FORM 10-QSB
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
ATI NETWORKS, INC.
COLORADO
84-1089801
460 Cedar Street
Fond du Lac, Wisconsin
54935
(920) 922-7030
(920) 922-7011 (fax)
Check whether the issuer (1) 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 report(s), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practical date:
Common Stock, $0 Par Value - 4,307,030 shares as of March 31, 2000.
PART I - FINANCIAL INFORMATION
ATI NETWORKS, INC.
BALANCE SHEET
AS OF MARCH 31, 2000
ASSETS
Current Assets
Cash and equivalents $ 16,579
Accounts Receivable 15,225
Inventories at Whsl Cost 1,342
Total Current Assets 33,146
Property and Equipment
Equipment 74,506
Furniture & Fixtures 8,432
82,938
Accum. Depreciation (59,740)
Total Property and Equipment 23,198
Other Assets
Sterling Capital Fund 10,000,000
Security Deposit 647
Total Other Assets 10,000,647
Total Assets $ 10,056,991
LIABILITIES AND CAPITAL
Current Liabilities
Accounts Payable and expenses $ 45,865
Deferred Payroll 25,833
Capital lease obligations 2,520
Line of Credit - Firstar Bank 274,470
Total Current Liabilities 348,688
Long-Term Liabilities
Capital lease obligations 2,070
Total Liabilities 350,758
Capital
Common Stock
Class A - 4,307,030 issued 1,329,425
Class B - 3,000,000 reserved 10,000,000
Accumulated Deficit <1,613,533>
Stock subscription receivable <9,659>
Total stockholders equity 9,706,233
Total Liabilities & Capital $ 10,056,991
ATI NETWORKS, INC.
STATEMENT OF OPERATIONS
(Unaudited)
ATI Networks, Inc.
Summary Income Statement
For the Three Months Ending March 31, 2000
Quarter ending
March 31, 2000
Total Revenues 3,585
Operating Expenses
Cost of Sales 1,193
Sales and Marketing Expense 3,051
General And Administrative Expense 36,525
Research & Development Expense 2,827
Depreciation 3,000
Total Operating Expenses 46,596
Net Operating Income (Loss) (43,011)
Other Income (Expenses)
Interest Expense <2,864>
Other 0
Net Other Income (Expenses) <2,864>
Net Income (Loss) before Taxes (45,875)
Income Tax Provision 0
Net Income (Loss) $ (45,875)
Net loss per common share $ (.01)
(basic and diluted)
Weighted average number of common
shares outstanding 3,515,726
ATI NETWORKS, INC.
STATEMENT OF CASH FLOW
FOR THE THREE MONTHS
ENDED MARCH 31, 2000
(Unaudited)
Quarter ending
March 31, 2000
ATI Networks, Inc.
Statement of Cash Flow
For the three Months Ended March 31, 2000
Cash Flows from operating activities:
Net Loss $ (45,875)
Adjustments to reconcile net
loss to net cash used in
operating activities
Depreciation and Amortization 3,000
Accounts Receivable(net) <225>
Inventory <446>
Notes Payable-accrued interest 4,868
Accounts Payable and accrued expenses <3,190>
Accrued salaries - officer/stockholders 21,250
Net cash used in operating activities <20,618>
Cash Flows From Investing Activities:
Purchases of property and equipment <736>
Cash Flows from Financing Activities:
Payments on Capital Lease obligations <168>
Proceeds from Capital Stock Issuances 37,100
Net Cash provided by Financing activities 36,932
Change in Cash and Equivalents 15,578
Cash and Cash Equivalents, beginning of year 1,001
Cash and Cash Equivalents, end of year 16,579
Supplemental Cash Flow Information
Cash Paid for Interest 903
Non-Cash Investing and financing Activities
Reduction of due from Officer/stockholder 60,000
Issuance of capital stock by reduction in
amount of salaries-officer 100,000
ATI Networks, Inc. and Subsidiary
Notes to Consolidated Financial Statements (unaudited)
March 31, 2000
A. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-QSB and
Item 310 (b) of Regulation S-B. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals)considered necessary
for a fair presentation have been included. Operating results for the three
months ended March 31, 2000 and 1999 are not necessarily indicative of the
results that may be expected for the year ended December 31, 2000. For
further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's Form 10-KSB/A filed on May 11,
2000.
B. ORGANIZATION
ATI Networks, Inc., and its wholly-owned subsidiary ATI, Inc. (the
"Company"), is a U.S.-based company that is building a global e-business
that can be used for business advertising, automated vehicle tracking,
wireless communications, and entertainment. The principal market for the
Company's products and technologies are companies seeking to advertise
their products and services on these software platforms. Additional
markets include companies with mobile assets, organizations requiring the
wireless transfer of data and the general public.
C. REVOLVING LINE OF CREDIT
In September 1998, the Company signed an agreement for a $250,000
line-of-credit with Firstar Bank of Wisconsin. Accrued interest and
outstanding principal was due and payable September 1999. The line-of-
credit is collateralized by a general business security agreement.
Outstanding borrowings, including interest and other charges, under this
line-of-credit amounted to $274,470 as of March 31, 2000. As of March
31, 2000 the Company is in default under the terms of the agreement. On
March 30, 2000, the Company entered into an agreement with the bank
consenting to a money judgment of $287,309, under which the bank consented to
wait to docket and execute on the judgment until after May 31, 2000. The
excess judgment, of approximately $13,000, represents late charges that
management of the Company believes will be waived by the bank if the line-of-
credit is repaid by May 31, 2000.
D. NET LOSS PER COMMON SHARE
As required by SFAS No. 128, the following is a reconciliation of the basic
and diluted EPS calculations for the three months ended March 31:
2000 1999
Net loss (numerator) $ (45,875) $ (68,886)
Weighted average share
(denominator) 3,515,726 2,597,840
Basic net loss per share $ (.01) $ (.03)
Dilutive shares
(denominator) 3,515,726 2,597,840
Diluted net loss per share $ (.01) $ (.03)
SFAS No. 128 also requires disclosure of any transaction occurring
after the end of the most recent period but before issuance of the
financial statements that would have materially changed the number of common
shares or potential common shares outstanding at the end of the period if
the transaction had occurred before the end of the period. There are no
such matters to record.
E. STOCK OPTION PLAN
The Company has a Stock Purchase and Option Plan ("Plan") under which
it has granted stock options and warrants to purchase common stock to
employees, directors, officers, and others at various times since 1994.
Options and warrants are granted at an option price per share equal to or
greater than fair value at the date of grant. Generally, options granted to
employees vest over a five-year period and expire 10 years after the date
of grant. Canceled options are available for future grant.
The following is a summary of stock option plan activity for the three
months ended March 31, 2000:
Shares:
Granted -
Exercised (1,044,000)
Canceled -
March 31:
Outstanding 5,759,410
Exercisable 5,174,360
Average exercise price per share
Granted -
Exercised $0.10
Canceled -
March 31:
Outstanding $1.33
Exercisable $1.31
Stock options outstanding at March 31, 2000 had a range of exercise
prices of $.10 to $5.00 and an average remaining contractual life of
three years.
Options outstanding with an exercise price of $1.00 or less totaled
5,018,410, of which 4,555,210 were exercisable at March 31, 2000.
The remaining 741,000 options outstanding had a price of greater than
$1.00, of which 619,150 were exercisable at March 31, 2000. The
weighted-average remaining contractual life for each of these groups of
options was two years and six years, respectively.
The Company has adopted the disclosure only provisions of the Statements
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (SFAS 123), but continues to measure compensation cost
for the stock options using the intrinsic value method prescribed by
Accounting Principles Board Opinion No. 25. Accordingly, no compensation
expense has been recognized for the options granted, since the options are
granted, at the discretion of the Board of Directors, at an option price per
share not less than fair market value, as determined by the Board, at the
date of grant.
If the Company had elected to recognize compensation expense based on
the value at the grant dates with the method prescribed by SFAS 123; net
loss would have been changed to the proforma amounts indicated in the
table below:
For the three months ended March 31, 2000:
Reported ProForma
Net Loss $(45,875) $(72,720)
Basic and diluted
earnings per share $(.01) $(.02)
For the three months ended March 31, 1999:
Reported ProForma
Net Loss $(68,886) $(102,411)
Basic and diluted
earnings per share $(.03) $(.04)
F. MEDIA CREDITS
On March 7, 2000, the Company received, for consideration, $10 million in
estimated value of media credits from Cable Print News Media. The Company
subsequently conveyed the media credits to another company, which is
consolidating such media credits for potential future gain, in exchange for
10 partnership units valued at $10 million in the Sterling Capital Fund.
ITEM 1. IMPORTANT FACTORS RELATED TO FORWARD-LOOKING STATEMENTS AND
ASSOCIATED RISKS
The statements contained in this report that are not purely historical are
forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended (the "Securities Act") and Section 21E of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
including statements regarding the Company's expectations, hopes, intentions
or strategies regarding the future. All forward-looking statements included
herein are based on information available to the Company on the date 3-31-2000.
Forward-looking statements encompass the (i) expectation that the Company can
secure additional capital, (ii) continued expansion of the Company's
operations through joint ventures and acquisitions, (iii) success of existing
and new marketing initiatives undertaken by the Company, and (iv)success in
controlling the cost of services provided and expenses as a percentage of
revenues.
The forward-looking statements included herein are based on current
expectations that involve a number of risks and uncertainties. These
forward-looking statements were based on assumptions that the Company would
continue to expand, that capital will be available to fund the Company's
growth at a reasonable cost, that competitive conditions within the industry
would not change materially or adversely, that demand for the Company's
services would remain strong, that there would be no material adverse change
in the Company's operations or business, and that changes in laws and
regulations or court decisions will not adversely or significantly alter
the operations of the Company. Assumptions relating to the foregoing involve
judgements with respect to, among other things, future economic, competitive,
regulatory and market conditions, which are difficult to predict accurately
and many of which are beyond the control of the Company.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS OR PLAN OF OPERATION
The following discussion should be read in conjunction with the Financial
Statements thereto.
The Company and its products have received positive exposure in the national
media, but thus far has lacked sufficient capital to fully implement its
marketing plan. The growth of the Internet as a distribution medium for
software and information has greatly expanded the global market for the
Company's core products, while at the same time created new opportunities for
the Company to create and sell variations of its products. It is expected
that with the additional exposure of the Company and its products to the
online community, that demand and traffic will continue to increase for the
Company's products and websites. The Company believes continuing to expand
exposure to the online community is a must to creating brand name
recognition, while partnering and distribution contracts are expanded.
Company management expects to see significant growth in its future sales
figures as awareness of the company's products expands. However, to create
and maintain mindshare of the Company's products in the mind of the public
requires an increase in marketing and sales related expenses. The ability of
the company to survive will require additional capital in 2000 to fund
operations until profitability is reached. As the company expands the
awareness of its Internet websites, it is expected that the increased use of
its online auction sites will impact positively on the company's net profits
throughout 2000.
Like many early stage technology companies, the majority of the Company's
assets are intangible assets such as copyrights, trademarks, and Research and
Development costs. The trend of the Company's sales margins is Expected to
stay the same or increase, as the Company begins receiving revenues from
future website sales, where margins equal or exceed current software sales
margins.
It is expected that the percentage of foreign sales will remain the same, or
increase slightly, since this closely represents the approximate ratio of
foreign users to total users of the Internet. The Company does not market
directly to the government and does not expect any significant sales to come
from this sector.
PART II - OTHER INFORMATION
PART I
ITEM 1. DESCRIPTION OF BUSINESS
BUSINESS SUMMARY
ATI Networks is building a global e-business by leveraging its Proprietary
online technology, compelling content, and proven marketing techniques, to
create high volume, high profit margin websites. The company plans to
continue expanding its exciting community of sites that enable people to
carry on retail and B2B commerce, download digital audio and video media,
while fostering a feeling of community among site visitors.
The company owns a number of public sites that range from www.landnet.com,
featuring the latest information on NASA space launches, to sites that offer
the user access to fine art and discount computers in an auction environment.
The company's auction technology is now being used at www.artgems.com, a
consumer website that offers fine art, direct to consumers over the Internet.
Areas of the company's websites are available only to businesses for business
to business transactions, while other site areas are available to the general
public.
The company has created a website, www.tallyvotes.com that enables webmasters
around the globe to quickly compose a survey, or election, on their website
using the tallyvotes.com template and voting server. Webmasters around the
world can implement and use the company's voting engine for free, to do in
minutes what would normally take webmaster/programmers weeks to create from
scratch. Imagine the future of online voting, a worldwide need that will
increase voter turnout, while expanding democracy around the globe. Millions
of websites around the globe that can use the company's voting engine to
implement online voting, or create surveys, on their own websites in 15
minutes or less. Analysts have estimated the future of online voting to
evolve into an estimated $10 billion per year business.
The company plans to expand its existing websites to include an online
recycling business, and discount computer products auction. These sites will
cross-link to one another, and will provide an e-commerce environment for
manufacturers of computers and electronic equipment to sell discounted excess
inventory through a global network of online affiliates and Value Added
Resellers (VAR's). The company is currently using its proprietary online
auction technologies and e-commerce websites, in which it has verified its web
auction technology.
It has also established banner advertising contracts with Flycast
Communications/Engage, both CMGI companies, and Cable, Print, News Media, a
consortium of 70 magazines and over 200 websites partnered with the company
in building its online brands. The company is positioning itself to become a
leading community of engaging destination websites that enable business to
business, e-tail commerce, and entertainment.
Through a related company, the company has begun to compile worldwide
distribution rights to a digital library of past and future movies.
There are over 3,500 movies produced each year, of which less than 10% get
distributed through movie theaters and television. Company management believes
this opens up a tremendous opportunity for the company that owns worldwide
digital distribution rights to some of these films. In exchange for
exclusive worldwide,digital distribution rights to the movies in its library,
it will create digital copies of these films. The sale and distribution of
these movies will be offered by the company to online customers in DVD
format, but eventually will be distributed digitally over the Internet through
secure, high speed servers.
SOURCES OF REVENUE
Company revenues are generated from a number of sources in three primary ways:
1)Advertising
2)Electronic retail sales
3)Percentage based, transaction fees received from online product sales sold
on the company's websites, and from the sale of advertising banners.
Since the company's revenue model is based on the use of its sites as online
commerce exchanges, it receives a percentage of each sale made, plus revenue
from information and advertising, not just on the sale of products. In this
way, the company provides a forum for people to meet and carry on business,
in exchange for which it charges a sales transaction fee, and for which it
charges advertisers to reach the company's online audiences.
The company's next generation websites combine the latest database, search
engine, language translation, and e-commerce technologies to link
manufacturers to VAR's, businesses to businesses, and manufacturers with the
general public. Although the majority of the company's initial ecommerce
sales were done in the US, the company has planned the growth of the business
to enable it to do business around the globe, 24 hours a day, 7 days per
week. A nonprofit organization partner, recycleit.org, will provide
businesses and individuals with an environmentally friendly, and tax
deductible process to dispose of old computer equipment such as computers,
monitors, and keyboards.
INDUSTRY OVERVIEW
The Online Marketplace is booming. Increasingly businesses are recognizing
the place to do business in the future is over the Internet. According to IDC,
the number of Internet users will grow from the current estimate of 150
million to reach approximately 320 million by the end of 2002. Other estimates
of the growing online community put the global user number over 1 billion
by 2002. Worldwide commerce revenue on the Internet grew to over $20 billion
in 1999, and is expected to surpass $204 billion in 2001, according to Zona
Research. Online advertising revenues are projected to grow to over $10
billion in 2002 (Jupiter).
Electronic commerce is one of the hottest subjects on the Net today. There is
no shortage of predictions about the number and value of electronic
transactions that will take place over the Internet over the next decade, but
these predictions vary wildly. This highlights one of the fundamental problems
of business on the Internet; that it is next to impossible to predict anything
accurately. Although the predictions vary, the surveys seem to unanimously
agree on one thing: electronic commerce will continue to grow exponentially.
One typical example last year from Forrester Research, states the following:
"Net merchants will this year sell over $50 billion worth of goods over the
Internet. By 2002 this will swell to over $200 billion."
MARKET OPPORTUNITY AND DEMAND
According to the latest statistics from Forrester Research, over 50% of the
nearly $4 billion in 1999 online retail sales occurred in the two industries
the company has focused its retail sales efforts, namely computer products and
entertainment. Additionally, the future of the online voting market is
estimated at over $10 Billion per year, and is in its earliest stages.
The company's online voting server and related website, TallyVotes.com, are
perfectly positioned to capitalize on this evolving global market.
According to statistics from IDC, over 50% of all households in the
US own a computer. Many of these same households own more than one. Globally,
the number of new computers and monitors shipped exceeded 100 million units
each in 1999, and is expected to grow to over 150 million units each for the
calendar year, 2002. The continued growth in the demand of new computers has
created closets and warehouses full of old computers, which has created a
tremendous need for businesses and individuals to dispose of this outdated
equipment. A recent USA Today feature story focused on the growing problem of
disposing of this old equipment in a responsible way, and the need for an
organized system of recycling. Since it is illegal in many states to dispose
of computer monitors and other electronic equipment that contains hazardous
material in landfills, it is obvious that the need for environmentally
responsible recycling of outdated computer equipment will only increase in the
coming decade. The company offers a viable and economical solution to this
growing problem.
According to a recent survey by Zona Research regarding the habits of online
retail shoppers, it was found that 93% of these buyers spend between $25 and
$249 when purchasing products online. The average business to business
transactions are considerably higher and the company is now positioning
itself to offer an online B2B environment that will provide an ideal forum
for businesses of all sizes to carry on global commerce and develop new
business.
The Internet has provided a low cost medium to reach the global audience.
Despite the rapid proliferation of websites, there is currently no company
specifically focused as we have envisioned and described here. Management
believes an excellent business opportunity exists for the company to create
the leading "central meeting place on the web" for both businesses and the
public to benefit from the purchase of discount products and the disposal of
outdated products through its nonprofit sister organization, the RecycleIt.org
network.
Additionally, decreasing profit margins of neighborhood computer retailers,
along with the increase of online computer and peripheral businesses, has
created a compelling need for the local neighborhood computer retailers to
change the way they do business. This compelling need gives the company an
opportunity to provide many of these retailers with a perfect solution to
increase foot traffic to their stores, while at the same time providing these
local retail affiliates with a way to do increase their profit margins by
purchasing from the company's website.
THE ATI NETWORKS ADVANTAGE
The company attracts people to its community of sites with regular
sweepstakes promotions and prize giveaways that reward people for subscribing
to its sites. It expects to retain people's interest on its family of
websites by providing them access to the best digital content, while
rewarding its website visitors with points and prize entries for referring
friends to the company's sites.
The company has established marketing agreements with certain well-
established, high traffic websites, to redirect and promote traffic to the
company's community of websites. The company also plans to promote its
websites using a variation of the marketing technique used by America Online
to generate millions of new customers each year. These plans include
advertising its Internet brands on the JetDisc, an innovative new CDROM that
will be distributed free to millions of airline travelers. JetDisc is a web-
enabled CDROM that millions of airline passengers will view each month. The
JetDisc showcases the latest products, technologies, upcoming movies, and
promotional giveaway offers on behalf of its sponsors. ATI Networks will
promote its web properties each month by offering premium incentives such as
frequent flyer miles and prizes for travelers that visit the company websites
and register as a customer.
In the entertainment sector, the company has formed alliances with MUZE, the
leading music database, to provide online access to its 1.7 million music
titles and 400,000 album titles, through the company's entertainment shopping
areas. The company will then enable its site visitors to create their own
custom CD's by choosing from song titles in its online MUZE database.
Through a related company, the company has begun to compile worldwide
distribution rights to a digital library of past and future movies.
There are over 3,500 movies produced each year, of which less than 10% get
distributed through movie theaters and television. This opens up a tremendous
opportunity for the company that owns worldwide digital distribution rights to
some of these films. In exchange for exclusive worldwide, digital
distribution rights to the movies in its library, it will create digital
copies of these films. The sale and distribution of these movies will be
offered initially to online customers in DVD format, but eventually will be
distributed digitally over the Internet through secure, high speed servers.
The company is focusing its e-business on building and acquiring websites that
meet the growing demands of both consumers and businesses in the categories of
computer products and entertainment. The company plans to enroll thousands of
online affiliates of the company, and its related nonprofit company,
recycleit.org, to serve as distribution avenues for discount computer and
electronic merchandise, as well as collection points for recycling of
discarded computers, computer peripherals, and monitors. In exchange for
becoming affiliates of the company, VAR's receive two major benefits:
First, VAR's will have daily, online access to discount inventory from all
major computer, monitor, and electronics manufacturers, which they currently
do not receive. This discount inventory often comes with similar
manufacturer's warranties as new equipment, but this inventory sells for a
fraction of the price of new equipment. Therefore, the discount inventory we
will provide them with access to, via our online auction, enables VAR's to
benefit from higher profit margins than they currently receive on brand new
equipment.
Second: Local VAR's will benefit from the increased foot traffic that will be
generated for them by turning their stores into local collection points for
the millions of outdated computers, keyboards, modems, and monitors.
With donated equipment going to recycleit.org, a related nonprofit entity, the
donors will receive tax benefits from otherwise useless and outdated computer
equipment.
Company management predicts that its website affiliate programs will motivate
small business users two ways. First, by allowing them to share in revenues
generated by the recycling of equipment brought into their facilities, while
also giving them access to computer equipment inventory from manufacturers
at discount prices. This e-business model, coupled with the company's ability
to provide users with a large inventory of discount products and daily prize
giveaways, will encourage business users to visit company auction sites daily
to both do business and be entertained.
INVESTMENT HIGHLIGHTS
Due to the capital intensive nature of rapidly growing Internet companies,
management expects to need to raise additional funds in future offerings to
fund its growth, to develop new or enhance existing services, and to acquire
complementary products, businesses, or technologies. If additional funds are
raised through the issuance of equity or convertible debt securities, the
percentage ownership of existing stockholders will be reduced and such
securities may have rights, preferences, or privileges senior to those of our
existing stockholders. If adequate funds are not available or are not
available on acceptable terms, the company's ability to fund its expansion,
take advantage of unanticipated opportunities, develop or enhance services or
products, or otherwise respond to competitive pressures would be
significantly limited.
Management is currently negotiating a private placement of equity funding with
accredited and institutional investors, which it believes will enable it to
continue additional website development, and provide enough working capital
to fund operations for the next 12 months.
This capital will be used to hire additional staff, expand national marketing
and branding promotions for the company's websites, and to make acquisitions
that will strengthen the company's growing network of web properties.
PRODUCTS AND MARKET
ATI Networks developers and engineers have previously developed the
following products:
*TallyVotes.com - This site enables webmasters around the globe to quickly
compose a survey, or election, on their website using the tallyvotes.com
template and voting server. Webmasters around the world can implement and use
the company's voting engine for free, to do in minutes what would normally
take webmaster/ programmers weeks to create from scratch. Millions of websites
around the globe can use the company's voting engine to implement online
voting, or create surveys, on their own websites in minutes.
*LotsofStuff.com - a portal site that enables its users to have direct access
to the latest search engine technology and destinations on the web. This
website provides a portal to art and computer product auctions, news, real
estate, weather, sports, sweepstakes, free lotteries, games, and virtual
tours of countries all over the globe.
*ArtGems.com - Internet website property known on the web as artgems.com, this
website provides viewers with access to a large inventory of art and a live
auction environment. Digital pictures of the inventory may be viewed and
multiple bids can be made on multiple items by anyone logged onto the site.
The Company currently has Internet marketing rights to art inventory with
three nationally known artists.
*Landnet.com - Internet website property known on the web as landnet.com, this
site features information about the latest NASA space launch with real-time
NASA reports and pictures. The site also provides information about the
Company's GPS tracking and wireless communications technology and products.
*aRealGem.com - Internet website property known on the web as arealgem.com,
the site enables Timeshare property buyers and sellers around the world to
connect with each other. Visitors to the site may view and search for
available properties for sale in 70 countries. Visitors may list their
property for sale, submit photos or video files using easy online
instructions. The website is available for viewing and use by 70 million
users of the Internet. The site allows users to post and view listings for
free.
* NavQuest - Comprehensive mapping and routing software product on CD-Rom.
NavQuest includes most U.S. and Canadian streets and highways, advance routing
features, optional GPS tracking capabilities, city and address search features,
and a database of thousands of attractions and points of interest. This
product was sold to JetDisc.com.
* LogiTrak - Map Based Tracking and Messaging via the Internet - A Windows 95
software application for communicating with, and viewing the locations of,
multiple wireless devices from a remote PC via the Internet. Two- way
messages can be quickly transmitted and received through a graphic interface
utilizing GPS satellites, communications satellites, and the Internet. The
market for this product includes most transportation companies and over 100
million existing cellular telephone users. The ever-increasing demand for
tracking and wireless communications generates tremendous future potential for
LogiTrak.
* JetDisc and JetDisc.com - JetDisc is a web-enabled CDROM that millions of
airline passengers will view each month. The JetDisc and its website,
JetDisc.com are unique advertising tools that are used to showcase the latest
products, technologies, upcoming movies, and promotional giveaway offers on
behalf of its sponsors. ATI Networks plans to promote its web properties each
month by offering premium incentives such as frequent flyer miles and prizes
for travelers that visit the company websites and register as a customer.
ELECTRONIC COMMERCE
According to statistics from IDC, over 50% of all households in the US own a
computer. Many of these same households own more than one. Globally, the
number of new computers and monitors shipped exceeded 100 million units
each in 1999, and is expected to grow to over 150 million units each for the
calendar year, 2002.
According to a recent survey by Zona Research regarding the habits of online
retail shoppers, it was found that 93% of these buyers spend between $25 and
$249 when purchasing products online. However, the average business to
business transactions are considerably higher. The Internet has provided a
low cost medium to reach the global audience. Despite the rapid proliferation
of websites, management believes an excellent business opportunity exists for
the company to create the leading "central meeting place on the web" for both
businesses and the public to benefit.
GROWTH OF THE INTERNET AND ONLINE COMMERCE
The Internet Today: A Quick Overview
Consider the following examples of the extraordinary power of the Internet.
It took radio 37 years to get to 50,000,000 listeners.
It took television 13 years to get to 50,000,000 viewers.
It took the Internet a mere 4 years to get to 50,000,000 users.
At the end of 1999 that number had grown to over 150 million, and it is now
estimated by some analysts that by year-end 2002 the Internet population will
grow to a staggering one billion online users, or one out of every five
people on the planet.
According to a recent report on customer buying habits conducted by
Forrester Research, computer products and entertainment were respectively, the
number one and number three leading product categories consumers prefer to
buy over the Internet. It is predicted by all major market forecasters that
this trend will continue over the next decade at growth rates that exceed 50%
per year.
COMPETITION
The company has some competition from many online resellers of new and used
computer equipment. However, company management believes it can continue to
build a rapidly growing base of new customers and new member/affiliates, by
combining the largest selection of products, with the best prices on the
Internet for the discount products the company offers. Additionally, it will
be the only exchange organization in the US that is able to receive and
responsibly recycle outdated computer equipment, so the company will be the
leader in providing this online exchange service on the web.
The online market is characterized by rapidly changing technologies,
frequent new product, and service introductions, and evolving industry
standards. The recent growth of the Internet and intense competition compound
these market characteristics. To achieve our goals, we need to effectively
integrate the various software programs and tools required to enhance and
improve our Internet websites, and to effectively manage the growth of our
online business. The company is prepared to manage this growth with a team of
management people with prior successful experience in building high volume,
scaleable network systems.
Our future success will depend on our ability to adapt to rapidly changing
technologies by continually improving the performance features and reliability
of our web based services. In addition, future site enhancements must meet the
requirements of both current and future users, and must achieve significant
market acceptance. We believe that providing entertaining websites will
enhance the value of the ATI Networks community of websites, to the people and
businesses coming to our sites. Since the company's marketing efforts will be
focused on rapidly creating high traffic sites, building brand name awareness,
and rapidly building a network of affiliates, we believe it is imperative for
website visitors to have a positive experience each time they reach one of our
sites. Our focus on site quality and access speed will enhance our visitors'
experience by combining efficient ways of conducting e-commerce with
entertaining, web-based diversions, to meet the needs of a vibrant online
community.
CUSTOMERS
The customer base of website commerce is unlimited in scope and numbers. Some
of the companies currently contracted as advertisers include the following:
Sony
Alta Vista
Discover Card
Essential.com
Hewlett Packard
Dell
Mortgageit.com
RocketLinks.com
GM
BellSouth
American Family
Wells Fargo Online
Intelihealth.com
Smartgroups
Healthcentral
Predict It
Washington Post
EZPrints.com
BargainBid.com
Food.com
VarsityBooks
Enonymous.com
Office Click
Hot Office
Sweepstakes
BOTWEB
Mediaworks
eCampus
Shop Center
CGU
Corvette Cars
Credit Counselor's
Office.com
Overstock.com
BizBuyer
eMD.com
Demasiado
Smart Portfolio
PetSmart
HealthExtras.com
Domini Social Investments
Hotbar.com
CarSmart
FirstSource
Sweeps
Computer Learning Centers
TradeCenter
Discovery Online Health
MentorLabs
VarsityBooks
Nedudomains
i-motors
Petfooddirect.com
Instant Ship
Passagen
How2.com / Cuervo
Medical Web
Bonzi99
AARP
GE Warranty
Brother Corp
TreeLoot
I Point
US West
Three Stooges
Enginehouse
Self- Test Software
Jones International University
Open Auto
Travelbreak.com
Boca Research
PNC Bank
USWest Local
BingoDabber
Playboy Enterprises
Loyalty ECM
Ford Outfitters
Boombots
Homepage
AnyLoan
Providian
PAR
BOTWEB
EntryPoint
Mr Jet
DW - Quickflight
Desktop
MSN
Banca Fideuram
Dash
bikeshop.com
eproject
VideoProfessor
Timedance
Storerunner
Stockwinners.com
Pier House Resort A
Letstalk
Entrepreneur.com
Coke
Treeway
iMotors
Wildjack Casino
Furniture Online
Career Engine
PureTec
EMPLOYEES
Operations 6
Clerical 2
Administrative 2
Technical 2
None of the Company's employees are subject to collective bargaining
agreements and the Company considers its relations with its employees to be
excellent.
COPYRIGHTS/PATENTS
The Company owns the Copyrights and Trademarks for LogiTrak and plans to
acquire the rights to certain websites. Intellectual property and trademark
protection is an integral part of the corporate strategy to maximize
exclusivity and legally protect ownership of the Company's proprietary
technology properties in the marketplace.
None of the Company's business, products, or properties are subject to
material regulation (including environmental regulation) by federal, state,
or local governmental agencies.
INSURANCE
The Company maintains director and officer ("D&O") liability insurance on a
claims made basis for all of its current officers and directors. Insurance
coverage under such policies is contingent upon a policy being in effect when
a claim is made, regardless of when the events which caused the claim
occurred. The cost and availability of such coverage has varied widely in
recent years. While the Company believes its insurance policies are adequate
in amount and coverage for its current operations, there can be no assurance
that the coverage maintained by the Company is sufficient to cover all future
claims or will continue to be available in adequate amounts at a reasonable
cost.
IMPORTANT FACTORS RELATED TO FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS
The statements contained in this report that are not purely historical are
forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended (the "Securities Act") and Section 21E of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
including statements regarding the Company's expectations, hopes, intentions
or strategies regarding the future. All forward-looking statements included
herein are based on information available to the Company on the date 3-31-2000.
Forward-looking statements encompass the (i) expectation that the Company can
secure additional capital, (ii) continued expansion of the Company's
operations through joint ventures and acquisitions, (iii) success of existing
and new marketing initiatives undertaken by the Company, and (iv)success in
controlling the cost of services provided and general administrative expenses
as a percentage of revenues.
The forward-looking statements included herein are based on current
expectations that involve a number of risks and uncertainties. These
forward-looking statements were based on assumptions that the Company would
continue to expand, that capital will be available to fund the Company's
growth at a reasonable cost, that competitive conditions within the industry
would not change materially or adversely, that demand for the Company's
services would remain strong, that there would be no material adverse change
in the Company's operations or business, and that changes in laws and
regulations or court decisions will not adversely or significantly alter
the operations of the Company. Assumptions relating to the foregoing involve
judgements with respect to, among other things, future economic, competitive,
regulatory and market conditions, which are difficult to predict accurately
and many of which are beyond the control of the Company.
ITEM 2. DESCRIPTION OF PROPERTY
FACILITIES
The following tabulates certain information with respect to the lease
currently executed between the Company and the Leaseholder.
Square Monthly
Location Footage Rental
Lessor
Executive Offices 2,500 $600
Wisconsin Lumber Co.
460 Cedar Street
Fond du Lac, WI
54935
ITEM 3. LEGAL PROCEEDINGS
One material proceeding is pending against the Company, which could have an
adverse effect on shareholders. However, management believes this issue may
be resolved prior to any adverse action against the company. Additionally,
their was a claim entered in first quarter against the company by a
disgruntled former employee for $25,000 in first quarter. The Company refutes
the claim and is considering an appeal.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
There has been limited trading in ATI Networks, Inc. Common Stock,and there
can be no assurance that an active trading market will develop or be
sustained. Provided a trading market does develop in the future, the market
price of the shares of Common Stock is likely to be highly volatile and may
be significantly affected by factors such as fluctuations in the Company's
operating results, announcements of technological innovations or new
products by the Company or its competitors, governmental regulatory action,
developments with respect to patents or proprietary rights and general market
conditions. The Company plans to be listed on Standard and Poor's Standard
Corporation Description and Records.
RESTRICTIONS OF TRANSFER
Shares of ATI Networks, Inc. Common Stock held by non-affiliate ATI, Inc.'s
stockholders will be freely transferable, except for shares held by persons
who may be deemed to be "affiliates" of ATI Networks, Inc. under the
Securities Act of 1933, as amended (the "Securities Act"). Persons who may be
deemed to be affiliates of ATI Networks, Inc. generally include individuals
or entities that control, are controlled by, or are under common control with
ATI Networks, Inc. and may include certain of the Securities Act, such
exemptions afforded by Section 4(1) or Rule 701 of the Securities Act or Rule
144 thereunder.
DIVIDENDS ON ATI NETWORKS, INC. COMMON STOCK
ATI Networks, Inc. does not intend to pay any dividends in the foreseeable
future and will follow a policy of retaining its earnings for use in its
operations. In addition, under its proposed loan agreement, ATI Networks,
Inc. will be prohibited from paying cash dividends without prior approval of
its lender banks.
TRANSFER AGENTS
The transfer agent for the ATI Networks, Inc. Common Stock is American
Securities Transfer, Inc., whose address is 12039 W. Alameda Parkway,
Suite Z-2, Lakewood, Colorado 80228 and whose telephone number is
(303) 986-5400.
ITEM 6. SELECTED FINANCIAL DATA
See Section IV. EXHIBITS AND REPORTS, Financial Data Schedule
ITEM 7. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On April 21, 2000, the company engaged the services of a new accounting firm,
Hoffman, Morrison, and Fitzgerald, P.C. as its independent certifying
accountants.
The decision to change auditing firms was accepted by the Company's audit
committee. In connection with the Former Auditor's audit of the fiscal years
ended Dec. 31, 1996 and Dec. 31, 1997, (i) there were no disagreements on
any matters of accounting principles or practice, financial statement
disclosure, or auditing scope or procedure, which disagreements if not
resolved to the satisfaction of the Former Auditors would have caused them
to make reference thereto in their report and (ii) there were no reportable
events as defined in paragraph 304(a)(1)(v) of Regulation S-K. The decision
was mutually agreed upon by the Company and the Former Auditors as a result
of ATI Networks' change from a private to a public company, and the
subsequent need for an accounting firm with expertise in the area of SEC
auditing requirements.
SIGNATURES
In accordance with Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the registrant caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
ATI NETWORKS, INC.
Registrant
May 12, 2000
/s/ Lawrence Bestor
Lawrence Bestor
Chief Executive Officer/Director
/s/ Steven Sorenson
Steven Sorenson
Secretary/ Director