FORM 10-KSB
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: $ 82,743
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
PART I
ITEM 1. DESCRIPTION OF BUSINESS
EXECUTIVE SUMMARY
ATI Networks is building a global e-business by leveraging its proprietary
online technology, compelling content, and proven marketing techniques, to
create high volume, high profit margin websites. The company plans to
continue expanding its exciting community of sites that enable people to
carry on retail and B2B commerce, download digital audio and video media,
while fostering a feeling of community among site visitors.
The company owns a number of public sites that range from www.landnet.com,
featuring the latest information on NASA space launches, to sites that offer
the user access to fine art and discount computers in an auction environment.
The company's auction technology is now being used at www.artgems.com, a
consumer website that offers fine art, direct to consumers over the Internet.
Areas of the company's websites are available only to businesses for business
to business transactions, while other site areas are available to the general
public.
The company has created a website, www.tallyvotes.com that enables webmasters
around the globe to quickly compose a survey, or election, on their website
using the tallyvotes.com template and voting server. Webmasters around the
world RIGHT NOW can implement and use the company's voting engine for free,
to do in minutes what would normally take webmaster/ programmers weeks to
create from scratch. Imagine the future of online voting, a worldwide need
that will increase voter turnout, while expanding democracy around the globe.
Millions of websites around the globe that can use the company's voting
engine to implement online voting, or create surveys, on their own websites
in 15 minutes or less. Analysts have estimated the future of online voting to
evolve into an estimated $10 billion per year business.
The company plans to expand its existing websites to include an online recycling
business, and discount computer products auction. These sites will cross-link
to one another, and will provide an e-commerce environment for manufacturers
of computers and electronic equipment to sell discounted excess inventory
through a global network of online affiliates and Value Added Resellers (VAR's).
The company is currently using its proprietary online auction technologies and
e-commerce websites, in which it has verified its web auction technology.
It has also established banner advertising contracts with Flycast Communications
/Engage, both CMGI companies, and Cable, Print, News Media, a consortium of 70
magazines and over 200 websites partnered with the company in building its
online brands. The company is positioning itself to become a leading community
of engaging destination websites that enable business to business, e-tail
commerce, and entertainment.
Through a related company, the company has begun to compile worldwide
distribution rights to a digital library of past and future movies. There are
over 3,500 movies produced each year, of which less than 10% get distributed
through movie theaters and television. Company management believes this opens
up a tremendous opportunity for the company that owns worldwide digital
distribution rights to some of these films. In exchange for exclusive
worldwide,digital distribution rights to the movies in its library, it will
create digital copies of these films. The sale and distribution of these
movies will be offered by the company to online customers in DVD format, but
eventually will be distributed digitally over the Internet through secure,
high speed servers.
SOURCES OF REVENUE
Company revenues are generated from a number of sources in three primary ways:
1)Advertising
2)Electronic retail sales
3)Percentage based, transaction fees received from online product sales sold
on the company's websites, and from the sale of advertising banners.
Since the company's revenue model is based on the use of its sites as online
commerce exchanges, it receives a percentage of each sale made, plus revenue
from information and advertising, not just on the sale of products. In this
way, the company provides a forum for people to meet and carry on business,
in exchange for which it charges a sales transaction fee, and for which it
charges advertisers to reach the company's online audiences.
The company's next generation websites combine the latest database, search
engine, language translation, and e-commerce technologies to link manufacturers
to VAR's, businesses to businesses, and manufacturers with the general public.
Although the majority of the company's first year ecommerce sales were done
in the US, the company has planned the growth of the business to enable it to
do business around the globe, 24 hours a day, 7 days per week. A nonprofit
organization partner, recycleit.org, will provide businesses and individuals
with an environmentally friendly, and tax deductible process to dispose of old
computer equipment such as computers, monitors, and keyboards.
INDUSTRY OVERVIEW
The Online Marketplace is booming. Increasingly businesses are recognizing the
place to do business in the future is over the Internet. According to IDC, the
number of Internet users will grow from the current estimate of 150 million to
reach approximately 320 million by the end of 2002. Other estimates of the
growing online community put the global user number over 1 billion by 2002.
Worldwide commerce revenue on the Internet grew to over $20 billion in 1999,
and is expected to surpass $204 billion in 2001, according to Zona Research.
Online advertising revenues are projected to grow to over $10 billion in 2002
(Jupiter).
Electronic commerce is one of the hottest subjects on the Net today. There is
no shortage of predictions about the number and value of electronic
transactions that will take place over the Internet over the next decade, but
these predictions vary wildly. This highlights one of the fundamental problems
of business on the Internet; that it is next to impossible to predict anything
accurately. Although the predictions vary, the surveys seem to unanimously
agree on one thing: electronic commerce will continue to grow exponentially.
One typical example last year from Forrester Research, states the following:
"Net merchants will this year sell over $50 billion worth of goods over the
Internet. By 2002 this will swell to over $200 billion."
MARKET OPPORTUNITY AND DEMAND
According to the latest statistics from Forrester Research, over 50% of the
nearly $4 billion in 1999 online retail sales occurred in the two industries
the company has focused its retail sales efforts, namely computer products and
entertainment. Additionally, the future of the online voting market is
estimated at over $10 Billion per year, and is in its earliest stages.
The company's online voting server and related website, TallyVotes.com, are
perfectly positioned to capitalize on this evolving global market.
According to statistics from IDC, over 50% of all households in the US own a
computer. Many of these same households own more than one. Globally, the number
of new computers and monitors shipped will exceed 100 million units each in
1999, and is expected to grow to over 150 million units each for the calendar
year, 2002. The continued growth in the demand of new computers has created
closets and warehouses full of old computers, which has created a tremendous
need for businesses and individuals to dispose of this outdated equipment. A
recent USA Today feature story focused on the growing problem of disposing of
this old equipment in a responsible way, and the need for an organized system
of recycling. Since it is illegal in many states to dispose of computer
monitors and other electronic equipment that contains hazardous material in
landfills, it is obvious that the need for environmentally responsible
recycling of outdated computer equipment will only increase in the coming
decade. The company offers a viable and economical solution to this growing
problem.
According to a recent survey by Zona Research regarding the habits of online
retail shoppers, it was found that 93% of these buyers spend between $25 and
$249 when purchasing products online. The average business to business
transactions are considerably higher and the company is now positioning itself
to offer an online B2B environment that will provide an ideal forum for
businesses of all sizes to carry on global commerce and develop new business.
The Internet has provided a low cost medium to reach the global audience.
Despite the rapid proliferation of websites, there is currently no company
specifically focused as we have envisioned and described here. Management
believes an excellent business opportunity exists for the company to create
the leading "central meeting place on the web" for both businesses and the
public to benefit from the purchase of discount products and the disposal of
outdated products through its nonprofit sister organization, the RecycleIt.com
network.
Additionally, decreasing profit margins of neighborhood computer retailers,
along with the increase of online computer and peripheral businesses, has
created a compelling need for the local neighborhood computer retailers to
change the way they do business. This compelling need gives the company an
opportunity to provide many of these retailers with a perfect solution to
increase foot traffic to their stores, while at the same time providing these
local retail affiliates with a way to do increase their profit margins by
purchasing from the company's website.
THE ATI NETWORKS ADVANTAGE
The company attracts people to its community of sites with regular sweepstakes
promotions and prize giveaways that reward people for subscribing to its sites.
It expects to retain people's interest on its family of websites by providing
them access to the best digital content, while rewarding its website visitors
with points and prize entries for referring friends to the company's sites.
The company has established marketing agreements with certain well-established,
high traffic websites, to redirect and promote traffic to the company's
community of websites. The company also plans to promote its websites using a
variation of the marketing technique used by America Online to generate
millions of new customers each year. These plans include advertising its
Internet brands on the JetDisc, an innovative new CDROM that will be
distributed free to millions of airline travelers. JetDisc is a web-enabled
CDROM that millions of airline passengers will view each month. The JetDisc
showcases the latest products, technologies, upcoming movies, and promotional
giveaway offers on behalf of its sponsors. ATI Networks will promote its web
properties each month by offering premium incentives such as frequent flyer
miles and prizes for travelers that visit the company websites and register
as a customer.
In the entertainment sector, the company has formed alliances with MUZE, the
leading music database, to provide online access to its 1.7 million music
titles and 400,000 album titles, through the company's entertainment shopping
areas. The company will then enable its site visitors to create their own
custom CD's by choosing from song titles in its online MUZE database.
Through a related company, the company has begun to compile worldwide
distribution rights to a digital library of past and future movies. There are
over 3,500 movies produced each year, of which less than 10% get distributed
through movie theaters and television. This opens up a tremendous opportunity
for the company that owns worldwide digital distribution rights to some of
these films. In exchange for exclusive worldwide, digital distribution rights
to the movies in its library, it will create digital copies of these films.
The sale and distribution of these movies will be offered initially to online
customers in DVD format, but eventually will be distributed digitally over
the Internet through secure, high speed servers.
The company is focusing its e-business on building and acquiring websites that
meet the growing demands of both consumers and businesses in the categories of
computer products and entertainment. The company plans to enroll thousands of
online affiliates of the company, and its related nonprofit company,
recycleit.org, to serve as distribution avenues for discount computer and
electronic merchandise, as well as collection points for recycling of discarded
computers, computer peripherals, and monitors. In exchange for becoming
affiliates of the company, VAR's receive two major benefits:
First, VAR's will have daily, online access to discount inventory from all
major computer, monitor, and electronics manufacturers, which they currently
do not receive. This discount inventory often comes with similar manufacturer's
warranties as new equipment, but this inventory sells for a fraction of the
price of new equipment. Therefore, the discount inventory we will provide them
with access to, via our online auction, enables VAR's to benefit from
higher profit margins than they currently receive on brand new equipment.
Second: Local VAR's will benefit from the increased foot traffic that will be
generated for them by turning their stores into local collection points for the
millions of outdated computers, keyboards, modems, and monitors. With donated
equipment going to recycleit.org, a related nonprofit entity, the donors will
receive tax benefits from otherwise useless and outdated computer equipment.
Company management predicts that its website affiliate programs will motivate
small business users two ways. First, by allowing them to share in revenues
generated by the recycling of equipment brought into their facilities, while
also giving them access to computer equipment inventory from manufacturers
at discount prices. This e-business model, coupled with the company's ability
to provide users with a large inventory of discount products and daily prize
giveaways, will encourage business users to visit company auction sites daily
to both do business and be entertained.
INVESTMENT HIGHLIGHTS
Due to the capital intensive nature of rapidly growing Internet companies,
management expects to need to raise additional funds in future offerings to
fund its growth, to develop new or enhance existing services, and to acquire
complementary products, businesses, or technologies. If additional funds are
raised through the issuance of equity or convertible debt securities, the
percentage ownership of existing stockholders will be reduced and such
securities may have rights, preferences, or privileges senior to those of our
existing stockholders. If adequate funds are not available or are not
available on acceptable terms, the company's ability to fund its expansion,
take advantage of unanticipated opportunities, develop or enhance services or
products, or otherwise respond to competitive pressures would be
significantly limited.
Management is currently negotiating a private placement of equity funding with
accredited and institutional investors, which it believes will enable it to
continue additional website development, and provide enough working capital
to fund operations for the next 12 months.
This capital will be used to hire additional staff, expand national marketing
and branding promotions for the company's websites, and to make acquisitions
that will strengthen the company's growing network of web properties.
PRODUCTS AND MARKET
ATI Networks developers and engineers have previously developed the following
products:
*TallyVotes.com - This site enables webmasters around the globe to quickly
compose a survey, or election, on their website using the tallyvotes.com
template and voting server. Webmasters around the world can implement and use
the company's voting engine for free, to do in minutes what would normally
take webmaster/ programmers weeks to create from scratch. Millions of websites
around the globe can use the company's voting engine to implement online
voting, or create surveys, on their own websites in minutes.
*LotsofStuff.com - a portal site that enables its users to have direct access
to the latest search engine technology and destinations on the web. This
website provides a portal to art and computer product auctions, news,
real estate, weather, sports, sweepstakes, free lotteries, games, and virtual
tours of countries all over the globe.
*ArtGems.com - Internet website property known on the web as artgems.com, this
website provides viewers with access to a large inventory of art and a live
auction environment. Digital pictures of the inventory may be viewed and
multiple bids can be made on multiple items by anyone logged onto the site.
The Company currently has Internet marketing rights to art inventory with
three nationally known artists.
*Landnet.com - Internet website property known on the web as landnet.com, this
site features information about the latest NASA space launch with real-time
NASA reports and pictures. The site also provides information about the
Company's GPS tracking and wireless communications technology and products.
*aRealGem.com - Internet website property known on the web as arealgem.com,
the site enables Timeshare property buyers and sellers around the world to
connect with each other. Visitors to the site may view and search for available
properties for sale in 70 countries. Visitors may list their property for sale,
submit photos or video files using easy online instructions. The website is
available for viewing and use by 70 million users of the Internet. The site
allows users to post and view listings for free.
* NavQuest - Comprehensive mapping and routing software product on CD-Rom.
NavQuest includes most U.S. and Canadian streets and highways, advance routing
features, optional GPS tracking capabilities, city and address search features,
and a database of thousands of attractions and points of interest. This product
was sold to JetDisc.com.
* LogiTrak - Map Based Tracking and Messaging via the Internet - A Windows 95
software application for communicating with, and viewing the locations of,
multiple wireless devices from a remote PC via the Internet. Two-way messages
can be quickly transmitted and received through a graphic interface utilizing
GPS satellites, communications satellites, and the Internet. The market for
this product includes most transportation companies and over 100 million
existing cellular telephone users. The ever-increasing demand for tracking and
wireless communications generates tremendous future potential for LogiTrak.
* JetDisc and JetDisc.com - JetDisc is a web-enabled CDROM that millions of
airline passengers will view each month. The JetDisc and its website,
JetDisc.com are unique advertising tools that are used to showcase the latest
products, technologies, upcoming movies, and promotional giveaway offers on
behalf of its sponsors. ATI Networks plans to promote its web properties each
month by offering premium incentives such as frequent flyer miles and prizes
for travelers that visit the company websites and register as a customer.
ELECTRONIC COMMERCE
According to statistics from IDC, over 50% of all households in the US own a
computer. Many of these same households own more than one. Globally, the
number of new computers and monitors shipped will exceed 100 million units
each in 1999, and is expected to grow to over 150 million units each for the
calendar year, 2002.
According to a recent survey by Zona Research regarding the habits of online
retail shoppers, it was found that 93% of these buyers spend between $25 and
$249 when purchasing products online. However, the average business to
business transactions are considerably higher. The Internet has provided a
low cost medium to reach the global audience. Despite the rapid proliferation
of websites, management believes an excellent business opportunity exists for
the company to create the leading "central meeting place on the web" for both
businesses and the public to benefit.
GROWTH OF THE INTERNET AND ONLINE COMMERCE
The Internet Today: A Quick Overview
Consider the following examples of the extraordinary power of the Internet.
It took radio 37 years to get to 50,000,000 listeners.
It took television 13 years to get to 50,000,000 viewers.
It took the Internet a mere 4 years to get to 50,000,000 users.
At the end of 1999 that number had grown to over 150 million, and it is now
estimated by some analysts that by year-end 2002 the Internet population will
grow to a staggering one billion online users, or one out of every five people
on the planet.
According to a recent report on customer buying habits conducted by Forrester
Research, computer products and entertainment were respectively, the number
one and number three leading product categories consumers prefer to buy over
the Internet. It is predicted by all major market forecasters that this trend
will continue over the next decade at growth rates that exceed 50% per year.
COMPETITION
The company has some competition from many online resellers of new and used
computer equipment. However, company management believes it can continue to
build a rapidly growing base of new customers and new member/affiliates, by
combining the largest selection of products, with the best prices on the
Internet for the discount products the company offers. Additionally, it will
be the only exchange organization in the US that is able to receive and
responsibly recycle outdated computer equipment, so the company will be the
leader in providing this online exchange service on the web.
The online market is characterized by rapidly changing technologies, frequent
new product, and service introductions, and evolving industry standards. The
recent growth of the Internet and intense competition compound these market
characteristics. To achieve our goals, we need to effectively integrate the
various software programs and tools required to enhance and improve our
Internet websites, and to effectively manage the growth of our online business.
The company is prepared to manage this growth with a team of management people
with prior successful experience in building high volume, scaleable network
systems.
Our future success will depend on our ability to adapt to rapidly changing
technologies by continually improving the performance features and reliability
of our web based services. In addition, future site enhancements must meet the
requirements of both current and future users, and must achieve significant
market acceptance. We believe that providing entertaining websites will
enhance the value of the ATI Networks community of websites, to the people and
businesses coming to our sites. Since the company's marketing efforts will be
focused on rapidly creating high traffic sites, building brand name awareness,
and rapidly building a network of affiliates, we believe it is imperative for
website visitors to have a positive experience each time they reach one of our
sites. Our focus on site quality and access speed will enhance our visitors'
experience by combining efficient ways of conducting e-commerce with
entertaining, web-based diversions, to meet the needs of a vibrant online
community.
CUSTOMERS
The customer base of website commerce is unlimited in scope and numbers. Some
of the companies currently contracted as advertisers include the following:
Sony
Alta Vista
Discover Card
Essential.com
Hewlett Packard Dell
Mortgageit.com
RocketLinks.com GM
BellSouth Local
American Family
Wells Fargo Online
Intelihealth.com
Smartgroups
Healthcentral
Predict It
Washington Post
EZPrints.com
BargainBid.com
Food.com
VarsityBooks
Enonymous.com
Office Click
Hot Office
Sweepstakes
BOTWEB
Mediaworks
eCampus
Shop Center
CGU,
Corvette Cars
Credit Counselor's
Office.com
Overstock.com
BizBuyer
eMD.com
Demasiado
Smart Portfolio
PetSmart
HealthExtras.com
Domini Social Investments
Hotbar.com
CarSmart
FirstSource
Sweeps
Computer Learning Centers
TradeCenter
Discovery Online Health
MentorLabs
VarsityBooks
Nedudomains
i-motors
Petfooddirect.com
Instant Ship
Passagen
How2.com / Cuervo
Medical Web
Bonzi99
AARP
GE Warranty
Brother Corp
TreeLoot
I Point
US West
Three Stooges
Enginehouse
Self- Test Software
Jones International University
Open Auto
Travelbreak.com
Boca Research
PNC Bank
USWest Local
BingoDabber
Playboy Enterprises
Loyalty ECM
Ford Outfitters
Boombots
Homepage
AnyLoan
Providian
PAR
BOTWEB
EntryPoint
Mr Jet
DW - Quickflight
Desktop
MSN
Banca Fideuram
Dash
bikeshop.com
eproject
VideoProfessor
Timedance
Storerunner
Stockwinners.com
Pier House Resort A
Letstalk
Entrepreneur.com
IPSOS - ASI
Coke
Treeway
iMotors
Wildjack Casino
Furniture Online
Career Engine
PureTec
EMPLOYEES
Operations 6
Clerical 2
Administrative 2
Technical 2
None of the Company's employees are subject to collective bargaining agreements
and the Company considers its relations with its employees to be excellent.
COPYRIGHTS/PATENTS
The Company owns the Copyrights and Trademarks for LogiTrak and plans to acquire
the rights to certain websites. Intellectual property and trademark protection
is an integral part of the corporate strategy to maximize exclusivity and
legally protect ownership of the Company's proprietary technology properties
in the marketplace.
None of the Company's business, products, or properties are subject to material
regulation (including environmental regulation) by federal, state, or local
governmental agencies.
INSURANCE
The Company maintains director and officer ("D&O") liability insurance on a
claims made basis for all of its current officers and directors. Insurance
coverage under such policies is contingent upon a policy being in effect when
a claim is made, regardless of when the events which caused the claim occurred.
The cost and availability of such coverage has varied widely in recent years.
While the Company believes its insurance policies are adequate in amount and
coverage for its current operations, there can be no assurance that the
coverage maintained by the Company is sufficient to cover all future claims
or will continue to be available in adequate amounts at a reasonable cost.
<PAGE>
IMPORTANT FACTORS RELATED TO FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS
The statements contained in this report that are not purely historical are
forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended (the "Securities Act") and Section 21E of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
including statements regarding the Company's expectations, hopes, intentions
or strategies regarding the future. All forward-looking statements included
herein are based on information available to the Company on the date 12-31-99.
Forward-looking statements encompass the (i) expectation that the Company can
secure additional capital, (ii) continued expansion of the Company's
operations through joint ventures and acquisitions, (iii) success of existing
and new marketing initiatives undertaken by the Company, and (iv) success in
controlling the cost of services provided and general administrative expenses
as a percentage of revenues.
The forward-looking statements included herein are based on current
expectations that involve a number of risks and uncertainties. These
forward-looking statements were based on assumptions that the Company would
continue to expand, that capital will be available to fund the Company's
growth at a reasonable cost, that competitive conditions within the industry
would not change materially or adversely, that demand for the Company's
services would remain strong, that there would be no material adverse change
in the Company's operations or business, and that changes in laws and
regulations or court decisions will not adversely or significantly alter
the operations of the Company. Assumptions relating to the foregoing involve
judgements with respect to, among other things, future economic, competitive,
regulatory and market conditions, which are difficult to predict accurately
and many of which are beyond the control of the Company.
ITEM 2. DESCRIPTION OF PROPERTY
FACILITIES
The following tabulates certain information with respect to the lease
currently executed between the Company and the Leaseholder.
Square Monthly Lease
Location Footage Rental Lessor
Executive Offices 2,500 $600.00 Wisconsin Lumber Co.
460 Cedar Street
Fond du Lac, WI
54935
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
No material legal proceedings to which the Company (or any of its directors
and officers in their capacities as such) is party or to which property of the
Company is subject is pending, although one material proceeding is known by
management of the Company to be contemplated, which, if begun and decided
against the company, could have an adverse effect on shareholders. However,
management believes this issue will be resolved prior to any adverse decision
against the company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
There has been limited trading in ATI Networks, Inc. Common Stock, and there
can be no assurance that an active trading market will develop or be
sustained. Provided a trading market does develop in the future, the market
price of the shares of Common Stock is likely to be highly volatile and may
be significantly affected by factors such as fluctuations in the Company's
operating results, announcements of technological innovations or new products
by the Company or its competitors, governmental regulatory action, developments
with respect to patents or proprietary rights and general market conditions.
The Company plans to be listed on Standard and Poor's Standard Corporation
Description and Records.
The last reported sale price of the Common Stock on December 31, 1999 was
0.6875 per share. The company's stock traded from a high in 1999 of $2.125
per share. The number of known shareholders of the Company's Common Stock was
approximately one hundred forty (140) on December 31, 1999.
Holders of Common Stock are entitled to receive such dividends as may be
declared by the Company's Board of Directors. No dividends on the Common
Stock have been paid by the Company, nor does the Company anticipate that
dividends will be paid in the foreseeable future.
As reflected in the price quotations above, there have been significant price
fluctuations in the Company's Common Stock. Factors that may cause or can cause
market prices to fluctuate include any purchase or sale of a significant
number of securities during a relatively short time period, quarterly
fluctuations in results of operations, announcements of new facilities,
issuance of additional securities, registration of securities and entrance of
such securities into the public float, market conditions specific to the
Company's industry, short sales by market makers and market conditions in
general. In addition, in recent years the stock market in general has
experienced significant price and volume fluctuations. These fluctuations,
which may be unrelated to the operating performance of specific companies,
have had a substantial effect on the market place for many small
capitalization companies such as the Company. Factors such as those cited
above, as well as other factors that may be related to the operating
performance of the Company, may adversely affect the price of the Common Stock.
DESCRIPTION OF SECURITIES
The authorized capital stock of ATI Networks, Inc. consists of twenty million
20,000,000)voting shares of Series A Common Stock, no par value, of which
3,233,030 shares were outstanding on December 31, 1999, 20 million
(20,000,000) non-voting shares of Series B Common Stock, no par value, of
which no shares were outstanding on December 31, 1999, and 20 million,
(20,000,000)Series A Convertible Preferred Shares, with a par value of $100
per share, of which no shares were outstanding on December 31, 1999.
Holders of ATI Networks, Inc. Common Stock are entitled to one vote per share
on all matters submitted to any vote of stockholders. Cumulative voting for
the election of directors is not permitted and therefore the holders of a
majority of the shares of ATI Networks, Inc. Common Stock will be able to
elect all of the directors. The ATI Networks, Inc. Common Stock does not
have preemptive rights and is not convertible, redeemable or assessable.
The holders of ATI Networks, Inc. Common Stock are entitled to receive
dividends as may be declared by the Board of Directors out of funds legally
available. See Dividends on ATI Networks, inc. Common Stock below. Upon
liquidation or dissolution, holders of ATI Networks, Inc. Common Stock are
entitled to share ratable in all net assets available for distribution to
stockholders.
RESTRICTIONS OF TRANSFER
Shares of ATI Networks, Inc. Common Stock held by non-affiliate ATI, Inc.'s
stockholders will be freely transferable, except for shares held by persons
who may be deemed to be "affiliates" of ATI Networks, Inc. under the
Securities Act of 1933, as amended (the "Securities Act"). Persons who may be
deemed to be affiliates of ATI Networks, Inc. generally include individuals
or entities that control, are controlled by, or are under common control with
ATI Networks, Inc. and may include certain of the Securities Act,
such exemptions afforded by Section 4(1) or Rule 701 of the Securities Act or
Rule 144 thereunder.
DIVIDENDS ON ATI NETWORKS, INC. COMMON STOCK
ATI Networks, Inc. does not intend to pay any dividends in the foreseeable
future and will follow a policy of retaining its earnings for use in its
operations. In addition, under its proposed loan agreement, ATI Networks,
Inc. will be prohibited from paying cash dividends without prior approval of
its lender banks.
TRANSFER AGENTS
The transfer agent for the ATI Networks, Inc. Common Stock is American
Securities Transfer, Inc., whose address is 12039 W. Alameda Parkway,
Suite Z-2, Lakewood, Colorado 80228 and whose telephone number is
(303) 986-5400.
ITEM 6. SELECTED FINANCIAL DATA
Not Applicable
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Financial
Statements thereto.
During the year 1999, the Company focused its development efforts on creating
new Internet content, e-commerce sites, and enhancing its Internet marketing
and branding partnerships. Existing website technologies were upgraded and
the new ReCycleIt website development was initiated. Strategic business
alliances for the websites were arranged. NavQuest was sold to a private
start-up firm, JetDisc.com, Inc. The Company continued development of the
wireless communications products group and completed the new related Internet
informational database website. LogiTrak is currently owned by ATI Networks
and will be sold to third parties under long-term licensing agreements.
The software and Internet industries are extremely competitive and dynamic.
The Company and its products have received positive exposure in the national
media, and is now poised to fully implement its marketing and branding plan.
The growth of the Internet as a distribution medium for software and
information has greatly expanded the global market for the Company's core
products, while at the same time created new opportunities for the Company
to create and sell variations of both its products and the products of others
from the company's websites.
Like many early stage technology companies, much of the Company's assets are
intangible assets such as copyrights, trademarks, and its proprietary
technologies.
ITEM 8. FINANCIAL STATEMENTS
The financial statements are included beginning at F-2. See page F-1 for the
Index to the Financial Statements.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
From the date the Registrant commenced operations through any subsequent
interim period preceding the dismissal there have been no disagreements with
the former accountant on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope of procedure.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
Chief Executive Officer: Larry Bestor
Age: 47
Office Street Address:
460 Cedar Street
Fond du Lac, WI 54935
Telephone: (920) 922-7030
Duties include contract negotiation, capitalization, and business direction.
Prior to founding the company, Mr. Bestor served in a variety of management
positions. He has over 10 years experience in the financial services field,
as an investment consultant for IDS/American Express and Prudential Insurance
Company. Mr. Bestor is listed in U.S. Registry's WHO'S WHO of American Colleges
and Universities, and WHO'S WHO in Leading American Executives. He attended
the University of Wisconsin Engineering School, and has a business degree
from Marian College. Mr. Bestor is also a Director of the Company.
<PAGE>
VP Marketing: Blade Thomas
Age: 46
Office Street Address: Same as above
Mr. Thomas previously served as Vice President of Marketing for Entrepreneur
Magazine and MET-Rx. At MET-Rx USA, he conceptualized and engineered the
production of radio, print and TV ad campaigns to create demand for retail
distribution of the company's products. Over a three year period, using his
direct response ads to increase demand for the company's products, annual
sales grew from $7.2 million to over $65 million. While with Entrepreneur
Magazine, he was the leading executive responsible for the sale of over 200
"how-to" business start-up and operations manuals, the company's subscription
and news stand sales, as well as trade shows, and business seminars.
Secretary: Steve Sorenson
Age: 47
Office Street Address: Same as above
Mr. Sorenson practices law in the Fox River Valley area as the owner of the
Sorenson Law Offices. He concentrates his practice in the areas of commercial,
corporate, and financial law. As a member of the State Bar Corporation and
Banking Section, he has been involved in projects that involve the revision
development of Wisconsin corporate and banking laws. Mr. Sorenson is the past
President of the Wisconsin State Bar Association. He received his Juris
Doctorate from Marquette University.
DIRECTORS OF THE COMPANY
Number of Directors:
All Officers above serve as Directors. In addition Dr. William Sybesma serves
as a Director. Lawrence Bestor and Steven Sorenson have served on the Board
since the inception of the company. Dr. Sybesma was added to the board in 1998.
Name: Dr. William Sybesma
Age: 51
Title: Director
Home Street Address:
865 Mullen Drive
Fond du Lac, WI 54935
Telephone: (920) 921-6363
Dr. Sybesma is Board Certified in the specialty of Otolaryngology - Head and
Neck Surgery, and practices at Agnesian Healthcare. He has served as President
of the Fond du Lac County Medical Society and on the Board of Directors of
the Fond du Lac Medical Clinic. Dr. Sybesma received his MD from the
University of Iowa School of Medicine.
Mr. Bestor and Mr. Thomas have worked previously in management positions in
startup businesses. Neither individual had signed non-compete agreements with
their former employers.
In 1999, Mr. Bestor was the co-founder of two other companies, JetDisc.com,
an advertising media company, and Emerald Point Development, a real estate
development company. Dr. Sybesma and Mr. Sorenson are also co-founders of
JetDisc.com.
COMPLIANCE WITH SECTION 16 (a) OF THE EXCHANGE ACT
The following material contains information concerning the directors,
including their recent employment, positions with the Company, other
directorships and age as of the date of this Form 10-KSB.
CAPACITY
NAME AGE WHICH SERVED OFFICER SINCE
Lawrence Bestor 47 Chairman 1998
460 Cedar Street CEO and President
Fond du Lac, WI
54935
Blade Thomas 46 Vice President 1998
460 Cedar Street Marketing
Fond du Lac, WI
54935
Steven Sorenson 47 Secretary, 1998
460 Cedar Street (Director since 1998)
Fond du Lac, WI
54935
William Sybesma 51 Director 1998
460 Cedar Street
Fond du Lac, WI 54935
Each director holds office until the next annual meeting of shareholders or
until a successor has been duly elected and qualified. There are currently
vacancies on the board of directors. The Board is seeking qualified nominees
to fill vacancies. Officers are appointed by and serve at the discretion of
the Board of Directors.
Under the securities laws of the United States, the Company's directors, its
executive officers, and any persons holding more than ten percent of the
company's Common Stock are required to report their initial ownership of the
Company's Common Stock and any subsequent changes in that ownership to the
Commission and the company. Specific due dates for these reports have been
established and the Company is required to disclose any failure to file, or
late filing, of such reports. Based solely on the Company's review of Forms
3, 4 and 5, and amendments thereto furnished to the Company and written
representations with respect to filing of such forms, the Company is aware
that all Forms have been filed timely to date.
COMMITTEES OF THE BOARD
The Board of Directors will delegate certain of its authority to a Compensation
Committee and a Audit Committee. There are currently vacancies on both of these
Committees. The Board expects to fill these vacancies after it has filled the
vacancies on the Board of Directors.
The primary function of the Compensation Committee will be to review and make
recommendations to the Board with respect to the compensation, including
bonuses, of the Company's officers and to administer the Company's proposed
Option Plan.
The function of the Audit Committee is to review and approve the scope of audit
procedures employed by the Company's independent auditors, to review and
approve the audit reports rendered by both the Company's independent auditors
and to approve the audit fee charge by the independent auditors. The Audit
Committee will report to the Board of Directors with respect to such matters
and recommends the selection of independent auditors.
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
__________________________________________Long Term Compensation
Annual Compensation Awards
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Payouts______
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other Restricted
Name and Annual Stock LTIP Other
Principal Comp. Award(s) Opt. P/outs Comp.
Position Year Salary Bonus ($) ($) ($) SARs(#) ($) ($)
Larry Bestor 1999 $75,000
460 Cedar St.
Fond du Lac, WI
Blade Thomas 1998 $ 5,000 10,000
460 Cedar Street
Fond du Lac, WI
</TABLE>
No employee of the Company receives any additional compensation for his
service as a director. Non-management directors receive no salary for their
services as such, but are entitled to receive reasonable travel or other
out-of-pocket expenses incurred by non-management directors in attending
meetings of the Board of Directors and a fee of $100.00 per meeting attended.
The Company has a profit sharing program for the benefit of its directors,
officers and other employees. The Board of Directors may recommend one or
more such programs for adoption in the future. The company also has an
Employee Stock Option Program(ESOP), which awards stock options to employees
at the will of the President and CEO.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of Common Stock as of December 31, 1999 by (i) each person known
by the Company to own beneficially more than 5% of the outstanding Common
Stock, (ii) each director, and (iii) all executive officers and directors as
a group. Each person has sole voting and sole investment or dispositive power
with respect to the shares shown except as noted.
Principal owners of the Company (those who beneficially own directly or
indirectly 10% or more of the common and preferred stock presently outstanding)
starting with the largest stockholder. Include separately all common stock
issuable upon conversion of convertible securities (identifying them
by asterisk) and show average price per share as if conversion has occurred.
Indicate by footnote if the price paid was for a consideration other than cash
and the nature of any such consideration.
Shares of ATI Networks
Common Stock
Beneficially Owned Percent
Name and as of the 12-31-99 of
Address Record Date Class
Lawrence Bestor 956,640 30%
460 Cedar Street
Fond du Lac, WI 54935
Oshkosh Truck Corp. 600,000 19%
2307 Oregon Street.
Oshkosh, WI 54901
Floyd Skeins 400,000 12%
4179 Brentwood Park Circle
Tampa, FL 33624
Susan Bestor 190,000 6%
460 Cedar Street
Fond du Lac, WI 54935
William Sybesma 80,000 2.5%
460 Cedar Street
Fond du Lac, WI 54935
Steven Sorenson 22,000 0.7%
460 Cedar Street
Fond du Lac, WI 54935
Blade Thomas 10,000 0.3%
460 Cedar Street
Fond du Lac, WI 54935
All Directors and Officers
As a Group 1,068,640 33%
The transactions described below were fair and reasonable to the Company on
the basis that such transactions were on terms at least as favorable as could
have been obtained from unaffiliated third parties. The transactions between
officers and directors of the Company, on the one hand, and the Company, on
the other, have inherent conflicts of interest.
(a) The number of shares subject to issuance under presently outstanding stock
purchase agreements, stock options, warrants or rights: 7,314,000 shares (67%
of total shares to be outstanding after the completion of the offering if all
securities sold, assuming exercise of options and conversion of convertible
securities). Indicate which have been approved by shareholders. State
expiration dates, exercise prices and other basic terms for these securities:
Year of Expiration Exercise Price Number of Shares
2004 $0.10 6,176,000
2004 $1.00 142,000
2004 $2.5 112,000
2005 $2.50 640,000
2006 $5.00 143,000
2007 $5.00 101,000
(b) Number of common shares subject to issuance under existing stock purchase
or option plans but not yet covered by outstanding purchase agreements, options
or warrants: 647,000 shares.
Shareholder approval is not required for grants made under the Employee Stock
Option Plan. Board approval is required for all other increases in
capitalization. The board is currently composed of two Company officers and
one non-employee shareholder representative.
All employees except the President have signed two year non-compete agreements.
The Company has an employee stock option plan that vests stock options awarded
each year over a 5 year period at 20% per year.
IV. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
The following documents are filed herewith or have been included as exhibits
to previous filings with the Commission and are incorporated herein by this
reference:
EXHIBIT NO. DOCUMENT
*3.1 Articles of Incorporation of the Company, as amended;
*3.2 Bylaws of the Company, as amended;
*23.1 Law Offices of Mark T. , Consent of Counsel
*23.2 Consent of Schenck and Associates, independent certified
public accountants for the Company
27 Financial Data Schedule
* Incorporated by reference from the issuer's Annual Report on Form 10KSB
(S.E.C> File No. 33-22832-d) filed June 30, 1998.
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 Chief Financial
Officers 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 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 Officer/Director Secretary/Director
/s/ Lawrence Bestor /s/ Steven Sorenson
Lawrence Bestor Steven Sorenson
Director
/s/ Dr. William Sybesma
Dr. William Sybesma
FINANCIAL STATEMENTS
December 31, 1998 and December 31, 1999
TABLE OF CONTENTS
FINANCIAL STATEMENTS
Balance Sheets F- (2-3)
Statements of Operations F- (4-5)
Statements of Stockholders' Equity F - 6
Statements of Cash Flows F - (7-8)
<PAGE>
F-2
BALANCE SHEETS
December 31, 1999 and December 31, 1998
ASSETS
1999 1998
Current assets
Cash and cash equivalents $ 1,001 14,814
Accounts receivable allowance 70,000 566,833
Inventories 895 10,084
Prepaid Expenses 2,246 2,850
Total Current Assets 74,142 594,581
Property and equipment
Office furniture and equipment 81,982 80,635
Less accumulated depreciation (55,444) (45,815)
Net property and equipment 26,538 34,820
Other Assets 111,832 264,490
Capitalized software development cost $ 212,512 517,741
F-3
LIABILITIES AND STOCKHOLDERS' EQUITY
1999 1998
Current liabilities
Note payable 269,602 200,238
Current maturities of long-term debt 6,357 2,524
Accounts payable 23,240 19,747
Accrued liabilities 147,135 89,918
Deferred revenue 52,416
Total current liabilities 442,566 362,319
Long-term debt, less current maturities 6,727
Total Liabilities 442,566 369,046
Stockholders equity
Common stock, no par value 1,151,135 1,168,391
Accumulated deficit (1,079,600) (775,122)
Unrealized loss on investments (16,800)
Treasury Stock (35,000) (35,000)
Stock Subscribed 500,000
Net Income (270,357) (333,424)
Total Stockholders' Equity (233,822) 524,845
F - 4
ATI, NETWORKS, INC.
STATEMENTS OF OPERATIONS
Years Ended December 31, 1999 and 1998
1999 1998
Total Revenues $ 82,743 99,404
Cost of sales 8,714 17,597
Operating expenses
Amortization of capitalized software
development costs 153,998 162,120
Research and development expenses 27,230 15,683
Sales and marketing expenses 24,504 31,228
General and administrative expenses 96,319 172,387
Depreciation expense 12,300 9,720
Net Operating Income (Loss) from Operations (240,322) (309,331)
Other income (expenses)
Gain/Loss on sale of investment securities 100 (15,953)
Dividend and interest income 72 238
Miscellaneous income/expense (52) (30)
Interest expense (29,887) (7,880)
Other income (expense), net (29,767) (23,625)
Loss before income taxes (270,089) (332,981)
Net loss $ (270,089) (332,981)
F - 5
ATI NETWORKS, INC.
Statements of Operations, continued
Years Ended December 31, 1999 and 1998
1999 1998
Net Loss $ (270,089) (332,981)
Net loss per share (0.08) (0.10)
Weighted - average number of
common shares outstanding 3,233,030 3,184,357
F - 6
ATI NETWORKS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended December 31, 1999 and 1998
Common Stock Accumulated Loss on
Shares Amount Deficit Investments Total
Balance,
December 31, 1998 3,010,340 1,167,391 (1,108,106) - 42,485
Issuance of
common Stock 222,690 (16,256) - - (16,256)
Repurchase of
common Stock - - - - -
Unrealized loss
on investments - - (270,089) (270,089)
Balance,December 31, 1999
3,233,030 1,151,135 (1,378,195) - (1,378,195)
F - 7
ATI Networks, Inc.
STATEMENTS OF CASH FLOWS
Years Ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Operating activities
Net loss (270,357) (333,424)
Adjustments to reconcile net loss to
net cash provided by (used for)
operating activities:
Depreciation and amortization 168,246 171,840
Loss on sale of property and equipment - -
Loss on sale of investment securities - -
Provision for losses on accounts receivable (4,015)
Deferred revenue changes 52,416
Decrease (increase) in:
Accounts receivable 496,675 (558,720)
Inventories (8,135) 34
Prepaid expenses -
Other 57,224 84,318
Increase (decrease) in:
Accounts payable 4,527 4,906
Accrued liabilities (604) (931)
Net cash provided by (used for)
operating activities 412,638 (634,198)
Investing activities
Purchase of property and equipment (7,312) (5,763)
Purchase of investment securities (20,000)
available for sale
Proceeds from sale of investment securities - -
available for sale
Capitalized software development costs (1,340) (274,640)
Net cash used for investing activities (8,652) (25,763)
Financing activities
Proceeds from issuance of note payable 71,273 200,238
and long-term debt
Retirement of note payable and long-term debt - -
Proceeds from sale of common stock 10,075 563,800
Purchase of common stock
Deferred Revenue (52,416)
Net cash provided by financing activities 115,002 657,943
</TABLE>
F - 8
ATI NETWORKS, INC.
Statements of Cash Flows, continued
Years Ended December 31, 1999 and 1998
1999 1998
Cash and cash equivalents
Net increase (decrease) 1,001 (10,125)
Beginning of year (14,814) (24,939)
End of year (13,813) 14,814
<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> 70,000
<ALLOWANCES> 0
<INVENTORY> 895
<CURRENT-ASSETS> 74,142
<PP&E> 81,982
<DEPRECIATION> 55,444
<TOTAL-ASSETS> 208,744
<CURRENT-LIABILITIES> 442,566
<BONDS> 0
0
0
<COMMON> 1,151,135
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> (233,822)
<SALES> 82,743
<TOTAL-REVENUES> 82,743
<CGS> 8,714
<TOTAL-COSTS> 310,835
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (270,089)
<INTEREST-EXPENSE> (29,887)
<INCOME-PRETAX> (270,089)
<INCOME-TAX> (270,089)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (270,089)
<EPS-BASIC> (.08)
<EPS-DILUTED> (.03)
</TABLE>
