Registration No.
SECURITIES AND EXCHANGE COMMISSION
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
ATN GROUP, INC.
(Exact name of registrant as specified in its charter)
NEVADA 4813 62-1816555
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation Industrial Classification Identification No.)
or organization) Code Number)
1661 INTERNATIONAL DRIVE, SUITE 400, MEMPHIS, TN 38120 - (901) 818-3318
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
E. ROBERT GATES
VICE CHAIRMAN AND CHIEF EXECUTIVE OFFICER
1661 INTERNATIONAL DRIVE, SUITE 400
MEMPHIS, TN 38120
(901) 818-3318
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
COPY TO:
JOHN ROOT, ESQ.
C/O SUITE 400
1661 INTERNATIONAL DRIVE
MEMPHIS, TN 38120
(901) 818-3318
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [x]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If the form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
Proposed maximum
Title of each class of securities Amount to be Proposed maximum aggregate Amount of
To be registered registered offering price per unit (1) offering price (1) registration fee
-------------------------------------- ------------ ---------------------------- ------------------- -----------------
<S> <C> <C> <C> <C>
Common Stock, par value $.01 per share 2,000,000 $ 12.50 $ 25,000,000 $ 6,600
-------------------------------------- ------------ ---------------------------- ------------------- -----------------
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457 under the Securities Act.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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SUBJECT TO COMPLETION, DATED OCTOBER 20, 2000
PRELIMINARY PROSPECTUS
[GRAPHIC OMITTED]
ATN GROUP, INC.
WORLDWIDE DATA COMMUNICATIONS
2,000,000 SHARES OF COMMON STOCK
This is an initial public offering of up to 2,000,000 shares of our common
stock.
The shares will be sold by our officers and directors. We will be selling
our shares in a direct offering on a "160,000 share minimum, 2,000,000 share
maximum" basis. No one has agreed to buy any of our shares, and there is no
assurance that any sales will be made. Prospective investors must purchase the
shares in increments of 100 shares. Until we have received subscriptions
totaling at least 160,000 shares, we will not sell any shares. All proceeds of
this offering will be deposited in a non-interest bearing escrow account. We
have the right to accept or reject any subscriptions for shares offered hereby
in whole or in part. The offering will remain open until all shares offered
hereby are sold or October 20, 2001, unless we decide to cease selling efforts
prior to such date.
Prior to this offering, there has been no public market for the shares, and
it is possible that no such trading will commence for a substantial period of
time after the first closing of this offering. We plan to apply for the
approval of the shares for quotation on the Nasdaq SmallCap Market or Nasdaq
National Market under the symbol ATNG. We estimate that the initial public
offering price will be $12.50 per share. The price of the shares has been
determined solely by us, and does not bear any direct relationship to our
assets, operations, book or other established criteria of value.
AN ELECTRONIC FORMAT OF THIS PROSPECTUS IS AVAILABLE ON OUR INTERNET WORLD WIDE
WEB SITE AT HTTP://WWW.ATNGROUP.COM.
THE SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND IMMEDIATE
SUBSTANTIAL DILUTION. YOU SHOULD CAREFULLY READ AND CONSIDER THE
"RISK FACTORS," COMMENCING ON PAGE 6 FOR INFORMATION THAT
SHOULD BE CONSIDERED IN DETERMINING WHETHER TO
PURCHASE ANY OF THE SHARES.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SHARES OR PASSED
UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
Underwriting Discounts Proceeds to
Price to Public and Commissions (1) Us (2)
--------------- --------------------- -----------
Per Share $ 12.50 - $25,000,000
--------------- --------------------- -----------
(1) Our officers and directors are offering the shares for sale. If one or
more underwriters or broker-dealers are used, of which there can be no
assurance, discounts of commissions are not anticipated to exceed 10%
of the offering price.
(2) Before deducting offering expenses payable by us estimated at $250,000.
The date of this Prospectus is October 22, 2000
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The information contained in this prospectus is not complete and may be changed.
We may not sell these securities until the registration statement filed with the
Securities and Exchange Commission is declared effective. This prospectus is not
an offer to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted. [TO BE PLACED
ON LEFT MARGIN OF COVER PAGE]
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YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE
IN THIS PROSPECTUS AND IN ANY ACCOMPANYING PROSPECTUS SUPPLEMENT. NO ONE HAS
BEEN AUTHORIZED TO PROVIDE YOU WITH DIFFERENT INFORMATION.
THE SECURITIES ARE NOT BEING OFFERED IN ANY JURISDICTION WHERE THE OFFER IS NOT
PERMITTED.
YOU SHOULD NOT ASSUME THAT THE INFORMATION IN THIS PROSPECTUS OR ANY PROSPECTUS
SUPPLEMENT IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT OF SUCH
DOCUMENTS.
WHERE YOU CAN FIND MORE INFORMATION
This prospectus is part of a registration statement on Form SB-2 under the
Securities Act that we filed with the Securities and Exchange Commission with
respect to the shares of common stock offered by this prospectus. This
prospectus does not contain all of the information set forth in the registration
statement and the exhibits and schedule filed therewith. For further information
about us and the shares offered by this prospectus, reference is made to the
registration statement and the exhibits and schedules filed therewith. A copy
of the registration statement and the exhibits and schedules filed therewith may
be inspected without charge at the public reference facilities maintained by the
SEC in Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and copies of
all or any part of the registration statement may be obtained from such office
upon the payment of the fees prescribed by the SEC and at the SEC regional
offices located at 1401 Brickell Ave., Suite 200, Miami, FL. 33131, tel:
305-536-4700, e-mail [email protected]. Please call the SEC at 1-800-SEC-0330 for
further information about its public reference room. The SEC maintains a World
Wide Web site that contains reports, proxy and information statements and other
information regarding registrants, including us, that file electronically with
the SEC. The address of the website is http://www.sec.gov. Our registration
statement and the exhibits and schedules we filed electronically with the SEC
are available on this site.
As of the date of this prospectus, we will be subject to the informational
requirements of the Securities Exchange Act of 1934, as amended, and we will
file reports and other information with the SEC. Such reports and other
information can be inspected and/or obtained at the locations and website set
forth above.
FORWARD LOOKING STATEMENTS
This prospectus includes "forward-looking statements". These statements
involve known and unknown risks, uncertainties and other factors which could
cause actual results, performance (financial or operating) or achievements
expressed or implied by such forward-looking statements not to occur or be
realized. Such forward-looking statements generally are based upon our best
estimates of future results, performance or achievement, based upon current
conditions, and the most recent results of operations. Forward-looking
statements may be identified by the use of forward-looking terminology such as
"may," "will," "expect," "believe," "estimate," "anticipate," "continue," or
similar terms, variations of those terms or the negative of those terms.
Potential risks and uncertainties include among other things, such factors as:
- the overall growth of Internet telephony and data usage,
- the market acceptance and amount of sales of our products and
services,
- the competitive environment within the Internet telephony industries,
- our ability to maintain or increase our market share of Internet
telephony market;
- unforeseen operational difficulties and financial losses due to year
2000 computer problems,
- the cost-effectiveness of the our product development activities,
- the other factors and information disclosed and discussed under "Risk
Factors" and in other sections of this prospectus.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Moreover, we do not assume
responsibility for the accuracy and completeness of the forward-looking
statements after the date of this prospectus.
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere in this prospectus. Because it is a summary, it does not contain all
of the information you should consider before making an investment decision. You
should read the entire prospectus carefully, including the sections titled "Risk
Factors," "Management", and "Certain Transactions" and the financial statements
and the notes relating to the financial statements.
ATN GROUP, INC.
THE COMPANY
ATN GROUP, INC - ("ATN") is a Nevada corporation with corporate offices located
in Memphis, Tennessee. The Company was incorporated January 2000 to develop a
fully integrated global data network to serve both the VoIP telecommunications
and web-based information needs of end-users worldwide. The management of the
US operations, as well as the strategic planning, financing and development of
its expansion internationally, will be the responsibility of the management team
of ATN Group. Joint ventures will be entered into with established
telecommunications partners in major regions around the world, accelerating the
deployment of the global data network. Acquisitions and /or strategic alliances
of/with resellers and ISPs are contemplated to achieve the Company's
speed-to-market and customer acquisition objectives.
EXISTING OPERATIONS - ATN Group owns interests in start-up operations in US,
Korea, Hong Kong and China. Packet switches are operational in Seoul and under
installation in LA and sales programs are being launched by ATN USA and ATN
Korea. Initially, the Company will market very price competitive long distance
and fixed fee subscription services between the two metropolitan areas. At the
same time, ATN USA is preparing to market nationwide its fixed fee subscription
service and prepaid calling cards on a combination IP and PSTN network, moving
its subscribers from leased gateways to ATN owned or proprietary gateways as the
ATN network is built out in the US during 2000 and 2001. The Company has its
corporate office in Memphis, TN and satellite locations in Austin, TX and
Irvine, CA. ATN Group has recruited into the Company in the US 11 executive and
technical staff members and is recruiting additional management and staff from
the industry. In addition, its JV affiliate ATN Korea, has an office in Seoul
with a current staff of 18 executives, engineers and marketing managers.
Management teams are being assembled to operate and manage ATN Hong Kong and ATN
China
We were initially incorporated on January 20, 2000 as ATN Group, Inc. Our
principal executive offices are located at 1661 International Drive, Suite 400,
Memphis, TN. 38120; telephone: (901) 818-3318; fax: (901) 818-3319; corporate
website: www.atngroup.com.
THE OFFERING
Shares Offered . . . . . . . . . . . 2,000,000 shares of common stock, par
value $.01 per share.
Price Per Share . . . . . . . . . . . $12.50
Shares Outstanding After Offering
Minimum . . . . . . . . . . . . 28,323,034
Maximum . . . . . . . . . . . . 30,163,034
Use of Proceeds . . . . . . . . . . We plan to use the proceeds from this
Offering for the following purposes:
- Joint Venture Development,
- Acquisition of Resellers
- Additional facilities/software
- Equipment,
- Offering Expenses
- Working capital and general
Corporate purposes.
See "Use of Proceeds".
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Proposed Symbol for Common Stock
on the Nasdaq Small Cap Market
or Nasdaq National Market (1) . . ATNG
Risk Factors . . . . . . . . . . . . Purchase of shares of common stock
being offered hereby involves a
significant degree of risk, including
risks associated with, but not limited
to the following:
- the majority of our long distance
telecommunication service contracts
have month-to-month terms,
- we have intense competition,
- we depend heavily on key personnel,
- a small number of competitors
account for a large percentage of
our competition,
- we are assuming a significant
growth in the telecommunications
industry on a global basis
industry,
- our ability to adapt to rapid
changes in the telecom industry,
- our ownership is concentrated among
insiders, and
- there will be immediate and
substantial dilution of the net
tangible book value of shares as a
result of this offering.
See "Risk Factors".
_________________
(1) We plan to apply for quotation of the common stock on the Nasdaq
SmallCap Market or Nasdaq National Market; however, there can be no
Assurance that the common stock will be approved for quotation or that
the we will be able to continue to meet the requirements for continued
quotation, that a public trading market will develop or that if such
market develops, it will be sustained. See "Risk Factors -- We May
Never Become Listed on Nasdaq or We May Become Delisted".
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SUMMARY FINANCIAL INFORMATION
STATEMENTS OF INCOME DATA:
Revenues $ -0-
Costs and Expenses:
General and Administrative $ 325,266
-----------
Total Expenses $ 325,266
-----------
Other Income, Net $ -0-
Net Income $ (325,266)
===========
Basic and Diluted Earnings Per Share . . .
We are a development stage company. To date our operations have consisted of
capital expenditures toward the development of our worldwide data communications
network. Early funds were raised principally through the private placement sale
of our common stock. Expenditures for our overhead have been kept as low as
possible to enable development of our systems through which our revenues will be
earned in the near future.
Balance Sheet Data:
Current Assets . . . . . . . . . . . . . . $6,156,885
Property and Equipment . . . . . . . . . 26,729
Total Assets . . . . . . . . . . . . . . 6,798,053
Current Liabilities . . . . . . . . . . . 194,871
Total Stockholders' Equity . . . . . . . 6,603,182
_______________
RISK FACTORS
The shares offered in this prospectus are speculative and involve a high
degree of risk. Only those persons able to lose their entire investment should
purchase any of the shares. Prior to making an investment decision, you should
carefully read this prospectus and consider, along with other matters referred
to herein, the following risk factors.
WE WILL FACE RISKS ENCOUNTERED BY SMALL CAP COMPANIES IN TELECOMMUNICATIONS
-RELATED BUSINESSES AND MAY BE UNSUCCESSFUL IN ADDRESSING THESE RISKS
We face risks frequently encountered by small cap companies in new and
rapidly evolving markets, including the market for global long distance services
and marketing. We may not succeed in addressing these risks, and our business
strategy may not be successful. These risks include uncertainties about our
ability to:
- attract a larger number of consumers for our services;
- sign up new consumer and commercial customers;
- add new and compelling services offered through our system;
- manage our expanding operations;
- adapt to potential decreases in competitors current rates;
- successfully introduce new products and/or make acquisitions;
- continue to develop and upgrade our technology and to minimize
technical difficulties and system downtime;
- develop new, strategic relationships and alliances; and
- attract, retain and motivate qualified personnel.
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OUR QUARTERLY OPERATING RESULTS ARE UNCERTAIN AND MAY FLUCTUATE SIGNIFICANTLY,
WHICH COULD NEGATIVELY AFFECT THE VALUE OF YOUR INVESTMENT
Our quarterly results of operations are likely to vary significantly from
quarter to quarter. A number of factors are likely to cause these variations,
some of which are outside of our control. These factors include:
- changes in revenue levels resulting from the seasonal buying and
use cycles of individual and commercial subscribers;
- changes in advertising and marketing costs that we incur to
attract and retain subscribers;
- changes in our pricing policies, the pricing policies of our
competitors or the pricing policies for telecommunications
companies generally;
- our rate of subscriber acquisition and the level of activity of
new and existing subscribers and others to our system;
- the introduction of new products and services by us or by our
competitors;
- unexpected costs and delays resulting from the expansion of our
operations; and
- the occurrence of technical difficulties or unscheduled system
downtime.
We believe that our revenues will be subject to seasonal fluctuations as a
result of general patterns of subscription and use that are typically higher
during the fourth calendar quarter and lower in the following quarter, though
our results of operations are not expected to be a direct result of these
fluctuations. In addition, expenditures by consumers and business tend to be
cyclical, reflecting overall economic conditions and consumer buying patterns.
Consequently, our results of operations could be harmed by a downturn in the
general economy or a shift in consumer buying patterns.
Due to these and other factors, we believe that quarter-to-quarter
comparisons of our operating results may not be meaningful and you should not
rely upon them as an indication of our future performance. Our operating
expenses are based on expected future revenues and are relatively fixed in the
short term. If our revenues are lower than expected, we could be adversely
affected. In addition, during certain future periods our operating results
likely will fall below the expectations of public market analysts and investors.
In this event, the market price of our common stock likely would decline. See
"Management's Discussion and Analysis."
IT IS DIFFICULT TO PREDICT OUR FUTURE PERFORMANCE
Our operating history makes predicting our future performance difficult and
does not necessarily provide investors with a meaningful basis for evaluating an
investment in our common stock. Although we began operations in 2,000, we will
not begin generating any significant revenue from advertising and marketing
until 2001. As a result, our performance since January 2000 is not comparable
to any prior periods. Moreover, we have never operated during a general economic
downturn in the United States, which typically adversely affects consumer and
business expenditures.
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IF WE ARE UNABLE TO STRENGTHEN OUR BRAND NAMES, WE MAY BE UNABLE TO COMPETE
EFFECTIVELY AGAINST COMPETITORS WITH GREATER BRAND NAME RECOGNITION
We have not historically emphasized our brand names and, although we
currently plan to significantly attempt to strengthen our brand names, such
program is dependent upon the completion of the minimum of the offering. As
competitive pressures in the telecommunications industry increase, brand name
strength may become increasingly important. If we do not strengthen our brand
names, we may be unable to maintain or increase and gain subscribers, which
would be expected to lead to decreased revenues from our clients. We may in the
future devote substantial resources to promote "ATN" or other brand names. The
reputation of our brand name will depend on our ability to produce high quality
service, and to provide a high-quality communication experience for consumers
using our service or receiving our promotions. Negative experiences of
subscribers, consumers or commercial users with our services might result in
publicity that could damage our reputation and diminish the strength of our
brand names.
The Internet Telephony industry changes rapidly and We may not be successful in
adapting to new technologies.
Our success in the Internet Telephony industry will be dependent upon its
ability to develop new software and services to meet changing customer
requirements. The Internet Telephony industry is characterized by rapidly
changing technology, evolving industry standards, emerging competition and
frequent new software and service introductions. There can be no assurance that
ATN Group can successfully identify new service opportunities and develop and
bring new services to the market in a timely manner, or that software, services
or technologies developed by others will not render ATN's services uncompetitive
or obsolete in the future. ATN's pursuit of technological advances may require
substantial time and expense, and there can be no assurance that ATN will
succeed in adapting its services to meet future customer requirements.
We may be unable to expand our Network Infrastructure.
We may be required to expand and adapt our network infrastructure as the
number of users and the amount of information they wish to transfer increases.
The expansion and adaptation of our network will require substantial financial,
operational and management resources. There can be no assurance, however, that
we will be able to expand or adapt our network to meet additional demand or
subscribers' changing requirements on a timely basis, at a commercially
reasonable cost, or at all, or that we will be able to deploy successfully any
necessary network expansion. Any failure to expand our network, as needed, on a
timely basis or to adapt to changing subscriber requirements or evolving
industry standards could have a material adverse effect on our overall business,
financial condition and results of operations.
If costs for use of telecommunications and data networks increase, Our
operations would suffer.
Our business relies upon on low cost access to the Internet, private ATM
networks and public switched telephone networks for international call
completion. Should the cost of internet access, data transport or public
switched telephone networks increase or such use otherwise become subject to
additional taxes, tariffs, user fees or other costs our cost savings for call
completion as compared to conventional long distance services may deteriorate.
This occurrence would have a material adverse effect on the our ability to
operate profitably, or at all.
IF WE CANNOT DEVELOP OR SECURE SUFFICIENT PROMOTIONAL OFFERS FROM CERTAIN
ADVERTISING AND MARKETING RESOURCES, OUR BUSINESS MAY SUFFER
If we are unsuccessful in developing, acquiring and renewing a continuing
array of advertising barter and credits as well as promotional offers for our
services, traffic on our service would likely decrease. The attractiveness of
our pricing to consumers is based in part on our ability to provide high quality
low cost service to consumers. In addition, a number of other telecommunication
companies give consumers access to similar offers. We face competition for low
cost, trial and promotional offers from these competitors.
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THE MAJORITY OF OUR CONTRACTS HAVE MONTH-TO-MONTH TERMS, AND THE LOSS OF A
SIGNIFICANT NUMBER OF THESE CONTRACTS IN A SHORT PERIOD OF TIME COULD HARM OUR
BUSINESS
As of October 2000, 100% of our customers prepay. The loss of a
significant number of these contracts in any one period will result in an
immediate and significant decline in our revenues and cause our business to
suffer.
THE LOSS OF THE SERVICES OF ANY OF OUR EXECUTIVE OFFICERS OR KEY PERSONNEL WOULD
LIKELY HARM OUR BUSINESS
Our future success depends to a significant extent on the efforts and
abilities of our senior management, particularly Tag Chong Kim, Chairman and
Director and Robert Gates, our Vice-Chairman and CEO and other key employees,
including our technical and sales personnel. The loss of the services of any of
these individuals could harm our business. We may be unable to attract, motivate
and retain other key employees in the future. Competition for employees in our
industry is intense, and in the past we have experienced difficulty in hiring
qualified personnel.
WE FACE INTENSE COMPETITION FROM MARKETING-FOCUSED COMPANIES FOR CUSTOMERS AND
MAY BE UNABLE TO COMPETE SUCCESSFULLY
We may be unable to compete successfully with current or future
competitors. We face intense competition from many companies, to provide
services for our customers.
Many of our existing competitors, as well as a number of potential new
competitors, have greater name recognition, larger customer bases and
significantly greater financial, technical and marketing resources than us.
These advantages may allow them to respond more quickly and effectively to new
or emerging technologies and changes in customer or client requirements. It may
also allow them to engage in more extensive research and development, undertake
farther-reaching marketing campaigns, adopt more aggressive pricing policies and
make more attractive offers to potential employees, strategic partners and
advertisers. In addition, current and potential competitors have established or
may establish cooperative relationships among themselves or with third parties
to increase the ability of their products or services to address the needs of
our prospective Internet advertising and marketing clients.
Internet Telephony is a rapidly developing industry, and new types of
products and services may emerge that are more attractive to consumers than the
types of services we offer. As a result, it is possible that new competitors may
emerge and rapidly acquire significant market share. See "Business --
Competition."
SECURITY AND PRIVACY BREACHES COULD SUBJECT US TO LITIGATION AND LIABILITY AND
DETER CONSUMERS FROM USING OUR SERVICES
Although we will accept credit card information in the future, we have no
experience at that now. In such event, we could be subject to litigation and
liability if third parties penetrate our network security or otherwise
misappropriate our users' personal or credit card information. This liability
could include claims for unauthorized purchases with credit card information,
impersonation or other similar fraud claims. It could also include claims for
other misuses of personal information, such as for unauthorized marketing
purposes. In addition, the Federal Trade Commission and other federal and state
agencies have been investigating various Internet companies in connection with
their use of personal information. We could be subject to investigations and
enforcement actions by these or other agencies.
The need to transmit confidential information securely has been a
significant barrier to electronic commerce and communications over the Internet.
Any compromise of security could deter people from using the Internet in general
or, specifically, from using the Internet to conduct transactions that involve
transmitting confidential information, such as purchases of goods or services.
Internet security concerns could frustrate our efforts. Also, our relationships
with consumers may be adversely affected if the security measures we use to
protect their personal information prove to be ineffective. We cannot predict
whether events or developments will result in a compromise or breach of the
technology we use to protect customers' personal information. We have no
insurance coverage for these types of claims.
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Furthermore, our computer servers may be vulnerable to computer viruses,
physical or electronic break-ins and similar disruptions. We may need to expend
significant additional capital and other resources to protect against a security
breach or to alleviate problems caused by any such breaches. We may be unable to
prevent or remedy all security breaches. If any of these breaches occur, we
could lose Internet advertising and marketing clients and visitors to our
websites.
WE FACE RISKS FROM POTENTIAL GOVERNMENT REGULATION AND OTHER LEGAL UNCERTAINTIES
RELATING TO THE TELECOMMUNICATION INDUSTRY USE OF THE INTERNET
ATN Group uses the Internet for transmission of long distance telephone
calls. Presently, the Federal Communication Commission in the United States
("FCC") does not regulate companies that provide Internet Telephony services as
common carriers or telecommunications service providers. Notwithstanding the
current state of the rules, the FCC's potential jurisdiction over the Internet
is broad because the Internet relies on wire and radio communications facilities
and services over which these regulatory authorities have long-standing
authority.
In Canada, the Canadian Radio-Television and Telecommunication Commission
("CRTC") determined in 1998 that Internet Telephony services providers must pay
local contribution charges for calls terminating on local telephone networks,
while those calls that originate and terminate on computers are not subject to
these charges. The possibility exists that regulatory authorities may one day
make a determination to apply international call termination fees or otherwise
tariff Internet telephony.
The European Union, distinguishes between voice telephony, which may be
regulated by the individual Member States, and other telecommunications
services, which are fully liberalized. In a Communication to the Member States
regarding Internet telephony, the European Commission concluded that Internet
telephony should not be considered voice telephony and thus should not be
regulated by the Member States. However, the Commission noted that providers of
Internet telephony whose services satisfied the European Union's definition of
voice telephony could be considered providers of voice telephony and could be
regulated by the individual Member States.
In Asia and the Pacific Rim, China limits competition in the
telecommunications industry to a few government-owned companies. At present,
only China Unicom, China Telecom, and Jitong Communications permit Internet
telephony on an experimental basis. It is uncertain whether Internet telephony
will continue to be permitted when the trial period ends. Changes in the
regulatory regimes of these countries that have the effect of limiting or
prohibiting Internet telephony, or that impose new or additional regulatory
requirements on providers of such services, may result in our being unable to
provide IT service within those countries.
ATN Group will also be required to comply with the regulations regarding
the operation of its business in several foreign jurisdictions and will be
subject to compliance with the requirements of the authorities of these locales
regarding the establishment and operation of its business.
Access charges are assessed by local telephone companies to long distance
companies for the use of the local telephone network to originate and terminate
long distance calls generally on a per minute basis. Access charges have long
been a source of dispute; with long distance companies arguing that the access
rates are substantially in excess of cost and local telephone companies arguing
that access rates are needed to subsidize lower local rates for end user and
other purposes. The Federal Communications Commission currently is considering
whether subscriber calls to Internet service providers should be classified as
"local" or "interstate" calls. Although the Federal Communications Commission to
date has determined that Internet service providers should not be required to
pay interstate access charges to local telephone companies, this decision may be
reconsidered in the future if the Federal Communications Commission finds these
calls to be "interstate." ATN's costs for doing business would increase if ATN
were required to pay interstate access charges.
In addition, we are not certain how our business may be affected by the
application of existing laws governing issues such as property ownership,
copyrights, encryption and other intellectual property issues, taxation, libel,
obscenity and export or import matters. It is possible that future applications
of these laws to our business could reduce demand for our services or increases
the cost of doing business as a result of litigation costs or increased service
delivery costs.
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Our services are available on the Internet in many states and foreign
countries, and these states or foreign countries may claim that we are required
to qualify to do business in their jurisdictions. Currently, we are qualified,
either directly or through our joint venture relationships, to do business in
the United States, South Korea, Hong Kong and China. Our failure to qualify in
other jurisdictions if we were required to do so could subject us to taxes and
penalties and could restrict our ability to enforce contracts in those
jurisdictions.
WE WILL HAVE BROAD DISCRETION IN THE USE OF THE NET PROCEEDS FROM THIS OFFERING,
AND THERE IS A RISK THAT WE MIGHT USE THEM INEFFECTIVELY
We will have broad discretion over how we use the net offering proceeds,
and we could spend the proceeds in ways with which you might not agree. We
cannot assure you that we will use these proceeds effectively. We plan to use
the proceeds from this offering for development, marketing, insurance,
leaseholds, hiring and working capital and general corporate purposes. We have
not definitively determined how we will allocate proceeds among these uses,
particularly in the event that more than the minimum amount is raised in this
offering. Our business strategy includes possible growth through acquisitions,
and we may use a substantial portion of the offering proceeds to buy businesses
we have not yet identified. See "Use of Proceeds."
WE MAY ONLY SELL THE MINIMUM NUMBER OF SHARES
We can have a closing and accept subscriptions for the sale of shares to
investors if at least 160,000 shares have been sold, which is the minimum number
of shares that may be sold in this offering. In the event such minimum amount,
or any amount which is significantly less that the maximum amount of 2,000,000
shares offered in this offering are sold, we may not be able to develop our
products and services and increase our market share in markets in which we
compete as aggressively than if more shares were sold. See "Use of Proceeds".
IMMEDIATE DILUTION
Purchasers of the shares being sold in the offering will experience
immediate and substantial dilution in the net tangible book value of their
shares. See "Dilution."
THE COMMON STOCK HAS NO PRIOR MARKET, AND WE CANNOT PREDICT WHEN OR WHETHER AN
ACTIVE TRADING MARKET WILL DEVELOP
There has not been a public market for our common stock. We are not sure
when the common stock will start trading, and this may not occur until well
after the first closing of this offering. We could decide not to facilitate the
commencement or continuation of a trading market for the common stock for an
extended period. We cannot predict the extent to which investor interest in our
common stock will lead to the development of an active trading market or how
liquid that market might become.
THE PRICE OF OUR COMMON STOCK AFTER THIS OFFERING IS LIKELY TO BE VOLATILE AND
MAY FALL BELOW THE INITIAL PUBLIC OFFERING PRICE
The stock market has experienced significant price and volume fluctuations,
and the market prices of securities of Internet-related companies have been
particularly volatile. Investors may be unable to resell their shares at or
above the initial public offering price. In the past, companies that have
experienced volatility in the market price of their stock have been subject to
securities class action litigation. A securities class action lawsuit against us
could result in substantial costs and a diversion of management's attention and
resources.
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<PAGE>
EXISTING SHAREHOLDERS WILL BE ABLE TO EXERCISE CONTROL OF OUR COMMON STOCK AND
MAY MAKE DECISIONS THAT ARE NOT IN THE BEST INTERESTS OF ALL SHAREHOLDERS
Insider control of a large amount of our common stock could have an adverse
effect on the market price of our common stock. At the completion of this
offering our Chairman of the Board and Director, Tag Chong Kim, our Vice
Chairman and Chief Executive Officer, E. Robert Gates and our Executive Vice
President, Woo Jong Kim will beneficially own approximately 79.5% of the
outstanding shares of our common stock (in the event the maximum number of
shares of common stock offered hereby are sold), or 84.6% of the outstanding
shares of our common stock (in the event the minimum 160,000 shares of common
stock offered hereby are sold). This concentration of ownership may have the
effect of delaying or preventing a change of control of ATN Group, Inc., even if
this change of control would benefit shareholders.
NO ASSURANCE OF PROFITABILITY
We may experience operating losses as we develop, produce and distribute
additional products and services, de-emphasize other products and services and
continue to develop our business. As a result, we may not be able to maintain
our profitability.
UNCERTAINTY OF ADDITIONAL FINANCINGS
We may be required to raise additional funds after this offering. If
additional funds are raised through the issuance of equity securities, you may
experience significant dilution. Furthermore, there can be no assurance that
additional financing will be available when needed or that if available, such
financing will include terms favorable to us or our stockholders. If such
financing is not available when required or is not available on acceptable
terms, we may be unable to develop or enhance our services, take advantage of
business opportunities or respond to competitive pressures, any of which could
have a material adverse effect on our business, financial condition and results
of operations. See "Management's Discussion and Analysis--Liquidity and Capital
Resources."
RISKS ASSOCIATED WITH OFFERING NEW BUSINESS AND CONSUMER SERVICES
We expect to introduce new and expanded services in order to generate
additional revenues, attract more businesses, advertisers, subscribers,
consumers and respond to competition. We also may in the future offer-expanded
services facilitating the purchase of goods by consumers from our business
customers or others. There can be no assurance that we will be able to offer
new products or services in a cost-effective or timely manner or that any such
efforts would be successful. Furthermore, any new service that we launch that is
not favorably received by consumers could damage our reputation or our brand
names. Expansion of our services in this manner would also require significant
additional expenses and development and may strain our management, financial and
operational resources. Our inability to generate revenues from such expanded
services sufficient to offset their cost could have a material adverse effect on
our business, financial condition and results of operations.
SHORT PRODUCT LIFE CYCLES MAY ADVERSELY AFFECT REVENUES
From time to time we or our competitors may announce new products,
capabilities or technologies that have the potential to replace or shorten the
life cycles of our existing products. Such announcements of currently planned
or other new products may cause certain customers to defer purchasing our
existing products.
VOLATILITY OF STOCK PRICES
The market for the common stock is highly volatile. The trading price of
the common stock could be subject to wide fluctuations in response to, among
other things:
- quarterly variations in operating and financial results,
- announcements of technological innovations or new products by us
or our competitors,
12
<PAGE>
- changes in prices of our products and services or our
competitors' products and services,
- changes in product mix,
- changes in our revenue and revenue growth rates, and
- response to our strategies concerning software and the Internet
marketing and advertising.
Statements or changes in opinions, ratings, or earnings estimates made by
brokerage firms or industry analysts relating to the market in which we do
business or relating to us could result in an immediate and adverse effect on
the market price of the common stock. In addition, the stock market has from
time to time experienced extreme price and volume fluctuations which have
particularly affected the market price for the securities of many software and
Internet companies and which often have been unrelated to the operating
performance of these companies. These broad market fluctuations may adversely
affect the market price of the common stock.
INTERNATIONAL SALES AND OPERATIONS AND CURRENCY FLUCTUATIONS COULD HAVE AN
ADVERSE AFFECT
International sales will be a significant source of our revenues. We
believe that maintaining and increasing profitability may be facilitated by and
among other matters, additional expansion of sales in foreign markets. In order
to increase international sales, we may be required to establish additional
foreign operations, hire additional personnel and recruit additional
international resellers. The introduction of the Euro may have an impact on
currency fluctuations. Although exposure to currency fluctuations to date has
not been significant, fluctuations in currency exchange rates in the future
could have a material adverse impact on us. Additional risks inherent in our
international business activities include:
- unexpected changes in regulatory requirements,
- tariffs and other trade barriers,
- costs of localizing products for foreign countries,
- lack of acceptance of localized products in foreign countries,
- longer accounts receivable payment cycles,
- difficulties in collecting payment,
- difficulties in managing international operations,
- potentially adverse tax consequences,
- reduced protection for intellectual property, and
- the burdens of complying with a wide variety of foreign laws.
Any of these factors or others that we have not yet contemplated could have
a material adverse effect on our future international operations.
LITIGATION AND POTENTIAL LITIGATION MAY BE COSTLY AND/OR TIME-CONSUMING
Our competitors and potential competitors may resort to litigation as a
means of competition. Any litigation involving us, whether as plaintiff or
defendant, regardless of the outcome, may result in substantial costs and
expenses to the us and significant diversion of effort by our management and
technical personnel. In the event of an adverse result in any such litigation,
we could be required to:
- expend significant resources to develop non-infringing
technology,
- obtain licenses to the technology which is the subject of the
litigation on terms not advantageous to us,
- pay damages, and/or
- cease the use of any infringing technology.
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<PAGE>
There can be no assurance that we would be successful in such development,
that any such licenses would be available and/or that we would have available
funds sufficient to satisfy any cash awards.
DEPENDENCE ON RETAILERS, DISTRIBUTORS AND SALES REPRESENTATIVES MAY ADVERSELY
AFFECT SALES AND CASH FLOWS
Our distributor customers are not contractually required to make future
purchases of our products and could discontinue carrying or purchasing our
products, at any time and for any reason. Distributors generally are in a strong
position to negotiate favorable terms of sale, including price discounts.
Further, resellers may give higher priority to products other than ours, thus
reducing their efforts to sell our products
UNCERTAIN PROTECTION OF INTELLECTUAL PROPERTY, RISKS OF THIRD-PARTY LICENSES.
We regard our patents, copyrights, service marks, trademarks, trade dress,
trade secrets, and similar intellectual property as critical to our success, and
rely on patent, trademark and copyright law, trade secret protection and
confidentiality and/or license agreements with employees, customers, partners
and others to protect our proprietary rights. We will hold several trademarks
and service marks in the United States. We may not seek or achieve effective
trademark, service mark, copyright and trade secret protection in every country
in which the our products and services are made available. There can be no
assurance that the steps we have taken to protect our proprietary rights will be
adequate or that third parties will not infringe or misappropriate our patents,
copyrights, trademarks, trade dress and similar proprietary rights. In addition,
there can be no assurance that other parties will not assert infringement
claims, including patent infringement claims, in which case we may have to
defend or protect our patents at significant cost.
RISKS ASSOCIATED WITH POTENTIAL ACQUISITIONS
As part of our business strategy, we may make acquisitions of, or
significant investments in, complementary companies, products or technologies.
Any such future acquisitions would be accompanied by the risks commonly
encountered in acquisitions of companies. Such risks include, among other
things:
- the difficulty of assimilating the operations and personnel of
the acquired companies,
- the potential disruption of our ongoing business,
- the diversion of resources from our existing businesses, sites
and technologies,
- the inability of management to maximize our financial and
strategic position through the successful incorporation of the
acquired technology into our products and services,
- additional expense associated with amortization of acquired
intangible assets,
- the maintenance of uniform standards, controls, procedures and
policies, and
- the impairment of relationships with employees and customers as a
result of any integration of new management personnel.
There can be no assurance we would be successful in overcoming these risks
or any other problems encountered with such acquisitions, and our inability to
overcome such risks could have a material adverse effect on our business,
financial condition and results of operations.
GENERAL LIABILITY AND COMMERCIAL INSURANCE, PRODUCT LIABILITY INSURANCE
Although we will carry general liability, product liability and commercial
insurance, there can be no assurance that this insurance will be adequate to
protect us against any general, commercial and/or product liability claims. Any
general, commercial and/or product liability claim which is not covered by such
policy, or is in excess of the limits of liability of such policy, could have a
material adverse effect on our financial condition. There can be no assurance
that we will be able to maintain this insurance on reasonable terms.
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<PAGE>
LIMITED DIRECTORS' LIABILITY COULD PREVENT STOCKHOLDERS FROM HOLDING DIRECTORS
RESPONSIBLE FOR A LACK OF CARE
Our Certificate of Incorporation provides that our directors (but not our
officers) will not be held liable to us or our stockholders for monetary damages
upon breach of a director's fiduciary duty, except to the extent otherwise
required by law.
NO DIVIDENDS
We have never paid any cash dividends on the common stock (other than
S-corporation distributions) and we do not anticipate paying any dividends in
the foreseeable future.
POSSIBLE ISSUANCE OF SUBSTANTIAL AMOUNTS OF ADDITIONAL SHARES WITHOUT
STOCKHOLDER APPROVAL COULD DILUTE STOCKHOLDERS
As of the date of this prospectus, we have an aggregate of 28,163,034
shares of common stock outstanding. Although there are no other material
present plans, agreements, commitments or undertakings with respect to the
issuance of additional shares of common stock or securities convertible into any
such shares, other than in connection with the exercise of outstanding stock
options, any shares issued would further dilute the percentage ownership of our
common stock held by our stockholders.
SHARES HELD BY INSIDERS
All of the 28,163,034 outstanding shares of our common stock are
restricted, which means that they may only be sold under certain conditions. Our
Chairman and Vice-Chairman of the Board, currently hold the majority of the
shares. If a large number of such shares are sold, it may reduce the value of
your shares.
DETERMINATION OF OFFERING PRICE
No investment banker, appraiser or other independent third party has been
consulted concerning this offering or the fairness of the offering price of the
shares. We have arbitrarily determined the offering price and other terms
relative to the shares offered. The offering price may not bear any
relationship to assets, earnings, book value or any other objective criteria of
value. In addition, since we do not have a professional underwriter, we may not
be able to sell shares as quickly and we may not be able to sell as many shares.
UTILITY OUTAGES
In the past we have experienced temporary outages in our telephone service
and electric power. While such outages have never affected systems that are
critical to our operations, there is no assurance that such outages will not
occur in the future more frequently or with greater magnitude or duration. Such
outages could materially and adversely affect our business, financial condition
and results of operations.
WE MAY NEVER BECOME LISTED ON NASDAQ OR WE MAY BECOME DE-LISTED
We intend to apply for inclusion of the shares on the Nasdaq SmallCap
Market or the Nasdaq National Market, and we hope that the shares will trade on
Nasdaq immediately upon the initial closing of the offering. Under Nasdaq
criteria, an issuer seeking initial inclusion of its securities on Nasdaq is
required to meet certain threshold levels relating to assets, market
capitalization, net income, market value of public float, minimum bid price and
number of registered market makers, among others. There is no assurance that
the shares will ever be approved for inclusion on Nasdaq. Even if the shares
become listed on Nasdaq, there is no assurance that they will not become
delisted at a future time if the Nasdaq-imposed maintenance thresholds are not
satisfied at all times. The inability to have the shares listed on Nasdaq could
materially hinder the development of a public trading market for the shares.
Any delisting could cause a material decline in the market price of the shares
if a market should develop and adversely affect the liquidity of the shares.
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<PAGE>
PENNY STOCK REGULATION
The SEC has adopted rules that regulate broker-dealer practices in
connection with transactions in "penny stocks". Penny stocks generally are
equity securities with a price of less than $5.00 (other than securities
registered on certain national securities exchanges or quoted on the Nasdaq
system, provided that current price and volume information with respect to
transactions in such securities is provided by the exchange or system). Prior to
a transaction in a penny stock, a broker-dealer is required to:
- deliver a standardized risk disclosure document prepared by the SEC
that provides information about penny stocks and the nature and level
of risks in the penny stock market;
- provide the customer with current bid and offer quotations for the
penny stock;
- explain the compensation of the broker-dealer and its salesperson in
the transaction;
- provide monthly account statements showing the market value of each
penny stock held in the customer's account; and
- make a special written determination that the penny stock is a
suitable investment for the purchaser and receive the purchaser's
written agreement to the transaction.
These requirements may have the effect of reducing the level of trading
activity in the secondary market for a stock that becomes subject to the penny
stock rules. If our shares becomes subject to the penny stock rules, investors
may find it more difficult to sell their shares in the event they becomes
otherwise freely resalable.
INABILITY TO ATTRACT MARKET MAKERS
There is currently no public trading market for the shares. The
development of a public trading market depends upon not only the existence of
willing buyers and sellers, but also on market makers. Following the completion
of the first closing under this offering, certain broker-dealers may become the
principal market makers for the shares. Under these circumstances, the market
bid and asked prices for the shares may be significantly influenced by decisions
of the market makers to buy or sell the shares for their own account, which may
be critical for the establishment and maintenance of a liquid public market in
the shares. Market makers are not required to maintain a continuous two-sided
market and are free to withdraw firm quotations at any time. Additionally, in
order to become listed on the Nasdaq SmallCap Market or Nasdaq National Market,
we need to have at least three registered and active market makers. We
currently have no market makers. No assurance can be given that any market
making activities of any market makers, if commenced, will be continued.
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<PAGE>
USE OF PROCEEDS
The net proceeds to us from the sale of the common stock (after deducting
offering expenses) are expected to be approximately $2,000,000 if the minimum
number of 160,000 shares is sold and $25,000,000 if the maximum number of
2,000,000 shares is sold. These proceeds are intended to be utilized
substantially as follows:
Application of Proceeds Minimum Maximum
------------------------- ---------- ------------
Joint Venture Development $ 0 $ 3,230,000
Acquisition of Resellers 500,000 5,000,000
Additional Facilities/Software 200,000 200,000
Equipment 500,000 10,000,000
Offering Expenses 100,000 250,000
Working Capital and General
Corporate Purposes 700,000 3,550,000
---------- ------------
$2,000,000 $ 25,000,000
========== ============
The amounts set forth above are estimates. The actual amount expended to
finance any category of expenses may be increased or decreased by our Board of
Directors, in its discretion, if a reapportionment or redirection of funds is
deemed to be in our best interests. The level and timing of expenditures
necessary for each of the intended uses described above will depend upon
numerous factors, including the progress of our product development activities,
the timing and amount of revenues resulting from our operation and changes in
competitive or technological conditions in our industry. If the minimum amount
is raised, our expansion plans will be limited. In the event that an amount
between the minimum and maximum amounts if raised hereby, we intend to allocate
such proceeds approximately proportionately to the above uses, but may,
dependent on circumstances, allocate the use of such proceeds in a different
manner. See "Risk Factors - Discretion in Use of Funds".
The expansion plans set forth in this prospectus represent our current
plans for the development and expansion of our business. We reserve the right
when and if the opportunity arises, to acquire other businesses, products and
technologies for the purpose of expanding our business, as described in this
prospectus. If such a business opportunity arises, we may use a portion of our
working capital for that purpose. We have no specific plans, arrangements,
understandings or commitments with respect to any such acquisition at the
present time, and it is uncertain as to when or if any acquisition will be made.
We are not currently involved in any negotiations for purchasing any business or
group of assets other than with respect to ATN Korea, Ltd., ATN Hong Kong Ltd.,
ATN China, Ltd., and ATN USA, Inc. See "Business - Strategy".
The net proceeds from this offering, together with internally generated
funds, based on historical experience, are expected to be adequate to fund our
working capital needs for the next 12 months. See "Management's Discussion and
Analysis - Liquidity and Capital Resources". Pending use of the proceeds from
this offering as set forth above, we may invest all or a portion of such
proceeds in marketable securities, short-term, interest-bearing securities, U.S.
Government securities, money market investments and short-terms,
interest-bearing deposits in banks.
THE BALANCE OF THIS PAGE
INTENTIONALLY LEFT BLANK
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<PAGE>
CAPITALIZATION
The following table sets forth our capitalization (i) at August 31, 2,000
and, (ii) as adjusted to give effect to the sale of the minimum number of
160,000 shares of common stock offered hereby and to the sale of the maximum
number of 2,000,000 shares of common stock offered hereby at an assumed public
offering price of $12.50 per share, and after the application of the net
proceeds of such sale, as described in "Use of Proceeds". See "Description of
Capital Stock".
<TABLE>
<CAPTION>
August 31, 2000 (unaudited)
--------------------------------------
Actual As Adjusted (1)
----------- -------------------------
Minimum Maximum
---------- --------------
<S> <C> <C> <C>
STOCKHOLDERS' EQUITY
Common Stock $.01 par value per share;
50,000,000 shares authorized; 28,163,034
shares issued and outstanding; 28,323,034 shares
issued and outstanding, as adjusted (assuming
the minimum number of shares are sold); 30,163,034
shares issued and outstanding, as adjusted (assuming
the maximum number of shares are sold) . . . . . . . $ 281,630 $ 283,230 $ 301,630
Additional Paid-In Capital . . . . . . . . . . . . . . . 6,984,162 8,982,562 31,964,162
Current Period Deficit in the Development Stage . . . . . (325,266) (325,266) (325,266)
Stock Subscriptions . . . . . . . . . . . . . . . . . . . (225,000) (225,000) (225,000)
Unrealized Losses on Marketable Securities . . . . . . . . (112,344) (112,344) (112,344)
----------- ----------- ------------
Total Stockholders' Equity . . . . . . . . . . . . . . . $6,603,182 $8,603,182 $31,603,182
=========== =========== ============
<FN>
___________________
(1) Adjusted to reflect the anticipated receipt and application of the net
proceeds of this offering.
</TABLE>
THE BALANCE OF THIS PAGE
INTENTIONALLY LEFT BLANK
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<PAGE>
DILUTION
Our net tangible book value at August 31, 2000 is $6,603,182 or $.23 per
share of common stock. Net tangible book value per share represents the amount
of total tangible assets less liabilities, divided by 28,163,034 the number of
shares of common stock outstanding at August 31, 2000. See "Description of
Capital Stock". After giving effect to the sale of 160,000 shares (in the event
that the minimum number of shares offered hereby are sold) or 2,000,000 shares
(in the event that the maximum number of shares offered hereby are sold), the as
adjusted net tangible book value at August 31,2000 would be 8,603,182 or $.30
per share in the event that the minimum number of shares offered hereby are
sold, or $31,603,182 or $1.05 per share in the event that the maximum number of
shares offered hereby are sold. This represents an immediate increase in net
tangible book value of $.07 per share in the event the minimum number of shares
are sold and $.82 in the event the maximum number of shares are sold to the
existing stockholders and an immediate dilution of $ 12.43 per share to new
investors in the event that the minimum number of shares offered hereby are
sold, or $ 11.68 per share to new investors in the event that the maximum number
of shares offered hereby are sold. The following table illustrates this per
share dilution:
<TABLE>
<CAPTION>
Minimum Maximum
-------- -------
<S> <C> <C>
Assumed Public offering price per share of Common Stock Offered
hereby (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12.50 $12.50
Net tangible book value per share before offering . . . . . . .23 .23
Increase per share attributable to new investors. . . . . . . .07 .82
As adjusted net tangible book value per share after offering . . .30 1.05
Dilution per share to new investors. . . . . . . . . . . . . . . $ 12.43 $11.68
<FN>
_____________________
(1) Assumes an offering price of $12.50 per share, before deduction of
offering expenses.
</TABLE>
The following tables summarize the relative investments of investors
pursuant to this offering and our current stockholders, assuming a per share
offering price of $12.50, before deduction of offering expenses:
<TABLE>
<CAPTION>
Current Public
Minimum Stockholders Investors Total
------- -------------- ------------ ------------
<S> <C> <C> <C>
Number of Shares of Common Stock Purchased . -0- 160,000 160,000
Percentage of Outstanding Common Stock After
Offering . . . . . . . . . . . . . . . . . . 99.4% .6% 100%
Gross Consideration Paid . . . . . . . . . . $ -0- $ 2,000,000 $ 2,000,000
Percentage of Consideration Paid. . . . . . -0-% 100% 100%
Average Consideration Per Share of Common
Stock . . . . . . . . . . . . . . . . . . . $ -0- $ 12.50 $ 12.50
Current Public
Maximum Stockholders Investors Total
------- -------------- ------------ ------------
Number of Shares of Common Stock Purchased . -0- 2,000,000 2,000,000
Percentage of Outstanding Common Stock After
Offering . . . . . . . . . . . . . . . . . . 93.4% 6.6% 100%
Gross Consideration Paid . . . . . . . . . . $ -0- $25,000,000 $25,000,000
Percentage of Consideration Paid. . . . . . -0-% 100% 100%
Average Consideration Per Share of Common
Stock . . . . . . . . . . . . . . . . . . . $ -0- $ 12.50 $ 12.50
</TABLE>
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
The following discussion should be read in conjunction with the
historical financial statements, including the notes thereto, included elsewhere
in this prospectus.
GENERAL
EIGHT MONTHS ENDED AUGUST 31, 2000.
Revenues
We are a development stage company. To date our operations have
consisted of capital expenditures toward the development of our worldwide data
communications network. Early funds were raised principally through the private
placement sale of our common stock. Expenditures for our overhead have been
kept as low as possible to enable development of our systems through which our
revenues will be earned in the near future.
General and Administrative Expenses
As we previously stated in this statement, we are a development stage
company incurring expenses to establish the infrastructure needed to sell
digital data communications products and services. Additionally, we are
expending funds to build our worldwide data network and begin providing
services.
LIQUIDITY AND CAPITAL RESOURCES
Foreign Currency Transactions
Our revenues from Asia are denominated in US dollars. Accordingly, we
do not incur transaction gains and losses related to foreign currencies. Our
monetary transactions are converted into US dollars before being transferred to
ATN Group, Inc. As a result, there are no transaction gains or losses related
to foreign currencies. All gains or losses occur on the level of the joint
venture and are taxed in that jurisdiction.
Income Taxes
We have formed ATN Group, Inc. as a C corporation, which means that
all taxes are incurred and paid directly by the company. Current losses from
activities as a development stage company will be carried forward and offset
against future taxable gains.
YEAR 2000 COMPLIANCE ISSUES
We have determined that products that we have developed are Year 2000
compliant. We currently believe that we have no liability concerning any of our
products with respect to Year 2000 requirements.
INFLATION
We believe that inflation has generally not had a material impact on
our operations. We do not anticipate a material negative impact as a result of
the effects of inflation.
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BUSINESS
OVERVIEW
INTRODUCTION
A full-fledged information society is rapidly becoming a reality. Its
development is fueled by the rapid technological change, which is transforming
the information industries. One of the most significant factors is the
increasing use by different sectors, notably the telecommunications, media and
information technology (IT) sectors, of the same technologies. Evidence of such
convergence has been mounting in recent years with the emergence of the Internet
and with the increasing capability of existing networks to carry both
telecommunications and broadcasting services. Products and services being
delivered by these competing industry sectors are illustrated by the following
examples:
- Broadcasters are branching into new areas, such as data broadcast
(data services over digital broadcasting platforms), Internet Web
casting of news, sports, concerts and of other audiovisual services
and telecommunications transport and services
- Telecommunications operators are providing audiovisual services, such
as video-on-demand and cable television.
- Internet service providers are starting to distribute audiovisual
material; Internet access providers are beginning to supply voice
telephony services (VoIP); telecommunications operators have become
major players in the provision of Internet access, as well as backbone
infrastructure.
- Cable operators are providing a range of telecommunications services,
including voice telephony and are starting to deploy cable modems to
offer high speed Internet access, in addition to their traditional
business of television programming distribution.
- Computer technology now plays a key role in content creation and
production in both cinema and broadcasting worlds.
- On-line services are being combined with television via systems such
as Web-TV
The flexibility of digital information is creating the possibility for more and
enriched conventional services, such as digital television and radio and better
quality mobile communications, as well as a whole range of new services and
applications. These new services are as varied as electronic newspapers,
on-line supermarkets and catalogues, home banking, and the use of multimedia web
sites for both internal business communications.
The implications of these developments are far reaching. Convergence is not just
about technology. It is about services and about new ways of doing business and
of interacting with society. The global nature of communications platforms
today, in particular the Internet, is providing a key, which will open the door
to the further integration of the world economy. The ATN Group is seizing this
opportunity and will take a significant position in the emerging and exploding
E-commerce global economy that is driven by digital technology. As the Business
Plan sets forth, ATN will position itself quickly to take advantage of the
re-distribution of market share that will occur as the convergence of these
major industry sectors continues to accelerate.
THE COMPANY
ATN GROUP, INC - ("ATN") is a Nevada corporation with corporate offices located
in Memphis, Tennessee. The Company was organized in January 2000 to develop a
fully integrated global data network to serve both the VoIP telecommunications
and web-based information needs of end-users worldwide. The management of the US
operations, as well as the strategic planning, financing and development of its
expansion internationally, will be the responsibility of the management team of
ATN Group. Joint ventures will be entered into with established telcom partners
in major regions around the world, accelerating the deployment of the global
data network. The Company must move quickly to exploit first-to-market
marketing advantages that exist today for the delivery of VoIP and other bundled
digital products and services for which demand is growing at an accelerating
rate. Acquisitions and /or strategic alliances of/with resellers and ISPs are
contemplated to achieve the Company's speed-to-market and customer acquisition
objectives.
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US OPERATION
The company will built up its own hybrid VoIP nationwide network and offer on a
monthly fixed fee basis unlimited long-distance calling product. The ATN
long-distance service will sell in the US at an equivalent four (4) cents per
minute (margins assume a residential subscriber utilization rate of 750 minutes
per month). ATN's business plan assumes the ATN price will decline to three (3)
cents per minute (or lower) as the level of competition intensifies. ATN
believes that pricing at this below-market level should make the ATN service
highly marketable in the US where a seven (7) cents per minute rate is the
competitive per-minute standard today. With ATN's network cost declining from
three (3) cents per minute to less than one (1) cent per minute, the Company
will be in a position, if necessary, to price even more aggressively than the
already low selling prices assumed in the business planning model. Noteworthy
is that the market leaders that today control over 95% of the telecommunications
market are not in a position to price below the five (5) cents mark. In order
to compete at these lower selling prices, these overburdened circuit-switch
carriers must restructure their operations to move away from their existing
circuit-switch platform and/or venture into the media and information technology
sectors, all of which are expensive in terms of time, money and strategic focus.
ASIAN OPERATION
JOINT VENTURE
STRATEGY - We are attempting to enter many Asian countries in a short period of
time and our basic strategy is to team up with people that have expertise in
communications and/or government regulation within those Asian territories.
Generally, we will enter into joint ventures or partnerships with entities
having access to individuals with the required expertise. Entities will be
formed to fully accommodate or exploit the relationships and foreign business
laws.
ATN KOREA - We have acquired a 49% equity interest in ATN Korea, Ltd. under a
joint venture arrangement that has been negotiated. We also have an agreement
with an officer and owner of ATN Korea to purchase an additional 11% ownership
interest in ATN Korea upon approval by the Korean government. The Korean
government recently approved ATN Korea's application for an IT license
permitting it to enter the Korean telecommunications market as a provider of
VoIP services. Operationally, ATN Korea has relationships with Dacom as well as
Korea Telecom and other carriers, through which it will terminate calls in Korea
and throughout Asia at very competitive rates. ATN Korea has net assets of
approximately $3 million. Its management, technical staff and sales team are all
experienced telecom professionals who have worked for years in the industry
throughout Asia. All are very knowledgeable in PSTN operations, satellite and IP
data/voice communications.
ATN HONG KONG AND ATN CHINA - In addition to its immediate entry into the Korean
market, ATN Group has entered into joint venture arrangements in Hong Kong and
China with Grand Oriental Asia Limited ("GOA"). The principals of GOA are well
capitalized and have existing relationships with business and political leaders
in Hong Kong and Mainland China. ATN owns 40 % and 49% interests, respectively,
in these two joint venture enterprises. The strategic alliances with GOA in
Hong Kong and China bring into the business structure of ATN Group operating
agreements with major telecom companies in Hong Kong in China, the first two of
strategic alliances that are critical to the success of the Company, not only in
Asia, but also the US and other markets worldwide that ATN Group will enter
beginning 2001.
INDUSTRY BACKGROUND
MAJOR PARADIGM SHIFT IN THE TELECOMMUNICATIONS INDUSTRY
TELECOMMUNICATIONS ACT IN 1996 - The promulgation of the Telecommunications Act
in 1996, to an extent, sealed the fate of competition in the local and long
distance markets. The arrival of competitive local exchange carriers (CLECs) has
brought about a change in the degree of competition in the business voice and
data services markets. Apart from the tumultuous rise in demand for
one-stop-shop solutions, new technologies are also emerging and the prices are
experiencing a continuous decline.
THE PSTN HAS SLOWLY EVOLVED OVER THE LAST 100 YEARS - The architecture of
today's PSTN (public switched telephone network) is a direct descendant of the
original manned switchboards of Alexander Graham Bell's day. The PSTN uses a
circuit-switched architecture in which a direct connection, or circuit, is made
between two users. It has slowly transformed from a mechanical switching fabric
with analog circuits to a complex mixture of analog and digital circuits with a
variety of signaling techniques. Voice is transmitted in one way: sampled in
8-bit bytes, 8,000 times a second, for an aggregate rate of 64 Kbps. The entire
telephone network is designed around this rate and for this one type of traffic
(voice). The fact that the entire PSTN was designed for circuit switching of
voice calls has made it very difficult and in many cases has limited the ability
to add new services to the network, or to increase the efficiency of traffic
handling.
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DIGITAL TECHNOLOGY: THE CATALYST OF CHANGE - The Telecommunications Industry is
undergoing radical change. Digital technologies have brought about the
capability to deliver voice over more cost-effective data networks using VoIP
(Voice using Internet Protocol), overwhelmingly considered to be the
next-generation technology for the telecommunications industry. The emergence
of VoIP as a more efficient, flexible and digitally interactive alternative to
traditional telecommunications is revolutionizing the industry. The rapid
change and volatility is presenting major business opportunities for
"fast-mover" VoIP companies such as ATN Group that will share in the
redistribution of industry returns as users of data networks literally take over
world markets.
ATN VOIP BUSINESS OPPORTUNITY - As the telecommunications industry continues its
rapid transition from circuit switch (or voice) networks to packet switch (or
data) networks, there will be a major reallocation of market share. We believe
that this shift in share of market should favor progressive companies such as
ATN Group that have been organized specifically around data communications,
initially focusing exclusively on the VoIP opportunity. The Company is
positioning itself to aggressively engage in competition for share of market in
the largest consumer service industry worldwide, which post-convergence will far
exceed $1 trillion.
IP TELEPHONY (VOIP) BUSINESS OPPORTUNITY
The emergence of VoIP as a low-cost alternative to long distance service
delivered today by market leaders over the PSTN circuit-switch network has
created a unique business opportunity for the Company. While the lower cost is
differentiating, more relevant today to carriers, service providers and
consumers worldwide is the capability using digital technologies to integrate
all forms of communications with other information products and services over
data networks.
PACKETIZED DATA: THE NEW STANDARD FOR NETWORK COMMUNICATIONS - The IP packet
network is becoming the standard of communications networks, as VoIP is quickly
emerging as the telephony technology of choice. All other major forms of
information and communications, too, are going digital. The use of existing
data networks via Internet Protocol (IP) is creating an epic change that is
reverberating throughout the telecommunications industry. Just as the Internet
is creating a "new economy", VoIP is transforming telecommunications.
FCC CHAIRMAN EXPECTS GREAT THINGS FROM IP TELEPHONY - FCC Chairman William E.
Kennard is watching the development of IP telephony and wireless technologies,
both of which have the potential to change the face of the telecommunications
marketplace. During a June 30, 2000 press conference, Kennard said IP
telephony's growth "will spread like wildfire" once the 53 percent of American
residential consumers now online discover they can make long-distance phone
calls at a fraction of the current cost.
SIZE OF IP TELEPHONY SERVICE MARKET GROWING RAPIDLY - There is a wide range of
numbers describing both the current size of the IP telephony market and the
growth of the market over the next three to five years. While the specific
projections vary, even the most conservative analysts are predicting phenomenal
growth. Estimates from respected market research firms predict VoIP revenues of
$10-20 billion by 2002.
-------------------------
THE COMPETITION IS MOMENTARILY "STYMIED" - The Company has an opportunity if it
moves quickly. This appears to be the situation in spite of the fact that the
competition will be intense for IP telecommunications market share in the
future. At present, the competition is somewhat hindered from providing VoIP at
retail. Consider the following:
1. The Company resides in a new industry currently in disarray. There are
no ITSPs (Internet Telephony Service Providers) that today offer a
basic phone-to-phone VoIP service. Furthermore, there is no indication
--------------
that these companies intend to expand their service offering to meet
the consumer demand for bundled services delivered in a total
information and communications solution.
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2. In addition to fundamental technical issues (see below), the various
service providers that "own" the customers locally have business,
financial and legal issues that must be resolved before they will be
in a position to offer IP telephony service:
3. RBOCs (Regional Bell Operating Companies) - Recently, the FCC made a
ruling allowing RBOCs to offer long distance services. This ruling
will be in dispute for quite some time. It is also expected that the
FCC will soon decide if, for the first time, it will allow another
regional phone carrier enter the long distance market.
4. ISPs - Even the large ISPs are entering the waters with a certain
amount of trepidation. In addition to capital outlay for new
equipment, many ISPs are concerned that the price attached to this new
IP telephony service also includes changing their basic business
strategy. Even with the new VoDSL technology currently being field
tested, they question how this will fit into their present and future
business plans.
5. Cable Companies - Cable companies have a problem unique to their
industry that will impede progress. Market surveys indicate that the
cable companies are perceived by their customers as poor service
providers and operators. Furthermore, those surveyed indicated
measurable resistance to relying on their cable company for either
their ISP or telephone service.
6. CLECs - At present, CLECs are wholesalers of data services, except to
business accounts that for the present are not the primary target
market for the Company (although an important market for ATN to
develop). Regardless, as with the ISPs, making large capital outlays
for new equipment does not fit well strategically for an industry that
has not yet matured financially.
7. Traditional long distance (and local) telephone companies face a
serious dilemma. With their advanced and extensive circuit-switched
and IP networks, AT&T, MCI WorldCom, have the technical capabilities
to offer Internet telephone service. What they lack is the economic
incentive. Their IP telephony offering competes against
("cannibalizes") their bread-and-butter circuit-switched voice
services.
8. The broadband switch technologies are just now being field tested
9. "Voice over Cable" - This voice technology is not yet ready for
deployment. The cable industry has just now unveiled its PacketCable
architecture, including features for IP telephony. Field trials will
begin in the second quarter and full equipment might (or might not) be
available by late 2000.
10. "Voice over DSL" (VoDSL) - This voice technology is not yet ready for
deployment. Noteworthy is that predictions are that DSL will be
available to at least 70 percent of US homes by 2004.
11. Consumers want bundled communications and information services.
Accordingly, we intend to quickly proceed to establish ourselves in the market
as the first ITSP (or other provider for that matter) to provide the consumer
-----
the bundled communications and information services wanted from a single service
provider. In addition to aggressively advertising, the Company contemplates
accelerating its time to market by aligning with certain local service providers
that have established customer bases. ISPs and CLECs are obvious potential
partners, more so the unregulated ISP. Both need capital/earnings and an entr e
into the VoIP market.
GROWTH OF THE INTERNET AND ONLINE COMMERCE AND OUR INTENDED MARKETING PLANS-
Over the past several years, the Internet has emerged as a powerful and
efficient new medium, enabling people worldwide to exchange information,
communicate and conduct business electronically. The number of people using the
Internet continues to expand rapidly. International Data Corporation ("IDC")
estimates that the number of people using the Internet will grow from
approximately 160 million worldwide in 1998 to over 500 million worldwide by the
end of 2003.
Businesses have recognized the online commerce opportunity and are
increasingly using the Internet to sell and distribute products and services.
According to IDC, online commerce will increase from approximately $50 billion
worldwide in 1998 to approximately $1.3 trillion worldwide in 2003, representing
a compound annual growth rate of approximately 92%. As online commerce and the
number of people using the Internet grow, advertisers and direct marketers are
increasingly using the Internet to locate customers, advertise products or
services and facilitate transactions. The eAdvertising Report, which was
prepared by Advertising Age and eMarketer, estimates that approximately $1.5
billion was spent on Internet advertising worldwide in 1998 and that this amount
will grow to approximately $8.9 billion in 2002.
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DIRECT MARKETING- We will use direct marketing as a primary method of selling
our services and products. Advertising expenditures can be broadly categorized
as either brand advertising or direct marketing. Brand advertising is intended
to generate brand name awareness and create a specific image for a particular
company, product or service. Direct marketing involves any direct communication
to a consumer intended to generate a specific response or action, generally the
purchase of a product or service. The Direct Marketing Association estimates
that direct marketing accounts for over 57% of total U.S. advertising
expenditures and that in 1998, marketers spent $80.1 billion in the United
States on direct marketing to consumers.
TRADITIONAL DIRECT MARKETING - Traditional direct marketing media include direct
mail, telemarketing and newspaper, magazine, radio and television
advertisements. Although traditional direct marketing is effective and widely
used, it presents a number of challenges for marketers and consumers alike.
Traditional direct marketers generally lack specific and timely information on a
particular consumer's immediate interests. As a result, marketers spend
considerable resources on communications most consumers don't want or need. For
example, according to BAIGlobal, Inc., the average response rate to the nearly
3.5 billion mailings of credit card solicitations in 1998 was only 1.2%. Given
the costs associated with traditional direct marketing, which include
telecommunications, postage, printing, assembly, labor and facilities, we
believe we must use a vary focused program using this method.
ONLINE DIRECT MARKETING - Online direct marketing media include banner
advertisements, targeted email solicitations and website sponsorships. We
believe online direct marketing is more attractive than traditional direct
marketing because it requires lower production costs and provides easier and
faster customer response features. In addition, online direct marketing allows
marketers to easily:
- develop one-to-one relationships with consumers;
- collect data and feedback on marketing campaigns; and
- customize marketing campaigns to broad audiences or specific
groups.
Even with these advantages, direct marketers face challenges in realizing
the full potential of the Internet as a marketing medium. With millions of
websites, only a fraction of which have significant audiences, it is difficult
for marketers to decide where to spend their marketing dollars. Even leading
brand name marketers who build their own websites must find ways to attract a
sizeable audience of visitors. In addition, technological hurdles may impede
conventional direct marketers from successfully extending their activities to
the Internet. In order to participate in most online marketing efforts,
marketers must build and maintain websites as well as incorporate order-taking
capabilities and develop systems to integrate online ordering with their
traditional databases.
We believe as marketers that we need a solution that benefits from the
effectiveness of direct marketing while overcoming the challenges presented by
both traditional and online marketing methods.
THE ATN SOLUTION
We act as a total communications company, acting between consumers. When a
consumer wishes to make a long distance telephone call, he simply picks up the
phone and dials. We handle all the connections and routing of the call between
where the call is begun and where it ends. We also offer a consumer-directed
process in which consumers select, from a list, only those products of immediate
interest to them. We believe that our solution creates a highly effective
method of direct marketing in terms of cost, targeting, efficiency and consumer
satisfaction.
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TECHNOLOGY
DEVELOPMENT OF ATN PROPRIETARY MULTI-MEDIA GATEWAY
We have finished the due diligence process to supply packet-switch equipment
that can provide through a joint venture arrangement an ATN designed,
manufactured and branded multi-media gateway that is "carrier-class" in its
design flexibility, capacity capability and scalability. To our knowledge, none
exist today, although Sonus' recently announced products are well beyond the
enterprise-level classification. We have agreed with two Korean companies that
we believe has the capability to produce the carrier class unit that we have
designed in detailed conceptual drawings and specifications. This gateway
capability can provide us another differentiating advantage over our
competitors, and position us to expand rapidly by product line rate of growth
without unnecessary duplicative capital outlays.
ATN UNIFIED MESSAGING SERVICE (UMS)
We will use the UMS service as the supporting tool for our national long
distance sales marketing. We have negotiated for a Korean company, with the
existing capacity to provide this UMS service to the US and we have designed a
customized product for that company to provide this UMS service is another
differentiating advantage over our long distance service competitors.
GREATER COMPRESSION RATE OF THE DIGITIZED DATA
Using new proprietary compression rate technology, we are able to send a much
smaller "packet" of digitized information through the Internet and have the
information decoded on the receiving end without significant loss. In making the
"transmission highway" of digitized data more efficient, the company is able to
maintain the lowest rate and utilize the biggest efficiency of International
dedicated leased line price.
STRATEGY
MISSION - Our mission is to operate globally a carrier-class data network to
facilitate the sale and delivery of "ATN-branded" voice, data and video digital
products to targeted markets worldwide, uniquely providing our customers
convenient access to these products and services by "fusing" the World Wide Web
information library with traditional telecommunications in an integrated
technological solution.
Initially, we plan to focus almost exclusively on its VoIP strategic initiative
in the US and Asia. While, at first, we will not add a variety of digital
services to its offering, wireless communications will be quickly integrated
into the operations plan, especially in Asia. The Company will position itself
to take advantage of the "re-shuffling" of market share that will occur as the
telecommunications industry races to go digital.
VOIP BUSINESS UNIT FOCUS - Initially, we will give emphasis to the development
and growth of our VoIP business unit, timing the introduction of other digital
products and services carefully to avoid any service degradation and/or loss of
management control over the its primary business operation. While we believe
that VoIP telecommunications should be profitable for the next several years,
margins will contract as VoIP competition intensifies over the longer term. We
will aggressively market our low-cost long distance service to quickly capture
market share before the current market leaders are able to restructure their
operations and before other VoIP operators are able to take meaningful positions
in the marketplace.
ISP BUSINESS UNIT - While the Company is wholly focused on its VoIP Business
Unit, it expects at the first practical opportunity to initiate the delivery of
ISP services to its VoIP customers. The incremental capital investment is
nominal, yet the "contribution" (variable income) per ATN account is expected to
increase markedly from these additional revenues. The plan is to commit capital
and human resources beginning 2001 to the ISP Business Unit. The restraint on
this initiative to provide this complementary service to ATN customers is
self-imposed to ensure that the total focus of management is on successfully
building the VoIP business in the US and Asia as discussed in this Memorandum.
Two points need to made, which are that the ATN China agreement requires that we
deliver both services in the Zhejiang province of China, and the ATN gateway to
be manufactured will have the capability to deliver both services by original
design.
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COMPLETE DIGITAL PRODUCTS AND SERVICES OFFERING - The long-term business
strategy of ATN Group is to operate on the frontier of the convergence of the
telecommunications, media and information technology sectors, building and
operating worldwide a digital-technology-based information and communications
company. We believe there is a high demand for data, and therefore bandwidth is
driven, not just by large corporations, but also by smaller firms and home
offices. The Strategis Group, a telecommunications industry consultant recently
reported that nearly 85% of mid-size firms are interested in bundled
telecommunications services from one provider, while almost 50% of mid-size
firms will definitely purchase bundled services. Among all firms likely to
purchase bundled services, 42% want the bundle to include a full suite of local,
long-distance, wireless, Internet, and enhanced data services. To accommodate
these demands, carriers must not only offer bundled services, they must also
provide complete communications solutions.
RETAIL TARGET MARKET - Most of the successful ventures to date within the
fast-growing data networks sector of the industry have been focused at the
wholesale carrier rather than the retail provider level much to the satisfaction
----------------- ---------------
of the Company. While numerous entities have a retail strategy, most have not
succeeded either for lack of capital, technical know-how or understanding of the
mass consumer markets. The Company believes that it has the resources and
capabilities to succeed at the retail level, providing services to both
commercial and general consumer end-users. "Speed to market", therefore,
becomes critical where the objective is to take the advantage of the commercial
benefits that accrue to first-to-market companies in any new industry.
HIGHLY VISIBLE BRAND NAME IDENTITY - Due to technological, regulatory and market
changes, local telephone companies, long distance carriers, cable operators,
cellular service providers, paging operators, and Internet access providers
compete for market share within an increasingly integrated
telecommunications/video marketplace. Effective market positioning will depend
on developing trusted national brands in the countries served by ATN and on
----------------
enhancing consumers' value by offering combinations of bundled
telecommunications services.
MAJOR COMMITMENT TO MARKETING AND ADVERTISING - The Company will aggressively
advertise, using national broadcast communications (primarily television) and
certain other complementary mass communications media, to establish its brand
and to generate sales.
GLOBAL INTERCONNECTIVITY - Among other differentiating dynamics, ATN products
and services will be uniquely offered to the marketplace using an
Internet-based, centralized data control facility. The Company expects to be
the first enterprise to "fuse" web-based services and traditional
telecommunication services in an integrated technological solution that is
"customer friendly", simple and easy to use. The resulting advantage for the
ATN customer will be worldwide telecommunications and access to real-time
information over the Internet by personal computer or by telephone from
anywhere, anytime.
DEVELOPMENT OF PROPRIETARY COMPRESSION TECHNOLOGIES - The Company owns certain
proprietary technology currently under development that will lower its cost of
operation, potentially creating for ATN a significant pricing and margin
competitive advantage. The development of specific business applications for
ATN Group's exclusive use of the technology in the area of data transfer over
digital networks is scheduled for completion in 2001. The patent applications
for these technologies are currently being filed, although no assurances can be
made that the commercial applications will be successfully deployed.
BEING FIRST TO MARKET - To date, no company has successfully entered the global
VoIP telecommunications market. We believe that this creates an exciting
competitive advantage and market opportunity for us. In complementary fashion,
we plan also to be first to establish a highly visible brand name, that
-----
"household name" that stands for great quality and service in providing advanced
communications and information solutions.
Our objective is to attain a leading position in the global total communications
market, while maintaining attractive profit margins. We intend to achieve our
objective through the following key strategies:
INCREASE SIZE OF SUBSCRIBER BASE - We intend to continue to expand our
subscriber base through acquisition activities. We also plan to initiate a
public relations campaign, in order to, among other things, attract new
subscribers. In addition, we intend to explore international opportunities,
including potential strategic alliances, in order to continue to expand our
subscriber base.
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INCREASE NUMBER OF CUSTOMERS BY DIRECT MARKETING - We are seeking to broaden our
base by increasing our direct and indirect sales and marketing efforts. We may
increase the size of our direct sales force In addition, we are seeking to take
advantage of existing distribution channels, such as advertising networks, to
expand the number of persons using our system.
EXPAND OFFERS - We expect to implement expansion through a combination of
internal sales efforts, partnerships and acquisitions.
ACQUISITIONS - We intend to explore possible acquisitions of complimentary
businesses.
SALES AND MARKETING
Our primary sales strategy is to sell our services directly to
consumers utilizing mass media and through a large body of agents/resellers
known as CLECs (defined below). We will sell our services directly to clients
utilizing employees and commission agents located in Los Angeles, CA, Memphis,
TN and Austin, TX area. Since one of our focuses is on communications to Asia,
we will initially concentrate on Asian customers located in California. We
believe that this will allow us to concentrate our efforts most effectively.
TECHNOLOGY INFRASTRUCTURE
We have developed an expandable, secure and reliable technology
infrastructure to support our marketing programs.
EXPANDABILITY - Our technology is designed to support up to approximately
360,000 calls in BHCA.
SECURITY - We incorporate a variety of encryption techniques meant to protect
the privacy of consumer information. We also employ a variety of automated fraud
detection procedures to identify patterns of abuse and potential fraudulent use
of the system. Our fraud detection systems can automatically disable accounts in
which fraud is suspected. The data center where our system is located provides
security management 24 hours per day, seven days per week.
COMPETITION
COMPETITION IN THE US
IP telephony technology will be deployed not only by the start-up ITSPs like
ATN Group but also by a wide array of competitors that range from traditional
long distance telephone companies to ISPs. In our opinion, this VoIP space
presents enormous business opportunities, rapidly drawing competitors from all
areas of the telecommunications, media and information technology (IT) sectors.
A variety of strategies are in play:
IXCS (INTEREXCHANGE CARRIERS) - IP telephony places traditional long distance
telephone companies - long distance and local alike - in a serious dilemma. On
the one hand, IP telephony appears to all to be the long-term future of
telecommunications, and these industry leaders would be well advised to position
themselves to profit in this shift. On the other hand, this shift threatens
their profitability in the short run and their very existence in the long run.
The Big Three long distance carriers, AT&T, MCI WorldCom, and Sprint, who
control over 80 percent of long distance revenues, face this problem most
directly. With their advanced and extensive circuit-switched and IP networks,
all three clearly have the technical capabilities to offer Internet telephone
service. What they lack is the economic incentive - their IP telephony
offerings not only compete directly against ("cannibalizes") their
bread-and-butter circuit-switched voice services, but could also legitimize in
their customer's minds IP telephony generally, and greatly increase the
competitive threat. As former AT&T executive David Isenberg explains, "no one
is moving too fast to kill their own cash cow." That said, however, all three
players appear to have resigned themselves to losing their high-margin
businesses in the near future and are steadily rolling out new IP telephony
products, banking on the theory that, as The Economist puts it, "it is better to
cannibalize your own revenues than to watch others do it for you."
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RBOCS (REGIONAL BELL OPERATING COMPANIES) - Local telephone services are
dominated by six (becoming four) Regional Bell Operating Companies - Bell
Atlantic/NYNEX, SBC/Pacific Bell, US West, BellSouth, and Ameritech (merging
with SBC) and GTE (merging with Bell Atlantic) on the local side, which serve
nearly 90 percent of local subscribers. While the recent ruling allowing RBOCs
to offer long distance services will be in dispute for quite some time, it is
natural to assume that RBOCs will look at packet-based technology as they begin
to roll out their inevitable long distance applications. Additionally, through
their alliances with ISPs, RBOCs are a natural convergence point for traditional
voice communications and data networks. (The initial seven companies were Nynex,
Bell Atlantic, BellSouth, Southwestern Bell, US West, Pacific Telesis and
Ameritech.) As a growth strategy and to protect its existing customer base, the
RBOCs, too, are offering new services and are growing their targeted residential
customer base by providing DSL-based Internet access. The aggressive deployment
and promotion of DSL by the Bell companies is under criticism. The top three DSL
providers now being SBC, US West and GTE.
CLECS (COMPETITIVE LOCAL EXCHANGE CARRIERS) - CLECs carry substantial appeal due
to their lower prices and personalized service. The growing need of small to
mid-sized businesses for effective and cost-efficient communications services
has led to the CLEC's increased development and deployment of services such as
frame relay, Internet Protocol (IP), and digital subscriber lines (DSL).
Moreover, the high potential of the small to mid-sized business market has
forced the CLECs to increasingly invest in technologies such as wireless local
loop (WLL), which are quick to deploy and cost far less than the traditional
fiber networks although quality of call is an issue. The growth in Internet
penetration coupled with the deployment of advanced data services such as frame
relay, asynchronous transfer mode (ATM), and Internet Protocol (IP) are driving
growth in the CLEC business telecommunications services market.
In order to gain quick entry into the local market, a number of CLECs such as
WinStar Communications, NEXTLINK, and Teligent are utilizing wireless local loop
(WLL) technology and local multipoint distribution services (LMDS), as opposed
to installing fiber/copper networks. A majority of the CLECs such as
Intermedia, ICG Communications, McLeod USA, and GST Telecommunications have
continued to invest in fiber technology either through installation of new
cables and wires or through acquisition of other wireline providers. The
emergence of data CLECs such as COVAD, NorthPoint and Rythms NetConnections has
provided a boost to the overall CLEC market growth. While the ILECs' DSL-based
Internet access is targeted primarily toward the residential customers, the
CLECs are focusing on business customers who have a need for high-speed Internet
access yet lack the resources to subscribe to private line services. CLECs are
increasingly establishing network and switching facilities in order to expand
their market coverage. The deployment of ATM, in particular, is reaching new
heights as the technology allows the service providers and the end-users to
converge their voice, data, and video traffic.
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ISPS (INTERNET SERVICE PROVIDERS) - According to high-tech market research firm
Cahners In-Stat Groups' recently released study, Voice Over IP: The Promises and
Challenges of Internet Telephony by senior analyst Laurie Gooding, reports that
ISPs are "rapidly transforming themselves into Internet telephony service
providers (ITSPs)." The study says these ISPs are tapping into a market
representing 70 percent of traditional carriers' current revenues. The ISPs are
a major competitive threat as they control large portfolios of customer accounts
to which to directly market telephony services. Setting aside the differences
between dialup, cable and DSL subscriber numbers for these ISPs are as follows:
INTERNET SERVICE PROVIDER SUBSCRIBERS
------------------------- -----------
America Online, Inc. 23,000,000
------------------------- -----------
EarthLink, Inc. 4,200,000
------------------------- -----------
NetZero, Inc. 4,000,000
------------------------- -----------
1stUp.com Corp. 3,500,000
------------------------- -----------
Juno Online Services, Inc. 3,000,000
------------------------- -----------
MSN Internet 2,600,000
------------------------- -----------
Freei.Net 2,200,000
------------------------- -----------
Spinway 2,000,000
------------------------- -----------
Prodigy 1,700,000
------------------------- -----------
AT&T Worldnet 1,500,000
------------------------- -----------
Excite@Home 1,150,000
------------------------- -----------
Road Runner 730,000
------------------------- -----------
Total 49,580,000
------------------------- -----------
Long-term rewards are enticing, but they also recognize that the transition
brings with it a myriad of concerns. While the rewards can be substantial, there
is a price attached. In addition to capital outlay for new equipment, many ISPs
will find the price also includes changing their basic business strategy and
their outlook for the future. "We're seriously considering all aspects of the
VoDSL opportunity but it's a complex situation," said Kurt Rahn, Sr. Manager of
Public Relations for EarthLink". The issues range from overall corporate
strategy and identity, to hardware selection. There are also new regulatory
issues inherent in providing telecommunications services that we haven't had to
deal with before."
CABLE COMPANIES - Voice over broadband (cable) could be the next competitor
class entering the VoIP theatre. According to high-tech market research firm
Cahners In-Stat Group, worldwide revenues from cable telephony services will
grow from a modest $293 million in 1999 to over $7 billion by the year 2004.
In-Stat reports that the concept of competitive residential telephone services
has interested cable TV operators for years and that although reliable telephony
equipment for hybrid fiber-coaxial (HFC) networks has been commercially
available, economic and operational barriers have limited service deployment.
However, over the past year, voice services have increasingly been bundled with
data and video services. Bundling has proven very attractive to consumers and
cable operators are now eager to expand the availability of their telephony
services.
At the same time, In-Stat believes that there is a technology migration underway
that will give a long-term boost to cable telephony. In the near future, cable
-----
telephony will migrate from traditional circuit-switched voice technology to
--------------------------------------------------------------------------------
Voice over IP (VoIP). "VoIP provides cable operators with two advantages in
-----------------------
comparison to circuit-switched solutions: improved scalability and lower costs.
These advantages will directly contribute to an increase in the availability of
cable telephony services", according to Mike Paxton, Senior Analyst with
In-Stat's Converging Markets & Technologies Service.
The cable industry, which is eager to offer VoIP services as part of its bundled
offering, has not yet mastered many of the technical issues, although in early
2000 it unveiled its PacketCable architecture, including features for IP
telephony. Field trials will begin in the second quarter and full equipment
could be available by late 2000.
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WHOLESALE VOIP NETWORK COMPETITORS - The Company does not plan to compete at the
wholesale level for the present. Industry leaders include IBasis - A wholesale
------
provider of international Internet telephony services, iBasis network has
strategically located points of presence (POPs) across the globe. iBasis
recently introduced the industry's first service level agreement (SLA) for
Internet telephony. iBasis' SLA for international termination services promises
much, a global footprint and operational support services to deliver a modular,
turnkey solution for international telecommunications providers. With this
turnkey solution, international Internet service providers (ISPs) can begin
selling voice, fax, prepaid calling and other value-added VoIP services, with
minimal capital investment. These new Internet telephony hosting services and
its proven global network, is well positioned to do for international
telecommunications providers what UUNet has done for ISPs.
ITSPS (INTERNET TELEPHONY SERVICE PROVIDERS) - Fledgling VoIP companies have not
yet succeeded to any major extent for several reasons. Until recently, the
technology itself did not provide a commercially acceptable call on a consistent
basis. Further, many of the companies executing VoIP strategies simply have
been undercapitalized. It is very noteworthy, however, that none of the other
ITSP companies, even Net2Phone, have a phone-to- phone service.
GOVERNMENT REGULATION
Laws and regulations that apply to Internet communications, commerce and
advertising are becoming more prevalent. The adoption of such laws could create
uncertainty in Internet usage and reduce the demand for all products and
services offered on the Internet. Recently, Congress enacted legislation
regarding children's privacy on the Internet. It is possible that additional
laws and regulations may be proposed or adopted with respect to the Internet,
covering issues such as user privacy, taxation, advertising, intellectual
property rights and information security. Several states have proposed
legislation to limit the use of personal user information gathered online or to
require online services to establish privacy policies.
The Federal Trade Commission recently reported that it has no present
intention of proposing legislation to address online privacy in the near future,
and that it believes self-regulation to be the best course of action, except for
rules enacted to implement the Children's Online Privacy Protection Act, which
governs the collection of personal information from children and the
confidentiality of such information. However, the FTC has initiated action
against at least one online service regarding the manner in which personal
information was collected from users and provided to third parties.
Legislation has recently been enacted in several states relating to sending
unsolicited emails, a practice commonly referred to as "spamming." The federal
government and several other states, including New York, are considering, or
have considered, similar legislation. Although the provisions of these current
and contemplated laws vary, generally they limit or prohibit both the
transmission of unsolicited emails and the use of familiar spamming techniques,
such as the use of forged or fraudulent routing and header information. Some
states, including California, require that unsolicited emails include opt-out
instructions and that senders of such emails honor any opt-out requests. We
believe that our email newsletters will not be affected by legislation directed
at unsolicited emails because we do not send unsolicited messages and because
our current practices are intended to comply with current and proposed
legislation. However, if we are required to change our business practices as a
result of new legislation, our business could suffer.
We do not know how our business may be affected by the application to the
Internet of existing laws governing issues such as property ownership,
copyrights, encryption and other intellectual property issues, taxation, libel,
obscenity and export or import matters. Most of these laws were adopted before
the advent of the Internet and do not contemplate or address the unique issues
of the Internet and related technologies. Changes in laws intended to address
such issues could create uncertainty in the Internet marketplace. That
uncertainty could reduce demand for our service or increase the cost of doing
business as a result of litigation costs or increased service delivery costs.
In addition, because our services are available on the Internet in multiple
states and foreign countries, these states and countries may claim that we are
required to qualify to do business in their jurisdictions. Currently, we are
qualified to do business only in US, Korea and Hong Kong. Our failure to qualify
in other jurisdictions where we are required to do so could subject us to taxes
and penalties. It could also restrict our ability to enforce contracts in those
jurisdictions. The application of laws or regulations from jurisdictions whose
laws do not currently apply to our business could have a material adverse effect
on our business, results of operations and financial condition.
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The European Union has adopted a privacy directive that went into effect in
1998. Under this directive, business entities domiciled in member states of the
EU are limited with respect to the transactions in which they may engage with
business entities domiciled outside the EU, unless the non-EU entities are
domiciled in jurisdictions with privacy laws comparable to the EU privacy
directive. The United States presently does not have laws that satisfy the EU
privacy directive. Discussions between representatives of the EU and the United
States are ongoing and may lead to certain safe harbor provisions which, if
adhered to, would allow business entities in the EU and the United States to
continue doing business without limitation. If these negotiations are not
successful and the EU begins enforcing the privacy directive, there could be an
adverse impact on international Internet business. If we do business directly in
the EU in the future, we will be required to comply with the EU privacy
directive.
INTELLECTUAL PROPERTY
We regard our copyrights, service marks, trademarks, trade secrets,
proprietary technology and similar intellectual property as critical to our
success, and we rely on trademark and copyright law, trade secret protection and
confidentiality and license agreements with our employees, customers,
independent contractors, partners and others to protect our intellectual
property rights. We have 1 patent application pending with respect thereto. We
have registered certain trademarks in the United States and may apply for
registration in the United States for other trademarks and service marks.
However, effective trademark, service mark, copyright and trade secret
protection may not be available in every country in which our products and
services are made available online. We generally rely on common law copyright
protection, and do not generally register our copyrights.
We have registered a number of domain names, including www.atngroup.com,
----------------
www.koreatalks.com, www.hongkongtalks.com, www.chinatalks.com . Domain names,
------------------ --------------------- ------------------
generally, are regulated by Internet regulatory bodies. The regulation of domain
names in the United States and in foreign countries is subject to change in the
near future. Regulatory bodies could establish additional top-level domains,
appoint additional domain name registrars or modify the requirements for holding
domain names. The relationship between regulations governing domain names and
laws protecting trademarks and similar intellectual property rights is unclear.
Therefore, we could be unable to prevent third parties from acquiring domain
names that infringe on or otherwise decrease the value of our trademarks and
other proprietary rights. We have no knowledge of any companies in other
countries using domain names that infringe on our trademarks.
We may be required to obtain licenses from others to refine, develop,
market and deliver new services. We may be unable to obtain any such license on
commercially reasonable terms, if at all, or guarantee that rights granted by
any licenses will be valid and enforceable.
EMPLOYEES
As of October 20, 2000, we had a total of 11 employees, including 3 in
sales and marketing, 4 in technology and development, and 4 in administration.
None of our employees are represented by unions, and we consider relations with
our employees to be good.
FACILITIES
We currently occupy approximately 3,000 square feet in a leased facility in
Memphis, TN, with a monthly rental cost of approximately $ 7,000 per month. Our
current lease for space expires in December 2000. We expect that this facility
will not be adequate to meet or needs over the next several months, and we are
currently in the process of seeking to lease up to 5,000 additional square feet
in the Memphis area. Additionally, we have space leased in Austin, Texas that
houses our operations center. Space is occupied in California that houses our
joint venture partner in ATN USA. Also located there is the sales force that
will focus on the California Asian market.
32
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following persons are our current executive officers, directors and
director nominees:
MANAGEMENT TEAM
MANAGEMENT - Tag Chong Kim, Chairman of the Board, and Robert Gates, Vice
Chairman and Chief Executive Officer, founded ATN in 1999. The Company's senior
management team possesses a wide range of business and technical skills.
NAME POSITION AGE
-------------------- ----------------------------------- ----
Tag Chong Kim* Chairman & Director 39
-------------------- ----------------------------------- ----
E. Robert Gates* Vice-Chairman & CEO 57
-------------------- ----------------------------------- ----
George Singer President & Chief Operating Officer 60
-------------------- ----------------------------------- ----
James Crunk EVP & Chief Financial Officer 52
-------------------- ----------------------------------- ----
Woo Jong Kim* EVP Asia Operation 37
-------------------- ----------------------------------- ----
* Director
-------------------- ----------------------------------- ----
Set forth below is a brief description of the background of our officers
and directors.
Our Board of Directors is elected annually by our stockholders. Directors
receive no cash compensation for their services to us as directors, but are
reimbursed for expenses actually incurred in connection with attending meetings
of the Board of Directors. Members of the Board of Directors are eligible to
participate in our stock option plan. Independent Directors are ineligible to
participate in our qualified stock option plan under current Internal Revenue
Service regulations.
The following sets forth certain information concerning ATN's officers and
directors.
Tag Chong Kim has been the Chairman and director of ATN since January 2000.
Since July 1998, Dr. Kim has been the founder and president of GTN Inc., a
private company engaged in IP telecommunications service. From June 1996 to
November 1997, Dr. Kim was the President and CEO of Dooco Co., Ltd (Korea), a
telecommunication networking device manufacturer and general consumer packaged
products Company. Between May 1994 and June 1996, Dr. Kim was Managing Director
of Dooco Co., Ltd (Korea) and from January 1992 to April 1994, Dr. Kim was chief
branch officer and project engineer of, the Korea branch office, the French Gas
Corporation (Gaz de France), a major global gas company. Before beginning his
international business career, Dr. Kim was engaged in the French Chemical
Research Institute in Toulouse, France from 1984 to 1991, as a senior research
fellow. Dr. Kim received a Master and PhD degree in Chemical engineering of
Organic Phosphorus Chemistry from University of Paul Sabatier, Toulouse, France.
E. Robert Gates has been Vice Chairman and Chief Executive Officer of ATN
since January 2000. From May 1999 to December 1999, Dr. Gates was a consultant
to GTN, Inc., a private company engaged in IP telecommunications. From October
1994 to May 1999, Dr. Gates served as Chairman and Chief Executive Officer of
TrendMark, Inc., a direct-marketing telecommunications company offering products
directly to the consumer, including one plus long distance, prepaid calling
cards and flat rate unlimited long distance. From December 1990 to September
1994, Dr. Gates was a consultant to several venture companies serving as Chief
Operating Officer and Chief Executive Officer. His clients included
International Golfers Club, Inc., a golf course management and consulting
company that utilized its own Smart Card technology; and Explorer Systems, Inc.,
a computer software manufacturer that developed a product for dental office
management. From July 1985 until November 1990, he served as President and
Chief Executive Officer of ATS Research, Inc., a High-Tech Phyto-Chemical
company engaged in the manufacturing and distribution of environmentally sound
chemicals utilizing Dr. Gates' patented chemistry. These products were, and are
still, being utilized by golf courses in the United States and Canada. Dr. Gates
holds a B.S. in Business Administration, an M.B.A. and a Ph.D. in Management.
33
<PAGE>
George Singer has been ATN's President and Chief Operating Officer since
October 2000. Mr. Singer, who received his Bachelor of Science degree from the
United States Naval Academy, was most recently Chief Technical Officer / Chief
Information Officer at Zer0Call.com, a start-up telecommunications and internet
company. From Nov. 1991 to Sept. 1995 Mr. Singer was President and CEO of
Seattle-based Arcada Communications, a privately-held switch-based regional long
distance carrier with $12.5 million annual revenue and 65 employees. At Arcada
he increased the customer base from 6,900 to 22,000, increased the gross profit
margin from 3% to more than 40%, and expanded the service area from two states
to 18 states. Later, he rejoined Arcada as Senior Vice President and CTO,
assuming responsibility for network design and operations, carrier contract
negotiations, pricing, strategic planning, and regulatory affairs. From 1994 to
1999 Mr. Singer was Treasurer and a Member of the Board of Directors of
America's Carriers Telecommunications Association (ACTA), one of the 3 long
distance industry associations. After ACTA's merger with COMPTEL, he was a
Member of the Board of COMPTEL, the largest and oldest LD association worldwide.
Mr. Singer's career spans more than 30 years in the telecommunications industry
and includes positions in Management, Operations, Sales and Marketing with a
local exchange carrier, equipment manufacturers, and interexchange carriers. His
career in telecommunications followed seven years active duty in the United
States Navy, primarily in nuclear submarines.
James M. Crunk has been Chief Financial Officer since October, 2000. Prior
to joining ATN Group, he was Vice President, Finance (CFO) and Business
Development for SpaceData, Inc., a new international telecommunications and data
company. Immediately preceding that assignment, Jim had several years with
Lockheed Martin as the senior finance and business lead for a wide variety of
tasks involved with space-based, trans-oceanic, and terrestrial
telecommunications, specifically working on joint ventures and developing
strategies for the privatization and commercialization of NASA assets. He has
also been the President of an international communications consulting company. A
large measure of his early career was with COMSAT and then INTELSAT in finance
and contract management. Jim brings more than 25 years' experience in high
technology communications and a wealth of business related interaction with many
different countries around the world. Jim received his BS from Middle Tennessee
State University and his MBA from Loyola College, Baltimore, MD. He is also a
member of many national and international associations and is a listed in Who's
Who Worldwide.
Woo Jong Kim has been a director of ATN since January 2000. Since
September 1999, Mr. Kim has been the president and CEO of ATN Korea Co., Ltd, a
Korean joint venture partner of ATN Group, Inc in Seoul, Korea. From 1998 to
1999, Mr. Kim was vice president of Dresdner Kleinwort Benson, Korea branch, a
leading German investment-banking firm. Between 1996 and 1998, Mr. Kim was a
senior analyst and fund manager of Oriens Capital, a corporate financing company
and from 1994 to 1996, Mr. Kim was senior analyst of ING Baring Securities,
Seoul Branch, a global leading security firm. From 1988 to 1994, Mr. Kim was a
senior accountant at KPMG Peat Marwick, Los Angeles Office. Mr. Woo Jong Kim
is a member the American Institute of Certified Public Accountants. He received
his undergraduate degree in International Relations from Seoul National
University and received a Master of Business Administration degree from the
University of California, Irvine.
The Audit Committee currently consists of Tag Chong Kim, E. Robert Gates
and Woo Jong Kim. We anticipate that new directors shall serve as the Audit
Committee immediately upon being elected to our Board of Directors. The Audit
Committee recommends engagement of our independent certified public accountants,
and is primarily responsible for reviewing and approving the scope of the audit
and other services performed by our independent certified public accountants and
for reviewing and evaluating our accounting principles and practices, systems of
internal controls, quality of financial reporting and accounting and financial
staff, as well as any reports or recommendations issued by the independent
accountants.
The Compensation Committee currently consists of Tag Chong Kim, E. Robert
Gates and Woo Jong Kim. We anticipate that new Directors shall serve as the
Compensation Committee immediately upon being elected to our Board of Directors.
The Compensation Committee generally reviews and approves our executive
compensation and currently administers our 2000 Stock Option Plan.
34
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the cash and other compensation paid in this
year to our chief executive officer and all other executive officers during the
fiscal year ended August 31, 2000.
Annual Compensation
-------------------
Name and Other Annual
Principal Position Year Salary Bonus Compensation(1)
------------------ ---- ------ ----- ---------------
Tag Chong Kim 2000 -0- -0- -0-
E. Robert Gates 2000 -0- -0- -0-
George Singer 2000 -0- -0- -0-
James Crunk 2000 -0- -0- -0-
Woo Jong Kim 2000 -0- -0- -0-
PROPOSED COMPENSATION
The following table shows the amount, which ATN expects to pay its executive
officers during the year ending December 31, 2000.
Annual Compensation
-------------------
Name and Other Annual
Principal Position Year Salary Bonus Compensation(1)
------------------ ---- ------- ------ ---------------
Tag Chong Kim 2000 236,805 62,500
E. Robert Gates 2000 236,805 62,500
George Singer 2000 40,000 10,000
James Crunk 2000 36,000 8,750
Woo Jong Kim 2000 140,000 35,000
To the date of our audit, our executive officers have received no pay,
electing instead to delay receipt of their earned salary for guiding the Company
toward formation. The first table "Executive Compensation" sets forth the
actual compensation in the form of Salary and Bonus received by the Executive
Officers of the Company. The second table "Proposed Compensation" anticipates
that funds will be received in the form of receipt of subscriptions receivable,
a bridge loan or the sale of this offering, and after that the Salary and Bonus
amounts that the Company anticipates paying to the listed Executive Officers.
This table does not propose the compensation forward into the next calendar year
for those Executive Officers.
35
<PAGE>
EMPLOYMENT AGREEMENTS
We have entered into employment agreements with each of Tag Chong Kim, E.
Robert Gates, George Singer, Woo Jong Kim and John Remillard. The employment
agreement with E. Robert Gates provides for him to serve as the Vice Chairman,
Chief Executive Officer and a director, and provides for an annual base salary
of $243,750, a bonus of 25 % of base income before taxes and various fringe
benefits. The employment agreement with Tag Chong Kim provides for him to serve
as the Chairman of the Board, provides for an annual base salary of $243,750 and
provides for a bonus of 25% of base income before taxes and various fringe
benefits. The employment agreement with George Singer provides for him to serve
as the President, Chief Operating Officer, provides for an annual base salary of
$160,000 and provides for a bonus of 25% of base income before taxes and various
fringe benefits. The employment agreement with Woo Jong Kim provides for him to
serve as the Executive Vice President of Asian Operations, provides for an
annual base salary of $140,000 and provides for a bonus of 25% of base income
before taxes and various fringe benefits. The employment agreement with John
Remillard provides for him to serve as the Chief Scientist, provides for an
annual base salary of $112,500 and provides for a bonus of 25% of base income
before taxes and various fringe benefits. ATN expects to complete the employment
agreement with the other executive officers within next 30 days.
Each of the above-described agreements becomes effective upon the first
closing of this offering, expires on the fifth anniversary of the first closing
of this offering and contains restrictions on the employee engaging in
competition with us for the term thereof and for one year thereafter and
provisions protecting our proprietary rights and information. Each agreement
also provides for the payment of three times the employee's previous year's cash
compensation, less $1.00, upon his or her termination in the event of a change
in control of ATN (a "Change in Control"), which is defined therein to mean (a)
a change in control as defined in Rule 12b-2 under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), (b) a person (as such term is defined
in Sections 13(d) and 14(d) of the Exchange Act) other than a current director
or officer of ATN becoming the beneficial owner, directly or indirectly, of 20%
of the voting power of our outstanding securities or (c) the members of the
Board of Directors at the beginning of any two-year period ceasing to constitute
at least a majority of the Board of Directors unless the election of any new
director during such period has been approved in advance by two-thirds of the
directors in office at the beginning of such two-year period.
STOCK OPTION AND BONUS PLANS
We have adopted the Stock Option and Bonus Plans in order to motivate our
qualified employees, officers, directors, consultants and independent
contractors, to assist us in attracting employees and to align the interests of
such persons with those of our stockholders. The Stock Option and Bonus Plans
provides for the grant of "stock options" within the meaning of the Section 422
of the Internal Revenue Code of 1986, as amended, "non-qualified stock options,"
restricted stock, performance grants and other types of awards to our officers,
key employees, consultants and independent contractors.
The Stock Option and Bonus Plans, which will be administered by the
Compensation Committee of the Board of Directors, authorizes the issuance of a
maximum of 2,400,000 shares of common stock which may be either newly issued
shares, treasury shares, reacquired shares, shares purchased in the open market
or any combination thereof. Incentive stock options generally may be granted at
an exercise price of not less than the fair market value of shares of common
stock on the date of grant, and non-qualified stock options may be granted at an
exercise price of not less than eighty five percent (85%) of such fair market
value. If any award under the Stock Option and Bonus Plans terminates, expires
unexercised, or is cancelled, the shares of common stock that would otherwise
have been issuable pursuant thereto will be available for issuance pursuant to
the grant of new awards.
Incentive Stock Option Plan.
The Incentive Stock Option Plan authorizes the issuance of options to
purchase up to 1,700,000 shares of ATN's Common Stock. The Incentive Stock
Option Plan became effective on December 1, 2000 and will remain in effect until
December 1, 2010, unless terminated earlier by action of the Board of Directors.
Only officers and employees of ATN may be granted options pursuant to the
Incentive Stock Option Plan.
In order to qualify for incentive stock option treatment under the Internal
Revenue Code, the following requirements must be complied with:
1. Options granted pursuant to the Plan must be exercised no later than:
36
<PAGE>
(a) The expiration of thirty (30) days after the date on which an option
holder's employment by ATN is terminated.
b) The expiration of one year after the date on which an option holder's
employment by ATN is terminated, if such termination is due to the
Employee's disability or death.
2. In the event of an option holder's death while in the employ of ATN,
his/her legatees or distributees may exercise (prior to the option's
expiration) the option as to any of the shares not previously exercised.
3. Options may not be exercised until one year following the date of grant.
4. The purchase price per share of Common Stock purchasable under an option
is determined by the Committee but cannot be less than the fair market
value of the Common Stock on the date of the grant of the option.
Non-Qualified Stock Option Plan.
The Non-Qualified Stock Option Plan authorizes the issuance of options to
purchase up to 700,000 shares of ATN's Common Stock. The Non-Qualified Stock
Option Plan became effective on December 1, 2000 and will remain in effect until
December 1, 2005, unless terminated earlier by the Board of Directors. ATN's
employees, directors, officers, consultants and advisors are eligible to be
granted options pursuant to the Plan, provided however that bona fide services
must be rendered by such consultants or advisors and such services must not be
in connection with the offer or sale of securities in a capital-raising
transaction. The exercise price for each option granted pursuant to this Plan is
determined by ATN's Board of Directors at the time of grant.
Stock Bonus Plan.
Up to 1,000,000 shares of Common Stock may be granted under the Stock Bonus
Plan. Such shares may consist, in whole or in part, of authorized but unissued
shares, or treasury shares. Under the Stock Bonus Plan, ATN's employees,
directors, officers, consultants and advisors are eligible to receive a grant of
ATN's shares; provided, however, that bona fide services must be rendered by
consultants or advisors and such services must not be in connection with the
offer or sale of securities in a capital-raising transaction.
The Plans are administered by ATN's Board of Directors. The Board of
Directors has the authority to interpret the provisions of the Plans and
supervise the administration of the Plans. In addition, the Board of Directors
is empowered to select those persons to whom shares or options are to be
granted, to determine the number of shares subject to each grant of a stock
bonus or an option and to determine when, and upon what conditions, shares or
options granted under the Plans will vest or otherwise be subject to forfeiture
and cancellation.
In the discretion of the Board of Directors, any option granted pursuant to
the Plans may include installment exercise terms such that the option becomes
fully exercisable in a series of cumulating portions. The Board of Directors may
also accelerate the date upon which any option (or any part of any options) is
first exercisable. Any shares issued pursuant to the Stock Bonus Plan and any
options granted pursuant to the Incentive Stock Option Plan or the Non-Qualified
Stock Option Plan will be forfeited if the "vesting" schedule established by the
Board of Directors at the time of the grant is not met. For this purpose,
vesting means the period during which the employee must remain an employee of
ATN or the period of time a non-employee must provide services to ATN. At the
time an employee ceases working for ATN (or at the time a non-employee ceases to
perform services for ATN), any shares or options not fully vested will be
forfeited and cancelled. In the discretion of the Board of Directors payment for
the shares of Common Stock underlying options may be paid through the delivery
of shares of ATN's Common Stock having an aggregate fair market value equal to
the option price, provided such shares have been owned by the option holder for
at least one year prior to such exercise. A combination of cash and shares of
Common Stock may also be permitted at the discretion of the Board of Directors.
Options are generally non-transferable except upon death of the option
holder. Shares issued pursuant to the Stock Bonus Plan will generally not be
transferable until the person receiving the shares satisfies the vesting
requirements imposed by the Board of Directors when the shares were issued.
37
<PAGE>
The Board of Directors of ATN may at any time, and from time to time,
amend, terminate, or suspend one or more of the Plans in any manner it deems
appropriate, provided that such amendment, termination or suspension cannot
adversely affect rights or obligations with respect to shares or options
previously granted. The Board of Directors may not, without shareholder
approval: make any amendment which would materially modify the eligibility
requirements for the Plans; increase or decrease the total number of shares of
Common Stock which may be issued pursuant to the Plans except in the case of a
reclassification of ATN's capital stock or a consolidation or merger of ATN;
reduce the minimum option price per share; extend the period for granting
options; or materially increase in any other way the benefits accruing to
employees who are eligible to participate in the Plans.
Any options granted under the Incentive Stock Option Plan or the
Non-Qualified Stock Option Plan must be granted before November 15, 2010. Any
shares granted pursuant to the Stock Bonus Plan must be issued prior to November
15, 2010. The Plans are not qualified under Section 401(a) of the Internal
Revenue Code, nor are they subject to any provisions of the Employee Retirement
Income Security Act of 1974.
PERSONAL LIABILITY AND INDEMNIFICATION OF DIRECTORS
Our Bylaws, in accordance with Nevada General Corporate Law, contain
provisions which reduce the potential personal liability of directors for
certain monetary damages and provide for indemnification of directors and other
persons. We are unaware of any pending or threatened litigation against us or
our directors that would result in any liability for which such director would
seek indemnification or similar protection. Additionally, we have entered into
Indemnification Agreements with each of our executive officers and directors.
The agreements provide for reimbursement for all direct and indirect costs of
any type or nature whatsoever (including attorneys' fees and related
disbursements) actually and reasonably incurred in connection with either the
investigation, defense or appeal of a "Proceeding", as defined in the
Indemnification Agreements, including amounts paid in settlement by or on behalf
of an "Indemnitee", as defined such agreements.
Such indemnification provisions are intended to increase the protection
provided directors and, thus, increase our ability to attract and retain
qualified persons to serve as directors. Because directors liability insurance
is only available at considerable cost and with low dollar limits of coverage
and broad policy exclusions, we do not currently maintain a liability insurance
policy for the benefit of our directors, although we are researching the
acquisition of such insurance and we may attempt to acquire such insurance in
the future. We believe that the substantial increase in the number of lawsuits
being threatened or filed against corporations and their directors has resulted
in a growing reluctance on the part of capable persons to serve as members of
boards of directors of companies, particularly of companies which are or intend
to become public companies.
In the opinion of the SEC, indemnification for liabilities arising under
the Securities Act of 1933, such as those contained in the Indemnification
Agreements, is contrary to public policy and, therefore, is unenforceable.
Our officers and directors will be covered by officers' and directors'
liability insurance unless the cost is prohibitive. We are currently seeking to
obtain officers' and directors' insurance. The policy coverage will be $
5,000,000, which includes reimbursement for costs and fees. There will be a
maximum aggregate deductible for each loss under the policy of $ 15,000,000.
38
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth the beneficial ownership of our common stock
as of January 2000, and as adjusted to reflect the sale of the shares of Common
Stock offered by this Prospectus, of (i) each person known by us to beneficially
own 5% or more of the shares of outstanding common stock, (ii) each of our
executive officers and directors, and (iii) all of our executive officers and
directors as a group. Except as otherwise indicated, all shares are
beneficially owned, and investment and voting power is held by, the persons
named as owners.
<TABLE>
<CAPTION>
Amount and Nature of Percentage Ownership of Percentage Ownership of
Name and Address of Common Stock Common Stock Common Stock
Beneficial Owner Beneficially Owned Before Offering After Offering
----------------- ------------------- ----------------------- -----------------------
Minimum Maximum
------- -------
<S> <C> <C> <C> <C>
Tag Chong Kim 10,750,000 38.2% 37.9% 35.6%
1867 Johnson Rd.
Germantown, TN. 38139
E. Robert Gates 10,750,000 38.2% 37.9% 35.6%
Woo Jong Kim 2,500,000 8.9% 8.8% 8.3%
All officers and directors 24,000,000.00 85.3% 84.6% 79.5%
as a group (3 persons)
</TABLE>
_____________________________
CERTAIN TRANSACTIONS
We have granted options to purchase 1,447,826 shares of common stock at an
exercise price of $15.625 per share in equal installments over a five year
period to consultants, Millennium Capital Quest Corporation. See "Management
Discussion and Analysis."
All transactions between us and any or our officers or directors will be on
terms no less favorable to us than would be available from unaffiliated third
parties.
PLAN OF DISTRIBUTION
ARBITRARY DETERMINATION OF OFFERING PRICE
We have determined the initial offering price of the shares arbitrarily.
Among the factors we considered were the nature and scope of our operations, our
current financial condition and financial requirements, estimates of our
business potential and prospects, the perceived market demand for our products,
the economics of the information technology, Internet and software industries,
the general condition of the equities market, the valuations of other companies
in our market segment, and other factors.
LIMITED STATE REGISTRATION
We will qualify or register the sales of the shares in a limited number of
states. We will not accept subscriptions from investors resident in other
states.
39
<PAGE>
TERMS OF SALE OF THE SHARES
We are offering the shares on a "160,000 share minimum, 2,000,000 share
maximum" basis through our officers and directors. No sales commissions will be
paid to any of our officers or directors. Prospective investors must purchase
the shares in increments of 100 shares. Until we have sold at least 160,000
shares, we will not accept subscriptions for any shares. All proceeds of this
offering will be deposited in an non-interest bearing escrow account with South
Trust Bank, Memphis TN. We have the right to accept or reject any subscription
for shares offered hereby, in whole or in part, for any reason or for no reason.
The offering will remain open until all shares offered hereby are sold or
October 19, 2001, unless we decide to cease selling efforts at any time prior to
such date. We will reimburse our officers and directors for expenses incurred
in connection with the offer and sale of the shares. Our officers and directors
are relying on Rule 3a4-1 of the Exchange Act as a "safe harbor" from
registration as a broker-dealer in connection with the offer and sales of the
shares. In order to rely on such "safe harbor" provisions provided by Rule
3a4-1, an officer or director must (1) not be subject to a statutory
disqualification; (2) not be compensated in connection with such selling
participation by payment of commissions or other remuneration based either
directly or indirectly on such transactions; (3) not be an associated person of
a broker-dealer; and (4) (i) restrict participation to transactions involving
offers and sale of the shares, and (ii) perform substantial duties for the
issuer after the close of the offering not connected with transactions in
securities, and not have been associated with a broker or dealer for the
preceding 12 months, and not participate in selling an offering of securities
for any issuer more than once every 12 months, and (iii) restrict participation
to written communications or responses to inquiries of potential purchasers.
Our officers and directors intend to comply with the guidelines enumerated in
Rule 3a4-1.
USE OF A BROKER-DEALER
We may locate one or more broker-dealers who may offer and sell the shares
on terms acceptable to us. If we determine to use a broker-dealer, such
broker-dealer must be a member in good standing of the National Association of
Securities Dealers, Inc. and registered, if required, to conduct sales in those
states in which it would sell the shares. We anticipate that we would not pay
in excess of 10% as a sales commission for any sales of the shares. If a
broker-dealer were to sell shares, it is likely that such broker-dealer would be
deemed to be an underwriter of the securities as defined in Section 2(11) of the
Securities Act and we would be required to obtain a no-objection position from
the National Association of Securities Dealers, Inc. regarding the underwriting
and compensation terms entered into between us and such potential broker-dealer.
In addition, we would be required to file a post-effective amendment to the
registration statement of which this prospectus is a part to disclose the name
of such selling broker-dealer and the agreed underwriting and compensation
terms. We have no agreements or understandings with any broker-dealer to offer
shares for sale.
In order to comply with the applicable securities laws, if any, of certain
states, the shares will be offered or sold in such states through registered or
licensed brokers or dealers in those states.
DESCRIPTION OF CAPITAL STOCK
CAPITAL STOCK
Our authorized capital stock consists of 50,000,000 shares of common stock,
par value $.01 per share.
COMMON STOCK
General. We have 50,000,000 authorized shares of common stock, par value
$.01 per share, 28,163,034 of which are issued and outstanding prior to this
offering. All shares of common stock currently outstanding are validly issued,
fully paid and non-assessable, and all shares which are the subject of this
prospectus, when issued and paid for pursuant to this offering, will be validly
issued, fully paid and non-assessable.
40
<PAGE>
Voting Rights. Each share of our common stock entitles the holder thereof
to one vote, either in person or by proxy, at meetings of stockholders. Our
Board of Directors is elected annually at each annual meeting of the
stockholders. See "Principal Stockholders" and "Risk Factors" - Concentration
of Stock Ownership in Management".
Dividend Policy. All shares of common stock are entitled to participate
ratably in dividends when, as and if declared by our Board of Directors out of
the funds legally available thereof. Any such dividends may be paid in cash,
property or additional shares of common stock. We have not paid any dividends
since our inception and presently anticipates that all earnings, if any, will be
retained for development of our business and that no dividends on the shares of
common stock will be declared in the foreseeable future. Any future dividends
will be subject to the discretion of our Board of Directors and will depend
upon, among other things, future earnings, our operating and financial
condition, our capital requirements, general business conditions and other
pertinent facts. There can be no assurance that any dividends on the common
stock will ever be paid.
Miscellaneous Rights and Provisions. Holders of common stock have no
preemptive or other subscriptions rights, conversions rights, redemption or
sinking fund provisions. In the event of the liquidation or dissolution,
whether voluntary or involuntary, of ATN, each share of common stock is entitled
to share ratably in any assets available for distribution to holders of the
equity of ATN after satisfaction of all liabilities.
Shares Eligible for future Sale. Upon completion of this offering, we will
have 28,323,034 shares of common stock outstanding if the minimum number of
shares offered hereby are sold, or 30,163,034 shares of common stock outstanding
if the maximum number of shares offered hereby are sold. Of these shares, the
shares sold in this offering will be freely tradable without restriction or
further registration under the Securities Act, except for any shares purchased
by an "affiliate" of ATN (in general, a person who has a control relationship
with ATN), which will be subject to the limitations of Rule 144 adopted under
the Securities Act. All of the remaining shares are deemed to be "restricted
securities", as that term is defined under Rule 144 promulgated under the
Securities Act.
In general, under Rule 144 as currently in effect, subject to the
satisfaction of certain other conditions, commencing 90 days after the date of
this prospectus, a person, including an affiliate of ATN (or persons whose
shares are aggregated), who has owned restricted shares of common stock
beneficially for at least one year is entitled to sell, within any three-month
period, a number of shares that does not exceed the greater of 1% of the total
number of outstanding shares of the same class or the average weekly trading
volume of our common stock on all exchanges and/or reported through the
automated quotation system of a registered securities association during the
four calendar weeks preceding the date on which notice of the sale is filed with
the SEC. Sales under Rule 144 are also subject to certain manner of sale
provisions, notice requirements and the availability of current public
information about us. A person who has not been an affiliate of ATN for at
least the three months immediately preceding the sale and who has beneficially
owned shares of common stock for at least one year is entitled to sell such
shares under Rule 144 without regard to any of the limitations described above.
All of the shares of restricted stock presently outstanding have not been
held at least one year. Accordingly, commencing following the completion of the
offering, these 28,163,034 shares will be eligible for resale pursuant to Rule
144 at the rates and subject to the conditions discussed above. The sale of any
substantial number of these shares in the public market could adversely affect
prevailing market prices following the offering.
No predictions can be made as to the effect, if any, that sales of shares
under Rule 144 or otherwise or the availability of shares for sale will have on
the market, if any, prevailing from time to time. Sales of substantial amounts
of the common stock pursuant to Rule 144 or otherwise may adversely affect the
market price of the common stock offered hereby.
CERTAIN PROVISIONS IN THE BY LAWS
The Nevada Corporation Law further contains certain anti-takeover
provisions. Nevada Corporation Law provides, with certain exceptions, that as a
Nevada corporation, we may not engage in any of a broad range of business
combinations with a person who owns 15% or more of our outstanding voting stock
(an "interested stockholder") for a period of three years from the date that
such person became an interested stockholder unless: (i) the transaction
resulting in a person's becoming an interested stockholder, or the business
combination is approved by the board of directors of the corporation before the
person becomes an interested stockholder; (ii) the interested stockholder
acquire 85% or more of our outstanding voting stock (excluding shares owned by
persons who are both officers and directors of ATN, and shares held by certain
employee stock ownership plans); or (iii) the business combination is approved
by our Board of Directors and by the holders of at least 66-2/3% of our
outstanding voting stock at an annual or special meeting, excluding shares owned
by the interested stockholder.
41
<PAGE>
EXPERTS
Our financial statements as of August 31, 2000, appearing in this
prospectus and registration statement have been audited by Greg Shelton,
Certified Public Accountant, independent auditors, as set forth in their report
thereon, appearing elsewhere in this prospectus and in this registration
statement, and are included in reliance upon such reports given upon the
authority of said firm as experts in accounting and auditing.
LEGAL MATTERS
The validity of the shares offered hereby will be passed upon for us by
Cokinos, Bosien & Young, a Professional Corporation, Houston, Texas.
THE BALANCE OF THIS PAGE
INTENTIONALLY LEFT BLANK
<PAGE>
INDEX TO FINANCIAL STATEMENTS
[INSERT FINANCIAL STATEMENTS]
See accompanying notes and accountant's report.
<PAGE>
GREG SHELTON, CPA
2763 SUMMER OAKS DRIVE, SUITE 102
BARTLETT, TN 38134-2850
Office: 901-382-0557
Fax: 901-382-8946
E-Mail: [email protected]
INDEPENDENT AUDITOR'S REPORT
Board of Directors
ATN Group, Inc.
Memphis, Tennessee
I have audited the accompanying balance sheet of ATN Group, Inc., as of August
31, 2000, and the related statements of income, stockholders' equity, and cash
flows for the period from inception to eight months then ended. These financial
statements are the responsibility of the Company's management. My
responsibility is to express an opinion on these financial statements based on
my audit.
I conducted my audit in accordance with generally accepted auditing standards.
These standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statement referred to above present fairly, in all
material respects, the financial position of ATN Group, Inc., as of August 31,
2000, and the results of its operations and cash flows for the initial and
interim period of eight months then ended in conformity with generally accepted
accounting principles.
October 9, 2000
See accompanying notes and accountant's report.
<PAGE>
<TABLE>
<CAPTION>
ATN GROUP, INC.
BALANCE SHEET
AUGUST 31, 2000
ASSETS
------
<S> <C>
CURRENT ASSETS
Cash in Bank $ 989
Advance Receivable - Officer 31,000
Advance Receivable - Employees 1,448
Marketable Securities 37,448
Stock Subscriptions Receivable - Related Party 6,000,000
Stock Subscriptions Receivable 86,000
-----------
Total Current Assets 6,156,885
-----------
PROPERTY AND EQUIPMENT
Furniture and Fixtures 25,000
Office Equipment 4,495
-----------
Total 29,495
Less: Accumulated Depreciation (2,766)
-----------
Total Property and Equipment 26,729
-----------
OTHER ASSETS
Rent Deposit 4,603
Advances Toward Purchase of Joint Venture 550,000
Advances Toward Purchase of New Technology 59,836
-----------
TOTAL OTHER ASSETS 614,439
-----------
TOTAL ASSETS $6,798,053
===========
</TABLE>
See accompanying notes and accountant's report.
<PAGE>
<TABLE>
<CAPTION>
ATN GROUP, INC.
BALANCE SHEET
AUGUST 31, 2000
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S> <C>
CURRENT LIABILITIES
Note Payable $ 20,000
Note Payable - Officer 49,871
Advance Payable 125,000
-----------
TOTAL CURRENT LIABILITIES 194,871
-----------
STOCKHOLDERS' EQUITY
Common Stock, $.01 par value,
50,000,000 shares authorized,
28,163,034 shares issued and outstanding 281,630
Additional Paid-in Capital 6,984,162
Stock Subscriptions (225,000)
-----------
7,040,792
Current Period Deficit in the Development Stage (325,266)
Net Unrealized Losses on Marketable Securities (112,344)
-----------
TOTAL STOCKHOLDERS' EQUITY 6,603,182
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $6,798,053
===========
</TABLE>
See accompanying notes and accountant's report.
<PAGE>
<TABLE>
<CAPTION>
ATN GROUP, INC.
STATEMENT OF INCOME
EIGHT MONTHS ENDING AUGUST 31, 2000
<S> <C>
Revenues $ -0-
----------
Operating Expenses in the Development Stage
Management Contract Labor 79,981
Salaries - Office 12,690
Automobile Expenses 6,611
Depreciation 2,766
Entertainment and Meals 8,424
Miscellaneous Expenses 20,148
Rent - Office Space and Storage 50,124
Secretarial & Office Support 9,876
Supplies 7,031
Technical Assistance and Support 33,218
Telephone 8,974
Travel Expenses 85,423
----------
Total Operating Expenses in the Development Stage 325,266
----------
Operating Loss in the Development Stage (325,266)
Other Income (Expenses) in the Development Stage
(-0-)
----------
Current Period Deficit in the Development Stage $(325,266)
==========
</TABLE>
See accompanying notes and accountant's report.
<PAGE>
<TABLE>
<CAPTION>
ATN GROUP, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
EIGHT MONTHS ENDING AUGUST 31, 2000
COMMON STOCK ADDITIONAL
------------- PAID-IN STOCK
SHARES AMOUNT CAPITAL SUBSCRIPTIONS TOTAL
---------- -------- ---------- --------------- -----------
<S> <C> <C> <C> <C> <C>
Balance, Beginning
of Year -0- $ -0- $ -0- $ (-0-) $ -0-
JANUARY:
Issued Stocks for
Subscriptions 25,000,000 250,000 (250,000) -0-
Reduced Stock
Subscriptions for
Office Furniture 25,000 25,000
FEBRUARY:
Issued Stocks for
Stock Subscriptions
Receivable 2,400,000 24,000 5,976,000 6,000,000
Issued Stocks for
Marketable
Securities 163,034 1,630 148,162 149,792
MARCH:
Issued Stocks for
Stock Subscriptions
Receivable 600,000 6,000 860,000 866,000
Current Period
Deficit in the
Development
Stage (325,266)
Unrealized Losses
on Marketable
Securities (112,344)
---------- -------- ---------- --------------- -----------
Balance, End
of Year 28,163,034 $281,630 $6,984,162 $ (225,000) $6,603,182
========== ======== ========== =============== ===========
</TABLE>
See accompanying notes and accountant's report.
<PAGE>
<TABLE>
<CAPTION>
ATN GROUP, INC.
STATEMENT OF CASH FLOWS
EIGHT MONTHS ENDING AUGUST 31, 2000
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Current Period Deficit in the Development Stage $(325,266)
Adjustments to reconcile net income to net cash
used by operating activities:
Depreciation 2,766
----------
NET CASH USED BY OPERATING ACTIVITIES (322,500)
----------
CASH FLOWS FROM INVESTING ACTIVITIES
Net Advancements to Officer (31,000)
Net Advancements to Employees (1,448)
Purchases of Property and Equipment (4,495)
Office Space Rent Deposit (4,603)
Total Advancements Toward Purchase of Joint Venture (550,000)
Total Advancements Toward Purchase of New Technology (59,836)
----------
Net Cash Used by Investing Activities (651,382)
----------
Cash Flows from Financing Activities
Cash Received from Stock Subscriptions Receivable 780,000
Proceeds from Short-term Note 20,000
Net Amount on Loan from Officer 49,871
Proceeds from Advancement Payable 125,000
----------
Net Cash Provided by Financing Activities 974,871
----------
NET INCREASE IN CASH 989
CASH AT INCEPTION -0-
----------
CASH AT END OF PERIOD $ 989
==========
</TABLE>
See accompanying notes and accountant's report.
<PAGE>
ATN GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 2000
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business Activity
------------------
The Company, ATN Group, Inc., was incorporated in the State of Nevada on
January 20, 2000. The Company's principal office is located in Memphis, TN.
The Company's principal business is to provide digital data communications
services using the traditional data communications services, Internet
Protocol (IP), and web-based information needs of end-users worldwide.
Voice on Internet Protocol (VoIP) is a low-cost alternative to
long-distance service that uses packet switch (data) networks instead of
circuit switch (voice) networks. Internet Telephony Service Providers
(ITSP) will provide this service of connecting phone-to-phone using the
Internet Protocol (IP) instead of the present service using Public Switched
Telephone Network (PSTN). At the present time, the Company is developing
the integrated global data network to provide these services. In order to
provide these services to the overseas market, the Company has established
joint ventures with various companies to provide these services to Korea,
China, Hong Kong and other countries in Asia. In addition to the
long-distance services, the Company is preparing to market nationwide its
fixed fee subscription service and pre-paid calling cards using a
combination of IP and PSTN network connections.
Development Stage Company
---------------------------
The company is considered to be a development stage company since it is
devoting substantially of all its efforts to establishing a new business
and its planned principal operations either have not commenced or have
commenced, but have not produced any significant revenue. Consequently, the
Company devotes substantially all of its efforts to financial planning and
budgeting, raising capital, research and development activities,
establishing sources of connections, acquiring property and equipment,
recruiting and training personnel, and developing markets. During this
period, cumulative net losses, expenses over revenues, will be classified
as Deficit Accumulated in the Development Stage in the Stockholders' Equity
section of the Balance Sheet.
Revenue Recognition
--------------------
Upon completion of the local and global data network connections, revenues
will be recognized upon receipt of the fees for its fixed fee subscription
services and pre-paid calling cards.
<PAGE>
ATN GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 2000
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Marketable Securities
----------------------
Marketable Securities are classified as "available for sale" and are
carried in the financial statements at fair market value. Realized gains
and losses, determined using the specific identification method, are
included in earnings; unrealized holding gains and losses are reported in
other comprehensive income in the Stockholders' Equity section of the
Balance Sheet.
Property, Plant and Equipment
--------------------------------
Property, plant, and equipment are recorded at cost and depreciation is
computed using the both the modified accelerated cost recovery system
(MACRS) and accelerated cost recovery system (ACRS), for both book and tax
purposes. The Company uses the following useful lives for each type of
property:
Furniture & Fixtures 7 years
Office Equipment 5 years
Depreciation expense totaled $2,766 for the eight months ending August 31,
2000. Maintenance and repair costs are expensed as incurred.
Cash Equivalents
-----------------
For purposes of the statement of cash flows, the Company considers only
cash in bank accounts to be cash equivalents.
Income Taxes
-------------
Income taxes are provided for the tax effects of transactions reported in
the financial statement and consist of taxes currently due plus deferred
taxes for operating losses that are available to offset future taxable
income. During the development stage, no Federal and State income taxes are
currently due since the Company will incur operating losses. A deferred
income tax asset on the net operating losses will be recognized at the end
of the Company's reporting period. The Company has chosen the calendar year
to report its yearly revenues and expenses.
<PAGE>
ATN GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 2000
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Stock Subscriptions Receivables and Stock Subscriptions
------------------------------------------------------------
Common Stocks issued in exchange for a subscription receivable amount are
recorded as stock subscriptions. In the event that the subscription will be
collected, the subscription amount will be recorded as a Stock Subscription
Receivable and classified as a current asset. In the event that the
subscription will not be collected, the subscription amount will be record
as a Stock Subscription and classify as a reduction in the Stockholders'
Equity.
Related Parties and Joint Ventures
--------------------------------------
The Company entered into an agreement, dated February 17, 2000, with Grand
Oriental Asia, Ltd (GOA) to form two joint ventures, whereas the Company
will acquire a 40% interest and GOA will acquire a 60% interest in the Hong
Kong joint venture and the Company will acquire a 49% interest and GOA will
acquire a 51% interest in the China joint venture. The joint ventures will
operate under the names ATN Hong Kong, Ltd and ATN China, Ltd. The
agreement provided that GOA would purchase 2,400,000 shares of Common Stock
of ATN Group, Inc. Also, the agreement allows GOA to use the Company's new
compression technology, when fully developed and patented, for digitized
speech, data, and video for intercontinental and domestic telephone
connections. In turn, GOA will be responsible for obtaining and providing
termination of telephone connections to Hong Kong and Mainland China. GOA
will pay the Company for telecommunications terminated by the Company and
the Company will pay GOA for telecommunications terminated by GOA.
The Company entered into an agreement, dated January 20, 2000, with
KoreaTalks.com, Ltd, and a company's executive to form a joint venture,
whereas the Company has purchased a 49% ownership in the joint venture, ATN
Korea, Ltd. with an option to purchase additional 11% from the executive,
when the Korean government approves the transaction. The joint venture will
operate under the name ATN Korea, Ltd. ATN Korea, Ltd will provide
telecommunication connections to Korea and will act as a hub for
telecommunication connections throughout Asia.
<PAGE>
ATN GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 2000
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Related Parties and Joint Ventures (continued)
---------------------------------------------------
The Company entered into an agreement, dated September 2000, with ASEAN
Telecom, LLC, to form a joint venture, whereas the Company will acquire a
50% interest and ASEAN Telecom, LLC will acquire the remaining 50% interest
in the joint venture. The joint venture will operate under the name ATN
USA, Inc. ATN USA, Inc. will provide telecommunication connections
domestically within the United States and will terminate calls in other
international countries where connections have been established.
NOTE B - MARKETABLE SECURITIES
In order to hire a highly qualified manager as contract labor, the Company
agreed to exchange 163,034 shares of Company's Common Stock for 798,892
shares of USATalks.com, Inc. common stock. The value of the 798,892 shares
at the time of exchange was $149,792. As of August 31, 2000, the value of
the shares had decreased to $37,448. This unrealized loss of $112,344 is
shown as a decrease in Stockholder's Equity.
NOTE C - STOCK SUBSCRIPTIONS - RELATED PARTY
The Company entered into an agreement with a related party, terms outlined
in the Summary of Significant Account Policies of Related Parties and Joint
Ventures, whereas the related party will purchase 2,400,000 shares of
Common Stock for an agreed upon price of $2.50 per share.
NOTE D - STOCK SUBSCRIPTIONS
The Company entered into an agreement with an investment company to issue
600,000 shares of Common Stock for a total price of $866,000, of which
$780,000 was received as of August 31, 2000, and the remaining $86,000 was
received in September 2000.
<PAGE>
ATN GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 2000
NOTE E - ADVANCES TOWARD PURCHASE OF JOINT VENTURE
The Company entered into an agreement with a related party, terms outlined
in the Summary of Significant Accounting Policies of Related Parties and
Joint Ventures, whereas the Company has purchased a 49% ownership in the
joint venture, ATN Korea, Ltd. with an option to purchase additional 11%,
when the Korean government approves the transaction. As of August 31, 2000,
the Company paid $550,000 towards the purchase of the joint venture.
NOTE F - ADVANCES TOWARD PURCHASE OF NEW TECHNOLOGY
The Company entered into an agreement, dated April 22, 2000, with an
inventor and other unrelated companies to purchase a new technology to
compress digitized speech, data, and video. The other parties fail to
perform their obligations under the original agreement, and the agreement
was assigned and amended on September 21, 2000 with the inventor. Upon full
performance of the agreement by the inventor, the Company will transfer
1,500,000 shares of Common Stock and entered into an employment contract.
As of August 31, 2000, the Company paid $59,836 towards the purchase of the
new technology and paid and additional $6,500 subsequent to the balance
sheet date and previous to the audit date of October 9, 2000. As of October
9, 2000, the contract has not been fully performed by the inventor;
therefore, the Company has issued the common stock, but holds the
certificates in escrow awaiting full performance by the inventor.
NOTE G - ADVANCE PAYABLE
Advancement from an unrelated party that was payable in 30 days from August
18, 2000, with options to extend, including interest at an undetermined
rate, collateralized personally by the officers of the Company.
<PAGE>
ATN GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 2000
NOTE H - CASH FLOW INFORMATION
The Company had a noncash financing transaction relating to the issuance of
163,034 shares of Common Stock for receipt of marketable securities valued
at $149,792. Refer to Note B - Marketable Securities for details.
The Company had a noncash financing transaction relating to the issuance of
2,400,000 shares of Common Stock for Stock Subscriptions Receivable valued
at $6,000,000. Refer to Note C - Stock Subscriptions - Related Party for
details
The Company had a noncash financing transaction relating to the issuance of
600,000 shares of Common Stock for Stock Subscriptions Receivable valued at
$866,000. Refer to Note D - Stock Subscriptions for details.
The Company had a noncash financing transaction relating to the issuance of
25,000,000 shares of Common Stock for Stock Subscriptions valued at
$250,000 to officers and management contract labor.
The Company had a noncash financing transaction relating to purchase of
office furniture from an officer for a reduction in Stock Subscriptions
valued at $25,000.
The Company paid $-0- for interest and $-0- for income taxes for the eight
months ending August 31, 2000.
Note I - Subsequent Events
Subsequent to the balance sheet date of August 31, 2000, the company issued
10,000 shares of Common Stock for $50,000 on September 11, 2000 to an
unrelated party.
Refer to Note D - Stock Subscriptions for subsequent event related to
receipt of cash on Stock Subscriptions Receivable.
Refer to Note E - Advances Toward Purchase of Technology for subsequent
events related to the purchase of new technology with cash.
Refer to Note A - Summary of Significant Accounting Policies - Related
Parties and Joint Ventures for subsequent event related to signing of a
joint venture agreement.
<PAGE>
PROSPECTIVE INVESTORS MAY RELY ONLY ON THE INFORMATION CONTAINED IN THIS
PROSPECTUS. ATN HAS NOT AUTHORIZED ANYONE TO PROVIDE PROSPECTIVE INVESTORS WITH
DIFFERENT OR ADDITIONAL INFORMATION. THIS PROSPECTUS IS NOT AN OFFER TO SELL
NOR IS IT SEEKING AN OFFER TO BUY IN ANY JURISDICTION WHERE SUCH OFFER, OR SALE
IS NOT PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS CORRECT ONLY
AS OF THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF THIS
PROSPECTUS OR ANY SALE OF THESE SHARES.
______________________
TABLE OF CONTENTS
_______________________
Where You Can Find More Information . . . .
Forward-Looking Statements. . . . . . . . . . .
Prospectus Summary. . . . . . . . . . . . . . .
Risk Factors. . . . . . . . . . . . . . . . . .
Use of Proceeds. . . . . . . . . . . . . . . .
Capitalization . . . . . . . . . . . . . . . . .
Dilution . . . . . . . . . . . . . . . . . . . .
Management's Discussion and Analysis. . . . .
Business . . . . . . . . . . . . . . . . . . . .
Management . . . . . . . . . . . . . . . . . . .
Principal Stockholder . . . . . . . . . . . . .
Certain Transactions. . . . . . . . . . . . . .
Plan of Distribution . . . . . . . . . . . . .
Description of Capital Stock. . . . . . . . .
Experts. . . . . . . . . . . . . . . . . . . . .
Legal Matters . . . . . . . . . . . . . . . . .
Index to Financial Statements . . . . . . . .
<PAGE>
[GRAPHIC OMITTED]
ATN GROUP, INC.
WORLDWIDE DATA COMMUNICATIONS
2,000,000 SHARES
OF
COMMON STOCK
__________________
PROSPECTUS
___________________
OCTOBER 20 , 2000
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under the provisions of the By-Laws of the Registrant and applicable
provisions of the General Corporation Law of Nevada, each person who is or was a
director or officer of Registrant shall be indemnified by the Registrant as of
right to the full extent permitted or authorized by the General Corporation Law
of Nevada. Under such law, to the extent that such person is successful on the
merits of defense of a suit or proceeding brought against such person by reason
of the fact that such person is a director or officer of the Registrant, such
person shall be indemnified against expenses (including attorneys' fees)
reasonably incurred in connection with such action. If unsuccessful in defense
of a third-party civil suit or a criminal suit is settled, such a person shall
be indemnified under such law against both (1) expenses (including attorneys'
fees) and (2) judgments, fines and amounts paid in settlement if such person
acted in good faith and in a manner such person reasonably believed to be in, or
not opposed to, the best interests of the Registrant, and with respect to any
criminal action, had no reasonable cause to believe such person's conduct was
unlawful. If unsuccessful in defense of a suit brought by or in the right of
the Registrant, or if such suit is settled, such a person shall be indemnified
under such law only against expenses (including attorneys' fees) incurred in the
defense or settlement of such suit if such person acted in good faith and in a
manner such person reasonably believed to be in, or not opposed to, the best
interests of the Registrant except that if such a person is adjudicated to be
liable in such suit for negligence or misconduct in the performance of such
person's duty to the Registrant, such person cannot be made whole even for
expenses unless the court determines that such person is fairly and reasonably
entitled to be indemnified for such expenses.
The officers and directors of the Registrant will be covered by officers'
and directors' liability insurance, unless such coverage is cost prohibitive.
The policy coverage is $ 5,000,000, which includes reimbursement for costs and
fees. There will be a maximum aggregate deductible for each loss under the
policy of $ 15,000,000. The Registrant has entered into Indemnification
Agreements with each of its executive officers and directors. The Agreements
provide for reimbursement for all direct and indirect costs of any type or
nature whatsoever (including attorneys' fees and related disbursements) actually
and reasonably incurred in connection with either the investigation, defense or
appeal of a Proceeding, as defined, including amounts paid in settlement by or
on behalf of an Indemnitee, as defined.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses of the distribution, all of which are to be borne by
the Registrant, are as follows:
SEC Registration Fee . . . . . . . . . . . . . . . . . . $ 5,213
Blue Sky Fees and Expenses . . . . . . . . . . . . . . 60,000*
Accounting Fees and Expenses . . . . . . . . . . . . . 60,000*
Legal Fees and Expenses . . . . . . . . . . . . . . . . 70,000*
Printing and Engraving . . . . . . . . . . . . . . . . . 40,000*
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . 14,787*
-----------
Total . . . . . . . . . . . . . . . . . . . . . . . $250,000
__________
*Estimated
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
In February 2000, the Registrant entered into a private placement of its
shares of common stock with Grand Oriental Asia, Ltd. It was felt that this
transaction helped solidify the position of Registrant in the Asian market.
2,400,000 shares of common stock were subscribed by Grand Oriental Asia, Ltd. At
$2.50 per common share.
<PAGE>
In March 2000, the Registrant agreed to a private sale of 600,000 common
shares at prices which vary from $2.50 per common share to $5.00 per common
share. Registrant also agreed to allow payments for this stock over the period
from March 2000 to July 2000. Funds from this private sale were used to fund
development operations.
Each of the foregoing transactions was effected by the Company without the
assistance of underwriters or brokers. Accordingly, no underwriting discounts
or commissions were paid.
Each of the issuances of securities described above was exempt from the
registration requirements of the Securities Act of 1933 pursuant to the
provisions of Section 4(2). Each of issuances was effected only to accredited
investors. Each purchaser received a disclosure document prior to purchasing
such securities.
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INTENTIONALLY LEFT BLANK
<PAGE>
ITEM 27. EXHIBITS.
Number Description
------ -----------
3.1 Certificate of Incorporation of the Registrant.
3.2 Bylaws of the Registrant.
4.1 Specimen Common Stock Certificate.
5.1 Opinion and Consent of Cokinos, Bosien & Young regarding the legality
of the securities being registered.
10.1 2000 Stock Option Plan.
10.2 Employment Agreement between the Registrant and E. Robert Gates.
10.3 Employment Agreement between the Registrant and Tag Chong Kim.
10.4 Form of Indemnification Agreement between the Registrant and its
executive officers and directors
10.5 Form of Subscription Agreements for this offering.
10.6 Escrow Agreement between Registrant and South Trust Bank
23.1 Consent of Greg Shelton, CPA.
ITEM 28. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers, and
controlling persons of the small business issuer pursuant to the foregoing
provisions, or otherwise, the small business issuer has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the small business issuer of expenses incurred or
paid by a director, officer or controlling person of the small business issuer
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the small business issuer will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
Registrant hereby undertakes that it will:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of the Securities
Act;
(ii) Reflect in the prospectus any facts of events which, individually or
together, represent a fundamental change in the information in the
registration statement; and
(iii) Include any additional or changed material information on the plan of
distribution.
(2) For determining any liability under the Securities Act, treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration
statement, and the offering of the securities at that time as the initial
bona fide offering of those securities.
(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
<PAGE>
(4) For determining any liability under the Securities Act, treat the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the small business issuer under Rule 424(b)(1), or
(4) or 497(h) under the Securities Act as part of this registration
statement as of the time the Commission declared it effective.
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INTENTIONALLY LEFT BLANK
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of Memphis,
State of Tennessee on the 23rd day of October, 2000.
ATN Group, Inc.
By:
-----------------------------------------
Vice Chairman and Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints E.
Robert Gates, with full power of substitution, his/her true and lawful
attorney-in-fact and agent to do any and all acts and things in his/her name and
on his/her behalf in his/her capacities indicated below which he may deem
necessary or advisable to enable ATN Group, Inc. to comply with the Securities
Act of 1933, as amended, and any rules, regulations and requirements of the
Securities and Exchange Commission, in connection with this Registration
Statement, including specifically, but not limited to, power and authority to
sign for him/her in his/her name in the capacities stated below, any and all
amendments (including post-effective amendments) thereto, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done in such connection, as
fully to all intents and purposes as we might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and agent, or his
substitute or substitutes, may lawfully do or cause to be done by virtue
thereof.
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities
indicated on October 23, 2000
Signatures Title
---------- -----
Vice Chairman, Chief Executive Officer,
----------------------------- Secretary and Director
(Principal Executive Officer)
Chairman of the Board and Director
-----------------------------
Acting Chief Financial Officer
----------------------------- (Principal Financial and Accounting
Officer)
<PAGE>
