UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC. 20549
Form 10-KSB/A
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
Commission file number 0-23062
ATLANTA TECHNOLOGY GROUP, INC.
(Name of small business issuer in its charter)
Delaware 58-2077053
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
400 Embassy Row
Suite 570
Atlanta, GA 30338
(Address of principal executive offices)
(Zip code)
(770) 671-0600
(Issuer's telephone number)
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. [X]
Revenues for the registrant for the fiscal year ended December 31, 1995 were
$1,559,701.
The aggregate market value of voting stock held by non-affiliates of the
registrant was approximately $313,802 as of December 31, 1995.
As of December 31, 1995, the Registrant had 2,800,275 shares of Common Stock,
par value $0.001, outstanding.
Total number of pages [43] Exhibit Index is located at page [42]
DOCUMENTS INCORPORATED BY REFERENCE: Registration Statement on Form SB-2
(file # 33-00256) dated January 12, 1996
Transitional Small Business Disclosure Format (Check one): Yes[] No[X]
ATLANTA TECHNOLOGY GROUP, INC.
Form 10-KSB
For the Fiscal Year Ended December 31, 1995
PART 1
Item 1. Description of Business
General
Atlanta Technology Group Inc. ("ATG" or the "Company") was
incorporated in the State of Delaware on October 12, 1993 under the name of
Time Value Corporation as a holding company for high technology companies
and changed its name to Atlanta Technology Group, Inc. in February 1994 by
filing a Certificate of Amendment in the State of Delaware. Atlanta Technology
Group is the parent company of three high technology entities, Net City, Inc.,
Silver Ridge Software, Inc. and Time Value Corporation. Time Value Corporation
("TVC") was incorporated in June 1991 in the state of Georgia under the name
of Converging Systems, Inc. On September 13,1993, TVC acquired 3,300,000 of
the 4,018,327 issued and outstanding common shares of FSQ Systems Corp.
("FSQ"). 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. Prior to the
merger, FSQ did not have any operations. The Company then approved a Plan of
Reorganization (the "Plan") for TVC. Under the terms of the Plan, the Company
issued 2,010,000 shares of its common stock to the shareholders of TVC in
exchange for all of the issued and outstanding shares of TVC. Silver Ridge
Software Inc. ("SRS") was incorporated in August 1993 in Georgia. The Company
merged with SRS in May 1994 under a pooling of interest transaction in which
the Company exchanged 500,000 shares of stock for all the issued and
outstanding shares of SRS. Net City, Inc., a Georgia corporation, is not
currently engaged in any operating activities.
The principal office of the company is located at 400 Embassy Row,
Suite 570, Atlanta, Georgia, 30328 and its telephone number is (770) 671-0600.
The Company has 19 employees on staff, including 5 in sales, 4 in
administration, 7 in programming and 3 in technical support.
Subsidiaries
Time Value Corporation
Time Value Corporation ("TVC") was incorporated in June 1991 for the
purpose of developing, marketing and supporting a solution to reduce the
clinical and administrative costs of producing documentation, correspondence,
and recordkeeping for the medical community. The solution is a proprietary
product of TVC and is known as Documentplus.
Prior to September 1994, TVC was involved in research and development
of its proprietary product known as 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 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 $18,600 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. Revenues from support fees were
$8,750 for fiscal 1994 and $38,050 for fiscal 1995.
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 in January and February were
$130,835, an increase of 19.1% over the $109,848 achieved during the same two
month period in 1995. Revenue from the sale of forms through January and
February 1996 has been $47,677, which was an increase of 147.6% over the
$19,258 during the same two month period of 1995 and revenue from support fees
during the same period increased to $24,850 an increase of 105.4% over the
$12,100 during January and February 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.
Management believes that based on the results of operations for the first two
months of 1996 that adherence to the Company's plan will result in the Company
becoming profitable in the second quarter of 1996. Management has developed a
plan to sustain and expand this profitability through (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. 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 each area of medical specialty.
TVC is also seeking to market its products nationwide through trade
publications and seminars. TVC has retained three national physician
management consulting groups 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."
The Company has filed a Registration Statement on Form SB-2
(file #33-00256) for the offer and sale of 1,400,000 shares of its common
stock at $3.00 per share (the "Offering"). The Company believes that the
proceeds from the Offering together with anticipated cash flows should be
sufficient to satisfy its financial needs for a period of at least 12 months.
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 cost 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 is a comprehensive computer based system
designed to reduce the time clinicians and their staff spend preparing
paperwork, documentation and correspondence in a medical, dental, or
chiropractic practice. A complete Documentplus system consists of a
microcomputer, a printer, an optical mark scanner, one or more of the
Documentplus software programs, 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 generation 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 to patients and referring and consulting
dentists, physicians and chiropractors quickly, accurately and efficiently.
TVC believes that effective patient communication is essential for maintaining
and expanding a dental, medical, or chiropractic practice and for maintaining
a record of diagnosis and recommended treatment which 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 practitioners, and
insurance companies.
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 plans, 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.
Documentplus is comprised of various submodules. Each submodule
provides the 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 forms. 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, 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 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 a OMS form with Documentplus, 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
Corporation and National Computer Systems, Inc. ("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 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 reports
Medico-legal Letter - to patient's attorney with information regarding
patient's history and treatment procedures
TVC introduced the Chiropractic module on September 10, 1994 and has
sold and installed over 220 systems since the introduction. These sales have
been the result of TVC's attending seminars under the direction of Markson
Management Services, Inc. as well as independent chiropractic trade shows
during 1995.
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 the Documentplus system and
are warranted by Scantron Corporation 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 Documentplus 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 and Marketing
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 which 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 having
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)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.
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 TMJ 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 dentistry, chiropractic, and medicine, as well as
responding to the needs of clinicians.
The Company has not undertaken any marketing or 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
channel, 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 Services, Inc.,
an unaffiliated chiropractic management company that conducts seminars for
healthcare practitioners on how to operate their offices more efficiently,
Activator Methods Inc. and two other marketing and distribution companies. The
other two marketing and distribution companies sponsor conferences and provide
publications targeted to the medical community. The contracts will provide for
national exposure of Documentplus in catalogs, at seminars and through articles
in chiropractic journals and magazines published by these organizations. In
addition, TVC has begun national advertising in journals and other professional
chiropractic publications.
Silver Ridge Software, Inc.
Silver Ridge Software, Inc. was incorporated in 1993 as a computer
consulting and software engineering firm.
Services
Silver Ridge Software provides customized computer software solutions
and contract engineering services to companies ranging from insurance and
finance to embedded control systems and telecommunications. Silver Ridge
Software 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,
Silver Ridge Software maintains an internal development team trained in areas
of software design, network support and training, systems evaluation, technical
writing, and project management. Silver Ridge personnel are trained in
multiple programming languages including Assembler, C, C++, Focus, Foxpro,
Clipper, Access, Powerbuilder, Visual Basic, and Visual C++. Silver Ridge
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, Silver Ridge Software 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
their 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, Silver
Ridge Software 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.
Net City, Inc.
Net City, Inc. was incorporated in September 1994 for the purpose of
developing an online service. The Company contributed an existing online
service which it had acquired from Millennium Global, Inc. in exchange for
Millennium's outstanding note to the Company. The Company acquired Millennium
Global, Inc.'s online service system including required computer hardware and
software in exchange for an outstanding note of $125,313 owed to the Company.
Subsequently, the Company formed Net City, Inc. to develop the online service
acquired. Net City, Inc. consequently changed the name of Millennium On-line to
Net City. Net City, Inc. is not currently conducting any operations.
ITEM 2. DESCRIPTION OF PROPERTY
Time Value Corporation currently is leasing facilities totaling 2300 sq.
feet at 1117 Perimeter Center West, Atlanta, Georgia under a lease which
expires on May 15, 1996. The Company shares this space with Time Value
Corporation, on a rent free basis. The monthly lease payment for these
facilities is approximately $3000. Time Value Corporation has anticipated that
it will need additional space at the time the current lease expires. Silver
Ridge Software is occupying 2900 sq. feet at 400 Embassy Row, Atlanta, Georgia
under a lease which expires in 1999. Silver Ridge Software believes that its
facilities will meet its needs through the next several years. The monthly
lease payment for Silver Ridge Software is approximately $3900.
ITEM 3. LEGAL PROCEEDINGS
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 Fiberoptic Atlanta Inc. The Company's share of these
estimated future costs have been accrued at December 31, 1994. During 1995, no
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 may be subject, from time to time, to various legal
proceedings relating to claims arising out of its operations in the ordinary
course of 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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's 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 the Company's Common Stock as quoted by the NASD's
Electronic Bulletin Board. These quotations represent prices between dealers
in securities, do not include retail mark-ups, mark-downs or commissions and do
not necessarily represent actual transactions.
Common Stock High Low
Fiscal Quarter Ended:
June 30, 1994 $10.19 $4.19
September 30, 1994 $12.00 $4.00
December 31, 1994 $12.00 $3.00
March 31, 1995 $3.75 $.25
June 30, 1995 $4.50 $1.00
September 30, 1995 $1.00 $1.00
December 31, 1995 $1.00 $.375
(b) Approximate Number of Shareholders. At December 31, 1995,
there were 718 holders of record of the Company's Common Stock. Since certain
of the shares of Common Stock are held in street name, it is believed that
there are substantial additional beneficial holders of Common Stock.
(c) Dividends. Holders of Common Stock are entitled to dividends
when and if declared by the Board of Directors out of funds legally available
therefor. No dividends have been paid with respect to the Company's Common
Stock and no cash dividends are anticipated to be paid in the foreseeable
future.
Recent Sales of Unregistered Securities
On October 12, 1993, the Company approved a plan of reorganization
(the "Plan") with TVC under the terms of which the Company issued 2,010,000
shares of Common Stock to the twelve shareholders of TVC in exchange for all of
the issued and outstanding share of TVC. The securities issued to the
shareholders of TVC were "restricted" securities as defined in Rule 144
promulgated under the Securities Act of 1933 (the "Act") and were issued for
investment purposes only and without a view to redistribution. All of the
shareholders of TVC were, prior to the sale of the Company's securities to such
persons, fully informed and advised about such matters concerning the Company,
including its business, financial affairs and other matters. No general forms
of advertising were used and no commissions or other forms of compensation
were paid in connection with these sales to the shareholders of TVC. Sales of
restricted Common Stock to the shareholders of TVC were exempt from the
registration provisions of the Act by virtue of Section 4(2) of the Act, as
transactions by an issuer not involving any public offering.
On October 25, 1993, FSQ Systems Corporation was merged into the
Company. In connection with this merger, the Company issued 111,620 shares of
Common Stock to the shareholders of FSQ. Sales of Common Stock to the
shareholders of FSQ were exempt from the registration provisions of the Act by
virtue of Section 3(b) of the Act and Rule 504 of the Securities and Exchange
Commission (the "Commission").
Between November 1993 and January 1994, the Company sold 75,334 shares
of Common Stock, at a price of $3.00 per share to six persons in a private
offering. All of the securities sold in connection with this offering were
restricted securities as defined in Rule 144. No general forms of advertising
were used in connection with this offering. All investors in this offering
received information concerning the Company, including audited financial
statements. No underwriters were used in connection with the sale of Common
Stock in this offering although the Company paid sales commissions of $7,300
to one broker/dealer for soliciting investors. Sales of Common Stock pursuant
to this private offering were exempt from the registration provisions of the
Act by virtue of Section 4(2) of the Act and Rules 505 and 506 of the
Commission, as transactions by an issuer not involving any public offering.
In December 1993, the Company issued 28,832 shares of Common Stock to
AAI as payment for advances of $86,496 made by AAI to the Company in 1993. In
December 1993, the Company issued 44,948 shares of Common Stock to TSI as
payment for advances of $134,844 made by TSI to the Company in 1993.
The securities issued to TSI and AAI were restricted securities as
defined in Rule 144. No general forms of advertising were used in connection
with the issuance of the shares to TSI and AAI. Both TSI and AAI were
principal shareholders of the Company at the time of the transactions and had
access to information concerning the Company, including audited financial
statements. No underwriters were used in connection with the issuance of these
shares and no sales commissions were paid to any person. The issuance of
Common Stock to TSI and AAI was exempt from the registration provisions of the
Act by virtue of Section 4(2) of the Act, as transactions not involving any
public offering.
On May 10, 1994, the Company granted an employee/consultant, as payment
for outside consulting services, options to purchase 200,000 shares of Common
Stock. Options to purchase 20,000 shares are exercisable at $3.00 per share
and the remaining options are exercisable at $5.00 per share. The options are
exercisable at various times and upon certain conditions. The options are due
to expire on or before May 10, 1999. As of December 31, 1994, the holder of
the options had exercised options on 114,000 of the shares. The shares
underlying the options were registered with the Commission by registration
statement on Form S-8 filed May 20, 1994.
The options issued in the transactions described above were restricted
securities as defined in Rule 144. No general forms of advertising were used in
connection with the issuance of the options. The options were issued for
investment purposes only and without a view to distribution. The option holder
acquired the options for his own account and was fully informed and advised
about matters concerning the Company, including its business, financial affairs
and other matters. The holder of the options has signed an agreement providing
that the options, as well as the shares issuable upon the exercise of the
options, may not be offered, sold or transferred other than pursuant to an
effective registration statement under the Act, or pursuant to an applicable
exemption from such registration. No underwriters were involved in the sale
of the options and no commissions or other forms of remuneration were paid to
any person in connection with such sale. The issuance of the options
described above was exempt from the registration provisions of the Act by
virtue of Section 4(2) of the Act, as transactions not involving any public
offering.
In May 1994, the Company acquired Silver Ridge Software Inc. ("SRS")
and issued 500,000 shares of Common Stock to the former owners of SRS in
exchange for all of the issued and outstanding common stock of SRS. The
securities issued to the shareholders of SRS were restricted securities as
defined in Rule 144 and were issued for investment purposes only and without a
view to redistribution. All of the shareholders of SRS were, prior to the sale
of the Company's securities to such persons, fully informed and advised about
such matters concerning the Company, including its business, financial
affairs and other matters. No general forms of advertising were used and no
commissions or other forms of compensation were paid in connection with these
sales to the shareholders of SRS. Sales of restricted Common Stock to the
shareholders of SRS were exempt from the registration provisions of the Act by
virtue of Section 4(2) of the Act, as transactions by an issuer not involving
any public offering.
On July 15, 1994, the Company entered into an agreement with Rubix
marketing, Inc., a Georgia corporation ("Rubix") to market certain on-line
computer services. As compensation for its efforts, Rubix is entitled to
options for up to 1,000,000 shares of the Company's common stock exercisable at
$9.50 per share and due to expire on July 31, 1997. The options are issued
only after certain revenue levels are attained by Net City, Inc. As of
December 15, 1995 there have been no options issued to Rubix for its servic
The options issued in the transactions described above were restricted
securities as defined in Rule 144. No general forms of advertising were used in
connection with the transaction. The options are to be issued for investment
purposes only and without a view to distribution. Rubix was fully informed and
advised about matters concerning the Company, including its business, financial
affairs and other matters. Rubix has signed an agreement attesting to its
understanding that the options, as well as the shares issuable upon the
exercise of the options, may not be offered, sold or transferred other than
pursuant to an effective registration statement under the Act, or pursuant to
an applicable exemption from such registration. No underwriters were involved
in the transaction described aboveand no commissions or other forms of
remuneration were paid to any person in connection with such transaction. The
issuance of the options described above, should they occur, will be exempt from
the registration provisions of the Act by virtue of Section 4(2) of the Act,
as transactions by an issuer not involving any public offering.
On August 31, 1994, the Company issued 2,000 shares to a consultant in
exchange for services in potentially developing Net City's on-line service.
The securities issued to the consultant were restricted securities as defined
in Rule 144. No general forms of advertising were used in connection with the
issuance of shares to the consultant. The consultant was, prior to the sale
of the Company's securities to him, fully informed and advised about such
matters concerning the Company, including its business, financial affairs and
other matters. No underwriters were used in connection with the issuance of
these shares and no sales commissions were paid to any person. The issuance
of Common Stock to the consultant was exempt from the registration provisions
of the Act by virtue of Section 4(2) of the Act, as transactions by an issuer
not involving any public offering.
In March 1995, ATG 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 eighteen 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 August 1995, ATG initiated a
private offering of units that ultimately included one promissory note in the
face amount of $50,000, bearing interest at twelve percent per annum and due
six months from the date of issuance, and one warrant to purchase 16,666 shares
of the Common Stock. The amount raised in this offering was $400,800.
(Collectively, the "1995 Offerings").
All of the securities sold in connection with the 1995 Offerings were
restricted securities as defined in Rule 144. No general forms of advertising
were used in connection with the 1995 Offerings. All investors in the 1995
Offerings received information concerning the Company, including audited
financial statements. No underwriters were used in connection with the sale of
the Company's securities in the 1995 Offerings, although the company paid sales
commissions of $17,000 to Brookstreet Securities Corporation for soliciting
investors. Sales of the Company's securities pursuant to the 1995 Offerings
were exempt from the registration provisions of the Act by virtue of Section
4(2) of the Act and Regulation D promulgated by the Commissio as transactions
by an issuer not involving any public offering.
On April 3, 1995, the Company issued 5,000 shares to two individuals
for marketing services rendered. The securities issued for these services
were restricted securities as defined in Rule 144. No general forms of
advertising were used in connection with the issuance of the shares to the two
individuals. The individuals were, prior to the sale of the Company's
securities to them, fully informed and advised about such matters concerning
the Company, including its business, financial affairs and other matters. No
underwriters were used in connection with the issuance of these shares and no
sales commissions were paid to any person. The issuance of Common Stock to
these individuals was exempt from the registration provisions of the Act by
virtue of Section 4(2) of the Act, as transactions by an issuer not involving
any public offering.
On December 19, 1995, the Company issued a promissory note in the face
amount of $36,000, bearing interest at ten percent per annum and due three
months from the date of issuance to an individual investor. On February 2,
1996, the Company issued a promissory note in the face amount of $50,000,
bearing interest at twelve percent per annum and due six months from the date
of issuance to an individual investor. On February 9, 1996, the Company issued
a promissory note in the face amount of $24,000 with no interest and due three
months from the date of issuance to an individual investor. No general forms of
advertising were used in connection with the issuance of these promissory
notes. The individual investors were, prior to the sale of the Company's
securities to them, fully informed and advised about such matters concerning
the Company, including its business, financial affairs and other matters. No
underwriters were used in connection with the issuance of these promissory
notes and no sales commissions were paid to any persons. These transactions
were exempt from the registration provisions of the Act by virtue of Section
4(2) of the Act, as transactions by an issuer not involving any public
offering.
ITEM 6. 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. Net City Inc. is not currently conducting operations.
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 profitability and does not have
long-term financing in place. The Company has developed a plan to achieve
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 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.
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.
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 believes that it has laid the groundwork which will enable
it to break even in May 1996. The Company started its advertising campaign in
December 1995 and is seeing increased leads and sales because of the marketing.
Based on the Company's projections, the Company anticipates that it will break
even in May 1996 on revenues of $202,117 and operating expenses of $169,343.
The projected income before taxes will begin covering the capitalized research
and development costs at that time and the Company believes that it will
continue to be profitable throughout 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 losses. 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 decreased in 1994 to 47% from 53% in 1993. This decrease is
primarily the result of increased research and development costs associated
with the introduction of new products.
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 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 65 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 in 1995, 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 systems 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 December 31, 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 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
revenues from the sales of forms increases, the cost of goods 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.
Liquidity and Capital Resources
The Company has financed 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.
In March 1995, the Company initiated a private offering of units that included
one promissory notes 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 warrant to purchase 10,000 shares of Common Stock for $5.00 per share with
one warrant to purchase 16,666 shares of Common Stock fo $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 twelve percent 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.
In December 1995, the Company borrowed $36,000 from an unrelated third party.
This note carries an interest rate of ten percent and is due March 1996.
In February 1996, the Company borrowed $24,000 from an unrelated third party.
This note carries no interest and is due in May 1996. Also in February 1996,
the Company borrowed $50,000 from an unrelated third party, bearing interest
at twelve percent 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 activitites of its
subsidiaries' until revenues are sufficient to fund such activities.
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.
Item 7. Financial Statements
The following financial statements are attached hereto commencing on Page 27.
Independent Auditor's Report (December 31, 1995 and 1994).
Consolidated Balance Sheets at December 31, 1995 and 1994.
Consolidated Statements of Operations for the years ended December 31, 1995
and 1994.
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1995, and 1994.
Consolidated Statement of Cash Flows for the years ended December 31, 1995
and 1994.
Notes to Consolidated Financial Statements for the years ended
December 31, 1995 and 1994.
Item 8. Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons
The present members of the Company's Board of Directors are as follows:
Name Age Position
Hale R. Spiegelberg 44 CEO, Secretary, CFO and a Director
James Cassidy 62 President, and a Director
Gregory W.L. Richter 33 Director
Herbert W. Browne 69 Director
Mr. Hale R. Spiegelberg has been Chief Executive Officer and a
director of ATG since its inception, and has been actively involved in the
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 Communication Systems Inc., a company that developed
software for the dental profession using an optical mark scanning system.
Patient Communication Systems is currently inactive. 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 a director of Acquisition Advisors, Inc., a company
formed to provide consulting services on mergers and acquisitions. During the
same period he has served as an officer or director of several financial
companies, including Norris Hirschberg (1991) and Masters Financial Group,Inc.
(1991).
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 until 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 of 1993
until March 15, 1996. 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 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 a 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, DC. Mr. Browne is a graduate of the
University of Alabama with a degree in Chemistry.
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 has agreed to appoint Daniel C. Montano, of
Brookstreet Securities Corporation, to the Board of Directors of the Company.
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. 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 a 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 Section 17(a)(2) and (3) of the Securities Act.
Compliance With Section 16(a) of the Securities Exchange Act of 1934.
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent of
a registered class of the Company's equity securities, to file with the
Securities and Exchange Commission initial reports of ownership and reports of
changes in ownership of Common Stock and other equity securities of the Company
Officers, directors and greater than ten-percent shareholders are required by
SEC regulations to furnish the Company with copies of all Section 16(a) forms
they file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company, and written representations that no other
reports were required during fiscal year ended December 31, 1995, the
Company's directors, executive officers and greater than ten-percent
shareholders complied with all applicable Section 16(a) filing requirements.
Item 10. Executive Compensation
Mr. Spiegelberg received no remuneration for his service between 1993 and
1995, and there were no executives of the Company whose aggregate cash and
cash equivalent forms of remuneration was in excess of $100,000 between 1993
and 1995.
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.
Compensation of Directors.
Standard Arrangements. The Company does not pay its directors for
attending meetings of the Board of Directors. The Company has no standard
arrangement pursuant to which directors of the Company are compensated for any
services provided as a directors or for committee participation or special
assignments.
Other Arrangements. During the year ended December 31, 1995 and except
as disclosed above, no director of the Company received any form of
compensation from the Company.
Employment Contracts
The Company 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
the Company or from a change-in-control of the Company or a change in an
executive officer's responsibilities following a change-in-control.
Item 11. Security Ownership by Certain Beneficial Owners and
Management.
The following table sets forth as of December 31, 1995, information
concerning beneficial ownership of the common stock of the Company by (i) each
person (including any "group" as that term is defined in Section 13(d)(3) of
the Securities Exchange Act of 1934) known by the Company to own beneficially
more than 5% of such common stock, (ii) each officer and director of the
Company, and (iii) all directors and executive officers as a group.
Number of Shares of
Name and Address of Common Stock Percentage of Outstanding
Beneficial Owner Beneficially Owned Common Stock
Hale R. Spiegelberg 1,158,317(1) 56.36% (1)
6065 Roswell Rd.
# 2267
Atlanta, GA 30328
Greg Richter 346,500(3) 12.3%
400 Embassy Row, #570
Atlanta, GA 30328
Pollution Research and Control Corp. 400,000 14.3%
515 W. Colorado St.
Glendale, CA 91204
Total Software Inc. 644,948(2) 23.1%
2131 Pleasant Hill Rd., Ste 151-175
Duluth, GA 30136
Einzelhaft Partners, A.G. 350,000(2) 12.52%
P.O. Box 1062
Grand Cayman, Cayman Islands
Axis Capital, A.G. 250,000(4) 8.9%
P.O. Box 1062
Grand Cayman, Cayman Islands
Acquisitions Advisors, Inc. 568,832(2) 20.3%
6065 Roswell Rd.,Ste. 2267
Atlanta, GA 30328
All Executive Officers and 1,504,817 53.74%
Directors as a Group
(1) Hale R. Spiegelberg is Chairman and Chief Executive Officer of ATG. He
is a director and shareholder of Capital Placement Corporation which owns
14,537 shares (.52%) of Common Stock. He is also a beneficial owner of Total
Software, Einzelhaft Partners, A.G. and Acquisition Advisors, Inc.
(2) Also included in beneficial ownership of Hale R. Spiegelberg.
(3) Gregory W.L. Richter is a director of ATG. He is also a beneficial owner
of Axis Capital, A.G.
(4) Also included in beneficial ownership of Gregory W.L. Richter.
Item 12. Certain Relationships and Related Party Transactions
In September 1993, Hale R. Spiegelberg and Greg Richter (former 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.
In December 1993, the Company 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 of debt for each share
of stock. As a result, the Company issued 44,948 shares to TSI and 28,832
shares to AAI.
Between November, 1993 and January, 1994 the Company sold 75,334 shares of its
common stock to AAI and five other persons 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, the Company 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 February 1995, the Company sold 5,114 shares of PRCC Common Stock on the
open market for approximately $3350.
In December 1995, Company accepted computer equipment from Greg Richter in
exchange for a $12,000 note which was outstanding during 1994.
As of December 31, 1995, the Company owed $24,500 to TSI and $143,720 to AAI.
At December 31, 1995, substantially all of the assets of SRS, approximating
$171,000 were subject to a security interest in favor of TSI.
13. Exhibits and Reports on Form 8-K.
(a) Exhibits:
Exhibit
3.1 Certificate of Incorporation of Time Value Corporation, a Delaware
corporation*
3.2 Certificate of Amendment of Certificate of Incorporation, a Delaware
corporation to Change Name to Atlanta Technology Group, Inc. *
3.3 By-Laws of Time Value Corporation, a Delaware corporation*
10.1 Authorship and Booth Rental Agreement between Markson Management
Services, Inc. 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*
11 Statement re: Computation of Per Share Earnings*
22 Subsidiaries of Registrant*
24 Consent of Allen P. Fields
________________________________
* Incorporated by reference to the Company's Registration Statement on
Form SB-2 (file no. 33-00256) filed January 12, 1996
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during 1995.
ATLANTA TECHNOLOGY GROUP, INC.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, this report has
been signed by the following persons on behalf of the Registrant and in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Date
<S> <C>
/s/ Hale R. Spiegelberg May 28, 1996
__________________________ _______________________
Hale R. Spiegelberg
Chairman of the Board, Chief Executive Officer
Chief Financial Officer, Secretary, Director
/s/ Jim Cassidy May 28, 1996
______________________________ _______________________
James Cassidy
President, Director
/s/ Herb W. Browne May 28, 1996
_______________________________ _______________________
Herbert W. Browne
Director
________________________________ _______________________
Gregory W.L. Richter
Director
</TABLE>
ATLANTA TECHNOLOGY GROUP, INC., AND SUBSIDIARIES
(Formerly Time Value Corporation)
Consolidated Financial Statements
December 31, 1995 and 1994
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.
March 18, 1996
<PAGE>
<TABLE>
ATLANTA TECHNOLOGY GROUP, INC.
(Formerly Time Value Corporation)
CONSOLIDATED BALANCE SHEET
December 31, 1995 and 1994
<CAPTION>
1995 1994
<S> <C> <C>
ASSETS (Note 3)
Current Assets $ 53,187 $ 21,994
Cash
Accounts receivable - trade, net 166,481 214,754
of allowance for doubtful
accounts of $12,000 at December
31, 1995 and 1994, respectively
Inventory 19,513 10,435
Due from officer & director - 12,000
Other current assets (Note 4) 5,755 21,000
_______ _______
Total Current Assets 244,936 280,183
Equipment, Fixtures and Computers
Equipment, fixtures and computers,
net of accumulated depreciation of
$104,516 and $61,578 at December 31,
1995 and 1994, respectively 130,136 133,256
Other Assets
Software development costs, net of
accumulated amortization of $84,787
and $27,889 at December 31,1995 and
1994 respectively (Notes 2 and 5) 451,617 511,256
Investments (Note 6) - -
Deferred offering costs (Note 7) 130,025 -
Other assets 69,817 20,465
________ _______
Total Assets $ 1,026,531 $945,160
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Notes payable - 10% (Note 7) $160,000
Notes payable - 12% (Note 7) 350,000
Notes payable - Other (Note 7) 82,800 $15,000
Notes payable to affiliates (Note 1C) 168,220 $200,700
Accounts payable - trade 221,827 193,590
Accrued salaries and payroll
taxes payable 26,090 54,489
Accrued interest payable 27,509 450
Other current liabilities 75,447 12,200
________ ________
Total Current Liabilities 1,111,893 476,429
Note Payable - Noncurrent (Note 7) 50,000 -
Minority Interests (Note 1B) - 66,667
Commitments and Contingencies
(Notes 10 and 11) - -
Stockholders' Equity (Notes 1, 2, 9)
Common stock 2,800 2,795
Additional paid-in capital 2,520,783 2,371,338
Retained earnings (deficit) (2,658,945) (1,972,069)
___________ ___________
Total Stockholders' Equity (135,362) 402,064
___________ ___________
Total Liabilities and Stockholders'
Equity $1,026,531 $945,160
___________ ___________
<FN>
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
ATLANTA TECHNOLOGY GROUP, INC.
(Formerly Time Value Corporation)
CONSOLIDATED STATEMENT OF OPERATIONS
Years Ended December 31, 1995 and 1994
<CAPTION>
1995 1994
<S> <C> <C>
Revenues $1,559,701 $1,023,414
Cost of Sales 649,426 539,970
Gross Profit 910,275 483,444
Operating Expenses
Selling, general & administrative 1,501,544 1,145,129
Research and Development - 169,737
Depreciation and amortization 110,409 33,416
Interest (Note 7) 51,865 594
_________ _________
Total operating expenses 1,663,818 1,348,876
_________ _________
Loss from operations (753,543) (865,432)
Other income (loss)
(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)
Provision for taxes (Notes 2 and 8) - -
__________ __________
Loss before minority interests and
investments accounted for under
the equity method (753,543) (1,191,379)
Minority interests 66,667 82,630
__________ ___________
Loss before investments accounted
for under the equity method (686,876) (1,108,749)
Loss from investments accounted
for under the equity method - (105,000)
__________ ___________
Net loss $(686,876) $(1,213,749)
__________ __________
Weighted average number of common
shares outstanding 2,948,525 2,732,525
_________ _________
Loss per common share (Note 2) $(.23s) $(.44)
______ ______
<FN>
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
ATLANTA TECHNOLOGY GROUP, INC.
(Formerly Time Value Corporation)
Consolidated Statement of Stockholders' Equity
Years Ended December 31, 1995 and 1994
<CAPTION>
Common Additional Paid-in Retained Total
Stock Capital Earnings
<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)
<FN>
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
ATLANTA TECHNOLOGY GROUP, INC.
(Formerly Time Value Corporation)
CONSOLIDATED STATEMENT OF CASH FLOWS
Years Ended December 31, 1995 and 1994
<CAPTION>
1995 1994
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $(686,876) $(1,213,749)
Adjustments to reconcile net
loss to net cash used by operating
activities:
Depreciation and amortization 367,307 398,478
Minority interest shares 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)
Increase in account payable-trade, net 28,237 147,939
Decrease (Increase) in other assets 19,579 (6,566)
Increase in other liabilities 61,907 21,136
_________ _________
Net cash used by operating activities (228,240) (474,500)
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)
Additions to software development costs (197,259) (240,035)
_________ _________
Net cash provided by (used in)
investing activities (233,982) (295,760)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuance of
notes payable, net 604,800 -
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) -
(Decrease) Increase in borrowing
from affiliates (32,480) 185,150
Decrease in loans to officers 12,000 (12,000)
Other equity changes 1,120 1,000
_________ _________
Net cash provided by financing activities 493,415 787,530
Net increase in cash 31,193 17,270
Cash at beginning of period 21,994 4,724
_________ _________
Cash at end of period $53,187 $21,994
_________ _________
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS
Taxes paid during the period 0 0
Interest paid during the period $24,000 $594
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
See Notes 1,2,9, and 11 of Notes to
Financial Statements
<FN>
See accompanying notes to financial statements
</TABLE>
<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, 1994, 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 transaction 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 these 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 online
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, purchased certain assets of MGI, including
computer hardware and software, in exchange for the cancellation of certain
notes held by the Company totaling approximately $125,000. The assets
acquired were transferred to a newly formed, wholly-owned subsidiary of the
Company, Net City Inc. ("NCI") in exchange for all the issued and outstanding
stock of NCI. 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
Officer 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 dealings, 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 A.G. and Einzelhaft
Partners A.G., 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 online 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 scanners 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.
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 at 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 109") 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 iscomputed as the
tax payable or refundable for the period plus or minus thechange 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 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 market 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 $ 13
PRCC common stock, 5,114 shares 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 charged to operations during
1995 and 1994 amounted to $256,898 and $117,171, respectively.
6. Investments
Investments include the common stock of a subsidiary of PRCC. At December 31,
1994, the Company reduced the carrying value of this investment from the
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 also
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 associated 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:
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 Roe,
payable in ten equal monthly installments
without interest $1,800
Non-interest bearing
note due March 19, 1996 $36,000
_______
Total $82,800
_______
* 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 had 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 2006 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.
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 250,000 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
shares were received, of which 50,334 were fully paid and 15,000 remained
unpaid (these were subsequently paid for in January 1994). Additional
subscriptions for 10,000 shares were received and 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 of 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 of the
Company's stock on the date of issuance by a charge against income.
In 1995, the Company issued 5,000 shares of its common stock in exchange for
marketing services in connection with the Company's product lines. These shares
were 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.
<PAGE>
<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>
<PAGE>
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 approximate 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.
The Company has three 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.
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 in the
amount of $6,000 costs have 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 statment, 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 expenses 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.
ATLANTA TECHNOLOGY GROUP, INC.
(Formerly Time Value Corporation)
Form 10-KSB
For the Year Ended December 31, 1995
INDEX TO EXHIBITS REQUIRED BY SECTION 13(a)
24 Consent of Allen P. Fields.................................... E-2
CONSENT OF INDEPENDENT AUDITOR
I consent to the use of my report dated March 18, 1996 in this Form
10-KSB of Atlanta Technology Group, Inc., a Delaware corporation, for the
year ended December 31, 1995.
________________________
Allen P. Fields, C.P.A.
Atlanta, Georgia
March 28, 1996
