial expert under the
applicable federal securities law regulations.
There are no agreements that a director will resign at the request of
another person and the above named Directors are not acting on behalf of nor
will act on behalf of another person.
CODE OF ETHICS
Due to the limited nature of the company's operations and the limited
number of employees, the Company has not adopted a Code of Ethics.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Pursuant to Section 16(a) of the Securities Exchange Act of 1934, our
Directors, executive officers and beneficial owners of more than 10% of the
outstanding Common Stock are required to file reports with the Securities and
Exchange Commission concerning their ownership of and transactions in our Common
Stock and are also required to provide to us copies of such reports. Based
solely on such reports and related information furnished to us, we believe that
in fiscal 2013 all such filing requirements were complied with in a timely
manner by all Directors and executive officers
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth the annual salary, bonuses and all other
compensation awards and pay outs on account of our Chief Executive Officer and
our one other officer who earned in excess of $100,000 per annum for services
rendered to us during the fiscal years ended January 31, 2013 and 2012.
20
SUMMARY COMPENSATION TABLE
Change in
Pension
Value and
Non-Equity Nonqualified All
Incentive Deferred Other
Name and Plan Compen- Compen-
Principal Stock Option Compen- sation sation
Position Year Salary(1) Bonus Awards Awards sation Earnings (1)(2) Total
------------ ---- ------ ----- ------ ------ ------ -------- ------ -----
Alex 2013 $ 84,000 -- $ -- -- -- -- -- $ 84,000
Stelmak, CEO 2012 $ 62,500 -- $ -- -- -- -- $82,500 $145,000
Dr. Abel
Raskas, 2013 $ 84,000 -- $ -- -- -- -- -- $ 84,000
President 2012 $ 62,500 -- -- -- -- -- $82,500 $145,000
----------
(1) The Company's employment agreements with Messrs. Stelmak and Raskas expired
in April 2011. Effective as of May 1, 2011, Messrs. Stelmak and Raskas are
compensated at the rate of $7,000 per month.
(2) Includes amounts payable for health insurance, home office expenses and
transportation costs.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
Option Awards Stock Awards
----------------------------------------------------------------- ----------------------------------------------
Equity
Incentive
Equity Plan
Incentive Awards:
Plan Market or
Awards: Payout
Equity Number of Value of
Incentive Number Market Unearned Unearned
Plan Awards; of Value of Shares, Shares,
Number of Number of Number of Shares Shares or Units or Units or
Securities Securities Securities or Units Units of Other Other
Underlying Underlying Underlying of Stock Stock That Rights Rights
Unexercised Unexercised Unexercised Option Option That Have Not That That
Options (#) Options (#) Unearned Exercise Expiration Have Not Vested Have Not Have Not
Name Exercisable Unexercisable Options (#) Price($) Date Vested(#) ($) Vested(#) Vested($)
---- ----------- ------------- ----------- ----- ---- --------- ------ -------- ---------
Alex Stelmak -- -- -- -- -- 30,000(1) $300 -- --
Abel Raskas -- -- -- -- -- 3,000(1) $300 -- --
----------
(1) The restricted shares of common stock listed in the table vested on March
5, 2013.
21
COMPENSATION PURSUANT TO PLANS
The Company does not have any pension or profit sharing plans.
COMPENSATION TO DIRECTORS
All of our directors are also officers who do not receive separate
compensation for serving as directors. The compensation of Messrs Raskas and
Stelmak is set forth above in the Summary Compensation Table.
EMPLOYMENT CONTRACTS
Effective as of May 1, 2011, Messrs. Stelmak and Raskas are compensated at
the rate of $7,000 per month.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of January 31, 2013 the Common Stock
ownership of each person and /or group known by the Company to be the beneficial
owner of five percent or more of the Company's Common Stock, each director
individually, and all officers and directors as a group. Each person has sole
voting and investment with respect to the shares of Common Stock shown, and all
ownership is of record and beneficial.
Number of
Name Shares Owned (1) Percent Owned
---- ---------------- -------------
Alex Stelmak 4,479,476 (2) 31.1%
Stan Mashov 887,778 (2) 6.2%
Dr. Abel Raskas 4,479,476 (2) 31.1%
Officers & Directors
as a Group (3 Persons) 9,846,730 (2) 68.4%
----------
(1) Based upon 14,415,735 issued and outstanding shares of Common Stock on
January 31, 2013.
(2) Includes 30,000 shares of restricted common stock granted to each of
Messrs. Stelmak, Raskas and Mashov on March 5, 2010 that vested on March 5,
2013.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On March 5, 2010, the Board granted 90,000 restricted shares of Common
Stock (the "Restricted Stock") to each officer and director (Messrs. Stelmak,
Raskas and Mashov). The Restricted Stock vested in three equal annual
installments on the first, second and third anniversaries of the grant date.
22
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The following table shows the audit fees we were billed by Donohue
Associates, L.L.C. for fiscal 2013 and 2012:
2013 2012
------ ------
Audit fees $9,000 $9,000
Audit fees were for the audit of our annual financial statements, review of
financial statements included in our 10-Q quarterly reports, and services that
are normally provided by independent auditors in connection with our other
filings with the SEC. This category also includes advice on accounting matters
that arose during, or as a result of, the audit or review of our interim
financial statements.
As part of its duties, our Board pre-approves audit and non-audit services
performed by our independent auditors in order to assure that the provision of
such services does not impair the auditors' independence. Our Board does not
delegate to management its responsibilities to pre-approve services performed by
our independent auditors.
23
ITEM 15. EXHIBITS
(a) Financial Statements
See "Index to Consolidated Financial Statements" set forth on page 34.
(b) Exhibits
Incorp by
Exhibit Ref. to
Number Exh. Description
------ ---- -----------
3.1 3.1(1) Articles of Incorporation of the Registrant, as amended
3.2 3.2(1) By-laws of the Registrant
10.1 3.3(2) Amendment to and Plan of Reorganization
10.2 10.1(3) FX Direct Purchase and Sale Agreement
10.3 (4) Cash Subordinated Loan Agreement
10.4 99.1(6) MoveIdiot.com Asset Purchase Agreement
10.5 10.1(7) Equity Incentive Plan
31.1 * Certification pursuant to 18 U.S.C. Section 1350 as
adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 by Alex Stelmak, as Chief Executive Officer
31.2 * Certification pursuant to 18 U.S.C. Section 1350 as
adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 by Alex Stelmak, as Chief Financial Officer
32.1 * Certification pursuant to 18 U.S.C. Section 1350 as
adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 by Alex Stelmak, as Chief Executive Officer
and Chief Financial Officer
101 * The following materials from the Advanced Technologies
Group, Ltd. Annual Report on Form 10-K for the fiscal
year ended January 31, 2013 formatted in Extensible
Business Reporting Language (XBRL): (i) the Statements
of Operations, (ii) the Balance Sheets, (iii) the
Statements of Cash Flows, (iv) Statement of
Stockholders' (Deficit) and (v) related notes.
#101.INS XBRL Instance Document.
#101.SCH XBRL Taxonomy Extension Schema Document.
#101.CAL XBRL Taxonomy Extension Calculation Linkbase
Document.
#101.LAB XBRL Taxonomy Extension Label Linkbase
Document.
#101.PRE XBRL Taxonomy Extension Presentation Linkbase
Document.
#101.DEF XBRL Taxonomy Extension Definition Linkbase
Document.
In accordance with Rule 406T of Regulation S-T, these
interactive data files are deemed "not filed" for
purposes of section 18 of the Exchange Act, and
otherwise are not subject to liability under that
section.
----------
* Filed herewith
+ Employee Compensation Agreement
(1) Registrant's Registration Statement on Form 10-KSB File No. 000-30987.
(2) Registrant's Current Report on Form 8-K filed on January 22, 2001.
(3) Registrant's Current Report on Form 8-K filed on January 30, 2009.
(4) Included as Exhibit C to Exhibit 10.2.
(5) Intentionally Omitted.
(6) Registrant's Current Report on Form 8-K filed on July 22, 2009.
(7) Registrant's Current Report on Form 8-K filed on March 8, 2010.
24
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Amendment to the Report to be
signed on its behalf by the undersigned, thereunto duly authorized.
ADVANCED TECHNOLOGIES GROUP, LTD.
Dated: April 24, 2013 By: /s/ Alex Stelmak
-------------------------------------------------
Alex Stelmak
Chief Executive Officer and Director
Executive Officer, Principal Financial
Officer and Principal Accounting Officer)
Dated: April 24, 2013 By: /s/ Abel Raskas
-------------------------------------------------
Abel Raskas
President and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Amendment to the Report has been signed below by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated.
Dated: April 24, 2013 By: /s/ Alex Stelmak
-------------------------------------------------
Alex Stelmak
Director
Dated: April 24, 2013 By: /s/ Abel Raskas
-------------------------------------------------
Abel Raskas
Director
Dated: April 24, 2013 By: /s/ Stan Mashov
-------------------------------------------------
Stan Mashov
Director
25
ADVANCED TECHNOLOGIES GROUP, LTD. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
----
Report of Independent Registered Public Accounting Firm F-2
Consolidated Balance Sheets as of January 31, 2013 and January 31,
2012 F-3
Consolidated Statements of Operations for the years ended January 31,
2013 and January 31, 2012 F-4
Consolidated Statements of Cash Flows for the years ended January 31,
2013 and January 31, 2012 F-5
Consolidated Statements of Changes in Stockholders' Equity (Deficit)
for the years ended January 31, 2013 and January 31, 2012 F-6
Notes to Consolidated Financial Statements F-7
F-1
DONAHUE ASSOCIATES, LLC
CERTIFIED PUBLIC ACCOUNTANTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors
Advanced Technologies Group, Ltd
We have audited the accompanying consolidated balance sheets of Advanced
Technologies Group, Ltd as of January 31, 2013 and 2012, and the related
consolidated statements of operations, consolidated stockholders' equity, and
consolidated cash flows for each of the two years in the period ended January
31, 2013. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall consolidated financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Advanced Technologies Group, Ltd as of January 31, 2013 and 2012, and the
consolidated results of its operations and its cash flows for each of the two
years in the period ended January 31, 2013, in conformity with U.S. generally
accepted accounting principles.
/s/ Donahue Associates LLC
------------------------------------
Donahue Associates LLC
Monmouth Beach, New Jersey
April 11, 2013
F-2
Advanced Technologies Group, Ltd.
Consolidated Balance Sheets
As of January 31, 2013 and January 31, 2012
31-Jan-13 31-Jan-12
------------ ------------
ASSETS
Current assets:
Cash $ 1,342,513 $ 1,185,519
Subordinated note receivable 0 956,218
------------ ------------
Total current assets $ 1,342,513 $ 2,141,737
Other assets:
Investment in FX Direct Dealer 5,000 5,000
Trademark- net 4,841 5,449
Fixed assets- net 675 1,258
------------ ------------
Total assets $ 1,353,029 $ 2,153,444
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable & accrued expenses $ 250,184 $ 597,377
------------ ------------
Total current liabilities 250,184 597,377
Shareholder advance payable 7,796 7,796
------------ ------------
Total liabilities 257,980 605,173
Shareholders' equity:
Series A preferred stock, one share convertible to one share of common;
non-participating, authorized 1,000,000 shares at stated value of $3 per
share, issued and outstanding 762,081 shares at January 31, 2012 and
50,165 at January 31, 2013 111,120 1,712,601
Series B preferred stock, one share convertible to one share of common;
non-participating, authorized 7,000,000 shares at
stated value of $3 per share, issued and outstanding 1,609,955 shares
at January 31, 2012 and 135,496 at January 31, 2013 374,865 4,384,754
Common stock - $.0001 par value, authorized 100,000,000 shares,
issued and outstanding, 18,948,966 shares at January 31, 2012 and
14,415,729 at January 31, 2013 1,442 1,895
Additional paid in capital 38,435,638 32,823,815
Accumulated deficit (37,828,016) (37,374,794)
------------ ------------
Total shareholders' equity 1,095,049 1,548,271
------------ ------------
Total Liabilities & Shareholders' Equity $ 1,353,029 $ 2,153,444
============ ============
See the notes to the financial statements.
F-3
Advanced Technologies Group, Ltd.
Consolidated Statements of Operations
For the Years Ended January 31, 2013 and January 31, 2012
31-Jan-13 31-Jan-12
------------ ------------
General and administrative expenses:
Salaries and benefits $ 193,000 $ 170,000
Consulting 57,850 20,000
General administration 202,392 90,693
------------ ------------
Total general & administrative expenses 453,242 280,693
------------ ------------
Net loss from operations (453,242) (280,693)
Other revenues and expenses:
Interest income 20 27,556
------------ ------------
Net income (loss) before provision for income taxes (453,222) (253,137)
Provision for income taxes 0 (1,200,000)
------------ ------------
Net income (loss) $ (453,222) $ (1,453,137)
============ ============
Basic & fully diluted net income (loss) per common share:
Net income (loss) per share before extraordinary item $ (0.03) $ 0.08
Weighted average of common shares outstanding:
Basic 16,663,718 18,948,966
Fully diluted 16,663,718 18,948,966
See the notes to the financial statements.
F-4
Advanced Technologies Group, Ltd.
Consolidated Statements of Cash Flows
For the Years Ended January 31, 2013 and January 31, 2012
31-Jan-13 31-Jan-12
----------- ------------
Operating Activities:
Net income (loss) $ (453,222) $ (1,453,137)
Adjustments to reconcile net income (loss) items
not requiring the use of cash:
Amortization 608 605
Depreciation 583 581
Changes in other operating assets and liabilities :
Deferred tax asset 0 1,200,000
Prepaid taxes 0 488,575
Accounts payable & accrued expenses (347,193) (938,720)
----------- ------------
Net cash used by operations (799,224) (702,096)
Investing activities:
Proceeds from note receivable 956,218 1,877,115
----------- ------------
Net cash provided by investing activities 956,218 1,877,115
Financing Activities:
Advances received (paid) shareholders 0 (2,076)
----------- ------------
Net cash used by financing activities 0 (2,076)
----------- ------------
Net increase (decrease) in cash during the year 156,994 1,172,943
Cash balance at beginning of the year 1,185,519 12,576
----------- ------------
Cash balance at January 31st $ 1,342,513 $ 1,185,519
=========== ============
Supplemental disclosures of cash flow information:
Interest paid during the year $ 0 $ 0
Income taxes paid during the year $ 0 $ 0
See the notes to the financial statements.
F-5
Advanced Technologies Group, Ltd.
Consolidated Statement of Changes in Shareholders' Equity
For the Years Ended January 31, 2013 and January 31, 2012
Common Common Preferred Preferred Paid in Accumulated
Shares Par Value Shares Value Capital Deficit Total
------ --------- ------ ----- ------- ------- -----
Balance at January 31, 2011 18,948,966 $ 1,895 2,372,036 $ 6,097,355 $32,823,815 $(35,921,657) $ 3,001,408
Net loss (1,453,137) (1,453,137)
---------- ------- ---------- ----------- ----------- ------------ -----------
Balance at January 31, 2012 18,948,966 $ 1,895 2,372,036 $ 6,097,355 $32,823,815 $(37,374,794) $ 1,548,271
Shares retired (4,533,237) (453) (2,186,375) (5,611,370) 5,611,823 0
Net loss (453,222) (453,222)
---------- ------- ---------- ----------- ----------- ------------ -----------
Balance at January 31, 2013 14,415,729 $ 1,442 185,661 $ 485,985 $38,435,638 $(37,828,016) $ 1,095,049
========== ======= ========== =========== =========== ============ ===========
See the notes to the financial statements.
F-6
Advanced Technologies Group, Ltd.
Notes to the Consolidated Financial Statements
For the Years Ended January 31, 2013 and January 31, 2012
1. ORGANIZATION OF THE COMPANY AND SIGNIFICANT ACCOUNTING PRINCIPLES
Advanced Technologies Group, Ltd. (the Company) was incorporated in the State of
Nevada in February 2000. In January 2001, the Company purchased 100% of the
issued and outstanding shares of FX3000, Inc., a Delaware corporation, which
owned the rights to the FX3000, a spot foreign currency trading software
platform. The FX3000 software program was a real time quote and money management
platform used by independent spot foreign currency traders.
In March 2002, the Company sold the FX3000 software program, for a 25% interest
in a joint venture with Tradition NA, a subsidiary of Compagnie Financiere
Tradition, a publicly held Swiss corporation. The Company and Tradition formed
FX Direct Dealer LLC (FXDD), a Delaware company that marketed the FX3000
software to independent foreign currency traders.
In March 2009, the Company sold its 25% interest in the joint venture to FXDD
for $26 million.
In June 2010, the United States District Court of the Southern District of New
York granted an asset freeze to the Securities and Exchange Commission (SEC)
freezing most of the Company's assets. The asset freeze was granted based upon
allegations by the SEC that the Company had raised approximately $15 million
from 2001 to 2002 by improperly selling shares of its common stock. The SEC
action sought disgorgement of all Company profits earned from the sale of the
FXDD interest.
In October 2010, the Company reached an agreement with the SEC to settle the
action in its entirety, which received the final approval of the SEC on December
30, 2010. Under the settlement agreement, the Company consented to a judgment in
the total amount of $19,186,536, of which $14,883,400 was paid in January 2011.
The balance was payable in nine monthly installments ending in October 2011. The
funds collected by this judgment were to be distributed to the investors who
participated in the unregistered offerings pursuant to a Plan of Distribution
approved by the United States District Court for the Southern District of New
York in March 2011. During fiscal year 2013, the funds collected by the judgment
were distributed to these shareholders and the Company retired 4,533,237 common
shares. In addition, 711,916 preferred A shares and 1,474,459 preferred B shares
were retired during fiscal year 2013.
All the common and preferred shareholders that participated in the S.E.C.
settlement have been paid in full as of January 31, 2013.
Effective as of July 20, 2009, the Company entered into an Asset Purchase
Agreement with Dan Khasis, LLC ("Seller"), pursuant to which ATG acquired all of
the rights to Seller's website "MoveIdiot.com" and the related software for a
purchase price of $57,000 plus the issuance to Seller of 25,000 restricted
shares of Common Stock. In addition, Seller was entitled to receive up to an
additional 50,000 restricted shares of Common Stock if certain membership goals
for the MoveIdiot.com website were met in the 12 months following the closing;
however, the goals were not met.
F-7
MoveIdiot.com was designed to enable individuals and businesses to keep track of
their property on-line. The software program enables users to manage their
possessions on-line and print automatically generated labels that are sealable
to be used in the event of moving from one location to another. The Company had
not received any revenues from MoveIdiot.com through the date of this report. On
or about August 1, 2012, the Company received a letter from the operator of the
MoveIdiot.com website claiming that the Company owed it approximately $85,000 in
unpaid service fees, which claim was subsequently settled for $46,525. At
present, the MoveIdiot.com website is not in operation and the Company is
evaluating whether or not to continue the development of this website.
USE OF ESTIMATES - The preparation of the consolidated financial statements in
conformity with generally accepted accounting principles requires management to
make reasonable estimates and assumptions that affect the reported amounts of
the assets and liabilities and disclosure of contingent assets and liabilities
and the reported amounts of revenues and expenses at the date of the financial
statements and for the period they include. Actual results may differ from these
estimates.
CASH - For the purpose of calculating changes in cash flows, cash includes all
cash balances and highly liquid short-term investments with an original maturity
of three months or less.
SUBORDINATED NOTE RECEIVABLE - The subordinated loan receivable from FXDD
results from the sale of the Company's interest in the joint venture in 2009.
The estimated fair value of the subordinated loan receivable from FXDD is based
upon the discounting of the future cash flows from the asset using a risk
adjusted lending rate form loans of similar in risk and duration. At January 31,
2013 and January 31, 2012, the fair value of the subordinated loan receivable
was $-0- and $956,218, respectively. The Company was paid in full in fiscal year
2013.
FIXED ASSETS - Office equipment is stated at cost. Depreciation expense is
computed using the straight-line method over the estimated useful life of the
asset, which managements estimates to be three years.
LONG LIVED ASSETS - The Company reviews for the impairment of long-lived assets
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. An impairment loss would be recognized when
estimated future cash flows expected to result from the use of the asset and its
eventual disposition is less than its carrying amount.
INCOME TAXES - The Company accounts for income taxes in accordance with
generally accepted accounting principles which require an asset and liability
approach to financial accounting and reporting for income taxes. Deferred income
tax assets and liabilities are computed annually for differences between
financial statement and income tax bases of assets and liabilities that will
result in taxable income or deductible expenses in the future based on enacted
tax laws and rates applicable to the periods in which the differences are
expected to affect taxable income.
F-8
Valuation allowances are established when necessary to reduce deferred tax
assets and liabilities to the amount expected to be realized. Income tax expense
is the tax payable or refundable for the period adjusted for the change during
the period in deferred tax assets and liabilities.
The Company follows the accounting requirements associated with uncertainty in
income taxes using the provisions of Financial Accounting Standards Board (FASB)
ASC 740, INCOME TAXES. Using that guidance, tax positions initially need to be
recognized in the financial statements when it is more likely than not the
positions will be sustained upon examination by the tax authorities. It also
provides guidance for derecognition, classification, interest and penalties,
accounting in interim periods, disclosure and transition. As of January 31, 2013
and January 31, 2012, the Company has no uncertain tax positions that qualify
for either recognition or disclosure in the financial statements. All tax
returns from fiscal years 2009 to 2012 are subject to IRS audit.
2. FAIR VALUE OF FINANCIAL INSTRUMENTS
FAIR VALUE MEASUREMENTS under generally accepted accounting principles clarifies
the principle that fair value should be based on the assumptions market
participants would use when pricing an asset or liability and establishes a fair
value hierarchy that prioritizes the information used to develop those
assumptions. Under the standard, fair value measurements are separately
disclosed by level within the fair value hierarchy as follows.
Level 1 - Quoted prices in active markets for identical assets or liabilities.
Level 2 - Observable inputs other than Level 1 prices such as quoted prices for
similar assets or liabilities; quoted prices in markets with insufficient volume
or infrequent transactions (less active markets); or model-derived valuations in
which all significant inputs are observable or can be derived principally from
or corroborated by observable market data for substantially the full term of the
assets or liabilities.
Level 3 - Unobservable inputs to the valuation methodology that are significant
to the measurement of fair value of assets or liabilities.
To the extent that valuation is based on models or inputs that are less
observable or unobservable in the market, the determination of fair value
requires more judgment. In certain cases, the inputs used to measure fair value
may fall into different levels of the fair value hierarchy. In such cases, for
disclosure purposes, the level in the fair value hierarchy within which the fair
value measurement is disclosed and is determined based on the lowest level input
that is significant to the fair value measurement.
Cash, subordinated note receivable, and accounts payables and accrued expenses
in the balance sheet are estimated to approximate fair market value at January
31, 2013 and January 31, 2012 because of their short term nature.
F-9
3. NET LOSS PER SHARE
Basic net income (loss) per share has been computed based on the weighted
average of common shares outstanding during the years. Diluted net income (loss)
per share gives the effect of outstanding preferred stock which is convertible
into common stock (see Note 4). For fiscal years 2013 and 2012, the effects of
the convertible preferred stock equivalents were excluded from the calculation
of fully diluted loss per share since its inclusion would be anti-dilutive.
The calculation for net income (loss) per share is as follows.
31-Jan-13 31-Jan-12
------------ ------------
Net income (loss) $ (453,222) $ (1,453,137)
============ ============
Basic & fully diluted shares outstanding
(weighted average) 16,663,718 18,948,966
Basic income (loss) per share $ (0.03) $ (0.08)
4. PREFERRED STOCK
CLASS A PREFERRED STOCK: Class A preferred stock has a stated value of $3 per
share. Holders of the Class A preferred stock are entitled to receive a common
stock dividend of 13% of the outstanding Class A shares on an annual basis based
on a value of $3 per share. The Class A preferred stock is convertible into
common stock at a conversion ratio of one preferred share for one common share.
CLASS B PREFERRED STOCK: Class B preferred stock has a stated value of $3 per
share. Holders of the Class B preferred stock are entitled to receive a common
stock dividend of 6% of the outstanding Class B shares on an annual basis based
on a value of $3 per share. The Class B preferred stock is convertible into
common stock at a conversion ratio of one preferred share for one common share.
F-10
5. INCOME TAXES
Provision for income taxes is comprised of the following:
31-Jan-13 31-Jan-12
----------- -----------
Net income (loss) before provision for
income taxes $ (453,222) $ (253,137)
=========== ===========
Current tax expense:
Federal $ 0 $ 0
State 0 0
----------- -----------
Total 0 0
Less deferred tax benefit:
Tax loss carry forwards (5,119,260) (4,757,929)
Change in valuation allowance 1,200,000
Less allowance for tax recoverability 5,119,260 4,757,929
----------- -----------
Provision for income taxes $ 0 $ 1,200,000
=========== ===========
Deferred tax asset:
Tax loss carry forwards $ 5,119,260 $ 4,757,929
Less valuation allowance (5,119,260) (4,757,929)
----------- -----------
Net deferred tax asset $ 0 $ 0
=========== ===========
Note: The deferred tax benefits arising from the timing differences expires in
fiscal years 2032 and 2033 and may not be recoverable upon the purchase of the
Company under current IRS statutes.
6. COMMITMENTS AND CONTINGENCIES
In purchasing MoveIdiot.com, as discussed more fully in Note 1, the Company has
agreed to issue an additional 50,000 restricted shares of its common stock to
the developers of the software of MoveIdiot.com in the event certain revenue
targets are met.
7. CONCENTRATION OF CREDIT RISK
The Company is substantially reliant on the efforts of the chief executive
officer and the president of the Company. A withdrawal of these efforts would
have a material adverse effect on the Company's future plans and operations.
The Company has balances in banks that are in excess of insured amounts.
8. SUBSEQUENT EVENTS
The Company has made a review of material subsequent events from January 31,
2013 through the date of this report and found no material subsequent events
reportable during this period.
F-1
