-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, E51H/OI6loTO8obgYZ5NpFU5WYfdWROBpHh5wIJoDJLZ0I3EpBDU0+6oQDwwJTyG AemcxF8ViNHEeVy8F1Ldow== 0001108017-02-001677.txt : 20020715 0001108017-02-001677.hdr.sgml : 20020715 20020715165432 ACCESSION NUMBER: 0001108017-02-001677 CONFORMED SUBMISSION TYPE: 10QSB/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20011231 FILED AS OF DATE: 20020715 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ADVA INTERNATIONAL INC CENTRAL INDEX KEY: 0000807732 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 161284228 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10QSB/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-16341 FILM NUMBER: 02703186 BUSINESS ADDRESS: STREET 1: BTC 454 S ANDERSON RD STREET 2: SUITE 214 CITY: ROCK HILL STATE: SC ZIP: 29730 BUSINESS PHONE: 8033276790 MAIL ADDRESS: STREET 1: BTC 454 S ANDERSON RD STREET 2: SUITE 214 CITY: ROCK HILL STATE: SC ZIP: 29730 FORMER COMPANY: FORMER CONFORMED NAME: ADVANCED MEDICAL PRODUCTS INC DATE OF NAME CHANGE: 19920703 10QSB/A 1 qsba3.htm Form 10-QSB/A for ADVA
                       SECURITIES AND EXCHANGE COMMISSION
                                 Washington D.C.

                                  FORM 10-QSB/A


[X]     QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
        EXCHANGE ACT OF 1934

                For the quarterly period ended December 31, 2001

                                       OR

[  ]    TRANSITION REPORT PERSUANT TO SECTION 13 OR 15(d) OF THE
        EXCHANGE ACT

                For the transition period from________to________

                         Commission file number 0-16341



                             ADVA International Inc.
                 (Name of small business issuer in its charter)



            Delaware                                    16-1284228
            --------                                    ----------
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
 incorporation or organization)


                              454 South Anderson Road
                         Rock Hill, South Carolina 29730
                                  803.327.6790
 (Address and phone number of principal executive offices and place of business)

                APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                   PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the issuer filed all documents and reports required to be filed by
section q2, 13 or 15(d) of the Exchange Act after the distribution of securities
under a plan confirmed by a court.

        Yes X   No __

                         APPLICABLE TO CORPORATE ISSUERS

The number of shares outstanding of the issuer's common stock as of February 28,
2002 is 13,185,194.




                                       1






                     ADVA INTERNATIONAL INC. AND SUBSIDERARY

                                  FORM 10 -QSB

                                      INDEX

                                                                           Page
                                                                           ----
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements:

   Consolidated Balance Sheet as of December 31, 2001
        and March 31, 2001....................................................3

   Consolidated Statements of Operations for the Three
        and Nine Months Ended December 31, 2001 and 2000,
        and the cumulative period April 2, 1998 (inception)
        through December 31, 2001.............................................5

   Consolidated Statements of Changes in Stockholders'
        Equity (Deficiency) for the cumulative period
        April 2, 1998 (inception) through December 31, 2001...................6

   Consolidated Statements of Cash Flows for the nine
        Months Ended December 31, 2001 and 2000 and the
        cumulative period April 2, 1998 (inception)
        through December 31,2001..............................................7

   Notes to Consolidated Financial Statements.................................8

Item 2. Plan of Operation....................................................11

PART II. OTHER INFORMATION

Item 2. Changes in Securities................................................12

Item 6. Exhibits and Reports on Form 8-K.....................................12

SIGNATURES...................................................................12

Forward Looking Statements

When used in this Form 10-QSB, the words "may", "might", "will", "should",
"could", "expect(s)", "plan(s)", "intend(s)", "anticipate(s)", "believe(s)",
"estimate(s)", "predicts", "potential", or "continue(s)" or the negative of such
terms and other comparable terminology are intended to identify "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Such statements are subject to certain risks and uncertainties,
including but not limited to economic conditions, changes in laws or
regulations, our history of operating losses, limited access to capital, demand
for our products and services, dilution from issuance of additional shares,
newly developing technologies, loss of permits, conflicts of interests in
related party transactions, regulatory matters, the occurrence of events not
covered by insurance, a substantial increase in interest rates, protection of
technology, lack of industrial standards, raw material commodity pricing, the
ability to receive bid awards, the inability to implement our growth strategy,
the inability to maintain key employees, the effects of competition and our
ability to obtain additional financing. Such factors, which are discussed in
"The Plan Of Operation" and the notes to condensed consolidated financial
statements, could effect the Company's financial performance and could cause the
Company's actual results for future periods to differ materially from any
opinions or statements expressed with undue reliance on any such forward-looking
statements, which speak only as of the date made. Although we believe the
expectations reflected in the forward-looking statements are reasonable, we
cannot and do not guarantee future results, levels of activity, performance or
achievements. See "Plan of Operation".




                                       2


Item 1.           Financial information
- -------           ---------------------



                        ADVA INTERNATIONAL AND SUBSIDIARY
                        (A Development Stage Enterprise)

                           Consolidated Balance Sheet


                                                   Dec. 31,            March 31,
                                                    2001                 2001
- ---------------------------------------------------------------------------------
                                                 (Unaudited)

Assets

Current assets
     Cash and cash equivalents                  $   18,664          $   961,483
     Accounts receivable, other                         46                 -
     Prepaid expenses                               33,167               56,500
- ---------------------------------------------------------------------------------

Total current assets                                51,877            1,017,983

 Furniture and equipment, net of
      accumulated depreciation of
      $3,578                                        22,099                 -

Software                                           320,436              200,000

Deferred financing costs, net of
      of $358,859 and $221,155                     558,641              696,345

Deposit                                              2,979                2,979
- ---------------------------------------------------------------------------------

Total assets                                    $  956,032         $  1,914,328
- ---------------------------------------------------------------------------------


                                       3



                        ADVA INTERNATIONAL AND SUBSIDIARY
                        (A Development Stage Enterprise)

                           Consolidated Balance Sheet

                                                   Dec. 31,            March 31,
                                                     2001                 2001
- ---------------------------------------------------------------------------------
                                                 (Unaudited)


Liabilities and Stockholders' (Deficiency)

Current liabilities
     Notes payable                               $  85,000        $       -
     Current maturities of long term debt        1,500,000             300,000
     Accrued transaction and creditor
        payables                                       560             147,267
     Accrued professional fees                     312,234              49,400
     Accrued interest                              125,086              27,742
     Accounts payable and accrued expenses,
        other                                       50,537              33,515
     Due to officer                                 37,882
- ---------------------------------------------------------------------------------

Total current liabilities                        2,111,299             557,924

Long-term debt                                        -              1,500,000
- ---------------------------------------------------------------------------------

Total liabilities                                2,111,299           2,057,924

Commitments (Note 3, 4)

Stockholders' (deficiency)
     Class A preferred stock, no par value            -                  -
         Authorized 4,000 shares, none issued
     Class B preferred stock, no par value            -                  -
         Authorized 6,000 shares, none issued
     Common stock, $.001 par value
         Authorized 20,000,000 shares
         Issued and outstanding 13,185,194
         shares                                     13,185              13,185
     Additional paid-in capital                  1,937,815           1,937,815
     (Deficit) accumulated during the
        development stage                       (3,106,267)         (2,094,596)

Total stockholders' (deficiency)                (1,155,267)           (143,596)
- ---------------------------------------------------------------------------------

Total liabilities and stockholders'
        (deficiency)                           $   956,032          $1,914,328
- ---------------------------------------------------------------------------------


           See accompanying notes to consolidated financial statements




                                       4


                        ADVA INTERNATIONAL AND SUBSIDIARY
                        (A Development Stage Enterprise)

                      Consolidated Statement of Operations




                                                                                           Cumulative
                                                                                             Period
                                                                                            April 2,
                                                                                              1998
                                           Three Months           Nine Months              (Inception)
                                              Ended                   Ended                  through
                                             Dec. 31,                Dec. 31,                Dec. 31,
                                         2001       2000         2001       2000               2001
- --------------------------------------------------------------------------------------------------------
                                     (Unaudited)  (Unaudited)  (Unaudited)  (Unaudited)  (Unaudited)

Sales, license fees                   $    -      $   -       $    -      $    -     $      8,484


Operating expenses
     Salary and employee related        63,995       29,998      179,329       85,060        527,059
     General and administrative        110,027       88,540      591,709      170,663      1,127,866
     Expenses related to merger          5,000       84,411       30,336      266,174        995,278
- ---------------------------------------------------------------------------------------------------------

Total operating expenses               179,022      202,949      801,374      521,897      2,650,203
- ---------------------------------------------------------------------------------------------------------

(Loss) from operations                (179,022)    (202,949)    (801,374)    (521,897)    (2,641,719)
- ----------------------------------------------------------------------------------------------------------

Other income (expense)
     Miscellaneous income                 -           -             -           -              1,305
     Interest (expense), Officer        (1,558)       -           (4,366)       -            (12,587)
     Interest (expense), debt          (71,429)     (57,276)    (213,390)    (166,181)      (485,355)
     Interest income                         7        6,139        7,460       14,840          32,089
- ----------------------------------------------------------------------------------------------------------

Total other (expense)                  (72,980)     (51,137)    (210,296)    (151,291)       (464,547)
- ----------------------------------------------------------------------------------------------------------

Net (loss)                           $(252,002)   $(254,086)  $(1,011,670)   $(673,188)    $(3,106,267)
- ----------------------------------------------------------------------------------------------------------

Basic and diluted loss per share        $(0.02)      $(0.02)       $(0.08)      $(0.05)         $(0.26)
- ----------------------------------------------------------------------------------------------------------

Weighted average shares outstanding  13,185,194   12,468,750   13,185,194   12,376,266       11,871,525
- -----------------------------------------------------------------------------------------------------------

           See accompanying notes to consolidated financial statements




                                       5




                        ADVA INTERNATIONAL AND SUBSIDIARY
                        (A Development Stage Enterprise)

     Consolidated Statements of Changes in Stockholders' Equity (Deficiency)


                                                                                            (Deficit)                       Total
                                                                                           Accumulated                      Stock
                                                                              Additional   During the       Stock          Holders'
                                      Preferred Stock        Common Stock       Paid-In     Development   Subscription      Equity
                                     shares     Amount     Shares    Amount     Capital        Stage       Receivable     Deficiency
- ------------------------------------------------------------------------------------------------------------------------------------

Balance, April 2, 1998 (inception)     -       $  -          -     $   -      $   -        $   -          $      -       $     -

Common stock issued, May 14, 1998      -          -        1,000       10       300,990        -              (1,000)       300,000

Net (loss)                             -          -          -         -          -          (287,851)           -         (287,851)
- ------------------------------------------------------------------------------------------------------------------------------------

Balance, March 31, 1999                -          -        1,000       10       300,990      (287,851)        (1,000)        12,149

Original issue discount arising
  from options granted in connection
  with debt, Jan. 14, 1998             -          -          -         -        900,000        -                 -          900,000
  2000

Net (loss)                             -          -          -         -          -          (339,034)           -         (339,034)
- ------------------------------------------------------------------------------------------------------------------------------------

Balance, March 31, 2000                -          -        1,000       10     1,200,990      (626,885)        (1,000)       573,115

Common stock issued, May 17, 2000      -          -           13       -        300,000        -                 -          300,000

Stock options exercised, May 17, 2000  -          -          176        2       449,998        -                 -          450,000

Recapitalization, March 2, 2001        -          -   13,184,005   13,173       (13,173)       -                 -             -

Receipt of stock subscription,
  March 2, 2001                        -          -          -          -         -            -               1,000          1,000

Net (loss)                             -          -          -          -         -        (1,467,711)           -       (1,467,711)
- -
- ------------------------------------------------------------------------------------------------------------------------------------

Balance, March 31, 2001                -          -   13,185,194   13,185     1,937,815    (2,094,596)           -         (143,596)

Net (loss) (unaudited)                 -          -         -           -         -        (1,011,671)           -       (1,011,671)
- ------------------------------------------------------------------------------------------------------------------------------------

Balance, December 31, 2001 (Unaudited) -        $ -   13,185,194 $ 13,185   $ 1,937,815   $ (3,106,267)          -     $ (1,156,267)
- ------------------------------------------------------------------------------------------------------------------------------------

          See accompanying notes to consolidated financial statements.



                                       6


                        ADVA INTERNATIONAL AND SUBSIDIARY
                        (A Development Stage Enterprise)

                      Consolidated Statement of Cash Flows


                                                                                          Cumulative
                                                                                            Period
                                                                                            April 2,
                                                                                             1998
                                                                                          (Inception)
                                                                  Nine Months Ended         through
                                                                       Dec. 31,             Dec. 31,
                                                                 2001           2000          2001
- ---------------------------------------------------------------------------------------------------------
                                                               (Unaudited)    (Unaudited)   (Unaudited)
Cash Flows from operating activities
   Net (loss)                                                 $(1,011,671)    $ (673,188)  $(3,106,267)
   Adjustments to reconcile net (loss) to net cash (used in)
        Operating activities
                Amortization of deferred finance costs            137,703        137,441       358,859
                Depreciation                                        3,578           -            3,578                                                                   -
        Changes in assets and liabilities
                Accounts receivable                                   (46)          -              (46)
                Prepaid expenses                                   23,333        (29,000)      (33,167)
                Deposits                                           (2,979)          -           (2,979)
                Accrued transaction and creditor payables        (299,440)          -              560
                Accounts payable and accrued expenses             263,449       (272,850)      487,857

- -----------------------------------------------------------------------------------------------------------

Net cash (used in) operating expenses                            (886,073)      (837,597)   (2,291,605)
- -----------------------------------------------------------------------------------------------------------

Cash flows from investing activities
       Software and related costs                                (120,436)          -         (320,436)
       Purchase of furniture and equipment                        (25,677)          -          (25,677)
       Repayment of (loan to) officer                               4,367         (7,379)       37,882
- -----------------------------------------------------------------------------------------------------------

Net cash (used in) investing activities                          (141,746)        (7,379)     (308,231)
- -----------------------------------------------------------------------------------------------------------

Cash flows from financial activities
     Proceeds from long-term debt, net of finance fees             85,000        390,000     1,567,500
     Proceeds from stock issuance and subscription                   -           750,000     1,051,000
- -----------------------------------------------------------------------------------------------------------

Net cash provided by financing activities                          85,000      1,140,000     2,618,500
- -----------------------------------------------------------------------------------------------------------

Net  (decrease) increase in cash and cash equivalents            (942,819)       295,024        18,664

Cash and cash equivalents at the beginning of the period          961,483        183,492          -
- -----------------------------------------------------------------------------------------------------------

Cash and cash equivalents at the end of period                     18,664        478,516        18,664
- -----------------------------------------------------------------------------------------------------------

Non cash activity
    During the year ended March 31, 2000, the Company incurred $900,000 in
non-cash deferred finance charges from options for common stock issued with debt.
The amount was credited to additional paid-in capital.
- ----------------------------------------------------------------------------------------------------------

           See accompanying notes to consolidated financial statements



                                       7



                        ADVA INTERNATIONAL AND SUBSIDIARY
                        (A Development Stage Enterprise)

                      Notes to Consolidated Balance Sheets

1. Basis of Presentation

The consolidated Financial statements are unaudited and
include the accounts of ADVA International Inc. ("ADVA") and its wholly owned
subsiderary Global Information Group USA, Inc. ("GIG"). All significant
inter-company accounts and transactions have been eliminated in consolidation.

In the opinion of management, all adjustments (consisting of normal recurring
accruals) have been made which are necessary to present fairly the financial
position of the company as of December 31, 2001, and the results of its
operations for the three and nine months ended December 31, 2001 and 2000. The
results of operations experienced for the nine months ended December 31, 2001
are not necessarily indicative of the results to be experienced for the fiscal
year ended March 31, 2002.

The statements and related notes have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission. Accordingly, certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
omitted pursuant to such rules and regulations. The accompanying notes should
therefore be read in conjunction with the Company's March 31, 2001 annual
financial statements.


2. Business Operations

From April 2, 1998 (inception) to March 31, 2000, the Company maintained
operations in the Netherlands and in April 2000 moved all operations to the
United States. The Company is in the development stage and planned principal
operations have not yet commenced.

The Company develops and markets 3D graphics applications software running on
the Linux and UNIX operating systems. The Company's present software product is
believed to be the only complete 3D solid modeling, animation and rendering
system currently available on the Linux OS. The Company's software has been
designed for use by digital media professionals in the production of film and
video special effects, animation, computer-aided design and scientific
visualization, Internet web site and print graphics, game development and
virtual television. Since acquiring the software and the underlying source code
in February 2000, the Company has been enhancing the software, performing market
research and developing marketing plans for sales of the software to users in
the 3D graphics applications market.

The Company's success will depend in part on its ability to obtain patents and
product license rights, maintain trade secrets, and operate without infringing
on the proprietary rights of others, both in the United States and other
countries. There can be no assurance that patents issued to or licensed by the
Company will not be challenged, invalidated, or circumvented, or that the rights
granted thereunder will provide proprietary protection or competitive advantages
to the Company.

The Company has no significant operating history and, from April 2, 1998
(inception) to December 31, 2001, has generated a net loss of $3,106,267. This
loss has been financed by proceeds from equity and debt issuances.

New debt and equity issuances are expected to provide near term working capital
until earnings from operations can support the Company. There can be no
assurance that management will be successful in its efforts to attract such
capital.

An interest payment to investors due in August 2001 was not made. Negotiations
to revise the terms of this loan and future interest payments have been
undertaken and are currently ongoing. As a result, the Company is in default
under its loan agreements and has classified the debt as a current liability.

On November 27, 2001, an aggregate total of $85,000 was advanced to the Company
in the form of a loan by several individual lenders. The instruments bear an
interest rate of 7.5% compounded annually.



                                       8



3. Employment and Consulting Agreements

In January 2000, GIG entered into an employment agreement with the Chief
Executive Officer that provides for payments of $110,000 per year along with
certain other benefits in exchange for defined services to be performed by the
employee. The agreement is not for a specific term and may be terminated by
either party at any time.

On April 23, 2001, the Board of Directors granted an Incentive Stock Option (see
Note 5) to the President of GIG who is also a Director of both ADVA and GIG to
purchase 100,000 shares of ADVA common stock in connection with an employment
agreement with GIG. ADVA's Board of Directors approved the option on April 23,
2001. The incentive stock option will vest annually in four equal increments
commencing on April 23, 2001. The exercise price, $1.75 per share, was set at
the closing price of the common stock on the grant date.

On May 1, 2001, GIG entered into an employment agreement with the President of
GIG for a minimum of one year, providing payments of $125,000 per year along
with certain other benefits.

On May 1, 2001, the Company entered into a one-year contractual agreement with a
consultant to act as Chief Financial Advisor to the Company. The agreement
provides for payment of $4,300. monthly, and is cancelable on thirty days notice
by the consultant or the Company. The Company also granted an Incentive Stock
Option (see note 5) to acquire 25,000 shares of common stock at $1.25 per share
which vests in equal quarterly increments beginning August 1, 2001. This
agreement was ratified by the ADVA Board of Directors on August 17, 2001

On September 1, 2001 the Company entered into an agreement with a consultant to
become Director of Software Development for GIG at an annual salary of $85,000.
On December 1, 2001, the employee terminated his employment with the Company and
continues to work for GIG as a consultant.


4. ADVA Outside Director Options

On August 17, 2001, the Board of Directors in consideration for advisory and
consultant services rendered to Global Information Group USA Inc., granted a
Director a Non-Qualified Stock Option for 10,000 shares at an option price of
$1.25 per share.

Outside Directors of ADVA, in lieu of other compensation received stock option
grants for Board Meeting attendance as follows:

        Ronald G Moyer          1,500
        Ruud A.M.Pruijm           750
        Philip L.van Wijngaarden  750
        C.Roger Jones             750
        Michael Tolson         *2,000

* Options granted as newly elected board member.



                                       9


5. ADVA Stock Option Plan

The Company, at its August 17, 2001 Board of Directors meeting "authorized the
2001 ADVA Stock Option Plan and further authorized to set aside 1,400,000 shares
of the common stock of the Company for sale and issuance to the executives and
key employees of the Company and its subsidiaries and affiliates in accordance
with the terms of the Plan."

Options granted under the plan are Incentive Stock Options or Non-Qualified
Stock Options and are granted at a price equal to the fair market value of the
Company's common stock at the date of grant. In addition, no Incentive Stock
Option may be granted to an employee owning directly or indirectly stock having
more than 10% of the total combined voting power of all classes of stock of the
Company unless the exercise price is set at not less than 110% of the fair
market value of the shares subject to such Incentive Stock Option on the date of
the grant and such Incentive Stock Option expires not later than five years from
the date of grant.

Generally, the Incentive Stock Options and Non-Qualified Stock Options have
terms of ten years from the date of grant. On each anniversary date of grant,
the options vest in increments of 20%. The options become fully vested and
exercisable four years from the date of grant. Notwithstanding the preceding,
the board of directors determines the terms of options granted on a case
- -by-case basis. See Note 3, 4 for options granted during the nine months ended
December 31, 2001.

The 2001 ADVA Stock Option Plan was approved by a majority of shareholders at
the annual meeting on September 25, 2001.

The options granted to employees and Directors as described in notes 3 and 4
were issued prior to stockholder approval of the Stock Option Plan (the
"Plan")at exercise prices exceeding the market value of the common stock on
September 26, 2001, the date the "Plan" was approved by the stockholders. Since
there was no increase in market value between the date's issuance and the
approval date, no compensation was recorded.


6. Director  Changes

On September 26, 2001, the slate of Directors proposed by management was approved
by a majority of the shareholders of ADVA International Inc. to include Anthony
E. Mohr, George L. Down, Ruud AM Pruijm, C. Roger Jones and Michael Tolson. Earlier
the same day, Philip van Wijngaarden resigned as Director of ADVA International
citing a lack of adequate time needed to devote to his responsibilities as Director.
The Board has not yet moved to fill the vacancy left by his departure.


                                       10



Item 2.           Plan of Operations
- -------           ------------------

The following information should be read in conjunction with the consolidated
financial statements and notes thereto appearing elsewhere in this Form
10-QSB/A.

Our short-term objectives are to raise additional operating funds through a
mixture of equity capital and loans. With anticipated additional funding we
expect to continue further software development on Linux, Unix and other
software platforms. We further anticipate executing multiple software licensing
and joint venture agreements in the 3D graphics technology space.

Our long- term objectives are to generate increasing revenues in four areas: the
Linux end user market; the 3D animation and production markets through software
licensing and joint venture partnerships; The licensing of the Company's
technology to developers of Computer-Aided Design (CAD) tools and finally, sales
of 3D tools to CAD end users.

During the Quarter and nine months ended December 31, 2001, ADVA suffered a loss
from operations of $179,022 and $801,374 respectively. We funded our operating
losses during these periods through a combination of proceeds from long-term
debt and the remaining proceeds from the private sale of shares of our common
stock.

During the year ended March 31, 2001, we generated operating losses of
$1,253,445. We funded these operating losses during this period through a
combination of low interest long-term debt and the remaining proceeds from the
private sale of shares of our common stock.

We do not have available creditor, bank financing or other external sources of
funding. Due to historical operating losses, our operations have not generated
positive cash flow. In order to obtain capital we may need to sell additional
shares of common stock and/ or borrow funds from private lenders, some of which
may take the form of a Convertible loan. There is no assurance if we do receive
a convertible loan we will be able to pay this money back to the lender prior to
its due date, thus having to convert the loan to stock. The Company is actively
seeking fresh capital from a pool of accredited investors, some of which are
existing investors.

Based upon the anticipated combination of an infusion of capital through low
interest loans, convertible to stock after one year, capital raised through the
sale of additional stock plus anticipated revenue from joint venture agreements
with hardware and software manufacturers in the 3D, Animation and CAD
marketplaces, we believe we will have adequate funds to meet our projected cash
needs through 2002.

However, should we not receive an infusion of capital, and or not execute
anticipated agreements with hardware and software manufacturers, the Company
will incur additional losses and may be forced to cease operations. No
assurances can be given at this time as to the availability of the new funding,
the terms thereof, or the execution of revenue generating agreements.

Going forward, we have reduced our total number of employees to two, now relying
on outside vendors and consultants for many of the Company's operations. Should
new operating capital becomes available, the Company anticipates the immediate
re-hiring or contracting of certain former employees.




                                       11

                           PART II. OTHER INFORMATION

Item 2. Changes in Securities

                   None

Item 6. Exhibits and Reports on Form 8-K.

        (a)     Exhibits

                  None

        (b)     Reports on Form 8-K

                  No reports on 8-K have been filed during the quarter covered
                  by this report.



                                   Signatures

In accordance with the requirements of the Exchange Act, the issuer caused this
report to be signed on its behalf by the undersigned, thereunto duly signed.


                                                 /s/ Ernst R. Verdonck
                                                ----------------------------
                                                     Ernst R. Verdonck
                                                     CEO and President

Date: 07/15/02

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