SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10QSB
Quarterly Report under Section 13 or 15(d) of
the Securities Exchange Act of 1934
CIK NO.: 0001098329
For Quarter Ended
September 30, 2002
ATNG, INC.
(Exact name of registrant as specified in its charter)
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TEXAS 0-28519 76-0510754
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(State or other jurisdiction of (Commission File Number) (IRS Employer Identification
incorporation) No.)
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3435 Wilshire Blvd., Suite 2040, Los Angeles, California 90010
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (213) 401-2031
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to the filing
requirements for at least the past 90 days.
Yes X No
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
38,545,858 as of September 30, 2002
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ATNG, Inc.
(A Development Stage Company)
Consolidated Balance Sheets
ASSETS
September 30, December 31,
2002 2001
(Unaudited)
CURRENT ASSETS
Cash $3,596 $82,069
Prepaid Advertising 0 1,165,000
Accounts Receivable-Net 0 25,000
Other 0 16,805
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Total Current Assets 3,596 1,288,874
PROPERTY AND EQUIPMENT-NET 0 64,807
INTELLECTUAL PROPERTY 0 5,539
PREPAID ADVERTISING 0 1,110,000
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$3,596 $2,469,220
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LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Accounts Payable $1,309,562 $1,073,913
Accrued Salaries 2,408,064 1,635,019
Payroll Taxes 492,745 262,425
Accrued Interest 135,781 43,193
Notes Payable-Related 469,497 389,710
Notes Payable-Other 318,000 348,000
Notes Payable-Bank 300,000
Deferred Income 0 60,355
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Total Current Liabilities 5,433,649 3,812,615
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OTHER OBLIGATIONS 318,100 186,750
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COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIENCY
Common Stock, $.0001 par value:
Authorized 100,000,000
Issued 39,545,858;30,352,728 respectively;
Outstanding 38,545,858; 29,352,728 respectively 3,856 2,935
Capital in Excess of Par Value 18,499,519 11,371,563
Deficit Accumulated During Development Stage (24,251,528) (12,904,643)
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Stockholders' Deficiency (5,748,153) (1,530,145)
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$3,596 $2,469,220
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The accompanying notes are an integral part of these financial statements
ATNG, Inc.
(A Development Stage Company)
Consolidated Statement of Operations
Three Months Ended Nine Months Ended Cumulative to
September 30 September 30 September 30,
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2002 2001 2002 2001 2002
---- ---- ---- ---- ----
(Unaudited) (Unaudited)
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REVENUES
Telecommunication services-net $32,577 $ 79,124 $ 331,239 $ 98,434 $ 616,166
Advertising - Net 157,271 358,527 358,527
Services and Other-Net 2,852 89,397 89,397
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Total Revenue 192,700 79,124 779,163 98,434 1,064,090
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OPERATING EXPENSES
Cost of Services 205,133 335,984 746,891 404,113 1,609,077
Advertising 283,500 511 1,013,312 125,136 4,401,746
General & Administrative 697,806 3,486,049 3,409,960 4,576,386 10,949,701
Write-off of intellectual
property 5,538 6,995 5,538 107,715 113,253
Write-off of prepaid
advertising 1,387,500 1,387,500 1,387,500
Interest 63,095 33,991 243,389 48,654 384,726
Depreciation 0 6,657 9,798 21,792 48,544
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2,642,573 3,870,187 6,,816,796 5,283,796 18,894,548
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OTHER EXPENSE
Disposal of Fixed Assets 62,448 127,255 127,255
Excess of purchase price
over net book value of
acquired subsidiaries 3,162,202 3,162,202
Investment Banking Fee 1,909,640 1,909,640
Merger and reorganization
costs 43,000 110,561 472,181
Write-off of investment in
marketable securities 149,792
Write-off of investment in
joint venture 600,000
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105,448 0 5,309,658 0 6,421,070
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NET (LOSS) ($2,555,321) ($3,791,063) ($11,346,884) ($5,185,362) ($24,251,528)
======================================================================================
NET (LOSS) PER COMMON SHARE BASIC
AND DILUTED ($0.07) ($0.14) ($0.34) ($0.20) ($0.83)
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WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING BASIC AND DILUTED 37,279,256 26,586,779 33,212,238 26,089,764 29,301,031
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The accompanying notes are an integral part of these financial statements
ATNG, Inc.
(A Development Stage Company)
Statements of Cash Flow
Cumulative to
September 30,
2002 2001 2002
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CASH FLOWS FROM OPERATING ACTIVITIES
Net (Loss) ($11,346,884) ($5,187,675) ($24,251,528)
Adjustments to reconcile net (loss) to net cash (used)
by operating activities
Depreciation 9,798 21,795 48,544
Amortization of Prepaid Advertising 887,500 887,500
Debt for Expenses 80,433
Write off of excess purchase price of investment in subsidiary 3,162,202 3,162,202
Write off of fixed assets 127,257 127,257
Write off of Intellectual Property 5,538 96,807 113,253
Write Off of Marketable Securities 1,387,500 1,387,500
Write Off of Korean Joint Venture 600,000
Common Stock Warrants Issued for Services 21,548
Common Stock Issued for Debt 11,250
Common Stock issued for Services, Salaries and Interest 2,742,127 3,010,000 6,866,196
Common Stock issued for Advertising 109,800 3,000,000 3,109,800
Common Stock issued for Investment Banking Services 1,385,550 1,385,550
(Increase) in other obligations 177,460
Changes in assts and liabilities
(Inc) Dec in Accounts Receivable, Prepaids and Other 90,999 (26,347) 49,194
Increase in Accounts Payable and Accrued Expenses 513,878 862,956 1,893,409
Increase in Accrued salaries 764,937 643,289 2,399,956
Notes Payable transferred to Stock (Other Obligations)
(Increase) in Prepaid Advertising (3,000,000)
Increase (Decrease) in Deferred Revenue (261,825) (201,470)
Other
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Net Cash (Used) by Operating Activities (421,623) (567,925) (1,993,404)
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CASH FLOWS FROM INVESTING ACTIVITIES
Cash paid for property and equipment (19,048) (36,621) (87,602)
Acquisition of subsidiaries net of cash acquired 5,585 5,585
Cash paid for intellectual property (113,253)
Investment in Korean Joint Venture (600,000)
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Net Cash (Used) in Investing Activities (13,463) (36,621) (795,270)
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CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings-Related 128,763 251,500 583,763
Repayment of borrowings-Related (48,976) (113,176)
Proceeds from borrowings-Other 45,000 127,000 415,000
Repayment of borrowings-Other (30,000) (52,000)
Proceeds from borrowings-Bank 74,076 74,076
Cash Paid for Offering Costs (102,958)
Proceeds from sale of Common Stock 187,750 224,527 1,987,565
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Net Cash Provided by Financing Activities 356,613 603,027 2,792,270
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NET INCREASE (DECREASE) IN CASH (78,473) (1,519) 3,596
CASH BEGINNING OF PERIOD 82,069 1,619 0
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CASH END OF PERIOD $3,596 $100 $3,596
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The accompanying notes are an integral part of these financial statements
ATNG, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
September 30, 2002
(Unaudited)
NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying interim consolidated financial statements of ATNG, Inc. (the
Company) are unaudited. In the opinion of management, the interim data includes
all adjustments, consisting only of normal recurring adjustments, necessary for
a fair presentation of the results for the interim period. The results of
operations for the period ended September 30, 2002 are not necessarily
indicative of the operating results for the entire year.
We have prepared the financial statements included herein pursuant to the rules
and regulations of the Securities and Exchange Commission. Certain information
and footnote disclosure normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations. We believe the disclosures made
are adequate to make the information not misleading and recommend that these
condensed financial statements be read in conjunction with the financial
statements and notes included in our Form 10-KSB for the year ended December 31,
2001.
The Company was incorporated under the laws of the State of Nevada on January
20, 2000. On October 16, 2000, the Company completed an agreement and Plan of
Reorganization (the Agreement) with Pathobiotek Diagnostics, Inc. (Pathobiotek),
a public Company incorporated under the laws of the State of Texas, whereby the
shareholders of the Company received 27,836,186 shares of Pathobiotek common
stock for all of the outstanding shares of common stock of the Company. On
completion of the transaction, the Company became a wholly owned subsidiary of
Pathobiotek. However, since this transaction resulted in the existing
shareholders of the Company acquiring control of Pathobiotek, for financial
reporting purposes the business combination is accounted for as an additional
capitalization of Pathobiotek (a reverse acquisition with the Company as the
accounting acquirer). Under the terms of the Agreement, the Company agrees to
pay $250,000 as consideration for Pathobiotek.
The Company acquired Asian Infolink Inc. and Segment Data Management, Inc. as
wholly owned subsidiaries in February 2002. All assets and liabilities were
acquired in exchange for 1,800,000 shares of common stock valued at $1.55 per
share. The transaction was accounted for as a purchase and the excess of the
purchase price over the net book value of assets acquired has been written off
against operations. The financial statements for the period ended September 30,
2002 contain the financial statements for the companies acquired. All
intercompany balances and transactions have been eliminated in consolidation.
ATNG, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
September 30, 2002
(Unaudited)
The Company provides voice and data telecommunications services utilizing Voice
over Packet ("VOP") network. Its signature product is BlueKiwi residential long
distance service. BlueKiwi is a flat rate, unlimited long distance calling plan
offering instate and state-to-state calling in the contiguous U.S. In May of
2002 the Company introduced Chunsa Telecom a prepaid long distance calling plan
to South Korea. The Company is considered a development stage company as defined
by Statement of Financial Accounting Standards (SFAS) 7.
During 2001, the Company commenced operations and earned its initial revenue
from telecommunication services. Its efforts, since inception, have consisted of
financing activities, the acquisition of technology and initial test marketing
of its services.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
REVENUE RECOGNITION
Revenue is recognized as services are provided to customers. Monthly recurring
charges include fees paid by customers for lines of service, additional features
on those lines and co-location space. These charges are billed monthly, in
advance, and are fully earned during the month. Usage charges and reciprocal
compensation charges are billed in arrears and are fully earned when billed.
Initial, non-recurring fees are deferred and amortized over estimated customer
lives.
ADVERTISING
The Company expenses costs of print and media advertisements as of the first
date the advertisements took place. Advertising costs which have future
benefits, generally in the form of revenue, are capitalized and will be
amortized on a cost-pool-by-cost-pool basis over the period during which the
future benefits are expected to be received based on the ratio that current
period revenues for the direct-response advertising cost pool bear to the total
of current and estimated future period revenues for that
direct-response-advertising cost pool. These costs consist of radio and
newspaper advertising requiring response to a toll free telephone marketer.
Management estimates that the amortization period will not exceed two years, and
will periodically review and assess the recoverability of the prepaid
advertising and write down the asset to its estimated recoverable value if
deemed necessary. As of September 30, 2002 the Company wrote off its remaining
prepaid advertising.
ATNG, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
September 30, 2002
(Unaudited)
(LOSS) PER SHARE
(Loss) per common share is computed based on the weighted average number of
common shares outstanding during the periods. Convertible equity instruments,
such as stock warrants, are not considered in the calculation of net loss per
share as their inclusion would be antidilutive.
CASH EQUIVALENTS
For purposes of reporting cash flows, the Company considers as cash equivalents
all highly liquid investments with a maturity of three months or less at the
time of purchase. At September 30, 2002, there were no cash equivalents.
NOTE 2 - BASIS OF ACCOUNTING
The accompanying financial statements have been prepared on the basis of
accounting principles applicable to a going concern, which contemplates the
realization of assets and extinguishments of liabilities in the normal course of
business. At September 30, 2002, the Company had commenced principal operations
and, as shown in the accompanying financial statements, has incurred losses
during the period from inception to September 30, 2002 of $24,251,528 and has a
working capital deficiency of $5,430,053.
NOTE 3-COMMON STOCK
During the first nine months of 2002 the Company issued an aggregate of
9,193,130 of its common stock for services, acquisition of subsidiaries,
payroll, consultants and investment banking.
ATNG, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
September 30, 2002
(Unaudited)
NOTE 5- SIGNIFICANT TRANSACTIONS AND EVENTS
During the first nine months of 2002 the Company entered into various agreements
in conjunction with its principal operations. The significant agreements are as
follows:
o Corporate Sponsorship/Advertising Agreement entered into January 4,
2002 for insertion of advertising into magazines distributed to school
districts. Total estimated distributions of 5,115,000. Cost to be paid
as a commission from sales.
o Employment agreement entered into January 30, 2002 which engages the
services of a senior network executive with an annual salary of
$120,000 plus stock incentives of 250,000 shares the first year of
employment and 250,000 shares the second year of employment and an
additional $300,000 of stock from a proposed offering of S-8 stock.
Annual bonus to be determined and paid in stock.
o Wholesale Minutes Sales Agreement entered into February 1, 2002 for a
period of 90 days. Not renewed.
o Wholesale Minutes Sales Agreement entered into March 29, 2002 for a
period of one year.
o Purchase of Stock Agreements entered into February 20, 2002 for the
purchase of Asian Infolink, Inc. and Segment Data Management, Inc. for
a total of 1,800,000 shares of company stock. The contracts also call
for a payment of S-8 stock totaling $500,000 for the services of two
key employees of the acquired companies.
o Consultant Agreement entered into March 28, 2002 for merger and
acquisition and public relations services. Contract calls for payment
of 250,000 shares of stock each quarter starting in the second quarter
of 2002 through the first quarter of 2003. Agreement may be terminated
by either party at the end of a quarter.
o In conjunction with the acquisition of Asian Infolink, Inc. (AIL) and
Segment Data Management, Inc. (SDM) the Company acquired its own
customer sales and service operations and data processing previously
provided by third party vendors. AIL and SDM are based in Los Angeles,
CA. and the Company's headquarters were in Memphis, TN. In view of the
difficulty in managing the operations from Memphis, TN. The Board of
Directors decided to close the Memphis office and move all operations
to Los Angeles. In conjunction with the move two senior executives
transferred to Los Angeles and two remained in Memphis, TN. All other
Memphis employees (7) were laid off. The Company continues to retain a
national sales office in Memphis. The Company accounted for this
acquisition using the purchase method and the excess of the purchase
price over the net book value of the acquired subsidiaries of
$3,162,202 has been charged to operations. Also, the remaining net
book value of the fixed assets and leasehold improvements of $64,807
attributable to the Memphis operations.
o The Company entered into two agreements for Investment Banking and
Merger and Acquisitions with one company and one individual. The
Company issued 1,500,000 shares of stock valued at $.85 per share for
a total consideration of $1,275,000 for services to be performed over
one year. The contract with the individual provides for ongoing merger
and acquisition services for a period of one year in exchange for
282,000 shares of stock valued at $.51 per share for a total
consideration of $144,000. These two amounts totaling $1,419,000 have
been charged to operations . In view of the uncertain nature and
timing of these services the Company charged operations at the time
the contracts were signed.
ATNG, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
September 30, 2002
(Unaudited)
o Media and Stock Purchase Agreement entered into March 5, 2002. The
agreement provides for the purchase of Media from the Company in
exchange for stock and a percentage of revenues directly derived from
the use of the media to sell the product of the contracting company.
In exchange for $5,000,000 of media the Company will receive 1,000,000
shares from a proposed stock offering plus 30% of the gross revenue
from the sale of the software program less $5 shipping and handling
from those sales directly attributable to the media advertising. At
September 30, 2002 none of the media had been used and no revenue
had resulted. The 1,000,000 shares of stock will be held in escrow by
the company attorney pending consummation of the media usage.
o Public Relations and Mergers and Acquisition services agreements
entered into March 28, 2002 provides for services to be rendered in
exchange for 250,000 shares of restricted stock per quarter for one
year. May be cancelled by either party at the end of any quarter.
o Two Consulting and Investor Relations agreements entered into in May
2002 provide for services to be rendered in exchange for 165,000
shares of restricted common stock. Agreement is for nine months and
may be cancelled by either party upon proper notice.
o Carrier Service agreement entered into on June 3, 2002 which provides
for network service to Korea for twelve months.
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
CHANGES IN FINANCIAL CONDITION
Operations for the three and nine months ended September 30, 2001 and 2002
represent two different phases in the Company's development stage. In the nine
months ended September 30, 2001 the Company launched a long distance flat rate
program to Korea using third party vendors. The quality of the telephone service
was not good and the customer sales and service vendor did not provide adequate
service and the program was terminated. All operations have ceased in ong
distance business. The company does not have sufficient current assets to pay
current liabilities, and cannot realize any value from its prepaid advertising
asset without a business. The prepaid advertising is the company's only
significant asset, but has been written off because all business operations have
ceased. has been terminated. Also the company has ceased all operations in Asian
Infolink and Sequented Data divisions due to continuing losses. The company has
no operations at this time and is contemplating whether to attempt a Chapter 11
Reorganization or a Private Reorganization.
RESULTS OF OPERATIONS FOR THE QUARTER ENDED SEPTEMBER 30, 2002 COMPARED TO SAME
PERIOD IN 2001
The Company had combined revenues in the quarter ended September 30, 2002 of
$192,700 compared to $79,124 in the same period in 2001. Of those revenues
$32,577 were telecommunication services, and $157,271 were advertising. The
Company incurred $2,642,573 in operating expenses in the quarter compared to
$3,870,187 in the same quarter in 2001. The Company incurred in the quarter
extraordinary expenses consisting of $62,448 in write off on disposal of assets,
and incurred $43,000 in reorganization costs. The expenses of advertising
increased to $283,500 in 2002 from $511 in 2001, cost of services decreased to
$205,133 in 2002 compared to $335,984 in 2001, and general and administrative
decreased to $697,806 in 2002 compared to $3,486,049 in 2001. Interest expenses
increased to $63,095 in 2002 over $33,991 in 2001. Prepaid adveritsing in an
amount of $1,387,500 was written off in the current quarter.
The net loss was ($2,555,321) in the quarter in 2002 compared to ($3,791,063) in
the quarter in 2001. The net loss per share was ($.07) in the quarter in 2002
compared to ($.14) in 2001 in the quarter.
The third quarter of 2002 continued to present numerous problems. The Company
had a large number of cancellations which impacted operations through lost
revenue and refunds. The network provider terminated service in the third
quarter and all long distance sales and operations were terminated. All of the
Asian Infolink and Sequented Data operations were ceased due to unprofitability.
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002 COMPARED TO
THE SAME PERIOD IN 2001
Revenues for the first nine months of 2002 consist of $331,239 from the flat
rate residential program BlueKiwi (now terminated) and $358,527 of sales from
advertising sold to merchants to advertise on the Korean Directory service of
Asian Infolink, Inc. Sale of data management services by Segment Data Management
Inc. of $89,397 in 2002 accounted for the remainder of Revenue. In thenine
months ended September 30, 2001 the company only had $98,434 in long distance
revenue.
The company had total revenue in the period of $779,163 in 2002 compared to
$98,434 in 2001.
The operating expenses for the nine month period were $6,816,389 in 2002
compared to $5,283,796 in 2001. The company incurred other expenses of
$5,309,658 in the period in 2002 compared to $0 in the same period in
2001. The largest components of the other expenses were write offs of
$3,162,202 for excess of purchase price over net book value of acquired
subsidiaries and $1,909,640 in investment banking fees.
The Company incurred a net loss of ($11,346,884) for the first nine months in
2002 compared to ($5,185,362) in the same period in 2001. The net loss per share
was ($.34) in 2002 and ($.20) in 2001. The trend of losses is expected to
continue until revenues are achieved which exceed operating and other expenses.
The company has ceased all operations, and does not know if or when it will
recommence any operations.
LIQUIDITY AND CAPITAL RESOURCES
The Company does not believe it can raise the necessary capital to fund the
operations of the Company.
The Company assumed a bank loan of Asian Infolink, Inc. in the amount of
$225,925. Additional borrowings were made during the period of $74,075. The loan
was due November 20, 2002 and bears interest at 7% per annum.
The Company has no plans at the present to neither hire any additional employees
nor devote any significant amount to Research and Development until such time as
the growth of the business has generated sufficient cash flows to meet the
operating needs of the Company.
The Company has no plans for material commitments for capital expenditures as of
September 30, 2002.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings - None.
Item 2. Changes in securities -
During the quarter ended September 30, 2002 the Company issued an aggregate of
3,560,180 shares of its common stock for its payroll and services. This includes
2,000,000 shares registered on Form S-8.
Item 3. Defaults upon senior securities - None.
Item 4. Submission of matters to a vote of security holders - None.
Item 5. Other information - None.
Item 6. Exhibits and reports on Form 8-K
(a) The following are filed as Exhibits to this
Quarterly Report. The numbers refer to the Exhibit Table of
Item 601 of Regulation S-K:
Exhibit 99.1
Exhibit 99.2
(b) Reports on Form 8-K filed during the three months
ended September 30, 2002. (incorporated by reference)
July 3, 2002
September 30, 2002
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf of the
undersigned thereunto duly authorized.
Dated: December 16, 2002
ATNG, INC.
/s/Tag Chong Kim
_____________________________________________________________
Tag Chong Kim, President
by: Robert Gates, By Power of Attorney in Fact