<PAGE>

                      U .S. SECURITIES EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB
                  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                   For the Fiscal Year Ended December 31, 2003
                           Commission File No. 0-23761

                      ADVANCED TECHNOLOGY INDUSTRIES, INC.
                      ------------------------------------
                 (Name of small business issuer in its charter)

           Delaware                                               13-4000208
           --------                                               ----------
(State or other jurisdiction of                               (I.R.S. Employer
incorporation or organization)                               Identification No.)

                            Seydelstrasse 28, D-10117
                                 Berlin, Germany
                    (Address of principal executive offices)
                    Issuer's telephone number: 49 30 201-7780

Securities registered pursuant to Section 12(b) of the Act:      None

Securities registered pursuant to Section 12(g) of the Act: Common Stock (Title
of class)

Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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.
Yes [X]; No [ ]

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best or registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]

Issuer's revenues for its most recent fiscal year:  $ 0

At May 17, 2004 there were 56,543,433 outstanding shares of registrant's common
stock held by non-affiliates, with a market value of approximately $10,177,817
based on a closing bid quotation on the NASD OTC Bulletin Board on that date of
$0.__ per share.

Check whether the issuer has filed all documents and reports required to be
filed by Section 12, 13 and 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Not applicable

At May 17, 2004, a total of 71,722,270 shares of registrant's common stock
were outstanding.

Transitional Small Business Disclosure Format (check one):  Yes; [ ] No [X]

                      ADVANCED TECHNOLOGY INDUSTRIES, INC.

<PAGE>

PART I

ITEM 1. DESCRIPTION OF BUSINESS

FORWARD LOOKING STATEMENTS. The following discussion and analysis should be read
in conjunction with the financial statements and notes thereto included
elsewhere in this report on Form 10-KSB of Advanced Technology Industries, Inc.
(the "Company" or "ATI"). This report on Form 10-KSB contains certain statements
that are "forward looking statements" within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended. Those statements, among other things, include the
discussions of the Company's expectations set forth below. Although the Company
believes that the expectations reflected in the forward looking statements are
reasonable, management can give no assurance that such expectations will prove
to have been correct. Generally, forward looking statements relate to business
plans or strategies, projected or anticipated benefits or other consequences of
such plans or strategies, or projections involving anticipated revenues,
expenses, earnings, levels of capital expenditures, liquidity or indebtedness,
ability to raise working capital, or other aspects of operating results or
financial position. All phases of the operations of the Company are subject to a
number of uncertainties, risks and other influences, many of which are outside
the control of the Company and any one of which, or a combination of which,
could materially affect the results of the Company's operations and whether the
forward looking statements made by the Company ultimately prove to be accurate.
These influences include, but are not limited to the following: whether or not
we can successfully commercialize the products of our subsidiaries; whether or
not we are able to acquire new, marketable technologies; whether or not others
develop products or services that are more readily accepted than, or compete
with, the products or services we currently offer or intend to offer; political
turmoil or changes in government policies in the countries in which we do
business; changes in regulations or laws that adversely impact the ability of
our subsidiary, ATI Nuklear AG, to undertake the management of nuclear waste
clean-up projects in Russia; whether or not we are able to raise sufficient
capital to fund our operations, including funding the development of the
technologies owned by our subsidiaries, and other factors or influences that may
be out of our control. Although not always the case, forward looking statements
can be identified by the use of words such as "believes," "expects," "intends,"
"projects," "anticipates," "contemplates," or "estimates."

ACQUISITIONS

On June 18, 2003, the Company entered into an Agreement and Plan of Merger (the
"Merger Agreement") by and among the Company, LTDnetwork, Inc., a Delaware
corporation ("LTDN") and LTDN Acquisition Corp., a Delaware corporation and
wholly-owned subsidiary of the Company ("Merger Sub"). Pursuant to the Merger
Agreement, Merger Sub will be merged with and into LTDN, and LTDN will continue
as the surviving corporation and as a wholly-owned subsidiary of the Company
(the "Merger"). Pursuant to the terms Merger Agreement, stockholders of LTDN
will receive in exchange for such stockholders shares of common stock of LTDN,
such number of shares of common stock, par value $0.0001 per share, of the
Company ("Common Stock") such that after the issuance of such shares of Common
Stock, such stockholders of LTDN will own in the aggregate at least 58% of the
outstanding shares of Common Stock. Such percentage of shares of Company Common
Stock to be issued to the stockholders of LTDN may be increased depending on the
amount of cash on LTDN's balance sheet and the existence of certain liabilities
of the Company, in each case at the time of the Merger.

The consummation of the Merger is contingent upon the approval and adoption by
the Company's stockholders of an amendment to the Company's Certificate of
Incorporation to increase the Company's authorized capital stock, the approval
and adoption of the Merger Agreement by LTDN's stockholders, the conversion of
the indebtedness of the Company into Common Stock, LTDN having at least
$5,000,000 on its balance sheet at the time of the Merger (less any funds loaned
by LTDN to the Company prior to the Merger), the effectiveness of a registration
statement registering the shares of Common Stock to be issued to the
stockholders of LTDN and other conditions set forth in the Merger Agreement.

The foregoing description of the Merger Agreement does not purport to be
complete and is qualified in its entirety by the terms and conditions of the
Merger Agreement, which is filed as Exhibit 2.1 to the Company's Form 10-QSB for
the quarterly period ended June 30, 2003 and is incorporated herein by
reference.

ATI is currently in discussions with LTDN to revise the Merger Agreement to
provide that the shares to be issued to the stockholders of LTDN will be issued
in a private placement with the LTDN stockholders receiving registration rights
with respect to such shares. In addition, rather than issuing Common Stock to
the stockholders of LTDN, ATI and LTDN contemplate revising the Merger Agreement
to provide for the issuance of preferred stock convertible into shares of Common
Stock and the issuance of warrants to purchase shares of preferred stock or
Common Stock. It is contemplated that the aggregate shares of such preferred
stock will be convertible into the same number of shares of Common Stock that
the stockholders of LTDN would have received under the Merger Agreement before
any such revisions. As a result, no vote of ATI's stockholders would be needed
prior to the consummation of the Merger. However such a vote would be needed to
increase the Company's authorized capital stock ATI to allow for the
contemplated preferred stock to convert into Common Stock. ATI and LTDN believe
that these proposed amendments will allow the Merger to be completed on a much
faster time schedule. There can be no assurance that ATI and LTDN will agree on
the terms of any such amendments.

Alfa-Pro Products Gmbh--Acquisition of Assets.
----------------------------------------------

On June 28, 2003, the Company entered into an Asset Purchase Agreement (the
"Alfa-Pro Asset Purchase Agreement") with Alfa-Pro Products GmbH ("Alfa-Pro")
and Alice Schlattl pursuant to which ATI will purchase all of the intellectual
property rights of Alfa-Pro in consideration for cash in an amount not to exceed
$90,000 and the issuance of 20,000,000 unregistered shares of Common Stock (such
number of issued shares will represent less than 10% of the outstanding shares
of Common Stock following the Merger with LTDN). In addition, the Company has
agreed to pay off certain debts of affiliates and related parties of Alfa-Pro.
The Alfa-Pro asset purchase is scheduled to close immediately prior to the
Merger with LTDN.

The foregoing description of the Alfa-Pro Asset Purchase Agreement does not
purport to be complete and is qualified in its entirety by the terms and
conditions of the Alfa-Pro Asset Purchase Agreement, which is filed as Exhibit
2.3 to the Company's Form 10-QSB for the quarterly period ended June 30, 2003
and is incorporated herein by reference.

In May 2004, the Company reached an agreement with Alfa Pro, Alice Schlattl and
related individuals to amend the Alfa-Pro Asset Purchase Agreement to, among
other things, effect the transfer to ATI of all intellectual property that is
controlled by Alfa Pro and such other parties as soon as administratively
possible. Under the terms of the new understanding, ATI will purchase all of the
intellectual property rights of Alfa Pro and such other parties in consideration
for cash in an amount not to exceed $90,000 and the issuance of unregistered
preferred stock of ATI of the same series that is contemplated to be issued to
the stockholders of LTDN if the Merger Agreement is revised as noted above. Such
number of issued shares will represent, on an as converted basis, less than 10%
of the outstanding shares of Common Stock following the consummation of the
previously announced transaction with LTDN. In addition, ATI has agreed to pay
off certain debts of affiliates and related parties of Alfa-Pro.

COMPANY OPERATIONS.

GENERAL. The Company is a development stage company and its efforts have been
primarily devoted to technology identification and acquisition, research and
development and raising capital.

The Company was formed in 1995 to acquire and commercialize new or previously
existing but non-commercialized technologies, particularly those developed by
scientists and engineers in Israel, Russia, and Germany. Directly or through a
subsidiary, the Company may acquire a direct interest in these technologies, a
right to use these technologies, and/or an ownership interest in the entity
owning these technologies. The acquisition of technologies by the Company may be
made by the issuance of Common Stock or other securities, cash or other
consideration, or a combination thereof. Our principal activities include
identifying, reviewing and assessing technologies for their commercial
applicability and potential.

Daily operation of our companies in which we have stock ownership is handled
directly by each company's existing management. All acquired technologies and
companies function fully autonomously of us. When we acquire an interest in a
company, we negotiate for representation on its board of directors. Our
designated representative is responsible for monitoring all aspects of our
investment and reporting material events directly to our Board of Directors. In
instances where we own a controlling interest in a portfolio company, we have
the ability to direct the development, marketing, and commercialization of
products. However, where we own only a minority interest or do not otherwise
exercise control over a portfolio company we must rely upon and be governed by
the decisions of management of those companies concerning those matters. In
addition, where we have a non-controlling interest in a portfolio company, in
the absence of other agreements (such as revenue sharing agreements), we will
earn revenues from the portfolio company only in the form of dividends which may
be declared by the portfolio company and the declaration of said dividends are
solely within the discretion of the Board of Directors of the portfolio company.

Described below are the various technologies in which we presently own an
interest.

RESEAL

RESEAL, Ltd, 96% owned subsidiary ("RESEAL"), was formed to hold the Company's
ownership of two proprietary resealable beverage packaging products,
specifically a resealable metal beverage can and a resealable cardboard
tetra-pak package. The main emphasis of RESEAL over the next twelve months will
be on the successful commercialization of its metal beverage packaging products.

RESEAL is preparing for the production of 10,000 machine-fabricated samples for
distribution to beverage producers who have previously expressed a high degree
of interest in the resealable beverage cans. It is anticipated that production
of those samples, marketing and general operational expenses will require less
than $450,000. RESEAL anticipates that in the event it is required to purchase
capital equipment for the full scale production of our resealable beverage cans,
an additional $2,000,000 would be required. The production of the machine
produced samples has been delayed by a failed financing, the proceeds of which
were to be used to complete this production run.

To date, RESEAL has not entered into any distribution or sales agreements. We
anticipate, based upon responses received from major beverage producers and
beverage packaging manufacturers, that RESEAL may be in a position to enter into
distribution or sales agreements within the next twelve month period. There can
be no assurance that RESEAL will enter into distribution or sales agreements, or
if entered into that the agreements will result in significant sales or revenue
to the Company. The ability to successfully commercialize the RESEAL products
and technology is heavily dependent upon our ability to raise additional funds.

We believe that RESEAL can obtain financing on favorable terms for a substantial
portion of its intended funding from the beverage producers and/or packagers,
suppliers and/or other sources. However, if financing is not available,
management believes that RESEAL will be able to obtain the necessary funds to
pay for the production, marketing and operational expenses from other sources.
An inability to raise funds to continue the commercialization of the RESEAL
products and technology would further delay their introduction to market.

We are in discussions with a major manufacturer of aluminum cans for the
formalization of a working research and development agreement. The proposed
agreement would provide the manufacturer with a right of first refusal for any
packaging related products already developed or developed in the future by ATI,
RESEAL or Cetoni in exchange for an annual research and development retainer
paid to us by the manufacturer.

CETONI GMBH

Cetoni Umwelttechnologie EntwicklungsGmbH, a wholly owned subsidiary ("Cetoni"),
is a German based design and engineering firm focused on developing and
patenting technologies and products for the consumer market. Since 1995, Cetoni
has designed and patented products for the beverage, automotive accessory,
sport, healthcare, household, office and general consumer markets.

Cetoni's products are designed to fill a gap in a market where products do not
exist or to make a significant improvement over products currently serving the
target market. The markets for Cetoni's products are automotive accessory (Tool
Star, Ring Memory), healthcare (Pharmaceutical packaging), household goods
(butter dish, sugar dispenser, candy dispenser, fruit peeler and fruit peeler
with tray), sports (Power Ball and Walk and Roll), office and general consumer
markets (Light Boy, Cleaning Center). It is anticipated that Cetoni will devote
the majority of its focus during 2004 on the successful commercialization of
RESEAL's products, which it developed, and to prepare the commercialization of
the above products.

The Company plans to review the commercialization prospects of all products and
investigate the most efficient and effective paths to market for all products,
focusing our energy and attention towards the most favorable prospects.

OPERATIONS IN RUSSIA.

As noted below under "Plan of Operation", the Company intends to reorganize its
Russian based and/or nuclear operations into Nuclear Technologies, Inc., a newly
formed Delaware corporation ("Nuclear Technologies"). Other than costs
associated with the restructuring and an approximately $56,000 payment, we do
not anticipate expending any further significant amounts on these operations. At
the current date, it is unknown whether ATI will be successful in restructuring
its Russian and nuclear related business activities. The restructuring is not
complete and it is currently undeterminable as to when or if the restructuring
will be completed. In the event that the Stock Subscription Agreement between
ATI and Nuclear Technologies is not consummated, ATI anticipates expending no
further funds for the development of these businesses and anticipates
reevaluating the scope of such operations. There can be no assurance that the
projects contemplated by Nuclear Technologies will be successful should the
restructure be completed. The following is a description of the operations that
are contemplated to be transferred to Nuclear Technologies:

ATI Nuklear AG
--------------

ATI Nuklear AG, a wholly owned subsidiary of the Company ("ATI Nuklear"), has
developed a business plan for the manufacture and marketing of its core
technologies and products in Russia and continental Europe. ATI Nuklear is
presently continuing its test program for the technologies and products in
Russia and Germany to verify the suitability of its technology rights for these
applications in shielding, encapsulating and immobilization for transporting and
storing nuclear waste.

On March 21, 2003, the Company and ATI Nuklear entered into a Restructure
Agreement (the "Nurescell Restructure Agreement") with Triton Private Equities
Fund, and Nurescell Inc. ("Nurescell"), pursuant to which the Company and ATI
Nuklear agreed to cancel $1,000,000 of debt owed to them in consideration for
the transfer to ATI Nuklear of 100% of the technology ownership rights of
Nurescell's radiation shielding technology. This transaction requires the
approval of the shareholders of Nurescell. The Company understands that
Nurescell is currently discussing the applicable disclosure document with the
Securities and Exchange Commission. Such technology will be transferred to
Nuclear Technologies once it is transferred to ATI Nuklear.

As of December 31, 2003, we owned 4,590,000 shares of Nurescell Inc. common
stock, representing 9.97% of their outstanding and issued shares.

The Nurescell Restructure Agreement was completed on January 21, 2004.
Accordingly, Nurescell has transferred to ATI and ATI Nuklear all right, title
and interest in and to the Nurescell Technology in return for the cancellation
by ATI and ATI Nuklear of the ATI Obligations.

Other than any potential costs associated with the proposed restructure, we do
not anticipate expending any further significant funds on these activities.

International Center of Advanced Technologies.

The Company owns a 50% interest in the International Center of Advanced
technologies ("ICAT"). ICAT currently owns a foam glass technology developed by
Russian scientists. This foam glass technology is an innovative insulation
product made from waste created in the mining of alumina. The developers of this
foam glass technology maintain the belief that the product maintains numerous
advantages over traditional fiber glass insulation. It is the target of ICAT to
commercialize the foam glass technology with a Russian aluminum producer.

Other than any potential costs associated with the proposed restructure, we do
not anticipate expending any further significant funds on these activities.

Sibconvers

The Company owns a 50% interest in Sibconvers. Sibconvers intends to pursue
programs offered by various governmental agencies of Russia, the United States,
and European Union countries for the conversion of Russian nuclear defense
industries into high-tech non-defense and nuclear remediation enterprises and to
retrain nuclear and military researchers, technicians and engineers employed in
those industries. Those industries are primarily located in the closed "nuclear
cities" in Siberia.

Other than any potential costs associated with the proposed restructure, we do
not anticipate expending any further significant funds on these activities.

International Laboratory For Nuclear Waste Management

The Company is a party to an agreement with the Federal Republic of
Germany-nuclear research facility-Forschungszentrum Juelich Institute fur
Sicherheitsforschung and Reaktortechnik and the Institute of Physics and
Engineering of Krasnoyarsk State University that provides for the formation of a
laboratory to be known as the International Laboratory for Nuclear Waste
Management. This venture intends to pursue contracts and programs concerning the
research, development, testing and certification for nuclear waste remediation
applications in the closed "nuclear cities" in Siberia.

Other than any potential costs associated with the proposed restructure, we do
not anticipate expending any further significant funds on these activities.

Russian Contracts for Research and Development.
-----------------------------------------------

The Company is a party to a research and development agreement with a
Moscow-based State Scientific Research Institute Scientific Production Company
named Lutch pursuant to which such entity has agreed to perform various contract
research and development services related to technology obtained by the Company
from Nurescell for a total price of $985,000. The Company paid $100,000 under
this contract during 2002. To date, services have not beenprovided and we are in
the process of renegotiating the terms and conditions of this agreement.

The Company is a party to a research and development agreement with a branch of
the Ministry of the Atomic Energy of the Russian Federation pursuant to which
such entity has agreed to perform various contract research and development
services to develop an industrial fireproof swelling cable coating for a total
price of $462,000. As a result of limited funding of this contract, the
performance of services were rescheduled to occur commencing with the quarter
ended December 31, 2003 and to be completed within one year. As a continued
result of limited funding, no services have been performed under this agreement.
It is uncertain when or if any services will eventually be completed under this
contract.

Other than any potential costs associated with the proposed restructure, we do
not anticipate expending any further significant funds on these activities.

EKOR Compound

On November 30, 1999, we acquired an interest which entitles us to receive 2% of
the gross revenues generated by Eurotech (the "EKOR Compound") from Eurotech,
Ltd., a former affiliate ("Eurotech"). EKOR Compound is a patented silicon
geo-polymer developed by scientists at the Kurchatov Institute in Moscow,
Russia, specifically designed and developed for possible containment of
ecologically hazardous radioactive materials that persist from the 1986
explosion of the Chernobyl Nuclear Power Plant Reactor 4 in Chernobyl, Ukraine.
Application of the EKOR Compound foam layer is intended to contain radioactive
dust in an enclosed area by forming a permanent barrier between the soil and the
air thus trapping the contamination. We understand that Eurotech has exclusive
licensing rights to the production and application of this compound, with the
exception of the former Soviet Union. Eurotech has publicly stated that the EKOR
Compound has completed preliminary field and laboratory testing. ATI does not
believe that Eurotech is actively marketing the EKOR Compound and is not aware
of Eurotech's plans with respect to such marketing. To date, the Company has not
received any amount from EKOR with respect to such agreements.

ISRAELI INVESTMENTS AND TECHNOLOGIES

During April, 1999, we acquired a 20% equity interest in each of two Israeli
companies, Flexitech, Ltd. ("Flexitech") and Pirocat, Ltd. ("Pirocat").
Flexitech has developed a heating element, which can be printed on a thin film
substrate, and Pirocat has developed a technology, which allows for conversion
of plastic waste into fuel, which can be used to produce gasoline, diesel fuel,
and heating oil. ATI is not involved in the operations of such companies and
does not intend to incur any future funds with respect to such companies.

MARKETING AND DISTRIBUTION
--------------------------

We believe that several of our acquired technologies and products are ready for
commercialization and marketing, specifically our beverage packaging products.
As a result, we will devote significant business activities and resources to the
successful commercialization and marketing of our acquired technologies and
products. We also have little experience marketing products of a technological
or consumer nature. The introduction of a new product or technology into the
market place requires vast capital resources and an increase in corporate
personnel. Our product marketing relies on the development of strategic
alliances with global distributors. This places the burden of marketing the
products directly on the strategic partners and keeps our cost risk low and
reduces the amount of capital resources we need to operate successfully.
Conversely, the risks include the inability to locate the proper partner and or
the partner is ineffective.

COMPETITION
-----------

Competition in all of the areas in which we own and propose to purchase
technologies is intense. We compete against a wide range of companies,
universities, think tanks, consumer product companies and others, most which
possess substantially greater financial and marketing resources and experience
than us. Competition in our core business segments is typically based on product
recognition and acceptance, price, and sales and marketing expertise and
resources. Any one or more of our competitors or other enterprises not presently
identified by or known to us may develop technologies and/or products which are
superior to ours, less expensive than our products and technologies or market
more successfully existing or new competing products and technologies. To date,
we have not generated any revenues from our products or technologies and are
competing against companies that may have significantly greater financial and
human resources.

RESEARCH AND DEVELOPMENT
------------------------

In the fiscal year ended December 31, 2003, we spent $88,754 on research and
development.

By comparison, in the fiscal year ended December 31, 2002, we spent $1,137,990
on research and development.

GOVERNMENTAL REGULATION

We are not aware of any U.S. or foreign laws or regulations that govern the
marketing, sale or use of any of our present technologies, other than U.S.,
Russian and Western European environmental safety laws and regulations
pertaining to the containment and remediation of radioactive contamination and
the toxicity of materials used in connection therewith. There can be no
assurance that more stringent or different standards may not in the future be
adopted or applied depending on the intended use of such products, or that if
adopted or applied, they will not materially increase the cost  of licensing
and using such products, or prevent their use altogether. Moreover, there can be
no assurance that any or all jurisdictions in which we presently operate or in
the future may conduct our business will not enact laws or adopt regulations
which increase the cost of or prevent us from licensing or marketing its other
technologies or otherwise doing business therein. Particularly in the case of
Russia, the enactment of such laws or the adoption of such regulations may have
a presently unquantifiable, substantial adverse impact on our financial
condition, business and business prospects.

EMPLOYEES
---------
We currently employ no part-time and three full-time employees. We engage a
small number of independent consultants to assist in the identification,
assessment, acquisition and marketing of technologies in the regular course of
our business. Our subsidiary, Cetoni, currently employs five full-time and three
part-time employees. Cetoni's employees engage in product research, development
and marketing.

Since the commencement of merger discussions with LTDN, we have been aided and
assisted by LTDN's senior management, including Allan Klepfisz and Chai Ong in
relation to our product marketing endeavors, corporate structure issues, debt
and cost reduction strategies and capital raising requirements.

ATI Nuklear currently has a supervisory board consisting of Allan Klepfisz, Chai
Ong and Christa Sieber. ATI Nuklear maintains one full-time employee, President
Hans-Joachim Skrobanek, and three consultants.

We believe that we have good relations with our current employees.

ITEM 2. DESCRIPTION OF PROPERTY

Our principal executive offices are located in Berlin, Germany. The 142.9
square meter office space is located at Seydelstrasse 28, D-10117, Berlin,
Germany with a monthly rent of approximately 1,906.29 EURO and a lease with a
remaining term of 4 years. Our telephone number is (49) 30 201-7780. ATI Nuklear
and RESEAL shares office space with us.

Cetoni's principal executive offices are located in a 220 square meter space at
Patriching 26, D-94034, Passau, Germany. The facility is leased with a monthly
rent of $750 with no expiration date. The facility is leased from a family
member of the former principal shareholder of Cetoni.

In light of the impending Merger with LTDN and our intentions in relation to ATI
Nuklear, we intend to rationalize our office requirements so that related
expenses are reduced.

Upon completion of the above referenced merger with LTD, the Company anticipates
relocating its offices to New York, New York.

ITEM 3. LEGAL PROCEEDINGS

During the quarter ended June 30, 2003, the Company has been notified that Dr.
Jurgen Lempert intended to commence legal proceeding against the Company
relating to his termination as Chief Executive Officer of ATI Nuklear. A German
court ruled the Dr. Lempert is entitled to collect 55,450 EUROs ($69,629). At
December 31, 2003 the Company has accrued such amounts.

Dr. Alexander Kaul, former Chairman of the Supervisory Board of ATI Nuklear, has
initiated legal proceedings against the Company for monies he believes are due
under his terminated employment contract. A German court ruled that Dr. Kaul is
entitled to collect 54,000 EUROS ($67,808). At December 31, 2003 the Company has
accrued such amounts.

Peter Goerke, a former Vice President of the Company, initiated legal
proceedings against the Company for the value of his remaining employment
agreement, accrued wages and expenses. A German court ruled that Mr. Goerke is
not entitled to the remaining value of his employment contract and is only
entitled to collect 157,272.60 Euros ($197,486). At December 31, 2003 the
Company has accrued such amounts.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
        MATTERS

COMMON STOCK

Each share of Common Stock entitles the holder thereof to share ratably in
dividends and distributions, if any, on the Common Stock when, as and if
declared by the Board of Directors, from funds legally available. There are no
preemptive, subscription or conversion rights. Upon liquidation, dissolution or
winding up of the affairs of the Company and after payment of creditors and
satisfaction of any amounts outstanding to holders of the Preferred Stock, the
assets legally available for distribution will be divided ratably on a
share-for-share basis among the holders of the outstanding shares of Common
Stock. The holders of the outstanding shares of Common Stock are not entitled to
cumulative voting and are entitled to one vote per share with respect to all
matters that are required by law to be submitted to a vote of shareholders,
including the election of Directors. Accordingly, the holders of more than 50%
of the outstanding shares of Common Stock will have the ability to elect all of
the Directors.

PREFERRED STOCK

Currently, no shares of Preferred Stock have been designated by the Board of
Directors. The Board of Directors has the authority, without further action by
the holders of the Common Stock, to issue Preferred Stock in one or more series
and to fix as to any such series, the dividend rate, redemption prices,
preferences on liquidation or dissolution, sinking fund terms, if any,
conversion rights, voting rights and any other preference or special rights and
qualifications. Shares of Preferred Stock issued by the Board of Directors could
be utilized, under certain circumstances, as a method of raising additional
capital, for possible acquisitions or for any purpose. The Board of Directors
has not authorized the issuance of any series of Preferred Stock and there are
no agreements, understandings or plans for the issuance of any Preferred Stock.
As noted above under "Description of Business-Acquisitions," the Company is
contemplating creating a new series of Preferred Stock in connection with the
Merger and the consummation of the Alf-Pro Asset Purchase Agreement, to the
extent such transactions are revised.

MARKET INFORMATION.

Our Common Stock is traded on the NASD OTC Bulletin Board currently under the
symbol AVDI.

The table below sets forth the range of high and low bid quotes of our Common
Stock for each quarter for the last two fiscal years as reported by the Over The
Counter -Bulletin Board. The bid prices represent inter-dealer quotations,
without adjustments for retail mark-ups, markdowns or commissions and may not
necessarily represent actual transactions.

2002                                High             Low
-------                            -------          -------
First Quarter                       $1.10            $0.26
Second Quarter                      $2.23            $0.51
Third Quarter                       $0.69            $0.16
Fourth Quarter                      $0.26            $0.09

2003                                High             Low
-------                            -------          -------
First Quarter                       $0.38            $0.14
Second Quarter                      $0.60            $0.18
Third Quarter                       $0.38            $0.21
Fourth Quarter                      $0.29            $0.11

There were approximately 165 shareholders of record of Common Stock as of
May 17, 2004.

There are currently eighteen active market makers of our Common Stock consisting
of Wm. V. Frankel & Co, Inc., Knight Equity Markets, L.P., Brookstreet
Securities Corp., The Vertical Group, Inc., Wien Securities, BrokerageAmerica
LLC, V Finance Investements, Inc. Sterne Agee Capital Markets, Inc., GVCR
Company LLC, Hill Thompson Magid & Co., Schwab Capital Markets L.P., TD
Waterhouse capital Markets, Inc., May Financial Corporation, Pershing Trading
Company, Domestic Securities Inc., Crown Financial Group, Inc., Jefferies &
Company Inc., and Seaboard Securities.

Interwest Stock Transfer Company, located at 1981 East Murray Holladay Road,
Salt Lake City, Utah, is the transfer agent and registrar for our Common Stock.

We have never declared or paid cash dividends on our Common Stock, and we
anticipate that future earnings, if any, will be retained for development of our
business. Payment of cash dividends in the future will be wholly dependent upon
our earnings, financial condition, capital requirements and other factors deemed
relevant by us. It is not likely that cash dividends will be paid in the
foreseeable future. In the event of the acquisition of a business by us or the
merger with another company, control of our company and our Board of Directors
may pass to others. In that event, the payment of dividends would be wholly
dependent upon such persons.

RECENT ISSUANCE OF STOCK

During May 2003, the Company issued 2,000,000 shares of common stock to
investors in exchange for $240,000.

During May 2003, the Company issued 360,677 shares of restricted Company Common
Stock for the satisfaction of $45,000 in legal fees.

During June 2003, the Company issued 2,000,000 shares of restricted Company
Common Stock to a consultant. These shares have been valued at $940,000 and
expensed during the period ended June 30, 2003.

During June 2003, the Company entered into a Conversion Agreement with LTDN
pursuant to which LTDN converted $800,000 of debt owed to it into 8,000,000
shares of restricted Company Common Stock.

During July 2003, the Company and a former consultant entered into a conversion
agreement pursuant to which the Company and such consultant agreed to convert
EURO 108,402 ($124,012) of outstanding consulting fees due to such consultant
into 510,000 shares of Company Common Stock.

During September 2003, the Company issued 85,000 shares of its common stock for
the satisfaction of $18,700 in consulting fees.

During November 2003, the Company issued 150,000 shares of its restricted common
stock for the satisfaction of services provided valued at $24,000.

During November 2003, the Company issued 100,000 shares of its restricted common
stock for the satisfaction of services provided valued at $16,000.

During November 2003, the Company issued 50,000 shares of its restricted common
stock for the satisfaction of $8,000 in consulting fees.

During November 2003, the Company issued 340,000 shares of its restricted common
stock as consideration for services provided valued at $34,979.

During November 2003, the Company entered into a Conversion Agreement with LTDN
pursuant to which LTDN converted $125,000 of debt owed to it into 1,250,000
shares of restricted Company common stock.

During November 2003, the Company issued 660,000 shares of its restricted common
stock as full and final payment of all principal and interest in an amount of
$67,900.

During March 2004, the Company issued 6,000,000 shares of its restricted common
stock as payment in full of a promissory note payable in the amount of $890,000
plus $288,103 of accrued interest.

During March 2004, the Company issued 1,000,000 shares of its restricted common
stock to LTD as part of the conversion of a $100,000 note payable.

ITEM 6. PLAN OF OPERATION

The following discussion and analysis should be read in conjunction with the
remainder of this Annual Report on Form 10-KSB including, but not limited to,
the financial statements and notes thereto included herein.

The Company is a development stage company and its efforts have been primarily
devoted to technology identification and acquisition, research and development
and raising capital. This discussion provides an analysis of the Company's
anticipated plan of operation for the next 12 months.

The Company was formed in 1995 to acquire and commercialize new or previously
existing but non-commercialized technologies, particularly those developed by
scientists and engineers in Israel, Russia, and Germany. Directly or through a
subsidiary, the Company may acquire a direct interest in these technologies, a
right to use these technologies, and/or an ownership interest in the entity
owning these technologies. The acquisition of technologies by the Company may be
made by the issuance of common stock or other securities, cash or other
consideration, or a combination thereof. Our principal activities include
identifying, reviewing and assessing technologies for their commercial
applicability and potential.

During the next 12 months the Company intends to concentrate on the (i)
consummation of the Merger with LTDN pursuant to the Merger Agreement, (ii)
commercialization of products developed by RESEAL, (iii) commercialization of
products developed by Cetoni (iv) if the transactions under the Alfa-Pro Asset
Purchase Agreement are consummated, commercialization of products developed from
the acquired intellectual property and (v) development of any new products
created by the founder of Cetoni. In addition, the Company also intends to
substantially restructure its operations in Russia. See "Description of
Business." In connection with such reorganization, on July 28, 2003, the Company
entered into a Stock Subscription Agreement with ATI Nuklear, Nuclear
Technologies, Hans Skrobanek, the president and a director of the Company, and
Peter Goerke, a former officer of the Company, pursuant to which (a) in
consideration for the issuance to the Company and ATI Nuklear of 4,100 and 1,000
shares, respectively, of common stock of Nuclear Technologies ("Nuclear Common
Stock"), (i) the Company and ATI Nuklear will transfer certain assets to Nuclear
Technologies relating to the Russian based and/or nuclear focused operations of
the Company and ATI Nuklear and (ii) Nuclear Technologies will assume certain
liabilities of the Company and ATI Nuklear relating to such assigned assets and
(b) Hans Skrobanek and Peter Goerke will each purchase 2,450 shares of Nuclear
Common Stock for an aggregate purchase price of $1.00. As part of the
reorganization, it is anticipated that the Company will pay approximately
$56,000 of existing liabilities in connection with such assumed assets and will
convert approximately $163,000 of existing liabilities in connection with such
assumed assets into shares of Common Stock. Following the consummation of such
transaction, Nuclear Technologies will be a 51% owned subsidiary of the Company
with the remaining 49% being owned by Hans Skrobanek and Peter Goerke. Other
than as noted above, the Company currently anticipates that Nuclear Technologies
will arrange to finance its own operations and that the Company will not be
responsible for such funding. At the current date, it is unknown whether ATI
will be successful in completing the restructuring of its Russian and nuclear
related business activities to effectively complete the proposed transaction
with Nuclear Technologies. In the event that the Stock Subscription Agreement
between ATI and Nuclear Technologies is not consummated, ATI anticipates
expending no further funds for the development of these businesses and
anticipates reevaluating the scope of such operations. There can be no assurance
that the projects contemplated by Nuclear Technologies will be successful should
the restructure be completed.

Except for a nominal amount of revenue from the sale of Cetoni products in a
prior period, we have not generated any revenue from operations since our
inception and we have not been profitable since our inception. We will require
additional financing to continue our planned operations during the next 12-month
period. Management believes that it will be able to raise the necessary
financing to continue planned operations. We will attempt to raise this
additional capital through the public or private placement of our securities,
debt or equity financing, joint ventures, or the licensing or sale of our
technologies and products. In addition, ATI anticipates receiving funds in
connection with the Merger. However, there is no guarantee that we will be able
to successfully raise the required funds for operations or that such funds will
be available on terms satisfactory to us or that the Merger will be consummated.
Any inability to raise additional funds would require that we significantly
scale back our planned operations.

Ideally, upon the commercialization of our products, and implementation of
operational cost controls, we would hope that sustainable revenues will be able
to be generated so as to avoid the necessity to raise significant funds in the
longer term. Although we believe that we will recognize additional revenues
during the next twelve months based on expressions of interest from third
parties to acquire licenses to use our technologies and purchase our products,
there can be no assurances as to when and whether we will be able to
commercialize our products and technologies and realize any revenues therefrom.
In addition, no assurance can be given that we can complete the development of
any technology or that, if any technology is fully developed, it can be
manufactured and marketed on a commercially viable basis. Furthermore, no
assurance can be given that any technology will receive market acceptance. Being
a development stage company, we are subject to all risks inherent in the
establishment of a developing or new business.

RISK FACTORS

WE HAVE LIMITED OPERATING HISTORY; WE HAVE NOT GENERATED ANY SIGNIFICANT
REVENUES FROM OPERATIONS; WE EXPECT TO INCUR ADDITIONAL SIGNIFICANT LOSSES.

ATI was incorporated in 1995 and has conducted only limited operations to date
consisting primarily of activities related to identifying and acquiring our
technologies and products. We are subject to all of the business risks
associated with a new enterprise, including, but not limited to:

         o    inability to successfully market our technologies and products;

         o    risks of unforeseen capital requirements;

         o    failure of market acceptance of our technologies and products;

         o    failure to establish business relationships; and

         o    competitive disadvantages as against larger and more established
              companies.

ATI anticipates that it will continue to incur significant operating losses
through 2004. ATI may incur additional losses thereafter, depending upon our
ability to generate revenues from the license or sale of our technologies and
products or to enter into any or a sufficient number of joint ventures or
collaborations. ATI has generated no meaningful revenues to date. Although ATI's
management believes that it may recognize revenues during 2004, based on
expressions of interest from third parties to acquire licenses to use our
technologies and purchase our products, there can be no assurance as to when or
whether we will be able to commercialize our products and technologies and
realize any revenues therefrom. ATI products and technologies have never been
utilized on a large-scale commercial basis. In addition, ATI may have to sell
and issue Common Stock or securities convertible into Common Stock in order to
obtain the funding necessary to support operations which will dilute your
shareholdings and may negatively impact the price of Common Stock.

ATI'S CURRENT AND NEW PRODUCTS MAY NOT COMPETE SUCCESSFULLY WITH COMPETITOR'S
PRODUCTS.

The markets for ATI's products experience and will continue to experience
rapidly changing technologies, evolving industry standards and new product
introductions by its competitors. These market characteristics and the
activities of ATI's competitors, including their introduction of new products
and product upgrades, could render ATI's technology obsolete. ATI may not
successfully develop, introduce or manage the transition of new products or do
so on a timely basis in response to changing technologies and standards and new
products and product upgrades introduced by its competitors. Failed market
acceptance of existing or new products or problems associated with new product
transitions could harm ATI's business, results of operations and financial
condition.

Many of its current and potential competitors have larger technical staffs, more
established and larger marketing and sales organizations and significantly
greater financial resources. As the market for ATI's products continues to
develop, additional competitors may enter the market and competition may
intensify. Inability to compete in the following factors could have a material
adverse effect on ATI's business: product performance, product features, ease of
use, reliability, hardware and competitor compatibility, brand name recognition,
product reputation, pricing, levels of advertising, availability and quality of
customer support and timeliness of product upgrades.

HOLDERS OF COMMON STOCK WILL HAVE THEIR PERCENTAGE OWNERSHIP DILUTED BY MORE
THAN 58% UPON COMPLETION OF THE MERGER AND AS A RESULT THE PRICE OF ITS COMMON
STOCK MAY DECLINE.

A significant number of shares of Common Stock will be available for trading in
the public market which will result in substantial dilution to existing
shareholders upon completion of the Merger. The additional shares in the market
will dilute the percentage interest of ATI's other shareholders and may have a
material adverse effect on the market price of Common Stock. Any such decline in
the market price of its Common Stock could impede ATI's efforts to obtain
additional financing through the sale of additional equity or equity-related
securities or could make such financing more costly.

ANY INABILITY OF ATI TO PROTECT ITS INTELLECTUAL PROPERTY MAY LIMIT ITS ABILITY
TO COMPETE AND RESULT IN A LOSS OF A COMPETITIVE ADVANTAGE.

ATI relies principally on copyright, trademark, patent, trade secret and
contract laws to protect its proprietary technology. ATI cannot be certain that
it has taken adequate steps to prevent misappropriation of its technology or
that its competitors will not independently develop technologies that are
substantially equivalent or superior to ATI's technology.

ATI and its subsidiaries have prepared and filed patent applications covering
several of consumer products in industrial countries. ATI's success depends, in
part, on its ability to obtain and protect patents covering, and maintain trade
secrecy protection of, industrial technologies, as well as other, future
technologies, and to operate without infringing on the proprietary rights of
third parties. There can be no assurance that any of ATI's pending or future
patent applications will be approved, that ATI will develop additional
proprietary technology that is patentable, that any patents issued will provide
ATI with a competitive advantage or will not be challenged by third parties or
that the patents of others will not have an adverse effect on ATI's ability to
conduct business.

Furthermore, there can be no assurance that others will not independently
develop similar or superior technologies or design around any technology that is
patented by ATI or its subsidiaries. It is possible that ATI may need to acquire
licenses to, or to contest the validity of, issued or pending patents of third
parties relating to our products. There can be no assurance that any license
acquired under such patents would be made available to ATI on acceptable terms,
if at all, or that ATI would prevail in any such contest. In addition, ATI would
incur substantial costs in defending itself in suits brought against us on our
patents or in bringing patent suits against other parties.

In addition to patent protection, ATI relies on trade secrets, proprietary
know-how and technology which it seeks to protect, in part, by confidentiality
agreements with our prospective working partners and collaborators, employees
and consultants. There can be no assurance that these agreements will not be
breached, that ATI would have adequate remedies for any breach, or that our
trade secrets and proprietary know-how will not otherwise become known or be
independently discovered by others.

ATI MAY BE SUBJECT TO INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS THAT ARE COSTLY
TO DEFEND AND COULD LIMIT ITS ABILITY TO USE SOME TECHNOLOGIES IN THE FUTURE.

Although ATI believes that none of the technologies or products it has developed
or the trademarks it uses or any of the other elements of its business infringe
on the proprietary rights of any third parties, third parties may assert claims
against ATI for infringement of their proprietary rights and these claims may be
successful. ATI could incur substantial costs and diversion of management
resources in the defense of any claims relating to proprietary rights, which
could materially adversely affect its business, results of operations or
financial condition. Parties making these claims could secure a judgment
awarding substantial damages as well as injunctive or other equitable relief
that could effectively block ATI's ability to market or license its products in
the United States, Germany or elsewhere. Such a judgment could have a material
adverse effect on ATI's ability to sell its products or on its costs of doing
business. If a third party asserts a claim relating to proprietary technology or
information against ATI, it may seek licenses to the intellectual property from
the third party. However, ATI cannot be certain that third parties will extend
licenses to it on commercially reasonable terms, or at all. ATI's failure to
obtain the necessary licenses or other rights or to obtain those rights at a
reasonable cost could materially adversely affect its ability to sell its
products or its costs of doing business.

THE PRICE OF THE COMMON STOCK HAS BEEN AND MAY IN THE FUTURE BE AFFECTED BY
PRICE AND VOLUME FLUCTUATION IN THE MARKET FOR DEVELOPMENTAL STAGE COMPANIES.

The Over the Counter Bulletin Board, where many developmental stage companies
are traded, experiences extreme price and volume fluctuations. These
fluctuations often have been unrelated or disproportionate to the operating
performance of these companies. These broad market and industry factors may
materially adversely affect the market price of the Common Stock, regardless of
ATI's actual operating performance. In the past, following periods of volatility
in the market price of an individual company's securities, securities class
action litigation often has been instituted against that company. ATI has not
been the subject to any lawsuits alleging that it has violated various
provisions of federal securities laws. The filing of litigation against ATI, or
any other claims, if made, could result in substantial costs and a diversion of
the attention and resources of ATI's management.

IF ATI IS UNABLE TO HIRE AND RETAIN KEY PERSONNEL, IT MAY BE UNABLE TO DEVELOP
PRODUCTS OR ACHIEVE SALES OF PRODUCTS.

ATI's success depends to a significant extent on the performance of its
executive officers and key technical personnel. The loss of one or more of ATI's
key employees could have a material adverse effect on its ability to develop
products or to sell products. ATI believes that its future success will depend
in large part on its ability to attract and retain highly skilled technical,
managerial and sales and marketing personnel. There can be no assurance that ATI
will be successful in attracting and retaining these personnel. If the Merger is
consummated, it is contemplated the certain members of LTDN's management will
become executive officers of the Company.

ATI'S RESEARCH AND DEVELOPMENT PROGRAM AND COSTS MAY NOT RESULT IN INCREASED
SALES OR REVENUE.

Developing new products and technologies is expensive. ATI plans to continue
significant investments in product research in the near future. ATI cannot
assure that significant sales or revenue from the products it is developing will
be achieved.

ATI WILL REQUIRE SIGNIFICANT ADDITIONAL CAPITAL IN ORDER TO FULLY IMPLEMENT ITS
BUSINESS PLAN AND MARKETING STRATEGY.

Future capital requirements could vary significantly and will depend upon
certain factors, many of which are not within ATI's control. Factors that may
bear on ATI's future capital requirements include:

         o    the timing of licensing of technologies and sales of products;

         o    market acceptance of ATI's technologies and products;

         o    the existence and terms of any licensing and/or joint venture
              agreements for the marketing and sales of technologies and
              products;

         o    the ongoing development and testing of technologies and products;
              and

         o    the availability of financing.

In addition, ATI will require substantial additional capital to expand its
business to hire administrative, marketing, technical and operational support
personnel, and to a lesser extent, for research and development activities. As
of the date hereof, ATI has not identified any sources of and cannot provide any
assurances that it ever will obtain the additional capital necessary to fully
effectuate our business goals. Moreover, ATI cannot provide assurances that
additional capital requirements will not arise, or that for periods following
fiscal year 2004 it will generate sufficient revenues to cover expenses or
generate profits. If adequate financing is not available, ATI may be required to
delay, scale back or eliminate certain of its research and development programs
and marketing and sales programs, forego technology acquisition opportunities,
or license third parties to commercialize technologies that ATI would otherwise
seek to develop. To the extent ATI raises additional capital by issuing equity
securities, holders of our equity securities will be diluted.

No assurance can be given that ATI will be able to obtain any working capital or
complete any further offerings of securities, or that, if obtained or completed,
that such funding will be sufficient or that it will not cause substantial
dilution to our shareholders. Further, no assurance can be given as to the
completion of research and development activities and the successful marketing
of ATI technologies.

ATI MAY NOT SUCCESSFULLY OVERCOME PROBLEMS ENCOUNTERED IN CONNECTION WITH
POTENTIAL FUTURE ACQUISITIONS.

As part of ATI's long-term growth strategy, it may seek to acquire or make
investments in complementary businesses, technologies, services or products or
enter into strategic relationships with parties who can provide access to those
assets, if appropriate opportunities arise. From time to time, ATI may enter
into discussions and negotiations with companies regarding our acquiring,
investing in, or partnering with their businesses, products, services or
technologies. ATI may not identify suitable acquisition, investment or strategic
partnership candidates, or if it does identify suitable candidates, may not
complete those transactions on commercially acceptable terms or at all.
Acquisitions often involve a number of special risks, including the following:

         o    difficulty integrating acquired operations, products, services and
              personnel;

         o    the acquisition may disrupt our ongoing business;

         o    ATI may not be able to successfully incorporate acquired
              technology and rights into our service offerings and maintain
              uniform standards, controls, procedures, and policies;

         o    ATI may not be able to retain the key personnel of the acquired
              company;

         o    the acquired businesses may fail to achieve the revenues and
              earnings anticipated; and

         o    ATI may ultimately be liable for contingent and other liabilities,
              not previously disclosed to us, of the companies that we acquire.

In addition, an acquisition could materially adversely affect ATI's operating
results by:

         o    diluting shareholder ownership interest;

         o    causing ATI to incur additional debt; and

         o    forcing ATI to amortize expenses related to goodwill and other
              intangible assets.

Any of these factors could have a material adverse effect on ATI's business.
These difficulties could disrupt our ongoing business, distract our management
and employees and increase our expenses. Furthermore, ATI may incur indebtedness
or issue equity securities to pay for any future acquisitions.

ATI MAY NOT BE SUCCESSFUL IN ENTERING INTO STRATEGIC ALLIANCES.

ATI intends to enter into strategic partnerships, joint ventures and/or teaming
arrangements with regional and multinational corporations to promote our
technologies and products. In the event that ATI is unable to develop these
relationships or once developed maintain them for any reason, our business,
operating results and financial condition could be materially adversely
affected. Moreover, ATI can give no assurances that any such relationships will
result in the sale or licensing of our technologies or products.

CERTAIN RISKS MAY ATTACH TO OPERATIONS IN FOREIGN COUNTRIES.

ATI conducts a significant portion of its business outside the United States.
Certain risks attach to operations in foreign countries. Legal systems in some
of the nations in which ATI conducts operations, including the licensing of
technologies and selling products, may not be as developed as the United States
legal system. Consequently, contract rights which ATI takes for granted in the
United States may be unenforceable in some of these jurisdictions. Any inability
to enforce contracts or collect payment from clients located in these areas
would have material adverse effect on ATI's business and results of operations.

Some of the overseas contracts by which ATI provides products and services will
be denominated in currencies other than United States Dollars. In addition,
ATI's expenses are recorded in different currencies. As a result, ATI will be
subject to the effects of exchange rate fluctuations with respect to any of
these currencies.

Some of the foreign countries in which ATI's clients are located have or may
enact laws that restrict conversion of their currencies into United States
Dollars. Any inability to convert the entire amount received from contracts
performed overseas may limit ATI's ability to utilize revenue generated in such
currencies outside of that jurisdiction and restrict us to fund our business
activities outside those countries.

The above list is intended to identify some of the principal factors that could
cause actual results to differ materially from those described in the
"Description of Business--Forward Looking Statements" included elsewhere in this
report. These factors are not intended to represent a complete list of all risks
and uncertainties inherent in our business.

ITEM 7. FINANCIAL STATEMENTS

Our financial statements for the year ended December 31, 2003 are attached
hereto as pages F-1 through F-52.

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

None.

ITEM 8A.  CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures. The Company's Chief
Executive Officer and Chief Financial Officer have conducted an evaluation of
the Company's disclosure controls and procedures as of the end of the period
covered by this report (the "Evaluation Date"). Based on their evaluation, the
Company's Chief Executive Officer and Chief Financial Officer have concluded
that the Company's disclosure controls and procedures are effective to ensure
that information required to be disclosed by the Company in reports that it
files or submits under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported within the time periods specified in the
applicable Securities and Exchange Commission rules and forms.

(b) Changes in Internal Controls and Procedures. During our most recent fiscal
quarter the Company instituted a more formalized book keeping process by
centralizing many of its record keeping responsibilities and established a dual
signature policy on all Company bank accounts.

PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS, COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT and CODE OF ETHICS

DIRECTORS AND OFFICERS

As of December 31, 2003, our officers and Directors were:

NAME                          AGE           TITLE
----                          ---           -----

Hans-Joachim Skrobanek        53        President and Director

Peter Goerke                  43        Former Vice President

James Samuelson               34        Vice President, Chief Financial Officer,
                                        Secretary

Hans-Joachim Schuerholz       77        Director

All directors hold office until the next annual meeting of stockholders and
until their successor have been elected and qualified. The Board of Directors
elects the officers annually.

Hans-Joachim Skrobanek has been our President since October 27, 1999 and a
Director since December, 1999. Mr. Skrobanek was previously engaged in project
financing and technology transfers from Russia and the Ukraine to the West. From
1995 to 1999, Mr. Skrobanek was employed as a consultant to Eurotech, Ltd. and
was directly involved in technology transfers from Russia and Israel to Western
markets. Mr. Skrobanek graduated from the University of Frankfurt in 1976 with a
Bachelor of Commerce degree.

Peter Goerke joined us as a Vice President in March of 2000. Prior to this he
served as the Chief of Department of Intracamion, an international
transportation company. He also served as a consultant to the Treuhandanstalt.
Mr. Goerke has a Masters Degree in Politics from the Institute of International
Relations, Moscow, Russia. He is fluent in German, Russian, English and French.
Mr. Goerke's employment contract was terminated on December 14, 2003, effective
as of March 14, 2004.

James Samuelson joined us as Vice President, Chief Financial Officer in February
2000. Mr. Samuelson has also served as the Chief Operating Officer and Chief
Financial Officer of our wholly-owned subsidiary Cetoni. From February 1998 to
January 2000, Mr. Samuelson served as a Vice President of Corporate Finance for
Eastbrokers AG/WMP Bank AG in Vienna, Austria. In 1997, Mr. Samuelson was
employed as a Vice President from Grammont, Ltd., a boutique investment banking
firm in Paris, France. Prior to 1997, Mr. Samuelson was engaged in graduate
studies. Mr. Samuelson received a Master of Business Administration Degree in
1996, and a Bachelor of Science in Business Administration degree in 1992, both
from Creighton University.

Hans-Joachim Schuerholz has served as one of our directors since May 1999. From
1995 to present, Mr. Schuerholz has served as a managing director and consultant
for a real estate company in Saxony, Germany. From 1993 to 1995, Mr. Schuerholz
was employed as a legal consultant to the City of Dresden, Germany, in the area
of restitution and priority investment law. He graduated from the University of
Menster in 1953 with a legal degree.

The Company has only two members on its Board of Directors and therefore does
not have a separate audit committee but the Company believes that Hans-Joachim
Schuerholz would be considered an audit committee financial expert.

COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

To the best of our knowledge, Kurt Seifman and ERBC Holdings, LTD., a former
affiliate of the Company, failed to file Form 4'S relating to several
transactions occurring in 2003 prior to them longer being considered an
affiliate of the Company.

To the best of our knowledge, LTDN has not filed a Form 4 reflecting its
acquisition of shares of Common Stock in November 2003.

CODE OF ETHICS

The Company has not adopted a Code of Ethics that applies to its executive
officers. The Company expects to have a change of management upon the
consummation of the Merger with LTDN. The Company expected the Merger to be
completed prior to the end of 2003 and therefore did not otherwise adopt such a
Code of Ethics. If the Merger does occur within the next few months, current
management anticipates adopting such a Code of Ethics.

ITEM 10. EXECUTIVE COMPENSATION

The following table presents, for each of the last three fiscal years ending
December 31, 2003 the annual compensation earned by our chief executive officer
and our most highly compensated executive officers.
<TABLE>
<CAPTION>

=========================================================================================================
                                                               LONG TERM COMPENSATION
---------------------------------------------------------------------------------------------------------
                                ANNUAL COMPENSATION                  Awards          Payouts
                            --------------------------------  ---------------------  ---------

                                                   Other                  Securities              All
                                                   Annual     Restricted  Underlying    LTIP     Other
                                          Bonus    Compen-    Stock       Options/    Payouts   Compen-
                     Year    Salary ($)    ($)     sation($)  Awards($)   SARs(#)       ($)     sation($)
-------------------  -----  -----------  --------  ---------  ----------  ----------  --------  ---------
<S>                  <C>    <C>          <C>       <C>        <C>         <C>         <C>       <C>
Hans-Joachim Skrobanek,
President            2003   $110,000 (1)
-------------------  -----  -----------  --------  ---------  ----------  ----------  --------  ---------
                     2002    110,000
-------------------  -----  -----------  --------  ---------  ----------  ----------  --------  ---------
                     2001    110,000
-------------------  -----  -----------  --------  ---------  ----------  ----------  --------  ---------
James Samuelson,
Vice President,
Chief Financial
Officer, Secretary   2003   $120,000 (2)
-------------------  -----  -----------  --------  ---------  ----------  ----------  --------  ---------
                     2002   $120,000
-------------------  -----  -----------  --------  ---------  ----------  ----------  --------  ---------
                     2001   $120,000
-------------------  -----  -----------  --------  ---------  ----------  ----------  --------  ---------
</TABLE>

         (1) Mr. Skrobanek is entitled to receive a salary equal to $110,000 per
annum under his employment agreement with the Company. Due to the Company's
financial condition, Mr. Skrobank has accrued an amount equal to $93,840 during
the year ended December 31, 2003.

         (2) Mr. Samuelson is entitled to receive a salary equal to $120,000 per
annum under an agreement with the Company. Due to the Company's financial
condition, Mr. Samuelson accrued salary during 2001, 2002 and 2003 in a combined
amount of $312,800. During July 2003, Mr. Samuelson and the Company agreed to
convert $265,800 of accrued salary due to Mr. Samuelson into 1,526,238 shares of
Common Stock of the Company. This conversion is contingent upon the shares being
validly issued to Mr. Samuelson and registered on Form S-8. As of the date of
this document, no shares have been issued to Mr. Samuelson under this agreement.
<TABLE>
<CAPTION>

===============================================================================================
                           OPTIONS/SAR GRANTS IN THE FISCAL YEAR 2003
-----------------------------------------------------------------------------------------------
                                      INDIVIDUAL GRANTS
-----------------------------------------------------------------------------------------------
                                     Number of     % of Total
                                     Securities    Options/SARs
                                     Underlying    Granted to
                                     Option/SARs   Employees in   Exercise or Base   Expiration
Name                         Year    Granted (#)   Fiscal Year    Price ($/Share)    Date
---------------------------  -----   -----------   ------------   ----------------   ----------
<S>                          <C>
Hans-Joachim Skrobanek,
President                    2003
                             2002
---------------------------  -----   -----------   ------------   ----------------   ----------
                             2001
---------------------------  -----   -----------   ------------   ----------------   ----------

---------------------------  -----   -----------   ------------   ----------------   ----------
James Samuelson, Vice
President, Chief Financial
Officer, Secretary           2003

                             2002
---------------------------  -----   -----------   ------------   ----------------   ----------
                             2001
---------------------------  -----   -----------   ------------   ----------------   ----------

===============================================================================================
</TABLE>

INCENTIVE STOCK OPTION PLAN.

On October 22, 2000 our Board of Directors adopted a new stock option entitled
the Advanced Technology Industries, Inc. 2000 Stock Option Plan ("Plan"). Under
the Plan options may be issued to directors, officers, key employees,
consultants, agents, advisors, and independent contractors who are in a position
to contribute materially to the prosperity of the Company. The Plan provides for
the issuance of both Incentive Stock Options ("ISO"s") and Non-Qualified Stock
Options ("NQSO's"). ISO's are issued to employees and NQSO's are generally
issued to non-employees. The number of shares that are subject to ISO's is
limited to 3,000,000 under the Plan. The number of NQSO's that may be issued is
subject to the discretion of the Board of Directors.

Our Board of Directors administers the Plan but may delegate such administration
to a committee, which shall consist of at least two members of the Board. The
Board or the Committee has the authority to determine the number of options to
be granted, when the options may be exercised and the exercise price of the
options, provided that the exercise price may never be less than the fair market
value of the shares of the Common Stock on the date the option is granted (110%
in the case of any employee who owns more than 10% of the combined voting power
or value of all classes of stock). Options may be granted for terms not
exceeding ten years from the date of the grant, except for options granted to
person holding in excess of 10% of the Common Stock, in which case the options
may not be granted for a term not to exceed five years from the date of the
grant.

The shareholders approved the Plan on May 18, 2001.

In 2000 our Board approved the issuance of ISO options to purchase 470,000
shares of common stock and NQSO's to purchase 615,000 shares. All of said
options were issued with an exercise price of $.343 per share.

COMPENSATION OF DIRECTORS

There is no standard or individual compensation package for any of the
directors.

EMPLOYMENT CONTRACTS

We currently have an employment contract with Mr. Skrobanek. Under the terms of
the contract Mr. Skrobanek is entitled to a salary of $110,000 per annum.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information as of December 31, 2003 as to each
person who is known to ATI to be the beneficial owner of more than 5% of the
outstanding Common Stock (giving effect to all warrants and options exerciseable
within 60 days) and as to the security and percentage ownership of each
executive officer and director of ATI and all officers and directors of ATI as a
group. Except where specifically noted, each person listed in the table has sole
voting and investment power with respect to the shares listed.
<TABLE>
<CAPTION>

------------------- ------------------------------------ -------------------------- -------------------------
                             Name and Address               Security Ownership             Percentage
     Title of                       Of                       Amount and Nature                 Of
      Class                  Beneficial Owners            Of Beneficial Ownership            Class
------------------- ------------------------------------ -------------------------- -------------------------
      <S>           <C>                                       <C>                            <C>

      Common        LTDnetwork Inc.                            10,125,000                     14.12%
                    211 Madison Avenue, Suite
                    New York, NY

      Common        Kurt Seifman                                3,376,422                      5.2%
                    5 West 86th Street
                    New York, NY  10024
------------------- ------------------------------------ -------------------------- -------------------------
      Common        Hans Joachim Skrobanek
                    Taubenstrasse 20                            1,073,359                        1.4%
                    Berlin, Germany D-10117
------------------- ------------------------------------ -------------------------- -------------------------
      Common        Hans Joachim Schuerholz                       15,000
                    Taubenstrasse 20                                                             0%
                    Berlin, Germany D-10117
------------------- ------------------------------------ -------------------------- -------------------------
      Common        James Samuelson                               179,056 (1)
                    Taubenstrasse 20                                                             0%
                    Berlin, Germany D-10117
------------------- ------------------------------------ -------------------------- -------------------------
      Common        Peter Goerke                                  50,000
                    Taubenstrasse 20                                                             0%
                    Berlin, Germany D-10117
------------------- ------------------------------------ -------------------------- -------------------------
                    Officers and Directors as a group
                    (5 persons)                                 1,323,415                       1.85%
------------------- ------------------------------------ -------------------------- -------------------------
</TABLE>

(1) Includes 179,056 shares held directly by Mr. Samuelson. Additionally, Mr.
Samuelson is entitled to receive 1,526,238 shares, to be registered on Form S-8,
as consideration for the conversion of $265,000 of accrued salary, these shares
have not been issued as of May 17, 2004. Mr. Samuelson is also entitled to
receive 937,777 shares of restricted stock and an option to purchase 937,777
shares of common stock at a price of $0.22 per share. As of May 17, 2004, these
shares have not been issued to Mr. Samuelson and he has not exercised any of the
above referenced options.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

By letter agreement dated June 1, 1996 we engaged ERBC Holdings LTD ("ERBC") to
provide consulting services for one year. That agreement has been renewed
annually. During 2001, we incurred consulting fees of $240,000 for services
provided under the contract. At December 31, 2002, we owed ERBC $895,176 under
the agreement. As of December 31, 2003, we owed ERBC $1,015,176 under the
agreement.

Amounts due to related parties represent various demand notes, plus interest at
10% per annum, payable to certain stockholders, relatives of shareholders and
companies affiliated with stockholders. Interest expense accrued on these demand
notes totaled $ 356,945 in 2003 and $300,824 in 2002.

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

         (a) Exhibits.

Exhibit 31.1 Certification of the Principal Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002, with respect to the registrant's
Annual Report on Form 10-KSB for the period ended December 31, 2003

Exhibit 31.2 Certification of the Principal Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002, with respect to the registrant's
Annual Report on Form 10-KSB for the period ended December31, 2003

Exhibit 32.1 Certification of the Principal Executive Officer and the Principal
Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
with respect to the registrant's Annual Report on Form 10-KSB for the period
ended December 30, 2003

Exhibit 2.1 Agreement and Plan of Merger, dated as June 18, 2003, among Advanced
Technology Industries, Inc., LTDnetwork, Inc. and LTDN Acquisition Corp. (1)

Exhibit 2.2 Conversion Agreement, dated as of June 19, 2003, between LTDnetwork,
Inc. and the Advanced Technology Industries, Inc. (1)

Exhibit 2.3 Asset Purchase Agreement, dated as of July 11, 2003, among Advanced
Technology Industries, Inc., Alfa-Pro Products Gmbh and Alice Schlattl (2)

Exhibit 2.4 Assignment of Shares, dated April 29, 2002, between Alice Schlattl
and Advanced Technology Industries, Inc. (this copy of the contract has been
translated from the executed version which was written in German) (2)

Exhibit 10.1 Release and Stock Purchase Agreement, dated as of July 15, 2003,
between James Samuelson and Advanced Technology Industries, Inc. (2)

Exhibit 10.2 Stock Subscription Agreement, dated as of July 28, 2003, among
Advanced Technology Industries, Inc., ATI Nuklear AG, Nuclear Technologies,
Inc., Hans-Joachim Skrobanek and Peter Goerke. (2)

(1) Incorporated by reference from the registrant's Quarterly Report on Form
10-QSB for the quarter ended March 31, 2003 (File No. 0-230761)

(2) Incorporated by reference from the registrant's Quarterly Report on Form
10-QSB for the quarter ended June 30, 2003.

Reports of Form 8-K

The Company filed an amended report of Form 8-K/A on January 24, 2003. This
report amended a previous filing on form 8-K filed on September 13, 2002.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Marcum & Kliegman LLP, Certified Public Accountants, provided accounting
services to the Company during the year ended December 31, 2003. The Board has
selected Marcum & Kliegman LLP to provide accounting services to the Company for
the year ending December 31, 2004.

The following table presents fees for professional audit services rendered by
Marcum & Kliegman, LLP for the audit of the Company's annual financial
statements for the years ended December 31, 2003 and 2002, and fees billed for
other services rendered by Marcum & Kliegman, LLP during 2003 and 2002.

                                                   2003        2002
                                                 --------------------

Audit Fees (1) ...............................   $ 104,697  $ 138,246
Audit Related Fees (2)                               -        -
Tax Fees (3) .................................       -         11,078
All Other Fees (4)                                   -        -
                                                 --------------------
                                                 $ 104,697  $ 149,324

Notes:

(1) Audit fees consist of fees for audit of the Company's annual financial
    statements, review of financial statements included in the Company's
    quarterly reports on Form 10-Q and services normally provided by the
    independent auditor in connection with statutory and regulatory filings or
    engagements.

(2) Audit related fees consist of fees for audits of financial statements of the
    employee benefit plans maintained by the Company.

(3) Tax fees consist of fees for tax consultation and tax compliance services
    for the Company and its employee benefit plans.

(4) All other fees consist of fees primarily related to consultations regarding
    the employee benefit plans.

The Company does not have an Audit Committee, therefore there is not
pre-approval of audit and permissible non-audit services provided by the
independent auditors. The non-audit services include audit-related services, tax
services and other services. The Company's policy is to pre-approve all services
and fees for up to one year, which approval includes the appropriate detail with
regard to each particular service and its related fees.

Management has considered whether the services provided by Marcum & Kliegman,
LLP, apart from the audit services described under the heading "Audit Fees"
above, are compatible with maintaining the independence of Marcum & Kliegman,
LLP.



<PAGE>

                                   SIGNATURES

In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.

                                ADVANCED TECHNOLOGY INDUSTRIES, INC.

Dated: May 17, 2004             By: /s/ Hans-Joachim Skrobanek
                                    --------------------------------------
                                    Hans-Joachim Skrobanek, President

Dated: May 17, 2004             By: /s/ James Samuelson
                                    --------------------------------------
                                    James Samuelson
                                    Chief Financial Officer

Dated:  May 17,2004             By: /s/ Hans-Joachim Schuerholz
                                    --------------------------------------
                                    Hans-Joachim Schuerholz
                                    Director


<PAGE>


                     CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

I, Hans-Joachim Skrobanek, certify that:

(1) I have reviewed this annual report on Form 10-KSB of Advanced Technology
Industries, Inc., (the "Company");

(2) Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

(3) Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
Company as of, and for, the periods presented in this annual report;

(4) The Company's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the
Company and have:

                  (a) designed such disclosure controls and procedures, or
         caused such disclosure controls and procedures to be designed under our
         supervision, to ensure that material information relating to the
         Company, including its consolidated subsidiaries, is made known to us
         by others within those entities, particularly during the period in
         which this annual report is being prepared; and

                  (b) designed such internal controls over financial reporting,
         or caused such internal controls over financial reporting to be
         designed under our supervision, to provide reasonable assurance
         regarding the reliability of financial reporting and the preparation of
         financial statements for external purposes in accordance with generally
         accepted accounting principles;

                  (c) evaluated the effectiveness of the Company's disclosure
         controls and procedures and presented in this annual report our
         conclusions about the effectiveness of the disclosure controls and
         procedures, as of the end of the period covered by this annual report
         based on such evaluation; and

                  (d) disclosed in this annual report any change in the
         Company's internal control over financial reporting that occurred
         during the Company's fourth fiscal quarter that has materially
         affected, or is reasonably likely to materially affect, the Company's
         internal control over financial reporting; and

(5) The Company's other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
Company's auditors and the audit committee of the Company's board of directors
(or persons fulfilling the equivalent function):

                  (a) all significant deficiencies and material weaknesses in
         the design or operation of internal controls over financial reporting
         which are reasonably likely to adversely affect the Company's ability
         to record, process, summarize and report financial information; and

                  (b) any fraud, whether or not material, that involves
         management or other employees who have a significant role in the
         Company's internal controls over financial reporting.

Date: May 17, 2004          By: /s/ Hans-Joachim Skrobanek
                                ------------------------------------------------
                                Hans-Joachim Skrobanek, Chief Executive Officer



<PAGE>

                  CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

I, James Samuelson, certify that:

(1) I have reviewed this annual report on Form 10-KSB of Advanced Technology
Industries, Inc., (the "Company");

(2) Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

(3) Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
Company as of, and for, the periods presented in this annual report;

(4) The Company's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the
Company and have:

                  (a) designed such disclosure controls and procedures, or
         caused such disclosure controls and procedures to be designed under our
         supervision, to ensure that material information relating to the
         Company, including its consolidated subsidiaries, is made known to us
         by others within those entities, particularly during the period in
         which this annual report is being prepared; and

                  (b) designed such internal controls over financial reporting,
         or caused such internal controls over financial reporting to be
         designed under our supervision, to provide reasonable assurance
         regarding the reliability of financial reporting and the preparation of
         financial statements for external purposes in accordance with generally
         accepted accounting principles;

                  (c) evaluated the effectiveness of the Company's disclosure
         controls and procedures and presented in this annual report our
         conclusions about the effectiveness of the disclosure controls and
         procedures, as of the end of the period covered by this annual report
         based on such evaluation; and

                  (d) disclosed in this annual report any change in the
         Company's internal control over financial reporting that occurred
         during the Company's fourth fiscal quarter that has materially
         affected, or is reasonably likely to materially affect, the Company's
         internal control over financial reporting; and

(5) The Company's other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
Company's auditors and the audit committee of the Company's board of directors
(or persons fulfilling the equivalent function):

                  (a) all significant deficiencies and material weaknesses in
         the design or operation of internal controls over financial reporting
         which are reasonably likely to adversely affect the Company's ability
         to record, process, summarize and report financial information; and

                  (b) any fraud, whether or not material, that involves
         management or other employees who have a significant role in the
         Company's internal controls over financial reporting.

Date: May 17, 2004                  By: /s/ James Samuelson
                                        ----------------------------------------
                                        James Samuelson, Chief Financial Officer



<PAGE>

                      ADVANCED TECHNOLOGY INDUSTRIES, INC.
                                AND SUBSIDIARIES
                          (A Development Stage Company)

                          CONSOLIDATED FINANCIAL REPORT

                               FOR THE YEARS ENDED
                           DECEMBER 31, 2003 AND 2002



<PAGE>

              ADVANCED TECHNOLOGY INDUSTRIES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                       Page Nos.
                                                                       ---------

INDEPENDENT AUDITORS' REPORT                                               1

CONSOLIDATED BALANCE SHEET                                                 2
  December 31, 2003

CONSOLIDATED STATEMENTS OF OPERATIONS                                      3
  For the Years Ended December 31, 2003 and 2002
  For the Period from Inception (October 25, 1995) to
    December 31, 2003

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIENCY)                    4 - 14
  For the Period from Inception (October 25, 1995) to
    December 31, 2003

CONSOLIDATED STATEMENTS OF CASH FLOWS                                   15 - 16
  For the Years Ended December 31, 2003 and 2002
  For the Period from Inception (October 25, 1995) to
    December 31, 2003

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                              17 - 52

SELECTED FINANCIAL DATA
  For the Five Years Ended December 31, 2003

(*) Included in Part II, Item 6 of the Form.



<PAGE>

To the Board of Directors and Stockholders
Advanced Technology Industries, Inc. and Subsidiaries

                          INDEPENDENT AUDITORS' REPORT
                          ----------------------------

We have audited the accompanying consolidated balance sheet of Advanced
Technology Industries, Inc. and Subsidiaries, (the "Company") (a development
stage company) as of December 31, 2003 and the related consolidated statements
of operations, stockholders' deficiency, and cash flows for the years ended
December 31, 2003 and 2002 and for the period from inception (October 25, 1995)
to December 31, 2003. 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 audit.

We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. 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 audit provides 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 Technology Industries, Inc. and Subsidiaries (a development stage
company) as of December 31, 2003 and the results of their operations and their
cash flows for the year then ended and for the period from inception (October
25, 1995) to December 31, 2003, in conformity with accounting principles
generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. The Company incurred a net
loss for the year ended December 31, 2003 of $3,857,514, and as of
December 31, 2003 had a working capital deficiency of approximately $9,287,892.
As discussed further in Note 1 to the consolidated financial statements, these
factors raise substantial doubt about the Company's ability to continue as a
going concern. Management's plans regarding those matters are also described in
Note 1. The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.

/s/ Marcum & Kliegman LLP

New York, New York
April 29, 2004, except for note 4 dated may 17, 2004



<PAGE>

              ADVANCED TECHNOLOGY INDUSTRIES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)

                           CONSOLIDATED BALANCE SHEET

                                DECEMBER 31, 2003

                                     ASSETS
                                     ------

Current Assets:
  Cash and cash equivalents                                        $      7,992
  Prepaid expenses and other current assets                             157,153
                                                                   -------------
        Total Current Assets                                            165,145

Property and equipment, net                                             197,093
Note Receivable-Related Party                                           203,000
Due from related parties                                                 59,946
                                                                   -------------
        Total Assets                                               $    625,184
                                                                   =============

                    LIABILITIES AND STOCKHOLDERS' DEFICIENCY
                    ----------------------------------------

Current Liabilities:
  Loans and notes payable                                          $  1,908,701
  Accrued liabilities, including $1,394,036 due to related
    parties                                                           7,428,875
  Due to related parties                                                115,461
                                                                   -------------
      Total Liabilities                                               9,453,037
                                                                   -------------

Commitments

Stockholders' Deficiency:
  Preferred stock - $0.001 par value; 1,000,000 shares
    authorized; -0- shares issued and outstanding                            --
  Common stock - $0.0001 par value; 100,000,000 shares
    authorized; 63,061,270 shares issued and outstanding                  6,308
  Additional paid-in capital                                         17,716,447
  Accumulated other comprehensive loss                               (1,194,774)
  Deficit accumulated during the development stage                  (25,310,834)
  Receivable on sale of stock                                           (45,000)
                                                                   -------------
      Total Stockholders' Deficiency                                 (8,827,853)
                                                                   -------------
      Total Liabilities and Stockholders' Deficiency               $    625,184
                                                                   =============

  The accompanying notes are an integral part of these consolidated financial
                                  statements.

                                       2


<PAGE>
<TABLE>

                 ADVANCED TECHNOLOGY INDUSTRIES, INC. AND SUBSIDIARIES
                             (A Development Stage Company)

                         CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>

                                             For the Years Ended         For the Period
                                                  December 31,           from Inception
                                        -----------------------------  (October 25, 1995)
                                            2003            2002      to December 31, 2003
                                        -------------   -------------    -------------
<S>                                     <C>             <C>             <C>
Revenues                                $         --    $         --    $         --
                                        -------------   -------------   -------------
Costs and Expenses:
  Research and development                    88,754       1,137,990       5,113,071
  Compensatory element of stock
    issuances pursuant to consulting
    professional and other agreements      1,223,827       1,506,996       6,335,965
  Consulting fees                            243,118         541,877       3,090,353
  Other general and administrative
    expenses                               1,832,415       2,010,554       7,962,536
  Depreciation and amortization
    expense                                   55,976         176,875         758,570
  Interest and amortization of debt
    issuance costs                           443,647         917,579       4,402,154
  Gain on sale of marketable
    securities                                    --        (100,818)       (875,156)
  Equity loss and amortization of
    goodwill of unconsolidated
    affiliate - Nurescell Inc.                    --              --       1,660,550
  Minority interest in loss of
    consolidated subsidiary                       --              --        (323,965)
  Loss on impairment of license fee               --         566,667         566,667
  Gain on Sale of Equipment                   (8,700)             --          (8,700)
  Interest Income                            (21,523)             --         (21,523)
                                        -------------   -------------   -------------
    Total Costs and Expenses               3,857,514       6,757,720      28,660,552
                                        -------------   -------------   -------------

Loss before extraordinary item            (3,857,514)      (6,757,720)    (28,660,522)

Extraordinary item - gain on sale of
  technology interest to former
  affiliate, net of income taxes of
  $-0-                                            --              --       3,349,688
                                        -------------   -------------   -------------
Net Loss                                $ (3,857,514)    $ (6,757,720)   $(25,310,834)
                                        =============   =============   =============

Basic and diluted loss per share        $       (.07)   $       (.14)
                                        =============   =============
Weighted average shares used in
  basic and diluted loss per share        56,519,472      47,647,310
                                        =============   =============

     The accompanying notes are an integral part of these consolidated financial
                                     statements.

                                          3
</TABLE>



<PAGE>
<TABLE>

               ADVANCED TECHNOLOGY INDUSTRIES, INC. AND SUBSIDIARIES
                           (A Development Stage Company)

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY

       FOR THE PERIOD FROM INCEPTION (OCTOBER 25, 1995) TO DECEMBER 31, 2003

<CAPTION>

                                                  Common Stock          Additional
                                           --------------------------     Paid-in
                                              Shares        Amount        Capital
                                           ------------  ------------  ------------
<S>                                        <C>           <C>           <C>
Period from Inception (October 25, 1995)
through December 31, 1997:
----------------------------------------

Issuance of common stock to founders for
  subscriptions ($0.0001 per share)         12,300,000   $     1,230   $        --
Issuance of stock for legal fees
  ($0.04 per share)                            500,000            50        19,950
Issuance of stock under consulting
  agreement ($0.04 per share)                1,605,000           161       284,839
Net loss - 1996                                     --            --            --
Issuance of stock under consulting
  agreements ($1.00 per share)                 750,000            75       749,925
Issuance of stock for cash pursuant to
  offering ($2.00 per share)                   306,500            30       612,970
Offering costs                                      --            --       (50,000)
Comprehensive income:
  Net loss - 1997                                   --            --            --
                                           ------------  ------------  ------------
Balance - December 31, 1997                 15,461,500   $     1,546   $ 1,617,684
                                           ============  ============  ============


                                           Accumulated   Accumulated      Total
                                              Other      During the    Stockholders'
                                          Comprehensive  Development                  Comprehensive
                                          Income (Loss)     Stage       Deficiency         Loss
                                           ------------  ------------   ------------   ------------

Period from Inception (October 25, 1995)
through December 31, 1997:
----------------------------------------

Issuance of common stock to founders for
  subscriptions ($0.0001 per share)        $        --   $        --    $     1,230
Issuance of stock for legal fees
  ($0.04 per share)                                 --            --         20,000
Issuance of stock under consulting
  agreement ($0.04 per share)                       --            --        285,000
Net loss - 1996                                     --      (372,500)      (372,500)
Issuance of stock under consulting
  agreements ($1.00 per share)                      --            --        750,000
Issuance of stock for cash pursuant to
  offering ($2.00 per share)                        --            --        613,000
Offering costs                                      --            --        (50,000)
Comprehensive income:
  Net loss - 1997                                   --    (1,267,567)    (1,267,567)   $(1,267,567)
                                           ------------  ------------   ------------   ------------
Balance - December 31, 1997                $        --   $(1,640,067)   $   (20,837)   $(1,267,567)
                                           ============  ============   ============   ============

    The accompanying notes are an integral part of these consolidated financial
                                    statements.

                                         4
</TABLE>



<PAGE>

               ADVANCED TECHNOLOGY INDUSTRIES, INC. AND SUBSIDIARIES
                           (A Development Stage Company)

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY

       FOR THE PERIOD FROM INCEPTION (OCTOBER 25, 1995) TO DECEMBER 31, 2003

                                                Common Stock         Additional
                                           -----------------------    Paid-in
                                             Shares       Amount       Capital
                                           ----------   ----------   ----------

Year Ended December 31, 1998:
----------------------------

Balance - January 1, 1998, as previously
  reported                                 15,461,500   $    1,546   $1,617,684
Effect of Cetoni pooling-of-interests       5,000,000          500       27,245
                                           ----------   ----------   ----------
Balance - January 1, 1998, restated        20,461,500        2,046    1,644,929

Comprehensive income:
  Net loss, restated for Cetoni
    pooling-of-interests                           --           --           --
  Other comprehensive income, net of
    tax:
      Translation adjustments                      --           --           --
      Unrealized gains                             --           --           --
                                           ----------   ----------   ----------
Balance - December 31, 1998, Restated      20,461,500   $    2,046   $1,644,929
                                           ==========   ==========   ==========

<TABLE>
<CAPTION>

                                           Accumulated    Accumulated     Total
                                              Other       During the     Stockholders'
                                           Comprehensive  Development                   Comprehensive
                                               Loss         Stage         Deficiency        Loss
                                           ------------   ------------   ------------   ------------
<S>                                        <C>            <C>            <C>            <C>
Year Ended December 31, 1998:
----------------------------

Balance - January 1, 1998, as previously
  reported                                 $        --    $(1,640,067)   $   (20,837)
Effect of Cetoni pooling-of-interests           36,122       (512,769)      (448,902)
                                           ------------   ------------   ------------
Balance - January 1, 1998, restated             36,122     (2,152,836)      (469,739)
Comprehensive income:
   Net loss, restated for Cetoni
     pooling-of-interests                           --       (795,568)      (795,568)   $  (795,568)
   Other comprehensive income, net of
     tax:
       Translation adjustments                 (54,137)            --        (54,137)       (54,137)
       Unrealized gains                             --             --             --             --
                                           ------------   ------------   ------------   ------------
Balance - December 31, 1998, Restated      $   (18,015)   $(2,948,404)   $(1,319,444)   $  (849,705)
                                           ============   ============   ============   ============

    The accompanying notes are an integral part of these consolidated financial
                                    statements.

                                         5
</TABLE>



<PAGE>
<TABLE>

                ADVANCED TECHNOLOGY INDUSTRIES, INC. AND SUBSIDIARIES
                            (A Development Stage Company)

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY

        FOR THE PERIOD FROM INCEPTION (OCTOBER 25, 1995) TO DECEMBER 31, 2003
<CAPTION>

                                                  Common Stock            Additional
                                            --------------------------      Paid-in
                                              Shares         Amount         Capital
                                            -----------    -----------    -----------
<S>                                         <C>            <C>            <C>
Year Ended December 31, 1999:
----------------------------

Balance - January 1, 1999                    20,461,500    $     2,046    $ 1,644,929

Cancellation of shares issued to founders    (6,795,000)          (679)           679
Stock issued pursuant to employment and
  consulting agreements                       1,009,411            101      1,009,310
Value assigned to stock options issued in
  connection with consulting agreement               --             --         61,000
Value assigned to 770,000 warrants issued
  in connection with convertible debt                --             --        531,000
Comprehensive income, net of tax:
   Net loss                                          --             --             --
   Other comprehensive income, net of
     tax:
       Foreign currency translation
         adjustments                                 --             --             --
       Unrealized gains on securities               --              --             --
                                            -----------    -----------    -----------
Balance - December 31, 1999                  14,675,911    $     1,468    $ 3,246,918
                                            ===========    ===========    ===========


                                          Accumulated    Accumulated       Total
                                             Other       During the     Stockholders'
                                          Comprehensive  Development                 Comprehensive
                                          (Loss)Income      Stage        Deficiency      Income
                                          ------------   ------------   ------------   ------------

Year Ended December 31, 1999:
----------------------------

Balance - January 1, 1999                 $   (18,015)   $(2,948,404)   $(1,319,444)

Cancellation of shares issued to
  founders                                         --             --             --
Stock issued pursuant to employment and
  consulting agreements                            --             --      1,009,411
Value assigned to stock options issued
  in connection with consulting
  agreements                                        --             --         61,000
Value assigned to 770,000 warrants
  issued in connection with convertible
  debt                                             --             --        531,000
Comprehensive income, net of tax:
  Net loss                                         --       (748,936)      (748,936)   $  (748,936)
  Other comprehensive income, net of
    tax:
     Foreign currency translation
       adjustments                             92,899             --         92,899         92,899
     Unrealized gains on securities         1,117,500             --      1,117,500      1,117,500
                                          ------------   ------------   ------------   ------------
Balance - December 31, 1999               $ 1,192,384    $(3,697,340)   $   743,430    $   461,463
                                          ============   ============   ============   ============

  The accompanying notes are an integral part of these consolidated financial
                                  statements.

                                       6
</TABLE>



<PAGE>
<TABLE>

                    ADVANCED TECHNOLOGY INDUSTRIES, INC. AND SUBSIDIARIES
                                (A Development Stage Company)

                     CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY

            FOR THE PERIOD FROM INCEPTION (OCTOBER 25, 1995) TO DECEMBER 31, 2003
<CAPTION>

                                                                                Accumulated
                                             Common Stock          Additional      Other
                                      --------------------------    Paid-in     Comprehensive
                                         Shares        Amount       Capital        Income
                                      ------------  ------------  ------------  ------------
<S>                                   <C>           <C>           <C>           <C>
Year Ended December 31, 2000:
----------------------------

Balance - January 1, 2000              14,675,911   $     1,468   $ 3,246,918   $ 1,192,384

Stock options exercised                   120,000            12        59,988            --
Shares issued for acquisition of
  Aberdeen                                400,000            40       499,960            --
Compensatory issuance of stock            218,000            22       287,486            --
Value assigned to stock options
  issued in connection with
  consulting agreements                        --            --       472,500            --
Value assigned to stock as
  additional consideration for
  financing activities                    713,571            71       222,788            --
Issuance of stock to retire debt
  from related party                   13,054,393         1,305     1,558,695            --
Issuance of stock to officers for
  bonus                                   100,000            10        20,190            --
Amortization of unearned financing
  costs                                        --            --            --
Comprehensive income:
  Net loss                                     --            --            --
  Other comprehensive income
    (loss), net of tax:
      Foreign currency translation
       adjustments                             --            --            --        69,578
      Unrealized holding losses
       arising during the year, net
       of taxes of $453,000                    --            --            --      (687,825)
      Less: Reclassification
             adjustments for
             gains included in net
             loss, net of taxes of
             $151,000                          --            --            --      (279,375)
                                      ------------  ------------  ------------  ------------
Balance - December 31, 2000            29,281,875   $     2,928   $ 6,368,525   $   294,762
                                      ============  ============  ============  ============

        The accompanying notes are an integral part of these consolidated financial
                                        statements.

                                             7
</TABLE>



<PAGE>
<TABLE>

                            ADVANCED TECHNOLOGY INDUSTRIES, INC. AND SUBSIDIARIES
                                        (A Development Stage Company)

                             CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY

                    FOR THE PERIOD FROM INCEPTION (OCTOBER 25, 1995) TO DECEMBER 31, 2003

<CAPTION>

                                      Deficit
                                     Accumulated                                    Total
                                     During the      Unearned       Receivable   Stockholders'
                                     Development     Financing      on Sale of      Equity       Comprehensive
                                        Stage          Costs          Stock       (Deficiency)       Loss
                                     ------------   ------------   ------------   ------------   ------------
<S>                                  <C>            <C>            <C>            <C>            <C>
Year Ended December 31, 2000:
----------------------------

Balance - January 1, 2000            $(3,697,340)   $        --    $        --    $   743,430

Stock options exercised                       --             --        (45,000)        15,000
Shares issued for acquisition of
  Aberdeen                                    --             --             --        500,000
Compensatory issuance of stock                --             --             --        287,508
Value assigned to stock options
  issued in connection with
  consulting agreements                       --             --             --        472,500
Value assigned to stock as
  additional consideration for
  financing activities                        --       (222,859)            --             --
Issuance of stock to retire debt
  from related party                          --             --             --      1,560,000
Issuance of stock to officers for
  bonus                                       --             --             --         20,200
Amortization of unearned financing
  costs                                       --         54,603             --         54,603
Comprehensive income:
  Net loss                            (3,368,644)            --             --     (3,368,644)   $(3,368,644)
  Other comprehensive income
   (loss), net of tax:
     Foreign currency translation
       adjustments                            --             --             --         69,578         69,578
     Unrealized holding losses
       arising during the year,
       net of taxes of $453,000               --             --             --       (687,825)      (687,825)
     Less: Reclassification
            adjustments for gains
            included in net loss,
            net of taxes of
            $151,000                          --             --             --       (279,375)      (279,375)
                                     ------------   ------------   ------------   ------------   ------------
Balance - December 31, 2000          $(7,065,984)   $  (168,256)   $   (45,000)   $  (613,025)   $(4,266,266)
                                     ============   ============   ============   ============   ============

  The accompanying notes are an integral part of these consolidated financial
                                  statements.

                                       8
</TABLE>



<PAGE>
<TABLE>

                        ADVANCED TECHNOLOGY INDUSTRIES, INC. AND SUBSIDIARIES
                                    (A Development Stage Company)

                         CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY

                FOR THE PERIOD FROM INCEPTION (OCTOBER 25, 1995) TO DECEMBER 31, 2003
<CAPTION>

                                                                                        Accumulated
                                                  Common Stock           Additional        Other
                                          ----------------------------    Paid-in       Comprehensive
                                             Shares         Amount        Capital          Income
                                          -------------  -------------  -------------   -------------
<S>                                         <C>          <C>            <C>             <C>
Year Ended December 31, 2001:
-----------------------------

Balance - January 1, 2001                   29,281,875   $      2,928   $  6,368,525    $    294,762

Value assigned to stock as additional
  consideration for financing
  activities                                 3,015,000            301      1,529,048              --
Issuance of stock for 4,590,000
  shares of Nurescell Inc.                   4,590,000            459      1,660,091              --
Issuance of stock to retire debt from
  related party                              3,336,745            334        527,539              --
Compensatory issuance of stock                 500,000             50        168,700              --
Issuance of stock on conversion of loan
  from officer                                 344,788             34         54,511              --
Issuance of stock for accrued expenses         316,056             32         49,968              --
Value assigned to stock options issued
  in connection with consulting
  agreement                                         --             --         37,500              --
Cashless exercise of warrants                   67,857              7             (7)             --
Issuance of stock on conversion of loan
  and accrued interest                       1,695,374            170        577,030              --
Issuance of stock for accrued interest
  on promissory notes                           61,844              6         22,178              --
Compensatory issuance of stock               1,381,826            139        356,885              --
Issuance of stock to employees as a
  sign-on bonus                                 75,000              8         18,743              --
Issuance of stock for legal fees               477,429             47        112,714              --
Proceeds from sale of minority interest
  in Reseal, Ltd.                                   --             --        275,000              --
Value assigned to stock options issued
  in connection with consulting
  agreement                                         --             --         10,000              --
Amortization of unearned financing
  costs                                             --             --             --              --
Comprehensive income:
  Net loss                                          --             --             --              --
  Other comprehensive income (loss),
    net of tax:
      Foreign currency translation
        adjustment                                  --             --             --          (5,824)
      Unrealized holding losses
        arising during the year, net
        of taxes of $-0-                            --             --             --        (178,663)
                                          -------------  -------------  -------------   -------------
Balance - December 31, 2001                 45,143,794   $      4,515   $ 11,768,425    $    110,275
                                          =============  =============  =============   =============

             The accompanying notes are an integral part of these consolidated financial
                                             statements.

                                                  9
</TABLE>



<PAGE>
<TABLE>

                                 ADVANCED TECHNOLOGY INDUSTRIES, INC. AND SUBSIDIARIES
                                             (A Development Stage Company)

                                  CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY

                         FOR THE PERIOD FROM INCEPTION (OCTOBER 25, 1995) TO DECEMBER 31, 2003

<CAPTION>

                                           Deficit
                                         Accumulated                                       Total
                                          During the       Unearned       Receivable    Stockholders'
                                          Development     Financing       on Sale of                    Comprehensive
                                             Stage          Costs            Stock        Deficiency         Loss
                                         -------------   -------------   -------------   -------------   -------------
<S>                                      <C>             <C>             <C>             <C>             <C>
Year Ended December 31, 2001:
----------------------------

Balance - January 1, 2001                $ (7,065,984)   $   (168,256)   $    (45,000)   $   (613,025)

Value assigned to stock as additional
  consideration for financing
  activities                                       --      (1,529,350)             --              --
Issuance of stock for 4,590,000
  shares of Nurescell Inc.                         --              --              --       1,660,550
Issuance of stock to retire debt
  from related party                               --              --              --         527,873
Compensatory issuance of stock                     --              --              --         168,750
Issuance of stock on conversion of
  loan from officer                                --              --              --          54,545
Issuance of stock for accrued expenses             --              --              --          50,000
Value assigned to stock options issued
  in connection with consulting
  agreement                                        --              --              --          37,500
Cashless exercise of warrants                      --              --              --              --
Issuance of stock on conversion of
  loan and accrued interest                        --              --              --         577,200
Issuance of stock for accrued interest
  on promissory notes                              --              --              --          22,184
Compensatory issuance of stock                     --              --              --         357,023
Issuance of stock to employees as a
  sign-on bonus                                    --              --              --          18,750
Issuance of stock for legal fees                   --              --              --         112,762
Proceeds from sale of minority
  interest in Reseal, Ltd.                         --              --              --         275,000
Value assigned to stock options issued
  in connection with consulting
  agreement                                        --              --              --          10,000
Amortization of unearned financing
  costs                                            --       1,405,402              --       1,405,402
Comprehensive income:
  Net loss                                 (7,629,616)             --              --      (7,629,616)   $ (7,629,616)
  Other comprehensive income (loss),
    net of tax:
      Foreign currency translation
        adjustment                                 --              --              --          (5,824)         (5,824)
      Unrealized holding losses
        arising during the year, net
        of taxes of $-0-                           --              --              --        (178,663)       (178,663)
                                         -------------   -------------   -------------   -------------   -------------
Balance - December 31, 2001              $(14,695,600)   $   (292,204)   $    (45,000)   $ (3,149,589)   $ (7,814,103)
                                         =============   =============   =============   =============   =============

                     The accompanying notes are an integral part of these consolidated financial
                                                     statements.

                                                          10
</TABLE>



<PAGE>
<TABLE>

                        ADVANCED TECHNOLOGY INDUSTRIES, INC. AND SUBSIDIARIES
                                    (A Development Stage Company)

                         CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY

                FOR THE PERIOD FROM INCEPTION (OCTOBER 25, 1995) TO DECEMBER 31, 2003

<CAPTION>

                                                                                         Accumulated
                                                 Common Stock            Additional        Other
                                          ---------------------------     Paid-in       Comprehensive
                                             Shares         Amount        Capital          Income
                                          ------------   ------------   ------------    ------------
<S>                                       <C>            <C>            <C>             <C>
For the Year Ended December 31, 2002:
-------------------------------------

Balance - January 1, 2002                   45,143,794   $      4,515   $ 11,768,425    $    110,275

Value assigned to stock as additional
  consideration for financing
  activities                                   833,306             83        285,139              --

Issuance of stock for legal fees             2,711,791            272        854,845              --

Proceeds from sale of minority interest
  in Reseal, Ltd.                                   --             --        125,000              --

Cashless exercise of warrants                   16,374              1             (1)             --

Compensatory issuance of stock                 250,000             25        344,975              --

Issuance of stock for consulting fees          400,000             40        227,960              --

Value assigned to options issued for
  consultant                                        --             --         50,679              --

Issuance of stock for finder's fee              50,000              5         10,195              --

Issuance of stock for loan incentive           100,000             10         17,990              --

Amortization of unearned financing
  costs                                             --             --             --              --

Exercise of stock options                      145,328             15         20,985              --

Comprehensive Income:
Net loss                                            --             --             --              --
  Other comprehensive income (loss),
    net of tax:
      Foreign currency translation
        adjustment                                  --             --             --         (17,225)
      Reclassification adjustment for
        gains included in net loss                  --             --             --          28,363
                                          ------------   ------------   ------------    ------------
Balance - December 31, 2002                 49,650,593   $      4,966   $ 13,706,192    $    121,413
                                          ============   ============   ============    ============

             The accompanying notes are an integral part of these consolidated financial
                                             statements.

                                                 11
</TABLE>



<PAGE>
<TABLE>

                                 ADVANCED TECHNOLOGY INDUSTRIES, INC. AND SUBSIDIARIES
                                             (A Development Stage Company)

                                  CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY

                         FOR THE PERIOD FROM INCEPTION (OCTOBER 25, 1995) TO DECEMBER 31, 2003

<CAPTION>

                                           Deficit
                                          Accumulated                                      Total
                                          During the       Unearned        Receivable   Stockholders'
                                          Development      Financing       on Sale of                    Comprehensive
                                             Stage           Costs           Stock       Deficiency          Loss
                                         -------------   -------------   -------------   -------------   -------------
<S>                                      <C>             <C>             <C>             <C>             <C>
For the Year Ended December 31, 2002:
------------------------------------

Balance - January 1, 2002                $(14,695,600)   $   (292,204)   $    (45,000)   $ (3,149,589)   $         --

Value assigned to stock as additional
  consideration for financing
  activities                                       --        (285,222)             --              --              --

Issuance of stock for legal fees                   --              --              --         855,117              --

Proceeds from sale of minority
  interest in Reseal, Ltd.                         --              --              --         125,000              --

Cashless exercise of warrants                      --              --              --              --              --

Compensatory issuance of stock                     --              --              --         345,000              --

Issuance of stock for consulting fees              --              --              --         228,000              --

Value assigned to options issued for
  consultant                                       --              --              --          50,679              --

Issuance of stock for finder's fee                 --              --              --          10,200              --

Issuance of stock for loan incentive               --              --              --          18,000              --

Amortization of unearned financing
  costs                                            --         577,426              --         577,426              --

Exercise of stock options                          --              --              --          21,000              --

Comprehensive Income:
  Net loss                                 (6,757,720)             --              --      (6,757,720)     (6,757,720)
    Other comprehensive income (loss),
      net of tax:
        Foreign currency translation
          Adjustment                               --              --              --         (17,225)        (17,225)
      Reclassification adjustment for
        gains included in net loss                 --              --              --          28,363          28,363

                                         -------------   -------------   -------------   -------------   -------------
Balance - December 31, 2002              $(21,453,320)   $         --    $    (45,000)   $ (7,665,749)   $ (6,746,582)
                                         =============   =============   =============   =============   =============

                     The accompanying notes are an integral part of these consolidated financial
                                                     statements.

                                                          12
</TABLE>



<PAGE>
<TABLE>

                       ADVANCED TECHNOLOGY INDUSTRIES, INC. AND SUBSIDIARIES
                                   (A Development Stage Company)

                        CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY

               FOR THE PERIOD FROM INCEPTION (OCTOBER 25, 1995) TO DECEMBER 31, 2003

<CAPTION>

                                                                                       Accumulated
                                                  Common Stock           Additional      Other
                                          ---------------------------     Paid-in     Comprehensive
                                             Shares         Amount        Capital     Income (Loss)
                                          ------------   ------------   ------------  ------------
<S>                                       <C>            <C>            <C>           <C>
For the Year Ended December 31, 2003:
------------------------------------

Balance - January 1 2003                   49,650,593    $     4,966    $13,706,192   $   121,413

Issuance of stock on conversion of loan     9,250,000            925        924,075            --

Issuance of stock for conversion of
  promissory note                           1,000,000            100        102,779            --

Issuance of stock for consulting fees       2,385,000            239      1,006,462            --

Issuance of stock for cash                  2,000,000            200        239,800            --

Issuance of stock for legal services          360,677             36         44,964            --

Issuance of stock for settlement of
   accrued liabilities                        510,000             51        123,961            --

Cancellation of shares pursuant to
   settlement agreement                    (2,095,000)          (209)           209            --

Effect of August settlement Agreement              --             --      1,160,857            --

Settlement regarding stock
   purchase executed in 2001                       --             --        270,000            --

Value assigned to 1,000,000
   warrants issued                                 --             --        137,148            --
Comprehensive Income:
Net loss                                           --             --             --            --
  Other comprehensive income (loss),
    net of tax:
      Foreign currency translation
        adjustment                                 --             --             --    (1,316,187)
                                          ------------   ------------   ------------  ------------
Balance - December 31, 2003                63,061,270    $     6,308    $17,716,447   $(1,194,774)
                                          ============   ============   ============  ============

            The accompanying notes are an integral part of these consolidated financial
                                            statements.

                                                13
</TABLE>



<PAGE>
<TABLE>

                                ADVANCED TECHNOLOGY INDUSTRIES, INC. AND SUBSIDIARIES
                                            (A Development Stage Company)

                                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY

                        FOR THE PERIOD FROM INCEPTION (OCTOBER 25, 1995) TO DECEMBER 31, 2003

<CAPTION>

                                            Deficit
                                          Accumulated                                     Total
                                          During the       Unearned      Receivable    Stockholders'
                                          Development      Financing     on Sale of                     Comprehensive
                                             Stage           Costs          Stock       (Deficiency)        Loss
                                         -------------   -------------  -------------   -------------   -------------
<S>                                      <C>             <C>            <C>             <C>             <C>
For the Year Ended December 31, 2003:
------------------------------------

Balance - January 1, 2003                $(21,453,320)   $         --   $    (45,000)   $ (7,665,749)   $         --

Issuance of stock on conversion of
  loan                                             --              --             --         925,000              --

Issuance of stock for conversion of
  promissory note                                  --              --             --         102,879              --

Issuance of stock for consulting fees              --              --             --       1,006,701              --

Issuance of stock for cash                         --              --             --         240,000              --

Issuance of stock for legal services               --              --             --          45,000              --

Issuance of stock for settlement of                --              --             --         124,012              --
  accrued liabilities

Cancellation of shares pursuant to
   settlement agreement                             -              --                             --              --

Effects of August Settlement Agreement             --              --             --       1,160,857              --

Settlement regarding stock
  purchase agreement executed 2002                 --              --             --         270,000              --

Value assigned to 1,000,000                        --              --             --         137,148              --
   warrants issued
Comprehensive Income:
  Net loss                                 (3,857,514)             --             --      (3,857,514)     (3,857,514)
    Other comprehensive income (loss),
      net of tax:
        Foreign currency translation
          adjustment                               --              --             --      (1,316,187)     (1,316,187)
                                         -------------   -------------  -------------   -------------   -------------
Balance - December 31, 2003              $(25,310,834)   $         --   $    (45,000)   $ (8,827,853)   $ (5,173,701)
                                         =============   =============  =============   =============   =============

                     The accompanying notes are an integral part of these consolidated financial
                                                     statements.

                                                         14
</TABLE>



<PAGE>
<TABLE>

                 ADVANCED TECHNOLOGY INDUSTRIES, INC. AND SUBSIDIARIES
                             (A Development Stage Company)

                         CONSOLIDATED STATEMENTS OF CASH FLOWS

<CAPTION>

                                                                                   For the Period
                                                           For the Years Ended     from Inception
                                                               December 31,       (October 25, 1995)
                                                       --------------------------- to December 31,
                                                          2003           2002            2003
                                                       ------------   ------------   ------------
<S>                                                    <C>            <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net loss                                             $ (3,857,514)  $(6,757,720)   $(25,310,834)
  Adjustments to reconcile net loss to net cash used
    in operating activities:
      Equity loss and amortization of goodwill of
        unconsolidated affiliate - Nurescell Inc.               --             --         850,431
      Writedown of equity investment in Nurescell
        Inc.                                                     --             --         810,119
      Expenses incurred on behalf of consolidated
        affiliate applied to the purchase of license            --             --        (405,432)
      Acquisition of Aberdeen                                   --             --         650,000
      Loss on impairment of license fee                         --        566,667         566,667
      Gain on sale of marketable securities                              (100,818)       (875,156)
      Extraordinary gain                                        --             --      (3,349,688)
      Stock-based compensation                            1,223,827     1,506,996       6,335,965
      Interest and amortization of debt issuance
        costs                                               443,647       917,579       4,402,154
      Research and development costs                             --             --         437,368
      Depreciation and amortization                          55,975       176,875         758,570
      Gain on sale of equipment                              (8,700)           --          (8,700)
Changes in assets (increase) decrease:
     Prepaid expenses and other current assets               29,613       (21,973)       (157,153)
     Note receivable - related party                         (6,000)           --          (6,000)
     Cumulative foreign currency translation
       adjustment                                        (1,316,187)      (17,225)     (1,194,774)
  Changes in liabilities increase (decrease):
     Accrued liabilities                                  2,201,732     3,101,025       6,855,682
                                                       ------------   ------------   ------------
    Net Cash Used in Operating Activities                (1,233,607)   (1,628,594)     (9,640,781)
                                                       ------------   ------------   ------------
CASH FLOWS FROM INVESTING ACTIVITIES
  Capital expenditures                                      (12,690)     (119,689)       (485,027)
  Proceeds from sale of equipment                             8,700           --           8,700
  Proceeds from sale of marketable securities                    --       332,095       3,012,656
                                                       ------------   ------------   ------------
    Net Cash (Used in)Provided by Investing Activities       (3,990)      212,406       2,536,329
                                                       ------------   ------------   ------------
CASH FLOWS FROM FINANCING ACTIVITIES
  Proceeds from exercise of options                              --        21,000          36,000
  Proceeds from issuance of common stock                    240,000            --         881,975
  Offering costs                                                 --            --         (50,000)
  Proceeds from loans and notes                           1,269,517       512,000       4,414,074
  Repayment of loans and notes                             (322,816)     (293,012)       (835,828)
  Proceeds from convertible debentures                           --            --         750,000
  Financing costs                                                --            --         (75,000)
  Advances (repayments to) from related parties              65,070     1,015,094       2,221,742
  Payments under capital lease obligations                  (15,268)      (10,538)        (35,951)
  Repayment of license fee payable                               --            --        (594,568)
  Proceeds from sale of minority interest in
    Reseal, Ltd.                                                 --       125,000         400,000
                                                       ------------   ------------   ------------
    Net Cash Provided by Financing Activities             1,236,503     1,369,544       7,112,444
                                                       ------------   ------------   ------------
Increase (Decrease) in Cash                                  1,096        (46,644)          7,992

Cash - Beginning of Year                                     6,896         53,540             --
                                                       ------------   ------------   ------------
Cash - End of Year                                     $     7,992     $    6,896    $      7,992
                                                       ============   ============   ============

     The accompanying notes are an integral part of these consolidated financial statements.

                                          15
</TABLE>



<PAGE>
<TABLE>

                    ADVANCED TECHNOLOGY INDUSTRIES, INC. AND SUBSIDIARIES
                                (A Development Stage Company)

                            CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>

                                                                                For the Period
                                                         For the Years Ended    from Inception
                                                             December 31,      (October 25, 1995)
                                                    ---------------------------  to December 31,
                                                        2003          2002           2003
                                                    ------------   ------------   ----------
<S>                                                 <C>            <C>            <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
-------------------------------------------------
  Cash paid during the year for:
    Interest                                        $              $     10,021            $
                                                    ============   ============   ==========
    Income taxes                                    $              $         --            $
                                                    ============   ============   ==========

SUPPLEMENTAL SCHEDULE OF NON-CASH AND FINANCING
-----------------------------------------------
  ACTIVITIES:
  -----------

  Equipment purchased under capital lease
    obligations                                     $         --   $     21,001   $   58,306
                                                    ============   ============   ==========
  Convertible debentures and interest assumed by
    Eurotech                                        $         --   $         --   $1,212,188
                                                    ============   ============   ==========
  Liabilities converted to equity                   $  124,012   $  --       --   $3,044,545
                                                    ============   ============   ==========
  Notes payable and accrued interest converted
    to equity                                       $    992,900   $         --   $  992,900
                                                    ============   ============   ==========
  Accrued expenses converted to equity              $         --   $         --   $  129,646
                                                    ============   ============   ==========
  Loans from related parties converted to equity    $         --   $         --   $  467,873
                                                    ============   ============   ==========
  Note receivable under settlement agreement        $    197,000   $         --   $  197,000
                                                    ============   ============   ==========
  Marketable securities received under settlement
    agreement                                       $    214,887   $         --   $  214,887
                                                    ============   ============   ==========
  Loans due related parties cancelled under
    settlement agreement                            $    748,969   $         --   $  748,969
                                                    ============   ============   ==========

                                             16
</TABLE>



<PAGE>

              ADVANCED TECHNOLOGY INDUSTRIES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - BUSINESS AND CONTINUED OPERATIONS

Organization and Description of Business
----------------------------------------

Advanced Technology Industries, Inc. ("ATI" or the "Company") was incorporated
under the laws of the State of Delaware on October 25, 1995. On February 1,
2000, the Company changed its name from Kurchatov Research Holdings, Ltd. to
Advanced Technology Industries, Inc. The Company was organized to identify,
assess and commercialize technologies introduced and developed by scientists
throughout the world with particular emphasis on technologies originating in
Russia, Germany and Israel. ATI is a development-stage company and as such has
no revenue or earnings from operations.

The accompanying consolidated financial statements include the accounts of ATI
and its Subsidiaries, Cetoni Umwelttechnologie Entwicklungs GmbH ("Cetoni"), ATI
Nuklear AG ("ATI Nuklear") (previously Nurescell AG) and Reseal, Ltd.
("Reseal"), collectively referred to as "the Company."

Cetoni and ATI Nuklear are 100% owned subsidiary and Reseal is a 96% owned
subsidiary.


During December of 1999, ATI acquired all of the outstanding capital stock of
Cetoni, a German-based design and engineering firm focused on developing and
patenting technologies and products for the consumer market. Cetoni is a
development-stage company and as such has no revenue or earnings from
operations.

On August 22, 2000, the Company entered into a joint agreement with Nurescell
US, a Nevada corporation, to form a German company named Nurescell AG. At the
time of this agreement, ATI Nuklear AG was owned 51% by Nurescell US and 49% by
ATI. During June 2001, ATI acquired the remaining 51% interest in Nurescell AG
and during July 2001, Nurescell AG changed its name to ATI Nuklear AG. ATI
Nuklear is a development-stage company focused on development of nuclear waste
remediation technologies.Since inception, ATI Nuklear had no revenues or
earnings from operations.

On June 8, 2001, ATI formed a new entity, Reseal, Ltd., which was incorporated
under the laws of the State of Delaware. Reseal (development-stage company) was
organized to commercialize its proprietary "reseal-able" packaging systems
technology. This patented system for re-sealing "pop-top" cans for both soft
drinks and beer has been developed and Reseal believes it is ready for
commercial introduction. Since inception, Reseal has had no revenue or earnings
from operations.

                                       17


<PAGE>

              ADVANCED TECHNOLOGY INDUSTRIES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - BUSINESS AND CONTINUED OPERATIONS (Continued)

Going-Concern and Management's Plan
-----------------------------------

The accompanying consolidated financial statements have been prepared in
conformity with accounting principles generally accepted in the United States of
America, which contemplate continuation of the Company as a going concern.
However, as shown in the accompanying consolidated financial statements, the
Company has incurred losses from operations since inception. Management
anticipates incurring substantial additional losses in 2004. Further, the
Company may incur additional losses thereafter, depending on its ability to
generate revenues from the licensing or sale of its technologies and products,
or enter into any or a sufficient number of joint ventures. The Company has no
significant revenue to date. There is no assurance that the Company can
successfully commercialize any of its technologies and products and realize any
revenues there from. The Company's technologies and products have never been
utilized on a large-scale commercial basis and there is no assurance that any of
its technologies or products will receive market acceptance. There is no
assurance that the Company can continue to identify and acquire new
technologies. As of December 31, 2003, the Company had an accumulated deficit
since inception of $25,310,834 and a working capital deficiency and
stockholder's deficiency of approximately $9,287,892 and $8,827,853,
respectively.

Management's business plan will require additional financing. To support its
operations during 2003, the Company borrowed monies from LTDnetwork, Inc. (Note
3). Additionally, the Company completed an equity financing whereby it sold
2,000,000 shares of its restricted common stock to foreign investors pursuant to
Regulation S of the Securities Act of 1933, as amended, for an aggregate amount
of $240,000.

While no assurance can be given, management believes the Company can raise
adequate capital to keep the Company functioning during 2004. No assurance can
be given that the Company can continue to obtain any working capital, or if
obtained, that such funding will not cause substantial dilution to shareholders
of the Company. If the Company is unable to raise additional funds, it may be
forced to change or delay its contemplated marketing and business plans.

Being a development stage entity, the Company is subject to all the risks
inherent in the establishment of a new enterprise and the marketing and
manufacturing of a new product, many of these risks which are beyond the control
of the Company. All of the factors discussed above raise substantial doubt about
the Company's ability to continue as a going concern.

These consolidated financial statements do not include any adjustments relating
to the recoverability of recorded asset amounts that might be necessary as a
result of the above uncertainty.

                                       18


<PAGE>

              ADVANCED TECHNOLOGY INDUSTRIES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation
---------------------------

All significant intercompany accounts and transactions have been eliminated in
consolidation. Investments in unconsolidated affiliates are accounted for using
the equity method when the Company owns at least 20%, but no more than 50% of
such affiliates. Under the equity method, the Company records its proportionate
shares of profits and losses based on its percentage interest in earnings of
companies 50% or less.

Use of Estimates
----------------

The preparation of financial statements, in conformity with accounting
principles generally accepted in the United States of America, requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.

Equity Method of Accounting for Unconsolidated Affiliates
---------------------------------------------------------

Investments in companies in which the Company has a 20% to 50% interest and has
the ability to exercise significant influence over operating and financial
policies are accounted for on the equity method.

At December 31, 2003, investments in companies accounted for under the equity
method consist of the following foreign development-stage technology companies:

                                                       %            Country of
                                                     Owned          Operations
                                                    -------         ----------

         Flexitech, Ltd. ("Flexitech")               20.00%           Israel
         Pirocat, Ltd. ("Pirocat")                   20.00%           Israel
         Sibconvers                                  50.00%           Russia
         Container Engineering, Ltd.                 50.00%           Russia

The Company does not have sufficient control over management, the board of
directors or financial matters and accordingly the Company does not consolidate
such entities. The above companies do not have any revenue nor any significant
assets, liabilities, commitments and contingencies.

                                       19


<PAGE>

              ADVANCED TECHNOLOGY INDUSTRIES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Fair Value of Financial Instruments
-----------------------------------

The recorded carrying values of accounts receivable, accounts payable and other
long-term obligations approximate the fair values of such financial instruments.

Cash and Cash Equivalents
-------------------------

For purposes of the statement of cash flows, the Company considers all
short-term investments with original maturities of three months or less when
purchased to be cash equivalents.

Concentration of Credit Risk
----------------------------

The Company places its cash in what it believes to be creditworthy financial
institutions. However, cash balances may exceed FDIC insured levels at various
times during the year.

Investments in Marketable Securities
------------------------------------

The Company accounts for its investments using Statement of Financial Accounting
Standards ("SFAS") No. 115, "Accounting for Certain Investments in Debt and
Equity Securities." This standard requires that certain debt and equity
securities be adjusted to market value at the end of each accounting period.
Unrealized market value gains and losses are charged to earnings if the
securities are traded for short-term profit. Otherwise, such unrealized gains
and losses are charged or credited to comprehensive income.

Management determines the proper classifications of investments in obligations
with fixed maturities and marketable equity securities at the time of purchase
and reevaluates such designations as of each balance sheet date. All securities
held by the Company, covered by SFAS No. 115, were designated as available for
sale. Accordingly, these securities are stated at fair value, with unrealized
gains and losses reported in comprehensive income. Realized gains and losses on
sales of investments are determined on a specific identification basis.

                                       20


<PAGE>

              ADVANCED TECHNOLOGY INDUSTRIES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Property and Equipment
----------------------

Property and equipment are stated at cost, less accumulated depreciation and
amortization. Depreciation is provided on a straight-line basis over the
estimated useful lives of the related assets, generally two to ten years.
Amortization of leasehold improvements is provided on a straight-line basis
over the lesser of the estimated useful lives of the improvements or the initial
term of the lease. Gain or loss is recognized upon sale or other disposition of
property and equipment.

Major repairs or replacements of property, plant and equipment are capitalized.
Maintenance, repairs and minor replacements are charged to operations as
incurred.

Licensing Fees
--------------

Licenses for exclusive marketing rights to various products have been acquired
from a related party.

Licensing fees are being amortized on a straight-line basis over 5 years. The
balance of the capitalized license fee of $566,667 was written off during 2002.

Impairment of Long-Lived Assets
-------------------------------

In accordance with SFAS No. 144, "Accounting for the Impairment or Disposal on
Long-Lived Assets," the Company reviews the carrying amount of long-lived assets
on a regular basis for the existence of facts or circumstances, both internally
and externally, that suggest impairment. The Company determines if the carrying
amount of a long-lived asset is impaired based on anticipated undiscounted cash
flows before interest from the use of the asset. In the event of impairment, a
loss is recognized based on the amount by which the carrying amount exceeds the
fair value of the asset. Fair value is determined based on appraised value of
the assets or the anticipated cash flows from the use of the asset, discounted
at a rate commensurate with the risk involved.

During the year ended December 31, 2001, the Company recorded an impairment loss
of $810,119 related to the equity investment in Nurescell Inc. The Company
recorded the loss because it had determined that the investment in Nurescell
Inc. had become impaired due to the decline in the value of the security.

Advertising Expenses
--------------------

Advertising expenses are charged to operations when incurred. There were no
advertising expenses for the years ended December 31, 2003 and 2002.

                                       21


<PAGE>

              ADVANCED TECHNOLOGY INDUSTRIES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Income Taxes
------------

Deferred taxes represent the tax effects of differences between the financial
reporting and tax bases of the Company's assets and liabilities at the enacted
tax rates in effect for the years in which the differences are expected to
reverse. The Company evaluates the recoverability of deferred tax assets and
establishes a valuation allowance when it is more likely than not that some
portion or all of the deferred tax assets will not be realized. Income tax
expense consists of the tax payable for the period and the change during the
period in deferred tax assets and liabilities.

Revenue Recognition
-------------------

The Company expects that it will derive substantially all of its revenue from
the sale, licensing and sub-licensing of its technologies and products. Revenue
from the sale of technology will be recognized in the year of sale. Revenue from
licensing and sub-licensing will be recognized in the periods when the fees have
been earned.

Research and Development
------------------------

In accordance with SFAS No. 2 "Accounting for Research and Development Costs,"
all research and development ("R&D") costs are expensed when they are incurred,
unless they are reimbursed under specific contracts. Assets used in R&D
activity, such as machinery, equipment, facilities and patents that have
alternative future use either in R&D activities or otherwise are capitalized.

Stock-Based Compensation
------------------------

The Company accounts for stock-based compensation for employees in accordance
with Accounting Principals Board ("APB") No. 25 and Financial Interpretation
No.44. Stock and options granted to third parties in connection with providing
goods and services to the Company are accounted for under the fair value method
as prescribed by SFAS No. 123.

                                       22


<PAGE>

              ADVANCED TECHNOLOGY INDUSTRIES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Stock-Based Compensation (Continued)
------------------------

In December 2002, the Financial Accounting Standard Board ("FASB") issued SFAS
No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure -
an Amendment of SFAS Statement No. 123." This statement amends SFAS No. 123 to
provide alternative methods of transition for a voluntary change to the fair
value-based method of accounting for stock-based employee compensation. In
addition, SFAS No. 148 amends the disclosure requirements of SFAS No. 123 to
require prominent disclosures in both annual and interim financial statements
about the method of accounting for stock-based employee compensation and the
effect of the method used on reported results. SFAS No.148 also requires that
those effects be disclosed more prominently by specifying the form, content, and
location of those disclosures. The Company has adopted the increased disclosure
requirements of SFAS No. 148 for the fiscal year ended December 31, 2002.

The addition disclosures required by SFAS No. 148 are as follows:
<TABLE>

                                                                   December 31,
                                                               2003           2002
                                                           ------------   ------------
<S>                                                        <C>            <C>
Net loss applicable to common stockholders, as reported    $(3,857,514)   $(6,757,720)
Add:  Stock-based employee compensation expense
        included in reported net loss applicable to
        common stockholders                                         --             --
Less: Total stock-based employee compensation expense
        determined under the fair value-based method of
        all awards                                                  --             --
                                                           ------------   ------------
Proforma net loss applicable to common stockholders        $(3,857,514)   $(6,757,720)
                                                           ============   ============
Net loss applicable to common stockholders per basic and
 dilutive shares:
    As reported                                            $      (.07)   $      (.14)
                                                           ============   ============
    Proforma                                               $      (.07)   $      (.14)
                                                           ============   ============
</TABLE>

Translation of Foreign Currencies
---------------------------------

The U.S. dollar is the functional currency for all of the Company's businesses,
except its operations in Germany and Russia. Foreign currency denominated assets
and liabilities for these units is translated into U.S. dollars based on
exchange rates prevailing at the end of each year, and revenues and expenses are
translated at average exchange rates during the year. The effects of foreign
exchange gains and losses arising from these translations of assets and
liabilities are included as a component of accumulated comprehensive loss.

                                       23


<PAGE>

              ADVANCED TECHNOLOGY INDUSTRIES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Loss Per Share of Common Stock
------------------------------

Basic net earnings (losses) per share of common stock have been computed by
dividing earnings (losses) available to common stockholders by the weighted
average number of common shares outstanding during the periods presented.

Diluted net earnings (losses) per share reflects per share amounts that would
have resulted if dilutive common stock equivalents had been converted to common
stock.

Common stock equivalents, consisting of options and warrants, discussed in Note
12, were not included in the calculation of diluted loss per share because their
inclusion would have been anti-diluted.

Deferred and Unearned Financing Costs
-------------------------------------

Financing costs in connection with the Company's debt offerings are being
amortized over the expected lives of the obligations.

Business Segment
----------------

Effective January 1, 1998, the Company adopted the provisions of SFAS No. 131,
"Disclosures About Segments of an Enterprise and Related Information." SFAS No.
131 establishes standards for the way public enterprises report information
about operating segments in annual consolidated financial statements and
requires reporting of selected information about operating segments in interim
financial statements regarding products and services, geographical areas and
major customers. The Company has determined that under SFAS No. 131, it operates
in two segments (see Note 14).

Gains on Issuance of Stock by Subsidiaries
------------------------------------------

At the time a subsidiary sells its stock to unrelated parties at a price in
excess of its book value, the Company's net investment in that subsidiary
increases. If at that time the subsidiary is not a newly-formed, non-operating
entity, nor a research and development, nor a development stage company,
nor is there a question as to the subsidiary's ability to continue in existence,
the Company records the increase in its consolidated statements of operations.
Otherwise, the increase is reflected in additional paid-in capital in the
Company's consolidated statements of stockholders' deficiency.

During the year ended December 31, 2003 and 2002, the Company's sale of its
minority interest in its Reseal subsidiary for $0 and $125,000, respectively,
were all credited to paid-in capital as Reseal is classified as a development
stage company.

                                       24


<PAGE>

              ADVANCED TECHNOLOGY INDUSTRIES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Comprehensive Income
--------------------

SFAS No. 130, "Accounting for Comprehensive Income," establishes standards for
reporting and disclosing of comprehensive income and its components (including
revenues, expenses, gains and losses) in a full set of general-purpose financial
statements. The items of other comprehensive income that are typically required
to be disclosed are foreign currency items, minimum pension liability
adjustments, and unrealized gains and losses on certain investments in debt and
equity securities.

Comprehensive loss, at December 31, 2003, consists of
foreign currency translation adjustments in the amount of $1,316,187.

Reclassifications
-----------------

Certain prior year amounts have been reclassified to conform to the current
year's presentation.

Impact of Recently Issued Accounting Standards
----------------------------------------------

In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statement No.
4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections."
SFAS No. 145 requires that gains and losses from extinguishment of debt be
classified as extraordinary items only if they meet the criteria in APB No. 30
("Opinion No. 30"). Applying the provisions of Opinion No. 30 will distinguish
transactions that are part of an entity's recurring operations from those that
are unusual and infrequent that meets the criteria for classification as an
extraordinary item. The Company's adoption of SFAS No.145 had no significant
impact on the Company's consolidated financial position or results of
operations.

                                       25


<PAGE>

              ADVANCED TECHNOLOGY INDUSTRIES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Impact of Recently Issued Accounting Standards (Continued)
----------------------------------------------

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities." SFAS No. 146 addresses financial accounting
and reporting for costs associated with exit or disposal activities and
nullified Emerging Issues Task Force Issue No. 94-3, "Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including certain costs incurred in a restructuring") SFAS No. 146 requires
that a liability at fair value for a cost associated with an exit or disposal
activity be recognized when the liability is incurred. However, an entity's
commitment to a plan, by itself, does not create a present obligation to others
that meets the definition of a liability. The Company's adoption of SFAS No. 146
had no significant impact on the Company's consolidated financial position or
results of operations.

In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others" (" FIN No. 45"). FIN No. 45 requires a company, at the
time it issues a guarantee, to recognize an initial liability for the fair value
of obligations assumed under the guarantee and elaborates on existing disclosure
requirements related to guarantees and warranties. The Company's adoption of FIN
No. 45 had no significant impact on its consolidated financial position or
results of operations.

In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities" ("FIN No. 46"). This interpretation of Accounting
Research Bulletin ("ARB") No. 51, "Consolidated Financial Statements," provides
guidance for identifying a controlling interest in a variable interest entity
("VIE") established by means other than voting interests. FIN No. 46 also
requires consolidation of a VIE by an enterprise that holds a controlling
interest. In December 2003, the FASB completed its deliberations regarding the
proposed modification to FIN No. 46 and issued Interpretation Number 46(R),
"Consolidation of Variable Interest Entities - an Interpretation of ARB No. 51"
("FIN No.46(R)"). The decisions reached included a deferral of the effective
date and provisions for additional scope exceptions for certain types of
variable interests. Application of FIN No. 46(R) is required in financial
statements of public entities that have interests in VIEs or potential VIEs
commonly referred to as special-purpose entities for periods ending after
December 15, 2003. Application by public small business issuers' entities is
required in all interim and annual financial statements for periods ending after
December 15, 2004. The adoption of FIN No. 46(R) is not expected to have an
impact on the Company's consolidated financial position or results of
operations.

                                       26


<PAGE>

              ADVANCED TECHNOLOGY INDUSTRIES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Impact of Recently Issued Accounting Standards (Continued)
----------------------------------------------

In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities." The Statement amends and
clarifies accounting for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities under SFAS
No. 133. This Statement is effective for contracts entered into or modified
after June 30, 2003, except as stated below and for hedging relationships
designated after June 30, 2003. The guidance should be applied prospectively.
The provisions of SFAS No. 149 that relate to Statement 133 Implementation
Issues that have been effective for fiscal quarters that began prior to June 15,
2003 should continue to be applied in accordance with their respective effective
dates. During the quarter ended September 30, 2003 the Company adopted SFAS No.
149.

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity." SFAS No. 150
establishes standards for classification and measurement in the statement of
financial position of certain financial instruments with characteristics of both
liabilities and equity. It requires classification of a financial instrument
that is within its scope as a liability (or an asset in some circumstances). The
Company's adoption of SFAS No. 150 had no significant impact on its consolidated
financial position or results of operations.

                                       27


<PAGE>

              ADVANCED TECHNOLOGY INDUSTRIES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - MERGER AND CONVERSION AGREEMENTS

Merger Agreement - LTD Network, Inc.
------------------------------------

On June 18, 2003, the Company entered into an agreement and Plan of Merger (the
"Merger Agreement") by and among the Company, LTD Network, Inc., a Delaware
corporation ("LTDN") and LTDN Acquisition Corp., a Delaware corporation and
wholly-owned subsidiary of the Company ("Merger Sub"). Pursuant to the Merger
Agreement, Merger Sub will be merged with and into LTDN, and LTDN will continue
as the surviving corporation and as a wholly-owned subsidiary of the Company
(the "Merger"). As a result of the Merger, stockholders of LTDN will receive in
exchange for such stockholders shares of common stock of LTDN, such number of
shares of common stock, par value $0.0001 per share, of the Company ("Company
Common Stock") such that after the issuance of such shares of Company Common
Stock, such stockholders of LTDN will own in the aggregate at least 58% of the
outstanding shares of Company Common Stock. Such percentage of shares of Company
Common Stock to be issued to the stockholders of LTDN may be increased depending
on the amount of cash on LTDN's balance sheet and the existence of certain
liabilities of the Company, in each case at the time of the Merger.

The consummation of the Merger is contingent upon the approval and adoption by
the Company's stockholders of an amendment to the Company's Certificate of
Incorporation to increase the Company's authorized capital stock, the approval
and adoption of the Merger Agreement by LTDN's stockholders, the conversion of
the indebtedness of the Company into Company Common Stock, LTDN having at least
$5,000,000 in cashon its balance sheet at the time of the Merger (less any funds
loaned by LTDN to the Company prior to the Merger), the effectiveness of a
registration statement registering the shares of Company Common Stock to be
issued to the stockholders of LTDN and other conditions set forth in the Merger
Agreement.

Through December 31, 2003 the Company had received approximately $983,334 from
LTDN pursuant to an outstanding promissory note, which was secured by certain
patents relating to the reseal-able can. On June 19, 2003, the Company and LTDN
entered into a conversion agreement pursuant to which the Company and LTDN
agreed to convert $800,000 of the outstanding company debt held by LTDN into
8,000,000 shares of Company Common Stock, which represented approximately 14% of
the outstanding Company Common Stock. In addition, LTDN released the security
for such debt. During November, the Company and LTDN entered into a conversion
agreement pursuant to which the Company and LTDN agreed to convert $125,000 of
the outstanding Company debt held by LTDN into 1,250,000 shares of Company
Common Stock. At December 31, 2003 $58,334 was outstanding under such promissory
note.

                                       28


<PAGE>

              ADVANCED TECHNOLOGY INDUSTRIES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE  3 - MERGER AND CONVERSION AGREEMENTS  (Continued)

Nurescell Inc. Restructure Agreement
-------------------------------------

On March 21, 2003, the Company and Nurescell Inc. ("Nurescell") entered into a
Restructure Agreement pursuant to which the Company agreed to cancel its $1
million principal promissory note and related interest due from Nurescell in
consideration of Nurescell transferring to the Company the licensed technology.
This transaction requires the approval of the shareholders of Nurescell. As of
December 31, 2003 the above restructure agreement had not closed. The Nurescell
Restructure Agreement was completed on January 21, 2004. Accordingly, Nurescell
has transferred to ATI and ATI Nuklear all rights, title and interest in and to
the Nurescell Technology in return for the cancellation by ATI and ATI Nuklear
of the ATI obligations.

Asset Purchase - Alfa Pro Products GmbH
---------------------------------------

On July 11, 2003, the Company entered into an Asset Purchase Agreement with
Alfa-Pro Products GmbH ("Alfa-Pro") and Alice Schlattl pursuant to which ATI
will purchase all of the intellectual property rights of Alfa-Pro in
consideration of cash in an amount not to exceed $90,000 and the issuance of
20,000,000 shares of Common Stock. In addition, the Company has agreed to pay
off certain debts of affiliates and related parties of Alfa-Pro. The Alfa-Pro
asset purchase is scheduled to close immediately prior to the Merger with LTDN.

In May 2004, the Company reached an agreement with Alfa Pro, Alice Schlattl and
related individuals to amend the Alfa-Pro Asset Purchase Agreement to, among
other things, effect the transfer to ATI of all intellectual property that is
controlled by Alfa Pro and such other parties as soon as administratively
possible. Under the terms of the new understanding, the Company will purchase
all of the intellectual property rights of Alfa Pro and such other parties for
consideration of cash in an amount not to exceed $90,000 and the issuance of 20
million common shares totalling approximately 600,000. Such number of issued
shares will represent, on an as converted basis, less than 10% of the
outstanding shares of the Company's Common Stock following the consummation of
the previously announced transaction with LTDN. In addition, the Company has
agreed to pay off certain debts of affiliates and related parties of Alfa-Pro.

                                       29


<PAGE>

              ADVANCED TECHNOLOGY INDUSTRIES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - MERGER AND CONVERSION AGREEMENTS  (Continued)

ATI Nuklear Stock Subscription Agreement
----------------------------------------

On July 28, 2003, the Company entered into a Stock Subscription Agreement with
Nuklear Technologies, Inc., a newly formed Delaware corporation ("Nuklear
Technologies"), Hans Skrobanek, the chief executive officer and a director of
the Company, and Peter Goerke, an officer of the Company, pursuant to which (a)
in consideration for the issuance to the Company and ATI Nuklear of 4,100 and
1,000 shares, respectively, of common stock of Nuklear Technologies ("Nuklear
Common Stock"), (i) the Company and ATI Nuklear will transfer certain assets to
Nuklear Technologies relating to the Russian based and/or nuclear focused
operations of the Company and ATI Nuklear and (ii) Nuclear Technologies will
assume certain liabilities of the Company and ATI Nuklear relating to such
assigned assets and (b) Hans Skrobanek and Peter Goerke will each purchase 2,450
shares of Nuclear Common Stock for an aggregate purchase price of $1.00. As part
of the transaction, it is anticipated that the Company will pay approximately
$56,000 of existing liabilities in connection with such assumed assets and will
convert approximately $163,000 of existing liabilities in connection with such
assumed assets into Company Common Stock. Following the consummation of such
transaction, Nuklear Technologies will be a 51% owned subsidiary of the Company
with the remaining 49% being owned by Hans Skrobanek and Peter Goerke. The above
transaction has not closed as of December 31, 2003. In the event that the Stock
Subscription Agreement between ATI and Nuclear Technologies is not consummated,
ATI anticipates expending no further funds for the development of these
businesses and anticipates reevaluating the scope of such operations.

NOTE 4 - AMENDED CETONI TRANSACTION AND SETTLEMENT AGREEMENT

In October 1999, the Company acquired al of the capital stock of Cetoni, a
German company, for consideration of 5,000,000 shares of Company Common Stock.
In April 2002, the Company and the seller amended the terms of the purchase in
order to satisfy certain German regulatory requirements. Pursuant to such
agreement, the Company agreed to pay the seller $130,000 and the Company
acknowledged a prior assumption of certain obligations related to the seller in
the amount of Euros 387,304,Such liability has been previously accounted for in
the consolidated financial statements of the Company and as of the date of the
agreement was equal to approximately $195,000. In addition, as part of this
transaction, the seller orally agreed to return the 5,000,000 shares of Company
Common Stock originally issued in the 1999 transaction. A third party obtained
such shares before they were returned to the Company. In August, 2003, the
Company and such third party entered into a settlement agreement pursuant to
which such third party agreed to transfer, and to cause certain relatives and
affiliates of such third party to transfer, to the Company 2,095,000 shares of
Common Stock and approximately 1,300,000 shares of common stock (the "Settlement
Shares") of another publicly traded

                                       30


<PAGE>

              ADVANCED TECHNOLOGY INDUSTRIES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 - AMENDED CETONI TRANSACTION AND SETTLEMENT AGREEMENT  (Continued)

company valued at $214,887. The 2,095,000 common shares were surrendered and
cancelled during the period December of 2003 through May 17, 2004. In addition,
such third party cancelled an obligation of the Company to pay such third party
$748,969. Furthermore, such third party executed a promissory note to pay the
Company $197,000 (which equaled a then outstanding amount existing under a
previously issued promissory note payable by the Company to the third party's
wife) on or prior to August 11, 2005 and such third party's wife agreed to
extend the maturity date of her existing promissory note until the payment by
third party consultant of his promissory note. The Company accounted for the
gain of $1,160,857 related to this settlement agreement as an increase to
paid-in-capital during the quarter ended September 30, 2003.


NOTE 5 - EQUIPMENT

Equipment at December 31, 2003 consisted of the following:

     Machinery and equipment                                  $234,761
     Transportation equipment                                  144,789
     Office furniture and fixtures                             167,675
     Software                                                   13,615
                                                             ---------
                                                               560,840
                                                               363,747
     Less: Accumulated depreciation                          ---------
                                                              $197,093
                                                             =========

Depreciation expense for the years ended December 31, 2003 and 2002 amounted to
$55,975 and $26,875, respectively.

                                       31


<PAGE>

              ADVANCED TECHNOLOGY INDUSTRIES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 - WRITE-DOWN OF LICENSE FEE

At the end of the third quarter of 2002, management concluded that certain
conditions and events were such that impairment testing was required to be
performed with respect to the license acquired in the Nurescell US transactions.
Due to the absence of current sales and sales contracts and funding available to
the Company, the Company recorded a loss from impairment related to the license
agreement of $566,667 during the years ending December 31,2002.

The following table presents the carrying amounts of the license fee at December
31, 2003 and 2002:

                                                          2003          2002
                                                       ----------    ----------

       License fee                                     $    -        $1,000,000
       Less:  Accumulated amortization                      -           433,333
       Less:  Loss from impairment                          -           566,667
                                                       ----------    ----------
             Total                                     $    -        $    -
                                                       ==========    ==========

NOTE 7 - LOANS AND NOTES PAYABLE

During the year ended December 31, 2000, the Company's Board of Directors
approved a private placement of its debt securities in an amount up to
$1,500,000. Interest on such debt securities is at the rate of 1% per month
cumulative. The Company has the option to pay the interest in cash or restricted
stock. If the option is exercised by the Company to pay the interest in stock,
the number of shares to be delivered to the lender will be determined by
multiplying (i) the average closing bid price of the stock for the five trading
days prior to the maturity date by (ii) 85% and dividing the interest due by the
resulting multiple. In addition, each lender shall receive one share of the
common stock for each $1.00 loaned to the Company.

The maturity date of the remaining promissory notes from above, totaling
$150,000, was extended to March 1, 2002. During April 2002, the maturity date of
the remaining promissory notes, totaling $150,000, was extended to June 1, 2002.
As consideration for entering into these agreements, the investor received two
shares of the Company's common stock for each $1.00

                                       32


<PAGE>

              ADVANCED TECHNOLOGY INDUSTRIES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7 - LOANS AND NOTES PAYABLE (Continued)

loaned to the Company (300,000 shares). In addition, the investor may be repaid
in cash or in the Company's common stock. The price per share for purposes of
computing the conversion ratio shall be $0.25 per principal share. The maturity
date of the remaining promissory notes, totaling $150,000, was extended to
August 11, 2005.

During May 2001, the Company borrowed $100,000 from an individual and issued a
promissory note, which provides that the loan is due in three months and
provides for interest at the rate of 1% per month. The Company issued 100,000
shares of its common stock to the lender as an incentive to make that loan. In
addition, the Company granted the lender piggyback registration rights for the
shares for a period of five years from the date of the loan. The loan's maturity
date was extended to March 1, 2002 and as consideration for entering into this
agreement, the individual received an additional 200,000 shares of the Company's
common stock. The parties extended the loan's maturity date to June 15, 2004
with no additional consideration.

During June 2001, the Company borrowed $260,000 from an individual and issued a
promissory note, which provides that the loan is due in six months and provides
for interest at the rate of 1% per month. The Company issued 260,000 shares of
its common stock to the lender. The loan's maturity date was extended to
February 6, 2002 and as consideration for entering into these agreements, the
individual received an additional 520,000 shares of the Company's common stock.
During February 2002, the maturity date was extended again to March 6, 2002 and
as consideration, the investor received 280,000 shares of the Company's common
stock. It was also agreed that if the loan was not repaid by March 6, 2002, the
loan would be extended by the Company and the Company will pay a late fee in the
amount of $500 per day, until all principal, interest and late fees are paid in
full. The Company is in default under this agreement and as of December 31,
2003, the Company has accrued $285,000 as late fees.

On July 13, 2001, the Company borrowed $15,000 from an individual and issued a
promissory note, which provides that the loan is due in three months and
provides for interest at the rate of 1% per month. The Company issued 15,000
shares of its common stock to the lender as an incentive to make that loan. The
loan's maturity date was orally extended to June 1, 2002 and as consideration,
the individual received an additional 30,000 shares of the Company's common
stock. Subsequently the notes have been extended to June 15, 2004, with no
additional consideration.

Also on July 13, 2001, an officer of the Company advanced $10,000 pursuant to a
promissory note, which provides that the loan is due in three months and
provides for interest at the rate of 1% per month. The Company issued 10,000
shares of its common stock to the lender as an incentive to make that loan. The
officer has agreed to extend the due date to June 15, 2004, with no additional
consideration.

On July 30, 2001, the Company borrowed $330,000 from an individual and issued a
promissory note, which provides that the loan is due in six months and provides
for interest at the rate of 1% per month. The Company issued 330,000 shares of
its common stock to the lender as an incentive to make that loan. In addition,
the Company granted the lender piggyback registration rights for the shares for
a period of five years from the date

                                       33


<PAGE>

              ADVANCED TECHNOLOGY INDUSTRIES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7 - LOANS AND NOTES PAYABLE (Continued)

of the loan. During February 2004, this note plus accrued interest was converted
into 2,220,000 shares of the Company's restricted common stock.

Effective September 10, 2001, the Company borrowed $560,000 from an individual
and issued a promissory note which provides that the loan is due January 31,
2002 and provides for interest at the rate of 1% per month. The Company issued
1,270,000 shares of its common stock to the lender as an incentive to make that
loan. During February 2004, this note plus accrued interest was converted into
3,780,000 shares of the Company's restricted common stock.

On November 27, 2001, the Company borrowed $10,000 from an individual and issued
a promissory note that provides that the loan is due in 90 days and provides for
interest at the rate of 1% per month. The Company issued 10,000 shares of its
common stock to the lender as an incentive to make that loan. The loan's
maturity date was extended to May 27, 2002 and as consideration for entering
into this agreement, the individual received an additional 20,000 shares of the
Company's common stock. The Company is in default under the note.

In connection with the Merger agreement with LTDN, the Company has a note
payable of $58,334The note accrues interest at a rate of 10% per annum (see Note
3).

Loan Payable
------------

On September 6, 2002, the Company entered into an agreement to borrow $60,000
from an individual. The loan bears interest at 10% per annum and is payable
immediately upon the Company obtaining additional financing. As an incentive to
make this loan, the individual received 100,000 shares of the Company's common
stock, with piggy-back registration rights, valued at $18,000. The Company has
expensed the entire amount as interest expense during the year ended December
31, 2002. During October 2003, the Company and the individual entered into an
agreement to convert the $60,000, plus accrued interest, into 660,000 shares of
the Company's restricted common stock as full and final payment of all
outstanding obligations of the Company to the individual.

During October 2002, the Company received an advance of $120,000 from an
individual, payable on demand. The loan accrues interest at 10% per annum.

                                       34


<PAGE>

              ADVANCED TECHNOLOGY INDUSTRIES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 - INCOME TAXES

There is no provision for income taxes for the years ended December 31, 2003 and
2002, as a result of net operating losses incurred during those years.

The components of deferred tax assets and liabilities at December 31, 2003 are
as follows:

      Deferred Tax Assets:
        Net operating loss carryforwards                       $3,840,000
        Compensatory element of stock issuances                 2,280,000
                                                               ----------
          Total Gross Deferred Tax Assets                       6,120,000

        Less:  Valuation allowance                              6,120,000
                                                               ----------
          Net Deferred Tax Assets                              $    -
                                                               ==========

The net change in the valuation allowance for deferred tax assets was an
increase of approximately $640,000 during the year ended December 31, 2003.

As of December 31, 2003, the Company had available approximately $9,600,000 of
net operating losses ("NOL") for income tax purposes that may be carried forward
to offset future taxable income, if any. The NOL carryforwards from December 31,
1999, 2000, 2001, 2002 and 2003 expire in the years 2019, 2020, 2021, 2022 and
2023, respectively. Pursuant to Section 382 of the Internal Revenue Code,
substantial restrictions are imposed on the utilization of NOL carryforwards in
the event of an ownership change. The Company's foreign subsidiary has a net
operating loss carryforward of approximately $7,844,000. Utilization of this
carryover is dependent upon future income earned by its foreign subsidiary.

A reconciliation between the statutory federal income tax rate (34%) and the
Company's effective rate is as follows:

                                                        For the Years Ended
                                                            December 31,
                                                        --------------------
                                                          2003        2002
                                                        --------    --------

       Federal statutory rate                            (34.0)%     (34.0)%
       Unutilized foreign losses                          19.3        18.1
       Change in valuation allowance                      14.7        15.9
                                                         -----       -----
         Effective rate                                   -0- %       -0- %
                                                         =====       =====

                                       35


<PAGE>

              ADVANCED TECHNOLOGY INDUSTRIES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 - ACCRUED LIABILITIES

Accrued liabilities at December 31, 2003 consist of the following:

    Professional fees                                  $1,504,938
    Consulting fees (including related
      parties of $955,176)                              3,097,076
    Payroll and other taxes                               645,881
    Interest (including related parties
      of $356,945)                                      1,183,792
    Other                                                 997,188
                                                       ----------
          Total                                        $7,428,875
                                                       ==========

NOTE 10 - SETTLEMENT AGREEMENT

During December 2003 the Company and a shareholder entered into a Settlement
Agreement whereby the Company and shareholder agreed to release each respective
party from any claims against the other regarding a stock purchase agreement
executed in 2001. As part of the agreement, the shareholder remitted to the
Company a total sum of $270,000 in settlement of any claims the Company may have
against the shareholder. The gain under this settlement agreement, is reflected
as a credit to additional paid-in capital

                                       36


<PAGE>

              ADVANCED TECHNOLOGY INDUSTRIES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11 - RELATED PARTY TRANSACTIONS

Amounts due to related parties represent various demand notes, including
interest at 10% per annum, payable to certain shareholders, relatives of
shareholders and companies affiliated with shareholders. Interest expense
accrued on these demand notes totaled $356,945 in 2003 and $300,824 in 2002. In
addition, the Company has a consulting agreement with ERBC (see Note 13). An
officer of the Company advanced the Company $21,915 to pay certain expenses of
the Company during the year ended December 31, 2002.

NOTE 12 - STOCKHOLDERS' EQUITY

Preferred stock
---------------

The Company has authorized 1,000,000 shares of preferred stock, par value -
$.001 per share. The Board of Directors of the Company has broad discretion to
create one or more series of preferred stock and to determine the rights,
preferences and privileges of any such series. No preferred stock has been
issued as of December 31, 2003.

Increase of Authorized Common Stock
-----------------------------------

During the quarter ended December 31, 2002, the Company, with the approval of
consenting stockholders, unanimously adopted and approved an amendment to ATI's
Certificate of Incorporation to increase the authorized common stock from
50,000,000 to 100,000,000 shares.

                                       37


<PAGE>

              ADVANCED TECHNOLOGY INDUSTRIES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12 - STOCKHOLDERS' EQUITY (Continued)

Common Stock
------------

Common Stock Issuances - 2001
-----------------------------

During January 2001, the Company issued in connection with a private placement
of debt, 100,000 shares of common stock as additional consideration to the
purchaser.

During January 2001, the Company issued 3,500,000 shares of common stock to
purchase 3,500,000 shares of the $.0001 par value common stock of Nurescell US
from Adrian and Dianna Joseph.

During April 2001, the Company issued 1,090,000 shares of common stock to
purchase 1,090,000 shares of the $.0001 par value common stock of Nurescell US
from the Glenn A. Cramer Separate Property Trust.

During April 2001, the Company issued 3,336,745 shares of common stock to a
related party for accrued consulting fees of $467,873 and conversion of a
$54,545 promissory note payable.

During April 2001, the Company issued 501,812 and 418,177 shares of common stock
in settlement of two promissory notes totaling $180,000 and $150,000,
respectively. In addition during November 2001, the Company issued 61,844 shares
of common stock in settlement of interest of one of the note holders valued at
$22,184.

On April 18, 2001, the Company issued 500,000 shares of common stock to its
President for consulting services performed. Shares issued under this agreement
were valued at $168,750, which was all charged to operations during the six
months ended June 30, 2001.

During April 2001, the Company issued 344,788 shares of common stock to its
President for the settlement of a promissory note totaling $60,000.

During April 2001, the Company issued in connection with a private placement of
debt, 770,000 shares of common stock as additional consideration to the
purchaser.

                                       38


<PAGE>

              ADVANCED TECHNOLOGY INDUSTRIES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12 - STOCKHOLDERS' EQUITY (Continued)

Common Stock (Continued)
------------

Common Stock Issuances - 2001 (Continued)
-----------------------------

During April 2001, the Company issued 316,056 shares of common stock to an
officer for the settlement of accrued wages of $50,000.

During July 2001, the Company issued 775,385 shares of common stock in
settlement of a promissory note with respect to $240,000 of principal and $7,200
of interest.

During July 2001, the Company issued in connection with a private placement of
debt, 355,000 shares of common stock as additional consideration to the
purchaser.

During July 2001, the Company issued 67,857 of its common stock due to a
cashless exercise of 112,500 warrants.

During December 2001, the Company issued in connection with a private placement
of debt, 691,696 shares of common stock as additional consideration to the
purchaser.

During October and November 2001, the Company issued in connection with a
private placement of debt, 578,304 shares of common stock as additional
consideration to the purchaser. The shares were valued at $255,000, of which
167,044 was charged to operations during 2001.

During October 2001, the Company issued 17,000 shares of common stock pursuant
to consulting arrangements with two consultants. Shares issued under these
arrangements were valued at $9,890, which was charged to operations during 2001.

During December 2001, the Company issued 1,328,000 shares of common stock
pursuant to consulting arrangements with various consultants. Shares issued
under these arrangements were valued at $332,000, which was charged to
operations during 2001.

During November 2001, the Company issued 36,826 shares of its common stock as
consideration for consulting services performed by two consultants totaling
$15,133.

In November and December 2001, the Company issued 75,000 shares of common stock
to two employees of the Company as a sign-on bonus, which was valued at $18,751,
and charged to operations during 2001.

In December 2001, the Company issued 477,429 shares of common stock as
consideration for legal services performed by its attorneys. Shares issued under
these arrangements were valued at $112,761, which was charged to operations
during 2001.

                                       39


<PAGE>

              ADVANCED TECHNOLOGY INDUSTRIES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12 - STOCKHOLDERS' EQUITY (Continued)

Common Stock (Continued)
------------

Common Stock Issuances - 2001 (Continued)
-----------------------------

During November 2001, the Company issued in connection with a private placement
of debt, 10,000 shares of common stock as additional consideration to the
purchaser. The shares were valued at $3,200, of which $1,209 was charged to
operations during 2001.

During December 2001, the Company issued an additional 510,000 shares of
its common stock as additional consideration for extending the due date on
promissory notes related to private placement of debt. The shares were valued at
$140,200, of which $36,927 was charged to operations during 2001, with the
remaining balance being amortized over the new term of the notes.

Common Stock Issuances - 2002
-----------------------------

During the year ended December 31, 2002, the Company issued an additional
833,306 shares of its common stock as additional consideration for extending the
due date on promissory notes related to private placement of debt. The shares
were valued at $285,222, which was charged to operations during the year ended
December 31, 2002.

In January 2002, the Company issued 280,670 shares of common stock as
consideration for legal services performed by its attorneys. Shares issued under
these arrangements were valued at $80,159, which was charged to operations
during 2002.

In February 2002, the Company issued 55,037 shares of common stock as
consideration for legal services performed by its attorneys. Shares issued under
these arrangements were valued at $11,245, which was charged to operations
during 2002.

During April 2002, the Company issued 16,374 of its common stock due to a
cashless exercise of 32,500 warrants.

During April 2002, the Company issued 328,104 shares of common stock as
consideration for legal services performed by its attorneys. Shares issued under
these arrangements were valued at $122,458, which was charged to operations
during 2002.

                                       40


<PAGE>

              ADVANCED TECHNOLOGY INDUSTRIES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12 - STOCKHOLDERS' EQUITY (Continued)

Common Stock (Continued)
------------

Common Stock Issuances - 2002 (Continued)
-----------------------------

During May 2002, the Company issued 95,146 shares of common stock as
consideration for legal services performed by its attorneys. Shares issued under
these arrangements were valued at $65,832, which was charged to operations
during 2002.

During June 2002, the Company issued 578,952 shares of common stock as
consideration for legal services performed by its attorneys. Shares issued under
these arrangements were valued at $329,603, which was charged to operations
during 2002.

In April 2002, the Company issued 250,000 shares of common stock pursuant to a
consulting arrangement. Shares issued under this arrangement were valued at
$345,000, which was charged to operations during 2002.

During July 2002, the Company issued 400,000 shares of common stock as
consideration for consulting services performed by a consultant. Shares issued
under the consulting agreement were valued at $228,000, which was charged to
operations during 2002.

During September 2002, the Company issued 673,882 shares of common stock as
consideration for legal services performed by its attorney. Shares issued under
the arrangement were valued at $168,471, which was charged to operations during
2002.

During September 2002, the Company issued 10,000 shares of common stock as
consideration for a finder's fee. Shares issued were valued at $1,600, which was
charged to operations during 2002.

During September 2002, the Company issued 100,000 shares of common stock as
consideration for loan incentives. Shares issued under the loan agreement were
valued at $18,000, which was charged to operations during 2002.

During October 2002, the Company issued 40,000 shares of common stock as
consideration for finder's fee. Shares issued were valued at $7,600, which was
charged to operations during 2002.

During October 2002, the Company issued 700,000 shares of common stock as
consideration for legal services performed by its attorneys. Shares issued under
these arrangements were valued at $77,350, which was charged to operations
during 2002.

During October 2002, the Company issued 145,328 shares of common stock due to
the exercise of options for $21,000.

                                       41


<PAGE>

              ADVANCED TECHNOLOGY INDUSTRIES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12 - STOCKHOLDERS' EQUITY (Continued)

Common Stock Issuances - 2003
-----------------------------

During May 2003, the Company issued 2,000,000 shares of common stock to
investors in exchange for $240,000.

During May 2003, the Company issued 360,677 shares of restricted Company Common
Stock for the satisfaction of $45,000 in legal fees.

During June 2003, the Company issued 2,000,000 shares of restricted Company
Common Stock to a consultant. These shares have been valued at $940,000 and
expensed during the period ended June 30, 2003.

During June 2003, the Company entered into a Conversion Agreement with LTDN
pursuant to which LTDN converted $800,000 of debt owed to it into 8,000,000
shares of restricted Company Common Stock.

During July 2003, the Company and a former consultant entered into a conversion
agreement pursuant to which the Company and such consultant agreed to convert
EURO 108,402 ($124,012) of outstanding consulting fees due to such consultant
into 510,000 shares of Company Common Stock.

During September 2003, the Company issued 85,000 shares of its common stock for
the satisfaction of $18,701 in consulting fees.

During November 2003, the Company issued 150,000 shares of its restricted common
stock for the satisfaction of services provided, valued at $24,000.

During November 2003, the Company issued 100,000 shares of its restricted common
stock for the satisfaction of services provided, valued at $16,000.

During November 2003, the Company issued 50,000 shares of its restricted common
stock for the satisfaction of $8,000 in consulting fees.

During November 2003, the Company issued 340,000 shares of its restricted common
stock as consideration for services provided valued at $34,999.

During November 2003, the Company entered into a Conversion Agreement with LTDN
pursuant to which LTDN converted $125,000 of debt owed to it into 1,250,000
shares of restricted Company common stock.

During November 2003, the Company issued 660,000 shares of its restricted common
stock as full and final payment of all principal and interest on a $67,900 note
payable to a third party.

                                       42


<PAGE>

              ADVANCED TECHNOLOGY INDUSTRIES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12 - STOCKHOLDERS' EQUITY (Continued)

Warrants
--------

At December 31, 2003, there were warrants outstanding to purchase 1,625,000
shares of the Company's common stock from $0.165 to $0.65 per share, of which
625,000 expire on April 14, 2004 and 1,000,000 expire on December 19, 2008. The
warrants were valued at $531,000 and were charged to financing costs in 1999
using the Black-Scholes pricing model with the following assumptions:

                                               Warrants
                                          625,000     1,000,000
                                          -------     ---------

   Risk-free interest rate                  5.0%        2.97%
   Expected life                          2 years      5 years
   Expected volatility                     65.00%      207.75%
   Dividend yield                            0%          0%

During April 2001, the Company issued 67,857 shares of common stock for the
cashless exercise of 112,500 warrants.

During January 2002, the Company issued 16,374 shares of common stock for the
cashless exercise of 32,500 warrants.

Options - Outside the Stock Option Plan
---------------------------------------

The Company entered into a one year consulting agreement on April 6, 2001 with a
public relations company for various consulting and financial professional
relations services in connection with the Company's interactions with
broker-dealers, financial professionals and analysts. The Company agrees to
issue to the consultant options to purchase 150,000 shares of the Company's
common stock. Of the options granted, there are 5 blocks of 30,000 warrants at
exercise prices of $.50, $.75, $1.00, $1.25 and $1.50. The consultant has the
right to convert the options into the Company's common stock on a cashless
basis. These options were valued at $.25 each on the grant date.

In May 2001, the Company entered into an agreement with a consultant for
managing and updating all aspects of the Company's website and internet. The
Company agreed to grant an option to purchase 24,000 shares of the Company's
restricted common stock at $.70 per share. The options expire on May 1, 2005.
The options were valued at $.61 per share on the grant date.

                                       43


<PAGE>

              ADVANCED TECHNOLOGY INDUSTRIES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12 - STOCKHOLDERS' EQUITY (Continued)

Options - Outside the Stock Option Plan (Continued)
---------------------------------------

The above options were valued using the Black-Scholes option pricing model with
the following assumptions:

                  Risk-free interest rate           5.0% - 5.5%
                  Expected life                  90 days - 5 years
                  Expected volatility                 65.0%
                  Dividend yield                         0%

Compensation costs charged to operations was $-0- in 2003 and $-0- in 2002.

In June 2000, a consultant exercised 90,000 options and the Company recorded a
receivable for $45,000.

Stock Option Plans
------------------

On October 26, 2000, the Board of Directors adopted the Advanced Technology
Industries, Inc. 2000 Stock Option Plan ("Plan"). On that date, the Board, which
is the Plan Administration under the Plan, awarded employees and officers
incentive stock options to purchase 470,000 shares of common stock. In addition,
consultants and advisors were awarded non-qualified stock options to purchase a
total of 615,000 shares. All of the options have an exercise price of $.343 per
share, which was the closing price of the stock on October 25, 2000.

During 2002, the Board of Directors and the majority shareholders amended the
above stock option plan to increase the number of shares that are subject to
ISO's from 3,000,000 to 5,000,000.

                                       44


<PAGE>

              ADVANCED TECHNOLOGY INDUSTRIES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12 - STOCKHOLDERS' EQUITY (Continued)

Stock Option Plans (Continued)
------------------

<TABLE>
                                                                                                 Weighted
                                                                Weighted                         Average
                                                Incentive        Average      Non-Qualified      Exercise
                                              Stock Options   Exercise Price  Stock Options       Price
                                              -------------   -------------   -------------   -------------
<S>                                           <C>             <C>             <C>             <C>
Outstanding - 12/31/00                             470,000    $        .34         615,000    $        .34

Options granted - 01/01-12/31/01:
  In the plan                                           --              --              --              --
Options granted - 01/01-12/31/01:
  Outside the option plan                               --              --         174,000             .96
Options expired/cancelled:
  Outside the plan                                      --              --              --              --
Options exercised:
  Outside the plan                                      --              --              --              --
                                              -------------   -------------   -------------   -------------
Outstanding - 12/31/01                             470,000             .34         789,000             .48

Options granted - 2002:
  In the plan                                           --              --              --              --
Options granted - 2002:
  Outside the option plan                               --              --         300,000             .14
Options expired/cancelled:
  Outside the plan                                      --              --              --              --
Options exercised
  Outside the plan                                      --              --        (145,328)            .14
                                              -------------   -------------   -------------   -------------
Outstanding - 12/31/02                             470,000             .34         943,672             .42

Options granted - 2003:
  In the plan                                           --              --              --              --
Options granted - 2003:
  Outside the option plan                               --              --              --              --
Options expired/cancelled:
  Outside the plan                                      --              --              --              --
Options exercised
  Outside the plan                                      --              --              --              --
                                              -------------   -------------   -------------   -------------
                                                   470,000             .34         943,672             .42
                                              =============   =============   =============   =============

Composition at 12/31/03:
------------------------
2000 stock option plan                             470,000    $        .34         615,000             .34
Options granted outside the plan                        --              --         328,672             .57
                                              -------------   -------------   -------------   -------------
Outstanding - 12/31/03                             470,000    $        .34         943,672    $        .42
                                              =============   =============   =============   =============

Total Number and Exercisable Value Price           470,000    $     160,000        943,672    $   396,342
                                              =============   =============   =============   ============
Total Number and Exercisable Value                 470,000    $     160,000        943,672    $   396,342
                                              =============   =============   =============   ============

                                       45
</TABLE>



<PAGE>

              ADVANCED TECHNOLOGY INDUSTRIES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12 - STOCKHOLDERS' EQUITY (Continued)

Earnings Per Share
------------------

Securities that could potentially dilute basic earnings per share ("EPS") that
were not included in the computation of diluted EPS, because to do so would have
been anti-dilutive consist of the following:

     Options to purchase common stock                            1,413,672
     Warrants to purchase common stock                           1,625,000
                                                                ----------
       Total as of December 31, 2003                             3,038,672
                                                                ==========

     Substantial Issuances After December 31, 2003 through May 17, 2004:

     Shares issuable for payment of consulting fee                 206,000
     Shares issued for conversion of notes payable               6,000,000
     Shares issued for conversion of debt                        1,000,000
     Shares issuable pursuant to conversion of accrued
        liabilities                                              1,526,238
     Shares issuable regarding proposed acquisition
       of Alfa-Pro products GmbH                                20,000,000
     Shares issuable under new option grants                       937,777
     Shares issuable pursuant to employee compensation             937,777

In addition, additional shares will be issuable to LTDN at the closing of the
proposed transaction, which will increase LTDN's ownership percentage to not
less than 58% (See Note 3).

The Company has been notified by TPG Capital Corporation ("TPG") that TPG
believes it is entitled to receive an additional 1,465,671 shares of the
Company's common stock under an agreement previously executed between the
parties. The Company is investigating TPG's claims to determine the validity of
such claims.

                                       46


<PAGE>

              ADVANCED TECHNOLOGY INDUSTRIES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13 - COMMITMENTS AND OTHER MATTERS

Consulting Agreement - ERBC
---------------------------

By letter dated June 1, 1996, the Company engaged ERBC Holdings, LTD ("ERBC"),
an affiliate of the Company by virtue of common stockholders, as a consultant
for a one-year period to undertake all aspects of the Company's operations in
Russia. Pursuant to the letter agreement, the Company agreed to pay ERBC a fee
of $115,000 for the year during which it has been engaged. During June 1997, the
Company renewed the agreement with ERBC for an additional one-year period on
like terms. During June 1998, the Company renewed the agreement with ERBC for an
additional one-year term and agreed to pay ERBC a fee of $168,577 for the year
during which it has been engaged. Commencing in 2001, fees under the consulting
agreement are $240,000 per year. During April 2001, ERBC entered into an
agreement to convert $467,873 of accrued consulting fees into the Company's
common stock. Included in accrued liabilities as of December 31, 2003 is
$1,015,176 related to this agreement.

Russian Contracts for Research and Development
----------------------------------------------

The Company is a party to a research and development agreement with a
Moscow-based State Scientific Research Institute Scientific Production Company
named Lutch pursuant to which such entity has agreed to perform various contract
research and development services related to technology obtained by the Company
from Nurescell for a total price of $985,000. As of December 31, 2003 the
Company paid $100,000 under this agreement, which has been charged to research
and development expenses during the year ended December 31, 2002. As a continued
result of limited funding, no services have been performed under this agreement.
It is uncertain when or if any services will eventually be completed under this
contract.

The Company is a party to a research and development agreement with a branch of
the Ministry of the Atomic Energy of the Russian Federation pursuant to which
such entity has agreed to perform various contract research and development
services to develop an industrial fireproof swelling cable coating for a total
price of $462,000. As a result of limited funding of this contract, the
performance of services were rescheduled to occur commencing with the quarter
ended December 31, 2003 and to be completed within one year. As a continued
result of limited funding, no services have been performed under this agreement.


                                       47


<PAGE>

              ADVANCED TECHNOLOGY INDUSTRIES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13 - COMMITMENTS AND OTHER MATTERS

Technology Purchase
-------------------

In connection with an oral agreement, the Company has agreed to acquire the
rights to certain technologies now held by a German Bank, for an estimated
purchase price of $500,000 payable in cash and/or Company's common stock. This
transaction is expected to close during the year ended December 31, 2004. During
April 2004, LTDN paid 100,000 Euro's ($110,860) to the German Bank as part of
this oral agreement.

International Operations
------------------------

The Company has strategic alliances, collaboration agreements and licensing
agreements with entities, which are based and/or have operations in Russia and
Ukraine. Both of these countries have experienced volatile and frequently
unfavorable economic, political and social conditions. The Russian economy and
the Ukrainian economy are characterized by declining gross domestic production,
significant inflation, increasing rates of unemployment and underemployment,
unstable currencies, and high levels of governmental debt as compared to gross
domestic production. The prospects of widespread insolvencies and the collapse
of various economic sectors exist in both countries.

In view of the foregoing, the Company's business, earnings, asset values and
prospects may be materially and adversely affected by developments with respect
to inflation, interest rates, currency fluctuations, government policies, price
and wage controls, exchange control regulations, taxation, expropriation, social
instability, and other political, economic or diplomatic developments in or
affecting Russia and Ukraine. The Company has no control over such conditions
and developments, and can provide no assurance that such conditions and
developments will not adversely affect the Company's operations.

Conversion Agreements
------------------------

On July 15, 2003 the Company and the chief financial officer of the Company
entered into a conversion agreement pursuant to which the Company and such
employee agreed to convert $265,800 of accrued salary due to such employee into
1,526,238 shares of Company Common Stock. The Company has agreed to file a
registration statement on Form S-8 in order to register the shares being issued
to such employee. Such employee has agreed to certain restrictions on the number
of shares of Company Common Stock that may be sold over certain period of time.
As of December 31, 2003, none of these shares had been issued to such employee.
The closing of this conversion agreement is effective upon the filing of the S-8
registration statement.

                                       48


<PAGE>

              ADVANCED TECHNOLOGY INDUSTRIES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13 - COMMITMENTS AND OTHER MATTERS (Continued)

Royalty Fees
------------

Pursuant to a Patent Maintenance and Development Contract dated May 31, 2002,
the Company agreed to pay to certain persons a royalty fee equal to 1% of the
sales revenue the Company receives from the sale of reseal-able cans, which are
manufactured or distributed worldwide under a license from the Company. Such
persons agreed to provide research and development services to the Company with
respect to the commercialization of the reseal-able can. As of December 31,
2003, the Company had not received any revenue with respect to sales of the
reseal-able can and, therefore, as of such date, the Company had not paid any
royalty fees pursuant to such agreement.

Legal Disputes
--------------

During the quarter ended June 30, 2003, the Company has been notified that Dr.
Jurgen Lempert intended to commence legal proceeding against the Company
relating to his termination as Chief Executive Officer of ATI Nuklear. A German
court ruled the Dr. Lempert is entitled to collect 55,450 EUROs ($69,629). At
December 31, 2003, the Company has accrued such amounts.

A noteholder has threatened to sue the Company for repayment of an outstanding
note. To date, the Company has not been served with a lawsuit. In the event the
noteholder does sue the Company, the Company believes it has sufficient defenses
and intends to vigorously defend itself against such claims.

James Cassidy and TPG Capital have threatened litigation against the Company
regarding a purported reset provision in an agreement entered into during 1999.
To date, the Company has not been sued and is investigating the claims of
Cassidy and TPG. Should litigation arise, the Company believes that it has
sufficient defenses and intends to vigorously defend itself against such claims.

Pollet, Richardson and Patel, LLC has threatened litigation against the Company
regarding payment for outstanding legal services. To date, the Company has not
been sued and is in discussions to settle this matter without litigation. Based
upon preliminary information received by the Company, should litigation arise,
the Company believes that it has sufficient defenses and can counter sue Pollet,
Richardson and Patel LLC for damages.

Dr. Alexander Kaul, former Chairman of the Supervisory Board of ATI Nuklear, has
initiated legal proceedings against the Company for monies he believes are due
him under his terminated employment contract. A German court ruled that Dr. Kaul
is entitled to collect 54,000 EUROS ($67,808). At December 31, 2003 the Company
has accrued such amounts.

Peter Goerke, a former Vice President of the Company, initiated legal
proceedings against the Company for the value of his remaining employment
agreement, accrued wages and expenses. A German court ruled that Mr. Goerke

                                       49


<PAGE>

              ADVANCED TECHNOLOGY INDUSTRIES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13 - COMMITMENTS AND OTHER MATTERS

Legal Disputes - (Continued)
------------

is not entitled to the remaining value of his employment contract and is only
entitled to collect 157,272.60 Euros ($197,486) at December 31, 2003 the Company
has accrued such amounts.

The Company is also subject to various matters of litigation during its normal
course of operations. Management believes that the eventual outcome of these
matters will not have a material adverse effect on the Company's consolidated
financial position, results of operations, or cash flows.

Lien on Star Can patents
------------------------

During June 2003, the Company became aware that Paxsys Ltd., a Bermuda
corporation, in connection with a failed financing, had placed a lien against
the patents relating to the reseal-able can. The Company disputes the validity
of the claim.

NOTE 14 - SEGMENT REPORTING

The Company's business is organized on a geographic basis, and the Company's
Chief Operating Decision Maker assesses performance and allocates resources on
this basis.

The Company has two geographic reportable segments: U.S.A. and Germany. The
accounting policies of the segments are the same as described in the summary of
significant accounting policies. The Company evaluates segment performance based
on income (loss) before interest and extraordinary items. Segment results for
2003 and 2002 are as follows:

                                       50


<PAGE>

              ADVANCED TECHNOLOGY INDUSTRIES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14 - SEGMENT REPORTING (Continued)
<TABLE>

                                          U.S.A.       Germany    Eliminations  Consolidated
                                       -----------   -----------   -----------   -----------
<S>                                    <C>           <C>           <C>           <C>
    2003:
    ----

    Loss before extra-
      ordinary item                    $ 1,667,434   $ 2,190,040   $        --   $ 3,857,514
                                       ===========   ===========   ===========   ===========
    Depreciation and
      amortization                     $        --   $    55,976   $        --   $    55,976
                                       ===========   ===========   ===========   ===========

    Identifiable Assets                $   262,946   $   362,238   $        --   $   625,184
                                       ===========   ===========   ===========   ===========
    2002:
    -----

    Loss before extra-
      ordinary item                    $ 3,152,411   $ 3,605,309   $        --   $ 6,757,720
                                       ===========   ===========   ===========   ===========
    Depreciation and
      amortization                     $        --   $   176,875   $        --   $   176,875
                                       ===========   ===========   ===========   ===========

    Identifiable Assets                $    59,946   $   434,042   $        --   $   493,988
                                       ===========   ===========   ===========   ===========

</TABLE>

NOTE 15 - SUBSEQUENT EVENTS (UNAUDITED)

Subsequent Stock Issuances
--------------------------

During March 2004, the Company issued 6,000,000 shares of its restricted common
stock as payment in full of a promissory note payable in the amount of $890,000
plus $288,103 of accrued interest.

During March 2004, the Company issued 1,000,000 shares of its restricted common
stock to LTD as part of the conversion of a $100,000 note payable.

Settlement agreements
---------------------
During February 2004, the Company and a former Director of ATI Nuklear reached
a settlement on amounts due to the former Director. Under the terms of the
settlement agreement, the former Director is entitled to receive a cash payment
of $21,000 and 141,000 shares of the Company's common stock. As of May 17, 2004,
these shares have not been issued.

                                       51


<PAGE>

           ADVANCED TECHNOLOGY INDUSTRIES, INC. AND SUBSIDIARIES
                       (A Development Stage Company)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 15 - SUBSEQUENT EVENTS (Continued)

Conversion Agreements and Future Issuances of Stock
---------------------------------------------------

During March 2004, the Company and 10 former Russian employees entered into a
conversion agreement whereby the employee agreed to convert $143,623 of accrued
salary into 955,925 shares of the Company's common stock. As of May 17, 2004,
these shares have not been issued.

Compensation Agreement
----------------------

During March 2004, the Company agreed to issue to an employee and officer
937,777 shares of the Company's restricted common stock as consideration for
services provided. As of May 17, 2004, these shares have not been issued.

During March 2004, the Company agreed to issue to an employee a 10-year option
to purchase 937,777 shares of the Company's common stock at exercise price of
$0.22 per share.


Consulting Agreement
-------------------

On April 23, 2004, the Company entered into a one-year consulting for public
relation services. The Consultant shall receive 65,000 shares of the Company's
common stock as compensation.


NOTE 16 - QUARTERLY RESULTS (UNAUDITED)
<TABLE>

                                             Quarter Ended
                         ---------------------------------------------------------
                           March 31       June 30      September 30   December 31     Total Year
                         ------------   ------------   ------------   ------------   ------------
<S>                      <C>            <C>            <C>            <C>            <C>
2003:
----

Revenues                 $        --    $        --    $        --    $        --    $        --
Net loss                 $  (567,164)   $(2,044,372)   $  (401,968)   $  (844,010)   $(3,857,514)
Loss per share - basic
  and diluted            $      (.01)   $      (.04)   $      (.01)   $      (.01)   $      (.07)
                         ------------   ------------   ------------   ------------   ------------
2002:
-----

Revenues                 $        --    $        --    $        --    $        --    $        --
Net loss                 $(1,154,603)   $(1,945,348)   $(2,753,048)   $  (904,720)   $(6,757,719)
Loss per share - basic
  and diluted            $      (.03)   $      (.04)   $      (.06)   $      (.02)   $      (.14)

</TABLE>

                                       52