U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(Mark One)
|X| Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 2000
------------------
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from __________ to ___________.
Commission file number 0-27282
ATLANTIC TECHNOLOGY VENTURES, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 36-3898269
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
150 Broadway, Suite 1110, New York, New York 10038
(Address of principal executive offices)
(212) 267-2503
(Issuer's telephone number)
150 Broadway, Suite 1009, New York, New York 10038
(Former name, former address and former fiscal year, if changed
since last report)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No _____
-------
Number of shares of common stock outstanding as of September 30, 2000:
Transitional Small Business Disclosure Format (check one): Yes No X
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INDEX
Page
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PART I-- FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Consolidated Balance Sheets
as of September 30, 2000 and December 31, 1999 3
Consolidated Statements of Operations for the
three months ended September 30, 2000 and 1999,
the nine months ended September 30, 2000 and 1999,
and the period from July 13, 1993 (inception) to
September 30, 2000 4
Consolidated Statements of Cash Flows
for the nine months ended September 30, 2000 and 1999,
and the period from July 13, 1993 (inception) to
September 30, 2000 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations 9
PART II-- OTHER INFORMATION
Item 1. Legal Matters 14
Item 2. Changes in Securities and Use of Proceeds 14
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 17
SIGNATURES
EXHIBIT INDEX
-2-
PART I -- OTHER INFORMATION
Item 1. Financial Statements
ATLANTIC TECHNOLOGY VENTURES, INC. AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Balance Sheets
(Unaudited)
September 30, December 31,
Assets 2000 1999
-------------- -------------
Current assets:
Cash and cash equivalents $ 1,700,300 3,473,321
Accounts receivable 1,037,511 337,323
Prepaid expenses 37,599 17,414
------------- ----------
Total current assets 2,775,410 3,828,058
Property and equipment, net 218,172 131,832
Investment in affiliate 91,003 --
Other assets 2,901 --
------------- ----------
Total assets $ 3,087,486 3,959,890
============= ==========
Liabilities and Stockholders' Equity
Current liabilities - accounts payable and accrued expenses $ 1,061,784 542,759
------------- ---------
Stockholders' equity:
Preferred stock, $.001 par value. Authorized 10,000,000
shares; 1,375,000 shares designated as Series A
convertible preferred stock -- --
Series A convertible preferred stock, $.001 par value.
Authorized 1,375,000 shares; 368,958 and 610,088 shares
issued and outstanding at September 30, 2000 and
December 31, 1999, respectively (liquidation preference
aggregating $4,796,454 and $7,931,144 at September 30, 2000
and December 31, 1999, respectively) 369 610
Series B convertible preferred stock, $.001 par value.
Authorized 1,647,312 shares; 344,828 shares
outstanding at September 30, 2000 (liquidation preference
aggregating $1,000,000 at September 30, 2000) 345 --
Convertible preferred stock warrants, 112,896 and 117,195
issued and outstanding at September 30, 2000 and
December 31, 1999, respectively 520,263 540,074
Common stock, $.001 par value. Authorized 50,000,000
shares; 6,091,899 and 4,815,990 shares issued and outstanding
at September 30, 2000 and December 31, 1999, respectively 6,092 4,816
Common stock subscribed. 182 shares at September 30, 2000
and December 31, 1999 -- --
Additional paid-in capital 25,727,300 21,662,272
Deficit accumulated during development stage (24,228,125) (18,790,099)
------------- -----------
2,026,244 3,417,673
Less common stock subscriptions receivable (218) (218)
Less treasury stock, at cost (324) (324)
------------- -----------
Total stockholders' equity 2,025,702 3,417,131
------------- -----------
Total liabilities and stockholders' equity $ 3,087,486 3,959,890
============= ===========
See accompanying notes to consolidated financial statements.
-3-
ATLANTIC TECHNOLOGY VENTURES, INC. AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Operations
(Unaudited)
Cumulative
period from
July 13, 1993
(inception) to
Three months ended September 30, Nine months ended September 30, September 30,
-------------------------------------------------------------------
2000 1999 2000 1999 2000
----------- ------------ ------------- -------------- --------------
Revenues:
Development revenue $ 1,072,716 $ 247,163 $ 3,419,831 $ 247,163 $ 4,502,341
License revenue -- -- -- -- 2,500,000
Grant revenue -- 29,787 13,009 29,787 190,010
------------ ----------- ----------- ------------- -------------
Total revenues 1,072,716 276,950 3,432,840 276,950 7,192,351
------------ ----------- ----------- ------------- -------------
Costs and expenses:
Cost of development revenue 858,173 197,730 2,735,865 197,730 3,601,873
Research and development 360,454 179,594 682,807 1,105,072 9,057,372
Acquired in-process research
and development 263,359 -- 2,653,382 -- 2,653,382
General and administrative 554,181 354,099 2,840,464 1,062,887 16,508,892
License fees -- -- -- -- 173,500
------------ ----------- ----------- -------------- -------------
Total operating
expenses 2,036,167 731,423 8,912,518 2,365,689 31,995,019
------------ ----------- ----------- -------------- -------------
Operating loss (963,451) (454,473) (5,479,678) (2,088,739) (24,802,668)
Other (income) expense:
Interest and other income (22,940) (120,066) (97,267) (242,589) (1,255,733)
Interest expense -- -- -- -- 625,575
Equity in (earnings)/loss of
affiliate 31,915 -- 55,615 -- 55,615
------------ ----------- ----------- -------------- -------------
Total other (income)
expense 8,975 (120,066) (41,652) (242,589) (574,543)
------------ ----------- ------------ --------------- -------------
Net loss $ (972,426) $ (334,407) $(5,438,026) $ (1,846,150) $ (24,228,125)
============ =========== ============ =============== =============
Imputed convertible preferred
stock dividend -- -- -- -- 5,331,555
Preferred stock dividend issued in
preferred shares 152,195 -- 811,514 -- 1,125,880
------------ ----------- ------------ -------------- -------------
Net loss applicable to
common shares $ (1,124,621) (334,407) (6,249,540) (1,846,150) (30,685,560)
============ =========== ============ =============== =============
Per share -basic and diluted:
Net loss applicable to
common shares $ (0.19) (0.07) (1.14) (0.45)
============ =========== ============ ===============
Weighted average shares of common
stock outstanding 6,033,257 4,767,138 5,504,144 4,138,836
============ =========== ============ ==============
See accompanying notes to consolidated financial statements.
-4-
ATLANTIC TECHNOLOGY VENTURES, INC. AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Cash Flows
(Unaudited)
Cumulative
period from
July 13, 1993
(inception) to
Nine months ended September 30, September 30,
---------------------------------
2000 1999 2000
-------------- ----------------- ---------------
Cash flows from operating activities:
Net loss $ (5,438,026) (1,846,150) (24,228,125)
Adjustments to reconcile net loss to
net cash used in operating activities:
Acquired in-process research and development 1,800,000 -- 1,800,000
Expense relating to issuance of warrants -- -- 298,202
Expense relating to the issuance of options -- -- 81,952
Expense related to Channel merger -- -- 657,900
Change in equity of affiliate 55,615 -- 55,615
Compensation expense relating to
stock options and warrants 1,073,511 -- 1,282,293
Discount on notes payable - bridge financing -- -- 300,000
Depreciation 51,529 90,825 481,939
Loss on disposal of furniture and equipment -- -- 73,387
Changes in assets and liabilities:
(Increase) decrease in accounts receivable (700,188) 104,195 (1,037,511)
(Increase) decrease in prepaid expenses (20,185) 25,724 (37,599)
Increase (decrease) in accrued expenses 519,025 (466,174) 1,061,784
Increase (decrease) in accrued interest -- -- 172,305
(Increase) decrease in other assets (2,901) -- (2,901)
------------ ---------- -----------
Net cash used in operating activities (2,661,620) (2,091,580) (19,040,759)
------------ ---------- -----------
Cash flows from investing activities:
Purchase of furniture and equipment (137,869) (49,295) (779,599)
Acquisition of investment (146,618) -- (146,618)
Proceeds from sale of furniture and equipment -- -- 6,100
------------ ---------- -----------
Net cash used in investing activities (284,487) (49,295) (920,117)
------------ ---------- -----------
Cash flows from financing activities:
Proceeds from exercise of warrants -- -- 5,500
Proceeds from exercise of stock options 344,597 8 397,097
Proceeds from issuance of demand notes payable -- -- 2,395,000
Repayment of demand notes payable -- -- (125,000)
Proceeds from the issuance of notes payable -
bridge financing -- -- 1,200,000
Proceeds from issuance of warrants -- -- 300,000
Repayment of notes payable - bridge financing -- -- (1,500,000)
Repurchase of common stock -- -- (324)
Preferred stock dividend paid -- (318) (318)
Proceeds from the issuance of common stock -- -- 7,547,548
Proceeds from issuance of convertible preferred stock 828,489 -- 11,441,673
------------ ---------- ------------
Net cash provided by (used in) financing
activities 1,173,086 (310) 21,661,176
------------ ---------- ------------
Net decrease in cash and cash equivalents (1,773,021) (2,141,185) (1,700,300)
Cash and cash equivalents at beginning of period 3,473,321 5,835,669 --
------------ ---------- ------------
Cash and cash equivalents at end of period $ 1,700,300 3,694,484 (1,700,300)
============ ========== ============
Supplemental disclosure of noncash financing activities:
Issuance of common stock in exchange for
common stock subscriptions $ -- -- 7,027
Conversion of demand notes payable and the related
accrued interest to common stock -- -- 2,442,304
Cashless exercise of preferred warrants 19,811 -- 49,880
Conversion of preferred to common stock 289 -- --
Preferred stock dividend issued in shares 811,514 -- 1,125,880
============ ========== ============
See accompanying notes to consolidated financial statements.
-5-
ATLANTIC TECHNOLOGY VENTURES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September 30, 2000
(1) BASIS OF PRESENTATION
The accompanying consolidated financial statements have been prepared
in accordance with Generally Accepted Accounting Principles for interim
financial information. Accordingly, the statements do not include all
information and footnotes required by Generally Accepted Accounting Principles
for complete financial statements. In the opinion of management, the
accompanying financial statements reflect all adjustments, consisting of only
normal recurring adjustments, considered necessary for fair presentation.
Interim operating results are not necessarily indicative of results that may be
expected for the year ending December 31, 2000 or for any subsequent period.
These financial statements should be read in conjunction with Atlantic
Technology Ventures, Inc., and Subsidiaries' ("Atlantic") Annual Report on Form
10-KSB as of and for the year ended December 31, 1999.
(2) LIQUIDITY
Atlantic anticipates that their current resources, together with
proceeds from an agreement between Atlantic and Bausch & Lomb Surgical, will be
sufficient to finance their currently anticipated needs for operating and
capital expenditures for at least the next nine months. In addition, Atlantic
will attempt to generate additional capital through a combination of
collaborative agreements, strategic alliances, and equity and debt financing.
However, Atlantic can give no assurance that it will be able to obtain
additional capital through these sources or upon terms acceptable to them.
(3) COMPUTATION OF NET LOSS PER COMMON SHARE
Basic net loss per common share is calculated by dividing net loss
applicable to common shares by the weighted average number of common shares
outstanding for the period. Diluted net loss per common share is the same as
basic net loss per common share, as common equivalent shares from stock options,
stock warrants, stock subscriptions and convertible preferred stock would have
an antidilutive effect because Atlantic incurred a net loss during each period
presented.
(4) RECENTLY ISSUED ACCOUNTING STANDARDS
In December 1999, the staff of the Securities and Exchange Commission
issued Staff Accounting Bulletin ("SAB") No. 101, Revenue Recognition in
Financial Statements. SAB No. 101 summarizes certain of the staff's views in
applying generally accepted accounting principles to revenue recognition in
financial statements, including the recognition of non-refundable fees received
upon entering into arrangements. SAB No. 101, as amended, must be adopted no
later than the fourth quarter of fiscal years beginning after December 15, 1999
with an effective date of January 1, 2000 and the recognition of a cumulative
effect adjustment calculated as of January 1, 2000. Atlantic is in the process
of evaluating this SAB and the effect it will have on its consolidated financial
statements and current revenue recognition policy.
(5) EMPLOYMENT AGREEMENTS
Atlantic entered into employment agreements with four executives during
April and May, 2000. These agreements provide for the payment of signing and
year end bonuses in 2000 totaling $225,000, and annual base salaries aggregating
$550,000. Each agreement has an initial term of three years and can be
terminated by Atlantic, subject to certain provisions, with the payment of
severance amounts that range from three to six months.
(6) PREFERRED STOCK DIVIDEND
On February 15, 2000 and August 7, 2000, Atlantic's board of directors
declared a payment-in-kind dividend of 0.065 of a share of Series A convertible
preferred stock ("Series A Preferred") for each share of Series A Preferred held
as of the record date of February 2, 2000 and August 7, 2000, respectively. The
estimated fair value
-6-
of these dividends in the aggregate of $152,195 and $811,514 were included in
Atlantic's calculation of net loss per common share for the three and nine
months ended September 30, 2000, respectively.
During the nine months ended September 30, 2000, 4,299 Series A
convertible preferred stock warrants were exercised in cashless transactions for
9,453 shares of Atlantic's common stock.
(7) ISSUANCE OF STOCK WARRANTS
As more fully described in Note 8 to Atlantic's Annual Report on Form
10-KSB as of and for the year ended December 31, 1999, on January 4, 2000,
Atlantic entered into a Financial Advisory and Consulting Agreement with Joseph
Stevens & Company, Inc. pursuant to which Atlantic issued to Joseph Stevens &
Company, Inc. three warrants to purchase an aggregate of 450,000 shares of its
common stock. In accordance with EITF Issue No. 96-18, Accounting for Equity
Instruments That Are Issued to Other Than Employees for Acquiring, or in
Conjunction with Selling, Goods or Services and other relative accounting
literature, Atlantic is required to measure the expense associated with these
warrants at each reporting date and recognize the appropriate portion of the
expense at the end of each reporting period until the final measurement date is
reached (December 4, 2000 in this transaction). As a result, Atlantic recorded a
general and administrative expense of $11,857 and $1,073,511 for the three and
nine month periods ended September 30, 2000, respectively.
(8) INVESTMENT IN PREFERRED STOCK
On May 12, 2000, Atlantic acquired shares of preferred stock
representing a 35% ownership interest in TeraComm Research, Inc., a
privately-held company that is developing next-generation high-speed fiberoptic
communications technologies. The purchase price for this ownership interest was
$5,000,000 in cash, 200,000 shares of Atlantic's common stock, and a warrant to
purchase a further 200,000 shares of Atlantic's common stock. The warrants have
a term of three years and are exercisable at $8.975 per share of common stock,
but only if the market price of Atlantic common stock is $30 or more. Of the
$5,000,000 cash portion of the purchase price, Atlantic has paid $1,000,000.
On July 18, 2000, Atlantic and TeraComm amended the purchase agreement.
In the amendment, the parties agreed that the $4,000,000 balance of the
$5,000,000 cash component of the purchase price, including the $1,000,000
payments due on August 12, 2000 and November 12, 2000, would not be due until
TeraComm achieves a specified milestone. Within ten days after TeraComm achieves
that milestone, Atlantic must pay TeraComm $1,000,000 and must thereafter make
to TeraComm three payments of $1,000,000 at three-month intervals. If Atlantic
fails to make any of these payments, TeraComm's only recourse remains reducing
proportionately Atlantic's ownership interest. Atlantic's failure to make the
first $1,000,000 payment by midnight at the end of December 30, 2000 (whether or
not TeraComm has reached the milestone) will at the option of TeraComm be deemed
to constitute failure by Atlantic to timely make that payment.
On November 10, 2000, TeraComm informed Atlantic that it does not
expect to achieve by midnight at the end of December 30, 2000, the milestone
specified in the amendment to the purchase agreement. If TeraComm does not
achieve the milestone, and Atlantic does not make by midnight at the end of
December 30, 2000, a $1,000,000 payment towards the balance of the cash portion
of the purchase price, Atlantic will be deemed to have surrendered to TeraComm a
proportion of Atlantic's TeraComm shares equal to the proportion of the dollar
value of the purchase price for Atlantic's TeraComm shares ($6,795,000) that is
represented by the unpaid $4,000,000 of the cash portion of the purchase price.
This would have the effect of reducing to 14.4% Atlantic's ownership interest in
TeraComm. Atlantic expects that if TeraComm does not achieve the milestone,
Atlantic will not make any further payments towards the cash portion of the
purchase price.
Of the $1,000,000 cash and common stock and common stock warrants
valued at $1,800,000 currently invested in TeraComm, Atlantic has expensed
approximately $2,650,000 as acquired in-process research and development as
TeraComm's product development activity is in the very early stages. The
majority of future investments, if any, will likely represent additional
acquired in-process research and development.
-7-
(9) PRIVATE PLACEMENT OF SERIES B PREFERRED SHARES
On September 28, 2000, Atlantic entered into a convertible preferred
stock and warrants purchase agreement (the "Purchase Agreement") with BH Capital
Investments, L.P. and Excalibur Limited Partnership (together, the "Investors")
pursuant to which Atlantic agreed to sell, and the Investors agreed to purchase
for up to $3,000,000, shares of Atlantic's Series B preferred stock and warrants
to purchase 201,000 shares of Atlantic's common stock (those warrants, "Investor
Warrants"). At the first closing, which occurred on September 28, 2000, for a
$2,000,000 purchase price Atlantic issued to the Investors and to the Escrow
Agent 689,656 shares of Series B preferred stock and Investor Warrants to
purchase 134,000 shares of common stock. Of these, half the shares of Series B
preferred stock and Investor Warrants exercisable for half the shares of common
stock are being held in escrow, pending approval by Atlantic's stockholders of
the proposals to be voted on at a special meeting to be held on December 20,
2000, and have therefore not been recorded or included as outstanding in the
accompanying financial statements. These proposals include the ratification and
approval of the Series B preferred stock financing with the Investors and the
potential issuance in connection therewith of 20% or more of our outstanding
common stock or voting power before issuance of the Series B preferred stock,
and approval of the amendment of the certificate of designations, preferences
and rights of Series A convertible preferred stock to subordinate the rights of
the Series A preferred stock to the rights of the Series B preferred stock with
respect to dividend rights and rights upon liquidation, winding up, or
dissolution. If the stockholders fail to approve either proposal, the Investors
will be entitled to have returned to them the $1,000,000 held in escrow from the
first closing, and, as stated in the Purchase Agreement, certain penalties will
be imposed. As of September 30, 2000, net proceeds of approximately $830,000
were received by Atlantic. At the second closing, if any, Atlantic will, for a
$1,000,000 purchase price, issue to the Investors further shares of Series B
preferred stock (the number of shares being a function of the market price) and
Investor Warrants to purchase a further 67,000 shares of common stock. The
Investors' obligation in connection with the second closing is subject to
certain conditions.
The exercise price of the Investor Warrants is equal to 110% of the
lower of (1) the market price on the issue date and (2) the market price 180
days after the applicable closing date. Each Investor Warrant may be exercised
any time during the five years from the date of granting. The Investor Warrants
may not be exercised if doing so would result in Atlantic's issuing a number of
shares of common stock in excess of the limit imposed by the rules of the Nasdaq
SmallCap Market.
Holders of shares of Atlantic's outstanding Series B convertible
preferred stock can convert each share into shares of common stock without
paying us any cash. The conversion rate is equal to $2.90 divided by the
conversion price. The conversion price per share of Series B preferred stock on
any given day is the lower of (1) $3.00, (2) the average closing bid price of
our common stock during the five trading days ending the immediately preceding
trading day, or (3) the average of the two lowest closing bid prices on the
principal market of the common stock out of 15 trading days immediately prior to
conversion. The conversion price may be adjusted in favor of holders of shares
of Series B stock upon certain triggering events.
In addition, each March 31, June 30, September 30, and December 31,
Atlantic is obligated to pay dividends, in arrears, to holders of shares of
Series B preferred stock, and the dividends consist of 8% annually of the
original purchase price paid for the Series B preferred stock. These dividends
must be paid either in cash or in shares of Series B preferred stock. If these
dividends are paid in shares of Series B preferred stock, those shares will be
valued at 85% of the two lowest consecutive closing bid prices of our common
stock during the 20 trading days prior to the applicable dividend date. Atlantic
must also pay to holders of Series B preferred stock, on an as-converted basis,
any dividends (other than dividends payable in shares of our capital stock) that
Atlantic proposes to distribute to the holders of Series A preferred stock,
common stock, or other junior securities.
If Atlantic is liquidated, sold to or merged with another entity (and
Atlantic is not the surviving entity after the merger), Atlantic will be
obligated to pay holders of shares of Series B preferred stock a liquidation
preference equal to the original purchase price paid per share of Series B
preferred stock for each share of Series B preferred stock held, before any
payment is made to holders of shares of the Series A preferred stock or common
stock. In addition, Series B preferred stock issued to the Investors is subject
to redemption under certain circumstances.
(10) COST OF DEVELOPMENT REVENUE
In accordance with a license and development agreement, as amended,
Bausch & Lomb Surgical reimburses Atlantic's subsidiary, Optex Ophthalmologics,
Inc. ("Optex"), for costs Optex incurs in developing its Catarex(TM) technology,
plus a profit component. For the three and nine months ended September 30, 2000,
this agreement provided $1,072,716 and $3,419,831 of development revenue, and
related cost of development revenue of $858,173 and $2,735,865, respectively.
For the three and nine months ended September 30, 1999, this agreement provided
$247,163 of development revenue, and related cost of development revenue of
$197,730.
-8-
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
You should read the following discussion of our results of operations
and financial condition in conjunction with our Annual Report on Form 10-KSB for
the year ended December 31, 1999.
RESULTS OF OPERATIONS
THREE MONTH PERIOD ENDED SEPTEMBER 30, 2000 VS. 1999
In accordance with a license and development agreement, as amended,
Bausch & Lomb Surgical reimburses our subsidiary, Optex Ophthalmologics, Inc.
("Optex"), for costs Optex incurs in developing its Catarex(TM) technology, plus
a profit component. In the third quarter of 2000, this agreement provided
$1,072,716 of development revenue, and the related cost of development revenue
was $858,173. For the quarter ended September 30, 1999, this agreement provided
$247,163 of development revenue, and the related cost of development revenue was
$197,730.
For the quarter ended September 30, 2000, research and development
expense was $360,454 as compared to $179,594 in the third quarter of 1999. This
increase is due to increased expenditures on certain development projects
including CT-3.
As of September 30, 2000, we have made an investment in TeraComm
Research, Inc., a privately held company that is developing next-generation high
speed fiberoptic communications technologies, of $1,000,000 cash and common
stock and common stock warrants valued at $1,800,000. For the quarter ended
September 30, 2000, we have expensed approximately $263,359 ($2,650,000 has been
expensed through September 30, 2000) of this payment as acquired in-process
research and development as TeraComm's product development activity is in the
very early stages.
For the quarter ended September 30, 2000, general and administrative
expense was $554,181 as compared to $354,099 in the third quarter of 1999. This
increase is largely due to an increase in payroll costs over last year of
approximately $106,000, an increase in fees for professional services of
approximately $69,000 attributable to fund raising diligence, and the $11,857 of
expense associated with warrants issued to Joseph Stevens & Company.
For the third quarter of 2000, interest and other income was $22,940
compared to $120,066 in the third quarter of 1999, a decrease of 55%. This
decrease is primarily due to the decline in our cash reserves which resulted in
decreased interest income.
NINE MONTH PERIOD ENDED SEPTEMBER 30, 2000 VS. 1999
In accordance with a license and development agreement, as amended,
Bausch & Lomb Surgical reimburses our subsidiary, Optex, for costs Optex incurs
in developing its Catarex(TM) technology, plus a profit component. In the nine
month period ended September 30, 2000, this agreement provided $3,419,831 of
development revenue, and the related cost of development revenue was $2,735,865.
For the nine month period ended September 30, 1999, this agreement provided
$247,163 of development revenue, and the related cost of development revenue was
$197,730.
For the nine month period ended September 30, 2000, research and
development expense was $682,807 as compared to $1,105,072 net of Bausch & Lomb
reimbursements of $878,199 in the nine month period ended September 30, 1999.
This decrease is due to reduced expenditures for the overall nine month period
on certain development projects.
As of September 30, 2000, we have made an investment in TeraComm
Research, Inc. of $1,000,000 cash and common stock and common stock warrants
valued at $1,800,000. For the nine month period ended September 30, 2000, we
have expensed approximately $2,650,000 of this payment as acquired in-process
research and development as TeraComm's product development activity is in the
very early stages.
-9-
For the nine month period ended September 30, 2000, general and
administrative expense was $2,840,464 as compared to $1,062,887 net of Bausch &
Lomb reimbursements of $43,720 in the nine month period ended September 30,
1999. This increase is largely due to the $1,073,511 of expense associated with
warrants issued to Joseph Stevens & Company, costs of approximately $159,000
incurred in hiring and relocating executives, an increase in payroll costs over
last year of approximately $71,000 and an increase in fees for professional
services of approximately $387,000 attributable to fundraising, due diligence
and closing of the TeraComm investment.
For the nine month period ended September 30, 2000, interest and other
income was $97,267 compared to $242,589 in the nine month period ended September
30, 1999. This decrease is primarily due to the decline in our cash reserves
which resulted in decreased interest income.
LIQUIDITY AND CAPITAL RESOURCES
From inception to September 30, 2000, we incurred an accumulated
deficit of $24,228,125, and we expect to continue to incur additional losses
through the year ending December 31, 2000 and for the foreseeable future.
Our available working capital and capital requirements will depend upon
numerous factors, including progress of our research and development programs;
our progress in and the cost of ongoing and planned preclinical and clinical
testing; the timing and cost of obtaining regulatory approvals; the cost of
filing, prosecuting, defending, and enforcing patent claims and other
intellectual property rights; competing technological and market developments;
changes in our existing collaborative and licensing relationships; the resources
that we devote to developing manufacturing and commercializing capabilities;
technological advances; status of competitors; our ability to establish
collaborative arrangements with other organizations; and our need to purchase
additional capital equipment.
We anticipate that our current resources, together with proceeds from
the Bausch & Lomb agreement, will be sufficient to finance our currently
anticipated needs for operating and capital expenditures for at least the next
nine months. In addition, we will attempt to generate additional capital through
a combination of collaborative agreements, strategic alliances and equity and
debt financing. However, we can give no assurance that we will be able to obtain
additional capital through these sources or upon terms acceptable to us. At
September 30, 2000, we had $1,700,300 in cash and cash equivalents and working
capital of $1,713,626.
On September 28, 2000, Atlantic entered into a convertible preferred
stock and warrants purchase agreement (the "Purchase Agreement") with BH Capital
Investments, L.P. and Excalibur Limited Partnership (together, the "Investors")
pursuant to which Atlantic agreed to sell, and the Investors agreed to purchase
for up to $3,000,000, shares of Atlantic's Series B preferred stock and warrants
to purchase 201,000 shares of Atlantic's common stock (those warrants, "Investor
Warrants"). At the first closing, which occurred on September 28, 2000, for a
$2,000,000 purchase price Atlantic issued to the Investors and to the Escrow
Agent 689,656 shares of Series B preferred stock and Investor Warrants to
purchase 134,000 shares of common stock. Of these, half the shares of Series B
preferred stock and Investor Warrants exercisable for half the shares of common
stock are being held in escrow, pending approval by Atlantic's stockholders of
the proposals to be voted on at a special meeting to be held on December 20,
2000, and have therefore not been recorded or included as outstanding in the
accompanying financial statements. As of September 30, 2000, net proceeds of
approximately $830,000 were received by Atlantic. At the second closing, if any,
Atlantic will, for a $1,000,000 purchase price, issue to the Investors further
shares of Series B preferred stock (the number of shares being a function of the
market price) and Investor Warrants to purchase a further 67,000 shares of
common stock. The Investors' obligation in connection with the second closing
are subject to certain conditions.
On May 12, 2000, we acquired shares of preferred stock representing a
35% ownership interest in TeraComm Research, Inc., a privately-held company that
is developing next-generation high-speed fiberoptic communications technologies.
The purchase price for this ownership interest was $5,000,000 in cash, 200,000
shares of our common stock, and a warrant to purchase a further 200,000 shares
of our common stock. The warrants have a term of three years and are exercisable
at $8.975 per share of common stock, but only if the market price of our common
stock is $30 or more. Of the $5,000,000 cash portion of the purchase price, we
have paid $1,000,000.
On July 18, 2000, Atlantic and TeraComm amended the purchase agreement.
In the amendment, the parties agreed that the $4,000,000 balance of the
$5,000,000 cash component of the purchase price, including the
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$1,000,000 payments due on August 12, 2000 and November 12, 2000, would not be
due until TeraComm achieves a specified milestone. Within ten days after
TeraComm achieves that milestone, we must pay TeraComm $1,000,000 and must
thereafter make to TeraComm three payments of $1,000,000 at three-month
intervals. If we fail to make any of these payments, TeraComm's only recourse
remains reducing proportionately our ownership interest. Our failure to make the
first $1,000,000 payment by midnight at the end of December 30, 2000 (whether or
not TeraComm has reached the milestone) will at the option of TeraComm be deemed
to constitute failure by us to timely make that payment.
On November 10, 2000, TeraComm informed us that it does not expect to
achieve by midnight at the end of December 30, 2000, the milestone specified in
the amendment to the purchase agreement. If TeraComm does not achieve the
milestone, and we do not make by midnight at the end of December 30, 2000, a
$1,000,000 payment towards the balance of the cash portion of the purchase
price, we will be deemed to have surrendered to TeraComm a proportion of our
TeraComm shares equal to the proportion of the dollar value of the purchase
price for our TeraComm shares ($6,795,000) that is represented by the unpaid
$4,000,000 of the cash portion of the purchase price. This would have the effect
of reducing to 14.4% our ownership interest in TeraComm. We expect that if
TeraComm does not achieve the milestone, we will not make any further payments
towards the cash portion of the purchase price.
We do not currently have the full amount of the unpaid portion of the
cash purchase price for our TeraComm shares. If circumstances make it desirable
for us to pay the unpaid portion of the cash purchase price, we would endeavor
to raise the necessary amount through debt or equity financing, or a combination
of both. It is, however, possible that we will not be able to raise the required
amount.
RECENTLY ISSUED ACCOUNTING STANDARDS
In December 1999, the staff of the Commission issued Staff Accounting
Bulletin or SAB No. 101, Revenue Recognition in Financial Statements. SAB No.101
summarizes certain of the staff's views in applying generally accepted
accounting principles to revenue recognition in financial statements, including
the recognition of non-refundable fees received upon entering into arrangements.
This SAB, as amended, must be adopted no later than the fourth quarter of fiscal
years beginning after December 15, 1999 with an effective date of January 1,
2000 and the recognition of a cumulative effect adjustment calculated as of
January 1, 2000. We are in the process of evaluating this SAB and the effect it
will have on our consolidated financial statements and current revenue
recognition policy.
RESEARCH AND DEVELOPMENT ACTIVITIES
Preclinical and clinical studies involving our primary technologies are
proceeding according to plan.
Optex
Optex's development of the Catarex device is continuing in cooperation
with Bausch & Lomb. Bausch & Lomb is preparing to file a 510(k) with the U.S.
Food and Drug Administration, or the "FDA," for the Catarex device. In a 510(k)
filing, a company requests that the FDA treat a given technology as
substantially equivalent to an already approved technology. In preparation for
this filing, Bausch & Lomb had a pre-filing meeting with the FDA in October
2000. Based on the results of this meeting Bausch & Lomb is in the process of
compiling the required data for the 510(k) and expects to file that application
when all the required data are completed.
CT-3
We are continuing to develop CT-3, a patented synthetic derivative of
tetrahydrocannabinol (THC), the active ingredient in marijuana, as an
alternative to nonsteroidal anti-inflammatory drugs (NSAIDs). In May 2000, the
FDA approved an Investigational New Drug application, or "IND," to begin
clinical trials for CT-3 in the U.S. In July 2000 we began in Paris, France, the
first Phase I clinical study to examine the effects of CT-3 on the central
nervous system. CT-3 was designed to maximize the medical properties of
marijuana without producing undesirable psychoactive effects. This trial used a
sensitive test developed by the National Institute on Drug Abuse to measure
marijuana-like effects caused by drugs, and the trial confirmed that CT-3 does
not produce any such effects. The study was completed in August, and the final
report is expected in December 2000.
-11-
Gemini
Our subsidiary Gemini Technologies, Inc. is continuing its research on
antisense enhancing technology. On August 14, 2000, Gemini was awarded a Small
Business Innovation Research (SBIR) Phase II grant by the National Institute for
Allergy and Infectious Diseases (NIAID), a unit of the National Institutes of
Health (NIH). The grant, which totals approximately $750,000, will be used to
fund a pre-clinical efficacy study using aerosolized 2-5A antisense compound for
the inhibition of respiratory syncytial virus (RSV) in monkeys. It also will
provide funds for the toxicological and pharmacological studies needed to file
an investigational new drug (IND) application with the FDA to begin clinical
studies in humans.
This research is intended to build upon research previously published
in the Proceedings of the National Academy of Sciences (PNAS) Vol. 95, July
1998, that documented the compound's effectiveness against a broad spectrum of
RSV strains. Data collected to date indicate that the molecule to be tested has
130 times greater in vitro potency than Ribavarin (Virazole), one of two
FDA-approved treatments for RSV infections (the other treatment is a monoclonal
antibody recommended for use in high-risk infants only). This molecule has also
been shown to be stable against degradative enzymes, and is capable of being
absorbed into lung tissue when administered in a droplet formulation.
The primate study will be conducted at the Tulane Regional Primate
Research Center in Covington, Louisiana. Vicki Traina-Dorge, Ph.D., will
overview the animal study. Hagen Cramer, Ph.D., of Gemini will design the study
and develop the aerosolization method. He will also act as Principle
Investigator of the grant. All of the analyses will be conducted at the Gemini
research facility in Cleveland, Ohio. Other team members of Gemini include Jim
Okicki, chemical research associate, Frank Longano, biology research associate,
Lateef Saffore, biology research associate, Robert Silverman, Ph.D., consultant,
and Doug Leaman, Ph.D., consultant.
By focusing the 2-5A antisense program on primate-oriented RSV, we will
be able to more effectively pursue corporate partnerships to develop an RSV
therapeutic treatment as a lead product candidate for our 2-5A antisense
technology. After we enter into such a partnership, we plan to expand our
research and development of 2-5A antisense technology into additional areas of
potential clinical use. These additional areas include other infectious diseases
(herpes, human immunodeficiency virus), certain cancers (chronic myelogenous
leukemia, glioblastoma), conditions modulated by 5-alpha reductase and
dihydrotestosterone receptors (acne and androgenic alopecia), and aspects of the
interferon pathway that are mediated by PKR (a protein kinase enzyme), all of
which have shown promising in vitro studies to date.
TeraComm
On May 12, 2000, we acquired a 35% ownership interest in TeraComm
Research, Inc. (See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources.") TeraComm is
developing a fiberoptic transmitter that uses a high-temperature superconductor
(HTS) material to switch a laser beam on and off with a high-speed electronic
digital signal. HTS materials have zero electrical resistance at low
temperatures (< 70 K), and also can have very high optical reflectance in their
superconducting state while they can transmit light in their normal
(non-superconducting) state. TeraComm discovered that a small electric current
in an HTS material could switch the material between states, and do so very
quickly--in less than a millionth millionth of a second. Because the HTS optical
switch works best at far infrared wavelengths and these optical waves are too
large to send through an optical fiber, the TeraComm invention employs an
optical wavelength converter to change the waves to the band that is just right
for the fiber.
Thus far, TeraComm has successfully developed methods of producing
effective HTS thin-films with metal electrodes, has successfully demonstrated
control of optical transmission in HTS films using electric current, and has
been awarded patents covering implementation of this technology for fiberoptic
telecommunications. To date, we have provided TeraComm with approximately
$1,000,000 of development funds. Our investment is enabling TeraComm to continue
its development program.
On May 23, 2000, we announced that we had appointed Walter L. Glomb,
Jr., as Vice President. Mr. Glomb is responsible for supporting our investment
in TeraComm and identifying complimentary electronic infrastructure and
communication technologies for us to develop. Mr. Glomb is based in our new
office in Vernon, Connecticut, in the center of the major cluster of photonics
companies that stretches from Boston to New Jersey.
-12-
Atlantic's new strategy focuses on our developing strategic partnerships with
early-stage companies, and we feel that this region promises to be a rich source
of such partnerships.
On November 10, 2000, TeraComm informed us that it does not expect to
achieve by midnight at the end of December 30, 2000, the milestone specified in
the amendment to the purchase agreement. We expect that if TeraComm does not
achieve the milestone, we will not make any further payments towards the cash
portion of the purchase price of our shares of TeraComm preferred stock. (See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources.")
-13-
PART II -- OTHER INFORMATION
Item 1. Legal Matters
Litigation Brought by Christopher R. Richied
On May 13, 1999, Christopher R. Richied filed suit against a group of
defendants, including Atlantic, in the U.S. District Court for the Southern
District of New York. This lawsuit is described in our Quarterly Reports on Form
10-QSB for the quarterly periods ended June 30, 1999 and September 30, 1999. As
we reported in our Quarterly Report on Form 10-QSB for the quarterly period
ended June 30, 2000, this case was settled by the parties on August 8, 2000, and
the defendants have agreed that Atlantic is not required to contribute to any
settlement payment and will not be responsible for any costs incurred in
defending this litigation.
Arbitration Brought by the Cleveland Clinic Foundation
Our subsidiary Gemini has an exclusive worldwide sublicense from the
Cleveland Clinic Foundation to a U.S. patent and related patent applications, as
well as corresponding foreign applications, relating to 2-5A chimeric antisense
technology and its use for selective degradation of targeted RNA. On May 8,
2000, the Cleveland Clinic Foundation filed a claim for arbitration before the
American Arbitration Association to terminate this sublicense, claiming that we
have breached the sublicense by failing to fulfill our obligations under the
sublicense.
Item 2. Changes in Securities and Use of Proceeds
(c) Recent sales of unregistered securities; use of proceeds from
registered securities
On September 28, 2000, Atlantic entered into a convertible preferred
stock and warrants purchase agreement (the "Purchase Agreement") with BH Capital
Investments, L.P. and Excalibur Limited Partnership (together, the "Investors")
pursuant to which we agreed to sell, and the Investors agreed to purchase for up
to $3,000,000, shares of our Series B preferred stock and warrants to purchase
201,000 shares of our common stock (those warrants, "Investor Warrants"). The
terms of the Series B preferred stock are described in the certificate of
designations, preferences and rights of Series B convertible preferred stock. At
the first closing, which occurred on September 28, 2000, for a $2,000,000
purchase price we issued to the Investors and to the Escrow Agent 689,656 shares
of Series B preferred stock and Investor Warrants to purchase 134,000 shares of
common stock. Of these, half the shares of Series B preferred stock and Investor
Warrants exercisable for half the shares of common stock are being held in
escrow, pending approval by Atlantic's stockholders of the proposals to be voted
on at a special meeting to be held December 20, 2000, and therefore have not
been recorded or included as outstanding in the accompanying financial
statements. As of September 30, 2000, net proceeds of approximately $830,000
were received by Atlantic. At the second closing, if any, we will, for a
$1,000,000 purchase price, issue to the Investors further shares of Series B
preferred stock (the number of shares being a function of the market price) and
Investor Warrants to purchase a further 67,000 shares of common stock. The
Investors' obligations in connection with the second closing are subject to
certain conditions described in the Purchase Agreement.
Exemption
The Series B preferred stock and Investor Warrants were issued in
reliance upon exemption under Regulation D of the Securities Act.
Conversion of Series B preferred stock
The Series B preferred stock is convertible, at the holder's option,
into shares of common stock. The conversion rate for the Series B preferred
stock is equal to the price per share paid for the Series B preferred stock
divided by the conversion price in effect at the time of conversion. The
conversion price is the lower of (x) $3.00, (y) the market price, and (z) the
average of the two lowest closing bid prices on the principal market of the
common stock out of the 15 trading days immediately prior to conversion, which
will be adjusted proportionately for any reorganizations, reclassifications,
stock splits, stock dividends, reverse stock splits and similar events.
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The conversion price will be reduced by an additional 5% if the common
stock is not listed on either the Nasdaq SmallCap Market or Nasdaq National
Market on that date, and in no event will the conversion price be lower than the
Floor Price, if any. The Floor Price means $1.50 for the conversion of a share
of Series B preferred stock effected during the 12 months following the
applicable issue date for that share, subject to adjustment as follows:
o If the conversion price is below the Floor Price for 30 calendar days at
any time after the issue date for that share, then the Floor Price will
thereafter equal $1.00 (but in no event for longer than 12 months
following the applicable issue date).
o The conversion price will be reduced by 15% and will not be subject to the
Floor Price if any of the following events occurs:
(a) for any period of five consecutive trading days there is no closing
bid price of the common stock;
(b) the common stock ceases to be listed for trading on any of the NYSE,
the AMEX, the Nasdaq National Market or the Nasdaq SmallCap Market;
or
(c) A. Joseph Rudick resigns as Chief Executive Officer or Frederic P.
Zotos resigns as President of Atlantic (or the employment of either
of them terminations as a result of death or disability).
o The conversion price will not be subject to the Floor Price and will be as
otherwise calculated pursuant to the Series B Certificate of Designations
if any of the following events occur:
(a) Bausch & Lomb Surgical ("B&L") fails to file before January 31,
2001, an application with the U.S. Food and Drug Administration (the
"FDA") seeking approval to market our Catarex technology;
(b) the FDA does not grant final approval on or before June 1, 2001 to
B&L to market the Catarex technology; or
(c) we fail to secure by December 27, 2000 the stockholder approvals to
be voted on at the special meeting.
Additionally, the Series B Certificate of Designations provides that
the Investors may not convert their shares of Series B preferred stock if doing
so would result in our issuing a number of shares of common stock in excess of
the limit imposed by the rules of the Nasdaq Smallcap Market.
Exercise of Investor Warrants
The Investor Warrants may be exercised for shares of common stock. The
exercise price for one share of common stock is equal to 110% of the lower of
(1) the market price on the issue date or (2) the market price one hundred
eighty days after the applicable closing date. Each Investor Warrant is
exercisable five years from the date of granting. The Investor Warrants may not
be exercised if doing so would result in our issuing a number of shares of
common stock in excess of the limit imposed by the rules of the Nasdaq SmallCap
Market.
Item 4. Submission of Matters to a Vote of Security Holders
On September 5, 2000, Atlantic filed with the Securities and Exchange
Commission a definitive proxy statement seeking stockholder approval of the
following two proposals at the annual meeting of stockholders held on September
29, 2000:
1. RESOLVED, that A. Joseph Rudick, Frederic P. Zotos, Steve H. Kanzer
and Peter O. Kliem are hereby elected as directors of Atlantic, to serve until
their respective successors are duly elected and qualified.
2. RESOLVED, that the board of directors' selection of KPMG LLP to
serve as Atlantic's independent auditors for the year ending December 31, 2000,
hereby is ratified.
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Both proposals were approved by our stockholders. Tabulated below are
the number of shares and votes in favor of these proposals, with the total
voting power represented by the common stock and the preferred stock as of the
record date of August 24, 2000, being 7,274,836:
- --------------------------------------------------------------------------------------------------------
Proposal 1 Proposal 2
- --------------------------------------------------------------------------------------------------------
Consenting shares of common stock All nominees: 4,024,983 4,023,108
- --------------------------------------------------------------------------------------------------------
Votes represented by those shares of All nominees: 4,024,983 4,023,108
common stock
- --------------------------------------------------------------------------------------------------------
Consenting shares of preferred stock A. Joseph Rudick: 350,983 329,920
Steve H. Kanzer: 329,920
Frederic P. Zotos: 329,920
Peter O. Kliem: 350,983
- --------------------------------------------------------------------------------------------------------
Votes represented by those shares of A. Joseph Rudick: 1,147,714 1,078,838
preferred stock Steve H. Kanzer: 1,078,838
Frederic P. Zotos: 1,078,838
Peter O. Kliem: 1,147,714
- --------------------------------------------------------------------------------------------------------
Aggregate votes represented A. Joseph Rudick: 5,172,697 5,101,946
Steve H. Kanzer: 5,103,821
Frederic P. Zotos: 5,103,821
Peter O. Kliem: 5,172,697
- --------------------------------------------------------------------------------------------------------
Aggregate votes represented, expressed A. Joseph Rudick: 98.7% 98.2%
as percentage of votes represented by Steve H. Kanzer: 98.2%
all shares Frederic P. Zotos: 98.2%
Peter O. Kliem: 98.7%
- --------------------------------------------------------------------------------------------------------
Item 5. Other Information
On July 18, 2000, Atlantic and TeraComm Research, Inc. amended the
Preferred Stock Purchase Agreement dated May 12, 2000, pursuant to which we
purchased 1,400 shares of TeraComm preferred stock representing a 35% ownership
interest in TeraComm.
In this amendment, the parties agreed that the $4,000,000 balance of
the $5,000,000 cash component of the purchase price, including the $1,000,000
payments due on August 12, 2000 and November 12, 2000, would not be due until
TeraComm achieves a certain milestone. Within ten days after TeraComm achieves
that milestone, we must pay TeraComm $1,000,000 and must thereafter make to
TeraComm three payments of $1,000,000 at three-month intervals. If we fail to
make any of these payments, TeraComm's only recourse remains reducing
proportionately our ownership interest. Our failure to make the first $1,000,000
payment by midnight at the end of December 30, 2000 (whether or not TeraComm has
reached the milestone) will at the option of TeraComm be deemed to constitute
failure by us to timely make that payment.
This amendment allows Atlantic to limit its financial commitment to
TeraComm until such time as TeraComm has been able to demonstrate in practice
some of the theoretical potential of its technology.
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Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Description
- ----------- -----------
3.1 Certificate of Designations, Preferences and Rights of Series
B Convertible Preferred Stock of Atlantic filed on September
28, 2000 (filed herewith).
3.2 Certificate of Amendment of the Certificate of Designations,
Preferences and Rights of Series B Convertible Preferred Stock
of Atlantic filed on November 17, 2000 (filed herewith).
10.1 Amendment dated as of July 18, 2000, to the Preferred Stock
Purchase Agreement dated May 12, 2000, between Atlantic and
TeraComm Research, Inc. (filed herewith).
10.2 Convertible Preferred Stock and Warrants Purchase Agreement
dated September 28, 2000, between Atlantic, BH Capital
Investments, L.P. and Excalibur Limited Partnership (filed
herewith).
10.3 Amendment No. 1, dated October 31, 2000, to Convertible
Preferred Stock and Warrants Purchase Agreement dated
September 28, 2000, between Atlantic, BH Capital Investments,
L.P. and Excalibur Limited Partnership (filed herewith).
10.4 Registration Rights Agreement dated September 28, 2000 between
Atlantic, BH Capital Investments, L.P. and Excalibur Limited
Partnership (filed herewith).
10.5 Escrow Agreement dated September 28, 2000 between Atlantic, BH
Capital Investments, L.P. and Excalibur Limited Partnership
(filed herewith).
10.6 Form of Stock Purchase Warrants issued on September 28, 2000
to BH Capital Investments, L.P., exercisable for shares of
common stock of Atlantic (filed herewith).
10.7 Form of Stock Purchase Warrants issued on September 28, 2000
to Excalibur Limited Partnership, exercisable for shares of
common stock of Atlantic (filed herewith).
(b) Form 8-K
No reports on Form 8-K were filed during the quarter for which this
report is filed.
-17-
SIGNATURES
In accordance with the requirements of the Exchange Act, Atlantic
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ATLANTIC TECHNOLOGY VENTURES, INC.
Date: November 20, 2000 /s/ Frederic P. Zotos
----------------------
Frederic P. Zotos
President
Date: November 20, 2000 /s/ Nicholas J. Rossettos
--------------------------
Nicholas J. Rossettos
Chief Financial Officer
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