UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 8-K Current Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report: November 7, 2005 WORLD ENERGY SOLUTIONS, INC. (Exact Name of Small Business Issuer in Its Charter) Florida 0-25097 65-078-3722 (State or other jurisdiction (Commission (IRS Employer of Incorporation) File Number) Identification No.) 3900A 31st Street North, St. Petersburg, Florida 33714 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 727-525-5552 Advanced 3-D Ultrasound Services, Inc. (Former Name or Former Address, if changed since last report.) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) SECTION 2 - FINANCIAL INFORMATION Item 2.01: Completion of Acquisition or Disposition of Assets On November 7, 2005, Registrant merged with Professional Technical Solutions, Inc., a Florida corporation ("PTS"). Registrant was the surviving entity. Under the terms of the Agreement and Plan of Merger, Shareholders of PTS received one common share of Registrant for each outstanding common share of PTS. 11,617,925 common shares are issuable to PTS shareholders, making the number of Registrant's common shares outstanding following the merger 23,279,488 .. Professional Technical Systems, Inc. manufactures and sells transient voltage surge suppressors and related products and commercial and residential energy-saving equipment and applications to distributors and customers throughout the United States. PTS is located in St. Petersburg, Florida. The assets acquired through the merger include cash, accounts receivable, property and equipment, and inventory. Benjamin Croxton was President and a board member of both the Registrant and PTS. Mike Prentice was a member of both boards. The principle followed in determining the amount of consideration paid was the relative value of PTS and Registrant, taking into account the advantages to both companies if the merger were consummated. SECTION 9 -- FINANCIAL STATEMENTS AND EXHIBITS REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders Professional Technical Systems, Inc. St. Petersburg, Florida We have audited the balance sheets of Professional Technical Systems, Inc. as of December 31, 2004 and 2003, and the related statements of earnings, changes in stockholders' equity, and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the 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 financial statements referred to above present fairly, in all material respects, the financial position of Professional Technical Systems, Inc. as of December 31, 2004 and 2003, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2004 in conformity with accounting principles generally accepted in the United States of America. Ferlita, Walsh & Gonzalez, PA October 31, 2005 PROFESSIONAL TECHNICAL SYSTEMS, INC. BALANCE SHEETS December 31, 2004 2003 ------------ ------------ ASSETS CURRENT ASSETS Cash $ 101,961 $ 21,340 Accounts receivable 51,118 61,405 Inventory 144,925 190,351 Prepaid expenses 9,137 21,714 Other current assets 1,160 870 Land held for resale 486,947 0 ------------ ------------ Total Current Assets 795,248 295,680 PROPERTY AND EQUIPMENT, NET 80,100 35,922 DEPOSITS 3,510 1,400 ------------ ------------ $ 878,858 $ 333,002 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Current portion of long-term debt $ 28,651 $ 6,169 Accounts payable 36,292 15,740 Accrued expenses 12,396 10,825 Advance payments from dealers and customers 20,469 5,778 Note payable 210,000 0 Loans payable to related party 214,041 75,387 ------------ ------------ Total Current Liabilities 521,849 113,899 LONG-TERM DEBT, less current portion 75,321 135,995 STOCKHOLDERS' EQUITY Common stock, $.001 par value, 100,000,000 shares authorized, 18,884,675 issued and outstanding in 2004, 12,000,000 shares issued and outstanding in 2003 18,885 12,000 Additional paid-in capital 755,690 0 Retained earnings (deficit) (492,887) 71,108 ------------ ------------ 281,688 83,108 ------------ ------------ $ 878,858 $ 333,002 ============ ============ See accompanying notes and accountants' report. - 2 - PROFESSIONAL TECHNICAL SYSTEMS, INC. STATEMENTS OF EARNINGS Years Ended December 31, 2004 2003 ------------ ------------ Net Sales $ 497,109 $ 671,441 Cost of Goods Sold 275,540 253,310 ------------ ------------ Gross Profit 221,569 418,131 General and Administrative Expenses 415,983 416,588 ------------ ------------ Earnings (Loss) From Operations (194,414) 1,543 Other Income (Expense) Bad debt expense (11,384) (3,000) Impairment loss (22,555) 0 Interest expense (13,526) (6,545) Miscellaneous income (expense) (1,506) 47,036 Research and development (309,967) 0 Warranty expense (5,227) (455) ------------ ------------ Total Other Income (Expense) (364,165) 37,036 ------------ ------------ Earnings (Loss) Before Provision for Income Taxes (558,579) 38,579 Provision for Income Taxes 0 0 ------------ ------------ NET EARNINGS (LOSS) $ (558,579) $ 38,579 ============ ============ WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 10,781,587 12,000,000 ============ ============ EARNINGS (LOSS) PER SHARE Earnings (Loss) from Operations $ (0.02) $ 0.00 ============ ============ Net Earnings (Loss) $ (0.05) $ 0.00 PROFESSIONAL TECHNICAL SYSTEMS, INC. STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY Years Ended December 31, 2004 and 2003 Common Stock Additional Retained Total -------------------------- Paid-in Earnings Stockholders' Shares Amount Capital (Deficit) Equity ------------ ------------ ------------ ------------ ------------ Balance at December 31, 2002 12,000,000 $ 4,000 $ 0 $ 40,529 $ 44,529 Net earnings 0 0 0 38,579 38,579 3,000-for-1 forward split 0 8,000 0 (8,000) 0 ------------ ------------ ------------ ------------ ------------ Balance at December 31, 2003 12,000,000 12,000 0 71,108 83,108 Net loss 0 0 0 (558,579) (558,579) Employee stock bonus award 288,000 0 1,266 0 1,266 Issuance of stock for technology 5,130,000 2 22,553 0 22,555 3,000-for-1 forward split 0 5,416 0 (5,416) 0 Issuance of stock for services 30,000 30 14,970 0 15,000 Issuance of stock for cash 1,436,675 1,437 716,901 0 718,338 ------------ ------------ ------------ ------------ ------------ Balance at December 31, 2004 18,884,675 $ 18,885 $ 755,690 $ (492,887) $ 281,688 ============ ============ ============ ============ ============
PROFESSIONAL TECHNICAL SYSTEMS, INC. STATEMENTS OF CASH FLOWS Years Ended December 31, 2004 2003 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES Net earnings (loss) $ (558,579) $ 38,579 Adjustments to reconcile net earnings (loss) to net cash used by operating activities: Depreciation expense 8,010 5,913 Bad debt expense 11,384 3,000 Impairment loss 22,555 0 Employee stock bonus award 1,266 0 Stock issued for services 15,000 0 (Increase) decrease in: Accounts receivable 5,822 (35,985) Inventory 45,426 (20,655) Prepaid expenses 12,577 (20,823) Other current assets (290) 3,185 Deposits (2,110) 0 Increase (decrease) in: Accounts payable 20,552 15,740 Accrued expenses 1,571 (760) Advance payments from dealers and customers 14,691 3,784 ------------ ------------ Net Cash Used by Operating Activities (402,125) (8,022) ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of property and equipment (52,188) (20,768) Acquisition of land held for resale (276,947) 0 ------------ ------------ Net Cash Used by Investing Activities (329,135) (20,768) ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES Proceeds for issuance of common stock 718,338 0 Proceeds from loans payable to related party 272,000 65,000 Repayment of loans payable to related party (140,265) (85,070) Proceeds from long-term debt 69,142 95,170 Repayment of long-term debt (107,334) (58,837) ------------ ------------ Net Cash Provided by Financing Activities 811,881 16,263 ------------ ------------ NET INCREASE (DECREASE) IN CASH 80,621 (12,527) Cash at Beginning of Year 21,340 33,867 ------------ ------------ CASH AT END OF YEAR $ 101,961 $ 21,340 ============ ============ SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid during the year for: Interest $ 15,551 $ 6,545 Income taxes $ 727 $ 252 Non-cash investing and financing activities: Cost of property and equipment acquired through capital lease $ 0 $ 16,073 Cost of land held for resale acquired with long-term debt $ 210,000 $ 0 Common stock issued for technology $ 22,555 $ 0 Employee stock bonus award $ 1,266 $ 0 Common stock issued for services $ 15,000 $ 0 See accompanying notes and accountants' report. - 5 - PROFESSIONAL TECHNICAL SYSTEMS, INC. SCHEDULES OF GENERAL AND ADMINISTRATIVE EXPENSES Years Ended December 31, 2004 2003 ------------ ------------ GENERAL AND ADMINISTRATIVE EXPENSES Advertising $ 14,041 $ 4,613 Auto expenses 6,005 5,503 Depreciation 8,010 5,814 Dues and subscriptions 5,123 2,475 Freight 2,011 2,223 Insurance 39,714 40,832 Legal, accounting and other professional fees 49,670 5,465 Licenses, fees and other taxes 5,634 3,074 Maintenance and repairs 3,606 4,213 Meals and entertainment 11,287 2,635 Occupancy 25,486 23,821 Office expense 17,689 16,305 Payroll taxes 16,193 20,446 Salaries and wages 192,410 261,200 Travel 3,180 1,908 Utilities 15,924 16,061 ------------ ------------ $ 415,983 $ 416,588 PROFESSIONAL TECHNICAL SYSTEMS, INC. FINANCIAL STATEMENTS Years Ended December 31, 2004 and 2003 TABLE OF CONTENTS Page No. REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.......................1 FINANCIAL STATEMENTS Balance Sheets...............................................................2 Statements of Earnings.......................................................3 Statements of Changes in Stockholders' Equity................................4 Statements of Cash Flows.....................................................5 Notes to Financial Statements................................................6 .. NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Description of Business Professional Technical Systems, Inc. (the Company) manufactures and sells transient voltage surge suppressors and related products and commercial and residential energy-saving equipment and applications to distributors and customers throughout the United States. Sales revenue reflected in the accompanying financial statements is entirely from the sale of transient voltage surge suppressors. The Company is located in St. Petersburg, Florida. 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 revenue and expenses during the reporting period. Accordingly, actual results could differ from those estimates. Accounts Receivable The Company carries its accounts receivable at cost less an allowance for doubtful accounts which is based on management's assessment of the collectibility of accounts receivable. Based on management's assessment, an allowance was not required at December 31, 2004 and 2003. Inventory Inventory is stated at the lower of average cost or market and includes costs of materials, labor and manufacturing overhead. Property and Equipment Property and equipment are carried at cost. Depreciation is computed on the straight-line method based on the estimated useful lives of the related assets. Capital leases are included as a component of property and equipment and amortization of assets under capital leases is included in depreciation expense. Cash Flow Statement For the purpose of reporting cash flows, the Company has defined cash equivalents as those highly liquid investments purchased with an original maturity date of three months or less. Warranty Costs The Company provides product warranties for specific product lines and accrues for estimated future warranty costs in the period in which revenue is recognized. Freight Costs The Company includes freight-in costs in cost of goods sold. Total freight-in included in cost of goods sold for the years ended December 31, 2004 and 2003 was $12,043 and $13,658, respectively. Advertising Expense The Company expenses advertising as incurred. NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Income Taxes Deferred income tax assets and liabilities are computed annually for differences between the financial statement basis and tax basis of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is the tax payable or refundable for the period plus or minus the change during the period in deferred tax assets and liabilities. Research and Development Costs Expenditures for research and development activities are charged to expense as incurred. Such expenditures amounted to $309,967 and $-0-, in 2004 and 2003, respectively. Research and development expenditures for equipment that has alternative future uses are capitalized. Fair Value of Financial Instruments The carrying amounts reported in the balance sheets for cash, receivables, and payables are a reasonable estimate of fair value. NOTE B--INVENTORY Inventory consists of the following at December 31: 2004 2003 ------------------------------------- Raw materials $ 98,995 $ 59,992 Work-in-process 14,346 - Finished goods 37,206 108,985 Non-manufactured goods 7,435 25,674 ------------------------------------- 157,982 194,651 Less allowance for obsolescence 13,057 4,300 ------------------------------------- $ 144,925 $ 190,351 ===================================== NOTE C--PROPERTY AND EQUIPMENT Property and equipment consist of the following at December 31: 2004 2003 ------------------------------------- Office equipment $ 27,439 $ 24,285 Manufacturing equipment 42,633 42,633 Furniture and fixtures 6,398 5,692 Vehicles 56,453 49,703 Research and development equipment 43,772 6,000 Leasehold improvements 18,158 14,352 ------------------------------------- 194,853 142,665 Less accumulated depreciation 114,753 106,743 ------------------------------------- $ 80,100 $ 35,922 ===================================== Office equipment at December 31, 2004 and 2003, respectively, includes equipment acquired under a capital lease with a capitalized value of $16,073. Related amortization included in accumulated depreciation was $3,885 and $670 at December 31, 2004 and 2003, respectively. NOTE D--BORROWINGS The Company has a note payable to a bank which is secured by land held for resale and the personal guarantee of the Company's President. The loan is payable in one principal payment plus all accrued and unpaid interest on June 30, 2005. The note calls for the payment of monthly interest beginning July 30, 2004. The loans bears interest at the prime rate published by the Wall Street Journal plus 2% (7.25% at December 31, 2004) an had a balance of $210,000 at December 31, 2004. On March 31, 2005, the Company sold the land held for resale for $560,000, with an after-tax gain of $73,053. A portion of the proceeds were used to repay the mortgage on the land. The land was acquired with the expectation of developing a new facility, however, with the change of those plans the land was reclassified to held for sale. Loans payable to related party represents the balance owed to the President of the Company for short-term informal loans advanced to the Company. The loans are unsecured and until January 1, 2004, were non-interest bearing. On January 1, 2004, the Board of Directors of the Company approved a resolution to accrue interest on these loans payable at the variable rate assessed the Company on its bank line of credit which was 8% at December 31, 2004. At December 31, 2004 and 2003, the loans had a balance of $214,041 and $75,387, respectively, including accrued interest of $6,919 at December 31, 2004. Long-term debt consists of the following at December 31: 2004 2003 ------------------------------------- Stockholder credit cards, monthly payments due based on a percentage of the outstanding balance, including variable interest at the rate of 3.9% at at December 31, 2004; unsecured. $ 15,049 $ 34,217 Stockholder revolving line of credit, monthly payments due based on a percentage of the outstanding balance, including variable interest at the rate of 7.49% at December 31, 2004; unsecured. 39,237 44,164 Revolving bank line of credit, monthly payments due based on a percentage of the outstanding balance,including variable interest at the rate of 8% at December 31, 2004; guaranteed by the Company's President. 37,432 48,788 Capital lease payable, monthly payments of $325,including interest at 8.3%, due September 2008;secured by equipment. 12,254 14,995 ------------------------------------- 103,972 142,164 Less current portion 28,651 6,169 ------------------------------------- $ 75,321 $ 135,995 ===================================== The Stockholder credit cards and revolving line of credit reflected in the above table are payable to the President of the Company. NOTE E--LEASE COMMITMENTS The Company maintains two facilities: its main office which houses its corporate and manufacturing facilities and a second unit used for research and development within the same industrial complex and has two separate leases. The main office lease has a term expiring on October 15, 2006 and contains a one-year renewal option. The research and development facility does not contain a renewal option and the payment of its rent is guaranteed by the Company's President. That lease has a term ending on October 14, 2006. NOTE E--LEASE COMMITMENTS (CONTINUED) At December 31, 2004, the minimum rental payments due under these operating leases are as follows: 2005 $ 49,200 2006 45,000 ------------------------------------- Total $ 94,200 ===================================== - ------------------------------------------------------------------------------- Total rent expense on these leases was $25,486 and $25,680 for the years ended December 31, 2004 and 2003, respectively. NOTE F--RELATED PARTY TRANSACTIONS Through September of 2004, the Company leased its main facility from the President of the Company and paid rent of $21,400 and $25,680 for the years ended December 31, 2004 and 2003, respectively, to that individual. In September of 2004, the facility was sold to an unrelated party. During 2004 and 2003, the Company wrote-off $11,384 and $3,000, respectively, of accounts receivable for expenses paid on behalf of a company owned by the Company's President that was created for the expansion and furtherance of the Company's research and development activities. In 2004, the Company reflected sales of $5,000, which were paid for, to this same entity. Interest expense recorded on debts owed the President of the Company totaled $10,725 and $6,323 for the years ended December 31, 2004 and 2003, respectively. See Note D for details of related party debt balances. As part of the employment agreement with the Company's Chief Financial Officer (CFO), on March 5, 2004, the Company issued 5,130,000 (1,710 pre-split) shares of its common stock in exchange for energy-saving technology valued at $22,555 developed by the CFO. In accordance with the guidance of SFAS 142, Goodwill and Other Intangible Assets, the acquired asset was written off. NOTE G--CONCENTRATIONS OF CREDIT RISK The Company sells its products to customers on an open credit basis. The Company's trade accounts receivable are due from such customers and are generally uncollateralized. Sales to one customer accounted for approximately 14% of the Company's total sales for the year ended December 31, 2004, and sales to two customers accounted for approximately 27% of the Company's total sales for the year ended December 31, 2003. At December 31, 2004, the Company's deposits in a financial institution exceeded amounts covered by insurance provided by the U.S. Federal Deposit Insurance Corporation by $17,065. NOTE H--INCOME TAXES The provision for federal and state income taxes for the years ended December 31, 2004 and 2003 is as follows: 2004 2003 ------------------------------------- Current $ - $ 727 Deferred - (727) ------------------------------------- Total provision for income taxes $ - $ - ===================================== - ------------------------------------------------------------------------------- Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. NOTE H--INCOME TAXES (CONTINUED) Significant components of the Company's deferred tax assets and liabilities as of December 31 are as follows: 2004 2003 ------------------------------------- Deferred tax assets: Net operating loss carryforwards $ 102,798 $ - Other 4,959 1,907 ------------------------------------- Total deferred tax assets 107,757 1,907 ------------------------------------- Deferred tax liabilities: Book basis of property and equipment in excess of tax basis 221 1,387 ------------------------------------- Total deferred tax liabilities 221 1,387 ------------------------------------- Net deferred tax asset before valuation allowance 107,536 520 Valuation allowance (107,536) (520) ------------------------------------- Net deferred tax asset $ - $ - ===================================== - -------------------------------------------------------------------------------- The Company has recorded a 100% valuation allowance against the net deferred tax asset at December 31, 2004 and 2003 due to the uncertainty of its ultimate realization. The valuation allowance increased $107,016 from December 31, 2003 to December 31, 2004. At December 31, 2004, the Company has available unused federal net operating losses of approximately $505,965 that may be applied against future taxable income and if not utilized, will expire by the end of 2024. A reconciliation of the expected tax provision for income taxes with amounts determined by applying the statutory U.S. federal and state of Florida income tax rate is as follows: 2004 2003 ------------------------------------- Expected provision $ - $ 5,787 Nondeductible expenses - 1,318 Decrease in the valuation allowance - (6,378) Effect of net operating loss carryforward - (727) ------------------------------------- Provision for income taxes $ - $ - ===================================== - ------------------------------------------------------------------------------- NOTE I--OTHER INCOME Included within the Other Income (Expense) section of the Statement of Earnings for the year ended December 31, 2003 is $45,000 of miscellaneous income for proceeds received on the settlement of customer trade receivables written off in a prior period. NOTE J--COMMON STOCK On March 5, 2004, the Company's stockholders approved an amendment to the Articles of Incorporation reducing the par value of common stock from $1 to $.10 per share and increasing the number of authorized shares of common stock from 7,000 to 100,000,000. On that same date, the Company issued 288,000 (96 pre-split) common shares to its employees as a stock bonus award and 5,130,000 (1,710 pre-split) common shares in exchange for technology. On April 30, 2004, the Company's board of directors declared a 3,000-for-1 forward stock split. On June 1, 2005, the Company's stockholders approved an amendment to the Articles of Incorporation reducing the par value of the common stock from $.10 to $.001. Stockholders' equity reflects the stock split by reclassifying from "Retained Earnings (Deficit)" to Common Stock an amount equal to the par value of the additional shares arising from the split. All references in the financial statements to the number of shares authorized, outstanding, and per share amounts have been restated to reflect these changes for all periods presented. NOTE K--OTHER SUBSEQUENT EVENTS On May 25, 2005, the Company entered into a letter of intent to be acquired by Advanced 3-D Ultrasound Services, Inc. (ADVU), a company based in Oldsmar, Florida. Under the letter of intent, each stockholder of the Company would receive one share of ADVU common stock for every share of Company common stock held. The letter of intent is nonbinding and subject to the execution of a definitive agreement and customary business and financial due diligence. On August 16, 2005, World Energy Solutions, Inc. (WESI), a St. Petersburg, Florida company that is owned by the President and CFO of the Company, merged with ADVU. Following the merger, ADVU remained the surviving entity. During the period January 1, 2005 through August 10, 2005, the Company sold 1,716,250 shares of its common stock at fifty cents per share for a total of $858,125. In July of 2005, the Company repurchased 6,000,000 shares of its common stock from the Company's President for $6,000 and 2,563,500 shares from the Company's CFO for $2,564. Item 9.01: Financial Statements and Exhibits Exhibit 10 - Material Contracts 10.1 - Agreement and Plan of Merger Between Registrant and Professional Technical Systems, Inc..............* * filed herewith SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. WORLD ENERGY SOLUTIONS, INC. f/k/a Advanced 3-D Ultrasound Services, Inc. (Registrant) By: /s/ Benjamin C. Croxton --------------------------- Benjamin C. Croxton Chief Executive Officer Chief Financial Officer Dated: November 14, 2005