<PAGE>
As filed with the Securities and Exchange Commission on July 5, 1996
Registration No. 333-256
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
AMENDMENT NO. 3
TO
FORM SB-2
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
----------------------
ATLANTA TECHNOLOGY GROUP, INC.
(Name of small business issuer in its charter)
DELAWARE 737 58-2077053
(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
400 EMBASSY ROW
SUITE 570
ATLANTA, GEORGIA 30328
(770) 671-0600
(Address and telephone number
of principal executive offices)
400 EMBASSY ROW
SUITE 570
ATLANTA, GEORGIA 30328
(Address of principal place of business)
JAMES CASSIDY
PRESIDENT
ATLANTA TECHNOLOGY GROUP, INC.
400 EMBASSY ROW
SUITE 570
ATLANTA, GEORGIA 30328
(770) 671-0600
(Name, address and telephone number of agent for service)
----------------------
Copies to:
Ronald Warner, Esq. Lawrence W. Horwitz, Esq.
Thelen, Marrin, Johnson & Bridges Horwitz, Cutler & Beam
333 South Grand Avenue Two Venture Plaza
Suite 3400 Suite 380
Los Angeles, California 90071 Irvine, California 92718
<PAGE>
ATLANTA TECHNOLOGY GROUP, INC.
CROSS REFERENCE SHEET
Pursuant to Item 501(b) of Regulation S-B
Showing Location in the Prospectus
of Information Required by Items of Form SB-2
<TABLE>
<S> <C>
Form SB-2 Item Number and Caption Prospectus
1. Forepart of Registration Statement and Outside Facing Page of Registration Statement; Outside Front
Front Cover Page of Prospectus.......................... Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages of Available Information; Incorporation of Certain
Prospectus.............................................. Documents by Reference; Table of Contents
3. Summary Information; Risk Factors....................... Prospectus Summary; Risk Factors
4. Use of Proceeds......................................... Prospectus Summary; The Company; Use of Proceeds
5. Determination of Offering Price......................... Underwriting
6. Dilution................................................ Dilution
7. Selling Security Holders................................ Not Applicable
8. Plan of Distribution.................................... Underwriting
9. Legal Proceedings....................................... The Company -- Legal Proceedings
10. Directors, Executive Officers, Promoters and
Control Persons......................................... Management and Principal Shareholders
11. Security Ownership of Certain Beneficial Owners
and Management.......................................... Management and Principal Shareholders
12. Description of Securities to be Registered.............. Description of ATG Securities
13. Interests of Named Experts and Counsel.................. Not Applicable
14. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities.......... Disclosure of Commission Position
15. Organization Within Last Five Years..................... The Company
16. Description of Business................................. The Company
17. Management's Discussion and Analysis or Plan of Management's Discussion and Analysis of Financial
Operation............................................... Condition and Results of Operations
18. Description of Property................................. The Company -- Facilities
19. Certain Relationships and Related Transactions.......... Certain Relationships and Related Transactions
20. Market For Common Equity and Market For Common Equity and Related Stockholder
Related Stockholder Matters............................. Matters
21. Executive Compensation.................................. Management and Principal Shareholders
22. Financial Statements.................................... Financial Statements
23. Changes In and Disagreements With Accountants
on Accounting and Financial Disclosure.................. Not Applicable
</TABLE>
<PAGE>
********************************************************************************
*INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A *
*REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE *
*SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY *
*OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT *
*BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR *
*THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE *
*SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE *
*UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF *
*ANY STATE. *
********************************************************************************
SUBJECT TO COMPLETION, DATED JULY 5, 1996
PROSPECTUS
ATLANTA TECHNOLOGY GROUP, INC.
1,400,000 SHARES COMMON STOCK
Atlanta Technology Group, Inc., a Delaware corporation ("ATG" or "the
Company," includes ATG's operating subsidiaries unless otherwise noted) is
offering 1,400,000 shares of its Common Stock (the "Common Stock") for $3.00 per
share (the "Offering"). See "Description of ATG Securities -- Common Stock."
Application has been made for approval of the Common Stock for listing on
the Boston Stock Exchange. Currently, the Common Stock is traded in the over-
the-counter market of the NASDAQ Bulletin Board under the symbol "ATYG." On
June 28, 1996, the closing bid and asked prices of the Company's Common Stock as
reported by NASDAQ were $2.50 and $4.00, respectively.
INVESTMENT IN THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
POTENTIAL INVESTORS SHOULD NOT INVEST IN THESE SECURITIES UNLESS THEY CAN AFFORD
TO LOSE THEIR ENTIRE INVESTMENT. SEE "RISK FACTORS," COMMENCING ON PAGE 3, FOR
CERTAIN CONSIDERATIONS RELEVANT TO AN INVESTMENT IN ATG COMMON STOCK. IN
ADDITION, THE "PENNY STOCK" REGULATIONS OF THE SECURITIES AND EXCHANGE
COMMISSION APPLY TO THE SHARES OF COMMON STOCK; AN INVESTOR'S ABILITY TO
LIQUIDATE OR TRADE HIS OR HER SHARES MAY BE ADVERSELY AFFECTED. SEE "PENNY
STOCK REGULATION."
THESE ARE SPECULATIVE SECURITIES. INVESTMENT IN THESE SECURITIES INVOLVES
IMMEDIATE AND SUBSTANTIAL DILUTION
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- -------------------------------------------------------------------------------
Price to Public Underwriting Discounts(1) Proceeds to Issuer
or Other Persons(2)(4)
- -------------------------------------------------------------------------------
Per Share $ 3.00 $ 0.30 $ 2.70
- -------------------------------------------------------------------------------
Total (3) $4,200,000 $420,000 $3,780,000
- -------------------------------------------------------------------------------
- ---------------
(1) Does not include additional compensation to Brookstreet Securities
Corporation in the form of a non-accountable expense allowance equal to
three percent of the gross proceeds of the offering. See "Underwriting."
(2) Before deduction of estimated expenses of $250,000 payable by ATG, including
the three percent non-accountable expense allowance, of which $42,000 has
been paid to Brookstreet Securities Corporation. The non-accountable
expense allowance consists of: (1) expenses for Underwriter's legal
counsel; (2) due diligence costs such as travel, telephone, copying,
research and expert review of technology; (3) costs of road shows, including
travel, meetings, hotels, shipping costs and support costs in local cities;
and (4) miscellaneous costs. ATG has also agreed to grant to Brookstreet
Securities Corporation, for nominal consideration, warrants to purchase
140,000 shares of the Common Stock at $3.60 per share. See "Underwriting."
(3) ATG has granted the Underwriters an option, exercisable within 30 days of
the effective date of this registration statement, to purchase up to an
additional 210,000 shares of the Common Stock at the public offering price,
less underwriting discounts and commissions, solely for the purpose of
covering overallotments, if any. In the foregoing table, the amount shown
assumes the overallotment option will not be exercised. If the
overallotment option is exercised in full, the price of the Common Stock to
the public would be $4,830,000; the Underwriting Discounts would be
$483,000; and the Proceeds to the Issuer or Other Persons would be
$4,347,000.
(4) Other expenses include: SEC Registration Fee, NASD Fee, Representative Non-
Accountable Expense Allowance, Accounting Fees and Expenses, Legal Fees and
Expenses, Printing Expenses, Blue Sky Fees and Miscellaneous Expenses.
After deducting such expense allowance and Offering expenses, the net
proceeds of to the Company will be approximately $3,530,000 (assuming the
overallotment option is not exercised).
BROOKSTREET SECURITIES CORPORATION
<PAGE>
The shares of Common Stock are being sold by the Company and offered by the
Underwriters on a "firm commitment" basis, subject to prior sale, when, as and
if accepted by the Underwriters, and subject to certain conditions. The
Underwriters reserve the right to withdraw, cancel or modify such offer and to
reject orders in whole or in part. It is expected that the certificates
representing the shares of Common Stock will be ready for delivery at the
offices of Brookstreet Securities Corporation, 2361 Campus Drive, Suite 210,
Irvine, California 92715 within 10 full business days after the date the
Registration Statement is declared effective by the Securities and Exchange
Commission.
<PAGE>
AVAILABLE INFORMATION
ATG is subject to the informational requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and in accordance with the
Exchange Act files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed with the Commission by ATG can be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of such
material can be obtained from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington D.C. 20549 at prescribed rates.
The Common Stock is quoted on the National Association of Securities
Dealers Automated Quotation ("NASDAQ") Bulletin Board under the symbol "ATYG."
Application has been made for approval of the Common Stock for listing on the
Boston Stock Exchange.
No person is authorized to give any information or to make any
representation not contained in this Prospectus and, if given or made, such
information or representation should not be relied upon as having been
authorized. This Prospectus does not constitute an offer to exchange or sell,
or a solicitation of an offer to exchange or purchase, the securities offered by
this Prospectus in any jurisdiction to or from any person to whom it is unlawful
to make such offer or solicitation in such jurisdiction. Neither the delivery
of this Prospectus nor any distribution of the securities to which this
Prospectus relates shall, under any circumstances, create any implication that
there has been no change in the affairs of ATG since the date of this
Prospectus.
<PAGE>
TABLE OF CONTENTS
Prospectus Summary.......................................................... 1
Summary Financial Data...................................................... 2
Risk Factors................................................................ 3
Company Investment Risks.................................................. 3
Common Stock Investment Risks............................................. 7
Use of Proceeds............................................................. 9
Penny Stock Regulation...................................................... 11
Dividend Policy............................................................. 11
Capitalization.............................................................. 12
Dilution.................................................................... 12
Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................................. 13
The Company................................................................. 18
Time Value Corporation.................................................... 19
Silver Ridge Software, Inc................................................ 26
Legal Proceedings......................................................... 26
Employees................................................................. 27
Facilities................................................................ 27
Management and Control Persons.............................................. 27
Directors, Executive Officers, Promoters and Control Persons.............. 27
Executive Compensation.................................................... 29
Loans to Officers and Directors........................................... 29
Security Ownership of Certain Beneficial Owners and Management............ 29
Certain Relationships and Related Transactions.............................. 31
Description of ATG Securities............................................... 32
Underwriting................................................................ 34
Market for Common Equity and Related Stockholder Matters.................... 35
Legal Matters............................................................... 36
Experts..................................................................... 37
SEC Position on Indemnification for Securities Act Liabilities.............. 37
Index to Consolidated Financial Statements.................................. 38
<PAGE>
PROSPECTUS SUMMARY
This summary is qualified in its entirety by the more detailed information
and financial statements appearing elsewhere in this Prospectus. All financial
statements contained in this Prospectus are presented on a consolidated basis
unless otherwise noted.
THE COMPANY
Atlanta Technology Group, Inc. is a Delaware corporation formed in October
1993 as a holding company for technology companies. Its operating subsidiaries
are Time Value Corporation ("TVC"), a Georgia corporation, and Silver Ridge
Software Inc. ("SRS"), a Georgia corporation. However, the operations of SRS
have been scaled down while concentration has been focused on the development
and marketing of TVC's products. The Company is also parent to Net City, Inc.
("Net City"), a Georgia corporation, which is not currently conducting
operations.
TVC was incorporated for the purpose of developing, marketing and
supporting a solution to reduce the clinical and administrative costs of
producing documentation, correspondence and record keeping for the medical
community. The solution is a proprietary product of TVC and is known as
DOCUMENTPLUS.
SRS maintains an internal development team trained in areas of software
design, network support and training, systems evaluation, technical writing and
project management. SRS also provides contractors to companies that wish to
have programmers on site to interact with all departments that are involved with
the development of new systems and programs.
ATG's principal office is located at 400 Embassy Row, Suite 570, Atlanta,
Georgia 30328 and its telephone number is (770) 671-0600.
THE OFFERING
Common Stock 1,400,000 shares. In addition, the Underwriters have been
Offered by ATG granted an overallotment option for an additional
210,000 shares. See "Description of ATG Securities --
Common Stock."
Common Stock to be 4,200,275 shares based on 2,800,275 shares out-
Outstanding after the standing as of March 31, 1996. Does not include (i)
Offering 86,000 shares of Common Stock reserved for issuance
upon the exercise of stock options outstanding as of the
date hereof pursuant to an option agreement with an
employee for providing services outside of the scope of
his employment or (ii) 171,996 shares of Common Stock
reserved for issuance upon exercise of Common Stock
Purchase Warrants or (iii) 140,000 shares of Common Stock
reserved for issuance upon exercise of Representative
Warrants.
Use of Proceeds ATG intends to use $670,000 of the net proceeds of the
Offering for repayment of funds advanced to the Company
under previous private placement offerings. The remainder
of the net proceeds will fund research and product
development of its subsidiaries' products, marketing
advances to its subsidiaries and other general corporate
purposes. See "Use of Proceeds."
Risk Factors: The securities offered hereby involve a high degree of
risk. Among such risk factors are:
* the Company's historic operating losses
* the dependency on the proceeds of the offering
for the Company to continue as a going concern
* the Company's limited operating history
<PAGE>
* immediate and substantial dilution to investors in the Offering
For a more detailed discussion of these and other risk factors,
see "Risk Factors."
NASDAQ
Bulletin Board
Stock Symbol: ATYG
Proposed
Boston Stock
Exchange Symbol:
SUMMARY FINANCIAL DATA
The following table presents selected historical financial data for ATG
derived from ATG's consolidated financial statements. The historical financial
data are qualified in their entirety by reference to, and should be read in
conjunction with, the consolidated financial statements and notes thereto of
ATG, which are incorporated by reference into this Prospectus. The following
data should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the financial statements of
the Company and the notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31 MARCH 31
-------------------------------------- -------------------------
1993 1994 1995 1995 1996
---------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues $ 170,777 $ 1,023,414 $1,559,701 $ 274,850 $ 410,476
Selling, General and
Administrative Expenses 551,172 1,145,129 1,663,818 1,136,387 345,104
Operating Income (Loss) (473,939) (865,432) (753,543) 154,324 (96,762)
Net Income (Loss) (446,755) (1,213,749) (686,876) (100,335) (96,762)
Net Income (Loss) per Weighted
Average Number of Common Shares (.18) (.44) (.23) (.04) (.03)
Weighted Average Number of
Shares Outstanding 2,544,957 2,732,525 2,948,525 2,795,275 2,949,581
Supplemental Pro Forma per Share Data(1)(2)
Net Income (Loss) (635,011) (77,262)
Net Income (Loss) per Weighted Average
Number of Shares Outstanding (.20) (.02)
Balance Sheet Data:
Working Capital 223,945 (196,246) (866,957) (276,686) (1,067,886)
Total assets 1,272,934 945,160 1,026,531 902,813 1,096,536
Notes payable 31,000 215,700 811,020 334,380 867,352
Total shareholders' equity 1,001,433 402,064 (135,362) 303,394 (232,124)
</TABLE>
2
<PAGE>
(1) Assuming the sale of 223,333 shares of Common Stock offered hereby by the
Company at the public offering price of $3.00 per share occurred at January
1, 1995 and that interest expense of $51,365 relating to $670,000 of
indebtedness had not been incurred, the pro forma net loss of the Company
would have been $635,011. The pro forma loss per share would have been
$0.20.
(2) Assuming the sale of 223,333 shares of Common Stock offered hereby by the
Company at the public offering of $3.00 per share occurred at January 1,
1996 and that interest expense of $19,500 relating to $670,000 of
indebtedness had not been incurred, the pro forma net loss of the Company
would have been $77,262 or $0.02 per share.
RISK FACTORS
An investment in the Common Stock involves certain risks. In addition to
other information contained in this Prospectus, prospective purchasers should
consider carefully the following risk factors before investing in the Common
Stock.
COMPANY INVESTMENT RISKS
OPERATING LOSSES. The Company has not experienced a net operating profit
for any quarterly period since its inception. During the years ended December
31, 1993, December 31, 1994 and December 31, 1995, the Company suffered net
operating losses of $473,939, $865,432 and $753,543, respectively. For the
first quarter ended March 31, 1996, the Company had a net loss of $96,762. The
accumulated losses of the Company are $2,755,707. In addition, as of December
31, 1995 the Company had a working capital deficit of $866,957 and a
shareholders' equity deficit of $135,362. At March 31, 1996, the Company had a
working capital deficit of $1,067,886 and a shareholders' equity deficit of
$232,124. There can be no assurance that the Company will achieve or maintain
profitability or that its revenue growth can be sustained in the future. In
this regard, potential investors should note that the Company's audited
financial statements contain a qualified report of the certified public
accountant stating that without additional capital infusion the Company may not
be able to continue as a going concern.
ABILITY TO CONTINUE AS A GOING CONCERN WITHOUT ADDITIONAL FINANCING IS
QUESTIONABLE. The Company's independent certified public accountant has
qualified his report on the Company's financial statements for the years ended
December 31, 1994 and 1995, regarding the Company's ability to continue as a
going concern. In response, the Company has developed a comprehensive long-term
plan to achieve and sustain profitability. However, there can be no assurance
that the Company will be able to implement its plan or, if implemented, the plan
will produce sustained profits. See "The Company -- Future Development;
Management's Discussion and Analysis of Financial Condition and Results of
Operations."
LIMITED OPERATING HISTORY. The Company has only a limited operating
history and its operations are subject to all the risks inherent in the
establishment of a new business enterprise. The Company's limited operating
history makes future operating results difficult to predict. The commercial
success of the Company's operating subsidiaries will depend, in part, upon the
acceptance of their products within their respective markets and their ability
to successfully market their products. Failure to achieve market acceptance of
the products of the Company's operating subsidiaries as a result of competition,
technological change or other factors and their failure to market successfully
any existing, new or enhanced products would have a material adverse effect on
the Company's business, financial condition and results of operations. Further,
the likelihood of the success of the Company must be considered in light of the
problems, expenses, complications and delays frequently encountered in the first
few years of a new business. There can be no assurance that the operations of
the Company will be successful.
3
<PAGE>
A SUBSTANTIAL AMOUNT OF THE COMPANY'S ASSETS ARE RESEARCH AND DEVELOPMENT
COSTS. The Company's total assets as of December 31, 1995 were $1,026,531 and
as of March 31, 1996 were $1,096,536. Of those amounts, $451,617 and $547,860,
respectively, represented software development costs. Thus, a major component
of the Company's assets are intangible assets and they may not be available for
distribution in the event of a dissolution. In addition, in the event the
Company is required or desires to sell these assets in the future, the Company
may not realize the full amount of their carrying value of $547,860.
BROAD DISCRETION IN USE OF PROCEEDS. Besides $670,000 to be used for
repayment of funds advanced to the Company under previous private placements,
ATG intends to use the majority of the net proceeds of the Offering for working
capital to fund research and product development of its subsidiaries' products,
marketing advances to its subsidiaries and other general corporate purposes.
Accordingly, ATG will have broad discretion as to the application of such
proceeds. An investor will not have the opportunity to evaluate the economic,
financial and other relevant information which will be utilized by ATG in
determining the application of such proceeds. See "Use of Proceeds."
LIMITED SALES. Since its inception and through 1995, the Company, while
developing prototypes and working versions of proposed products, applied most of
its financial resources toward research and development of its products. The
efforts of the Company's primary operating subsidiary, Time Value Corporation,
were focused primarily on the development of the DOCUMENTPLUS system and not on
sales. Although the Company has a limited retail distribution system in place,
the Company intends to target additional customers in order to improve sales.
See "The Company -- Time Value Corporation."
RELIANCE ON INDEPENDENT MANUFACTURERS/SUBCONTRACTORS AND SUPPLIERS OF
COMPONENTS. The Company does not maintain its own production facilities, and
does not intend to do so in the foreseeable future. The Company anticipates
that its products will be produced, and its components will be supplied, by
independent companies. Many of these independent companies may manufacture and
supply products for the Company's existing and potential competitors. As is
customary in the industry, the Company does not have licensing or other supply
agreements with its suppliers. Typically, the purchase order is the Company's
"agreement" with the manufacturer or supplier. Therefore, any of these
companies could terminate its relationship with the Company at any time. In the
event the Company were to have difficulties with its present suppliers, the
Company could experience delays in supplying products to its customers and
potentially be forced to discontinue a product line. Presently, the Company is
heavily dependent on NCS and Scantron for the optical scanner sheets used with
the DOCUMENTPLUS system. The Company anticipates that sales of these sheets
will become an increasing component of revenues as more DOCUMENTPLUS systems are
sold. Any negative change in the Company's relationship with either of these
two companies would have a material adverse impact on the company's business,
financial condition and results of operations unless the Company could quickly
find a replacement supplier. At present, there are small companies that sell
optical mark scanner forms. However, management does not believe that any of
such small companies has significant sales. See "The Company -- Time Value
Corporation -- Income."
RELIANCE ON INDEPENDENT CONTRACTORS. The Company depends on the assistance
of independent medical professionals to complete the development of the
DOCUMENTPLUS specialty modules. These professionals often have time
restrictions that could delay the release of new specialty modules. Any delay
in the release of new specialty modules could have an adverse impact on the
Company's business, financial condition and results of operations. See "The
Company -- Time Value Corporation -- Product."
UNCERTAINTY OF MARKET ACCEPTANCE. To date, the Company has minimal sales
in view of its operating costs. The Company's success will, in large measure,
depend upon acceptance of its products by the healthcare and other industries.
Achieving such acceptance will require significant marketing investment. The
Company's success will be dependent upon acceptance of its existing and proposed
products. Such acceptance cannot be assured nor can it be assured that its
products can be developed or produced at acceptable cost levels.
4
<PAGE>
TECHNOLOGICAL OBSOLESCENCE. The computer and high technology industry is
characterized by extensive research and development and rapid technological
change resulting in very short product life cycles. Development of new or
improved products, processes or technologies within the industry may render the
Company's products obsolete or less competitive. The Company will be required
to devote substantial efforts and financial resources to enhance its existing
products and to develop new products. There can be no assurance that the
Company will succeed with these efforts. Moreover, there can be no assurance
that other products will not be developed which would render the Company's
products obsolete.
NO ASSURANCE OF SUCCESSFUL AND TIMELY DEVELOPMENT OF PRODUCTS. Because of
the high product turnover rate in the high technology industry, failure to bring
a product to market in a timely manner may result in poor market acceptance.
The Company cannot foresee whether a product will be introduced in a timely
manner when it begins research and development efforts. Thus, time and money
devoted to research and development may be wasted if the introduction of the
Company's products is not timely. There can be no assurance that the Company's
products will be introduced to the market in a timely manner.
RELIANCE ON RETAIL DISTRIBUTORS. The Company's success will depend to a
significant extent upon the ability to develop a multi-channel distribution
system with retail distributors to sell the Company's products in the
marketplace. There can be no assurance that the Company will be successful in
obtaining and retaining the retail distributors it requires to continue to grow
and expand its marketing and sales efforts.
COMPETITION. Currently, the Company faces very few competitors for TVC's
DOCUMENTPLUS system. However, the Company does face numerous small, as well as
large and financially more secure, competitors for the services that SRS
provides. There can be no assurance that additional competitors to TVC's
DOCUMENTPLUS system will not enter the market or that the market will grow to
accommodate any such increased competition. Additionally, there can be no
assurance that existing or potential competitors of the Company's operating
subsidiaries will not develop products that are functionally equivalent or
superior to those marketed by the Company. See "The Company -- Time Value
Corporation -- Competition."
RELIANCE ON KEY PERSONNEL. ATG relies upon certain key management
employees, including its Chairman and Chief Executive Officer, Hale R.
Spiegelberg, and the loss of any such individual could adversely affect ATG.
ATG believes that its future success will depend upon its ability to attract and
retain key personnel. There can be no assurance that ATG will be able to retain
key members of its management team or that it will be able to attract
experienced personnel in the future. ATG currently does not have employment
contracts with any of its employees. ATG has key person life insurance in the
amount of $3,000,000 for Mr. Spiegelberg. See "Management and Control Persons."
THIN MANAGEMENT. The Company relies heavily on Hale R. Spiegelberg for
day-to-day management. Loss of Mr. Spiegelberg would have an adverse effect on
the Company's ability to continue in its present state. In addition, as the
Company grows Mr. Spiegelberg may not be as effective as the sole manager of
day-to-day operations. Thus, the Company will need to attract a skilled
management team to manage such growth. There can be no guarantee that the
Company will be able to attract such a management team.
MR. SPIEGELBERG'S OTHER AFFILIATIONS. Hale R. Spiegelberg is the Chief
Executive Officer, Chief Financial Officer, Secretary and Director of the
Company. Mr. Spiegelberg is primarily responsible for the day-to-day operations
of the Company. Mr. Spiegelberg is also Director of Avionics One, Inc.,
President of Total Software, Inc., Director of Patient Communications Systems,
Inc., Director of Capital Placement Corporation, and Director of Acquisition
Advisors, Inc. Mr. Spiegelberg estimates that he spends minimal time (i.e.,
approximately two hours per week) on non-Company related business activities.
There can be no assurance that Mr. Spiegelberg's time on these activities will
not increase. See "Management and Control Persons -- Directors, Executive
Officers, Promoters and Control Persons."
5
<PAGE>
FAILURE TO ACHIEVE BUSINESS PLAN. Although ATG intends to expand its
marketing of Time Value Corporation's DOCUMENTPLUS system and Silver Ridge
Software Inc.'s services, no assurance can be given that ATG will be able to
achieve these objectives or that, if these objectives are achieved, ATG will be
profitable.
COMPANY MAY FACE DIFFICULTIES IN MANAGING GROWTH. As a result of both
internal development and expansion into additional applications and markets, the
Company is currently experiencing a period of rapid growth and expansion. Such
growth and expansion have placed and could continue to place a significant
strain on the Company's services and support operations, sales and
administrative personnel and other resources. The Company's ability to manage
such growth effectively will require the Company to continue improving its
operational management and financial systems and controls, and to train,
motivate and manage its employees. As a result, the Company is subject to
certain growth-related risks, including the risk that it will be unable to
retain the necessary personnel or acquire other resources necessary to service
such growth adequately.
FUTURE EARNINGS TO BE RETAINED; DIVIDENDS UNLIKELY. ATG has paid no cash
dividends on its common stock and it does not contemplate paying cash dividends
in the foreseeable future. It is the present intention of ATG's management to
retain future earnings, if any, for use in ATG's business. See "Dividend
Policy."
CONTROL BY EXISTING SHAREHOLDERS. Upon completion of the Offering, the
Company's existing stockholders will beneficially own 67% of the outstanding
Common Stock (63% if the Underwriters' overallotment option is exercised in
full). Of these shares, the Company's officers and directors, together with
shareholders who beneficially own more than five percent of the outstanding
stock of the Company, will beneficially own 55.4% of the outstanding Common
Stock (52.7% if the Underwriters' overallotment option is exercised in full).
Investors purchasing shares pursuant to this offering will beneficially own 33%
of the outstanding Common Stock (36% if the Underwriters' overallotment option
is exercised in full.) As a result, all or certain combinations of the
company's existing shareholders, acting in concert, will have the ability to
control the Board of Directors and policies of the Company.
ADDITIONAL FINANCING MAY BE REQUIRED. The Company believes that the
proceeds from the Offering, together with revenues from the operations of its
subsidiaries, will be sufficient to allow the Company to implement its business
plan and to sustain the Company for at least the next 12 months. Future events
could arise, however, that may result in the Company's need to revise or abandon
its business plan. In addition, the assumptions underlying the business plan
may prove to be unrealistic in the face of an ever-changing technological
marketplace. Under such circumstances, the proceeds from the Offering may be
insufficient for ATG's operational needs. In such case, ATG may need to obtain
additional equity capital or bank financing, and no assurance can be given that
such financing, if required, will be available, or, if available, that the terms
of such financing will be acceptable. If additional funds are raised by issuing
equity securities, further dilution to the existing shareholders may result. If
adequate funds are not available, ATG may be required to delay, scale back or
abandon its research and development programs or to obtain funds through
arrangements with affiliates or others that may require ATG to relinquish rights
to certain of its technologies or potential products or other assets.
Accordingly, the inability to obtain such financing could have a material
adverse effect on ATG's business, financial condition and results of operations.
RELIANCE ON PROPRIETARY TECHNOLOGY. The Company's ability to successfully
achieve future net sales growth will depend, in part, on its ability to protect
its proprietary technology and operate without infringing upon the rights of
others. The Company and its subsidiaries will endeavor to enter into
confidentiality and non-disclosure agreements with their employees and to limit
access to and distribution of their proprietary information. However, there can
be no assurance that such measures will provide adequate protection for the
trade secrets or other proprietary information of the Company and its
subsidiaries, or that the trade secrets or proprietary technology of the Company
and its subsidiaries will not otherwise become known or be independently
developed by competitors. There can be no assurance that the copyrights of the
Company or its subsidiaries will afford any significant degree of protection or
provide the Company or its subsidiaries with a competitive advantage. In
particular, there can be no assurance that any such copyrights will not be
challenged, invalidated or circumvented in the future. Failure of the Company
and its subsidiaries to protect their proprietary technology could have a
6
<PAGE>
material adverse effect on its business, financial condition and results of
operations. See "The Company -- Time Value Corporation."
DOCUMENTPLUS NOT A REGISTERED TRADEMARK. TVC's DOCUMENTPLUS system is one
of the Company's primary products. As of July 1, 1996 the name DOCUMENTPLUS has
not been registered with the United States Patent and Trademark Office.
Although the Company is currently engaged in efforts to register the name
DOCUMENTPLUS, or otherwise ensure TVC's ability to continue to use the name
DOCUMENTPLUS, there can be no assurance that TVC will be able to continue to use
the name DOCUMENTPLUS in the future.
INTELLECTUAL PROPERTY INFRINGEMENT. The Company may in the future be
notified that it is infringing upon certain intellectual property rights of
others. Although there are no pending lawsuits against the Company or
unresolved claims that the Company is infringing upon intellectual property
rights of others, the Company is aware of another tradename similar to
DOCUMENTPLUS which has been used prior to the Company's tradename. The Company
may possibly be infringing on the use of that other tradename, but no claim of
infringement has yet been made. If the Company determines it is infringing on
the other company's intellectual property rights, it will attempt to resolve any
dispute which may arise amicably. The Company is also currently reviewing its
alternatives to avoid any such dispute. There can be no assurance that
litigation or infringement claims will not occur in the future. Such litigation
or claims could result in substantial costs and diversion of resources and could
have a material adverse effect on the Company's business, financial condition
and results of operations. If it appears necessary or desirable, the Company
may seek licenses from the owners of patents or other intellectual property that
it is allegedly infringing. No assurance can be given, however, that licenses
could be obtained on commercially reasonable terms or that the terms of any
offered licenses will be acceptable to the Company. The failure to obtain the
necessary licenses or other rights could have a material adverse effect on the
Company's business, financial condition and results of operations.
ANTICIPATED FUTURE RESULTS MAY NOT COME TO FRUITION. This Prospectus
contains information regarding prospective business lines and results to be
derived from them. The goals established were made in good faith, and with
Management's belief that such goals are realistic and achievable. There can be
no assurance, however, that the goals will be realized. Circumstances beyond
the Company's control may result in failure to achieve the anticipated results.
These circumstances are listed in the other Risk Factors of this Prospectus, and
include, but are not limited to: (1) availability of independent medical
advisors to assist in creating new DOCUMENTPLUS specialty modules; (2) the
failure of independent suppliers such as NCS and Scantron to deliver supplies in
a timely manner; (3) competition from similar products; and (4) inability to
complete a public offering in a timely manner. In addition, there may be
unforeseen circumstances that impede the Company's ability to implement its
business plan or achieve and sustain profitability. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
COMMON STOCK INVESTMENT RISKS
NO ASSURANCE THAT THE COMPANY WILL BE APPROVED FOR LISTING ON THE BOSTON
STOCK EXCHANGE. Although the Company has made application to list the Common
Stock on the Boston Stock Exchange, there can be no assurance that the
application will be approved. Even if the Common Stock meets all of the
requirements for listing on the Boston Stock Exchange, such a listing may be
terminated if it fails to meet the continued listing criteria. The minimum
listing criteria for the Boston Stock Exchange include, among other things, (i)
$1,000,000 in total assets; (ii) $500,000 in stocholders' equity; (iii) $500,000
aggregate market value of the issued and outstanding shares of Common Stock;
(iv) 150,000 shares issued and outstanding; and (v) 250 beneficial stockholders.
If the Company either fails to gain approval of the Common Stock on the Boston
Stock Exchange or the Common Stock is suspended from trading on the Boston Stock
Exchange, trading in the Common Stock, if any, would thereafter be conducted on
the OTC Bulletin Board. In such event, an investor would likely find it more
difficult to dispose of, or to obtain accurate quotations as to the value of,
the Common Stock.
NO ASSURANCE OF CONTINUED PUBLIC MARKET. The Common Stock is currently
traded over-the-counter on the NASDAQ Bulletin Board under the symbol ATYG. In
the 12 months ended June 30, 1996, the total volume
7
<PAGE>
of the Common Stock traded on the NASDAQ Bulletin Board was 128,600 shares. The
Company can make no assurance that the volume of shares of the Common Stock will
increase or even remain at this level, nor can the Company assure that a broker-
dealer will establish and maintain a liquid market for the Common Stock. The
illiquidity of this proposed investment may force investors to hold their
investment indefinitely.
VOLUME NOT SUFFICIENT TO ACCURATELY REFLECT THE PRICE OF STOCK. The Common
Stock is thinly traded. As such, the price at which the Common Stock is traded
may not truly reflect its market price across a broad spectrum of potential
investors. While the Common Stock is currently trading at or near the Offering
price, there is no assurance that the prices at which the Common Stock has
traded will be maintained in the future. In addition, the price at which the
Common Stock is trading was only one of a number of factors considered in
determining the Offering price. See "Underwriting."
VARIABILITY IN QUARTERLY OPERATING RESULTS; POSSIBLE VOLATILITY OF STOCK
PRICE. Results of operations have fluctuated and may continue to fluctuate
significantly from quarter to quarter as a result of a number of factors,
including: (i) the volume and timing of system sales and customer acceptance;
(ii) customer purchasing patterns, long sales cycles, order cancellations and
rescheduling of system installations; (iii) the mix of direct and indirect
sales; and (iv) the action of competitors. In addition, the Company believes
that sales generated by its distributors, which are harder to predict, will
increase as a percentage of total revenues. Accordingly, the Company's future
operating results are likely to be subject to significant variability from
quarter to quarter. As a result, the Company believes that period-to-period
comparisons of its revenues and results of operations are not necessarily
meaningful and should not be relied upon as indicators of future performance.
Due to the foregoing factors, it is possible that the Company's operating
results will be below the expectations of public market analysts and investors.
In such event, the price of the Common Stock could be materially and adversely
affected. In addition, the market price for the Common Stock could be
adversely affected by general trends in the Company's industry, changes in
general market conditions and other factors. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
POSSIBLE ADVERSE EFFECT OF SHARES ELIGIBLE FOR FUTURE SALE ON MARKET PRICE
OF ATG SECURITIES. There are currently seven shareholders who each own
beneficially more than five percent of the Common Stock. See "Management and
Control Persons -- Security Ownership of Certain Beneficial Owners and
Management." Such shares (i) may become available for resale in the open market
pursuant to Rule 144 promulgated under the Securities Act of 1933 (the
"Securities Act"), or (ii) may become freely tradable pursuant to their
registration. Because the Common Stock is thinly traded, the sale by such
shareholders of an amount equal to one percent of the issued and outstanding
shares of the Common Stock, representing approximately 42,000 shares if the
Offering is successful (approximately 44,100 shares if the Underwriters exercise
their overallotment option), either individually or together, could be enough to
adversely affect the prevailing market price of the Common Stock. Such sales
also could impair ATG's ability to raise additional capital through the sale of
its securities. The directors, officers and employees of ATG who are also
shareholders of ATG have entered into a contractual agreement with Brookstreet
Securities Corporation that restricts, for a period of two years from the
effective date of this Prospectus, their ability to sell the Common Stock
beneficially owned by them including stock registered pursuant to any Form SB-2
Registration Statement. See "Underwriting."
PURCHASERS WILL SUFFER SUBSTANTIAL DILUTION IN NET TANGIBLE BOOK VALUE.
The initial offering price of the Common Stock of $3.00 per share will exceed
the net tangible book value per share of the Common Stock after the Offering.
Purchasers of the Common Stock in the Offering will therefore experience
immediate and substantial net tangible book value dilution. Based on the pro
forma net tangible book value of the Company as of March 31, 1996, and giving
theoretical effect to the proceeds to be received by the Company after the
Offering, the pro forma net tangible book value of the Company would have been
$0.65 per share. This represents an immediate dilution of $2.35 or 78% per
share to new investors purchasing shares of Common Stock in the Offering. To
the extent that options or warrants, currently outstanding or subsequently
granted, to purchase the Common Stock are exercised, there will be further
dilution.
8
<PAGE>
EFFECT OF REGISTRATION RIGHTS. Upon the completion of this Offering, the
Company will sell to the Representative warrants to purchase 140,000 shares of
Common Stock ("Representative Warrants"). The Representative Warrants will be
exercisable at $3.60 per share, for a period of four years, commencing one year
from the effective date of this Prospectus. From the Representative Warrants,
counsel to the Representative will receive warrants ("HCB Warrants") to purchase
$10,000 of the Common Stock at $3.60 per share and otherwise subject to the same
conditions as the Representative Warrants. Holders of the Representative
Warrants are given the opportunity to profit from a rise in the market price of
the Common Stock and are likely to exercise Representative Warrants at a time
when the Company might be able to obtain additional equity capital on more
favorable terms. In addition, to the extent that the Representative Warrants
are exercised, they will decrease the percentage of the Company owned by
investors in this Offering. The Representative Warrants are entitled to certain
demand and piggyback registration rights. Any exercise of these registration
rights may cause the Company to incur substantial expense, could impair the
Company's ability to raise capital through the sale of its equity securities and
if sold in the public market, such sales could have an adverse effect on the
market price of the Common Stock. See "Underwriting."
EFFECT OF PREFERRED STOCK. The Board of Directors is authorized to issue,
without shareholder approval, Preferred Stock with voting or conversion rights
that may adversely affect the voting power of the Common Stock shareholders.
See "Description of ATG Securities -- Description of Capital Stock -- Preferred
Stock."
RISKS OF LOW-PRICED SECURITIES. If the Common Stock fails to gain approval
for listing on the Boston Stock Exchange or, if approved, is suspended or
delisted, the Common Stock would be subject to rules under the Exchange Act that
impose additional sales practice requirements on broker-dealers who sell certain
low-priced securities to persons other than established clients and "accredited
investors" (for example, individuals with a net worth in excess of $1,000,000 or
an annual income exceeding $200,000, or $300,000 together with their spouses).
For transactions covered by such rules, a broker-dealer must make a special
suitability determination of the purchaser and have received the purchaser's
written consent to the transaction prior to the sale. Consequently, such rules
may adversely effect the initial marketability of the Common Stock because the
pool of potential investors is smaller, and the transaction fees higher, than if
such rules did not apply. In addition, such rules may affect the ability of
broker-dealers to sell the Common Stock in any secondary market that may develop
for the Common Stock. Thus, investors may not be able to sell readily Common
Stock purchased in the Offering. See "Penny Stock Regulation."
ANTI-TAKEOVER PROVISION. The Board of Directors is authorized to issue,
without shareholders' approval, Preferred Stock with voting or conversion rights
that may adversely affect the voting power of the Common Stock shareholders.
The provisions relating to the Company's Preferred Stock may make more difficult
the removal of management even if such removal would be considered beneficial to
shareholders generally, and may have the effect of limiting shareholder
participation in certain transactions such as mergers or tender offers whether
or not such transactions are favored by incumbent management. Because the Board
of Directors has authority to establish the terms of the Preferred Stock, it
could be issued to defend against an attempted takeover of the Company.
USE OF PROCEEDS
The net proceeds from the sale of the 1,400,000 shares of Common Stock
offered hereby are estimated to be approximately $3.530 million ($4.097 million
if the Underwriters' overallotment option is exercised in full) after deducting
underwriting discounts in the amount of $420,000, Underwriters' non-accountable
expense allowance in the amount of $126,000 and other expenses of the Offering
in the amount of $124,000. The Company expects to use the net proceeds over the
next 24 months approximately as follows:
9
<PAGE>
<TABLE>
<CAPTION>
APPROXIMATE PERCENTAGE OF
APPLICATION OF NET PROCEEDS DOLLAR AMOUNT NET PROCEEDS(1)
- --------------------------- ------------- ----------------
<S> <C> <C>
Repayment of Notes (1) $ 670,000 18.98%
New Product Development: Time Value Corporation (2) $ 564,208 15.98%
New Product Development: Silver Ridge Software (2) $ 196,127 5.56%
Marketing: Time Value Corporation (3) $1,893,010 53.62%
Marketing: Silver Ridge Software (3) $ 30,640 00.87%
Working Capital $ 176,015 4.99%
---------- ------
Totals $3,530,000 100.00%
========== ======
</TABLE>
(1) Represents the repayment of (a) promissory notes in the principal amount of
approximately $160,000 plus interest at an annual rate of 10% (the "10%
Notes"), issued to private investors in a private placement of units that
included one promissory note in the face amount of $50,000 and one warrant
to purchase 10,000 shares of the Common Stock at $5.00 per share; (b)
promissory notes in the principal amount of approximately $400,000 plus
interest at an annual rate of 12% (the "12% Notes"), issued to private
investors in a private placement of units that included one promissory note
in the face amount of $50,000 and one warrant to purchase 16,666 shares of
the Common Stock for $100 (the "August 1995 Private Placement"); (c) a
promissory note in the principal amount of $50,000 plus interest at an
annual rate of 12% issued to Daystar Partners (the "Daystar Partners Note");
and (d) promissory notes in the principal amount of $36,000 and $24,000 plus
interest at an annual rate of 10% and no interest rate, respectively, issued
to James G. Owen (the "First Owen Note" and the "Second Owen Note"). The
10% Notes are to be repaid with interest in September 1996 ($115,000
principal amount), October 1996 ($20,000 principal amount) and December 1996
($25,000 principal amount). The 12% Notes became due in March 1996. The
Company obtained extensions of the 12% Notes to postpone their due dates to
the closing date of the Offering. In the event the Offering does not close,
the Company will have to renegotiate the 12% Notes. The Daystar Partners
Note is to be repaid with interest in August 1996. The First Owen Note
became due in March 1996. The Second Owen Note became due in May 1996. The
Company obtained an extension of the First Owen Note and the Second Owen
Note to postpone their due dates to the closing date of the Offering. In
the event the Offering does not close, the Company will have to renegotiate
the First Owen Note and the Second Owen Note. Each of the above promissory
notes can be repaid prior to their stated maturity date without penalty.
None of the promissory notes were issued to affiliates, directors or
officers of the Company. The Company intends to repay the promissory notes
from the proceeds of the Offering.
(2) Represents the Company's estimated pass-through to its subsidiaries for
their use in new product development. See "The Company -- Time Value
Corporation -- Future Development; Management's Discussion and Analysis of
Financial Condition and Results of Operations."
(3) Represents the Company's estimated pass-through to its subsidiaries for
their use in marketing and promoting their products and services. See "The
Company; Management's Discussion and Analysis of Financial Condition and
Results of Operations."
The foregoing represents the Company's current estimate of the uses of the
net proceeds of the Offering and its plan of operation. The largest component
of the proceeds will be devoted to establishing a national distribution network
for TVC's DOCUMENTPLUS system. The estimates are based on certain assumptions
including, but not limited to, the assumption that TVC's proposed expansion of
its DOCUMENTPLUS modules can be accomplished at a fraction of the cost of
producing the original module. In addition to the foregoing, future events,
including the problems, delays, expenses and complications frequently
encountered by companies seeking to penetrate new markets or provide new
services, as well as changes in economic conditions or competitive conditions,
and the success or lack thereof of the Company's marketing efforts, may make
shifts in the allocation of funds necessary or desirable. There is no assurance
that the Company's assumptions will prove to be accurate or that unforeseen
expenses will not occur. In the event the Company's cost assumptions prove to
be inaccurate and additional expenditures are required or the Company encounters
impediments in any of its proposed expansion areas, it may not be able to
adequately implement its proposed business plan and the uses of the net proceeds
of the
10
<PAGE>
Offering may be reallocated. Any such reallocation will be among the new
product development and marketing categories.
Prior to expenditure, proceeds will be invested principally in high grade
short-term interest-bearing investments. Any proceeds received upon exercise of
the Underwriter's overallotment option or any of the Company's warrants will be
used for working capital. There can be no assurance that the overallotment
option will be exercised.
The Company believes that the net proceeds of the Offering when coupled
with revenues from operations will satisfy the Company's cash requirements for
approximately 12 months. During those 12 months, the Company's efforts will be
directed at expanding the operations of its subsidiaries. See "The Company;
Management's Discussion and Analysis of Financial Condition and Results of
Operations."
PENNY STOCK REGULATION
The Common Stock is subject to the Commission's regulations regarding
"penny stocks." The Commission has promulgated rules that define a penny stock
to be any equity security that has a price (as therein defined) of less than
$5.00 per share or an exercise price of less than $5.00 per share, subject to
certain exemptions, including securities listed on the NASDAQ System or on
designated exchanges.
For any transaction involving a penny stock, unless exempt, the rules
require the delivery, prior to the transaction, of a disclosure statement
prepared by the Commission relating to the penny stock market. Disclosure also
must be made about the risks of investing in penny stocks in both public
offerings and in secondary trading, commissions payable to both the broker-
dealer and the registered representative, current quotations for the securities
and the rights and remedies available to an investor in case of fraud in penny
stock transactions
The regulations explicitly exempt (1) transactions in which the price of
the security is $5.00 or more; (2) transactions in which the purchaser is an
accredited investor as defined by Rule 501 of Regulation D promulgated under the
Securities Act or is an established customer of the broker-dealer; (3)
transactions that are not recommended by the broker-dealer; and (4) transactions
by a broker-dealer who is not a market maker in the particular security and
whose sales related revenue from transactions in penny stocks does not exceed
five percent of total sales related revenue from transactions in securities.
In the event the Common Stock is not exempt from the provisions of the
Commission's "penny stock" rules, such rules may adversely effect the initial
marketability of the Common Stock because the pool of potential investors is
smaller, and the transaction fees higher, than if such rules did not apply. In
addition, such rules may affect the ability of broker-dealers to sell the Common
Stock in any secondary market that may develop for the Common Stock. Thus,
investors may not be able to sell readily Common Stock purchased in the
Offering.
DIVIDEND POLICY
The Company has never declared or paid any cash dividends on the Common
Stock. The Company intends to retain all available funds for use in its
business and therefore does not expect to pay any cash dividends in the
foreseeable future. Any future determination relating to dividend policy will
be made at the discretion of the Board of Directors of the Company and will
depend on a number of factors, including the future earnings, capital
requirements, financial condition and future prospects of the Company and such
other factors as the Board of Directors may deem relevant.
11
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
March 31, 1996 and as adjusted to give effect to the receipt of net proceeds
from the 1,400,000 shares of Common Stock offered by the Company hereby, less
underwriting commissions and expenses related to the Offering, and repayment of
$669,400 of notes payable to certain securityholders.
<TABLE>
<CAPTION>
MARCH 31, 1996
--------------------------
AS
ACTUAL ADJUSTED
------------ ------------
<S> <C> <C>
Notes Payable (2) $ 867,352 $ 197,952
Stockholders' Equity:
Preferred Stock, $.001 par value; 1,000,000 shares authorized;
none issued and outstanding -- --
Common Stock, $.001 par value; 10,000,000 shares authorized;
2,800,275 shares issued and outstanding; 4,200,275 shares
issued and outstanding as adjusted(1) 2,800 4,200
Capital in excess of par value 2,520,783 6,049,383
Retained earnings (2,755,706) (2,755,706)
----------- -----------
Total stockholders' equity $ (232,123) $ 3,297,877
=========== ===========
</TABLE>
- ----------
(1) Does not include (i) 210,000 shares of Common Stock reserved for the
Underwriters' overallotment option; (ii) 86,000 shares of Common Stock
reserved for issuance upon the exercise of stock options outstanding as of
the date hereof pursuant to an option agreement with an employee for
providing services outside of the scope of his employment; (iii) 22,000
shares of Common Stock reserved for issuance upon exercise of Common Stock
Purchase Warrants at an exercise price of $5.00 issued to certain ten
percent Noteholders; (iv) 149,996 shares issuable upon exercise of the
warrants for Common Stock issued to certain noteholders; or (v) 140,000
shares of Common Stock reserved for exercise upon the Representative
Warrants issued to the Underwriters.
(2) In February 1996 the Company issued promissory notes in the face amount of
$74,000. These notes will be repaid with the proceeds from the Offering.
See "Use of Proceeds." In addition, during the first quarter of 1996 the
Company repaid $7,000 to Advisors Acquisitions, Inc.
DILUTION
The net tangible book value of the Company as of March 31, 1996 was $(0.28)
per share of Common Stock. Net tangible book value per share represents the
amount of the Company's net tangible assets less total liabilities divided by
the number of shares of Common Stock outstanding. After giving effect to the
sale of 1,400,000 shares of Common Stock offered hereby by the Company at the
public offering price of $3.00 per share, the 149,996 shares issuable upon
exercise of the warrants for Common Stock issued to certain noteholders, and
after deducting estimated underwriting discounts and commissions and estimated
offering expenses payable by the Company, the Company's pro forma net tangible
book value at March 31, 1996 would have been $0.65 per share. This represents
an immediate increase in pro forma net tangible book value of $0.93 per share to
existing shareholders and an immediate dilution of $2.35, or 78%, per share to
new investors purchasing shares of Common Stock in this offering.
12
<PAGE>
<TABLE>
<S> <C>
Initial public offering price per share $3.00
Net tangible book value per share before Offering $(.28)
Increase per share attributable to new stockholders $ .93
Pro forma net tangible book value per share after Offering $ .65
-----
Dilution per share to new stockholders $2.35
=====
Percentage dilution to new shareholders 78%
=====
</TABLE>
The above computation of net tangible book value per share assumes that the
overallotment option granted to the Underwriters to purchase 210,000 shares of
Common Stock will not be utilized and that the Representative Warrants to
purchase 140,000 shares of Common Stock, which include the HCB Warrants to
purchase $10,000 of the Common Stock, will not be exercised.
The following table summarizes, as of March 31, 1996, the number of shares
purchased from the Company, the total investment made and the average price per
share invested since inception by existing stockholders and new stockholders.
<TABLE>
<CAPTION>
SHARES PURCHASED(1) TOTAL INVESTMENT(2) AVERAGE
PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- -------- ----------- -------- ---------
<S> <C> <C> <C> <C> <C>
Existing Stockholders 2,800,275 64.4% $2,390,253 36.3% $0.85
New Stockholders 1,400,000 32.2% 4,200,000 63.7% $3.00
Potentially Exercised Warrants 149,996 3.4% 800 00.0% $0.01
========= ===== ========== ===== =====
Total 4,350,271 100.0% $6,591,053 100.0%
========= ===== ========== =====
</TABLE>
(1) Does not include (i) 86,000 shares of Common Stock reserved for issuance
upon the exercise of stock options outstanding as of the date hereof
pursuant to an option agreement with an employee for providing services
outside of the scope of his employment; (ii) 22,000 shares of Common Stock
reserved for issuance upon exercise of Common Stock Purchase Warrants at an
exercise price of $5.00 issued to certain ten percent Noteholders; or (iii)
140,000 shares of Common Stock reserved for exercise upon the
Representative Warrants issued to the Underwriters because the effect of
these transactions, individually and collectively, is antidilutive.
(2) Table does not take into account the expenses of the Offering.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
Atlanta Technology Group, Inc. ("ATG") is a holding company based in
Atlanta, Georgia with three subsidiaries in the information technology field.
The primary subsidiary is Time Value Corporation, a Georgia corporation ("TVC")
that was formed to develop, market and support a medical cost containment system
designed to reduce the clinical and administrative costs of producing
documentation, correspondence and record keeping for the medical community. The
medical cost containment system is known as DOCUMENTPLUS. Silver Ridge Software
Inc. ("SRS") operates as a software engineering firm which develops custom
solutions for companies that need software design or assistance with network
support and training, systems evaluation, technical writing or project
management. SRS has, however, been relatively inactive while the Company's
focus has been to concentrate on the development and marketing of TVC's
products. Upon the completion of this offering, SRS's primary focus will be to
assist in the development of new specialties of DOCUMENTPLUS, as well as
enhancements to DOCUMENTPLUS.
13
<PAGE>
Net City Inc. is not currently conducting operations. The Company does not epect
to make any significant purchase or have any significant sale of plant or
equipment in the foreseeable future, nor does the Company anticipate any
significant changes in the number of employees.
PLAN TO ADDRESS GOING CONCERN OPINION
The Company's independent auditor has expressed the opinion that the
Company's ability to continue as a going concern is jeopardized unless the
Company obtains an infusion of capital to sustain the Company until it can
market its products on a profitable basis. The basis of this opinion is the
fact that the Company has yet to achieve sustained profitability and does not
have long-term financing in place. The Company has developed a plan to achieve
sustained profitability and allay doubts as to its ability to continue as a
going concern. This plan includes (1) diversification of existing product
lines; (2) enhancement of existing product lines; (3) expansion of the
geographical area in which it operates; and (4) raising capital through
securities offerings.
DIVERSIFICATION. The Company has designed its software product so that the
research and development expense of creating new DOCUMENTPLUS systems for
different medical specialty areas will be minimal. The Company has already
completed the basic system platform which enables it to complete the development
of additional medical specialty systems at a cost substantially lower than
developing the original DOCUMENTPLUS system. The primary costs of developing a
DOCUMENTPLUS module for a new medical specialty are creating the copyrighted
scannable forms and customizing the narrative output for the specific medical
specialty produced.
Presently, the Company is developing simultaneously DOCUMENTPLUS systems in
orthopedics, physical therapy, orthodontics and neurology. The Company
estimates that the cost of releasing these additional systems to the market will
be approximately $300,000 in total. The Company intends to fund the development
and release of these products from the proceeds of the Offering. The Company
plans to release these new DOCUMENTPLUS systems in the next 12 months. The
orthopedics, physical therapy and orthodontics specialty systems are scheduled
for release in the third quarter of 1996. The neurology specialty system is
scheduled for release in January 1997.
Based on information obtained by the Company in 1995, there are 20,000
orthopedists and 64,000 physical therapists licensed to practice in the United
States. The Company believes that this expansion could add as many as 8,500
users to its current base in five years in these two specialties alone. This
figure is based upon a market penetration of ten percent of licensed
practitioners in those specialties over that period of time. The Company
intends to market the new specialties by demonstrating the DOCUMENTPLUS systems
at seminars and trade shows for each medical specialty during the year. The
Company will also advertise in trade publications for each specialty.
The Company already has established sales, training and support personnel.
Since the DOCUMENTPLUS system works basically the same way in each medical
specialty, the Company feels that its personnel in the sales, training and
support departments will be adequate to launch the new specialty systems. As
future funding is available, the Company has identified additional specialties
that it intends to develop.
ENHANCEMENT OF EXISTING PRODUCT LINES. The Company is currently developing
additional DOCUMENTPLUS forms to be used in patient assessment and anticipates
that these forms will be ready for the market currently. These copyrighted
forms will be marketed to existing DOCUMENTPLUS users and used in the
orthopedics, physical therapy and neurology DOCUMENTPLUS systems.
EXPANSION. The Company has increased its number of salespersons from one
in 1994 to four in 1996. The Company is now working with three management
consultant groups with national exposure instead of one that is located
primarily in the Eastern United States. Additionally, the Company is achieving
more exposure from advertising in national trade catalogs and directories as
well as articles written in national trade publications about its products.
These activities have resulted in increased leads and sales over the same time
period in 1995. Management believes that this additional exposure will increase
sales during the second and third quarters of 1996.
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RAISING CAPITAL. The Company projects that after the completion of the
Offering, it will be able to fund the development of future specialty systems
from the recurring revenue produced from the sale of its DOCUMENTPLUS systems,
sales of copyrighted scannable forms and annual support fees. Management
believes that the proceeds from the Offering, together with the anticipated cash
flow from the operations of its subsidiaries, will be sufficient to support
currently anticipated working capital requirements for at least 12 months. A
portion of the net proceeds will be used to satisfy the Company's existing debt,
which carries interest, thereby reducing interest expense in future periods.
Management believes that at that time the Company will have sustained a level of
profitability that will enable it to conduct operations and continue expansion
efforts without the need for outside financing.
The Company broke even in May 1996. The Company started its advertising
campaign in December 1995 and is seeing increased leads and sales because of
this marketing effort. Based on the Company's projections, the Company
anticipates that it will continue to be profitable throughout 1996, as projected
income before taxes will be sufficient to cover capitalized research and
development costs.
TVC's potential market includes over 600,000 physicians, dentists and
chiropractors in private practice covering approximately 38 specialties in the
United States. TVCs products are designed to provide clinicians with a
comprehensive and efficient means of providing quality services to patients,
developing a large referral/consulting clinician base, processing accurate and
timely insurance claims and operating a practice with lower expenses. In order
to successfully market its products, TVC will need to penetrate and depend
heavily on established medical/dental/chiropractic distribution networks. TVC
intends to develop an initial network of distributors. Primary distribution
will be through direct and indirect sales channels, with special large marketing
opportunities requiring direct sales representation, and indirect sales to be
made by dealers or distributors. Each salesperson and distributor will be
required to attend a training program that will include computer technical
basics, demonstration techniques, and specific product features, functions and
benefits. TVC has negotiated marketing contracts for its chiropractic system
with four chiropractic management consultant companies. These companies sponsor
conferences and provide publications targeted to the medical community. They
have national exposure. They have agreed to recommend potential users of
DOCUMENTPLUS and provide booth space at their conferences, assist in the
deveolopment of OMS forms, refer potential users and promote DOCUMENTPLUS
through advertising in their publications.
In 1994, the Company spent $240,035 on capitalized software development
costs. In 1995, the Company spent $197,259 on capitalized software development
costs. The Company capitalizes the software development costs until the product
is available for market. The Company anticipates that it will continue to spend
approximately $25,000 per month in this area to facilitate the development of
new products scheduled for release during 1996.
The going concern qualification is contained in the 1994 and 1995 audited
financial statements. The independent auditor has indicated that the language
can be removed in 1996 as soon as the Company has completed the Offering and has
sufficient cash in the bank to cover its needs for 12 months. The independent
auditor also has indicated that the language can be removed once the Company has
achieved profitability.
FISCAL YEAR 1994
RESULTS FROM OPERATIONS. Revenues for 1994 were $1,023,414, a 500%
increase from revenues of $170,777 for 1993. This increase is primarily the
result of TVC's release of the DOCUMENTPLUS system for chiropractors in the
third quarter of 1994 and the increase of revenues of SRS.
ATG's gross profit percentage decreased in 1994 to 47% from 80% in 1993.
This decrease resulted because the main source of revenues in each year was
different. In 1993, revenue was derived mainly from sales of scannable forms. In
1994, revenue was derived mainly from sales of computers and scanners. The
scannable forms sold in 1993 carry a much higher gross profit than the hardware
sold in 1994. Thus, there was a decrease in gross profit percentage even though
the Company experienced an increase in revenues.
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Total operating expenses increased to $1,348,876 in 1994 from $566,014 in
1993. This $782,862 increase was primarily the result of an increase in the
sales and technical staff in an effort to increase the customer base, number of
products available for sale and higher levels of customer service.
Operating expenses increased during 1994, primarily as the result of
increased salaries, rent, payroll taxes and trade show expenses. Professional
fees increased in 1994 because of outside consultants that ATG hired to prepare
the year-end financial statements.
ATG plans to derive its income from the sale of TVC's products, including
DOCUMENTPLUS, optical mark scan ("OMS") forms and support fees. ATG's income
also includes fees generated by SRS's consulting activities and placing contract
employees with customers to oversee the development, installation and
maintenance of computer systems. Each DOCUMENTPLUS software product requires
the use of different OMS forms. The OMS forms used with the DOCUMENTPLUS system
are manufactured by National Computer Systems, Inc. ("NCS") and Scantron
Corporation ("Scantron") according to specifications supplied by TVC. TVC
purchases these OMS forms from NCS or Scantron and then resells them to users of
DOCUMENTPLUS. TVC received approximately $13,000 per month from the sale of OMS
forms. TVC plans to develop new OMS forms for each new medical DOCUMENTPLUS
system from which it will receive additional OMS forms revenues. In 1994, TVC
sold 67 DOCUMENTPLUS systems. This includes sales of 65 chiropractic
DOCUMENTPLUS systems and two general dental DOCUMENTPLUS systems. Through
December 31, 1994 revenues were $82,819 from the sale of OMS forms. There can
be no assurance that ATG can generate sufficient revenues to turn a profit.
In February 1994, TVC released its DOCUMENTPLUS General Dental Package. In
September 1994, TVC released its DOCUMENTPLUS Chiropractic Package. Although
the industry-wide acceptance of these products cannot be anticipated, it is
expected that TVC will generate additional revenues from the sale of its
DOCUMENTPLUS system to clinicians.
No income tax benefit is recognized for the operating losses incurred by
ATG in any year because future taxable income cannot be assured. These losses,
however, may be carried forward to future periods.
FISCAL YEAR 1995
RESULTS FROM OPERATIONS. Revenues for 1995 were $1,559,701, a 52% increase
from revenues of $1,023,414 for 1994. The reason for this increase was
primarily the fact that TVC had a full year of sales of the chiropractic
DOCUMENTPLUS system. TVC ended 1994 with the sale of 67 DOCUMENTPLUS systems.
During 1995, TVC sold 164 systems. TVC had 231 DOCUMENTPLUS systems installed
and operating by the end of 1995.
Sales and gross profits for the year ended December 31, 1995 increased over
the 1994 levels principally as a result of the increased business generated by
SRS in 1995 versus 1994 and the increased sales of TVC's DOCUMENTPLUS system in
the chiropractic market and the increased growth in the sale of scannable forms.
Revenues for the year ended December 31, 1995 increased to $1,559,701 from
$1,023,414 for the year ended 1994, an increase of $536,287. The increase in
revenues is the result of increased sales of TVC's DOCUMENTPLUS and copyrighted
scannable forms, and SRS's increased growth. TVC also began billing for annual
support of its DOCUMENTPLUS system to the first system purchasers during the
first quarter of 1995.
Operating expenses for the year ended December 31, 1995 increased by
$370,804 over the year ended December 31, 1994. The most significant increases
were in salaries, payroll taxes, trade show expenses and interest on short term
debt. The increase in salaries and payroll taxes reflects the hiring of
additional engineering, sales, administrative and research and development
personnel as well as the cost of contract personnel used by SRS as part of its
computer consulting service operations. Marketing expenses increased as a
result of TVC's DOCUMENTPLUS system being demonstrated to clinicians at seminars
and trade shows. Operating expenses for the year ended December 31, 1995 also
include commissions of $12,000 and offering expenses of $28,000 for the interim
financing obtained by the Company as well as a charge of $66,665 for
amortization of debt discount
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incurred by the issuance of warrants to purchase shares of the Company's common
stock which were issued to various investors in September 1995.
Cost of sales for the year ended December 31, 1995 decreased from 52.8% in
fiscal 1994 to 41.6% for fiscal 1995. The primary reason for the decrease was
the fact of increased sales of scannable forms in the first quarter of 1995.
This increase was due to the fact that there were increased numbers of
Documentplus users which led to increased sales of the paper associated with the
system. TVC estimates that each system which is purchased will lead to
recurring revenues of approximately $2000 per user per year for the purchase of
scannable forms. The scannable forms have a greater profit margin and as
revenue from the sale of these forms increase, the cost of sales will decrease.
Increased sales of forms should also lead to economies in purchasing as the
Company will be able to take advantage of greater volume discounts.
FIRST QUARTER 1996
Revenues for the first quarter ended March 31, 1996 were $410,476, a 49%
increase from revenues of $274,850 for the first quarter ended March 31, 1995.
The reason for this increase was primarily the fact that the Company expanded
its potential customer base by presenting Documentplus to doctors at more than
24 meetings during the first quarter of 1996 compared to eight meetings during
the same period in 1995. Attendance at these meetings ranged from 20 doctors to
over 300 doctors. The Company also began utilizing national advertising in the
fourth quarter of 1995. The sales cycle for the Documentplus system ranges from
one to nine months after initial contact. At the end of the first quarter 1995,
TVC had installed 127 systems in clinics, primarily in the eastern region of the
United States. At the end of the first quarter 1996, TVC had installed over 280
systems in clinics nationwide.
Gross profits for the first quarter ended March 31, 1996 increased to
$248,341 from $154,324 for the same period of 1995. The primary reason for this
increase was the fact that TVC is now receiving the benefit of the recurring
revenue from sales of the scannable forms to existing users as well as the
increase in new system sales. TVC also lowered its cost of goods sold in the
first quarter of 1996 to 39.5% from 43.8% in the first quarter of 1995. This
occurred because of the increased sales of scannable forms (which carry a lower
cost of goods) and the lower price on the scanners which was negotiated by TVC
with its supplier.
Operating expenses for the quarter ended March 31, 1996 were $345,104 an
increase of $90,445 over the period ended March 31, 1995. The most significant
increases were for marketing expenses and interest accruals on short term debt.
Marketing expenses increased as a result of TVC's Docementplus system being
demonstrated to clinicians at twenty four seminars and trade shows during the
first quarter of 1996 as compared to the eight seminars and shows attended in
the same period in 1995.
Net loss for the quarter ended March 31, 1996 was $96,762, a decrease of
$3,573 from the loss of $100,335 for the quarter ended March 31, 1995. This
decrease was due to the increased level of business achieved by TVC without any
corresponding increase in expenses for facilities and personnel. The net loss
for the quarter ended March 31, 1996 also included a charge of $66,665 for
amortization of the debt discount incurred by the issuance of warrants to
purchase shares of the Company's comon stock which were issued to various
investors in September 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations through sales, stockholder loans
and the issuance of Common Stock. Working capital decreased during the year
ended December 31, 1995 principally as a result of ATG borrowing funds on a
short term basis to fund operations of its subsidiaries.
In January 1995, the Company borrowed $30,000 from an unaffiliated company
at an interest rate of 8.5% per annum.
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In March 1995, the Company initiated a private offering of units that
included one promissory note in the face amount of $50,000, bearing interest at
ten percent per annum and due 18 months from the date of issuance, and one
warrant to purchase 10,000 shares of the Common Stock for $5.00 per share. The
amount raised in this offering was $160,320. In January 1996, the Company
exchanged one of these warrants for a warrant to purchase 16,666 shares of
Common Stock for $100.
In May 1995, the Company borrowed $35,000 on a demand note from the wife of
Hale R. Spiegelberg, Chairman and Chief Executive Officer of the Company. This
note carried an interest rate of ten percent per annum. This note was repaid in
October 1995.
In August 1995, the Company initiated a private offering of units that
ultimately included one promissory note in the face amount of $50,000, bearing
interest at 12% per annum and due six months from the date of issuance, and one
warrant to purchase 16,666 shares of Common Stock for $100. The amount raised
in this offering was $400,800. These promissory notes became due in March 1996.
The Company obtained extensions of these promissory notes to postpone their due
date to the closing date of the Offering. In the event the Offering does not
close, the Company will have to renegotiate these promissory notes.
In December 1995, the Company borrowed $36,000 from an unrelated third
party. This note carries an interest rate of ten percent per annum and was due
in March 1996. The Company obtained an extension of this promissory note to
postpone its due date to the closing date of the Offering. In the event the
Offering does not close, the Company will have to renegotiate this promissory
note.
In February 1996, the Company borrowed $24,000 from an unrelated third
party. This note carries no interest and was due in May 1996. The Company
obtained an extension of this promissory note to postpone its due date to the
closing date of the Offering. In the event the Offering does not close, the
Company will have to renegotiate this promissory note. Also in February 1996,
the Company borrowed $50,000 from an unrelated third party, bearing interest at
12% per annum and due six months from the date of issuance.
ATG plans to derive its income from the sale of its subsidiaries' existing
products, including products released or to be released in 1996, from the sale
of scannable forms and from the contract programming, software engineering and
development services of SRS. Until ATG's revenues are sufficient to fund its
subsidiaries' operations, ATG will need additional outside sources of capital to
finance its subsidiaries' operations and research and development activities.
ATG anticipates that the proceeds from the Offering will be sufficient to
finance its activities and also the activities of its subsidiaries until
revenues are sufficient to fund such activities for a period of 12 months.
ATG does not believe that inflation had a significant impact on its results
of operations in the past two years.
SEASONALITY
Management does not believe that the Company's business is seasonal.
THE COMPANY
The Company was incorporated in the State of Delaware in October 1993 under
the name Time Value Corporation as a holding company for high technology
companies and changed its name to Atlanta Technology Group, Inc. in February
1994. The Company and its corporate predecessors or affiliates entered into
certain transactions described sequentially below to accomplish such goal.
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The Company's current primary operating subsidiary is called Time Value
Corporation ("TVC") and was incorporated in Georgia in June 1991 under the name
Converging Systems, Inc. (in order to avoid confusion, the subsidiary shall be
referred to as "TVC" and the parent company, currently Atlanta Technology Group,
Inc., shall be referred to as "ATG" or the "Company"). At the time TVC was
incorporated, the Company and TVC were unaffiliated. In September 1993, TVC
acquired 82.12% of the issued and outstanding shares of FSQ Systems Corporation
("FSQ") for $14,000. FSQ was incorporated in New York in April 1993 and never
conducted any material operations. Its shares were never listed on a national
securities exchange, nor, to the knowledge of the Company's management, were
FSQ's shares ever traded in any organized broker-dealer network. In October
1993, FSQ was merged into the Company and the Company acquired all of the issued
and outstanding shares of TVC.
In May 1994, the Company acquired all of the issued and outstanding shares
of common stock of Silver Ridge Software Inc. ("SRS"), a Georgia corporation,
its other operating subsidiary. In May 1994, the Company filed a registration
statement with the Securities and Exchange Commission on Form 10-SB for sale of
ATG's common stock under section 12(g) of the Exchange Act.
The Company is also parent to Net City, Inc., a Georgia corporation, which
is not currently engaged in any operating activities.
TIME VALUE CORPORATION
Time Value Corporation was incorporated in June 1991 under the name
Converging Systems Inc. TVC was capitalized by Capital Placement Corp. ("CPC"),
a Delaware corporation, which contributed certain assets of its subsidiary,
Patient Communications Systems, Inc. ("PCS"). These assets, including
inventories, equipment, software development costs, and contract rights to a
certain royalty agreement, were transferred to CPC and then contributed to TVC
in exchange for 1,600,000 shares of TVC's common stock.
Prior to September 1994, TVC was involved in research and development of
its proprietary product known the DOCUMENTPLUS system. Beginning in September
1994 through December 1994, the Company introduced the DOCUMENTPLUS system at 18
seminars held primarily in the Eastern United States. As a result of these
presentations, 67 systems were sold in 1994. In 1995, the DOCUMENTPLUS system
was presented at 29 seminars sponsored by various management consulting groups
and six meetings held by state associations. This exposure resulted in sales of
164 systems during 1995. The sales cycle for the DOCUMENTPLUS system ranges
from one month to nine months from initial contact to contract execution. The
Company historically closes a sale of the DOCUMENTPLUS system with 10% of the
clinicians who attend the seminars where DOCUMENTPLUS is being presented. In
1996, the Company plans to attend 60 seminars between January and June. The
seminar schedule for the third and fourth quarters of 1996 will be determined in
May 1996.
TVC accepts checks, credit cards and approved leases at the time of order.
Most of the systems are sold under leasing arrangements which the individual
doctor arranges with independent companies.
INCOME. The DOCUMENTPLUS system is sold directly to end-users in the
medical field. Currently, TVC is marketing DOCUMENTPLUS to chiropractors, neck
and back pain clinics and spinal clinics in the United States. The total number
of end-users of the DOCUMENTPLUS system increased from 67 at December 31, 1994
to 231 at December 31, 1995. Revenue from the sale of systems more than doubled
from $212,371 in fiscal 1994 to $553,933 in fiscal 1995.
Each system module requires the use of different scan sheets. The scan
sheets used with each specialty module are manufactured by National Computer
Systems, Inc. ("NCS"), a Minnesota corporation, and Scantron Corporation
("Scantron"), a California corporation, according to specifications supplied by
TVC. TVC purchases these forms from NCS and Scantron and then resells the forms
to users of the specialty modules. TVC is currently receiving approximately
$24,000 per month from the sale of scan forms to current users. Revenue from
the sale of scannable forms increased from $82,819 during fiscal year 1994 to
$194,170 in fiscal year 1995. Revenue from support fees were $8,750 for fiscal
1994 and $38,050 for fiscal 1995.
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The increases experienced in each category were the direct result of the
additional 164 systems sold during 1995. Each system which is sold will
generate recurring revenue for TVC as users purchase the copyrighted scannable
forms from TVC and support fees are billed to users on an annual basis. In
1996, the revenues from the sale of systems for the first quarter were $234,145
an increase of 90% over the $122,832 achieved during same period in 1995.
Revenue from the sale of forms through March 31, 1996 has been $73,084 which was
an increase of 138% over the $30,675 during the same period of 1995 and revenue
from support fees during the period ended March 31, 1996 increased to $31,400 an
increase of 83% over the $17,150 during the same period in 1995.
FUTURE DEVELOPMENT. The Company, along with TVC, has adopted a plan to
address the issues which caused the report of the Company's independent
certified public accountant to contain a going concern qualification. In May
1996, the Company posted its first monthly profit. Management has developed a
plan to sustain and expand this profitability through (1) diversification of
existing product lines; (2) enhancement of existing product lines; and (3)
expansion of the geographical area in which it operates. Because the
incremental costs of developing a DOCUMENTPLUS system for a new medical
specialty is relatively small (approximately $75,000), TVC expects to be able to
grow quickly by offering different DOCUMENTPLUS specialty modules. TVC plans to
introduce four new modules in the next 12 months: orthopedics, physical therapy,
orthodontics, and neurology. Eventually, TVC anticipates introducing modules
for most areas of medical specialty.
DIVERSIFICATION. The Company has designed its software product so that the
research and development expense of creating new DOCUMENTPLUS systems for
different medical specialty areas will be minimal. The Company has already
completed the basic system platform which enables it to complete the development
of additional medical specialty systems at a cost substantially lower than
developing the original DOCUMENTPLUS system. The primary costs of developing a
DOCUMENTPLUS module for a new medical specialty are creating the copyrighted
scannable forms and customizing the narrative output for the specific medical
specialty produced.
Presently, the Company is simultaneously developing DOCUMENTPLUS systems in
orthopedics, physical therapy, orthodontics and neurology. The Company
estimates that the cost of releasing these additional systems to the market will
be approximately $300,000 in total. The Company intends to fund the development
and release of these products from the proceeds of the Offering. The Company
plans to release these new DOCUMENTPLUS systems in the next 12 months. The
orthopedics, physical therapy and orthodontics specialty systems are scheduled
for release in the third quarter of 1996. The neurology specialty system is
scheduled for release in January 1997.
Based on information obtained by the Company in 1995, there are 20,000
orthopedists and 64,000 physical therapists licensed to practice in the United
States. The Company believes that this expansion could add as many as 8,500
users to its current base in five years in these two specialties alone. This
figure is based upon a market penetration of ten percent of licensed
practitioners in those specialties over that period of time. The Company
intends to market the new specialties by demonstrating the DOCUMENTPLUS systems
at seminars and trade shows for each medical specialty during the year. The
Company will also advertise in trade publications for each specialty.
The Company already has established sales, training and support personnel.
Since the DOCUMENTPLUS system works basically the same way in each medical
specialty, the Company feels that its personnel in the sales, training and
support departments will be adequate to launch the new specialty systems. As
future funding is available, the Company has identified additional specialties
that it intends to develop.
ENHANCEMENT OF EXISTING PRODUCT LINES. The Company is currently developing
additional DOCUMENTPLUS forms to be used in patient assessment and anticipates
that these forms will be ready for the market in the second quarter of 1996.
These copyrighted forms will be marketed to existing DOCUMENTPLUS users and used
in the orthopedics, physical therapy and neurology DOCUMENTPLUS systems.
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EXPANSION. The Company has increased its number of salespersons from one in
1994 to four in 1996. The Company is now working with three management
consultant groups with national exposure instead of one that is located
primarily in the Eastern United States. Additionally, the Company is achieving
more exposure from advertising in national trade catalogs and directories as
well as articles written in national trade publications about its products.
These activities have resulted in increased leads and sales over the same time
period in 1995. Management believes that this additional exposure will increase
sales during the second and third quarters of 1996.
TVC is also seeking to market its products nationwide through trade
publications and seminars. TVC has retained three national distributors to
assist in marketing and promoting TVC believes that increased sales from this
national exposure will begin in the second or third quarter of 1996. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." No government approvals are required for the Company to market its
products.
The business plan currently being pursued by the Company is based on
information available to Management at the time of its preparation. The Company
and TVC recognize that difficulties could arise that could have an adverse
effect on TVC's ability to successfully implement its business plan. There
could be delays in getting new products to market. One potential source for
delay is the availability of independent medical professionals to devote
sufficient time to assist in the development of these new products. TVC could
experience cost overruns in the development and marketing of new products.
Because TVC is heavily dependent on others to supply the basic components of its
products, any increase in the costs of supplies may have an adverse effect on
sales and/or profitability. While TVC believes that there is a viable market
for computer generated medical records and it has a superior product to those
currently on the market, there can be no assurance that TVC's products will be
accepted by enough medical practitioners to support profitability. In addition,
the competitive advantage that TVC believes it currently enjoys may prove to be
illusory or easily overcome by a competitor in the future. In short, TVC cannot
anticipate the myriad of things that may occur that could have an adverse impact
on its ability to successfully implement its business plan.
PRODUCT: DOCUMENTPLUS. TVC's main product is the DOCUMENTPLUS system.
DOCUMENTPLUS is a comprehensive computer system designed to reduce the time
healthcare practitioners and their staff spend preparing paperwork,
documentation and correspondence. A complete DOCUMENTPLUS system consists of a
microcomputer, a printer, an optical mark scanner, one or more of the
DOCUMENTPLUS modules, a word processing program and copyrighted DOCUMENTPLUS
optical mark scannable forms. If the practitioner already owns an IBM
compatible computer and a word processing program (compatible with TVC's
proprietary software), a separate computer and word processing program are
normally not purchased. At the present time, TVC's software is compatible with
several word processing programs. As part of its service, TVC offers its
customers hardware products including microcomputers and Scantron optical
scanners, as well as the AmiPro word processing program.
DOCUMENTPLUS provides the healthcare practitioner with automatic patient
letter generating capabilities which TVC believes are needed today to promote
informed consent and reduce legal exposure. Today's healthcare practitioner is
acutely aware of the need for documentation in the area of patient
communications. However, because of the considerable time and cost involved
with such documentation, patient communications are primarily oral and create a
significant potential for misunderstanding and inadequate retention. Such
misunderstandings can create unnecessary malpractice exposure.
DOCUMENTPLUS is a computer based product designed to generate
individualized correspondence and reports to patients and referring and
consulting physicians, dentists and chiropractors quickly, accurately and
efficiently. TVC believes that effective patient communication is essential for
maintaining and expanding a medical, dental or chiropractic practice and for
maintaining a record of diagnosis and recommended treatment that can be used in
the defense of malpractice or similar claims. DOCUMENTPLUS is designed to
provide clinicians with a comprehensive and time efficient means of
communicating essential clinical information to the patient, referring
healthcare practitioners and insurance companies.
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Using DOCUMENTPLUS scannable forms for patient and clinician input in
conjunction with DOCUMENTPLUS software, a microcomputer and an optical mark
scanner, DOCUMENTPLUS generates individualized correspondence from the
healthcare practitioner to the patient, referring and/or consulting physicians,
dentists, chiropractors, insurance companies and others. TVC's copyrighted
optical mark scannable forms ("OMS forms"), including Patient Health
Questionnaires, Clinical Evaluation forms, Clinical Radiographic Findings forms,
Clinical Re-evaluation and Treatment forms, Daily SOAP Note forms (SOAP stands
for subjective, objective, assessment and plan, and represents the four parts of
a written account of the health problem made by a doctor) and Patient Outcome
Assessment forms, are filled out by patients and clinicians and input into the
DOCUMENTPLUS software by an optical mark scanner. The DOCUMENTPLUS program uses
the data read by the optical scanning device to generate customized letters from
the physician, dentist or chiropractor to patients explaining objectives and
treatment recommendations. Except for such copyrights, the Company does not own
or possess any patents or trademarks for it products or its business line.
DOCUMENTPLUS is comprised of various submodules. Each submodule provides
the healthcare practitioner with customized written communications for the
practitioner's specialty area in order to better inform the patient, the
patient's referring or consulting clinicians and the insurance providers of the
status of the patient's condition.
DOCUMENTPLUS begins with OMS forms designed by TVC with assistance from
medical, dental or chiropractic practitioners. Each submodule requires a series
of OMS forms designed to manage a patient throughout his or her association with
the physician, dentist or chiropractor. The OMS forms include a medical history
of the patient, which the patient completes during his/her initial visit, an
examination and evaluation OMS form completed by the clinician, a radiographic
diagnosis and treatment OMS form completed by the clinician and/or staff member,
and periodic progress OMS forms completed by the clinician or staff member.
The OMS forms contain a series of questions answered by darkening with a
pencil a round circle or "bubble" adjacent to the appropriate response on the
OMS form. The OMS forms are designed to provide a logical flow of information
and clinical findings from the general to the very specific. The division of
information on the OMS forms provides a readable, understandable and efficient
means of case evaluation and diagnosis. The OMS form is completed as the
physician, dentist or chiropractor, or an assistant, examines the patient or
evaluates other data, such as x-rays or results from laboratory tests. The use
of OMS forms provides the healthcare practitioner with a method for
standardizing the examination and diagnostic procedures for all new patients,
thereby providing a comprehensive and accurate record from the beginning of
treatment.
DOCUMENTPLUS also generates progress letters once the patient is under a
physician's, dentist's or chiropractor's care. The healthcare practitioner
determines the desired interval for the progress letter, then marks the
appropriate response adjacent to the clinical description on the OMS form, after
which DOCUMENTPLUS generates a letter of treatment status to the patient.
Referral letters also can be generated by DOCUMENTPLUS to advise referring
doctors, dentists or chiropractors of the recommended treatment for patients.
Simultaneously, clinicians being consulted concerning contributing problems are
notified as to the specific reason the patient has been referred to them.
Using an OMS form with the DOCUMENTPLUS software, the healthcare
practitioner also can generate billing and information narratives for the
patient's insurance company with specific diagnosis and treatment plan and
charges billed to the patient.
All correspondence generated by DOCUMENTPLUS can be reviewed and edited
prior to being printed in final form.
The OMS forms used with DOCUMENTPLUS are manufactured by Scantron and NCS.
Completed OMS forms are scanned by an optical mark scanner. DOCUMENTPLUS has
been developed for use with a Scantron optical mark scanner and a NCS optical
mark scanner. These scanners read the data on the OMS form by identifying the
darkness of each mark. Light transmitted through the OMS form allows the
scanner to read accurately both sides
22
<PAGE>
of the sheet in a single pass, and the data read by the optical scanner is then
transmitted to a microcomputer. TVC's proprietary software processes the data
into the appropriate correspondence and documentation requested by the
clinician. The correspondence and documentation are transferred into a word
processor for review, editing (if so desired), printing and distribution.
The following is a partial list of correspondence and documentation
automatically prepared from the OMS forms. In many cases multiple narratives of
the same document are prepared for distribution to referring or consulting
clinicians, the patient, the insurance provider, as well as for in-practice use.
Patient Health Questionnaire elicits additional information after the
preliminary history is taken
Doctor Heath Questionnaire summarizes the information the patient has
provided
Patient Initial Letter summarizes the patient's initial visit and
outlines planned treatment
Doctor Initial Letter to referring clinician summarizing patient's
initial visit and planned treatment
Medical Summary to consulting clinician summarizing findings
after medical history, clinical exam, and
radiographic findings
Informed Consent indicates informed consent for specific
procedures on behalf of patient
Progress Reports summarizes progress and expected developments
during various phases of treatment
Insurance Letter provides information to the insurance company
using proper diagnosis and treatment coding
Patient Complete Letter includes additional information from lab test
reports
Doctor Complete Letter to referring doctor with additional information
from lab test
Medico-legal Letter to patient's attorney with information regarding
patient's history and treatment procedures
TVC introduced the Chiropractic module in September 1994 and has sold and
installed over 200 systems since the introduction. These sales were the result
of TVC's participation in seminars under the direction of Markson Management
Services, Inc., as well as other independent chiropractic trade shows, during
1995. TVC plans to continue to attend trade shows as a method of product
distribution and promotion.
TVC has identified 38 additional specialty areas to be developed as
specialty authors, who are healthcare practitioners and other experts consulted
to develop modules, are selected and funding is available. Some of the
additional specialties slated for early development include cardiology,
neurology, orthopedics, dermatology, ophthalmology and podiatry. In order to
develop a new module, TVC ordinarily would retain a doctor or dentist who is a
specialist in a particular field of practice to consult with TVC as it designs
the module relating to their area of specialty. In return for these consulting
services, TVC may pay a percentage of the gross revenues received by TVC from
the sale of the module. TVC does not have any consulting agreement with any
person with respect to additional modules for the DOCUMENTPLUS system.
23
<PAGE>
BENEFITS OF DOCUMENTPLUS. The Company believes that the DOCUMENTPLUS system has
the following benefits:
Improves Patient Education and Communication. Creates an environment for
--------------------------------------------
attracting and developing new patients through the use of an effective, written
personal patient education and communication program.
Increases Patient Confidence. Intended to increase patient confidence in
----------------------------
the clinician by educating patients about their particular needs through written
communications.
Improves Communication Between Clinicians. Develops a mutually beneficial
-----------------------------------------
relationship between referring and consulting clinicians through detailed
correspondence relating to patient treatment and needs.
Eliminates Routine Dictation. Eliminates most of the requirements for
----------------------------
routine dictation, thus allowing for an increased patient load or redirection of
time to developing the practice.
Effective Time Management. Reduces consultation time and improves the
-------------------------
quality of care by providing an easy-to-use diagnostic tool and standardized
comprehensive records, documentation, and correspondence from initial visit
through on-going treatment.
Enhances Marketing. Creates an on-line records and documentation research
------------------
data bank for patient call backs as new techniques, procedures and treatments
become available for their conditions.
Increases Revenues. Enhances insurance claims turnaround and improves cash
------------------
flows by providing complete documentation and correspondence for insurance
companies.
Reduces Malpractice Exposure. Provides added protection against possible
----------------------------
litigation with comprehensive documentation supporting the diagnosis, treatment
and informed consent of the patient.
Improves Administration. Provides systems which improve financial
-----------------------
planning, processing of insurance claims and communications.
WARRANTIES AND TRAINING. TVC warrants its products for 90 days. After the
expiration of the initial warranty period, TVC will provide continuing technical
support for its software for an additional annual maintenance fee. The actual
amount of the annual maintenance fee depends upon the software purchased by the
customer. The optical mark scanners are sold by TVC for use with DOCUMENTPLUS
and are warranted by Scantron or NCS for a period of 90 days after shipment. A
maintenance agreement for the scanners is available directly from Scantron or
NCS.
Training of the clinician's staff to use TVC's products is provided by TVC.
TVC will provide users with a video tape and an instruction manual for
installation of the DOCUMENTPLUS system. Additional training is available if
requested by users. If on-site training is requested, the clinician is
responsible for all expenses incurred by TVC's personnel.
COMPETITION. Many firms have developed independent software applications
which are designed to solve only a portion of the problems facing
medical/dental/chiropractic practices. Accordingly, the medical, dental and
chiropractic market is very fragmented in its approach to office management
systems. As a result, TVC believes there is a need for a single software system
that will combine and/or integrate groups of individual applications and
technologies to create a comprehensive approach for managing office paperwork.
As with any new product, the extent to which the targeted community will
perceive a need for TVC's products is uncertain. The computer software industry
is highly competitive. TVC competes with other entities that have established
marketing and distribution networks, greater resources and capabilities, and
wider name recognition in the marketplace, including Scribe Systems, Inc. (maker
of Comp-U-Scribe Narrative Report Writer)
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<PAGE>
and Cornerstone Systems (maker of Narrative Power). TVC's competitors could
develop products which are functionally equivalent or superior to TVC's system,
in which case TVC's perceived competitive advantage concerning the nature of its
products would be lost.
Scribe Systems and Cornerstone Systems have had products in the marketplace
for a much longer period of time than the Company. Scribe System's product is
used by more customers in the western part of the United States than TVC's
because TVC has just recently begun advertising on a national level. The other
products both utilize keyboard input to feed the information into the computer
whereby Documentplus uses automated optical scanning technology. The TVC
scanning technology is quicker and less prone to data entry error than the
method used by either product. Documentplus is more expensive initially than
either of the other two; however, it is less expensive to utilize because it is
automated, performs the tasks quickly and more efficiently and does not require
additional personnel to handle increased paperwork.
MARKETING. TVC's potential market includes over 600,000 physicians,
dentists and chiropractors in private practice covering approximately 38
specialties in the United States. TVC's products are designed to provide
clinicians with a comprehensive and efficient means of providing quality
services to patients, developing a large referral/consulting clinician base,
processing accurate and timely insurance claims and operating a practice with
lower expenses.
The present marketing plan of TVC consists of the following elements:
(1) To utilize experienced medical/dental/chiropractic clinicians to
develop specific patient communications packages that relate to particular
specialties in their particular fields.
(2) To demonstrate DOCUMENTPLUS at symposiums, regional and national trade
shows (for each medical, dental or chiropractic specialty and their specific
associations) and study club groups.
(3) To introduce and incorporate DOCUMENTPLUS as part of the formal
curriculum where healthcare practitioners receive their training. Previous
versions of the Orthodontic and TMD modules have been used at Marquette
University and Tufts University.
(4) To develop a product "users" group to assist TVC in monitoring the
target specialties in medicine, dentistry and chiropractic as well as responding
to the needs of clinicians.
The Company has not undertaken any market feasibility studies to date.
In order to successfully market its products, TVC will need to penetrate
and depend heavily on established medical/dental/chiropractic distribution
networks. TVC intends to develop an initial network of distributors. Primary
distribution will be through direct and indirect sales channels, with special
large marketing opportunities requiring direct sales representation, and
indirect sales to be made by dealers or distributors. Each salesperson and
distributor will be required to attend a training program that will include
computer technical basics, demonstration techniques, and specific product
features, functions and benefits. TVC has negotiated marketing contracts for
its chiropractic system with Markson Management, Inc. ("Markson Management") and
Activator Methods, Inc. ("Activator Methods"), two unaffiliated chiropractic
management companies that conduct seminars for healthcare practitioners on how
to operate their offices more efficiently, and two other marketing and
distribution companies.
Among other things, Markson Management conducts trade shows for the
chiropractic industry. Healthcare practitioners associated with Markson
Management provided input in the development of the software and OMS forms used
with the chiropractic DOCUMENTPLUS system and Markson Management provides TVC
with access to its seminars and trade shows. In exchange, TVC is obligated to
pay Markson Management a royalty of 25% of the software sales price of the
chiropractic software and five percent of the revenue from the sales of all
chiropractic OMS forms, irrespective of whether such sales result from the
efforts of Markson Management.
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<PAGE>
Activator Methods is an Arizona corporation that sponsors conferences and
produces a publication targeted to the chiropractic industry. Activator Methods
has agreed to recommend DOCUMENTPLUS and provide booth space at its conferences,
assist in the development of OMS forms, refer potential users of the
chiropractic DOCUMENTPLUS system to TVC and promote DOCUMENTPLUS through
advertising in its publication. In exchange, TVC is obligated to pay Activator
Methods booth rental fees in the amount of $500 for each sale of the
chiropractic software made at its conferences. In addition, after the first 20
chiropractic software units are sold by Activator Methods, TVC is obligated to
pay to Activator Methods five percent of the revenue from OMS forms sold to
customers that purchase the chiropractic software because of the efforts of
Activator Methods. This agreement runs from year to year unless terminated by
either TVC or Activator Methods after 30 days notice.
The two other marketing and distribution companies sponsor conferences and
provide publications targeted to the medical community. They have national
exposure. They have agreed to recommend DOCUMENTPLUS and provide booth space at
their conferences, assist in the development of OMS forms, refer potential users
of the DOCUMENTPLUS system to TVC and promote DOCUMENTPLUS through advertising
in their publications. In exchange, TVC is obligated to pay booth rental fees
in the amount of $500 for each sale of the medical software made at their
conferences. These agreements run from year to year unless terminated by either
TVC or the marketing and distribution companies after 30 days notice.
SILVER RIDGE SOFTWARE INC.
Silver Ridge Software Inc. was incorporated in 1993 as a computer
consulting and software engineering firm.
SERVICES. SRS provides customized computer software solutions and contract
engineering services to companies in areas ranging from insurance and finance to
embedded control systems and telecommunications. SRS develops custom software
for its clients and has no immediate plans to develop or market products for the
general public at this time.
In order to satisfy the software development needs of its clients, SRS
maintains an internal development team trained in areas of software design,
network support and training, systems evaluation, technical writing and project
management. SRS personnel are trained in multiple programming languages
including Assembler, C, C++, Focus, Foxpro, Clipper, Access, Powerbuilder,
Visual Basic, and Visual C++. SRS also provides on-site contractors for clients
who want the participation of their own personnel in the development process.
In its first year of operations, SRS has obtained a broad client base
ranging from small to medium size entities with annual revenues of $10 million
to $250 million. Currently, SRS's largest client is Courier Dispatch
constituting approximately 20% of SRS's revenues. SRS has developed and
implemented a client/server based system for Courier to replace its aging
mainframe system. In addition, SRS has developed, implemented, and maintained
numerous software systems in fields as diverse as manufacturing, distribution,
and communications.
MARKET. As the software development marketplace is highly competitive, SRS
is aligning itself to meet current trends of "user friendly" software and
systems. SRS intends to market its services through direct mail advertising,
radio advertising and newspaper advertising. There are many software
development companies in competition with SRS. The Company provides no
assurance that SRS will be able to compete successfully in such an environment.
LEGAL PROCEEDINGS
The Company was a defendant in an action in Pineallas County Court, Florida
entitled Gregory S. Roe v. Hale Spiegelberg, et al. The plaintiff claimed, on
behalf of his wife, that the Company was responsible to pay a $10,000 note due
from Millennium Global Inc. ("MGI") under the theory that the Company purchased
MGI and all of its debts as well as its assets. The action was settled in
December 1995 and the Company agreed to pay Mr. Roe a total of $2,000, payable
in ten consecutive equal monthly installments.
26
<PAGE>
The Company was a party to an action in Fulton County Superior Court,
Georgia entitled Fiberoptic Atlanta Inc. v. Atlanta Technology Group, Inc., et
al. On June 13, 1995, the parties entered into a settlement agreement whereby
all lawsuits were dismissed and the parties agreed to share costs. There are no
ongoing obligations in connection with this settlement.
The Company may be subject, from time to time, to various legal proceedings
relating to claims arising out of its operations in the ordinary course of its
business. The Company, currently is not party to any legal proceedings, the
adverse outcome of which, individually or in the aggregate, management believes
would have a material adverse effect on the business, financial condition or
results of operations of the Company.
EMPLOYEES
As of December 31, 1995, the Company had 19 full-time employees and two
part-time employees. There are seven full-time employees in research and
development; two full-time and 1 part-time employees in training and support,
five full-time employees in sales and marketing, and five full-time and one
part-time employees in administration.
FACILITIES
Silver Ridge Software Inc. is leasing approximately 3,000 sq. feet at 400
Embassy Row, Atlanta, Georgia. The lease for this space expires in 1999. The
monthly lease payment for this space is approximately $3,900. The lessor is an
unaffiliated party, the US Post Office. The Company shares this space with
Silver Ridge Software Inc. and Time Value Corporation on a rent-free basis. The
Company believes that the lease payments are comparable to lease payments for
commercial space leased in the area. The Company currently intends to retain
its existing facilities to house its customer product operations.
MANAGEMENT AND CONTROL PERSONS
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The present executive officers, and members of the Board of Directors, are
as follows:
NAME AGE POSITIONS
- ---- --- ---------
Hale R. Spiegelberg 45 Chief Executive Officer, Chief Financial Officer,
Secretary, Director
James Cassidy 63 President, Director
Gregory W. L. Richter 33 Director
Herbert W. Browne 69 Director
The number of directors may be fixed from time to time by the Board of
Directors. The Board of Directors presently consists of four directors. Each
of the Company's directors has been elected to a one year term, expiring at
certain dates throughout 1996. Vacancies in the Board of Directors are filled
by a majority vote of the remaining directors or by a shareholder vote called
expressly for such purpose. The Company has agreed that, upon completion of the
Offering, the Board of Directors will increase its size to five, of which a
majority shall be outside directors. The Company also has agreed to appoint
Daniel C. Montano, of Brookstreet Securities Corporation, to the Board of
Directors of the Company.
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<PAGE>
MR. HALE R. SPIEGELBERG has been Chief Executive Officer and a director of
ATG since its inception, and has been actively involved in optical mark
scanning, and other high technology industries, for the past six years.
Currently, he is a full-time employee of ATG, and is committed to managing ATG
on a full-time basis. Since 1994, he has served as a director of Avionics One,
Inc., a company organized to design and develop an aircraft navigational system.
In 1994, he served as a director of Fiberoptic Atlanta, Inc. Since 1991, he has
served as President of Total Software, Inc., a computer software system and
hardware set-up company. Since 1989, he has been a director of Patient
Communications Systems, Inc., a company that developed software for the dental
profession using an optical mark scanning system. Patient Communications
Systems, Inc. is currently inactive. In 1989, he served as director of Human
Performance Corporation, a company engaged in the development of computer
controlled exercise and rehabilitation equipment. Since 1987, he has been the
sole officer and director of Capital Placement Corporation, a holding company
organized to engage in capitalization of high technology companies, and since
1991 he has been director of Acquisition Advisors, Inc., a company formed to
provide consulting services on mergers and acquisitions. Mr. Spiegelberg
estimates that the time required of him with regard to affiliations other than
the Company is minimal (i.e., approximately two hours per week). During the
same time period he has served as an officer or director of several financial
companies, including Norris Hirshberg (1991) and Masters Financial Group, Inc.
(1991). While at Masters Financial Group, Inc., Mr. Spiegelberg was suspended
by the NASD for five years, without admitting or denying fault, for allegedly
being involved in certain violations of NASD rules and regulations for failing
to keep paperwork current and failing to register employees with the NASD. Mr.
Spiegelberg is also subject to a cease and desist order from the State of
Maryland that bars him from acting as a broker in Maryland.
MR. JAMES CASSIDY has been a director of ATG since December 1995 and
President since March 15, 1996. He is Chairman of CPG, Inc., an engineering
consulting firm, and President of Ye Olde Cookie Company. Mr. Cassidy has been
associated with Ye Olde Cookie Company since 1987. He has been a consultant to
Durham Temporary Services since 1990. All three of these companies are located
in Atlanta, Georgia. From 1988 until 1990, Mr. Cassidy served as Chairman of
Patient Communication Systems Inc. in Atlanta. From 1960 until his retirement
in 1987, Mr. Cassidy held various positions at Sears Roebuck & Co. From 1980 to
1987 he assumed responsibility for facilities planning operations in the
Southeast, Southwest and Puerto Rican regions. In 1978 he was named National
Sales Manager. Mr. Cassidy graduated from Mt. St. Mary's College in 1960 with a
degree in Business Administration.
MR. GREGORY W. L. RICHTER was ATG's President from October 1993 to March
15, 1996. Currently, Mr. Richter is being retained by SRS as an outside
consultant. In 1986, Mr. Richter founded Blue Mountain Software, Inc., a
software consulting firm located in Atlanta. Mr. Richter was the President of
Blue Mountain Software, Inc. until it was bought by Fisher Business Systems,
Inc. in late 1992. He was employed by Fisher Business Systems, Inc. from the
time he sold Blue Mountain Software, Inc. until his employment by the Company.
A graduate of Georgia Tech with a degree in Electrical Engineering, Mr. Richter
studied computer design as a Grumman Aerospace scholar.
MR. HERBERT W. BROWNE has been a director of ATG since December 1995. He
has been a consultant to Noramco, Inc., a Johnson & Johnson company marketing
various chemicals to the pharmaceutical industry since 1986. Prior to his
retirement in 1985 from McNeil Laboratories, a Johnson & Johnson company, Mr.
Browne served as Senior Vice President (1978-1985), Vice President, Marketing
(1974-1979), Director of Sales Promotion (1967-1974), District Manager of the
Charlotte, North Carolina District (1964-1967) and a salesman in the Birmingham,
Alabama area where he established a record of leading his company in sales for
seven consecutive years. Mr. Browne presently serves as Chairman of PRIDE, the
nation's oldest and largest association dedicated to fighting drug abuse. He
has served on the Boards of the Suburban General Hospital and the University of
Pennsylvania Medical Center in Philadelphia. He has also served on the Board
and the Executive Committee of the National Pharmaceutical council and the
Steering Committee of the marketing section of the Pharmaceutical Manufacturers
Association, both located in Washington, D.C. Mr. Browne is a graduate of the
University of Alabama with a degree in Chemistry.
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<PAGE>
MR. DANIEL C. MONTANO has been the Director of Investment Banking for
Brookstreet Securities Corporation since 1995. Prior to that, he was President
of Montano Securities Corporation for 15 years. Montano Securities Corporation
ceased operations in December 1994. Mr. Montano has been in the Investment
Banking business for 27 years and has served on the Board of Directors of over
20 publicly-traded companies. Mr. Montano is 47 years old, and received a B.S.
in Business from California State University at Los Angeles and an MBA from the
University of Southern California. He is subject to a cease and desist order
pursuant to Section 8A, Section 5(b)(1) and Sections 17(a)(2) and (3) of the
Securities Act. The order was agreed to by Mr. Montano without admitting or
denying fault, and requires him to refrain from making fraudulent statements in
connection with a securities offering.
EXECUTIVE COMPENSATION
Mr. Spiegelberg received no remuneration for his services between 1993 and
1995, and there were no executives of the Company whose aggregate cash and cash
equivalent forms of remuneration were in excess of $100,000 between 1993 and
1995. Mr. Richter received $51,934.61 for his services in 1995. It is not
expected that the office of the President will receive more than $100,000 in
compensation in 1996. It is expected that Mr. Spiegelberg will receive no
remuneration for his services in 1996.
No officer or director of ATG has ever been granted any stock options or
awards under a Long Term Incentive Plan. ATG does not have a defined benefit,
pension, profit sharing or other retirement plan. The Company will not grant
options and warrants to officers, directors, employees, 5% shareholders or
affiliates in excess of 15% of the outstanding shares for a period of one year
from the date of this Prospectus. In addition, any options or warrants granted
to officers, directors, employees, 5% shareholders or affiliates will have an
exercise price no less than 85% of the fair market value of the Common Stock on
the date of the grant.
ATG does not pay its directors for attending meetings of the Board of
Directors. ATG has no standard arrangement pursuant to which directors are
compensated for any services provided as a director or for committee
participation or special assignments.
ATG does not have any written employment contracts with respect to any of
its executive officers, and does not have any compensatory plan or arrangement
that results or will result from the resignation, retirement or any other
termination of any executive officer's employment with ATG or from a change in
control of ATG or a change in an executive of officer's responsibilities
following a change in control.
LOANS TO OFFICERS AND DIRECTORS
In 1994, Gregory W. L. Richter, Director and former President of the
Company, received a loan from the Company in the amount of $12,000. In December
1995, the Company accepted computer equipment from Mr. Richter as payment of
this loan. There are no loans currently outstanding to any Officer or Director
of the Company.
Any future loans or advances will be for a bona fide business purpose and
approved by a majority of the disinterested directors. The Company has agreed
with certain state regulatory authorities that so long as the Company's
securities are registered in such states, or one year from the date of this
Prospectus, whichever is longer, the Company will not make loans to its
officers, directors, employees, or principal shareholders, except for loans made
in the ordinary course of business, such as travel advances, expense account
advances, relocation advances, or reasonable salary advances.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The only class of voting securities of ATG is the Common Stock. The
following table sets forth information concerning beneficial ownership of the
Common Stock, as of December 31, 1995, of ATG by (i) each person (including any
"group" as that term is defined in Section 13(d)(3) of the Exchange Act) known
by ATG to
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<PAGE>
own beneficially more than five percent of such Common Stock, (ii) each officer
and director of ATG, and (iii) all directors and executive officers as a group.
The table also sets forth the beneficial ownership of each person listed after
the Offering, assuming the Underwriters do not exercise their overallotment
option.
<TABLE>
<CAPTION>
PERCENT OF CLASS
NAME AND ADDRESS AMOUNT AND NATURE BEFORE AFTER
TITLE OF CLASS OF BENEFICIAL OWNER OF BENEFICIAL OWNER OFFERING OFFERING
- ---------------- -------------------------- ---------------------- --------- ---------
<S> <C> <C> <C> <C>
Common Stock Hale R. Spiegelberg
6065 Roswell Rd.
#2267
Atlanta, GA 30328 1,578,317(1) 56.36% 37.58%
Common Stock Gregory W.L. Richter
400 Embassy Row
#570
Atlanta, GA 30328 346,500(2) 12.3% 8.25%
Common Stock Pollution Research and
Control Corp.
515 W. Colorado St.
Glendale, CA 91204 400,000(3) 14.3% 9.52%
Common Stock Total Software Inc.
2131 Pleasant Hill Rd.
Suite 151-175
Duluth, GA 30136 644,948(4) 23.1% 15.35%
Common Stock Einzelhaft Partners, A.G.
P.O. Box 1062
Grand Cayman
Cayman Islands 350,000(5) 12.52% 8.33%
Common Stock Axis Capital, A.G.
P.O. Box 1062
Grand Cayman
Cayman Islands 250,000(6) 8.9% 5.95%
Common Stock Acquisition Advisors, Inc.
6065 Roswell Road
Suite 2267
Atlanta, GA 30328 568,832(7) 20.3% 13.54%
Common Stock All Executive Officers and
Directors as a Group 1,924,817 68.74% 45.83%
</TABLE>
- ------------------
(1) Hale R. Spiegelberg is Chairman and Chief Executive Officer of ATG. He is
a beneficial owner of Total Software Inc., Einzelhaft Partners, A.G. and
Acquisition Advisors, Inc. He is also a director and shareholder of
Capital Placement Corporation ("CPC"), which owns 14,537 shares (.52%) of
Common Stock. CPC acquired 1,600,000 shares of the Common Stock after it
contributed the start-up assets to the Company. CPC has divested itself of
the majority of its Common Stock holdings since then.
(2) Gregory W.L. Richter is a Director of ATG. He is also a beneficial owner
of Axis Capital, A.G. He acquired his shares from CPC in consideration
for 250,000 shares of common stock of Fisher Business Systems, Inc. in
December 1993.
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<PAGE>
(3) Pollution Research and Control Corp. acquired its shares for a promissory
note in the principal face amount of $1,000,000 in December 1991.
(4) Also included in beneficial ownership of Hale R. Spiegelberg. Total
Software Inc. ("TSI") acquired 800,000 shares of Common Stock from CPC for
$114,500 in March 1992. TSI acquired 400,000 shares of Common Stock by
exercising options in July 1992. The options were acquired in consideration
for services provided to the Company and had a total exercise price of
$20,000. TSI sold 600,000 shares of Common Stock to Acquisition Advisors,
Inc. ("AAI") for $100,000 in December 1992. TSI acquired 44,948 shares of
Common Stock in consideration for releasing $134,844 in debt owed by the
Company in December 1993.
(5) Also included in beneficial ownership of Hale R. Spiegelberg. Einzelhaft
Partners, A.G. acquired 100,000 shares from AAI in October 1993. Einzelhaft
Partners, A.G. acquired 250,000 shares of Common Stock in exchange for its
one-half ownership interest in SRS in May 1994.
(6) Also included in beneficial ownership of Gregory W.L. Richter. Axis
Capital, A.G. acquired its shares in exchange for its one-half ownership
interest in SRS in May 1994.
(7) Also included in beneficial ownership of Hale R. Spiegelberg. AAI acquired
600,000 shares of Common Stock from TSI for $100,000 in December 1992. AAI
acquired 40,000 shares of Common Stock for $120,000 in a private placement
between November 1993 and January 1994. AAI acquired 28,832 shares of
Common Stock in consideration for releasing $86,496 of debt owed by the
Company in December 1993.
Total Software Inc. and Acquisition Advisors Inc. are both owned by
Einzelhaft Partners A.G. Mr. Spiegelberg is the President of Total Software
Inc. and a director of Acquisition Advisors Inc. Mr. Spiegelberg has the right
to name the beneficiaries of the trust that owns Einzelhaft Partners A.G. but is
not the beneficiary of the trust. Mr. Spiegelberg is not an officer, director,
shareholder or trustee of Einzelhaft Partners A.G. nor a director of the trust.
Total Software Inc. had previously performed R & D consulting work for
Pollution Research and Control Corporation. Total Software Inc. and Acquisition
Advisors In. were shareholders of Pollution Research and Control Corporation in
the past.
Mr. Richter has the right to name the beneficiaries of the trust that owns
Axis Capital A.G. but is not the beneficiary of the trust. Mr. Richter is not
an officer, director, shareholder or trustee of Axis Capital A.G. nor a director
of the trust.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In January 1993, the Company accepted 65,114 shares of Pollution Research
and Control Corp.'s ("PRCC") restricted common stock as payment for the
remaining principal balance of a note receivable from a PRCC subsidiary and
forgave all interest due on the note.
In February 1993, the Company exercised an Underwriters Unit Purchase
Warrant of PRCC acquired in December 1992. As payment for the exercise price,
the Company surrendered warrants allowing for the purchase of 42,500 shares of
PRCC common stock. As a result of this transaction, the Company received
175,502 shares of PRCC common stock and warrants for the purchase of an
additional 217,502 shares of PRCC's common stock. In February 1993, the Company
sold 15,000 shares of PRCC's common stock and 150,000 PRCC warrants at its cost
to Total Software, Inc. ("TSI") for $112,500 in cash. Between January and June
1993, the Company sold 91,400 PRCC warrants on the open market for approximately
$43,623 and purchased 24,000 warrants for $9,900. In addition, the company sold
11,000 shares of PRCC's common stock for approximately $22,546. In addition,
14,002 shares of PRCC common stock were sold to Acquisition Advisors, Inc.
("AAI") for $28,004.
31
<PAGE>
In December 1993, ATG and its affiliates, TSI and AAI, agreed to convert
the amounts owed by TVC to TSI ($134,797) and AAI ($86,467) into shares of the
Company's common stock at the rate of $3.00 of debt for each share of stock. As
a result, ATG issued 44,948 shares of Common Stock to TSI and 28,832 shares of
Common Stock to AAI.
Between November 1993 and January 1994, ATG sold 75,334 shares of Common
Stock in a private placement for $3.00 per share. AAI purchased 40,000 shares
of the Common Stock in this private placement. Total net proceeds from the
offering amounted to $202,000, after deducting costs of $25,243 applicable to
the offering.
In December 1994, ATG sold 100,000 shares of Pollution Research and Control
Corp. ("PRCC") restricted Common Stock to PRCC at market price for $55,000 cash
and the removal of the trading restriction on the remaining 5,114 shares of
stock held by ATG. ATG realized a loss of approximately $92,000.
In 1994, Gregory W. L. Richter, Director and former President of the
Company, received a loan from the Company in the amount of $12,000. In December
1995, the Company accepted computer equipment from Mr. Richter as payment of
this loan.
In February 1995, the Company sold 5,114 shares of PRCC common stock on the
open market for approximately $3,350.
As of December 31, 1995, the Company owed $24,500 to TSI and $143,720 to
AAI. Substantially all of the assets of SRS, approximately $171,000, were
subject to a security interest in favor of TSI as a result of the Company's
loans from TSI.
On March 15, 1996, the SRS entered into a consulting agreement with Gregory
W.L. Richter, Director and former President of the Company, whereby Mr. Richter
would provide computer software engineering and design services in exchange for
compensation of $6,250 per month payable on the first of each month services are
desired.
The Company's Management believes that the terms of these transactions are
no less favorable to the Company than would have been obtained from an
unaffiliated third party in similar transactions. All future transactions with
affiliates will be on terms no less favorable than could be obtained from
unaffiliated third parties.
DESCRIPTION OF ATG SECURITIES
DESCRIPTION OF CAPITAL STOCK
COMMON STOCK. The Company is authorized to issue 10,000,000 shares of
Common Stock, $0.001 par value. As of March 31, 1996, the Company had 2,800,275
shares of Common Stock issued and outstanding. Holders of Common Stock are each
entitled to cast one vote for each share held of record on all matters presented
to shareholders. Cumulative voting is not allowed; hence, the holders of a
majority of the outstanding Common Stock can elect all directors.
Holders of Common Stock are entitled to receive such dividends as may be
declared by the Board of Directors out of funds legally available therefor and,
in the event of liquidation, to share pro rata in any distribution of the
Company's assets after payment of liabilities. The Board of Directors is not
obligated to declare a dividend and it is not anticipated that dividends will be
paid in the foreseeable future.
32
<PAGE>
Holders of Common Stock do not have preemptive rights to subscribe to
additional shares if issued by the Company. There are no conversion, redemption,
sinking fund or similar provisions regarding the Common Stock. All of the
outstanding shares of Common Stock are fully paid and non-assessable and all of
the shares of Common Stock offered hereby will be, upon issuance, fully paid and
non-assessable.
PREFERRED STOCK. The Company is authorized to issue 1,000,000 shares of
Preferred Stock. Under Delaware law, the rights, preferences, and limitations
of the Preferred Stock may be established from time to time by the Company's
Board of Directors. The Company's Certificate of Incorporation provides that
the Board of Directors has the authority to divide the Preferred Stock into
series and, within the limitations provided by Delaware statute, to fix by
resolution the voting power, designation preferences, relative participation,
optional or other special rights, and the qualifications, limitations or
restrictions of the shares of any series so established.
The Board of Directors is authorized to issue, without shareholders'
approval, Preferred Stock with voting or conversion rights that may adversely
affect the voting power of the Common Stock shareholders. The provisions
relating to the Company's Preferred Stock may make more difficult the removal of
management even if such removal would be considered beneficial to shareholders
generally, and may have the effect of limiting shareholder participation in
certain transactions such as mergers or tender offers whether or not such
transactions are favored by incumbent management. Because the Board of
Directors has authority to establish the terms of the Preferred Stock, it could
be issued to defend against an attempted takeover of the Company.
The Company does not have any present plans to issue shares of Preferred
Stock to any person.
ANTI-TAKEOVER LAW. The Company is currently subject to Section 203 of the
Delaware General Corporation Law ("Section 203"), which restricts certain
transactions and business combinations between a corporation and an "Interested
Stockholder" owning 15% or more of the corporation's outstanding voting stock,
for a period of three years from the date the stockholder becomes an Interested
Stockholder. Subject to certain exceptions, unless the transaction is approved
by the board of directors and the holders of at least 66.667% of the outstanding
voting stock of the corporation (excluding shares held by the Interested
Stockholder), Section 203 prohibits significant business transactions such as a
merger with, disposition of assets to or receipt of disproportionate financial
benefits by the Interested Stockholder, or any other transaction that would
increase the Interested Stockholder's proportionate ownership of any class or
series of the corporation's stock. The statutory ban does not apply if, upon
consummation of the transaction in which any person becomes an Interested
Stockholder, the Interested Stockholder owns at least 85% of the outstanding
voting stock of the corporation (excluding shares held by persons who are both
directors and officers or by certain employee stock plans). The Company plans
to amend its Certificate of Incorporation to be effective September 1, 1996, to
expressly elect not to be governed by Section 203. Approval will require an
affirmative vote of a majority of the shares entitled to vote. Management
believes that it controls sufficient shares to assure passage of the proposal.
LIMITATION OF LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS. The
Delaware Corporation Law and ATG's Certificate of Incorporation and Bylaws
authorize indemnification of a director, officer, employee or agent of the
Company against expenses incurred by him in connection with any action, suit, or
proceeding to which he is named a party by reason of his having acted or served
in such capacity, except for liabilities arising from his own misconduct or
negligence in performance of his duty. In addition, even a director, officer,
employee or agent of the Company who was found liable for misconduct or
negligence in the performance of his duty may obtain such indemnification if, in
view of all the circumstances in the case, a court of competent jurisdiction
determines such person is fairly and reasonably entitled to indemnification.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers, or persons controlling the Company pursuant
to the foregoing provisions, the Company has been informed that in the opinion
of the Securities and Exchange Commission, such indemnification is against
public policy as expressed in the Securities Act and is therefore unenforceable.
33
<PAGE>
STOCK TRANSFER AGENT. The transfer agent for the Common Stock is OTR,
Incorporated 1130 S.W. Morrison Street, Suite 250, Portland, Oregon 97205,
telephone 503-225-0375.
UNDERWRITING
The following is a summary of the principal terms of the Underwriting
Agreement among ATG and the underwriters named below (the "Underwriters"). The
form of the Underwriting Agreement is filed as an exhibit to the Registration
Statement, of which this Prospectus forms a part. This summary does not purport
to be complete and is subject to, and qualified in its entirety by reference to,
all of the provisions of the Underwriting Agreement, including the definitions
therein of certain terms, which provisions and definitions are incorporated
herein by reference. Subject to the terms and conditions of the Underwriting
Agreement, ATG has agreed to sell to the Underwriters, for whom Brookstreet
Securities Corporation is acting as representative (in such capacity, the
"Representative"), and the Underwriters have agreed to purchase, on a firm
commitment basis, the number of shares of Common Stock set forth opposite their
names below.
NAME NUMBER OF SHARES OF COMMON STOCK TO BE PURCHASED
---- ------------------------------------------------
Brookstreet Securities Corporation
Total 1,400,000
Brookstreet Securities Corporation has been in business for ten years. The
firm is a medium sized securities firm licensed in all 50 states, operating in
85 branch offices. The firm has almost 200 registered stockbrokers. It makes
markets in NASDAQ securities and has an experienced Investment Banking
Department. The firm has not managed any firm commitment offerings, but has
managed offerings on a "best-efforts" basis.
Prior to the Offering there was a small public market for the Common Stock.
The Offering price was determined as the result of negotiations between the
Company and the Representative based on a number of factors. While they
considered the price at which the Common Stock was trading on the NASDAQ
Bulletin Board, they did not view such price as dispositive of the true market
value of the Company because the Common Stock is thinly traded and subject to
widely varying prices in the over-the counter market.
Among the factors considered in determining the Offering price were (i) the
financial history of the Company; (ii) the estimated near and intermediate term
results of operations of the Company; (iii) the position of the Company in its
industry and its market niche; (iv) substantial research regarding the Company's
current financial condition, products, marketing efforts and customer
satisfaction; and (v) the growth potential of the Company and its industry.
ATG has granted an option to the Underwriters, exercisable during the 30
day period commencing on the date of this Prospectus, to purchase an aggregate
of up to an additional 210,000 shares of Common Stock at the public offering
price less underwriting discounts and commissions, for the sole purpose of
covering overallotments, if any. The Underwriters may exercise such
overallotment option in whole or in part. The shares of Common Stock are being
sold by the Company and offered by the Underwriters on a "firm commitment"
basis, subject to prior sale, when, as and if accepted by the Underwriters, and
subject to certain conditions. The Underwriters reserve the right to withdraw,
cancel or modify such offer and to reject orders in whole or in part.
The Underwriters are responsible for paying all fees and expenses incurred
by them. ATG, however, has agreed to pay the Underwriters a non-accountable
expense allowance equal to three percent of the gross proceeds received by ATG
from the sale of the shares of the Common Stock being offered hereby (including
from the sale of any shares sold as a result of the Underwriters' exercise of
the overallotment option). ATG has advanced to the Representative, on a non-
refundable basis, $42,000 to be applied against the non-accountable expense
allowance.
34
<PAGE>
The Company shall increase its Board of Directors to at least five, of
which a majority shall be outside directors. All directors must have such
qualifications as would generally be found for directors of similarly situated
public companies. Upon the closing of the offering, the Board of Directors of
ATG has agreed to appoint Daniel C. Montano, of Brookstreet Securities
Corporation, to the Board of Directors of the Company.
ATG has agreed to indemnify the Underwriters, any controlling person of an
Underwriter, and other persons related to the Underwriters and identified in the
Underwriting Agreement, against certain liabilities, including liabilities
arising (i) under the Securities Act, (ii) out of any untrue statement or
material fact contained in the Registration Statement, this Prospectus, any
amendments thereto, and certain other documents, or (iii) out of any omission of
a material fact required to be stated therein or necessary to make the
statements therein not misleading, unless the statement or omission is made in
reliance upon and in conformity with written information furnished to ATG by or
on behalf of the Underwriters for use in the document in which it was used.
In connection with the Offering, ATG has agreed to sell to the
Representative (in its individual capacity and not as representative of the
Underwriters), for nominal consideration, warrants ("Representative Warrants")
to purchase 140,000 shares of the Common Stock at $3.60 per share, subject to
adjustment upon the occurrence of certain events, including stock splits and
combinations, reclassifications, exchanges and substitutions relating to the
Common Stock. Such adjustments are not intended to give the Representative
greater rights or protection than given to public purchasers of the Common
Stock. The Representative Warrants are exercisable for a period of four years
commencing one year from the date of this Prospectus. The Representative
Warrants grant to the holders thereof certain rights with respect to the
registration under the Securities Act of the securities issuable upon exercise
of the Representative Warrants. From these Representative Warrants, counsel to
the Representative, Horwitz, Cutler & Beam ("HCB"), will receive warrants to
purchase $10,000 of the Common Stock at $3.60 per share and otherwise subject to
the same conditions as the Representative Warrants. The Representative Warrants
are nontransferable by the Representative for one year from the date of this
Prospectus, except to persons who are both officers and shareholders of the
Representative or transfers occurring by operation of law. The Representative
Warrants received by HCB are nontransferable by HCB for one year from the date
of this Prospectus, except to persons who are partners in HCB or transfers
occurring by operation of law.
The directors, officers and employees of ATG who are also shareholders of
ATG have entered into a contractual agreement with Brookstreet Securities
Corporation that restricts, for a period of two years from the effective date of
the registration statement for the Common Stock being offered hereby, their
ability to sell the Common Stock beneficially owned by them including stock
registered pursuant to any form SB-2 Registration Statement.
Brookstreet Securities Corporation does not currently make a market in any
of the Company's securities. In general, the rules of the Commission will
prohibit the Underwriters from making a market in the Common Stock during the
"cooling off" period immediately preceding the commencement of sales in the
offering. The Commission has, however, adopted exemptions from these rules that
permit passive market making under certain conditions. These rules permit an
underwriter to make a market subject to the conditions, among others, that its
bid not exceed the highest bid by a market maker not connected with the offering
and that its net purchases on any one trading day not exceed prescribed limits.
Pursuant to these exemptions, certain Underwriters, selling group members (if
any) or their respective affiliates intend to engage in passive market making in
the Common Stock during the cooling off period. However, the Representative
will not engage in any market making activities unless the Common Stock is
approved for listing on the Boston Stock Exchange.
The Company paid to Brookstreet Securities Corporation $17,000 in
connection with its efforts to solicit investors in the Company's 1995 Private
Placements. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources."
35
<PAGE>
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Common Stock has traded on the over-the-counter-market on the National
Association of Securities Dealers, Inc.'s Electronic Bulletin Board since May
12, 1994. The following table sets forth the quarterly high and low bid prices
of ATG's Common Stock as quoted by the NASD's Electronic Bulletin Board. These
quotations represent the prices between dealers in securities, do not include
retail mark-ups, mark-downs or commissions and do not necessarily represent
actual transactions.
<TABLE>
<CAPTION>
COMMON STOCK HIGH LOW VOLUME
- ------------ ---- --- ------
Fiscal Quarter Ended:
- --------------------
<S> <C> <C> <C>
June 30, 1994 $10.19 $ 4.19 164,500
September 30, 1994 $12.00 $ 4.00 75,600
December 31, 1994 $12.00 $ 3.00 47,600
March 31, 1995 $ 3.75 $ 0.25 25,000
June 30, 1995 $ 4.50 $ 1.00 56,000
September 30, 1995 $ 1.00 $ 1.00 22,900
December 31, 1995 $ 1.00 $ 0.377 9,100
March 31, 1996 $ 1.25 $ 0.38 49,800
June 30, 1996 $ 4.00 $ 0.625 46,800
</TABLE>
As of March 31, 1996, there were 718 holders of record of the Common Stock.
Because some of the shares of Common Stock are held in street name, the number
of beneficial holders of common stock may be much higher.
Holders of common stock are entitled to dividends when, and if, declared by
the Board of Directors out of funds legally available for such purpose. No
dividends have been declared or paid with respect to the Common Stock, and no
cash dividends are anticipated to be declared or paid in the foreseeable future.
LEGAL MATTERS
The legality of the Common Stock being offered hereby will be passed upon
for the Company by Thelen, Marrin, Johnson & Bridges, 333 South Grand Avenue,
34th Floor, Los Angeles, California 90071. Certain legal matters will be passed
upon for the Underwriters by Horwitz, Cutler & Beam, Irvine, California.
36
<PAGE>
EXPERTS
The audited financial statements of the Company as of December 31, 1994 and
December 31, 1995, and for the years then ended have been examined by Allen P.
Fields, Certified Public Accountant, for the periods and to the extent set forth
in the reports and have been included herein in reliance upon such reports of
said accountant given on his authority as an expert in accounting and auditing.
SEC POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
The Delaware Corporation Law and ATG's Articles of Incorporation and Bylaws
authorize indemnification of a director, officer, employee or agent of ATG
against expenses incurred by him in connection with any action, suit, or
proceeding to which he is named a party by reason of his having acted or served
in such capacity, except for liabilities arising from his own misconduct or
negligence in performance of his duty. In addition, even a director, officer,
employee or agent of ATG who was found liable for misconduct or negligence in
the performance of his duty may obtain such indemnification if, in view of all
the circumstances in the case, a court of competent jurisdiction determines such
person is fairly and reasonably entitled to indemnification. Insofar as
indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers, or persons controlling ATG pursuant to the
foregoing provisions, ATG has been informed that in the opinion of the
Commission, such indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable.
In the event that a claim for indemnification against such liabilities
(other than payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the Company in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Company will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
37
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S> <C>
Independent Auditor's Report...................................................................... F-1
Consolidated Balance Sheets as of December 31, 1995, and 1994 (audited) and three month
period ended March 31, 1996 and 1995 (unaudited).................................................. F-2
Consolidated Statement of Operations for each of the two years ended December 31, 1995
and 1994 (audited) and three month period ended March 31, 1996 and 1995 (unaudited)............... F-3
Consolidated Statement of Stockholders' Equity for each of the two years ended December 31, 1995
and 1994 (audited) and three month period ended March 31, 1996 (unaudited)........................ F-4
Consolidated Statements of Cash Flows for each of the two years ended December 31, 1995
and 1993 (audited) and three month period ended March 31, 1996 and 1995 (unaudited)............... F-5
Notes to Consolidated Financial Statements for the two years ended December 31, 1994 and 1995..... F-6
</TABLE>
38
<PAGE>
Allen P. Fields
Certified Public Accountant
1801 Piedmont Avenue, Suite 103
Atlanta, Georgia 30324
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Atlanta Technology Group, Inc.:
I have audited the accompanying consolidated balance sheets of Atlanta
Technology Group, Inc. and Subsidiaries (formerly Time Value Corporation)(the
"Company") as of December 31, 1995 and 1994 and the related consolidated
statements of operations, stockholders' equity and cash flows for the years then
ended. These financial statements are the responsibility of the Company's
management. My responsibility is to express an opinion on these financial
statements based on my audits.
I conducted my audits in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audits provide a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of the Company as of December 31, 1995
and 1994 and the results of its operations and its cash flows for each of the
two years then ended in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 3 to the
financial statements, the Company has incurred losses from operations during
each year since inception that raise substantial doubt about its ability to
continue as a going concern. Management's plans in regards to these matters are
also described in Note 3. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Allen P. Fields
March 18, 1996
F-1
<PAGE>
ATLANTA TECHNOLOGY GROUP, INC.
(Formerly Time Value Corporation)
Consolidated Balance Sheet
<TABLE>
<CAPTION>
December 31 December 31 March 31 March 31
1995 1994 1995 1996
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
ASSETS(Note 3)
- --------------
Current Assets
- --------------
Cash $ 53,187 $ 21,994 $ 27,375 $ 32,170
Accounts receivable - trade, net of allowance
for doubtful accounts of $12,000 at
December 31, 1995 and 1994 and March 31,
1995 and 1996, respectively 166,481 214,754 106,262 201,016
Inventory 19,513 10,435 5,564 20,550
Due from officer and director - 12,000 12,000 -
Other current assets (Note 4) 5,755 21,000 19,865 5,037
----------- ----------- ----------- -----------
Total Current Assets 244,936 280,183 171,066 258,773
Equipment, Fixtures, and Computers
- ----------------------------------
Equipment, fixtures and Computers, net of
accumulated depreciation of $104,516, and
$61,578, at December 31, 1995 and 1994
and $57,058 and $114,052 for March 31,
1995 and 1996, respectively 130,136 133,256 144,663 123,912
Other Assets
- ------------
Software development costs, net of accumulated
amortization of $84,787, $27,889 at
December 31, 1995 and 1994 and $40,348
and $101,743 for March 31, 1995 and 1996,
respectively, (Notes 2 and 5) 451,617 511,256 558,617 547,860
Investments (Note 6) - - - -
Deferred offering costs (Note 12) 130,025 - - 139,851
Other Assets (Note 9) 69,817 20,465 28,467 26,140
----------- ----------- ----------- -----------
Total Assets $ 1,026,531 $ 945,160 $ 902,813 $ 1,096,536
=========== =========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current Liabilities
- -------------------
Notes payable - (10%) (Note 7) $ 160,000 - - $ 160,000
Notes payable - (12%) (Note 7) 350,000 - - 400,000
Notes payable-other (Note 7) 82,800 $ 15,000 - 156,200
Notes payable to affiliates (Note 1C) 168,220 200,700 $ 249,380 151,152
Accounts payable - trade 221,827 193,590 130,768 305,883
Accrued salaries and payroll taxes payable 26,090 54,489 67,604 18,672
Accrued interest payable 27,509 450 - 19,500
Other current liabilities 75,447 12,200 - 115,253
----------- ----------- ----------- -----------
Total Current Liabilities 1,111,893 476,429 447,752 1,326,660
Note Payable - Non-current (Note 7) 50,000 - 85,000 -
- -----------------------------------
Minority Interests (Note 1B) - 66,667 66,667 -
- ------------------
Commitments and Contingencies (Notes 10 and 11) - -
- -----------------------------
Stockholders' Equity (Notes 1,2,9 and 12)
- --------------------
Common stock 2,800 2,795 2,795 2,800
Additional paid-in capital 2,520,783 2,371,338 2,371,338 2,520,783
Retained earnings (deficit) (2,658,945) (1,972,069) (2,070,739) (2,755,707)
----------- ----------- ----------- -----------
Total Stockholders' Equity (135,362) 402,064 303,394 (232,124)
----------- ----------- ----------- -----------
Total Liabilities and Stockholders' Equity $ 1,026,531 $ 945,160 $ 902,813 $ 1,096,536
=========== =========== =========== ===========
</TABLE>
See notes to financial statements.
F-2
<PAGE>
ATLANTA TECHNOLOGY GROUP, INC.
(Formerly Time Value Corporation)
Consolidated Statement of Operations
<TABLE>
<CAPTION>
Years Ended Quarter Ended
December 31 December 31 March 31 March 31
1995 1994 1995 1996
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Revenues $1,559,701 $ 1,023,414 $ 274,850 $ 410,476
Cost of Sales 649,426 539,970 120,526 162,134
---------- ----------- ---------- ----------
Gross Profit 910,275 483,444 154,324 248,342
Operating Expenses
Selling, general and administrative 1,501,544 1,145,129 249,880 249,204
Research and development - 169,737 - -
Depreciation and amortization 110,409 33,416 4,779 76,400
Interest 51,865 594 - 19,500
---------- ----------- ---------- ----------
Total Operating Expenses 1,663,818 1,348,876 254,659 345,104
---------- ----------- ---------- ----------
Loss from operations (753,543) (865,432) (100,335) (96,762)
Other income
(Loss) gain on sale of securities - (325,947) - -
---------- ----------- ---------- ----------
Loss before taxes, minority interests and
investments accounted for under the equity
method (753,543) (1,191,379) (100,335) (96,762)
Provision for taxes (Notes 2 and 8) - - - -
---------- ----------- ---------- ----------
Loss before minority interests and investments
accounted for under the equity method (753,543) (1,191,379) (100,335) (96,762)
Minority interests 66,667 82,630 - -
---------- ----------- ---------- ----------
Loss before investments accounted for
under the equity method (686,876) (1,108,749) (100,335) (96,762)
Loss from investments accounted for under
the equity method - (105,000) - -
Net loss $ (686,876) $(1,213,749) $ (100,335) $ (96,762)
========== =========== ========== ==========
Weighted average number of
common shares outstanding 2,948,525 2,732,525 2,795,275 2,949,581
========== =========== ========== ==========
Loss per common share (Note 2) $(.23) $(.44) $(.04) $(.03)
========== =========== ========== ==========
</TABLE>
See notes to financial statements.
F-3
<PAGE>
ATLANTA TECHNOLOGY GROUP, INC.
(Formerly Time Value Corporation)
Consolidated Statement of Stockholders' Equity
Years Ended December 31, 1995 and 1994
(Audited)
and
Three Month Period Ended March 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID - IN RETAINED
STOCK CAPITAL EARNINGS TOTAL
<S> <C> <C> <C> <C>
Balance, January 1, 1994 2,669 $1,802,084 $ (758,320) $ 1,046,433
Issuance of 10,000 shares in a private
placement 10 29,990 30,000
Issuance of 2,000 shares in exchange
for research and development services 2 8,378 8,380
Issuance of 114,000 shares upon the
exercise of employee stock options 114 529,886 530,000
Cancellation of costs charged against
equity in prior year relating to private
placement 1,000 1,000
Net loss (1,213,749) (1,213,749)
----------- -----------
Balance, December 31, 1994 2,795 2,371,338 (1,972,069) 402,064
Issuance of 5,000 shares in exchange
for marketing services 5 14,995 15,000
Issuance of 171,996 warrants to
purchase common stock 134,450 134,450
Net loss (686,876) (686,876)
----------- -----------
Balance, December 31, 1995 2,800 2,520,783 (2,658,945) (135,362)
Net loss (96,762) (96,762)
Balance, March 31, 1996 $2,800 $2,520,783 $(2,755,707) $ (232,124)
====== ========== =========== ===========
</TABLE>
See notes to financial statements
F-4
<PAGE>
ATLANTA TECHNOLOGY GROUP, INC.
(Formerly Time Value Corporation)
Consolidated Statement of Cash Flows
<TABLE>
<CAPTION>
Years Ended Quarter Ended
December 31 December 31 March 31 March 31
1995 1994 1995 1996
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $(686,876) $(1,213,749) $(100,335) $ (96,762)
Adjustments to reconcile net loss to net
cash provided (used) by operating activities:
Depreciation and amortization 367,307 398,478 17,238 93,157
Minority interest share of loss (66,667) (82,630) - -
Realized loss on investments - 325,947 - -
- ----------------------------
Loss incurred in connection with the
- ------------------------------------
rescission of a former subsidiary - 119,000 - -
- ---------------------------------
Changes in operating assets and liabilities
Decrease (Increase) in accounts receivable-trade net 48,273 (184,055) 108,492 (34,534)
Increase in account payable-trade, net 28,237 147,939
Decrease (Increase) in other assets 19,579 (6,566) 7,671 (319)
Increase in other liabilities 61,907 21,136 (61,907) 110,434
--------- ----------- --------- ---------
Net cash used by operating activities (228,240) (474,500) (28,841) 71,976
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease in marketable securities and investments 3,095 47,705
Additions to equipment, fixtures, and computers (39,818) (103,430) (16,186) (3,312)
Additions to software development costs (197,259) (240,035) (59,820) (113,199)
--------- ----------- --------- ---------
Increase(decrease) in other noncurrent assets - - (8,002) 12
--------- ----------- --------- ---------
Net cash used by investing activities (233,982) (295,760) (84,008) (116,499)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuance of notes payable, net 604,800 - - 73,400
Proceeds from the issuance of common stock 15,000 568,380 - -
Proceeds from the payment of stock subscriptions - 45,000 - -
Costs associated with common stock offering (107,025) - - (32,826)
Decrease (increase) in borrowing from affiliates (32,480) 185,150 - -
Decrease in loans to officers 12,000 (12,000) - -
Payments on notes to affiliates (118,230) (17,068)
Other equity changes 1,120 1,000 - -
--------- ----------- --------- ---------
Net cash provided (used) by financing activities: 493,415 787,530 (118,230) (23,506)
Net increase (decrease) in cash 31,193 17,270 5,381 (21,017)
Cash at beginning of period 21,994 4,724 21,994 53,187
--------- ----------- --------- ---------
Cash at end of period $ 53,187 $ 21,994 $ 27,375 $ 32,170
--------- ----------- --------- ---------
SUPPLEMENTAL DISCLOSURE OF
CASH FLOWS
Taxes paid during the period 0 0 0 0
Interest paid during the period 24,000 594 19,500
</TABLE>
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES: See Notes
1,2,9 and 11 of Notes to Financial Statements
See notes to financial statements
F-5
<PAGE>
ATLANTA TECHNOLOGY GROUP, INC.
(Formerly Time Value Corporation)
Notes to Consolidated Financial Statements
For the Two Years Ended
December 31, 1995 and 1994
1. ORGANIZATION AND INTERCORPORATE RELATIONSHIPS
(A) THE COMPANY
Atlanta Technology Group, Inc. ("the Company") was incorporated under the laws
of the State of Delaware in October 1993. The Company changed its name from
Time Value Corporation in February 1994. The Company is also a successor to FSQ
Systems Corp. (incorporated in New York State in April 1993) ("FSQ") and is the
parent company of a Georgia corporation also named Time Value Corporation ("TV-
GA"). TV-GA was incorporated in June 1991 under the name Converging Systems,
Inc. ("CSI") which was merged into TV-GA on September 1, 1993.
(B) MERGERS AND ACQUISITIONS
On September 13, 1993, TV-GA acquired 3,300,000 shares of the issued and
outstanding common shares of FSQ (approximately 82%) for $14,000 in cash. On
October 25, 1993, FSQ was merged into the Company on the basis of 36 shares of
FSQ for one share of the Company's common stock. The Company then approved a
Plan of Reorganization ("the Plan") with TV-GA. Under the terms of the Plan,
the Company issued 2,010,000 shares of its common stock to the shareholders of
TV-GA in exchange for all of the issued and outstanding shares of TV-GA
(1,005,000 shares). As the result of this two for one exchange of shares; 1)
all prior transactions involving the Company's common stock are shown as double
the number of shares actually involved, and 2) TV-GA became a wholly-owned
subsidiary of the Company. The merger of FSQ into the Company and the
acquisition of TV-GA have been accounted for as a recapitalization and,
accordingly, the financial statements have been restated to reflect the merged
operations for all periods presented.
On May 12, 194, the Company acquired all the issued and outstanding shares of
Silver Ridge Software Inc. ("SRS"), in exchange for 500,000 shares of the
Company's common stock. This transactions was accounted for as a pooling of
interests and, accordingly, the financial statements have been restated for all
periods presented. SRS, a software development and consulting firm, was
previously an affiliate of the Company. The Company and SRS shared common
management and office facilities during 1995 and 1994 (Note 8).
SRS was incorporated in August 1993 under the laws of the state of Georgia by
Axis Capital, AG and Einzelhaft Partners, AG, which contributed certain computer
software technology in exchange for the SRS shares. In September 1993, SRS
incorporated Avionics One, Inc. ("AVI") as a wholly-owned subsidiary and
transferred a portion of the computer technology to AVI in exchange for all of
the outstanding common stock of AVI.
SRS then exchanged one third of its ownership in AVI for 133,333 shares of the
common stock of the Company (prior to the Company's stock becoming publicly
traded). SRS then sold the 133,333 shares of the Company to an unrelated third
party for 78,750 shares of US Pawn Inc., whose shares are traded on the NASDAQ
exchange. The value of theses shares (on the dates they were received) of
$149,000 was used as a basis in the valuation of the computer technology owned
by AVI. In 1994, the Company reduced the carrying value of this technology to
$200,000 with a corresponding charge to earnings. In 1995, the Company further
reduced the carrying value to zero with a corresponding charge to earnings.
In May 1994, the Company issued 100,000 shares of its common stock to the owners
of Millennium Global, Inc. ("MGI") which operated an on-line computer service,
in exchange for all of the issued and outstanding stock of MGI. In September
1994, the Company rescinded the acquisition of MGI, returned the MGI stock to
the former owners and received in return the 100,000 shares of the Company's
common stock previously issued. In addition, the Company entered into an asset
purchase agreement with MGI whereby the Company, as a secured creditor,
F-6
<PAGE>
purchased certain assets of MGI, including the computer hardware and software,
in exchange for the cancellation of certain notes held by the Company totaling
approximately $125,000. The assets acquired by the Company were recorded at
their fair market value at the time of acquisition (approximately $6,000) and
the excess of the purchase price over the fair market value has been charged
against earnings.
In February 1994, SRS acquired 47.5% of the issued and outstanding shares of
Lightwave Technology Inc. (which subsequently changed its name to Fiberoptic
Atlanta, Inc. ("FOA") for $100,000 in cash for the purpose of developing and
manufacturing plastic optical fiber for use in communications and data
transmissions. Since FOA has not begun to generate revenues, the Company has
assigned a zero basis to its investment.
(C) AFFILIATED COMPANIES AND RELATED PARTIES
Hale R. Spiegelberg is Chairman of the Board and Chief Executive Office of the
Company. He is also the President and sole director of Total Software Inc.
("TSI") and Acquisition Advisors Inc. ("AAI"), affiliates and shareholders of
the Company with whom the Company has had numerous business transactions.
During 1994, the Company borrowed $333,000 and repaid $150,000 to these two
affiliates. During 1995, the Company borrowed $14,000 and repaid $46,000 to
these two affiliates. At December 31, 1995, substantially all of the assets of
SRS, approximating $171,000 were subject to a security interest in favor of TSI.
TSI currently owns a total of 644,948 shares or 23% of the issued and
outstanding shares of the Company. Pollution Research and Control Corp.("PRCC"),
a publicly traded company with whom the Company has had numerous business
dealing, owns 400,000 shares or 14.3% of the issued and outstanding shares. AAI
currently owns a total of 568,832 shares or 20.3% of the issued and outstanding
stock of the Company. Axis Capital AG and Einzelhaft Partners AG, the former
shareholders of SRS, own a combined total of 600,000 shares or 21.4% of the
issued and outstanding shares of the Company. In addition, Axis Capital has
entered into a consulting agreement with SRS whereby Axis Capital agreed to
furnish certain computer software engineering services to support the
development of an on-line information system for SRS. The term of this contract
is for one year, beginning June 1, 1994 at a total cost of $62,496.
In September 1993, Hale R. Spiegelberg and Greg Richter (President of SRS)
entered into contracts with an unrelated third party to develop and design
certain computer software and hardware systems. The work was performed by
employees of SRS or by independent contractors paid by SRS. Upon completion of
the contract in January 1994, Messrs. Spiegelberg and Richter paid to SRS the
entire amount received as compensation under the contracts. Mr. Richter resigned
as President of the Company and as President of SRS effective March 15, 1996.
(D) OPERATIONS AND INDUSTRY CONCENTRATION
The Company currently operates through its two subsidiaries, TVC and SRS, which
are about equal in size based on sales. TVC products include a computer
generated system for healthcare practitioners using a microcomputer, printer,
optical mark scanner, and scannable forms to generate individualized
correspondence, reports to patients, doctors, and insurance companies and to
maintain a record of diagnosis and recommended treatment. TVC currently sells
this product to chiropractors, neck and back pain clinics, and spinal clinics
throughout the United States. SRS is a computer consulting and software
engineering firm that provides customized software solutions and contract
engineering services to customers throughout the United States in a wide variety
of industries..
TVC currently purchases all its optical mark scanner from one supplier and its
scannable forms from two suppliers. Although there is a limited number of
suppliers of these products, management believes that other suppliers could
provide similar products on comparable terms. However, a change in suppliers
could cause a delay in shipments, and a possible loss of sales which would
adversely effect operations.
F-7
<PAGE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Accrual accounting
- ------------------
The Company uses the accrual method of accounting for financial accounting
reporting purposes.
Marketable Securities
- ---------------------
Effective January 1, 1994, the Company adopted Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities" ("SFAS 115"). Under SFAS 115, securities held principally for the
purpose of selling them in the near future are classified as "trading
securities" and are reported a fair market value as of the balance sheet date.
All realized and unrealized gains and losses during the period are included in
the consolidated statement of operations. Securities classified as "available
for sale securities" are reported at fair market value as of the balance sheet
date with unrealized gains and losses excluded from the consolidated statement
of operations and reported as a separate component of shareholders' equity.
Inventories
- -----------
Inventories are stated at the lower of cost (first-in, first-out basis) or
market and consist primarily of optical scanning forms.
Depreciation of Equipment, Fixtures, and Computers
- --------------------------------------------------
Equipment, Fixtures and Computers are recorded at cost and depreciation is
provided using the straight-line method by charges to operations over the
estimated useful lives of the various classes of depreciable assets ranging from
three to five years.
Capitalized Software Development Costs
- --------------------------------------
Capitalized software development costs are amortized on a product-by-product
basis by charges to operations beginning when a product becomes available for
sale. Amortization is computed either 1) on a straight-line method over the
remaining economic useful life of the product (estimated to be five years) or,
2) the amount computed using the ratio that current gross revenues for a product
bear to the total of current and anticipated future gross revenues for that
product, whichever is greater.
Revenue Recognition
- -------------------
Revenues from the sale of computer hardware and software products are recognized
upon delivery to customers (provided that collection of the receivable is deemed
probable) since the Company has no significant remaining obligation subsequent
to delivery. Insignificant obligations remaining after delivery are accrued.
Revenues from annual customer maintenance fees are recognized ratably over the
period of the maintenance contracts.
Income Taxes
- ------------
Effective January 1, 1993, the Company adopted Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes"("SFAS") which requires an asset
and liability approach to financial accounting and reporting for income taxes.
Under SFAS 109, deferred tax assets and liabilities are provided for differences
between the financial statement and tax bases of assets and liabilities that
will result in future taxable or deductible amounts. The deferred tax assets
and liabilities are measured using the enacted tax laws and rates applicable to
the periods in which the differences are expected to affect taxable income.
Income tax expense is computed as the tax payable or refundable for the period
plus or minus the change during the period in deferred tax assets and
liabilities.
Earnings (loss) per share
- -------------------------
Earnings or loss per share are computed by dividing the net income or loss by
the weighted average number of common stock and common stock equivalents
outstanding during the period. Common stock equivalents have been excluded from
the computation if the effect of their inclusion would be anti-dilutive.
Use of Estimates
- ----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
F-8
<PAGE>
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
Change in Presentation
- ----------------------
Certain amounts in the prior year statements have been reclassified to conform
with the 1995 presentation.
3. GOING CONCERN DISCLOSURE
The Company has incurred losses since its inception and has a negative net worth
and negative working capital at December 31, 1995. Since the Company has no
long-term financing in place, it must rely on its own financial resources and
those of its affiliates and/or its stockholders to provide the necessary funds
to sustain operations until the Company begins to make its products on a
profitable basis. Management has developed a plan to achieve profitability and
projects that the Company will break-even in May 1996. Management's plan
includes 1) diversification of existing product lines, 2) enhancement of
existing product lines, 3) expansion of the geographical area in which it
operates and 4) raising capital through securities offerings (Note 12).
Management believes that its profitability plan will provide sufficient funds to
meet the Company's cash requirements during the next twelve months.
4. MARKETABLE SECURITIES
Marketable securities (included in other current assets) are as follows:
<TABLE>
<CAPTION>
1995 1994
----- ------
<S> <C> <C>
PRCC Underwriter's Unit Purchase Warrant
Equal to 102 warrants in 1995 and 1994 $ 37 $ 12
PRCC common stock, 5,114 share in 1994 - 3,119
----- ------
Total $ 37 $3,132
===== ======
</TABLE>
During 1994, SRS sold the 78,750 shares of US Pawn Inc. received in exchange for
133,333 shares of common stock of the Company for a total of $103,700 and
realized a loss of approximately $39,000.
In February 1994, the Company sold 1,000 shares of Pacific Animated Imaging
Corp. for its approximate cost.
In December 1994, the Company sold 100,000 shares of PRCC restricted stock to
PRCC for $55,000 and the removal of the trading restriction on the remaining
5,114 shares held by the Company. The Company realized a loss of approximately
$92,000 on the sale of the PRCC shares. In February 1995, the Company sold the
5,114 shares of PRCC at its approximate carrying value.
5. CAPITALIZED SOFTWARE DEVELOPMENT COSTS
Capitalized software development costs represent expenses incurred in producing
and enhancing product masters subsequent to establishing the "technological
feasibility" of the products, as that term is defined in the Statement of
Financial Accounting Standards No. 86. Capitalization of costs ceases when a
product is available for general release to customers. The Company produces a
complete working model of the product to establish technological feasibility.
The Company is currently distributing three product modules to customers, two of
which are fully amortized. Amortization included in cost of sales during 1995
and 1994 amounted to $256,898 and $117,171 respectively.
F-9
<PAGE>
6. INVESTMENTS
Investments include the common stock of a subsidiary of PRCC. At December 31,
994, the Company reduced the carrying value of this investment from its original
cost of $195,000 to zero with a corresponding charge to income. Since this
security is not publicly traded, its fair market value is not readily
determinable.
7. NOTES PAYABLE
During 1995, the Company borrowed $560,000 in two separate private placement
offerings. The first offering, ending in August 1995, included $160,000 in
notes payable bearing interest at 10% per annum and due 18 months from the date
of issuance. One of these notes in the amount of $50,000 is due in February
1997 and, accordingly, is classified as a noncurrent liability at December 31,
1995. In connection with this transaction, the Company issued to the
noteholders warrants to purchase 38,000 shares of common stock at $5.00 per
share for a total consideration of $320. In January 1996, the Company exchanged
a warrant to purchase 10,000 shares of common stock at $5 per share with a
warrant to purchase 16,666 shares of common stock for $100.
The second private placement, ending in September 1995, included $400,000 in
notes payable bearing interest at 12% per annum and due six months from the date
of issuance. Noteholders were also issued a warrant to purchase a Convertible
Adjustable Secured Bond ("CAS Bonds") in the amount of $50,000 for a total
consideration of $800. In January 1996, the Company exchanged each warrant to
purchase CAS Bonds in the face amount of $50,000 for a warrant to purchase
16,666 shares of common stock for $100.
Costs associate with these private placements amounting to $47,000 have been
capitalized as deferred offering costs and are being amortized over the term of
the notes to interest expense. The amount charged to income was $24,000 in
1995. Also included in deferred offering costs in the consolidated balance
sheet are expenses incurred in connection with the Company's proposed common
stock offering amounting to $107,025 (See Note 12).
Notes payable - other is comprised of the following:
<TABLE>
<CAPTION>
<S> <C>
10% demand note payable to an employee $15,000
8.5% note payable to Supermail International
Inc. due May 22, 1995 $30,000*
Settlement agreement with Gregory Row, payable
in ten equal monthly installments without
interest $ 1,800
Non-interest bearing note due March 19, 1996 $36,000
-------
Total $82,800
</TABLE>
* Supermail International Inc. has verbally extended the maturity date until the
effective date of the public offering (See Note 12).
8. INCOME TAXES
At December 31, 1995 and 1994, the Company has approximately $2,820,000 and
$2,066,000 respectively, of net operating losses for income tax purposes which
are available for offset against future taxable income, subject to certain
limitations. Such losses expire in the years 1006 through 2010. At December
31, 1995 and 1994, deferred tax assets of approximately $231,500 and $405,000
exist principally with respect to these net operating losses. Based on an
assessment of all available evidence as of December 31,1995, management has
concluded that these deferred tax assets should be reduced by valuation
allowances equal to the amounts of the deferred tax assets. No tax benefits are
recognized in the financial statements presented since the realization of future
taxable income cannot be assured.
F-10
<PAGE>
9. COMMON STOCK
The Company is authorized to issue up to 10,000,000 shares of common stock, par
value $.001. At December 31, 1995 and December 31, 1994, 2,800,275 shares and
2,795,275 shares were issued and outstanding. Each share is fully paid and
nonassessable and entitled to one vote. Stockholders do not have cumulative
voting rights for the election of directors, nor do they have any preemptive
rights to receive additional shares, should any be issued.
In November 1993, the Company completed a private stock placement by offering up
to 250,00 shares of its common stock to potential investors at an offering price
of $3.00 per share. As of December 31, 1993, subscriptions for 65,334 share
were received, of which 50,334 were fully paid and 15,000 remained unpaid (these
were subsequently paid for in January 1994. Total net proceeds from the
offering amounted to $202,000, after deducting costs of $25,243 applicable to
the offering.
In May 1994, the Company acquired SRS and issued 500,000 shares of its common
stock to the former owners of SRS in exchange for all the issued and outstanding
common stock of that company. Note 1B).
In August 1994, the Company, in connection with the rescission of MGI, issued
2,000 shares of its common stock to one of the owners of MGI in exchange for
certain computer software not included in the Asset Purchase Agreement. (Note
1B). This transaction was recorded at the fair market value on the date of
issuance by a charge against income.
The following table summarizes the issuance of shares of common stock pursuant
to an option agreement with an employee during 1994.
<TABLE>
<CAPTION>
OPTION EXERCISE PRICE
---------------------
NUMBER OF OPTIONS PER SHARE TOTAL
----------------- --------- -----
<S> <C> <C> <C>
Outstanding January 1, 1994 $0 $ 0
Granted 20,000 3 60,000
Granted 180,000 5 900,000
Exercised (20,000) 3 (60,000)
Exercised (94,000) 5 (470,000)
------- ---------
Outstanding December 31, 1994 86,000 430,000
Outstanding December 31, 1995 86,000 430,000
</TABLE>
At December 31,1995, all of the outstanding options were exercisable and expire
on May 10, 1999. At December 31, 1995, there were warrants outstanding to
purchase 171,996 shares of common stock, which expire on various dates through
January 2001.(Note 7). The warrants were recorded by a credit to Paid-in
Capital in the amount of $134,000, the approximately fair market value at dates
of issuance with a corresponding charge to Other Noncurrent Assets. This amount
is being amortized over the life of the loans received from the warrant holders.
Amortization for 1995 amounted to approximately $67,000.
10. COMMITMENTS AND CONTINGENCIES
The Company has two operating leases currently in effect. One expires in May
1996 and the other in December 1999. Rental expense under these operating
leases amounted to $93,638 and $84,461 for 1995 and 1994, respectively. Future
minimum rental payments are as follows: 1996-$60,970; 1997 through 1999 -
$46,330 per year.
F-11
<PAGE>
The Company has four distributorship agreements in effect whereby the Company
has agreed to pay specified amounts or percentages of sales to the distributors
in exchange for their marketing services. All amounts paid or owed under these
agreements are included in cost of sales in the Consolidated Statement of
Operations.
Under an agreement with Markson Management Services Inc. ("Markson"), the
Company is obligated to pay a royalty of 25% on the sale of chiropractic
software and 5% of the revenue from the sale of all chiropractic forms,
regardless of whether such sales result from the efforts of Markson.
Under an agreement with Activator Methods, Inc. ("Activator"), the Company is
obligated to pay booth rental fees in the amount of $500 for each sale of the
chiropractic software made at its conferences. In adition, after the first 20
chiropractic software units are sold by Activator, the Company is obligated to
pay a fee of 5% of the revenue for the sale of forms sold to customers generated
through the efforts of Activator.
Under the remaining two agreements, the Company is only obligated to pay booth
rental fees in the amount of $500 for each sale of medical software made at each
trade conference conducted by the distributor.
11. SETTLEMENT OF LEGAL MATTERS
On May 6, 1994, an action was commenced in the Superior Court, Fulton County,
Georgia, entitled Fiberoptic Atlanta, Inc. vs. Atlanta Technology Group, Inc.,
Silver Ridge Software Inc., Greg Richter and Hale R. Spiegelberg. On June 13,
1995, the parties entered into a settlement agreement whereby all lawsuits were
dismissed and the parties agreed to share ongoing costs pending the sale of the
assets of FOA. The Company's share of these estimated future costs in the
amount of $6,000 has been accrued at December 31, 1994. During 1995, no
additional costs were incurred relating to the sale of these assets.
During 1995, the Company was the defendant in an action in Pinellas County
Court, Florida entitled Gregory S. Roe vs. Hale Spiegelberg and Atlanta
Technology Group, Inc. This action was settled in December 1995 and the Company
agreed to pay Mr. Roe a total of $2,000 payable in ten consecutive monthly
payments to settle this suit. At December 31, 1995, all remaining payments have
been accrued. The Company is not currently involved in any other significant
legal proceedings.
12. SUBSEQUENT EVENTS
On January 12, 1996, the Company filed a registration statement with the
Securities and Exchange Commission to register 1,610,000 shares of common stock
at $3.00 per share pursuant to a public offering of common stock. In connection
with this registration statement, the Company has incurred costs of $130,025
which are shown as Deferred Offering Costs on the Consolidated Balance Sheet.
Upon the successful completion of the offering, these costs will be charged
against the proceeds received. If the offering is not completed, these costs
will be expensed by a charge in the Consolidated Statement of Operations.
In February 1996, the Company borrowed $24,000 from an unaffiliated third party,
without interest, due in May 1996.
In February 1996, the Company also borrowed $50,000 on a 12% promissory note due
in August 1996.
Through February 1996, the Company repaid $7,000 to Acquisition Advisors, Inc.,
an affiliate.
F-12
<PAGE>
============================================================================
No person has been authorized to
give any information or to make any
representation in connection with
the offer contained in this
Prospectus unless preceded or
accompanied by this Prospectus nor
has any person been authorized to
give any information or to make any
representation other than those
contained in this Prospectus in
connection with the offer contained
in this Prospectus, and, if given
or made, such information or
representations must not be relied
upon. This Prospectus does not
constitute an offer or solicitation
in any jurisdiction. Neither the
delivery of this Prospectus nor any
sale made hereunder shall under any
circumstances create an implication
that there has been no change in
the affairs of the company since
the date hereof. However, if any
material change occurs while this ATLANTA
Prospectus is required by law to be TECHNOLOGY
delivered, this Prospectus will be GROUP, INC.
amended or supplemented accordingly.
______________________
TABLE OF CONTENTS
Page
----
Prospectus Summary.....................
Summary Financial Data................. 1,400,000 shares of Common Stock
Risk Factors...........................
Use of Proceeds........................
Penny Stock Regulation.................
Dividend Policy........................
Capitalization.........................
Dilution............................... ______________________
Management Discussion and Analysis of PROSPECTUS
Financial Condition and Results of ______________________
Operations...........................
The Company............................
Management and Control Persons.........
Certain Relationships and Related
Transactions..........................
Description of ATG Capital Stock.......
Underwriting........................... BROOKSTREET SECURITIES CORPORATION
Market for Common Equity and Related
Stockholder Matters...................
Legal Matters..........................
Experts................................
SEC Position on Indemnification for
Securities
Act Liabilities.......................
Index to Financial Statements..........
______________________ ___________________, 1996
Until _____________, 1996 (25 days
after the date of this Prospectus),
all dealers effecting transactions in
the Common Stock , whether or not
participating in this distribution,
may be required to deliver a
Prospectus. This delivery requirement
is in addition to the obligations of
dealers to deliver a Prospectus when
acting as Underwriters and with
respect to their unsold allotments or
subscriptions.
============================================================================
<PAGE>
ATLANTA TECHNOLOGY GROUP, INC.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 27. Exhibits
Exhibit
- -------
1.1 Underwriting Agreement (form)*
1.2 Agreement Among Underwriters (form)*
3.1 Articles of Incorporation of Time Value Corporation, a Delaware
corporation*
3.2 Certificate of Amendment of Certificate of Incorporation of Time Value
Corporation, a Delaware corporation, to Change Name to Atlanta
Technology Group*
3.3 By-Laws of Time Value Corporation, a Delaware corporation*
3.4 Action By the Unanimous Written Consent of the Board of Directors of
Atlanta Technology Group, Inc. to amend its By-Laws*
5 Opinion of Thelen, Marrin, Johnson & Bridges re legality of shares*
10.1 Authorship and Booth Rental Agreement between Markson Management and
Time Value Corporation, a Georgia corporation*
10.2 Authorship and Booth Rental Agreement between Activator Methods, Inc.
and Time Value Corporation, a Georgia corporation*
10.3 Consulting Agreement between Gregory Richter, Atlanta Technology
Group, Inc. and Silver Ridge Software Inc.*
11 Statement regarding Computation of Per Share Earnings*
13.1 Form 10-KSB for the period ended December 31, 1994*
13.2 Form 10-QSB for the period ended March 31, 1995*
13.3 Form 10-QSB/A for the period ended June 30, 1995*
13.4 Form 10-QSB/A for the period ended September 30, 1995*
21 Subsidiaries of the Registrant*
23 Consents of Experts and Counsel
(a) Consent of Thelen, Marrin, Johnson & Bridges*
(b) Consent of Allen P. Fields, CPA dated January 9, 1996*
(c) Consent of Allen P. Fields, CPA dated March 6, 1996*
(d) Consent of Daniel C. Montano*
(e) Consent of Allen P. Fields, dated May 29, 1996*
(f) Consent of Allen P. Fields, dated June 28, 1996
24 Power of Attorney (see signature page)*
28 Specimen of Common Stock Certificate of Atlanta Technology Group,
Inc.*
* Previously filed.
II-1
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form SB-2 and has duly caused this Amendment No. 2 to
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Atlanta, State of Georgia, on July 5, 1996.
ATLANTA TECHNOLOGY GROUP, INC.
By /s/ Hale R. Spiegelberg
---------------------------------------------
Hale R. Spiegelberg, Chairman of the Board
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ------ ----
<S> <C> <C>
Chairman of the Board of Directors,
Chief Executive Officer, Chief
/s/ Hale R. Spiegelberg Financial Officer, Secretary July 5, 1996
- ---------------------------
Hale R. Spiegelberg
/s/James Cassidy President, Director July 5, 1996
- ---------------------------
James Cassidy
/s/Herbert W. Browne Director July 5, 1996
- ---------------------------
Herbert W. Browne
/s/Gregory W. L. Richter Director July 5, 1996
- ---------------------------
Gregory W.L. Richter
</TABLE>
<PAGE>
EXHIBITS
Exhibit
23 Consents of Experts and Counsel
(f) Consent of Allen P. Fields, dated June 28, 1996
<PAGE>
Allen P. Fields
Certified Public Accountant
1801 Piedmont Avenue
Suite 103
Atlanta, GA 30324
I hereby consent to reference my firm under the caption "Experts" and to the use
of my report on the consolidated financial statement of Atlanta Technology
Group, Inc. and Subsidiaries dated March 18, 1996 in this Amendment No. 3 to the
Registration Statement (Form SB-2) filed January 12, 1996 and related Prospectus
of Atlanta Technology Group, Inc. for the registration of 1,400,000 shares of
its common stock for $3.00 per share.
Allen P. Fields
June 28, 1996
