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Fortress Financial Group, Inc./WY · 10-Q · For 12/31/98

Filed On 5/17/99   ·   Accession Number 802206-99-2   ·   SEC File 0-24262

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  As Of                Filer                Filing    For/On/As Docs:Size

 5/17/99  Fortress Financial Group, Inc./WY 10-Q       12/31/98    2:40K

Quarterly Report   —   Form 10-Q
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q        Quarterly Report                                      18±    77K 
 2: EX-27     ƒ Financial Data Schedule                                1      5K 


10-Q   —   Quarterly Report
Document Table of Contents

Page (sequential) | (alphabetic) Top
 
11st Page   -   Filing Submission
"Item 1. Description of Business
"Item 2. Description of Property
"Item 3. Legal proceedings
"Item 4. Submission of Matters to a Vote of Security Holders
"Item 5. Market for the Registrant's Common Equity and Related Matters
"Item 6. Selected Financial Data
"Item 7. Management's discussion and Analysis of Financial condition and Results of Operation
"Item 8. Financial Statements
"Item 9. Changes in and Disagreements with Accountants or Accounting and Financial Disclosure
"Item 10. Directors and Executive Officers of the Registrant
"Item 11. Executive Compensation
"Item 12. Security Ownership of Certain Beneficial Owners and Management
"Item 13. Certain Relationships and Related Transactions
"Item 14. Exhibits and Reports on Form 8-K


UNITED STATES SECURITIES EXCHANGE CONMSSION Washington, D.C. 20549 FORM 10-Q ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For quarter ended March 31, 1998 Commission file number: 0-24262 ADVEN INC. (Exact name of registrant as specified in charter) WASHINGTON 91-1363905 (State or other jurisdiction of (IRS Employer identification No.) incorporation or organization) 3653 Hemlock Court, Reno, Nevada 89509 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code..... 702-829-8812 Securities registered pursuant to Section 12(b) of the Act: NONE Securities registered pursuant to Section 12(g) of the Act: NONE 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 such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for at least the past 90 days. Yes X No State the aggregate market value of the voting stock held by non-affiliates of the registrant. The aggregate market value shall be computed by reference to the price at which stock was sold, as of a specified date within 60 days prior to the date of filing. As of December 31, 1998, the Company had 5,469,667 shared of common stock issued and outstanding, and on March 31, 1997, the Company had 5,469,667 shares of common stock issued and outstanding, 859,700 of these shares being held by non-affiliates of the registrant. The aggregate market value of the voting stock held by non-affiliates of the registrant, based on the closing bid price of such stock, as of March 31, 1998 is $51,582., based upon $.06 mulitiplied the 859,700 shares of common stock held by non-affiliates. PART I Item 1. Description of Business. A. General Description of Business ADVEN, INC., a Washington corporation (the "Company"), was incorporated on August 22'nd, 1986. Adven, Inc. began conducting business through its wholly owned subsidiary, Surface Technologies, Inc. ("STI"). STI manufactures a cushioned playground surface which is sold primarily to restaurants, schools, parks and other entities which provide playgrounds for children. STI operates under a license from SAFEPAC, Inc., whereby SAFEPAC has authorized STI to use a patent in the production of the product and its registered trademark "SAFE-T-TURF". The Company was not able to obtain profitability as expected, due to poor performance by its dealer network, which faced too many installations and warranty problems. As a result, by the end of fiscal 1989, the Company was inactive and nearly insolvent. On December 28, 1990, the Company transferred its interest in STI to a creditor in full satisfaction of a debt. The company did not engage in active business in 1991, 1992, 1993, 1994 and 1995. On December 29, 1993, a shareholder meeting was held, at which the existing officers and directors resigned, and new officers and directors were elected. The Company's outstanding shares were reversed one for four, and a new block of treasury shares representing control of the company were issued to the new officers and directors. During 1993, 1994 and 1995 the Company actively sought business acquisitions and opportunities and funding for those efforts. On March 17, 1997, ADVEN, Inc. (the "Company") entered into a Supply and Licensed Manufacturing Agreement (the "Agreement") with DIS International (Marketing) Inc., a Barbados corporation ("DIS"). Pursuant to the Agreement, the Company received the exclusive right to formulate, manufacture, sell, distribute and put into use an oil-absorbent urethane foam (currently marketed under the name Zorbolite) in Australia and New Zealand. This oil-absorbent urethane foam ("Zorbolite") has been blended with various additives and concentrates through a process that changes the structure of the foam, allowing the foam to absorb hydro carbon liquids. Zorbolite has many potential industrial and consumer applications related to cleaning oil based pollutants. Item 2. Description of Property. The Company uses the office of its president, located at 3653 Hemlock Court, Reno, Nevada, 89509, provided at no expense to the Company Item 3. Legal proceedings. The Company is not involved in any threatened or pending legal proceeding. Item 4. Submission of Matters to a Vote of Security Holders. The Company did not submit any matters to a vote of Security holders during 1997. PART II Item 5. Market for the Registrant's Common Equity and Related Matters. Market Information: The Common Stock of the Company began trading over the counter on December 3,1996. The following table sets forth for the period indicated the range of high and low representative bid quotations for the Company's Common Stock. Fiscal Year Ended December 31, 1998 Bid High Low Year Ended Dec. 31, 1997 0.40 0.06 (b) Holders The Company had approximately 140 shareholders of record as of March 31, 1999, which number does not include shareholders whose shares are held in street or nominee names. (c) Dividends The Company has never paid a cash dividend on its common stock and does not expect to pay one in the foreseeable future. Payment of dividends in the future will depend on the Company's earnings (if any) and its cash requirements at that time. Management does not plan any stock dividend. Item 6. Selected Financial Data The selected financial data presented below was derived from the audited financial statements of the Company. The data should be read in conjunction with the Company's financial statements and the accompanying notes and "Management's Discussion and Analysis of Financial Condition and Results of Operations." Selected Operating Information Year Ending December 31, 1995 Adven, Inc. Consolidated As at and for the Years Ended December 31, 1994 1995 1996 1997 1998 Operating Revenue Nil Nil Nil 1,343 25,180 Income (Loss) (28,907) (6,416) (1,844) (8,794) 11,975 from operations Income (Loss) (0.02) Nil (.0011) (.0016) .0022 per common share Total Assets 23,187 15,635 13,391 1,710,604 1,609,639 Long Term Obligations Nil Nil Nil 505,100 389,160 Redeemable Preferred Stock Nil Nil Nil Nil Cash Dividends Nil Nil Nil Nil Nil per common share Item 7. Management's discussion and Analysis of Financial condition and Results of Operation. Financial Condition On January 15, 1997, an S-8 filing acknowledged the payment to John B. Lowy, 80,000 common shares as payment for services. The S-8 filing is incorporated by referrence to such filing. On March 13, 1997, the Company sold an aggregate of 2,666,666 shares of its Common Stock to a foreign company for an aggregate of $1,000,000. The Company issued an aggregate of 533,000 shares to another foreign entity as finders fee related to the aforementioned $1,000,000 sale. Subsequent to the Company's year end, Dec 31, 1977, the Company has an additional note receivable of $150,000 with a maturity of less than one year. During 1998, the Company received common stock valued at $397,523 from a related corporation (see Note 2) as payment on several notes receivable. The Business and Strategy On March 17, 1997, ADVEN, Inc. (the "Company") entered into a Supply and Licensed Manufacturing Agreement (the "Agreement") with DIS International (Marketing) Inc., a Barbados corporation ("DIS"). Pursuant to the Agreement, the Company received the exclusive right to formulate, manufacture, sell, distribute and put into use an oil-absorbent urethane foam (currently marketed under the name Zorbolite) in Australia and New Zealand. Pursuant to the Agreement, the Company is required to purchase the materials required to manufacture Zorbolite from DIS or its affiliates. Commencing in the first quarter of 1998, the Company is required to purchase a minimum of $50,000 of materials per quarter. The term of the Agreement is five years; however, the Company has the right to renew the Agreement for successive five year periods, provided the Company is not in default under the Agreement at that time. DIS has the right to terminate the Agreement upon 60 days written notice in the event that the Company fails to meet its obligations under the Agreement or acts in a manner prohibited under the Agreement. The Company has a right to cure any deficiency within the 60 day period. The Company's principal obligations under the Agreement are to pay the balance of the licensing fee ($500,000) and purchase minimum quotas of materials from DIS and to manufacture and exploit the sale and distribution of Zorbolite in the Territory. DIS also has the right to terminate the Agreement upon the happening of certain events related to the bankruptcy or insolvency of the Company. As consideration for the Agreement, the Company has paid $625,000 and is obligated to pay an additional $375,000 within the next six months. The amount and terms of the foregoing consideration were negotiated between the Company and DIS. The initial $625,000 was paid from the proceeds of the Company's Regulation S offering (see "Item 9 Notes to Financial Statements, Sales of Equity Securities Pursuant to Regulation S"). The Company plans to use the balance of the proceeds from the Regulation S offering to purchase equipment and hire personnel. Management plans to raise the remaining $375,000 required to be paid under the Agreement from the sale of securities. No assurance can be given that the Company will be able to raise sufficient funds. Results of Operations The Company has had little to no revenues for the past three fiscal years, the Company expects revenues to begin in the second half of 2000 subsequent to the establishment of a manufacturing and marketing distribution center in Australia or New Zealand. Item 8. Financial Statements. The report of independent certified public accountants is attached hereto as Exhibit A. See index to financial statements at page 11. Item 9. Changes in and Disagreements with Accountants or Accounting and Financial Disclosure. None. PART III Item 10. Directors and Executive Officers of the Registrant Identification of Directors and Executive Officers The present directors and executive officers and significant employees of the Company, their positions held in the Company, and duration as such, are as follows: Name Position Since Henri Hornby President / Director 12/29/93 Neil F. Hornby Secretary / Director 12/29/93 Family Relationships Henri Hornby, President and Director, and Neil F. Hornby, Secretary and Director, are brothers. Significant Employers None, other than officers of the Company. HENRI HORNBY has been self employed, managing his personal investments since 1989. From October 1988 to November 1989 he was the Chairman of the Board of Directors and the sole shareholder of Advent Securities, Inc., a Utah corporation, then licensed by the Commission as a broker/dealer. Advent began its retail brokerage business in January 1989. From January 1985 to December 1988, Mr. Hornby was a partner of International Projects Group of San Jose, California, a management consulting and public relations firm. Mr. Hornby has been an officer and director of five "blank check" companies: Yarborough Ventures Corporation (now Elegant Illusions, Inc. ("Ell")); Mont Blanc Resources, Inc. (now Grafix Time Corporation ("GTC")); Mont Rouge Resources, Inc. (now American Digital Communications, Inc. ("AMDC" or/and "Mont Rouge")); Zenith Ventures Corporation ("Zenith")); and Adven, Inc. In November, 1992, Ell completed a public offering of 137,800 Units at $1.00 per Unit. In May 1993, Ell acquired all of the outstanding stock of Elegant Illusions, Inc., a retailer of copy jewelry, in exchange for 13,400 shares of Ell common stock. The Company changed its name to Elegant Illusion, Inc. and Mr. Hornby and the other officers and directors of Ell resigned following the transaction. In March, 1987, GTC completed a public offering of 371,000 Units at $1.00 each. In May, 1987, GTC acquired all of the outstanding common stock of Movies Marketing, Inc. ("Movies"), a manufacturer and marketer of watches and electronic buttons and badges, in exchange for 4,000,000 shares of GTC common stock. Mr. Hornby and the other officers and directors of GTC resigned following the transaction. Mr. Hornby does not know the current status of this company. Mont Rouge completed a public offering 792,970 Units at $1.00 each in December of 1987. On March 1, 1988, Mont Rouge signed an agreement to acquire American Fidelity Holding Company ("AFH"), a company engaged in the purchase and sale of second mortgages. As a result of this transaction, Mr. Hornby and the other officers and directors of Mont Rouge resigned. As a consequence of the acquisition, Mont Rouge transferred $798,184 to AFH. AFH depleted all of the funds transferred to it by Mont rouge and, by about March, 1989, AFH closed its offices. Thereafter, Mr. Hornby confronted the then current management of Mont Rouge and negotiated a rescission of the acquisition. All of the shares issued pursuant to the acquisition were returned to Mont Rouge, however, Mont Rouge was unable to retrieve any of the $792,184 from AFH. In September 1993, Mont Rouge changed, its name to American Digital Communication, Inc., and acquired SMR (Specialized Mobile Radio) cellular channel licenses and operations. In January, 1989, Zenith completed a public offering of 510,000 Units at $1.00 each. In February, 1989, Zenith acquired all of the outstanding common stock of Epic Industries, Inc., a manufacturer of specialized computer chips, in exchange for 3,200,000 shares of Epic's common stock. Mr. Henri Hornby and all the officers and directors of Zenith resigned following the transaction. In 1993, Epic ceased doing business. In December of 1993, Henri Hornby purchased a controlling interest of 85 % of the issued and outstanding stock of Adven, Inc., representing 1,393,301 shares. He then brought Adven, Inc. up to date with its audited financial statements and with its filings with the Securities Exchange Commission. NEIL F. HORNBY has been President and Director of RAT International (Marketing) Limited, a company listed on the Vancouver Stock Exchange that holds the worldwide rights for certain proprietary encryption software programs, since July, 1993. Neil F. Hornby has been President and Director of Strategic Planning Group, Inc., a Nevada corporation, since December 15, 1992. Also, Mr. Hornby has been Secretary and Director of Adven, Inc., since December 29, 1993. Mr. Hornby was a partner in Western Wireless, Inc., an engineering firm, from 1989 to 1992. Mr. Hornby was President of Hamilton Williams & Co., San Jose, a full service licensed broker/dealer from 1988 to 1989. From 1986 to 1988 he was Executive Administrator for International Projects Group, a management consulting and public relations firm. Mr. Neil F. Hornby is the brother of Henri Hornby. Both Neil F. Hornby and Henri Hornby devote approximately 10 % of their time to the Company's business. Item 11. Executive Compensation Cash Compensation No cash compensation has been paid to the officers and directors of the Company. Compensation Pursuant to Plans No compensation was paid to executive officers pursuant to any plan during the fiscal year just ended, and the Company has no agreement or understanding, express or implied, with any officer or director concerning employment or cash compensation for services. Other compensation None. Item 12. Security Ownership of Certain Beneficial Owners and Management The following table sets forth as of March 25'TH, 1997, the names of persons who own of record, or were known by the Company to own beneficially, more than five percent of its total issued and outstanding common stock and the beneficial ownership of all such stock as of that date by officers and directors of the Company and all such officers and directors as a group. Except as otherwise noted, each person listed below is the sole beneficial owner of the shares and has sole investment and voting power as such shares. No person listed below has any option, warrant o r other right to acquire additional securities of the Company, except as may be otherwise noted. Name and Address Amount&Nature Percent of Beneficial of Beneficial of Title of Class Owner Ownership Class Common Stock par value .0001 SAME Henri Hornby* 1,393,301 25.0 % Vanuatu International Trust Company Ltd. 2,666,666 48.8 % Kennington Investments, Ltd. 533,000 9.7 % DIS International (Marketing), Ltd. 550,000 10.1 % All officers and directors 1,393,301 25.0 % *Officers and directors The Company's management knows of no affiliations between the foregoing entities or any arrangements between them with regard to the election of directors or other matters. Vanuata International Trust Company Ltd. is a trust organized under the laws of Vanuata, whose trustee is Lindsay Barret. Kennington Investments, Ltd. is a corporation incorporated under the laws of the Bahamas whose principal officers are Robert Montgomery/President and M.K. Parcell/Secretary. DIS International (Marketing) Inc. is a corporation organized under the laws of Barbados whose sole officer is Margaret Bruce/President. Item 13. Certain Relationships and Related Transactions. On March 17, 1997, ADVEN, Inc. (the "Company") entered into a Supply and Licensed Manufacturing Agreement (the "Agreement") with DIS International (Marketing) Inc., a Barbados corporation ("DIS"). Pursuant to the Agreement, the Company received the exclusive right to formulate, manufacture, sell, distribute and put into use an oil-absorbent urethane foam (currently marketed under the name Zorbolite) in Australia and New Zealand. This oil-absorbent urethane foam ("Zorbolite") has been blended with various additives and concentrates through a process that changes the structure of the foam, allowing the foam to absorb hydro carbon liquids. Zorbolite has many potential industrial and consumer applications related to cleaning oil based pollutants. On March 13, 1997, the Company sold an aggregate of 2,666,666 shares of its Common Stock to a foreign company for an aggregate of $1,000,000. The Company issued an aggregate of 533,000 shares to another foreign entity as finders fee related to the aforementioned $1,000,000 sale. Pursuant to the Agreement, the Company is required to purchase the materials required to manufacture Zorbolite from DIS or its affiliates. The term of the Agreement is five years; however, the Company has the right to renew the Agreement for successive five year periods, provided the Company is not in default under the Agreement at that time. DIS has the right to terminate the Agreement upon 60 days written notice in the event that the Company fails to meet its obligations under the Agreement or acts in a manner prohibited under the Agreement. The Company has a right to cure any deficiency within the 60 day period. The Company's principal obligations under the Agreement are to pay the balance of the licensing fee ($375,000) and purchase minimum quotas of materials from DIS and to manufacture and exploit the sale and distribution of Zorbolite in the Territory. DIS also has the right to terminate the Agreement upon the happening of certain events related to the bankruptcy or insolvency of the Company. As consideration for the Agreement, the Company has paid $625,000 and is obligated to pay an additional $375,000, and has issued 550,000 shares of its restricted common stock to DIS. The amount and terms of the foregoing consideration were negotiated between the Company and DIS. The initial $625,000 was paid from the proceeds of the Company's Regulation S offering (see "Item 9 of Notes to Financial Statements, Sales of Equity Securities Pursuant to Regulation S"). The Company plans to use the balance of the proceeds from the Regulation S offering to purchase equipment and hire personnel. Management plans to raise the remaining $375,000 required to be paid under the Agreement from the sale of securities. No assurance can be given that the Company will be able to raise sufficient funds. During 1997, Adven, Inc. loaned Wincanton Corporation a total of $ 1 00,000 at 1O% interest per annum, to be paid one year from the dates of issuance. During 1998, Adven, Inc. loaned Wincanton Corporation an additional $275,000 also at 10% interest per annum. These notes were also to be paid one year from the dates of issuance. Wincanton Corporation repaid $4,000 on the notes during 1998. On October 7, 1998, the Company exchanged the total notes receivable balance of $371,000, plus accrued interest to date of $23,444, for 1,806,924 share of Wincanton Corporation stock. This transaction resulted in a gain of $3,079. As of December 31, 1998, Adven, Inc. owns 15.96% of Wincanton Corporation. PART IV Item 14. Exhibits and Reports on Form 8-K (a) Exhibits: (1) Financial Statements - The Company's audited financial statements for the year ended December 31, 1998, are attached hereto as Exhibit A. (b) Reports on Form 8-K. The following report on form 8-K was filed by the Company during the fourth quarter of the fiscal year ended December 31, 1996. The Company filed an 8-K on March 21, 1997, which is incorporated by reference to such filing. SIGNATURES In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant caused this Report to be signed on its behalf by the undersigned, thereto duly authorized individual. ADVEN, INC. By Henri Hornby/President and Director In accordance with the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Name/Title Date Henri Hornby May 16, 1999 Henri Hornby President / Director Neil F. Hornby May 16, 1999 Neil F. Hornby Secretary Director Exhibit A Audited Financial Statements MARK BAILEY & CO. LTD. Certified Public Accountants Management Consultants Office Address: Mailing Address: 1495 Ridgeview Drive, Ste. 200 Phone: 775/332.4200 P.O. Box 6060 Reno, Nevada 89509-6634 Fax: 775/332.4210 Reno, Nevada 89513 Independent Auditors' Report Board of Directors Adven, Inc. We have audited the accompanying balance sheet of Adven, Inc. as of December 31, 1998 and the related statements of income, stockholders' equity, and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. The financial statements of Adven, Inc. as of December 31, 1997 and 1996 were audited by other auditors whose report dated March 10, 1998, expressed an unqualified opinion on those statements. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Adven, Inc. as of December 31, 1998, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. Reno, Nevada March 10, 1999 ADVEN, INC. BALANCE SHEETS December 31, 1998 and 1997 ASSETS 1998 1997 Current Assets Cash $2,866 $403,011 Interest receivable (Note 2) - 1,343 Note receivable (Note 2) - 100,000 Total current assets 2,866 504,354 Other Assets Investment in related party (Note 2) 397,523 - Supply and licensed manufacturing agreement (Note 3) 1,206,250 1,206,250 Total other assets 1,603,773 1,206,250 Total assets $1,606,639 $1,710,604 LIABILITIES AND STOCKHOLDERS'EQUITY Current Liabilities Accounts payable 975 975 Accrued interest (Note 3) 13,185 - License agreement payable (Note 3) 375,000 500,000 Loan payable - related party (Note 2) - 4,125 Total current liabilities 389,160 505,100 Stockholders' Equity Common stock, $.OOO1 par value, 20,000,000 shares authorized, 5,469,667 shares issued 547 547 Additional paid-in-capital 1,377,715 1,377,715 Accumulated deficit (160,783) (172,758) Total stockholders' equity 1,217,479 1,205,504 Total liabilities and stockholders' equity $1,606,639 $1,710,604 The Accompanying Notes are an Integral Part of the Financial Statements ADVEN, INC. STATEMENTS OF INCOME For the Years Ended December 31, 1998, 1997 and 1996 1998 1997 1996 Revenue Interest income (Note 2) $22,101 $1,343 0 Gain on asset exchange(Note 2) 3,079 - - Total revenue 25,180 1,343 - General and administrative expenses (4,145) (10,137) (1,844) Net income before interest expense, income taxes and extraordinary item 21,035 (8,794) (1,844) Interest expense (Note 3) (13,185) - - Net income before income taxes and extraordinary item 7,850 (8,794) (1,844) Income taxes (Note 4) - - - Net income before extraordinary item 7,850 (8,794) (1,844) Extraordinary item (Note 2) 4,125 Net income $11,975 $(8,794) (1,844) Earnings (loss) per share 0.0022 $(0.0016) (0.0011) The Accompanying Notes are an Integral Part of the Financial Statements ADVEN, INC. STATEMENTS OF CHANGES IN STOCKHOLDERS'EQUITY For the Years Ended December 31, 1998, 1997 and 1996 Additional Retained Common Stock Paid-in Earnings Total Shares Amount Capital (Deficit) Equity Balance at Dec.31,1995 1,640,001 $164 $169,848 $(162,120) 7,892 Net income at Dec31,1996 (1,844) (1,844) Balance at Dec31,1996 1,640,001 164 169,848 (163,964) 6,048 Sale of common stock 2,666,666 267 999,733 - 1,000,000 Finders fee paid by issuing common stock 533,000 53 199,822 - 199,875 Finders fee charged to paid-in capital - - (199,875) - (199,875) Payment on license agreement by issuing common stock 550,000 55 206,195 - 206,250 Payment of legal fee by issuing common stock 80,000 8 1,992 - 2,000 Net loss at Dec31,1997 - - - (8,794) (8,794) Balance at Dec31,1997 5,469,667 547 1,377,715 (172,758) 1,205,504 Net income at Dec31,1998 - - - 11,975 11,975 Balance at Dec31,1998 5,469,667 $ 547 $1,377,715 $(160,783) $1,217,479 The Accompanying Notes are an Integral Part of The Financial Statements ADVEN, INC. STATEMENTS OF CASH FLOWS December 31, 1998, 1997 and 1996 1998 1997 1996 Cash Flows from Operating Activities Net income $ 11,975 $(8,794) $ (1,844) Adjustments to reconcile net income to net Cash provided by operating activities: Gain on exchange of assets (3,079) -0- -0- Gain on extinguishment of debt (4,125) -0- -0- Payment of legal fees by issuance of common stock -0- 2,000 -0- Increase in interest receivable (22,101) (1,343) -0- Decrease in accounts payable -0- (2,243) (400) Increase in accrued interest 13,185 -0- -0- Net cash used in operating activities (4,145) (10,380) (2,244) Cash Flows from Investing Activities Issuance of notes receivable (275,000) (100,000) -0- Principal payments received on notes receivable 4,000 -0- -0- Payment of license agreement (125,000) (500,000) -0- Net cash used in investing activities (396,000) (600,000) -0- Cash Flows from Financial Activities Proceeds from issuance of common stock -0- 1,000,000 -0- Net cash provided by financing activities -0- 1,000,000 -0- Net increase (decrease) in cash and cash equivalents (400,145) 389,620 (2,244) Cash and cash equivalents at beginning of period (Note 1) 403,011 13,391 15,635 Cash and cash equivalents at end of period (Note 1) 866 3011 $13,391 The Accompanying Notes are an Integral Part of the Financial Statements ADVEN, INC. STATEMENTS OF CASH FLOWS For the Years Ended December 31, 1998, 1997, and 1996 Supplementary Schedule of Noncash Activities During 1998, the Company received common stock valued at $397,523 from a related corporation (see Note 2) as payment on several notes receivable. During 1998, 1997 and 1996, no amounts were actually paid for either interest or income taxes. During 1997, legal fees of $2,000 were paid through the issuance of 80,000 shares of the Company's common stock, and a finders fee of $199,875 was paid through the issuance of 533,000 shares of the Company's common stock. Also during 1997, partial payment of the license agreement was made through the issuance of 550,000 shares of the Company's common stock valued at $206,250. The Accompanying Notes are an Integral Part of the Financial Statements ADVEN, INC. NOTES TO FINANCIAL STATEMENTS December 31, 1998 and 1997 1. Organization And Significant Accounting Policies The Company was incorporated in the State of Washington on August 22, 1986. In 1987 the Company entered into an agreement to exchange 21,500,000 shares of unregistered, restricted common stock of the Company for all outstanding capital stock of Surface Technologies, Inc., which became a wholly owned subsidiary of the Company until December 28, 1990. On that date the Company exchanged 100% of its interest in Surface Technologies, Inc. to Forsell Investors Limited Partnership (a related party) in full satisfaction of all amounts owed by the Company to the partnership. On March 17, 1997, the company entered into a supply and licensed manufacturing agreement with DIS International, a Barbados corporation (see Note 3). Pursuant to the agreement, the Company received the exclusive right to formulate, manufacture, sell, distribute, and put into use a product that aids in growing plants via hydroponics, and an oil absorbent urethane foam in Australia and New Zealand. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Cash and Cash Equivalents For purposes of the statement of cash flows, the Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. 2. Public Offering The Company registered 15,000,000 of its common stock shares with the Securities and Exchange Commission, and made an initial public offering of 5,000,000 shares at $.03 per share in 1987. 3. Capitalization The Company approved a 25 for I reverse stock split on December 28, 1990 which reduced the number of authorized shares from 100,000,000 to 4,000,000, and reduced the amount of issued and outstanding shares from 40,000,000 to 1,600,000 shares. Immediately after the reverse stock split the Company approved an increase in the authorized common stock to 50,000,000 shares. On December 29, 1993 the Company approved a 4 for 1 reverse split which reduced the number of authorized shares from 50,000,000 to 12,500,000, and reduced the amount of issued and outstanding shares from 1,600,000 to 400,000 shares. Immediately after the reverse stock split the Company approved an increase in the authorized common stock to 20,000,000 shares. 4. Related Parly Transactions Forsell Investors Limited Partnership (FILP) is a limited partnership controlled by Richard Forsell, a shareholder and past President of Adven, Inc. FILP loaned $50,000 to the Company in December, 1988. No interest payments had been made on the loan and by November, 1990 there was in excess of $13,000 accrued interest in arrears. FILP gave written notice of default on the loan in 1990. FILP agreed to purchase 100% of the stock in Surface Technologies, Inc. (A wholly owned subsidiary acquired in 1987. See Note 1) in full satisfaction of its $50,000 loan and all accrued interest. Surface Technologies, Inc. had sustained repeated losses, warranty work problems, and excessive debt which obviated any reasonable prospect for Adven, Inc. to acquire the funds from the subsidiary to service the debt owned to FILP. In conjunction with the sale of all interest in Surface Technologies, Inc., Richard Forsell agreed to purchase 4,800,000 shares of stock in 1990 (prior to the reverse stock split of 25 for 1) for $4,500 to provide funds to pay Adven's outstanding bills as of December, 1990. The result of these transactions was to eliminate virtually all assets and liabilities from Adven, Inc. which would facilitate the search for a merger candidate to place in the public shell, and thereby create value for the shareholders. Wincanton Corporation is a corporation whose current President is also the current President of Adven, Inc. During 1997, Adven, Inc. loaned Wincanton Corporation a total of $ 1 00,000 at 10% interest per annum, to be paid one year from the dates of issuance. During 1998, Adven, Inc. loaned Wincanton Corporation an additional $275,000 also at 10% interest per annum. These notes were also to be paid one year from the dates of issuance. Wincanton Corporation repaid $4,000 on the notes during 1998. On October 7, 1998, the Company exchanged the total notes receivable balance of $371,000, plus accrued interest to date of $23,444, for 1,806,924 share of Wincanton Corporation stock. This transaction resulted in a gain of $3,079. As of December 31, 1998, Adven, Inc. owns 15.96% of Wincanton Corporation. During 1993, the former President of Wincanton Corporation, Walter Doyle, loaned Adven, Inc. $4,125. Subsequent to this transaction Mr. Doyle was terminated and moved out of the country. No payments have ever been made on this note, and the company no longer communicates with Mr. Doyle. It is management's belief that Adven, Inc. is no longer liable for this amount. 5. Supply and Licensed Manufacturing Agreement On March 17, 1997, the Company entered into a supply and licensed manufacturing agreement with DIS International, Inc., a Barbados corporation. Pursuant to the agreement, the Company received the exclusive right to formulate, manufacture, sell, distribute, and put into use two products, the first a plant growing medium that aids the use of hydroponics, and the second an oil absorbent urethane foam. The Company's rights to these products extend only to Australia and New Zealand. Pursuant to the agreement, the Company is required to purchase the materials required to manufacture these products from DIS International, Inc. or its affiliates. Commencing in the first quarter of 1998, the Company was required to purchase a minimum of $50,000 of materials per quarter. During 1998, Adven, Inc. purchased no materials from either DIS International, Inc. or its affiliates. The term of the agreement is five years. The Company has the right, however, to renew the agreement for successive five-year periods, provided the Company is not in default under the agreement at that time. DIS International, Inc. has the right to terminate the agreement upon 60 days written notice in the event that the Company fails to meet its obligations under the agreement or acts in a manner prohibited under the agreement. The Company has a right to cure any deficiency within the 60-day period. The Company's principal obligations under the agreement are to pay the balance of the licensing fee ($375,000), to purchase minimum quotas of materials from DIS International, Inc., and to manufacture and promote the sale and distribution of the products in Australia and New Zealand. DIS International, Inc. also has the right to terminate the agreement upon the occurrence of certain events related to the bankruptcy or insolvency of the Company. As consideration for the agreement, the Company paid $625,000, issued 550,000 shares of its common stock to DIS International, Inc., and is obligated to pay an additional $375,000 by June 30, 1999. During 1998, Adven, Inc. became aware that a company located in the Isle of Man, claiming that it owns the patent on one of the products and that DIS International, Inc. has no rights to the product at all, is suing DIS International, Inc. in Canada. Adven, Inc. is carefully watching the outcome of this trial. 6. Federal Income Taxes There are no material timing differences that would produce a deferred tax liability or asset. The following net operating loss carryforwards as of December 31, 1998 will expire if not applied by the dates scheduled below: Year ending December 31 Net Operating Loss 2002 $ 9,914 2003 21,740 2004 5,628 2005 4,571 2006 592 2007 415 2008 7,824 2009 28,907 2010 6,416 2011 1,844 2012 8,794 $96,645 7. Uncertainties During past years, the Company has sustained recurring losses, and the source of the Company's operating income was eliminated in the sale of all interest in Surface Technologies, Inc. in 1990. As a result of this sale in 1990, the Company was reduced to a public "shell" with no operations. Cash in 1998 was generated solely from the issuance of a note receivable to a related party (see Note 2), and the exchange of this note for common stock in the same related party. 8. Fair Value Of Financial Instruments Financial Accounting Standards Board ("FASB") Statement No. 107, "Disclosure about Fair Value of Financial Instruments," is a part of a continuing process by the FASB to improve information on financial instruments. The following methods and assumptions were used by the Company in estimating its fair value disclosures for such financial instruments as defined by the Statement. The carrying amount reported in the balance sheet for cash approximates fair value. The carrying amount reported in the balance sheet for the investment at December 3 1, 1998 is $397,523. The estimated fair value of this investment at December 31, 1998 is $198,761, based on the quoted market price for this investment. The carrying amount reported in the balance sheet for both the accounts payable and the license agreement payable approximates fair value because the maturities are less than one year in duration. 9. Sales Of Equiiy Securities Pursuant To Regulations On March 13, 1997, the Company sold an aggregate of 2,666,666 shares of its Common Stock to a foreign company for an aggregate of $1,000,000. The Company issued an aggregate of 533,000 shares to another foreign entity as payment of a finder's fee related to the aforementioned $1,000,000 sale. All of the foregoing shares were issued to entities that are not "US Persons" as that term is defined under Regulation S, and were issued pursuant to the exemption from registration provided by Regulation S. 10 - CONCENTRATION OF CREDIT RISK All of the Company cash is held in one account at the Comstock Bank in Carson City, Nevada. The FDIC amount is $100,000.

Dates Referenced Herein   and   Documents Incorporated By Reference

This 10-Q Filing   Date   Other Filings
12/15/92
12/29/93
12/31/95
12/31/9610-K
1/15/97S-8
3/13/97
3/17/97
3/21/978-K
3/31/9710-Q
12/31/9710-K, 10-Q
3/10/98
3/31/9810-Q
10/7/98
For The Period Ended12/31/9810-K
3/10/99
3/31/9910-K, 10-Q
5/16/99
Filed On / Filed As Of5/17/99
6/30/9910-Q
 
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