SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                   FORM 10-KSB


            ( X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934


                  For the Fiscal Year Ended September 30, 2002


                           Commission File No. 0-27175


                           ADVANCE TECHNOLOGIES, INC.
             ______________________________________________________
             (Exact name of registrant as specified in its charter)


            Nevada                                       95-4755369
_______________________________             ____________________________________
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
Incorporation or organization)


                             716 Yarmouth Road # 215
                         Palos Verdes Estates, CA 90275
                    ________________________________________
                    (Address of principal executive offices)


       Registrant's telephone number, including area code: (310) 265-7776


           Securities Registered Pursuant to Section 12(b) of the Act:


                               Title of each class
                Common Name of Each exchange on which registered
                   National Association of Securities Dealers
           Securities registered pursuant to Section 12(g) of the Act:

                        _________________________________

                       Indicate by check mark whether the
               Registrant (1) has filed all reports required to be
                 filed by Section 13 or 15(d) of the Securities
                  Exchange Act of 1934 during the preceding 12
                   months (or for such shorter period that the
             Registrant was required to file such reports), and (2)
              has been subject to such filing requirements for the
                                  past 90 days.


                                 Yes [X] No [ ]


                     Indicate by check mark if disclosure of
              delinquent filers pursuant to item 405 of Regulation
                  S-K is not contained herein, and will not be
              contained, to the best of registrants'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. [X]


<PAGE>


         Issuer's revenues for its most recent fiscal year were $29,039


                   The aggregate market value of voting stock
          held by non-affiliates of the Registrant as of September 30,
                        2002 was approximately $1,033,140


                  On October 1, 2002, approximately 17,218,967
               Shares of the Registrant's Common Stock, $0.001 par
                            value, were outstanding.


                       Documents Incorporated by Reference
                              Exhibit A & Exhibit B


<PAGE>


                           ADVANCE TECHNOLOGIES, INC.
                                TABLE OF CONTENTS


                                                                            Page
                                     PART I

Item 1.    BUSINESS.........................................................   4

Item 2.    PROPERTIES.......................................................   5

Item 3.    LEGAL PROCEEDINGS................................................   6

Item 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..............   6

                                     PART II

Item 5.    MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
             STOCKHOLDER MATTERS............................................   6

Item 6.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
             CONDITION AND RESULTS OF OPERATIONS............................   6

Item 7.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA......................   7

Item 8.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
             ACCOUNTING AND FINANCIAL DISCLOSURE............................   7


                                    PART III

Item 9.   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT................   7

Item 10.   EXECUTIVE COMPENSATION...........................................   8

Item 11.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
             AND MANAGEMENT.................................................   8

Item 12.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...................   8

                                     PART IV

Item 13.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORT..............   9

Item 14.   EXHIBITS, MANAGEMENT DISCUSSIONS AND OPERATIONS..................   9

           SIGNATURES.......................................................  10


<PAGE>


PART I

ITEM 1. BUSINESS

        Overview

        Advance  Technologies  Inc. is a developer of Infrared  Enhanced  Vision
        Technology  and  commercial  solutions.  The  company  has a world  wide
        license from Hughes  Aircraft  company,  Los Angeles,  California  for a
        patented advanced infrared imaging system. Advance Technologies licenses
        and develops  applied  infrared  enhanced  vision  solutions  for use in
        diverse industries including aviation, recreational vehicles, commercial
        trucking, marine, security, and fire fighting applications.  The Company
        is currently  engaged in the  development  of night vision  systems with
        applications in the commercial sector.

        Advance  Technologies  has  entered  into  a  licensing  agreement  with
        Kollsman  Inc.,  which has  incorporated  the company's  technology  and
        intellectual  property  into an  Enhanced  Vision  System for use on the
        Gulfstream  series of Aircraft.  The system entered  production in early
        2002, and is in the process of ramping up for full production.  Kollsman
        has announced a new enhanced  vision product in late 2002 focused at the
        low-end private aviation  market.  This product is expected to enjoy the
        same success as the Gulfstream product but with a far larger market.

        Background

        Advance  Technologies,  Inc.  ("the  Company") The Company was organized
        under the laws of the State of Delaware  under the name PWB  Industries,
        Inc.; the articles of incorporation  were issued June 16, 1969. The name
        was changed to Sun Energy,  Inc. ("The Company"),  which merged with Sto
        Med, Inc. on February 22, 1996 changing its name to Sto Med, Inc.  ("The
        Company") and domicile to the State of Nevada. On February 23, 1996, Sto
        Med, Inc., a privately held California corporation,  was acquired by Sto
        Med, Inc. ("The  Company") the California  Corporation  acquisition  was
        rescinded on August 23rd 1997. Sto Med Inc.  ("The  Company") the Nevada
        Corporation  changed  its  name to  Advance  Technologies,  Inc.,  ("The
        Company")  on August 23rd 1997.  On  September  27,  1999 the  "Company"
        acquired Seacrest  Industries of Nevada,  also known as Infrared Systems
        International.


                                       4


<PAGE>


        The Company

        The Registrant through its wholly owned subsidiary SEACREST  INDUSTRIES,
        INC.,  and through its  president and director Mr. Gary Ball was granted
        an  exclusive  world-wide  license  agreement  for the use of US  patent
        number 5,534,694 by Hughes Aircraft  Company,  for a key optical element
        of the Infrared  Aircraft  Landing System.  Gary Ball founder and CEO of
        Infrared   Systems   International   (ISI)  a/k/a  Seacrest   Industries
        International,  Inc. in 1992 formed the company for the singular purpose
        of providing  manufacturing  and sales  support for the unique  Infrared
        System  called   Enhanced   Vision  System  (EVS).   While  employed  by
        Electro-Optical Systems, a segment of Hughes Aircraft Company, as senior
        Program Manager and engineer,  he led the research and development  team
        responsible  for the  development  of the Enhanced  Vision System (EVS).
        This  technology was designed to allow aircraft pilots to actually "see"
        the airport environment through cloud ceiling or surface fog. The factor
        of enhanced  safety,  alone,  is generating an enormous  demand for this
        type of system.

        Significant Corporate Milestones

        Advance   Technologies   Inc.   was   granted  an  export   license  for
        Micro-bolonmeter  IR cameras for Medical  Applications  in the Far East.
        The  Department of Commerce  license  allowed  Advance  Technologies  to
        export 35 Night  Vision  Camera to  Telesis  Technologies  of Taiwan for
        incorporation  in their medical system,  Spectrum 9000. These units were
        than resold to end-users  medical  facilities  in Korea and Taiwan.  The
        license was  obtained on behalf of Telesis  Technologies  under terms of
        our Agent Agreement.

        Advance  Technologies  Inc.  received  the  initial  two  pre-production
        Niteagle  Systems from Telesis in 2002.  These units have been evaluated
        and demonstrated to potential customers.  This effort will continue into
        2003.

        Employees

        The Company employs a total of three (3) employees, One of which is full
        time,  the other two are used on a Reduced  hour  workweek as  required.
        This staff reduction Is the result of economic  conditions  discussed in
        the Management Discussion Section in depth.

ITEM 2. PROPERTIES

The Company's executive offices are located in Palos Verdes Estates, California.


                                       5


<PAGE>


ITEM 3. LEGAL PROCEEDINGS

There are no legal  proceedings  known or pending  against the Registrant or its
subsidiary

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

No matters were submitted to a vote of the Company's  Security  holders  through
the solicitation of proxies or Otherwise, during the fiscal year ended September
30, 2002.

PART II

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

The  Company  is  currently  trading,  OTC,  on  the  Nationals  Association  of
Securities  Dealers  "Pink  Sheets" with the high bid at $0.90 per share and the
low bid of $0.06 per share during the last year. Additional information required
by this item may be found in the Company's 2002 Financial Statements.

On September 30, 2002 there was 17,218,967  shares  outstanding of  registrant's
common stock, at $0.001 par value. There was an additional  38,858,057 shares of
Class B restricted stock.

The increase of common stock from 2,572,923 to 17,218,967  Resulted from the 30%
conversion of 144  restricted  stock To free trading  stock.  The conversion was
authorized by The board of directors of Advance Technologies January 1, 2002.

ITEM 6. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND REPORTS
        OF OPERATION

From  time to  time,  we may  publish  forward-looking  statements  relating  to
matters,  including  anticipated  financial  performance business propects,  the
progress  and  goals  for  our  research  and  development  programs,  marketing
strategies,  and other similar matters. The Private Securities Litigation Reform
Act of 1995 provides a safe harbor,  a variety of factors could cause Our actual
results and  experience to differ  materially  from the  Anticipated  results or
other expectations expressed in our Forward-looking  statements. In addition, we
disclaim any Intent or obligation to update those forwarding-looking statements.

When used in this discussion,  the words  "believes,"  "anticipates"  "expected"
"assumes"  "and similar  expressions  are intended to identify  forward  looking
statements.  Such statements are subject to risks and  uncertainties  that could
cause actual  results to differ  materially  from those  projected.  Readers are
cautioned not to place undue reliance on these  forward-looking  statements that
speak only as of the date of this report. We undertake no obligation to publicly
release the results of any Revisions to these  forward-looking  statements  that
may be made To reflect events or circumstances  after the date of this report or
to Reflect the occurrence of unanticipated events.


                                       6


<PAGE>


For a  more  detailed  description  of our  operations  for  2002  see  Item  14
Management Discussion for 2002

ITEM 7. FINANCIAL STATEMENTS.


The  financial  statements  required by this item are included in the  Company's
2000 Financial Statements and are presented in Part IV, Item 13.

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

None

PART III

ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

        GARY E. BALL Age 65, residing in Manhattan Beach, California is married.
        He attended California State University at Long Beach graduating in 1967
        BSEE and MSEE,  went on to perform  Graduate  Studies at  University  of
        Southern California. He has specialized in product design,  development,
        and  management  for  North  American  Aviation,   Autonetics  Division.
        Technical  Manager  in  charge  of  the  Pave  Track  program  for  Ford
        Aerospace.  Program Manager for Northrop Electro-Mechanical in charge of
        business  development on several classified DOD programs,  including the
        AMRAAM effort.  Program  Manager for Hughes  Aircraft where he developed
        the Infrared Enhanced Vision System,  reporting to the President of EDSG
        as directed by General Motors and directed all non-core business.  He is
        a member  of NATO  NIAG  study  group on  Aircraft  Integration.  He has
        authored  several articles for trade  publications,  the last 4 years he
        has provided consulting services to 10 U.S. and foreign  corporations in
        the field of IR technology.

        GARY L. BANE Age 64,  residing in Santa Barbara,  California is married.
        He attended  University of Southern  California  attaining BS Mechanical
        and Aeronautical (1960) MS Control Systems and Instrumentation (1966) MS
        Systems  Management  (1968).  University  of  California,   Los  Angeles
        studying Deep  Submergence  Vehicle,  Oceanography  and Offshore Systems
        Engineering.  Stanford  University  Executive Institute of Management of
        High Technology  Companies.  Mr. Bane is a specialist in the development
        and  management  of Deep  Ocean and  offshore  technology  projects.  He
        recently  retired  from  Rockwell  after 30 years as  director  of Ocean
        Systems. While at Rockwell he successfully managed significant technical
        solutions  and  advanced  state-of-the-art  programs  for  a  number  of
        classified programs.  He was General Manager of Interstate  Electronics;
        Oceanic  Division where he was responsible for profit and loss and R and
        D for offshore oil drilling and recovery projects.


                                       7


<PAGE>


        WENDY BALL Age 56, residing in Manhattan  Beach,  California is married.
        She graduated from University of Southern California,  BS cum Laude. Her
        career  has  been  focused  on  retail  merchandising,   where  she  has
        demonstrated  exceptional  skills  in  management,   team  building  and
        communications. She is National Sales Director for Christian Lacroix New
        York, a wholly owned  subsidiary of Louis Vitton Moet Hennessey  (LVNH).
        She  was  an  account   executive  for  Carolee   Jewelry  for  Southern
        California,  Arizona and Utah. She was co-owner Brava Specialty Clothing
        Store in Redondo Beach, California.

ITEM 10. EXECUTIVE COMPENSATION

        Other  than  information   provided  in  the  Company's  2002  Financial
        Statements  incorporated  Herein,executive  officers and directors  have
        Received no other compensation.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

<TABLE>
<CAPTION>


                   (1) Name and Address of           (2) Amount and Nature of         Percent of
Title of Class         Beneficial Owner                  Beneficial Ownership         Class
______________         ___________________               ____________________         ___________

<S>                    <C>                               <C>                          <C>
Preferred              Gary E. Ball                      9,240,000 Issued  Shares     18.4
                       28 Santa Cruz Court
                       Manhattan Beach, CA 90266

Preferred              Gary L. Bane                      364,000 Issued  Shares        1.0
                       2015 Edgewater
                       Santa Barbara, CA 93109

Preferred              Wendy Ball                        9,240,000 Issued Shares      18.4
                       28 Santa Cruz Court
                       Manhattan Beach, CA 90266

</TABLE>


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

        Gary E. Ball and Wendy Ball are married.

        The  consideration  exchanged under the Plan was negotiated  between the
        directors  and  executive  officers  of the  Registrant,  the  Board  of
        Directors of SEACREST  INDUSTRIES,  INC.  (the board of directors of the
        Registrant,  are the  same  board  of  directors  as  that  of  SEACREST
        INDUSTRIES,  INC.) and the SEACREST INDUSTRIES,  INC. Stockholders,  and
        the Board of Directors of the  Registrant  used criteria used in similar
        proposals  involving the Registrant in the past,  including the relative
        value of the assets of the  Registrant;  its present  and past  business


                                       8


<PAGE>


        operations;   future  potential  of  SEACREST   INDUSTRIES,   INC.;  its
        management;  and  the  potential  benefit  to  the  stockholders  of the
        Registrant.  The members of the Board of Directors  determined  in their
        good faith that the consideration for the exchange was reasonable, under
        these circumstances.

PART IV

ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

        The  following  documents  are filed as part of this Form 10-KSB  Annual
        Report:

        See Attached Financial Statements: Exhibit A (16 pages)

ITEM 14. EXHIBITS, MANAGEMENT DISCUSSIONS AND OPERATIONS

        The  following  document  is filed as part of this  Form  10-KSB  Annual
        Report:

        See Attached Exhibit A (15 pages)

        See Attached Exhibit B (6 pages)

        Exhibit 99.1 - Certification

        Exhibit 99.2 - Certification


                                       9


<PAGE>


                                   SIGNATURES


Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities  and
Exchange  Act of 1934,  the  Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.





Date: December 30, 2002                         Advance Technologies, Inc.
                                                (Registrant)

                                                By:/s/ GARY E. BALL
                                                   ----------------------
                                                       Gary E. Ball
                                                       President and Director


                                       10


<PAGE>






                                   EXHIBIT A







                           ADVANCE TECHNOLOGIES, INC.
                          (A Development Stage Company)

                        Consolidated Financial Statements

                           September 30, 2002 and 2001














                                       11


<PAGE>






                                 C O N T E N T S


Independent Auditor's Report..................................................13

Balance Sheets................................................................14

Statements of Operations......................................................15

Statements of Stockholders' Equity............................................16

Statements of Cash Flows......................................................19

Notes to the Financial Statements.............................................21


                                       12


<PAGE>


                          INDEPENDENT AUDITOR'S REPORT


To the Board of Directors and Stockholders of
Advance Technologies, Inc.
(A Development Stage Company)

We have audited the accompanying consolidated balance sheets of Advance
Technologies, Inc. (a development stage company) as of September 30, 2002 and
2001 and the related statements of operations, stockholders' equity and cash
flows for the years ended September 30, 2002 and 2001 and from inception on
October 1, 1985 through September 30, 2002. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Advance
Technologies, Inc. (a development stage company) as of September 30, 2002 and
2001 and the results of its operations and cash flows for the years ended
September 30, 2002 and 2001 and from inception on October 1, 1985 through
September 30, 2002 in conformity with accounting principles generally accepted
in the United States of America.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has minimal assets and is dependent upon
financing to continue operations. These factors raise substantial doubt about
its ability to continue as a going concern. Management's plans in regard to
these matters are also described in the Note 2. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.



Chisholm & Associates
North Salt Lake, Utah
December 27, 2002


                                       13


<PAGE>

<TABLE>
<CAPTION>


                           ADVANCE TECHNOLOGIES, INC.
                          (A Development Stage Company)
                           Consolidated Balance Sheets


                                     ASSETS

                                                                  September 30,
                                                             _______________________
                                                                2002          2001
                                                             _________     _________
<S>                                                          <C>           <C>

CURRENT ASSETS

   Cash                                                      $   1,719     $   3,515


     Total Current Assets                                        1,719         3,515
                                                             _________     _________

PROPERTY & EQUIPMENT, net                                       22,367        26,835
                                                             _________     _________

   TOTAL ASSETS                                              $  24,086     $  30,350
                                                             =========     =========


                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES

   Accrued Interest                                          $  23,267     $  13,007
   Advance Royalties                                            25,000        25,000
   Notes payable-officer                                        36,300        28,300
                                                             _________     _________

     Total Current Liabilities                                  84,567        66,307
                                                             _________     _________

LONG-TERM DEBT

   Line of Credit                                               85,500        85,500
                                                             _________     _________

   TOTAL LIABILITIES                                           170,067       151,807
                                                             _________     _________

STOCKHOLDERS' EQUITY

   Common stock, authorized 100,000,000 shares of
     $0.001 par value, issued and outstanding 17,218,967
      and 2,572,923 shares, respectively                        17,219         2,573
   Preferred Stock, Series A authorized 100,000,000
     shares of $0.001 par value, issued and outstanding
     38,808,057 and 50,204,102 shares, respectively             38,808        50,204
   Additional paid-in capital                                  446,496       446,496
   Retained earnings (deficit)                               $(648,504)     (620,730)
                                                             _________     _________

     Total Stockholders' Equity                               (145,981)     (121,457)
                                                             _________     _________

     TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY              $  24,086     $  30,350
                                                             =========     =========


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


</TABLE>


                                       14

<PAGE>

<TABLE>
<CAPTION>



                           ADVANCE TECHNOLOGIES, INC.
                          (A Development Stage Company)
                      Consolidated Statements of Operations


                                                                          For the period
                                                                          of entering
                                                                          Development
                                                                          Stage on
                                               For the Year Ended         October 1,
                                                 September 30,            1985 Through
                                           __________________________     September 30,
                                              2002            2001           2002
                                           ___________     __________     ______________
<S>                                        <C>             <C>              <C>

REVENUES                                   $    29,039     $   30,985       $   60,024
                                           ___________     __________       __________

EXPENSES:

   Depreciation & Amortization                   7,854          7,000           29,519
   Organization Costs                                -              -           11,331
   Research & Development                            -         61,500           72,750
   General and administrative                   38,699         18,625          608,962
                                           ___________     __________       __________

     Total Expenses                             46,553         87,125          722,562
                                           ___________     __________       __________

INCOME (LOSS) FROM OPERATIONS:                 (17,514)       (56,140)        (662,538)
                                           ___________     __________       __________

OTHER INCOME (EXPENSE):

   Interest Expense                            (10,260)       (10,191)         (23,267)
   Miscellaneous Income                              -         98,000           98,000
                                           ___________     __________       __________

       Total Other Income (Expense):           (10,260)        87,809           74,733
                                           ___________     __________       __________

NET INCOME (LOSS)                          $   (27,774)    $   31,669       $ (587,805)
                                           ===========     ==========       ==========


NET LOSS PER SHARE:
   Loss Per Share                          $     (0.00)    $     0.01       $    (0.55)
                                           ___________     __________       __________

   Weighted average shares outstanding      10,796,656      2,572,923        1,058,131
                                           ===========     ==========       ==========


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


</TABLE>


                                       15

<PAGE>

<TABLE>
<CAPTION>


                           ADVANCE TECHNOLOGIES, INC.
                          (A Development Stage Company)
                    Consolidated Statements of Stockholders'
             Equity (For the period of entering development stage on
                                 October 1, 1985
                           through September 30, 2002)


                                                                                       Deficit
                                                                                       Accumulated
                                                                                       During the
                              Common Stock        Additional                           Preferred
                            _________________      Paid-In       Stock                 Development
                            Shares     Amount      Capital       Shares     Amount     Stage
                            ______     ______     __________     ______     ______     ___________
<S>                          <C>       <C>         <C>          <C>         <C>         <C>

Balance, October 1,
 1985 (beginning of
 the development

 stage)                      6,487     $    7      $ 58,161           -     $    -      $ (60,701)

Shares issued for coal
 royalties at $0.01          4,369          4         1,525           -          -              -

Shares issued for
 services at $0.25             554          1         4,849           -          -              -

Shares issued for
 services at $0.03           1,601          2         1,680           -          -              -

Shares issued for
  services at $0.25          1,274          1        11,145           -          -              -

Shares issued for
 services at $0.01           2,290          2           798           -          -              -

Shares issued for
 services at $0.25          37,203         37       325,487           -          -              -

Preferred shares
 issued for services             -          -             -      10,048      1,004              -

Preferred shares expire          -          -         1,004     (10,048)    (1,004)             -

Net loss since the
 beginning of the
 development stage
 at October 1, 1985              -          -             -           -          -       (344,001)
                            ______     ______      ________     _______     ______      _________

Balance, September
 30, 1995                   53,778         54       404,649           -          -       (404,702)

Shares issued for
 services at $0.25           5,714          6        49,994           -          -              -

Rounding up of shares           (6)        (1)            -           -          -              -

Net loss for
 the year ended
 September 30, 1996              -          -             -           -          -        (50,000)
                            ______     ______      ________     _______     ______      _________

Balance, September
 30, 1996                   59,486         59       454,643           -          -       (454,702)


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


</TABLE>


                                       16

<PAGE>

<TABLE>
<CAPTION>


                           ADVANCE TECHNOLOGIES, INC.
                          (A Development Stage Company)
                    Consolidated Statements of Stockholders'
             Equity (For the period of entering development stage on
                                 October 1, 1985
                           through September 30, 2002)
                                   (Continued)


                                                                                       Deficit
                                                                                       Accumulated
                                                                                       During the
                              Common Stock        Additional                           Preferred
                            _________________      Paid-In       Stock                 Development
                            Shares     Amount      Capital       Shares     Amount     Stage
                            ______     ______     __________     ______     ______     ___________
<S>                          <C>       <C>         <C>          <C>         <C>         <C>

Balance Forward             59,486         59       454,643           -          -       (454,702)

Shares issued for
 services at $0.25             608          1         5,324           -          -              -

Net loss for
 the year ended
 September 30, 1997              -          -             -           -          -         (5,325)
                            ______     ______      ________     _______     ______      _________

Balance, September
 30, 1997                   60,094         60       459,967           -          -       (460,027)

Shares issued for
 services at $0.001         12,828         13           436           -          -              -

Net loss for
 the year ended
 September 30, 1998              -          -             -           -          -           (447)
                            ______     ______      ________     _______     ______      _________

Balance September
 30, 1998                   72,922         73       460,403           -          -       (460,474)

Shares issued for
 cash at $0.01           2,500,000      2,500        22,500           -          -              -

Shares issued for
 common stock of
 SeaCrest Industries
 Corp. at $0.001                 -          -       (36,407) 50,204,102     50,204              -

Net loss for
 the year ended
 September 30, 1999              -          -             -           -          -        (90,126)
                            ______     ______      ________     _______     ______      _________

Balance, September
 30, 1999                2,572,922      2,573       446,496  50,204,102     50,204       (550,600)

Net loss for
 the year ended
 September 30, 2000              -          -             -           -          -       (101,799)
                            ______     ______      ________     _______     ______      _________

Balance, September
 30, 2000                2,572,922      2,573       446,496  50,204,102     50,204       (652,399)


</TABLE>


                                       17

<PAGE>

<TABLE>
<CAPTION>



                           ADVANCE TECHNOLOGIES, INC.
                          (A Development Stage Company)
                    Consolidated Statements of Stockholders'
             Equity (For the period of entering development stage on
                                 October 1, 1985
                           through September 30, 2002)
                                   (Continued)
                                                                                       Deficit
                                                                                       Accumulated
                                                                                       During the
                              Common Stock        Additional                           Preferred
                            _________________      Paid-In       Stock                 Development
                            Shares     Amount      Capital       Shares     Amount     Stage
                            ______     ______     __________     ______     ______     ___________
<S>                          <C>       <C>         <C>          <C>         <C>         <C>

Balance Forward          2,572,922      2,573       446,496  50,204,102     50,204       (652,399)

Net income (loss)
 for the year ended
 September 30, 2001              -          -             -           -          -         31,669
                            ______     ______      ________     _______     ______      _________

Balance, September
 30, 2001                2,572,922      2,573       446,496  50,204,102     50,204       (620,730)

Shares issued for
 services at $0.001      3,250,000      3,250             -           -          -              -

Shares converted to
 common stock           11,396,045     11,396             - (11,396,045)   (11,396)             -

Net income (loss)
 for the year ended
 September 30, 2002              -          -             -           -          -        (27,774)
                            ______     ______      ________     _______     ______      _________

Balance, September
 30, 2002               17,218,967    $17,219      $446,496  38,858,057    $38,858      $(648,504)
                        ==========    =======      ========  ==========    =======      =========


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


</TABLE>


                                       18


<PAGE>

<TABLE>
<CAPTION>



                           ADVANCE TECHNOLOGIES, INC.
                          (A Development Stage Company)
                      Consolidated Statements of Cash Flows


                                                                          For the period
                                                                          of entering
                                                                          Development
                                                                          Stage on
                                               For the Year Ended         October 1,
                                                 September 30,            1985 Through
                                           __________________________     September 30,
                                              2002            2001           2002
                                           ___________     __________     ______________
<S>                                        <C>             <C>              <C>

CASH FLOWS FROM OPERATING ACTIVITIES

   Net loss                                $   (27,774)    $   31,669       $ (587,805)
   Adjustments to reconcile net loss
    to net cash, provided by operations:
     Stock issued for services                   3,250              -          403,025
     Depreciation & Amortization                 7,854          7,000           29,519
     Organization Costs                              -              -           11,331
     Decrease in prepaids                            -         12,500           14,680
     Increase (Decrease) in accrued
       liabilities                              10,260        (24,100)          23,269
                                           ___________     __________       __________

       Net Cash Flows Used in Operating
       Activities                               (6,410)        27,069         (105,981)
                                           ___________     __________       __________

CASH FLOWS USED IN INVESTMENT ACTIVITIES(39

   Purchase of Equipment                        (3,386)       (10,000)         (39,386)
   Investment in Subsidiary                          -              -              286
                                           ___________     __________       __________

       Net Cash Used in Investment
       Activities                               (3,386)       (10,000)         (39,100)
                                           ___________     __________       __________

CASH FLOWS FROM FINANCING ACTIVITIES

   Cash paid on Loan from Officer               (8,000)       (21,200)         (41,200)
   Proceeds from Loan from Officer              16,000              -           77,500
   Proceeds from Line of Credit                      -          6,000           85,500
   Proceeds from Issuance of Stock                   -              -           25,000
                                           ___________     __________       __________

       Net Cash Flows from Financing
       Activities                                8,000        (15,200)         146,800
                                           ___________     __________       __________

NET INCREASE (DECREASE) IN CASH                 (1,796)         1,869            1,719

CASH, BEGINNING OF YEAR                          3,515          1,646                -
                                           ___________     __________       __________

CASH, END OF YEAR                          $     1,719     $    3,515       $    1,719
                                           ===========     ==========       ==========


</TABLE>

                                       19


<PAGE>

<TABLE>
<CAPTION>


                           ADVANCE TECHNOLOGIES, INC.
                          (A Development Stage Company)
                      Consolidated Statements of Cash Flows
                                   (Continued)


                                                                          For the period
                                                                          of entering
                                                                          Development
                                                                          Stage on
                                               For the Year Ended         October 1,
                                                 September 30,            1985 Through
                                           __________________________     September 30,
                                              2002            2001           2002
                                           ___________     __________     ______________
<S>                                        <C>             <C>              <C>

SUPPLEMENTAL CASH FLOW INFORMATION

   Cash Paid for:
     Interest                              $         -     $        -       $        -
     Taxes                                 $         -     $        -       $        -

SUPPLEMENTAL NON-CASH INFORMATION

   During December 2001, the Company issued 3,250,000 shares of common stock for
   services valued at $3,250 (or $.001 per share).

   During the year ending September 30, 2002, a total of 11,396,045 shares of
   preferred stock were converted to common stock.


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


</TABLE>

                                       20


<PAGE>


                           ADVANCE TECHNOLOGIES, INC.
                          (A Development Stage Company)
                 Notes to the Consolidated Financial Statements
                           September 30, 2002 and 2001


NOTE 1 -      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

              a.  Organization

              The Company was organized under the laws of the state of Delaware
              on June 16, 1969 as PWB Industries, Inc. On November 10, 1975, the
              Company changed its name to Sun Energy, Inc. At that time, the
              Company began operations in the oil and gas lease industry. By
              1985, the Company discontinued its operations and became dormant.
              On March 6, 1996, the Company attempted a merger which failed. On
              August 23, 1997, the Company changed its name to Advance
              Technologies, Inc. and changed its place of domicile to from
              Delaware to Nevada.

              On September 27, 1999, pursuant to a plan of acquisition, the
              Company exchanged 50,204,102 shares of its Seris "A" preferred
              stock for 50,204,102 shares of SeaCrest Industries Corporation's
              common stock. This acquisition has been accounted for using the
              purchase method of a business combination.

              The Company is currently engaged in the development of a night
              vision system with applications in the military as well as civil.
              The Company has an agreement with a Taiwan company wherein they
              are jointly developing the night vision system for use in Class A
              coaches. The Company is also involved in the development of other
              Electro-optical mechanical devices.

              b.  Accounting Method

              The Company recognizes income and expenses on the accrual basis of
              accounting.

              c.  Consolidation

              The consolidated financial statement include the accounts of
              Advanced Technologies, Inc. and SeaCrest Industries Corporation, a
              wholly owned subsidiary. Intercompany transactions have been
              eliminated.

              d.  Cash and Cash Equivalents

              The Company considers all highly liquid investments with
              maturities of three months or less to be cash equivalents.


                                       21


<PAGE>


                           ADVANCE TECHNOLOGIES, INC.
                          (A Development Stage Company)
                 Notes to the Consolidated Financial Statements
                           September 30, 2001 and 2000


NOTE 1 -      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

              e.  Earnings (Loss) Per Share

              The computation of earnings per share of common stock is based on
              the weighted average number of shares outstanding at the date of
              the financial statements.

<TABLE>
<CAPTION>



                                                                          From
                                                                          Inception on
                                              For the Years Ended         October 1,
                                                 September 30,            1985 Through
                                           __________________________     September 30,
                                              2002            2001           2002
                                           ___________     __________     _____________
<S>                                        <C>             <C>            <C>

              Numerator - net loss         $   (27,774)    $  (31,669)    $ (587,805)

              Denominator - weighted
               average number of shares
               outstanding                  10,796,656      2,572,923      1,058,131
                                           ===========     ==========     ==========


              Loss per share               $     (0.00)    $     0.01     $    (0.55)
                                           ===========     ==========     ==========

</TABLE>

              f.  Provision for Income Taxes

              No provision for income taxes has been recorded due to net
              operating loss carryforwards totaling approximately $631,700 that
              will be offset against future taxable income. These NOL
              carryforwards begin to expire in the year 20004. No tax benefit
              has been reported in the financial statements because the Company
              believes there is a 50% or greater chance the carryforward will
              expire unused.

              Accordingly, per FASB 109, the potential tax benefits of the loss
              carryforwards are offset by the valuation of the same amount.

              Deferred tax assets and the valuation account is as follows at
              September 30, 2002 and 2001.

                                                 September 30,
                                           __________________________
                                              2002            2001
                                           ___________     __________
              Deferred tax asset:
                 NOL carryforward          $   214,700     $  205,000
              Valuation allowance             (214,700)      (205,000)
                                           ___________     __________
              Total                        $         -     $        -
                                           ===========     ==========


                                       22


<PAGE>


                           ADVANCE TECHNOLOGIES, INC.
                          (A Development Stage Company)
                 Notes to the Consolidated Financial Statements
                           September 30, 2002 and 2001


NOTE 1 -      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

              g.  Use of Estimates

              The preparation of financial statements in conformity with
              generally accepted accounting principles requires management to
              make estimates and assumptions that affect reported amounts of
              assets and liabilities, disclosure of contingent assets and
              liabilities at the date of the financial statements and revenues
              and expenses during the reporting period. In these financial
              statements assets and liabilities involve extensive reliance on
              management's estimates. Actual results could differ from those
              estimates.

              h.  Revenue Recognition

              The Company has received revenue pursuant to an agent agreement
              which allows the Company to receive fixed monthly service fees,
              and to bill for additional services provided. The Company records
              revenues when the services are performed. The Company has
              recognized $-0- and $31,669 in revenues for services performed in
              connection with this agreement for the years ended September 30,
              2002 and 2001.

              The Company is also entitled to reimbursement for various expenses
              associated with the development fo its night vision technology
              pursuant to the joint venture agreement with the Taiwan company.
              These reimbursements are recorded as miscellaneous income when
              received. The Company recognized miscellaneous income of $ -0- and
              $98,000 during the fiscal years 2002 and 2001 from reimbursement
              received from the joint venture partner.

NOTE 2 -      GOING CONCERN

              The accompanying financial statements have been prepared assuming
              that the Company will continue as a going concern. The Company is
              dependent upon raising capital to continue operations. The
              financial statements do not include any adjustments that might
              result from the outcome of this uncertainty. It is management's
              plan to raise capital in order to define their business
              operations, thus creating necessary operating revenue.

NOTE 3 -      DEVELOPMENT STAGE COMPANY

              The Company is a development stage company as defined in Financial
              Accounting Standards Board Statement No. 7. It is concentrating
              substantially all of its efforts in raising capital and developing
              its business operations in order to generate significant revenues.


                                       23


<PAGE>


                           ADVANCE TECHNOLOGIES, INC.
                          (A Development Stage Company)
                 Notes to the Consolidated Financial Statements
                           September 30, 2002 and 2001


NOTE 4 -      PROPERTY & EQUIPMENT

              Property & Equipment consists of the following at September 30,
              2002 and 2001:

                                                     September 30,
                                                 _____________________
                                                   2002         2001
                                                 ________     ________

              Equipment                          $ 39,386     $ 36,000
              Less: Accumulated Depreciation      (17,019)      (9,165)
                                                 ________     ________

              Net Property & Equipment           $ 22,367     $ 26,835
                                                 ========     ========

              Expenditures for property and equipment and for renewals and
              betterments, which extend the originally estimated economic life
              of assets or convert the assets to a new use, are capitalized at
              cost. Expenditures for maintenance, repairs and other renewals of
              items are charged to expense. When items are disposed of the cost
              and accumulated depreciation are eliminated from the accounts, and
              a gain or loss is included in the results of operations.

              The provision for depreciation is calculated using the
              straight-line method over the estimated useful lives of the
              assets. The useful lives of equipment are 5 years. Depreciation
              expense for the years ended September 30, 2002 and 2001 are $7,854
              and $7,000.

NOTE 5 -      ADVANCED ROYALTIES

              SeaCrest Industries Corporation, formerly Infrared Systems
              International, Inc., entered into a licensing agreement for
              marketing and distributing of infrared aircraft landing systems.
              Seacrest received $25,000 in advances. These royalty revenues have
              been deferred until future revenue streams occur, if any actually
              do occur, and these royalty revenues have been recorded as a
              liability.

NOTE 6 -      RELATED PARTY TRANSACTIONS

              As of September 30, 2002,the Company owes an officer the Company
              $36,300 for loans made. This note payable-officer is considered a
              current liability with no provision for interest.

NOTE 7 -      LINE OF CREDIT

              The Company has negotiated a Line of Credit with a corporation,
              wherein the Company has a credit limit of $125,000. This line
              accrues 12.0% interest annually and is due January 1, 2004. As of
              September 30, 2002, the Company has borrowed a total of $85,500.
              For the year ended September 30, 2002, the Company recorded
              $10,260 in interest expense. As of September 30, 2002, the Company
              has accrued interest totaling $23,267.


                                       24


<PAGE>


                           ADVANCE TECHNOLOGIES, INC.
                          (A Development Stage Company)
                 Notes to the Consolidated Financial Statements
                           September 30, 2002 and 2001


NOTE 8 -      COMMON STOCK

              During December 2001, the Company issued 3,250,000 shares of
              previously authorized but unissued common stock for consulting
              services for $3,250 (or $.001 per share).

              During the year ended September 30, 2002, 11,396,045 shares of
              preferred stock were converted to common stock.


                                       25


<PAGE>


                                   EXHIBIT B


                           Advance Technologies Inc.
                       Management Discussion and Analysis
                            Year End, September 2002


MANAGEMENT  DISCUSSIONS  AND  ANALYSIS OF  FINANCIAL  CONDITIONS  AND RESULTS OF
OPERATIONS

         Advance Technologies Inc. ("AVTX") is a developer of infrared (IR)
Enhanced Vision technology for commercial solutions and applications. The
Company engages in advance development activities and through strategic business
arrangements AVTX utilizes OEM suppliers and major system corporations to form
strategic business associations. This unique business model combines the
strength of our organization with the prior capital investment of the OEMs and
the in place established marketing and sales organization of the System
Integrator. Our ability to bridge advance IR technology into
application-specific markets shortens the development-to-market cycle and
associated high investment risks of this enterprise.

Business Overview

         The tragic events of September 11, 2001 has produced economic and
bureaucratic shock waves that has had a direct effected on AVTX and our
strategic plans. The effect has been most notable in the decline of the price of
our common stock in recent months reflecting the general slow down that has
effected our markets.

         The aftermath of 9-11 has effected Corporations such as Advance
Technologies Inc. through our significant involvement in Infrared Technology,
which is a controlled and regulated technology by the US Government. Since AVTX
is exclusively involved in commercial applications, and all of the technologies
we employ are considered "dual use technology" (military and commercial), the
governments restrictions have had little effect on the scope and direction of
our strategic plans. Thus, our plans for future products has not materially
changed. But, the government has imposed new requirements on Corporation like
AVTX to prove our system applications meet the commodity juristion regulations
(commercial non-military end-use) to the Department of State through compliance
to the International Traffic in Arms Regulation (ITAR), 22 CFR 120-130. This
burden of compliance has both lengthen and complicated the approval process.
This has contributed to a slow down thus effecting our rate of progress.

         ATI entered into an agreement with an off-shore OEM strategic partner
Telesis Electronics September of 2000, a Taiwanese privately held corporation.
Under the terms of this agreement ATI is developing IR systems in conjunction
with Telesis for sale in the USA as well as other foreign markets. Export
licenses are required to provide critical components for this work. Approval for
these licenses are taking more than a year to obtain. Furthermore additional
end-user restrictions are being imposed complicating and lengthening the
process. This same activity in the past took less than 6 months prior to 9-11,
with far less paper work and disclosure documents.

         The second event that has had an impact on AVTX stock has been the
authorization of a 30% of conversion of Advance Technology Preferred stock into
ATI common stock by the shareholder of record provided the holding period has
been met.


                                       26


<PAGE>


The resulting action has been to increase the number of shares of common stock
in the market (float), which under normal circumstances produces some degree of
pressure on the stock. This process of moving from a development Corporation
with restricted 144 stock to a fully free trading corporation is a common but
necessary growing pain of the maturation process.

         ATI's management is recommending to the Board of Directors that the 50%
of the remain balance of the Preferred Stock be released for conversion to
Common Stock on June 1, 2003. It is our opinion that it is a good time to
authorize the conversion of additional preferred shares to common stock. This
opinion is based upon several factors. First, the present depressed value of the
stock is viewed as under-valued in our opinion, when our potential is taken into
consideration. Second, there is a need to continue an orderly process for the
conversion of the preferred to common stock. And lastly, we are optimistic that
profitability will be achieved in 2003 and beyond. The positive prospects in
2003 will help to offset the effect of additional dilution, which we believe
AVTX can form a base for future growth.


Enhanced Vision Activities

         Enhance Vision System, our first project; has entered production.
         Advance Technologies benefits through a license agreement with Kollsman
         Inc.

         The License Agreement between Advance Technologies and Kollsman
         Instruments covers the transfer of proprietary intellectual property
         owned by Advance Technology. The data package consisted of technical,
         industrial, marketing, and FAA regulatory knowledge to facilitate the
         development of the IR EVS and subsequent FAA certification. Included as
         part of, but specifically partition within the Agreement is an option
         for Kollsman to use a Hughes Aircraft patent that was licensed to
         Advance Technologies in 1996. Kollsman elected to proceed forward with
         an IR EVS system based upon the content of the License Agreement, but
         without incorporating the Hughes Aircraft patent. There has been
         concerns expressed that the lack of inclusion of the Hughes Patent
         could in some way effect ATI our future revenue.

         ATI provided the Hughes patent to Kollsman on a sub-license agreement
         approved by Hughes Aircraft. In the sub-license agreement ATI provided
         the right to use the Hughes Aircraft license on a zero dollar ($0) mark
         up, passing the Hughes royalties through 1:1 with no increase. As a
         result, royalties due to ATI under the License Agreement are unaffected
         by either the use or non-use of the Hughes Patent.

         At the time of the decision by Kollsman to proceed forward without
         using the Hughes Patent in the development, ATI was fully consulted and
         agreed with the interim approach selected by Kollsman. The need to move
         forward quickly was deemed to be more important than a desire to
         produce a more robust performing system at that time. This decision to
         move forward as quickly as possible was a good business decision that
         has allowed us to reach the market sooner than our competition.


                                       27


<PAGE>


         ATI believes that the long term EVS will need to incorporate advance
         optical techniques to achieve the performance level dictated by the
         more difficult and demanding passenger carrying commercial aviation
         markets (FAA Part -121 & Part -135 operations). ATI has maintained our
         advance concept developments using both the Hughes Aircraft patent and
         other proprietary techniques. Under the License Agreement with
         Kollsman, ATI is obligated to offer these improvements to Kollsman as a
         first right of refusal. A provision in our agreement that ATI has fully
         comply with. We believe assisting in the development of a competing
         system to Kollsman would not be in the best interest of AVTX or our
         shareholders under current and foreseeable conditions.

         ATI and Kollsman had discussed working on an Advanced EVS based upon
         ATI's proprietary technology. Kollsman has taken an action to look into
         providing ATI with certain hardware items to support ATI's internal
         activities on the Advance System development. As of September no
         progress has been made on this program.

         Kollsman has issued the quarterly report required under the License
         Agreement to ATI stating eleven (11) EVS have been delivered to their
         customer. The definition of a delivered EVS system, is when Kollsman
         receives payment for the delivered system the system is considered at
         that time to have been sold. The time between Kollsman initial delivery
         to the aircraft supplier and the final sell off was initially taking
         10-12 weeks. The time in the pipeline has been decreased to 4-6 weeks,
         as the integration team becomes more experienced and the rate of
         delivery increased. The following table was constructed from the data
         provided by Kollsman.

                 UNITS DELIVERED & SOLD VERSUS 2002 (QUARTERLY)

                           INITIAL DELIVERY       UNITS SOLD         ACCUMATIVE

         1st Qt. 2002              2                  0                   0
         2nd Qt  2002              7                  5                   5
         3rd Qt. 2002             14                  6                  11
         4th Qr. 2002              -                  -

         The delivery rates are increasing as Kollsman ramps up production.
         Kollsman has released no information on their future production plans.
         Their end user continues to expand the application to additional
         aircraft through certification activity with the FAA. This will serve
         to increase the EVS market. No information has been released by either
         party at this time on the details or the likely effect of this activity
         on the overall EVS market.


                                       28


<PAGE>


         The License Agreement (July 1997) between Kollsman and ATI has a
         royalty schedule that was specifically tailored to achieve two key
         elements (1) for rapid recovery of the development investment and (2)
         maximize long term profits to ATI predicated upon a large EVS market.
         Under the provisions that implement this strategy the initial
         production units are royalty free. The royalty per unit increases in
         four discrete steps to a maximum value per unit.

         Kollsman Instruments released a PRESS RELEASE in September 2002,
         titled, KOLLMAN'S ENHANCED VISION SYSTEM PRODUCTLINE EXPAND. The Press
         Release announced the introduction of a "new reduced performance EVS
         version" called Night Window TM, a low cost derivative of the high
         performance Kollsman's "All-weather Window" system. The expansion of
         Kollsman into the higher volume, lower cost EVS market has been
         anticipated by Advance Technologies. This market is larger and is more
         accessible from an FAA certification standpoint.

         Kollsman has not released any additional information with regard to
         application, host platforms, or future sales. As this information
         become available, or creditable projections are made by independent
         sources, Advance Technologies will make appropriate announcements.

         ATI and Telesis Technologies signed an EVS agreement, which designates
         Telesis Technologies as our EVS representative for Far East
         opportunities. This agreement gives Telesis the right to present
         limited information on EVS and the benefit that EVS can provide to
         civil aviation. Discussions by Telesis in the Far East has provided no
         specific opportunity to date.

       Honeywell Technology License

         Honeywell provided ATI initial terms for a "field application" and/or
         "market use" of their Micro-bolometer technology. The terms and
         conditions have been evaluation by ATI and our partner Telesis. It
         appears the terms are reasonable based upon assumptions on the price
         and availability of a low cost import from Taiwan. This product will
         not be available until first quarter of 2003, therefore the need to
         finalize an agreement with Honeywell has been delayed until first or
         second quarter of 2003.

      NITEAGLE(TM)

         Telesis Technologies had provided two preproduction units for market
         evaluation and product finalization. Tests have been completed and
         detailed technical specifications of the production product completed.
         This process included the review and incorporation of technical
         advancements that have occurred in the last 18 months. The baseline
         configuration is up to date with the latest advancements to ensure that
         our economic base is solid and will not be obsoleted with near term
         improvements. The rapid pace of these improvements has been an
         impediment to finalizing the system and coming to market.


                                       29


<PAGE>


         Meetings in September were conducted with the ATI-Telesis team meeting
         with our potential launch customer (OEM RV supplier) and a key IR
         supplier in the USA. With the present ITAR restriction levied by the
         Department of State, ATI & Telesis concluded the initial production of
         the restricted IR technology should be performed in the USA, while the
         balance of the unrestricted hardware would be imported from the Far
         East. The meetings exceeded our expectations, and the product near term
         viability received a strong boost. Our business model was validated and
         our cost model is meeting our expectations. As always we retain back up
         and contingency plans to cover the unknown to the extent the unknown
         can be anticipated.

         The preliminary plan to launch the Niteagle project has been prepared
         and submitted to Telesis Electronics Board of Directors for approval.
         ATI has preciously approved the initial plan. We expect approval prior
         to the end of this year and to initiate the most next and most critical
         phase, a broad agreement that includes ATI, Telesis, The exclusive
         launch customer, and our USA IR supplier. .

      Spectrum 9000, Medical Equipment

         ATI continues to provide export license support under a time & service
         reimbursement agreement with Telesis Technologies. Telesis has not
         announced a date for introduction of the Spectrum 9000 into the US
         market. Additional discussions and meeting with medical equipment
         experts in the USA. ATI believes that Telesis will become activity in
         the US market in 2003, and what role ATI will play in that activity has
         not been determined.

     Development Projects

         Advance Technologies Inc. continues development activities on new
         Infrared systems for commercial markets. These projects cannot be
         forecast with any degree of certainty and all strategic partnerships or
         business arrangements remain confidential until such time as a formal
         announcement is appropriate without compromising the development plan
         and/or the application market.

CAPITAL RESOURCES

         No commitment for capital resources has been made during this reporting
         period.

FINANCIAL ANALYSIS

         The results on the operation represent projects of likely future events
         that cannot be guaranteed. Therefore, the financial analysis does not
         include projects, and no quantitative assessment has been provided
         based upon the future discussion of potential events in section 3.

         No material changes have been provided; therefore impact of
         unforeseeable events cannot be assessed.

         Present financial plans are adequate to meet our cash flow needs with
         our current project schedule.


                                       30