FORM 10-QSB
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION
13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
ATI NETWORKS, INC.
COLORADO
84-1089801
460 Cedar Street
Fond du Lac, Wisconsin
54935
(920) 922-7030
(920) 922-7011 (fax)
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 [ ]
Indicate the number of shares outstanding of each
of the issuer's classes of common stock, as of the
latest practical date:
Common Stock, $0 Par Value -
7,413,630 shares as of September 30, 2000.
TYPE: 10QSB OTHERDOC
SEQUENCE: 1
FILENAME: 0001.txt
DESCRIPTION: FORM 10-Q PERIOD ENDING 9/30/2000
FORM 10-QSB
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION
13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
ATI NETWORKS, INC.
COLORADO
84-1089801
460 Cedar Street
Fond du Lac, Wisconsin
54935
(920) 922-7030
(920) 922-7011 (fax)
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 [ ]
Indicate the number of shares outstanding of each
of the issuer's classes of common stock, as of the
latest practical date:
Common Stock, $0 Par Value -
7,413,630 shares as of September 30, 2000.
PART I - FINANCIAL INFORMATION
ATI NETWORKS, INC.
BALANCE SHEET
AS OF SEPTEMBER 30, 2000
ASSETS
Current assets
Cash and equivalents $ 6,777
Accounts receivable 15,000
Inventories 1,319
Total current assets 23,096
Property and equipment 81,393
Accum. depreciation (65,740)
Net property and equipment 15,653
Investment in Sterling Media
Capital Fund I, L.P. 10,000,000
Total assets $10,038,749
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 22,850
Accrued expenses 25,763
Deferred payroll 116,100
Line of credit - Firstar Bank 146,567
Total current liabilities 311,280
Long-term liabilities
Notes payable 206,783
Total liabilities 518,063
Stockholders' equity
Series A Convertible Preferred
Stock; $100 par value; authorized
20,000,000 shares; none issued 0
Common stock Class A; no par value;
authorized 20,000,000 shares;
7,413,630 issued 11,367,424
Accumulated deficit (1,837,079)
Stock subscription receivable (9,659)
Total stockholders equity 9,520,686
Total liabilities & capital $10,038,749
===========
ATI NETWORKS, INC.
STATEMENT OF OPERATIONS (Unaudited)
ATI Networks, Inc. Summary Income Statement
For the Three Months ending September 30, 2000 and 1999
2000 1999
Net sales $ 12 $ 13,212
Operating expenses:
Cost of sales 663 1,634
Sales and marketing expense 5,636 4,960
General and administrative expense 86,570 31,194
Research & development expense 6,822 3,782
Depreciation and amortization 3,000 43,275
Total operating expenses 102,691 84,845
Net operating income (loss) (102,679) (71,633)
Other income (expenses)
Interest expense 27,338 (3,870)
Other 0 (51)
Net other income (expenses) 27,338 (3,921)
Net income (loss) before taxes (130,017) (75,554)
Income tax provision 0 0
Net income (loss) $(130,017) $ (75,554)
========== ========
Net loss per common share $ (.02) $ (.02)
(basic and diluted)
Weighted average number of common
shares outstanding 7,413,630 3,146,194
ATI NETWORKS, INC.
STATEMENT OF OPERATIONS (Unaudited)
ATI Networks, Inc. Summary Income Statement
For the Nine Months ending September 30, 2000 and 1999
2000 1999
Net sales $ 3,903 $ 15,419
Operating expenses:
Cost of sales 3,232 7,938
Sales and marketing expense 20,200 54,944
General and administrative expense 193,528 91,781
Research & development expense 14,963 25,164
Amortization 0 (33,390)
Depreciation 9,000 9,225
Total operating expenses 240,923 155,662
Net operating income (loss) (237,020) (140,243)
Interest expense (32,297) (9,132)
Other (105) (230)
Net loss $(269,422) $ (149,605)
========== =========
Net loss per common share (basic
and diluted) $ (.04) $ (.05)
Weighted average number of common
shares outstanding 7,413,630 3,146,194
ATI NETWORKS, INC.
STATEMENT OF CASH FLOWS FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 2000 (Unaudited)
ATI Networks, Inc.
Statement of Cash Flow
For the Nine Months ended September 30, 2000
Cash Flows from Operating Activities:
Net loss $(269,422) $(149,605)
Adjustments to reconcile net
loss to net cash used in
operating activities
Depreciation and amortization 9,000 9,225
Accounts receivable(net) 60,000 (70,390)
Inventory (445) (1,937)
Prepaid expenses 670 (880)
Other assets 0 26,610
Accounts payable and accrued expenses (442) 12,167
Accrued salaries (48,483) 65,077
Net cash used in operating activities (249,122) (109,733)
Cash Flows From Investing Activities:
Gain on sale of property and equipment 809 0
Purchase of property and equipment 0 (540)
Cash Flows from Financing Activities:
Line of credit 146,567 251,441
Payments on capital lease obligations (4,758) (5,253)
Proceeds from capital stock issuances 175,099 46,275
Payments on note payable (62,819) (196,171)
Net cash provided by
financing activities 254,089 96,292
Change in cash and equivalents 5,776 (13,981)
Cash and cash equivalents,
beginning of year 1,001 14,872
Cash and cash equivalents,
end of period $ 6,777 & 891
===== ======
ATI Networks, Inc. and Subsidiary
Notes to Consolidated Financial Statements(unaudited)September
30,2000
A. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial
statements have been prepared in accordance with generally
accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and
Item 310 (b) of Regulation S-B. Accordingly, they do not
include all of the information and footnotes required by
generally accepted accounting principles for complete
financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have
been included. Operating results for the three months
ended September 30, 2000 are not necessarily indicative of
the results that may be expected for the year ended December
31, 2000. For further information, refer to the
consolidated financial statements and footnotes thereto
included in the Company's Form 10-KSB/A filed on May 11,
2000.
B. ORGANIZATION
ATI Networks is a U.S. based development company that is
building a global e-business with products that can be used
for business advertising, automated vehicle tracking, wireless
communications, and entertainment. The principal market
for the Company's products and technologies are companies
seeking to advertise their products and services on these
software platforms. Additional markets include companies
with mobile assets, organizations requiring the wireless
transfer of data, and the general public.
C. CREDIT LINES
In September 1998, the Company signed an 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 was
collateralized by a general business security agreement.
Outstanding borrowings, including interest and other
charges, under this line-of-credit amounted to $276,996
and the bank entered a judgement for $276,996 on May 31,
2000.
In June 2000, the company entered into a new borrowing
agreement with JetDisc.com, a private company owned by
officers and directors of the company, specifically Mr.
Sorenson, Dr. Sybesma, and Mr. Bestor. This line-of-credit
was collateralized by a general business security agreement.
Proceeds from this loan were used to pay Firstar Bank
$150,000 of the outstanding amount due to it. The balance
of $117,000, plus interest was due by September 30, 2000.
Lack of current available cash reserves has prevented the
company from paying this remaining balance due to Firstar,
but the company expects to do so before year end, provided
either new equity funds or a large credit line can be
secured on behalf of the company. It is not expected that
positive cashflow will be reached before 2nd or 3rd quarter
2001.
D. 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 three months ended September 30:
2000 1999
Net loss (numerator) (130,017) (75,554)
Weighted average share
(denominator) 7,413,630 3,146,194
Basic net loss per share $ (.02) $ (.02)
Dilutive shares
(denominator) 7,413,630 3,146,194
Diluted net loss per share $ (.02) $ (.02)
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.
E. 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 three months ended September 30, 2000:
Share options:
Granted - 0
Exercised - 1,000
Canceled - 0
September 30:
Outstanding 5,716,410
Exercisable 5,173,360
Average exercise price per share
Granted -
Exercised $0.10
Canceled -
September 30:
Outstanding $1.33
Exercisable $1.31
Stock options outstanding at September 30, 2000 had a range of
exercise prices of $.10 to $5.00 and an average remaining
contractual life of three years.
Options outstanding with an exercise price of $1.00 or
less totaled 4,976,409, of which 4,513,209 were exercisable at
September 30, 2000. The remaining 741,000 options outstanding had
a price of greater than $1.00, of which 619,150 were exercisable
at September 30, 2000. The weighted-average remaining contractual
life for each of these groups of options was two years and six
years, respectively.
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.
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 3-31-2000. 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 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. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND PLAN OF OPERATION
The following discussion should be read in conjunction with the
Financial Statements thereto.
The third quarter of FY 2000 has seen an increase in the number of
daily visitors to its newest website, YouthNetworks.com. The
company has entered into discussions with a number of companies
that management believes will be able to provide new content
and additional site traffic. Over the next six months the
Company expects to acheive traffic levels sufficient to
receive revenues from site advertising, website product sales,
and new webcasts.
The rapid growth of the Internet as a distribution medium
continues to expand the global market for the Company's core
products, while at the same time creates new opportunities for
the Company to create and sell variations of its products. It
is expected that with the additional exposure of the Company
and its products to the online community, demand and traffic
will continue to increase for the Company's content, products,
and websites. The Company believes continuing to expand
exposure to the online community is a must to creating brand
name recognition, while partnering and distribution contracts
are expanded.
Company management expects to see significant growth in its
future sales figures as awareness of the company and its products
expands. However, to create and maintain mindshare of the
Company's products in the mind of the public requires an increase
in marketing and sales related expenses. The ability of the
company to survive beyond the end of FY 2000 will require
additional capital to fund operations until profitability is
reached. During the course of this year, management has sought
outside funding from venture firms and angel investors. Although
agreements were reached that would have provided venture
funding to the company, the company has not yet received funds
from the companies agreeing to provide funding under these
agreements. Company management believes it is unlikely to receive
funds from the previous agreements with KAL Equity or VentureNet,
so it has now entered into discussions with other venture partners.
Given current market conditions, there is no assurance that
the capital required for the company to continue operations
will be secured, nor that the company will survive beyond the
end of FY 2000. To increase working capital, management plans
to sell or otherwise use a portion of the prepaid media credits
held by the Company to raise capital and provide advertising for
the company's websites and products. The advertising will be
targeted to increase site traffic and product sales. In October,
the company launched an online newsletter for the young audience
of youthnetworks.com in order to increase site traffic, and
product sales. As the company expands the awareness
of its Internet websites, it is expected that the increased
public use of its websites will impact positively on the
company's net profits throughout the balance of the year 2000.
The company has recently engaged the firm Kranitz and Phillips
as its securities counsel. Mr. Kranitz has been an attorney
in private practice since 1970, emphasizing securities,
banking and business law. Prior to establishing Kranitz &
Phillip (formally the law offices of Richard K. Kranitz),
he was with the law offices of Fretty & Kranitz, and McKay,
Martin & Kranitz. Mr. Kranitz has served as the law clerk
to the honorable Myron L. Gordon, US District Court and is a
graduate of the University of Wisconsin Law School. Mr.
Kranitz is a Director at the Grafton State Bank, while
serving as venture capital consultant and director of
various private companies. He is an entrepreneur and has
served as a director of a number of professional, civic,
and charitable organizations. Mr. Kranitz expertise and
resources are committed to ATI Networks to oversee and
implement all future securities filings and company offerings.
PART II - OTHER INFORMATION
PART I
ITEM 1. DESCRIPTION OF BUSINESS
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 software technologies and public
websites that enable the public to do voting online, to carry on
ecommerce, watch live video streaming over the Internet, and to
track GPS-enabled wireless devices over the Internet. 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.
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 3-31-2000. 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.
PART II
ITEM 1.
LEGAL PROCEEDINGS
A judgement was entered against the company by
Firstar Bank for a line-of-credit business
loan, in the amount of $267,000. Since the
judgement was entered, the loan has been
partially repaid by the company and the current
existing balance is $117,000 plus interest.
Additionally, there was a judgement entered
against a ATI, Inc., a subsidiary of the company,
by a disgruntled former employee for $25,000. The
company has contested this judgement, and has
refused to pay it.
ITEM 2.
CHANGES IN SECURITIES
None
ITEM 3.
DEFAULTS IN SENIOR SECURITIES
None.
ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS
Not Applicable.
ITEM 5.
OTHER INFORMATION
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 Computershare, whose address
is 12039 W. Alameda Parkway, Suite Z-2,
Lakewood, Colorado 80228 and whose
number is (303) 986-5400.
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.
ATI NETWORKS, INC.
Registrant
August 4, 2000
/s/ Lawrence Bestor
Lawrence Bestor
Chief Executive Officer/Director
/s/ Steven Sorenson
Steven Sorenson
Secretary/ Director
