FORM 10-KSB/A
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
ATI NETWORKS, INC.
COLORADO
84-1089801
460 Cedar Street Fond du Lac, Wisconsin 54935
920) 922-7030
Securities registered pursuant to Section 12 (b) of the Securities
Exchange
Act: Title of each class Name of each exchange on which registered
NONE
NASDAQ OTC:BB
Securities registered pursuant to section 12 (g) of the Securities
Exchange
Act: COMMON STOCK, NO PAR VALUE PER SHARE N/A
Check whether the issuer (1) filed all reports required to be
filed by
Section 13 or 15 (d) of the Securities Exchange Act of 1934 during
the
preceding 12 months (or) for such shorter period that the
registrant was
required to file such report(s), and (2) has been subject to such
filing
requirements for the past 90 days.
Yes [X] No [ ]
State issuer's revenues for its most recent fiscal year: $ 45,717
As of December 31,1999, 3,233,030 shares of the issuer's Common
Stock were
outstanding.
Transitional Small Business Disclosure Format: Yes No X
SIGNATURES
In accordance with Section 13 or 15 (d) of the Securities Exchange
Act of
1934, the registrant caused this report to be signed on its behalf
by the
undersigned, thereunto duly authorized.
A majority of the Directors and the Chief Executive and Financial
Officers of
the Company shall sign this Disclosure Document on behalf of the
Company and
by so doing thereby certify that each has made diligent efforts to
verify the
material accuracy and completeness of the information herein
contained. By
signing this Disclosure Document, the Chief Executive and
Independent Auditors
agree to make themselves, the Company's books and records, copies
of any
contract, lease or other document referred to in the Disclosure
Document, or
any other material contract or lease including stock options and
employee
benefit plans), except any proprietary or confidential portions
thereof, and
a set of the exhibits to this Disclosure Document, available upon
written
request, to each investor prior to the time of investment, and to
respond to
questions and otherwise confirm the information contained herein
prior to the
making of any investment by such investor.
The Chief Executive Officer signing this form is hereby certifying
that the
financial statements submitted fairly state the Company's
financial position
and results of operations, or receipts and disbursements, as of
the dates and
period(s) indicated, all in accordance with generally accepted
accounting
principles consistently applied (except as stated in the notes
thereto) and
with respect to year-end figures) including all adjustments
necessary for
fair presentation under the circumstances.
In accordance with the Securities Exchange Act of 1934, this
report has been
signed below by the following persons on behalf of the registrant
and in
capacities and on the dates indicated.
Chief Executive Secretary/Director
Officer/Director
/s/ Lawrence Bestor /s/ Steven
Sorenson
Lawrence Bestor Steven Sorenson
Director
/s/ Dr. William Sybesma
Dr. William Sybesma
ATI Networks, Inc. and Subsidiary
Consolidated Financial Statements
For the Years Ended December 31, 1999 and 1998
With Independent Auditors' Report
Financial Data Schedule
Independent Auditors Report F-(1)
Consolidated Financial Statements:
Balance Sheets F- (2)
Statements of Operations F- (3)
Statements of Stockholders' Equity F - (4)
Statements of Cash Flows F - (5)
Notes to Consolidated Financial Statements F - (6)
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS and SHAREHOLDERS of
ATI Networks, Inc.
We have audited the accompanying consolidated balance sheets of
ATI Networks,
Inc. and Subsidiary (the "Company") as of December 31, 1999 and
1998,and the
related consolidated statements of operations, statements of
stockholders'
deficit and cash flows for the years then ended. These
consolidated financial
statements are the responsibility of management. Our
responsibility is to
express an opinion on these consolidated financial statements
based on our
audits.
We conducted our audits in accordance with generally accepted
auditing
standards. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the
consolidated financial
statements are free of material misstatement. An audit includes
examining, on
a test basis, evidence supporting the amounts and disclosures in
the
consolidated financial statements. An audit also includes
assessing the
accounting principles used and significant estimates made by
management, as
well as evaluating the overall financial statement presentation.
We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above
present fairly, in all material respects, the consolidated
financial
position of ATI Networks, Inc. and Subsidiary as of December 31,
1999 and 1998,
and the results of its operations and its cash flows for the years
then ended
in conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been
prepared
assuming that the Company will continue as a going concern. As
discussed in
Note A to the consolidated financial statements, the Company has
incurred
recurring losses from operations and is in default of their bank
loan
and will require additional capital to fund its operations. These
matters
raise doubt about the Company's ability to continue as a going
concern.
Management's plans regarding these matters are also described in
Note A. The
consolidated financial statements do not include any adjustments
that might
result from the outcome of this uncertainty.
As described in Note J to the consolidated financial
statements,the
accumulated deficit at the beginning of 1998 has been adjusted.
/s/ HOFFMAN, MORRISON & FITZGERALD, P.C.
McLean, Virginia
April 28, 2000
A. ORGANIZATION AND FINANCING
The Company
ATI Networks, Inc. and its wholly owned subsidiary, ATI, Inc. is a
US based,
public company that is building a global e-business. The companies
products are
used for business advertising, wireless communications over the
Internet,
tracking of wireless devices, and entertainment. The principal
markets for
the company's products are small to medium size businesses,
companies with
mobile staff and other mobile assets, and the general public.
Financing
The Company is a development stage company and has incurred
recurring losses
from operations, and is currently in default on their bank loan,
(see Note C).
It will require additional capital to fund it operations to meet
its on-
going obligations for 2000. Management believes they will be
successful in
their efforts to obtain such financing. There can be no assurance
that the
company will not incur additional losses, or will not require
significant
amounts of additional capital. The accompanying consolidated
financial
statements have been prepared assuming the Company will continue
as a going
concern. The accompanying consolidated financial statements do not
include
any adjustments that might result from the outcome of these
uncertainties.
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation - The accompanying consolidated
financial
statements present the consolidation of the financial statements
of ATI Networks, Inc. and its wholly-owned subsidiary, ATI, Inc.
Material intercompany transactions and balances have been
eliminated in the
consolidation.
Basis of accounting - The accounts of the Company are maintained
on the
accrual basis of accounting whereby revenue is recognized when
earned, and
costs and expenses are recognized when incurred.
Use of estimates and assumptions - Management uses estimates and
assumptions
in preparing consolidated financial statements in accordance with
generally
accepted accounting principles. Those estimates and assumptions
affect the
reported amounts of assets and liabilities, the disclosure of
contingent
assets and liabilities, and the reported revenues and expenses.
Actual
results could vary from those estimates.
Accounts receivable - The Company uses the allowance method to
account for amounts, if any, of its accounts receivable which are
considered uncollectible. The Company grants unsecured credit to
its
United States customers.
Cash and cash equivalents - For purposes of the statement of cash
flows, the
Company considers investments held in money funds to be cash
equivalents.
Inventories - Inventories, consisting of computer software and
hardware, are
stated at the lower of cost, determined on the first-in, first-out
method, or
market.
Property and equipment - Property and equipment are stated at
cost.
Expenditures for additions and improvements are capitalized while
replacements, maintenance and repairs which do not improve or
extend the lives of the respective assets are expensed currently
as incurred.
Depreciation is provided over the estimated useful lives, ranging
from 3-10 years, of the respective assets, using the straight-line
method.
Advertising - Advertising costs are charged to operations as
incurred. For
the years ended December 31, 1999 and 1998, amounts charged to
operations
were $37,093 and $4,667, respectively.
Revenue recognition - Revenue is principally derived from sales of
licenses
for the Company's proprietary software, advertising on the
Company's
websites and commissions and fees relating to website activity.
The revenue
generated is recognized when the products are shipped or the
services have
been rendered.
Income Taxes - The Company, a C-corporation, accounts for income
taxes
under Statement of Financial Accounting Standards ("SFAS") No.
109,
"Accounting for Income Taxes." Under this method, deferred tax
assets
and liabilities are determined based on differences between the
financial
reporting and tax basis of assets and liabilities and are measured
using the enacted tax rates and laws that will be in effect when
the
differences are expected to reverse. Valuation allowances are
established when
necessary to reduce deferred tax assets to the amount expected to
be realized.
The principal differences are net operating loss and capital loss
carryforwards and the use of accelerated depreciation methods to
calculate
depreciation expense for income tax purposes.
Software development costs - SFAS No. 86, "Accounting for the
Costs of
Computer Software to be Sold, Leased or Otherwise Marketed",
requires
capitalization of certain software development costs subsequent to
the
establishment of technological feasibility and readiness of
general release.
Costs incurred by the Company between the completion of
technological
feasibility and general release have been insignificant and have
been expensed
in the accompanying consolidated financial statements.
Net loss per common share - The Company reports basic and diluted
earnings
per share ("EPS") according to the provisions of SFAS No. 128,
"Earnings Per
Share." SFAS No. 128 requires the presentation of basic EPS and,
for
companies with complex capital structures, diluted EPS. As the
Company has
common stock and common stock equivalents outstanding, basic and
diluted EPS
are presented. Basic EPS excludes dilution and is computed by
dividing net
income (loss) available to common stockholders by the weighted
average number of
common shares outstanding during the period. Diluted EPS is
computed by
dividing net income (loss) available to common stockholders,
adjusted by any
convertible preferred dividends; the after-tax amount of interest
recognized
in the period associated with any convertible debt; and any other
changes in
income or loss that would result from the assumed conversion of
those
potential common shares, by the weighted number of common shares
and common
share equivalents (unless their effect is anti-dilutive)
outstanding.
Capital Structure - SFAS No. 129, "Disclosure of Information about
Capital Structure," requires a summary presentation of the
pertinent
rights and privileges of the various securities outstanding. The
Company's
outstanding stock is completely comprised of voting common stock.
There are
no other rights or privileges to disclose. In addition, entities
are
required to disclose the number of shares issued upon conversion,
exercise, or
satisfaction of required conditions during the periods presented.
See Note H
for the options granted during 1998 and 1999 in accordance with
the Company's
Stock Option Plan.
Comprehensive Income - During 1998, the Company adopted Statement
of
Financial Accounting Standard (SFAS) No. 130, "Reporting
Comprehensive
Income." This pronouncement established standards for reporting
and display
of comprehensive income and its components in the financial
statements.
Comprehensive income is defined as the change in equity of a
business
enterprise during a period from transactions and other events and
circumstances from non-owner sources. Accordingly, the Company has
modified
the presentation of its consolidated financial statements to
present the
elements of comprehensive income, which included net income and
unrealized
losses on available-for-sale securities.
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Stock-based compensation - In October 1995, the FASB issued SFAS
No. 123,
"Accounting for Stock-Based Compensation", which encourages
companies to
recognize expense for stock-based awards based on their estimated
fair value
on the grant. SFAS is effective beginning with the year ending
December 31,
1996. SFAS No. 123 permits companies to account for stock-based
compensation
based on provisions prescribed in SFAS No. 123 or based on the
authoritative
guidance in Accounting Principles Board Opinion No. 25,
"Accounting for Stock
Issued to Employees". The Company has elected to continue to
account for its
stock based compensation in accordance with APB 25 which uses the
intrinsic
value method, however, as required by SFAS No. 123, the Company
has disclosed
the pro forma impact on the financial statements assuming the
measurement
provisions of SFAS No. 123 had been adopted. The Company accounts
for all
other issuances of equity instruments in accordance with SFAS No.
123.
Segment Information - Effective for financial statements for
periods
beginning after December 15, 1997, the FASB issued SFAS No. 131,
"Disclosure
about Segments of an Enterprise and Related Information."
This pronouncement requires public enterprises to report certain
information about operating segments, including products and
services,
geographic areas of operations, and major customers. The Company
has
determined that it does not have any separately reportable
business
segments for the years ended December 31, 1999 and 1998.
NEW ACCOUNTING PRONOUNCEMENTS:
Derivatives Instruments and Hedging Activities - In June 1998, the
FASB
issued SFAS No. 133, "Accounting for Derivative Instruments and
Hedging
Activities." It establishes accounting and reporting standards
for derivative instruments, including certain derivative
instruments embedded
in other contracts and for hedging activities. It requires that
an entity
recognize all derivatives as either assets or liabilities in the
balance sheet
and measure those instruments at fair value. The FASB has
recently issued
SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activities-
Deferral of Effective Date of FASB Statement No. 133." The
Statement defers
for one year the effective date of SFAS No. 133. Management
believes that the
adoption of this standard will not have a material effect on the
Company's
financial position or results of operations.
C. REVOLVING LINE OF CREDIT
The Company had a $50,000 line-of-credit with Bank One of Fond du
Lac,
which was due May 1998. Interest was payable monthly at prime
plus
1/2%. The line-of-credit was collateralized by a general business
security agreement and personal guarantee of the majority
shareholder. The
line-of-credit was paid off during 1998.
In September 1998, the Company signed another agreement for a
$250,000
line-of-credit with Firstar Bank of Wisconsin. Accrued interest
and
outstanding principal was due and payable September 1999. The line-
of-credit
is ollateralized by a general business security agreement.
Outstanding borrowings, including interest and other charges,
under this
line-of-credit amounted to $269,602 and $200,238 at December 31,
1999 and
1998, respectively. As of December 31, 1999 the Company is in
default under
the terms of the agreement. On March 30, 2000, the Company entered
into an
agreement with the bank consenting to a money judgment of
$287,309, under
which the bank consented to wait to docket and execute on the
judgment until
after May 31, 2000.
D. COMMITMENTS AND CONTINGENCIES
Capital lease obligationsThe Company leases certain equipment
held under
capital lease agreements expiring in 2002. The assets and
liabilities under
capital leases are recorded at the lower of the present value of
the minimum
lease payments or the fair value of the asset. The assets are
amortized over
their estimated productive lives. Amortization of assets under
capital leases
is included in depreciation and amortization expense.
Future minimum lease payments due under the capital lease
agreement as
of December 31, 1999 are as follows:
Year ending December 31:
2000 $ 3,762
2001 1,173
2002 684
Total minimum lease payments
5,619
Less: amount representing interest
(861)
4,758
Less: current portion
(3,043)
Long-term capital lease obligations
$ 1,715
D. COMMITMENTS AND CONTINGENCIES (continued)
Operating leaseThe Company leases its office facilities under a
month-to-month operating lease. Rent expense under all operating
leases
amounted to $7,200 for the years ended December 31, 1999 and 1998.
Partnering agreementThe Company has entered into a partnering
agreement with
Sybesma Research, LLC ("Sybesma"), whereby Sybesma reimbursed the
Company for
approximately $157,000 of software development costs incurred by
the Company
for their LogiTrak and NaviQuest software. The Company is
obligated to pay a
royalty to Sybesma equal to 15% of gross profits from their sale
of these
software products.
E. INCOME TAXES
The benefit for income taxes is as follows for the years ended
December 31:
1999 1998
Current $ - $ -
Deferred - -
Total benefit for income taxes $ - $ -
A reconciliation of income tax at the statutory rate to the
Company's
effective rate is as follows for the periods ended December 31:
1999 1998
Computed at the expected statutory rate $ (81,700) $ (78,500)
State income tax - net of Federal
tax benefit (11,900) (11,500)
Other, net 200 600
Less valuation allowance 93,400 89,400
Total benefit for income taxes $ - $ -
E. INCOME TAXES (continued)
Deferred tax assets and liabilities are as follows as of December
31:
1999 1998
Deferred tax assets:
Net operating loss carryforwards $ 525,700 $ 468,600
Capital loss carryforwards 9,800 9,800
Accrued vacation 1,000 1,000
Accrued payroll 63,500 27,400
Gross deferred tax assets 600,000 506,800
Deferred tax liabilities:
Depreciation and amortization (5,300) (5,600)
Valuation allowance (594,700) (501,200)
Net deferred taxes $ - $ -
The change in the valuation allowance for the years ended December
31,
1999 and 1998 was $93,400 and $89,400 (as adjusted to reflect the
prior-period adjustment, see Note J), respectively.
At December 31, 1999 and 1998, the Company had net operating loss
carryforwards of approximately $1,338,000 and $1,193,000
respectively,
for federal and State income tax purposes, which expire through
2019.
F. RELATED PARTY TRANSACTIONS
As of December 31, 1999 and 1998, the balance of amounts due from
the
President of the Company was $60,000.
G. EMPLOYEE INCENTIVE COMPENSATION PLAN
The Company has an incentive plan for the purpose of providing
incentive
compensation to officers and employees ("Plan"). The Plan provides
that 25%
of net income as defined in the Plan shall be placed in the
Employee
Incentive Fund, to be distributed to employees in amounts to be
determined,
at the sole discretion of the Employee Incentive Compensation
Committee.
Participants in the Plan include all officers upon their initial
hire date and
all salaried employees upon their completion of 12 months
employment with the
Company. The Board of Directors reserves the right to amend,
modify, suspend,
or discontinue the Plan at any time.
There were no Company payments made under the Plan during the
years
ended December 31, 1999 and 1998.
H. STOCK OPTION PLAN
The Company has a Stock Purchase and Option Plan ("Plan") under
which
it has granted stock options and warrants to purchase common stock
to
employees, directors, officers, and others at various times since
1994.
Options and warrants are granted at an option price per share
equal to or
greater than fair value at the date of grant. Generally, options
granted to
employees vest over a five-year period and expire 10 years after
the date of
grant. Canceled options are available for future grant.
The following is a summary of stock option plan activity for the
years
ended December 31, 1999 and 1998:
1999 1998
Shares:
Granted 5,000 5,000
Exercised (146,590) (20,000)
Canceled - (76,000)
December 31:
Outstanding 6,803,410 6,945,000
Exercisable 6,077,010 5,407,200
Average exercise price per share
Granted $1.00 $5.00
Exercised $0.10 $0.10
Canceled - $3.25
December 31:
Outstanding $1.28 $1.26
Exercisable $1.25 $1.14
Stock options outstanding at December 31, 1999 and 1998 had a
range of
exercise prices of $.10 to $5.00 and an average remaining
contractual life of
four years and five years, respectively.
Options outstanding at the beginning of the year ended December
31,
1998 have been restated and total 7,036,000.
Options outstanding with an exercise price of less than $1.00
totaled
6,108,410, of which 5,526,410 were exercisable at December 31,
1999.
The remaining 695,000 options outstanding had a price of $1.00 or
greater, of which 550,600 were exercisable at December 31, 1999.
The weighted-average remaining contractual life for each of these
groups of options was two years and six years, respectively.
H. STOCK OPTION PLAN (continued)
The Company has adopted the disclosure only provisions of the
Statements of Financial Accounting Standards No. 123, "Accounting
for
Stock-Based Compensation" (SFAS 123), but continues to measure
compensation
cost for the stock options using the intrinsic value method
prescribed by
Accounting Principles Board Opinion No. 25. Accordingly, no
compensation
expense has been recognized for the options granted, since the
options are
granted, at the discretion of the Board of Directors, at an option
price per
share not less than fair market value, as determined by the Board,
at
the date of grant.
If the Company had elected to recognize compensation expense based
on
the value at the grant dates with the method prescribed by SFAS
123; net loss
would have been changed to the proforma amounts indicated in the
table below:
For the year ended December 31, 1999:
Reported ProForma
Net Loss $(239,840) $(373,939)
Basic and diluted
earnings per share $(.08) $(.12)
For the year ended December 31, 1998:
Reported ProForma
Net Loss $(230,915) $(364,014)
Basic and diluted
earnings per share $(.08) $(.13)
For the years ended December 31, 1999 and 1998, the fair value of
the
stock has been estimated using the Black-Scholes option pricing
model
with the following assumptions: risk free interest rate of 5.65%
and
5.26%, expected volatility of 516% and 139%, a dividend payout
rate of
0% and an expected option life of 10 years.
I. SHARE EXCHANGE WITH WATERFORD INTERNATIONAL, INC.
ATI, Inc. and Waterford International, Inc. ("Waterford") entered
into a Plan
of Share Exchange (the "Plan") dated as of April 21, 1998.
Shareholders of ATI, Inc., a privately-owned company, exchanged
all of the
outstanding common shares of ATI, Inc. for an equal number of
common shares of
Waterford, a publicly-held company. As of the date of the share
exchange
Waterford International, Inc. was a non-operating public shell
corporation
with no net assets. In addition, ATI, Inc. paid $35,000 that was
distributed
to an existing shareholder of Waterford in exchange for shares
distributed to
shareholders of ATI, Inc. Pursuant to the Plan, ATI, Inc. became
a
wholly-owned subsidiary of Waterford. Subsequent to the share
exchange,
Waterford changed its name to ATI Networks, Inc. Subsequent to the
share exchange, shareholders of ATI, Inc. immediately prior to the
share exchange, owned approximately 86% of Waterford. Pursuant to
accounting interpretations and guidance issued by the Division of
Corporation
Finance of the SEC, the share exchange was treated as a capital
transaction
in substance, rather than a business combination. Accordingly,
the
accompanying consolidated financial statements reflect the
activities of ATI,
Inc. prior to the date of the share transfer.
J. PRIOR-PERIOD ADJUSTMENT
The accumulated deficit at the beginning of 1998 has been adjusted
to
correct an error in the amount of capitalized software development
costs and
a related item for the liability for shared development costs
previously
shown as deferred revenue in the balance sheets of the wholly-
owned
subsidiary as of December 31, 1997 and 1996. The accumulated
deficit, as of
the beginning of 1998 has been increased by $321,778 due to this
prior period
adjustment. The impact of this change on 1997 and 1996 is as
follows:
Accumulated Net
Earnings
Deficit Loss
Per
Share
As previously stated, December 31, 1996 $ (595,299) $ (129,627)
$(.05)
Adjustment:
Write-off of capitalized software
development costs and deferred
revenue, net (114,470) (114,470)
As restated, December 31, 1996 $ (709,769) $ (244,097)
$(.10)
As previously stated, December 31, 1997,
including 1996 adjustments $ (889,595) $ (179,826)
$(.07)
Adjustment:
Write-off of capitalized software
development costs and deferred
revenue, net (207,308) (207,308)
As restated, December 31, 1997 $ (1,096,903) $ (387,134)
$(.15)
K. NET LOSS PER COMMON SHARE
As required by SFAS No. 128, the following is a reconciliation of
the basic
and diluted EPS calculations for the periods presented:
December 31, December 31,
1999 1998
Net loss (numerator) $ (239,840) $ (230,915)
Weighted average share
(denominator) 3,148,659 2,906,351
Basic net loss per share $ (.08) $ (.08)
Dilutive shares
(denominator) 3,148,659 2,906,351
Diluted net loss per share $ (.08) $ (.08)
SFAS No. 128 also requires disclosure of any transaction occurring
after the end of the most recent period but before issuance of the
financial
statements that would have materially changed the number of common
shares or
potential common shares outstanding at the end of the period if
the
transaction had occurred before the end of the period. There are
no such
matters to record.
L. SUBSEQUENT EVENTS
On March 7, 2000, the Company received, for nominal consideration,
$10 million in estimated value of media credits from a marketing
company. The Company subsequently conveyed the media credits to
another
company, which is consolidating such media credits for potential
future
gain, in exchange for 10 partnership units.
FINANCIAL STATEMENTS
ATI Networks Inc. and Subsidiary
Consolidated Balance Statements
For the Years Ended December 31, 1998 and 1999
1999 1998
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,001 $14,822
Accounts receivable, net 15,000 1,175
Inventories 896 375
Prepaid expenses - 662
Total current assets 16,897 17,034
PROPERTY AND EQUIPMENT:
Equipment 73,770 73,098
Furniture and fixtures 8,432 8,432
82,202 81,530
Less: accumulated depreciation and amortization(56,740) (47,743)
Property and equipment, net 25,462 33,787
DUE FROM OFFICER/STOCKHOLDER 60,000 60,000
OTHER ASSETS:
Security deposit 647 647
$ 103,006 $111,468
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Note payable $ 269,602 $200,238
Capital lease obligations 3,043 3,070
Accounts payable and accrued expenses 49,055 23,738
Accrued salaries- officer/stockholders 164,583 73,666
Total current liabilities 486,283 300,712
Capital lease obligations 1,715 2,183
Total liabilities 487,998 302,895
Stockholders' deficit:
Series A convertible preferred stock, $100 par value;
authorized 20,000,000 shares; none issued
and outstanding - -
Common stock, no par value
Class A - authorized 20,000,000; 3,233,030 and
3,059,357 issued and outstanding for 1999
and 1998, respectively 1,192,325 1,136,391
Class B - authorized 20,000,000; none issued
and outstanding - -
Less: stock subscription receivable for
Class A common stock (9,659) -
Accumulated deficit (1,567,658) (1,327,818)
Total stockholders' deficit (384,992) (191,427)
$103,006 $111,468
The accompanying notes are an integral part of these consolidated
financial statements.
2
ATI Networks, Inc. and Subsidiary
Consolidated Statements of Operations
For the Years Ended December 31, 1999 and 1998
1999 1998
Net sales:
Software $ 34,234 $ 36,105
Websites 5,000 4,100
Other 6,483 1,219
Total net sales 45,717 41,424
Operating expenses:
Cost of sales 13,604 28,270
Research and development 27,230 15,683
Sales and marketing 57,016 34,847
General and administrative 147,279 155,735
Depreciation and amortization 11,825 13,439
Total operating expenses 256,954 247,974
LOSS FROM OPERATIONS (211,237) (206,550)
OTHER INCOME (EXPENSES):
Loss on sale of investments - (15,953)
Gain on disposal of property and equipment 100 342
Dividend and interest income 72 238
Interest expense (28,775) (8,992)
Total other expenses (28,603) (24,365)
NET LOSS $(239,840) $(230,915)
Net loss per common share (basic and diluted)$(0.08) $(0.08)
Weighted average number of common
shares outstanding 3,148,659 2,906,351
The accompanying notes are an integral part of these consolidated
financial statements.
3
ATI Networks, Inc. and Subsidiary
Consolidated Statements of Stockholders' Deficit
For the Years Ended December 31, 1999 and 1998
Accumulated
other
Shares Common Accumulated Stock comprehensive
Outstanding Stock Deficit Subscriptions income Total
Balance, December 31, 1997
2,597,840 $ 1,126,391 $(775,125) $ - $ (16,800)
$334,466
Prior period adjustment (see Note J)
- - (321,778) - -
(321,778)
Restated Balance, December 31, 1997
2,597,840 1,126,391 (1,096,903) - (16,800)
12,688
COMPREHENSIVE INCOME:
Realized loss on sale of investments
- - - - 16,800
16,800
Net loss
- - (230,915) - -
(230,915)
Total comprehensive income
- - (230,915) - 16,800
(214,115)
Stock issuances
12,000 30,000 - - -
30,000
Stock issuances in lieu of cash for compensation
12,000 13,000 - - -
13,000
Exercise of stock options
20,000 2,000 - - -
2,000
Share exchange (see Note I)
417,517 (35,000) - - -
(35,000)
Balance, December 31, 1998
3,059,357 $ 1,136,391 $ (1,327,818) $ - $ -
$(191,427)
Stock issuances
300 1,200 - - -
1,200
Stock issuances in lieu of cash for compensation
26,783 40,075 - - -
40,075
Exercise of stock options
146,590 14,659 - (9,659) -
5,000
Net loss (comprehensive net loss)
- - (239,840) - -
(239,840)
Balance, December 31, 1999
3,233,030 $ 1,192,325 $ (1,567,658)$(9,659) $ - $
(384,992)
The accompanying notes are an integral part of these consolidated
financial statements.
4
ATI Networks, Inc. and Subsidiary
Consolidated Statements of Cash Flows
For the Years Ended December 31, 1999 and 1998
1999
1998
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (239,840)
$(230,915)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 11,825
13,439
Gain on disposal of property and equipment (100)
(342)
Loss on sale of investments -
15,953
Stock issued for services in lieu of cash 40,075
13,000
Change in assets and liabilities affecting operations:
Accounts receivable, net (13,825)
6,938
Inventories (521)
9,675
Prepaid expenses 662
714
Security deposit -
(647)
Accounts payable and accrued expenses 25,317
3,296
Accrued salaries- officer/stockholders 90,917
73,666
Net cash used in operating activities (85,490)
(95,223)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of investments -
4,847
Purchases of property and equipment (340)
(4,230)
Increase in amounts due from officer/stockholder -
(60,000)
Net cash used in investing activities (340)
(59,383)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of note payable -
(50,000)
Proceeds from note payable 69,364
200,238
Payments on capital lease obligations (3,555)
(2,748)
Payment made for share exchange -
(35,000)
Proceeds from capital stock issuances 6,200
32,000
Net cash provided by financing activities 72,009
144,490
CHANGE IN CASH AND CASH EQUIVALENTS (13,821)
(10,116)
CASH AND CASH EQUIVALENTS, beginning of year 14,822
24,938
CASH AND CASH EQUIVALENTS, end of year $ 1,001 $
14,822
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest $ 28,775 $
8,992
NON-CASH INVESTING AND FINANCING ACTIVITIES
Financed acquistion of equipment through
capital lease obligation $ 3,060 $ -
The accompanying notes are an integral part of these consolidated
financial statements.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> $ 1,001
<SECURITIES> 0
<RECEIVABLES> 15,000
<ALLOWANCES> 0
<INVENTORY> 896
<CURRENT-ASSETS> 16,897
<PP&E> 82,202
<DEPRECIATION> 56,740
<TOTAL-ASSETS> 103,006
<CURRENT-LIABILITIES> 486,283
<BONDS> 0
0
0
<COMMON> 1,192,325
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> (103,006)
<SALES> 45,717
<TOTAL-REVENUES> 45,717
<CGS> 13,604
<TOTAL-COSTS> 256,954
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (239,840)
<INTEREST-EXPENSE> (28,775)
<INCOME-PRETAX> (239,840)
<INCOME-TAX> (239,840)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (239,840)
<EPS-BASIC> (.08)
<EPS-DILUTED> (.08)
</TABLE>
