<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 31, 1996
REGISTRATION NO. 333-256
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 2
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
ATLANTA TECHNOLOGY GROUP, INC.
(Name of small business issuer in its charter)
----------------
DELAWARE 737 58-2077053
(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
400 EMBASSY ROW
SUITE 570
ATLANTA, GEORGIA 30328
(770) 671-0600
(Address and telephone number of principal executive offices)
----------------
400 EMBASSY ROW
SUITE 570
ATLANTA, GEORGIA 30328
(Address of principal place of business)
JAMES CASSIDY
PRESIDENT
ATLANTA TECHNOLOGY GROUP, INC.
400 EMBASSY ROW
SUITE 570
ATLANTA, GEORGIA 30328
(770) 671-0600
(Name, address and telephone number of agent for service)
----------------
COPIES TO:
RONALD WARNER, ESQ. LAWRENCE W. HORWITZ, ESQ.
THELEN, MARRIN, JOHNSON & BRIDGES HORWITZ, CUTLER & BEAM
333 SOUTH GRAND AVENUE TWO VENTURE PLAZA
SUITE 3400 SUITE 380
LOS ANGELES, CALIFORNIA 90071 IRVINE, CALIFORNIA 92718
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<PAGE>
ATLANTA TECHNOLOGY GROUP, INC.
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(b) OF REGULATION S-B
SHOWING LOCATION IN THE PROSPECTUS
OF INFORMATION REQUIRED BY ITEMS OF FORM SB-2
<TABLE>
<CAPTION>
FORM SB-2 ITEM NUMBER AND CAPTION PROSPECTUS
--------------------------------- ----------
<S> <C>
1.Forepart of Registration Statement
and Outside Front Cover Page of
Prospectus...................... Facing Page of Registration Statement;
Outside Front Cover Page of Prospectus
2.Inside Front and Outside Back
Cover Pages of Prospectus....... Available Information; Incorporation of
Certain Documents by Reference; Table of
Contents
3.Summary Information; Risk
Factors......................... Prospectus Summary; Risk Factors
4.Use of Proceeds................... Prospectus Summary; The Company; Use of
Proceeds
5.Determination of Offering Price... Not Applicable
6.Dilution.......................... Dilution
7.Selling Security Holders.......... Not Applicable
8.Plan of Distribution.............. Underwriting
9.Legal Proceedings................. The Company--Legal Proceedings
10.Directors, Executive Officers,
Promoters and Control Persons... Management and Principal Shareholders
11.Security Ownership of Certain
Beneficial Owners and
Management...................... Management and Principal Shareholders
12.Description of Securities to be
Registered...................... Description of ATG Securities
13.Interests of Named Experts and
Counsel......................... Not Applicable
14.Disclosure of Commission Position
on Indemnification for
Securities Act Liabilities...... Disclosure of Commission Position
15.Organization Within Last Five
Years........................... The Company
16.Description of Business........... The Company
17.Management's Discussion and
Analysis or Plan of Operation... Management's Discussion and Analysis of
Financial Condition and Results of
Operations
18.Description of Property........... The Company--Facilities
19.Certain Relationships and Related
Transactions.................... Certain Relationships and Related
Transactions
20.Market For Common Equity and
Related Stockholder Matters..... Market For Common Equity and Related
Stockholder Matters
21.Executive Compensation............ Management and Principal Shareholders
22.Financial Statements.............. Financial Statements
23.Changes In and Disagreements With
Accountants on Accounting and
Financial Disclosure............ Not Applicable
</TABLE>
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED , 1996
PROSPECTUS
ATLANTA TECHNOLOGY GROUP, INC.
1,400,000 SHARES COMMON STOCK
Atlanta Technology Group, Inc., a Delaware corporation ("ATG" or "the
Company," includes ATG's operating subsidiaries unless otherwise noted) is
offering 1,400,000 shares of its Common Stock (the "Common Stock") for $3.00
per share (the "Offering"). See "Description of ATG Securities--Common Stock."
Application has been made for approval of the Common Stock on the SmallCap
market of the National Association of Securities Dealers Automated Quotation
System ("NASDAQ") under the symbol "ATEK." Currently, the Common Stock is
traded in the over-the-counter market of the NASDAQ Bulletin Board under the
symbol "ATYG." On March 31, 1996, the closing bid and asked prices of the
Company's Common Stock as reported by NASDAQ were $0.50 and $2.50,
respectively.
INVESTMENT IN THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
POTENTIAL INVESTORS SHOULD NOT INVEST IN THESE SECURITIES UNLESS THEY CAN
AFFORD TO LOSE THEIR ENTIRE INVESTMENT. SEE "RISK FACTORS," COMMENCING ON PAGE
6, FOR CERTAIN CONSIDERATIONS RELEVANT TO AN INVESTMENT IN ATG COMMON STOCK. IN
ADDITION, IF THE "PENNY STOCK" REGULATIONS OF THE SECURITIES AND EXCHANGE
COMMISSION APPLY TO THE SHARES OF COMMON STOCK, AN INVESTOR'S ABILITY TO
LIQUIDATE OR TRADE HIS OR HER SHARES MAY BE ADVERSELY AFFECTED. SEE "PENNY
STOCK REGULATION."
THESE ARE SPECULATIVE SECURITIES. INVESTMENT IN THESE SECURITIES INVOLVES
IMMEDIATE AND SUBSTANTIAL DILUTION.
----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
PROCEEDS TO
PRICE TO UNDERWRITING ISSUER OR
PUBLIC DISCOUNTS(1) OTHER PERSONS(2)(4)
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<S> <C> <C> <C>
Per Share.......................... $3.00 $0.30 $2.70
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Total(3)........................... $4,200,000 $420,000 $3,780,000
</TABLE>
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- --------------------------------------------------------------------------------
(1) Does not include additional compensation to Brookstreet Securities
Corporation in the form of a non-accountable expense allowance equal to
three percent of the gross proceeds of the offering. See "Underwriting."
(2) Before deduction of estimated expenses of $250,000 payable by ATG,
including the three percent non-accountable expense allowance, of which
$42,000 has been paid to Brookstreet Securities Corporation. ATG has also
agreed to grant to Brookstreet Securities Corporation, for nominal
consideration, warrants to purchase 140,000 shares of the Common Stock at
$3.60 per share. See "Underwriting."
(3) ATG has granted the Underwriters an option, exercisable within 30 days of
the effective date of this registration statement, to purchase up to an
additional 210,000 shares of the Common Stock at the public offering price,
less underwriting discounts and commissions, solely for the purpose of
covering overallotments, if any. In the foregoing table, the amount shown
assumes the overallotment option will not be exercised. If the
overallotment option is exercised in full, the price of the Common Stock to
the public would be $4,830,000; the Underwriting Discounts would be
$483,000; and the Proceeds to the Issuer or Other Persons would be
$4,347,000.
(4) Other expenses include: SEC Registration Fee, NASD Fee, Representative Non-
Accountable Expense Allowance, Accounting Fees and Expenses, Legal Fees and
Expenses, Printing Expenses, Blue Sky Fees and Miscellaneous Expenses.
After deducting such expense allowance and Offering expenses, the net
proceeds to the Company will be approximately $3,530,000 (assuming the
overallotment option is not exercised).
----------
The shares of Common Stock are being sold by the Company and offered by the
Underwriters on a "firm commitment" basis, subject to prior sale, when, as and
if accepted by the Underwriters, and subject to certain conditions. The
Underwriters reserve the right to withdraw, cancel or modify such offer and to
reject orders in whole or in part. It is expected that the certificates
representing the shares of Common Stock will be ready for delivery at the
offices of Brookstreet Securities Corporation, 2361 Campus Drive, Suite 210,
Irvine, California 92715 within 10 full business days after the date the
Registration Statement is declared effective by the Securities and Exchange
Commission.
BROOKSTREET SECURITIES CORPORATION
<PAGE>
AVAILABLE INFORMATION
ATG is subject to the informational requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and in accordance with the
Exchange Act files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed with the Commission by ATG can be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of such
material can be obtained from the Public Reference Section of the Commission
at 450 Fifth Street, N.W., Washington D.C. 20549 at prescribed rates.
The Common Stock is quoted on the National Association of Securities Dealers
Automated Quotation ("NASDAQ") Bulletin Board under the symbol "ATYG."
Application has been made for approval of the Common Stock for listing on the
NASDAQ SmallCap Market System under the symbol "ATEK."
No person is authorized to give any information or to make any
representation not contained in this Prospectus and, if given or made, such
information or representation should not be relied upon as having been
authorized. This Prospectus does not constitute an offer to exchange or sell,
or a solicitation of an offer to exchange or purchase, the securities offered
by this Prospectus in any jurisdiction to or from any person to whom it is
unlawful to make such offer or solicitation in such jurisdiction. Neither the
delivery of this Prospectus nor any distribution of the securities to which
this Prospectus relates shall, under any circumstances, create any implication
that there has been no change in the affairs of ATG since the date of this
Prospectus.
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Prospectus Summary........................................................ 4
Summary Financial Data.................................................... 5
Risk Factors.............................................................. 6
Company Investment Risks................................................ 6
Common Stock Investment Risks........................................... 10
Use of Proceeds........................................................... 13
Penny Stock Regulation.................................................... 14
Dividend Policy........................................................... 14
Capitalization............................................................ 15
Dilution.................................................................. 15
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 17
The Company............................................................... 22
Time Value Corporation.................................................. 22
Silver Ridge Software, Inc. ............................................ 29
Legal Proceedings....................................................... 30
Employees............................................................... 30
Facilities.............................................................. 30
Management and Control Persons............................................ 30
Directors, Executive Officers, Promoters and Control Persons............ 30
Executive Compensation.................................................. 32
Loans to Officers and Directors......................................... 32
Security Ownership of Certain Beneficial Owners and Management.......... 33
Certain Relationships and Related Transactions............................ 34
Description of ATG Capital Stock.......................................... 35
Underwriting.............................................................. 37
Market for Common Equity and Related Stockholder Matters.................. 39
Legal Matters............................................................. 39
Experts................................................................... 39
SEC Position on Indemnification for Securities Act Liabilities............ 40
Index to Financial Statements............................................. F-1
</TABLE>
3
<PAGE>
PROSPECTUS SUMMARY
This summary is qualified in its entirety by the more detailed information
and financial statements appearing elsewhere in this Prospectus. All financial
statements contained in this Prospectus are presented on a consolidated basis
unless otherwise noted.
THE COMPANY
Atlanta Technology Group, Inc. is a Delaware corporation formed in October
1993 as a holding company for technology companies. Its operating subsidiaries
are Time Value Corporation ("TVC"), a Georgia corporation, and Silver Ridge
Software Inc. ("SRS"), a Georgia corporation. However, the operations of SRS
have been scaled down while concentration has been focused on the development
and marketing of TVC's products. The Company is also parent to Net City, Inc.
("Net City"), a Georgia corporation, which is not currently conducting
operations.
TVC was incorporated for the purpose of developing, marketing and supporting
a solution to reduce the clinical and administrative costs of producing
documentation, correspondence and record keeping for the medical community. The
solution is a proprietary product of TVC and is known as Documentplus.
SRS maintains an internal development team trained in areas of software
design, network support and training, systems evaluation, technical writing and
project management. SRS also provides contractors to companies that wish to
have programmers on site to interact with all departments that are involved
with the development of new systems and programs.
ATG's principal office is located at 400 Embassy Row, Suite 570, Atlanta,
Georgia 30328 and its telephone number is (770) 671-0600.
THE OFFERING
<TABLE>
<S> <C>
Common Stock Offered by ATG....... 1,400,000 shares. In addition, the
Underwriters have been granted an
overallotment option for an additional
210,000 shares. See "Description of ATG
Securities--Common Stock."
Common Stock to be Outstanding
after the Offering............... 4,200,275 shares based on 2,800,275 shares
outstanding as of March 31, 1996. Does not
include (i) 86,000 shares of Common Stock
reserved for issuance upon the exercise of
stock options outstanding as of the date
hereof pursuant to an option agreement with
an employee for providing services outside
of the scope of his employment or (ii)
171,996 shares of Common Stock reserved for
issuance upon exercise of Common Stock
Purchase Warrants or (iii) 140,000 shares
of Common Stock reserved for issuance upon
exercise of Representative Warrants.
Use of Proceeds................... ATG intends to use $670,000 of the net
proceeds of the Offering for repayment of
funds advanced to the Company under
previous private placement offerings. The
remainder of the net proceeds will fund
research and product development of its
subsidiaries' products, marketing advances
to its subsidiaries and other general
corporate purposes. See "Use of Proceeds."
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
Risk Factors...................... The securities offered hereby involve a
high degree of risk. Among such risk
factors are:
.the Company's historic operating losses
. the dependency on the proceeds of the
offering for the Company to continue as a
going concern
. the Company's limited operating history
. immediate and substantial dilution
For a more detailed discussion of these and
other risk factors, see "Risk Factors."
NASDAQ Bulletin Board Stock
Symbol........................... ATYG
Proposed NASDAQ SmallCap Market
System Stock Symbol.............. ATEK
</TABLE>
SUMMARY FINANCIAL DATA
The following table presents selected historical financial data for ATG
derived from ATG's consolidated financial statements. The historical financial
data are qualified in their entirety by reference to, and should be read in
conjunction with, the consolidated financial statements and notes thereto of
ATG, which are incorporated by reference into this Prospectus. The following
data should be read in conjunction with "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and the financial statements
of the Company and the notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31 MARCH 31
---------------------------------- -----------------------
1993 1994 1995 1995 1996
---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues.............. $ 170,777 $1,023,414 $1,559,701 $ 274,850 $ 410,476
Selling, General and
Administrative
Expenses............. 551,172 1,145,129 1,663,818 1,136,387 345,104
Operating Income
(Loss)............... (473,939) (865,432) (753,543) 154,324 (96,762)
Net Income (Loss)..... (446,755) (1,213,749) (686,876) (100,335) (96,762)
Net Income (Loss) per
Weighted Average
Number of Common
Shares............... (.18) (.44) (.23) (.04) (.03)
Weighted Average
Number of Shares
Outstanding.......... 2,544,957 2,732,525 2,948,525 2,795,275 2,949,581
SUPPLEMENTAL PRO FORMA
PER SHARE DATA(1)
Net Income (Loss)..... (568,346)
Net Income (Loss) per
Weighted Average
Number of Shares
Outstanding.......... (.20)
BALANCE SHEET DATA:
Working Capital....... 223,945 (196,246) (866,957) (276,686) (1,069,886)
Total assets.......... 1,272,934 945,160 1,026,531 902,813 1,096,536
Notes payable......... 31,000 215,700 811,020 334,380 867,352
Total shareholders'
equity................. 1,001,433 402,064 (135,362) 303,394 (232,123)
</TABLE>
- --------
(1) Assuming the sale of 223,333 shares of Common Stock offered hereby by the
Company at the public offering price of $3.00 per share occurred at January
1, 1995 and that interest expense of $51,365 relating to $670,000 of
indebtedness had not been incurred, the pro forma net loss of the Company
would have been $568,346. The pro forma loss per share would have been
$0.20.
5
<PAGE>
RISK FACTORS
An investment in the Common Stock involves certain risks. In addition to
other information contained in this Prospectus, prospective purchasers should
consider carefully the following risk factors before investing in the Common
Stock.
COMPANY INVESTMENT RISKS
Operating Losses. The Company has not experienced a net operating profit
since its inception. During the years ended December 31, 1993, December 31,
1994 and December 31, 1995, the Company suffered net operating losses of
$446,755, $1,213,749 and $686,876, respectively. For the first quarter ended
March 31, 1996, the Company had a net loss of $96,962. The accumulated losses
of the Company are $2,755,706. In addition, as of December 31, 1995 the
Company had a working capital deficit of $1,356,829 and a shareholders' equity
deficit of $135,362. At March 31, 1996, the Company had a working capital
deficit of $1,069,886 and a shareholders' equity deficit of $232,123. There
can be no assurance that the Company will achieve or maintain profitability or
that its revenue growth can be sustained in the future. In this regard,
potential investors should note that the Company's audited financial
statements contain a qualified report of the certified public accountant
stating that without additional capital infusion the Company may not be able
to continue as a going concern.
Ability to Continue as a Going Concern Without Additional Financing is
Questionable. The Company's independent certified public accountant has
qualified his report on the Company's financial statements for the years ended
December 31, 1994 and 1995, regarding the Company's ability to continue as a
going concern. Key to this determination is the Company's lack of long-term
financing. Management believes that long-term financing will be obtained from
offerings of debt and equity securities, from the sale of its existing
products and products scheduled to be released in the near future, and by
borrowing funds from other sources. In addition, the Company has developed a
comprehensive long-term plan to achieve and sustain profitability. However,
there can be no assurance that the Company will be able to implement its plan
or, if implemented, the plan will produce sustained profits. See "The
Company--Future Development; Management's Discussion and Analysis of Financial
Condition and Results of Operations."
Limited Operating History. The Company has only a limited operating history
and its operations are subject to all the risks inherent in the establishment
of a new business enterprise. The Company's limited operating history makes
future operating results difficult to predict. The commercial success of the
Company's operating subsidiaries will depend, in part, upon the acceptance of
their products within their respective markets and their ability to
successfully market their products. Failure to achieve market acceptance of
the products of the Company's operating subsidiaries as a result of
competition, technological change or other factors and their failure to market
successfully any existing, new or enhanced products would have a material
adverse effect on the Company's business, financial condition and results of
operations. Further, the likelihood of the success of the Company must be
considered in light of the problems, expenses, complications and delays
frequently encountered in the first few years of a new business. There can be
no assurance that the operations of the Company will be successful.
A Substantial Amount of the Company's Assets Are Research and Development
Costs. The Company's total assets as of December 31, 1995 were $1,026,531 and
as of March 31, 1996 were $1,096,536. Of those amounts, $451,617 and $547,860,
respectively, represented software development costs. Thus, a major component
of the Company's assets are intangible assets and they may not be available
for distribution in the event of a dissolution. In addition, in the event the
Company is required or desires to sell these assets in the future, the Company
may not realize the full amount of their carrying value of $547,860.
Broad Discretion in Use of Proceeds. Besides $670,000 to be used for
repayment of funds advanced to the Company under previous private placements,
ATG intends to use the majority of the net proceeds of the Offering for
working capital to fund research and product development of its subsidiaries'
products, marketing advances to its subsidiaries and other general corporate
purposes. Accordingly, ATG will have broad discretion
6
<PAGE>
as to the application of such proceeds. An investor will not have the
opportunity to evaluate the economic, financial and other relevant information
which will be utilized by ATG in determining the application of such proceeds.
See "Use of Proceeds."
Limited Sales. Since its inception and through 1995, the Company, while
developing prototypes and working versions of proposed products, applied most
of its financial resources toward research and development of its products.
The efforts of the Company's primary operating subsidiary, Time Value
Corporation, were focused primarily on the development of the Documentplus
system and not on sales. Although the Company has a limited retail
distribution system in place, the Company intends to target additional
customers in order to improve sales. See "The Company--Time Value
Corporation."
Reliance on Independent Manufacturers/Subcontractors and Suppliers of
Components. The Company does not maintain its own production facilities, and
does not intend to do so in the foreseeable future. The Company anticipates
that its products will be produced, and its components will be supplied, by
independent companies. Many of these independent companies may manufacture and
supply products for the Company's existing and potential competitors. As is
customary in the industry, the Company does not have licensing or other supply
agreements with its suppliers. Typically, the purchase order is the Company's
"agreement" with the manufacturer or supplier. Therefore, any of these
companies could terminate its relationship with the Company at any time. In
the event the Company were to have difficulties with its present suppliers,
the Company could experience delays in supplying products to its customers and
potentially be forced to discontinue a product line. Presently, the Company is
heavily dependent on NCS and Scantron for the optical scanner sheets used with
the Documentplus system. The Company anticipates that sales of these sheets
will become an increasing component of revenues as more Documentplus systems
are sold. Any negative change in the Company's relationship with either of
these two companies would have a material adverse impact on the company's
business, financial condition and results of operations unless the Company
could quickly find a replacement supplier. At present, there are small
companies that sell optical mark scanner forms. However, management does not
believe that any of such small companies has significant sales. See "The
Company--Time Value Corporation--Income."
Reliance on Independent Contractors. The Company depends on the assistance
of independent medical professionals to complete the development of the
Documentplus specialty modules. These professionals often have time
restrictions that could delay the release of new specialty modules. Any delay
in the release of new specialty modules could have an adverse impact on the
Company's business, financial condition and results of operations. See "The
Company--Time Value Corporation--Product."
Uncertainty of Market Acceptance. To date, the Company has minimal sales in
view of its operating costs. The Company's success will, in large measure,
depend upon acceptance of its products by the healthcare and other industries.
Achieving such acceptance will require significant marketing investment. The
Company's success will be dependent upon acceptance of its existing and
proposed products. Such acceptance cannot be assured nor can it be assured
that its products can be developed or produced at acceptable cost levels.
Technological Obsolescence. The computer and high technology industry is
characterized by extensive research and development and rapid technological
change resulting in very short product life cycles. Development of new or
improved products, processes or technologies within the industry may render
the Company's products obsolete or less competitive. The Company will be
required to devote substantial efforts and financial resources to enhance its
existing products and to develop new products. There can be no assurance that
the Company will succeed with these efforts. Moreover, there can be no
assurance that other products will not be developed which would render the
Company's products obsolete.
No Assurance of Successful and Timely Development of Products. Because of
the high product turnover rate in the high technology industry, failure to
bring a product to market in a timely manner may result in poor market
acceptance. The Company cannot foresee whether a product will be introduced in
a timely manner when it begins research and development efforts. Thus, time
and money devoted to research and development
7
<PAGE>
may be wasted if the introduction of the Company's products is not timely.
There can be no assurance that the Company's products will be introduced to
the market in a timely manner.
Reliance on Retail Distributors. The Company's success will depend to a
significant extent upon the ability to develop a multi-channel distribution
system with retail distributors to sell the Company's products in the
marketplace. There can be no assurance that the Company will be successful in
obtaining and retaining the retail distributors it requires to continue to
grow and expand its marketing and sales efforts.
Competition. Currently, the Company faces very few competitors for TVC's
DOCUMENTPLUS system. However, the Company does face numerous small, as well as
large and financially more secure, competitors for the services that SRS
provides. There can be no assurance that additional competitors to TVC's
DOCUMENTPLUS system will not enter the market or that the market will grow to
accommodate any such increased competition. Additionally, there can be no
assurance that existing or potential competitors of the Company's operating
subsidiaries will not develop products that are functionally equivalent or
superior to those marketed by the Company. See "The Company--Time Value
Corporation--Competition."
Reliance on Key Personnel. ATG relies upon certain key management employees,
including its Chairman and Chief Executive Officer, Hale R. Spiegelberg, and
the loss of any such individual could adversely affect ATG. ATG believes that
its future success will depend upon its ability to attract and retain key
personnel. There can be no assurance that ATG will be able to retain key
members of its management team or that it will be able to attract experienced
personnel in the future. ATG currently does not have employment contracts with
any of its employees. ATG has key person life insurance in the amount of
$3,000,000 for Mr. Spiegelberg. See "Management and Control Persons."
Thin Management. The Company relies heavily on Hale R. Spiegelberg for day-
to-day management. Loss of Mr. Spiegelberg would have an adverse effect on the
Company's ability to continue in its present state. In addition, as the
Company grows Mr. Spiegelberg may not be as effective as the sole manager of
day-to-day operations. Thus, the Company will need to attract a skilled
management team to manage such growth. There can be no guarantee that the
Company will be able to attract such a management team.
Mr. Spiegelberg's Other Affiliations. Hale R. Spiegelberg is the Chief
Executive Officer, Chief Financial Officer, Secretary and Director of the
Company. Mr. Spiegelberg is primarily responsible for the day-to-day
operations of the Company. Mr. Spiegelberg is also Director of Avionics One,
Inc., President of Total Software, Inc., Director of Patient Communications
Systems, Inc., Director of Capital Placement Corporation, and Director of
Acquisition Advisors, Inc. Mr. Spiegelberg estimates that he spends minimal
time (i.e., approximately two hours per week) on non-Company related business
activities. There can be no assurance that Mr. Spiegelberg's time on these
activities will not increase. See "Management and Control Persons--Directors,
Executive Officers, Promoters and Control Persons."
Failure to Achieve Business Plan. Although ATG intends to expand its
marketing of Time Value Corporation's DOCUMENTPLUS system and Silver Ridge
Software Inc.'s services, no assurance can be given that ATG will be able to
achieve these objectives or that, if these objectives are achieved, ATG will
be profitable.
Company May Face Difficulties in Managing Growth. As a result of both
internal development and expansion into additional applications and markets,
the Company is currently experiencing a period of rapid growth and expansion.
Such growth and expansion have placed and could continue to place a
significant strain on the Company's services and support operations, sales and
administrative personnel and other resources. The Company's ability to manage
such growth effectively will require the Company to continue improving its
operational management and financial systems and controls, and to train,
motivate and manage its employees. As a result, the Company is subject to
certain growth-related risks, including the risk that it will be unable to
retain the necessary personnel or acquire other resources necessary to service
such growth adequately.
8
<PAGE>
Future Earnings to Be Retained; Dividends Unlikely. ATG has paid no cash
dividends on its common stock and it does not contemplate paying cash
dividends in the foreseeable future. It is the present intention of ATG's
management to retain future earnings, if any, for use in ATG's business. See
"Dividend Policy."
Control by Existing Shareholders. Upon completion of the Offering, the
Company's existing stockholders will beneficially own 67% of the outstanding
Common Stock (63% if the Underwriters' overallotment option is exercised in
full). Of these shares, the Company's officers and directors, together with
shareholders who beneficially own more than five percent of the outstanding
stock of the Company, will beneficially own 35.8% of the outstanding Common
Stock (34.1% if the Underwriters' overallotment option is exercised in full).
Investors purchasing shares pursuant to this offering will beneficially own
33% of the outstanding Common Stock (36% if the Underwriters' overallotment
option is exercised in full.) As a result, all or certain combinations of the
company's existing shareholders, acting in concert, will have the ability to
control the Board of Directors and policies of the Company.
Additional Financing May Be Required. The Company believes that the proceeds
from the Offering, together with revenues from the operations of its
subsidiaries, will be sufficient to allow the Company to implement its
business plan and to sustain the Company for at least the next 12 months.
Future events could arise, however, that may result in the Company's need to
revise or abandon its business plan. In addition, the assumptions underlying
the business plan may prove to be unrealistic in the face of an ever-changing
technological marketplace. Under such circumstances, the proceeds from the
Offering may be insufficient for ATG's operational needs. In such case, ATG
may need to obtain additional equity capital or bank financing, and no
assurance can be given that such financing, if required, will be available,
or, if available, that the terms of such financing will be acceptable. If
additional funds are raised by issuing equity securities, further dilution to
the existing shareholders may result. If adequate funds are not available, ATG
may be required to delay, scale back or abandon its research and development
programs or to obtain funds through arrangements with affiliates or others
that may require ATG to relinquish rights to certain of its technologies or
potential products or other assets. Accordingly, the inability to obtain such
financing could have a material adverse effect on ATG's business, financial
condition and results of operations.
Reliance on Proprietary Technology. The Company's ability to successfully
achieve future net sales growth will depend, in part, on its ability to
protect its proprietary technology and operate without infringing upon the
rights of others. The Company and its subsidiaries will endeavor to enter into
confidentiality and non-disclosure agreements with their employees and to
limit access to and distribution of their proprietary information. However,
there can be no assurance that such measures will provide adequate protection
for the trade secrets or other proprietary information of the Company and its
subsidiaries, or that the trade secrets or proprietary technology of the
Company and its subsidiaries will not otherwise become known or be
independently developed by competitors. There can be no assurance that the
copyrights of the Company or its subsidiaries will afford any significant
degree of protection or provide the Company or its subsidiaries with a
competitive advantage. In particular, there can be no assurance that any such
copyrights will not be challenged, invalidated or circumvented in the future.
Failure of the Company and its subsidiaries to protect their proprietary
technology could have a material adverse effect on its business, financial
condition and results of operations. See "The Company--Time Value
Corporation."
DOCUMENTPLUS Not A Registered Trademark. TVC's DOCUMENTPLUS system is one of
the Company's primary products. As of April 1, 1996 the name DOCUMENTPLUS has
not been registered with the United States Patent and Trademark Office.
Although the Company is currently engaged in efforts to register the name
DOCUMENTPLUS, or otherwise ensure TVC's ability to continue to use the name
DOCUMENTPLUS, there can be no assurance that TVC will be able to continue to
use the name DOCUMENTPLUS in the future.
Intellectual Property Infringement. The Company may in the future be
notified that it is infringing upon certain intellectual property rights of
others. Although there are no pending lawsuits against the Company or
unresolved claims that the Company is infringing upon intellectual property
rights of others, the Company is
9
<PAGE>
aware of another tradename similar to DOCUMENTPLUS which has been used prior
to the Company's tradename. The Company may possibly be infringing on the use
of that other tradename, but no claim of infringement has yet been made. If
the Company determines it is infringing on the other company's intellectual
property rights, it will attempt to resolve any dispute which may arise
amicably. The Company is also currently reviewing its alternatives to avoid
any such dispute. There can be no assurance that litigation or infringement
claims will not occur in the future. Such litigation or claims could result in
substantial costs and diversion of resources and could have a material adverse
effect on the Company's business, financial condition and results of
operations. If it appears necessary or desirable, the Company may seek
licenses from the owners of patents or other intellectual property that it is
allegedly infringing. No assurance can be given, however, that licenses could
be obtained on commercially reasonable terms or that the terms of any offered
licenses will be acceptable to the Company. The failure to obtain the
necessary licenses or other rights could have a material adverse effect on the
Company's business, financial condition and results of operations.
Anticipated Future Results May Not Come to Fruition. This Prospectus
contains information regarding prospective business lines and results to be
derived from them. The goals established were made in good faith, and with
Management's belief that such goals are realistic and achievable. There can be
no assurance, however, that the goals will be realized. Circumstances beyond
the Company's control may result in failure to achieve the anticipated
results. These circumstances are listed in the other Risk Factors of this
Prospectus, and include, but are not limited to: (1) availability of
independent medical advisors to assist in creating new DOCUMENTPLUS specialty
modules; (2) the failure of independent suppliers such as NCS and Scantron to
deliver supplies in a timely manner; (3) competition from similar products;
and (4) inability to complete a public offering in a timely manner. In
addition, there may be unforeseen circumstances that impede the Company's
ability to implement its business plan or achieve and sustain profitability.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations."
COMMON STOCK INVESTMENT RISKS
No Assurance that the Company Will Be Approved for Listing on the NASDAQ
SmallCap Market System. Although the Company has made application to list the
Common Stock on the NASDAQ SmallCap Market System, there can be no assurance
that the application will be approved. Even if the Common Stock meets all of
the requirements for listing on the NASDAQ SmallCap Market System, such a
listing may be terminated if, among other reasons, the minimum bid price of
the Common Stock falls below $1.00 per share. Other requirements of the
Company for continued listing on the NASDAQ SmallCap Market System are
(i) $2,000,000 in total assets; (ii) $1,000,000 in capital and surplus; and
(iii) $200,000 aggregate market value of the issued and outstanding shares of
Common Stock. If the Company either fails to gain approval of the Common Stock
on the NASDAQ SmallCap Market System or the Common Stock is suspended from
trading on the NASDAQ SmallCap Market System, trading in the Common Stock, if
any, would thereafter be conducted on the OTC Bulletin Board. In such event,
an investor would likely find it more difficult to dispose of, or to obtain
accurate quotations as to the value of, the Common Stock.
No Assurance of Continued Public Market. The Common Stock is currently
traded over-the-counter on the NASDAQ Bulletin Board under the symbol ATYG. In
the 12 months ended December 31, 1995, the total volume of the Common Stock
traded on the NASDAQ Bulletin Board was 113,000 shares. The Company can make
no assurance that the volume of shares of the Common Stock will increase or
even remain at this level, nor can the Company assure that a broker-dealer
will establish and maintain a liquid market for the Common Stock. The
illiquidity of this proposed investment may force investors to hold their
investment indefinitely.
Volume Not Sufficient to Accurately Reflect the Price of Stock. The Common
Stock is thinly traded. As such, the price at which the Common Stock is traded
may not truly reflect its market price across a broad spectrum of potential
investors. There is no assurance that the prices at which the Common Stock has
traded will be maintained in the future.
10
<PAGE>
Variability in Quarterly Operating Results; Possible Volatility of Stock
Price. Results of operations have fluctuated and may continue to fluctuate
significantly from quarter to quarter as a result of a number of factors,
including: (i) the volume and timing of system sales and customer acceptance;
(ii) customer purchasing patterns, long sales cycles, order cancellations and
rescheduling of system installations; (iii) the mix of direct and indirect
sales; and (iv) the action of competitors. In addition, the Company believes
that sales generated by its distribution partners, which are harder to
predict, will increase as a percentage of total revenues. Accordingly, the
Company's future operating results are likely to be subject to significant
variability from quarter to quarter. As a result, the Company believes that
period-to-period comparisons of its revenues and results of operations are not
necessarily meaningful and should not be relied upon as indicators of future
performance. Due to the foregoing factors, it is possible that the Company's
operating results will be below the expectations of public market analysts and
investors. In such event, the price of the Common Stock could be materially
and adversely affected. In addition, the market price for the Common Stock
could be adversely affected by general trends in the Company's industry,
changes in general market conditions and other factors. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Possible Adverse Effect of Shares Eligible for Future Sale on Market Price
of ATG Securities. There are currently seven shareholders who each own
beneficially more than five percent of the Common Stock. See "Management and
Control Persons--Security Ownership of Certain Beneficial Owners and
Management." Such shares (i) may become available for resale in the open
market pursuant to Rule 144 promulgated under the Securities Act of 1933 (the
"Securities Act"), or (ii) may become freely tradable pursuant to their
registration. Because the Common Stock is thinly traded, the sale by such
shareholders of an amount equal to one percent of the issued and outstanding
shares of the Common Stock, representing approximately 42,000 shares if the
Offering is successful (approximately 44,100 shares if the Underwriters
exercise their overallotment option), either individually or together, could
be enough to adversely affect the prevailing market price of the Common Stock.
Such sales also could impair ATG's ability to raise additional capital through
the sale of its securities. The directors, officers and employees of ATG who
are also shareholders of ATG have entered into a contractual agreement with
Brookstreet Securities Corporation that restricts, for a period of two years
from the effective date of this Prospectus, their ability to sell the Common
Stock beneficially owned by them including stock registered pursuant to any
Form SB-2 Registration Statement. See "Underwriting."
Offering Price Is Arbitrary. The offering price of the Common Stock has been
arbitrarily determined by negotiations between the Company and the
Underwriters, and is not necessarily related to the Company's net worth or
established valuation criteria.
Purchasers Will Suffer Substantial Dilution in Net Tangible Book Value. The
initial offering price of the Common Stock of $3.00 per share will exceed the
net tangible book value per share of the Common Stock after the Offering.
Purchasers of the Common Stock in the Offering will therefore experience
immediate and substantial net tangible book value dilution. Based on the pro
forma net tangible book value of the Company as of March 31, 1996, and giving
theoretical effect to the proceeds to be received by the Company after the
Offering, the pro forma net tangible book value of the Company would have been
$0.65 per share. This represents an immediate dilution of $2.35 or 78% per
share to new investors purchasing shares of Common Stock in the Offering. To
the extent that options or warrants, currently outstanding or subsequently
granted, to purchase the Common Stock are exercised, there will be further
dilution.
Effect of Registration Rights. Upon the completion of this Offering, the
Company will sell to the Representative warrants to purchase 140,000 shares of
Common Stock ("Representative Warrants"). The Representative Warrants will be
exercisable at $3.60 per share, for a period of four years, commencing one
year from the effective date of this Prospectus. From the Representative
Warrants, counsel to the Representative will receive warrants ("HCB Warrants")
to purchase $10,000 of the Common Stock at $3.60 per share and otherwise
subject to the same conditions as the Representative Warrants. Holders of the
Representative Warrants are given the opportunity to profit from a rise in the
market price of the Common Stock and are likely to exercise Representative
Warrants at a time when the Company might be able to obtain additional equity
capital on more favorable terms. In addition, to the extent that the
Representative Warrants are exercised, they will decrease the
11
<PAGE>
percentage of the Company owned by investors in this Offering. The
Representative Warrants are entitled to certain demand and piggyback
registration rights. Any exercise of these registration rights may cause the
Company to incur substantial expense, could impair the Company's ability to
raise capital through the sale of its equity securities and if sold in the
public market, such sales could have an adverse effect on the market price of
the Common Stock. See "Underwriting."
Effect of Preferred Stock. The Board of Directors is authorized to issue,
without shareholder approval, Preferred Stock with voting or conversion rights
that may adversely affect the voting power of the Common Stock shareholders.
See "Description of ATG Securities--Description of Capital Stock--Preferred
Stock."
Risks of Low-Priced Securities. If the Common Stock fails to gain approval
for listing on the NASDAQ SmallCap Market System or, if approved, is suspended
or delisted, the Common Stock would be subject to rules under the Exchange Act
that impose additional sales practice requirements on broker-dealers who sell
certain low-priced securities to persons other than established clients and
"accredited investors" (for example, individuals with a net worth in excess of
$1,000,000 or an annual income exceeding $200,000, or $300,000 together with
their spouses). For transactions covered by such rules, a broker-dealer must
make a special suitability determination of the purchaser and have received
the purchaser's written consent to the transaction prior to the sale.
Consequently, such rules may adversely effect the initial marketability of the
Common Stock because the pool of potential investors is smaller, and the
transaction fees higher, than if such rules did not apply. In addition, such
rules may affect the ability of broker-dealers to sell the Common Stock in any
secondary market that may develop for the Common Stock. Thus, investors may
not be able to sell readily Common Stock purchased in the Offering. See "Penny
Stock Regulation."
Anti-Takeover Provision. The Board of Directors is authorized to issue,
without shareholders' approval, Preferred Stock with voting or conversion
rights that may adversely affect the voting power of the Common Stock
shareholders. The provisions relating to the Company's Preferred Stock may
make more difficult the removal of management even if such removal would be
considered beneficial to shareholders generally, and may have the effect of
limiting shareholder participation in certain transactions such as mergers or
tender offers whether or not such transactions are favored by incumbent
management. Because the Board of Directors has authority to establish the
terms of the Preferred Stock, it could be issued to defend against an
attempted takeover of the Company.
12
<PAGE>
USE OF PROCEEDS
The net proceeds from the sale of the 1,400,000 shares of Common Stock
offered hereby are estimated to be approximately $3.530 million ($4.097
million if the Underwriters' overallotment option is exercised in full) after
deducting underwriting discounts in the amount of $420,000, Underwriters' non-
accountable expense allowance in the amount of $126,000 and other expenses of
the Offering in the amount of $124,000. The Company expects to use the net
proceeds over the next 24 months approximately as follows:
<TABLE>
<CAPTION>
APPROXIMATE PERCENTAGE OF
APPLICATION OF NET PROCEEDS DOLLAR AMOUNT NET PROCEEDS(1)
--------------------------- ------------- ---------------
<S> <C> <C>
Repayment of Notes(1).............................. $ 670,000 18.98%
New Product Development: Time Value
Corporation(2).................................... $ 564,208 15.98%
New Product Development: Silver Ridge Software(2).. $ 196,127 5.56%
Marketing: Time Value Corporation(3)............... $1,893,010 53.62%
Marketing: Silver Ridge Software(3)................ $ 30,640 00.87%
Working Capital.................................... $ 176,015 4.99%
---------- ------
Totals........................................... $3,530,000 100.00%
========== ======
</TABLE>
- --------
(1) Represents the repayment of (a) promissory notes in the principal amount
of approximately $160,000 plus interest at an annual rate of 10% (the "10%
Notes"), issued to private investors in a private placement of units that
included one promissory note in the face amount of $50,000 and one warrant
to purchase 10,000 shares of the Common Stock at $5.00 per share; (b)
promissory notes in the principal amount of approximately $400,000 plus
interest at an annual rate of 12% (the "12% Notes"), issued to private
investors in a private placement of units that included one promissory
note in the face amount of $50,000 and one warrant to purchase 16,666
shares of the Common Stock for $100 (the "August 1995 Private Placement");
(c) a promissory note in the principal amount of $50,000 plus interest at
an annual rate of 12% issued to Daystar Partners (the "Daystar Partners
Note"); and (d) promissory notes in the principal amount of $36,000 and
$24,000 plus interest at an annual rate of 10% and no interest rate,
respectively, issued to James G. Owen (the "First Owen Note" and the
"Second Owen Note"). The 10% Notes are to be repaid with interest in
September 1996 ($115,000 principal amount), October 1996 ($20,000
principal amount) and December 1996 ($25,000 principal amount). The 12%
Notes became due in March 1996. The Company obtained extensions of the 12%
Notes to postpone its due date to the closing date of the Offering. In the
event the Offering does not close, the Company will have to renegotiate
the 12% Notes. The Daystar Partners Note is to be repaid with interest in
August 1996. The First Owen Note became due in March 1996. The Company
obtained an extension of the First Owen Note to postpone its due date to
the closing date of the Offering. In the event the Offering does not
close, the Company will have to renegotiate the First Owen Note. The
Second Owen Note is to be repaid without interest in May 1996. Each of the
Notes can be repaid prior to their stated maturity date without penalty.
None of the promissory notes were issued to affiliates, directors or
officers of the Company. The Company intends to repay these Notes from the
proceeds of the Offering.
(2) Represents the Company's estimated pass-through to its subsidiaries for
their use in new product development. See "The Company--Time Value
Corporation--Future Development; Management's Discussion and Analysis of
Financial Condition and Results of Operations."
(3) Represents the Company's estimated pass-through to its subsidiaries for
their use in marketing and promoting their products and services. See "The
Company; Management's Discussion and Analysis of Financial Condition and
Results of Operations."
The foregoing represents the Company's current estimate of the uses of the
net proceeds of the Offering and its plan of operation. The largest component
of the proceeds will be devoted to establishing a national distribution
network for TVC's DOCUMENTPLUS system. The estimates are based on certain
assumptions including, but not limited to, the assumption that TVC's proposed
expansion of its DOCUMENTPLUS modules can be accomplished at a fraction of the
cost of producing the original module. In addition to the foregoing, future
13
<PAGE>
events, including the problems, delays, expenses and complications frequently
encountered by companies seeking to penetrate new markets or provide new
services, as well as changes in economic conditions or competitive conditions,
and the success or lack thereof of the Company's marketing efforts, may make
shifts in the allocation of funds necessary or desirable. There is no
assurance that the Company's assumptions will prove to be accurate or that
unforeseen expenses will not occur. In the event the Company's cost
assumptions prove to be inaccurate and additional expenditures are required or
the Company encounters impediments in any of its proposed expansion areas, it
may not be able to adequately implement its proposed business plan and the
uses of the net proceeds of the Offering may be reallocated.
Prior to expenditure, proceeds will be invested principally in high grade
short-term interest-bearing investments. Any proceeds received upon exercise
of the Underwriter's overallotment option or any of the Company's warrants
will be used for working capital. There can be no assurance that the
overallotment option will be exercised.
The Company believes that the net proceeds of the Offering when coupled with
revenues from operations will satisfy the Company's cash requirements for
approximately 12 months. During those 12 months, the Company's efforts will be
directed at expanding the operations of its subsidiaries. See "The Company;
Management's Discussion and Analysis of Financial Condition and Results of
Operations."
PENNY STOCK REGULATION
The Common Stock is subject to the Commission's regulations regarding "penny
stocks." The Commission has promulgated rules that define a penny stock to be
any equity security that has a price (as therein defined) of less than $5.00
per share or an exercise price of less than $5.00 per share, subject to
certain exemptions, including securities listed on the NASDAQ System or on
designated exchanges.
For any transaction involving a penny stock, unless exempt, the rules
require the delivery, prior to the transaction, of a disclosure statement
prepared by the Commission relating to the penny stock market. Disclosure also
must be made about the risks of investing in penny stocks in both public
offerings and in secondary trading, commissions payable to both the broker-
dealer and the registered representative, current quotations for the
securities and the rights and remedies available to an investor in case of
fraud in penny stock transactions.
The regulations explicitly exempt (1) transactions in which the price of the
security is $5.00 or more; (2) transactions in which the purchaser is an
accredited investor as defined by Rule 501 of Regulation D promulgated under
the Securities Act or is an established customer of the broker-dealer; (3)
transactions that are not recommended by the broker-dealer; and (4)
transactions by a broker-dealer who is not a market maker in the particular
security and whose sales related revenue from transactions in penny stocks
does not exceed five percent of total sales related revenue from transactions
in securities.
In the event the Common Stock is not exempt from the provisions of the
Commission's "penny stock" rules, such rules may adversely effect the initial
marketability of the Common Stock because the pool of potential investors is
smaller, and the transaction fees higher, than if such rules did not apply. In
addition, such rules may affect the ability of broker-dealers to sell the
Common Stock in any secondary market that may develop for the Common Stock.
Thus, investors may not be able to sell readily Common Stock purchased in the
Offering.
DIVIDEND POLICY
The Company has never declared or paid any cash dividends on the Common
Stock. The Company intends to retain all available funds for use in its
business and therefore does not expect to pay any cash dividends in the
foreseeable future. Any future determination relating to dividend policy will
be made at the discretion of the Board of Directors of the Company and will
depend on a number of factors, including the future earnings, capital
requirements, financial condition and future prospects of the Company and such
other factors as the Board of Directors may deem relevant.
14
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of March
31, 1996 and as adjusted to give effect to the receipt of net proceeds from
the 1,400,000 shares of Common Stock offered by the Company hereby, less
underwriting commissions and expenses related to the Offering, and repayment
of $669,400 of notes payable to certain securityholders.
<TABLE>
<CAPTION>
MARCH 31, 1996
-----------------------
ACTUAL AS ADJUSTED
---------- -----------
<S> <C> <C>
Notes Payable(2)....................................... $ 867,352 $ 197,952
========== ==========
Stockholders' Equity:
Preferred Stock, $.001 par value; 1,000,000 shares
authorized; none issued and outstanding............. -- --
Common Stock, $.001 par value; 10,000,000 shares
authorized; 2,800,275 shares issued and outstanding;
4,200,275 shares issued and outstanding as
adjusted(1)......................................... 2,800 4,200
Capital in excess of par value....................... 2,520,783 6,049,383
========== ==========
Retained earnings.................................... (2,755,706) (2,755,706)
========== ==========
Total stockholders' equity............................. $ (232,123) $3,297,877
</TABLE>
- --------
(1) Does not include (i) 210,000 shares of Common Stock reserved for the
Underwriters' overallotment option; (ii) 86,000 shares of Common Stock
reserved for issuance upon the exercise of stock options outstanding as of
the date hereof pursuant to an option agreement with an employee for
providing services outside of the scope of his employment; (iii) 22,000
shares of Common Stock reserved for issuance upon exercise of Common Stock
Purchase Warrants at an exercise price of $5.00 issued to certain ten
percent Noteholders; (iv) 149,996 shares issuable upon exercise of the
warrants for Common Stock issued to certain noteholders; or (v) 140,000
shares of Common Stock reserved for exercise upon the Representative
Warrants issued to the Underwriters.
(2) In February 1996 the Company issued promissory notes in the face amount of
$74,000. These notes will be repaid with the proceeds from the Offering.
See "Use of Proceeds." In addition, during the first quarter of 1996 the
Company repaid $7,000 to Advisors Acquisitions, Inc.
DILUTION
The net tangible book value of the Company as of March 31, 1996 was $(0.28)
per share of Common Stock. Net tangible book value per share represents the
amount of the Company's net tangible assets less total liabilities divided by
the number of shares of Common Stock outstanding. After giving effect to the
sale of 1,400,000 shares of Common Stock offered hereby by the Company at the
public offering price of $3.00 per share, the 149,996 shares issuable upon
exercise of the warrants for Common Stock issued to certain noteholders, and
after deducting estimated underwriting discounts and commissions and estimated
offering expenses payable by the Company, the Company's pro forma net tangible
book value at March 31, 1996 would have been $0.65 per share. This represents
an immediate increase in pro forma net tangible book value of $0.93 per share
to existing shareholders and an immediate dilution of $2.35, or 78%, per share
to new investors purchasing shares of Common Stock in this offering.
15
<PAGE>
<TABLE>
<S> <C>
Initial public offering price per share............................... $3.00
Net tangible book value per share before Offering................... $(.28)
Increase per share attributable to new stockholders................. $ .93
=====
Pro forma net tangible book value per share after Offering............ $ .65
=====
Dilution per share to new stockholders................................ $2.35
=====
Percentage dilution to new shareholders............................... 78%
=====
</TABLE>
The above computation of net tangible book value per share assumes that the
overallotment option granted to the Underwriters to purchase 210,000 shares of
Common Stock will not be utilized and that the Representative Warrants to
purchase 140,000 shares of Common Stock, which include the HCB Warrants to
purchase $10,000 of the Common Stock, will not be exercised.
The following table summarizes, as of March 31, 1996, the number of shares
purchased from the Company, the total investment made and the average price
per share invested since inception by existing stockholders and new
stockholders.16
<TABLE>
<CAPTION>
SHARES PURCHASED(1) TOTAL INVESTMENT(2)
---------------------------------------------
NUMBER PERCENT AMOUNT PERCENT AVERAGE PRICE PER SHARE
----------- -------- ---------- -------- -----------------------
<S> <C> <C> <C> <C> <C>
Existing Stockholders... 2,800,275 64.4% $2,390,253 36.3% $0.85
New Stockholders........ 1,400,000 32.2% 4,200,000 63.7% $3.00
Potentially Exercised
Warrants............... 149,996 3.4% 800 00.0% $0.01
========= ===== ========== ===== =====
Total................. 4,350,271 100.0% $6,591,053 100.0%
========= ===== ========== =====
</TABLE>
- --------
(1) Does not include (i) 86,000 shares of Common Stock reserved for issuance
upon the exercise of stock options outstanding as of the date hereof
pursuant to an option agreement with an employee for providing services
outside of the scope of his employment; (ii) 22,000 shares of Common Stock
reserved for issuance upon exercise of Common Stock Purchase Warrants at
an exercise price of $5.00 issued to certain ten percent Noteholders; or
(iii) 140,000 shares of Common Stock reserved for exercise upon the
Representative Warrants issued to the Underwriters because the effect of
these transactions, individually and collectively, is antidilutive.
(2) Table does not take into account the expenses of the Offering.
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
OVERVIEW
Atlanta Technology Group, Inc. ("ATG") is a holding company based in
Atlanta, Georgia with three subsidiaries in the information technology field.
The primary subsidiary is Time Value Corporation, a Georgia corporation
("TVC") that was formed to develop, market and support a medical cost
containment system designed to reduce the clinical and administrative costs of
producing documentation, correspondence and record keeping for the medical
community. The medical cost containment system is known as DOCUMENTPLUS.
Silver Ridge Software Inc. ("SRS") operates as a software engineering firm
which develops custom solutions for companies that need software design or
assistance with network support and training, systems evaluation, technical
writing or project management. SRS has, however, been relatively inactive
while the Company's focus has been to concentrate on the development and
marketing of TVC's products. Upon the completion of this offering, SRS's
primary focus will be to assist in the development of new specialties of the
Company's medical cost containment product, known as DOCUMENTPLUS, as well as
enhancements to DOCUMENTPLUS. Net City Inc. is not currently conducting
operations. The Company does not expect to make any significant purchase or
have any significant sale of plant or equipment in the foreseeable future, nor
does the Company anticipate any significant changes in the number of
employees.
PLAN TO ADDRESS GOING CONCERN OPINION
The Company's independent auditor has expressed the opinion that the
Company's ability to continue as a going concern is jeopardized unless the
Company obtains an infusion of capital to sustain the Company until it can
market its products on a profitable basis. The basis of this opinion is the
fact that the Company has yet to achieve 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.
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The Company already has established sales, training and support personnel.
Since the DOCUMENTPLUS system works basically the same way in each medical
specialty, the Company feels that its personnel in the sales, training and
support departments will be adequate to launch the new specialty systems. As
future funding is available, the Company has identified additional specialties
that it intends to develop.
Enhancement of Existing Product Lines. The Company is currently developing
additional DOCUMENTPLUS forms to be used in patient assessment and anticipates
that these forms will be ready for the market currently. These copyrighted
forms will be marketed to existing DOCUMENTPLUS users and used in the
orthopedics, physical therapy and neurology DOCUMENTPLUS systems.
Expansion. The Company has increased its number of salespersons from one in
1994 to four in 1996. The Company is now working with three management
consultant groups with national exposure instead of one that is located
primarily in the Eastern United States. Additionally, the Company is achieving
more exposure from advertising in national trade catalogs and directories as
well as articles written in national trade publications about its products.
These activities have resulted in increased leads and sales over the same time
period in 1995. Management believes that this additional exposure will
increase sales during the second and third quarters of 1996.
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.
TVC's potential market includes over 600,000 physicians, dentists and
chiropractors in private practice covering approximately 38 specialties in the
United States. TVCs products are designed to provide clinicians with a
comprehensive and efficient means of providing quality services to patients,
developing a large referral/consulting clinician base, processing accurate and
timely insurance claims and operating a practice with lower expenses. In order
to successfully market its products, TVC will need to penetrate and depend
heavily on established medical/dental/chiropractic distribution networks. TVC
intends to develop an initial network of distributors. Primary distribution
will be through direct and indirect sales channels, with special large
marketing opportunities requiring direct sales representation, and indirect
sales to be made by dealers or distributors. Each salesperson and distributor
will be required to attend a training program that will include computer
technical basics, demonstration techniques, and specific product features,
functions and benefits. TVC has negotiated marketing contracts for its
chiropractic system with four chiropractic management consultant companies.
These companies sponsor conferences and provide publications targeted to the
medical community. They have national exposure. They have agreed to recommend
potential users of DOCUMENTPLUS and provide booth space at their conferences,
assist in the development of OMS forms, refer potential users and promote
DOCUMENTPLUS through advertising in their publications.
In 1994, the Company spent $240,035 on capitalized software development
costs. In 1995, the Company spent $197,259 on capitalized software development
costs. The Company capitalizes the software development
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costs until the product is available for market. The Company anticipates that
it will continue to spend approximately $25,000 per month in this area to
facilitate the development of new products scheduled for release during 1996.
The going concern qualification is contained in the 1994 and 1995 audited
financial statements. The independent auditor has indicated that the language
can be removed in 1996 as soon as the Company has completed the Offering and
has sufficient cash in the bank to cover its needs for 12 months. The
independent auditor also has indicated that the language can be removed once
the Company has achieved profitability.
FISCAL YEAR 1994
Results from Operations. Revenues for 1994 were $1,023,414, a 500% increase
from revenues of $170,777 for 1993. This increase is primarily the result of
TVC's release of the DOCUMENTPLUS system for chiropractors in the third
quarter of 1994 and the increase of revenues of SRS.
ATG's gross profit 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's consulting activities and placing
contract employees with customers to oversee the development, installation and
maintenance of computer systems. Each DOCUMENTPLUS software product requires
the use of different OMS forms. The OMS forms used with the DOCUMENTPLUS
system are manufactured by National Computer Systems, Inc. ("NCS") and
Scantron Corporation ("Scantron") according to specifications supplied by TVC.
TVC purchases these OMS forms from NCS or Scantron and then resells them to
users of DOCUMENTPLUS. TVC received approximately $13,000 per month from the
sale of OMS forms. TVC plans to develop new OMS forms for each new medical
DOCUMENTPLUS system from which it will receive additional OMS forms revenues.
In 1994, TVC sold 67 DOCUMENTPLUS systems. Through December 31, 1994 revenues
were $82,819 from the sale of OMS forms. There can be no assurance that ATG
can generate sufficient revenues to turn a profit.
In February 1994, TVC released its DOCUMENTPLUS General Dental Package. In
September 1994, TVC released its DOCUMENTPLUS Chiropractic Package. Although
the industry-wide acceptance of these products cannot be anticipated, it is
expected that TVC will generate additional revenues from the sale of its
DOCUMENTPLUS system to clinicians.
No income tax benefit is recognized for the operating losses incurred by ATG
in any year because future taxable income cannot be assured. These losses,
however, may be carried forward to future periods.
FISCAL YEAR 1995
Results from Operations. Revenues for 1995 were $1,559,701, a 52% increase
from revenues of $1,023,414 for 1994. The reason for this increase was
primarily the fact that TVC had a full year of sales of the chiropractic
DOCUMENTPLUS system. TVC ended 1994 with the sale of 67 DOCUMENTPLUS systems.
During 1995, TVC sold 164 systems. TVC had 231 DOCUMENTPLUS systems installed
and operating by the end of 1995.
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Sales and gross profits for the year ended December 31, 1995 increased over
the 1994 levels principally as a result of the increased business generated by
SRS in 1995 versus 1994 and the increased sales of TVC's DOCUMENTPLUS system
in the chiropractic market and the increased growth in the sale of scannable
forms.
Revenues for the year ended December 31, 1995 increased to $1,559,701 from
$1,023,414 for the year ended 1994, an increase of $536,287. The increase in
revenues is the result of increased sales of TVC's DOCUMENTPLUS and
copyrighted scannable forms, and SRS's increased growth. TVC also began
billing for annual support of its DOCUMENTPLUS system to the first system
purchasers during the first quarter of 1995.
Operating expenses for the year ended December 31, 1995 increased by
$370,804 over the year ended December 31, 1994. The most significant increases
were in salaries, payroll taxes, trade show expenses and interest on short
term debt. The increase in salaries and payroll taxes reflects the hiring of
additional engineering, sales, administrative and research and development
personnel as well as the cost of contract personnel used by SRS as part of its
computer consulting service operations. Marketing expenses increased as a
result of TVC's DOCUMENTPLUS system being demonstrated to clinicians at
seminars and trade shows. Operating expenses for the year ended December 31,
1995 also include commissions of $12,000 and offering expenses of $28,000 for
the interim financing obtained by the Company as well as a charge of $66,665
for amortization of debt discount incurred by the issuance of warrants to
purchase shares of the Company's common stock which were issued to various
investors in September 1995.
Cost of sales for the year ended December 31, 1995 decreased from 52.8% in
fiscal 1994 to 41.6% for fiscal 1995. The primary reason for the decrease was
the fact of increased sales of scannable forms in the first quarter of 1995.
This increase was due to the fact that there were increased numbers of
DOCUMENTPLUS users which led to increased sales of the paper associated with
the system. TVC estimates that each system which is purchased will lead to
recurring revenues of approximately $2000 per user per year for the purchase
of scannable forms. The scannable forms have a greater profit margin and as
revenue from the sale of these forms increase, the cost of sales will
decrease. Increased sales of forms should also lead to economies in purchasing
as the Company will be able to take advantage of greater volume discounts.
FIRST QUARTER 1996
Revenues for the first quarter ended March 31, 1996 were $410,476, a 49%
increase from revenues of $274,850 for the first quarter ended March 31, 1995.
The reason for this increase was primarily the fact that the Company expanded
its potential customer base by presenting DOCUMENTPLUS to doctors at more than
24 meetings during the first quarter of 1996 compared to eight meetings during
the same period in 1995. Attendance at these meetings ranged from 20 doctors
to over 300 doctors. The Company also began utilizing national advertising in
the fourth quarter of 1995. The sales cycle for the DOCUMENTPLUS system ranges
from one to nine months after initial contact. At the end of the first quarter
1995, TVC had installed 127 systems in clinics, primarily in the eastern
region of the United States. At the end of the first quarter 1996, TVC had
installed over 280 systems in clinics nationwide.
Gross profits for the first quarter ended March 31, 1996 increased to
$248,341 from $154,324 for the same period of 1995. The primary reason for
this increase was the fact that TVC is now receiving the benefit of the
recurring revenue from sales of the scannable forms to existing users as well
as the increase in new system sales. TVC also lowered its cost of goods sold
in the first quarter of 1996 to 39.5% from 43.8% in the first quarter of 1995.
This occurred because of the increased sales of scannable forms (which carry a
lower cost of goods) and the lower price on the scanners which was negotiated
by TVC with its supplier.
Operating expenses for the quarter ended March 31, 1996 were $345,104 an
increase of $90,445 over the period ended March 31, 1995. The most significant
increases were for marketing expenses and interest accruals on short term
debt. Marketing expenses increased as a result of TVC's DOCUMENTPLUS system
being demonstrated to clinicians at twenty four seminars and trade shows
during the first quarter of 1996 as compared to the eight seminars and shows
attended in the same period in 1995.
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Net loss for the quarter ended March 31, 1996 was $96,762, a decrease of
$3,573 from the loss of $100,335 for the quarter ended March 31, 1995. This
decrease was due to the increased level of business achieved by TVC without
any corresponding increase in expenses for facilities and personnel. The net
loss for the quarter ended March 31, 1996 also included a charge of $66,665
for amortization of the debt discount incurred by the issuance of warrants to
purchase shares of the Company's common stock which were issued to various
investors in September 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations through sales, stockholder loans and
the issuance of Common Stock. Working capital decreased during the year ended
December 31, 1995 principally as a result of ATG borrowing funds on a short
term basis to fund operations of its subsidiaries.
In January 1995, the Company borrowed $30,000 from an unaffiliated company
at an interest rate of 8.5% per annum.
In March 1995, the Company initiated a private offering of units that
included one promissory note in the face amount of $50,000, bearing interest
at ten percent per annum and due 18 months from the date of issuance, and one
warrant to purchase 10,000 shares of the Common Stock for $5.00 per share. The
amount raised in this offering was $160,320. In January 1996, the Company
exchanged one of these warrants for a warrant to purchase 16,666 shares of
Common Stock for $100.
In May 1995, the Company borrowed $35,000 on a demand note from the wife of
Hale R. Spiegelberg, Chairman and Chief Executive Officer of the Company. This
note carried an interest rate of ten percent per annum. This note was repaid
in October 1995.
In August 1995, the Company initiated a private offering of units that
ultimately included one promissory note in the face amount of $50,000, bearing
interest at 12% per annum and due six months from the date of issuance, and
one warrant to purchase 16,666 shares of Common Stock for $100. The amount
raised in this offering was $400,800.
In December 1995, the Company borrowed $36,000 from an unrelated third
party. This note carries an interest rate of ten percent per annum and 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 12% per annum and due six months from the date of issuance.
ATG plans to derive its income from the sale of its subsidiaries' existing
products, including products released or to be released in 1996, from the sale
of scannable forms and from the contract programming, software engineering and
development services of SRS. Until ATG's revenues are sufficient to fund its
subsidiaries' operations, ATG will need additional outside sources of capital
to finance its subsidiaries' operations and research and development
activities. ATG anticipates that the proceeds from the Offering will be
sufficient to finance its activities and also the activities of its
subsidiaries until revenues are sufficient to fund such activities for a
period of 12 months.
ATG does not believe that inflation had a significant impact on its results
of operations in the past two years.
SEASONALITY
Management does not believe that the Company's business is seasonal.
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THE COMPANY
The Company was incorporated in the State of Delaware in October 1993 under
the name Time Value Corporation as a holding company for high technology
companies and changed its name to Atlanta Technology Group, Inc. in February
1994. The Company and its corporate predecessors or affiliates entered into
certain transactions described sequentially below to accomplish such goal.
The Company's current primary operating subsidiary is called Time Value
Corporation ("TVC") and was incorporated in Georgia in June 1991 under the
name Converging Systems, Inc. (in order to avoid confusion, the subsidiary
shall be referred to as "TVC" and the parent company, currently Atlanta
Technology Group, Inc., shall be referred to as "ATG" or the "Company"). At
the time TVC was incorporated, the Company and TVC were unaffiliated. In
September 1993, TVC acquired 82.12% of the issued and outstanding shares of
FSQ Systems Corporation ("FSQ") for $14,000. FSQ was incorporated in New York
in April 1993 and never conducted any material operations. Its shares were
never listed on a national securities exchange, nor, to the knowledge of the
Company's management, were FSQ's shares ever traded in any organized broker-
dealer network. In October 1993, FSQ was merged into the Company and the
Company acquired all of the issued and outstanding shares of TVC.
In May 1994, the Company acquired all of the issued and outstanding shares
of common stock of Silver Ridge Software Inc. ("SRS"), a Georgia corporation,
its other operating subsidiary. In May 1994, the Company filed a registration
statement with the Securities and Exchange Commission on Form 10-SB for sale
of ATG's common stock under section 12(g) of the Exchange Act.
The Company is also parent to Net City, Inc., a Georgia corporation, which
is not currently engaged in any operating activities.
TIME VALUE CORPORATION
Time Value Corporation was incorporated in June 1991 under the name
Converging Systems Inc. TVC was capitalized by Capital Placement Corp.
("CPC"), a Delaware corporation, which contributed certain assets of its
subsidiary, Patient Communications Systems, Inc. ("PCS"). These assets,
including inventories, equipment, software development costs, and contract
rights to a certain royalty agreement, were transferred to CPC and then
contributed to TVC in exchange for 1,600,000 shares of TVC's common stock.
Prior to September 1994, TVC was involved in research and development of its
proprietary product known the DOCUMENTPLUS system. Beginning in September 1994
through December 1994, the Company introduced the DOCUMENTPLUS system at 18
seminars held primarily in the Eastern United States. As a result of these
presentations, 67 systems were sold in 1994. In 1995, the DOCUMENTPLUS system
was presented at 29 seminars sponsored by various management consulting groups
and six meetings held by state associations. This exposure resulted in sales
of 164 systems during 1995. The sales cycle for the DOCUMENTPLUS system ranges
from one month to nine months from initial contact to contract execution. The
Company historically closes a sale of the DOCUMENTPLUS system with 10% of the
clinicians who attend the seminars where DOCUMENTPLUS is being presented. In
1996, the Company plans to attend 60 seminars between January and June. The
seminar schedule for the third and fourth quarters of 1996 will be determined
in May 1996.
TVC accepts checks, credit cards and approved leases at the time of order.
Most of the systems are sold under leasing arrangements which the individual
doctor arranges with independent companies.
Income. The DOCUMENTPLUS system is sold directly to end-users in the medical
field. Currently, TVC is marketing DOCUMENTPLUS to chiropractors, neck and
back pain clinics and spinal clinics in the United States. The total number of
end-users of the DOCUMENTPLUS system increased from 67 at December 31, 1994 to
231 at December 31, 1995. Revenue from the sale of systems more than doubled
from $212,371 in fiscal 1994 to $553,933 in fiscal 1995.
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Each system module requires the use of different scan sheets. The scan
sheets used with each specialty module are manufactured by National Computer
Systems, Inc. ("NCS"), a Minnesota corporation, and Scantron Corporation
("Scantron"), a California corporation, according to specifications supplied
by TVC. TVC purchases these forms from NCS and Scantron and then resells the
forms to users of the specialty modules. TVC is currently receiving
approximately $24,000 per month from the sale of scan forms to current users.
Revenue from the sale of scannable forms increased from $82,819 during fiscal
year 1994 to $194,170 in fiscal year 1995. Revenue from support fees were
$8,750 for fiscal 1994 and $38,050 for fiscal 1995.
The increases experienced in each category were the direct result of the
additional 164 systems sold during 1995. Each system which is sold will
generate recurring revenue for TVC as users purchase the copyrighted scannable
forms from TVC and support fees are billed to users on an annual basis. In
1996, the revenues from the sale of systems for the first quarter were
$234,145 an increase of 90% over the $122,832 achieved during same period in
1995. Revenue from the sale of forms through March 31, 1996 has been $73,084
which was an increase of 138% over the $30,675 during the same period of 1995
and revenue from support fees during the period ended March 31, 1996 increased
to $31,400 an increase of 83% over the $17,150 during the same period in 1995.
Future Development. The Company, along with TVC, has adopted a plan to
address the issues which caused the report of the Company's independent
certified public accountant to contain a going concern qualification.
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; and (3)
expansion of the geographical area in which it operates. Because the
incremental costs of developing a DOCUMENTPLUS system for a new medical
specialty is relatively small (approximately $75,000), TVC expects to be able
to grow quickly by offering different DOCUMENTPLUS specialty modules. TVC
plans to introduce four new modules in the next 12 months: orthopedics,
physical therapy, orthodontics, and neurology. Eventually, TVC anticipates
introducing modules for most areas of medical specialty.
Diversification. The Company has designed its software product so that the
research and development expense of creating new DOCUMENTPLUS systems for
different medical specialty areas will be minimal. The Company has already
completed the basic system platform which enables it to complete the
development of additional medical specialty systems at a cost substantially
lower than developing the original DOCUMENTPLUS system. The primary costs of
developing a DOCUMENTPLUS module for a new medical specialty are creating the
copyrighted scannable forms and customizing the narrative output for the
specific medical specialty produced.
Presently, the Company is simultaneously developing DOCUMENTPLUS systems in
orthopedics, physical therapy, orthodontics and neurology. The Company
estimates that the cost of releasing these additional systems to the market
will be approximately $300,000 in total. The Company intends to fund the
development and release of these products from the proceeds of the Offering.
The Company plans to release these new DOCUMENTPLUS systems in the next 12
months. The orthopedics, physical therapy and orthodontics specialty systems
are scheduled for release in the third quarter of 1996. The neurology
specialty system is scheduled for release in January 1997.
Based on information obtained by the Company in 1995, there are 20,000
orthopedists and 64,000 physical therapists licensed to practice in the United
States. The Company believes that this expansion could add as many as 8,500
users to its current base in five years in these two specialties alone. This
figure is based upon a market penetration of ten percent of licensed
practitioners in those specialties over that period of time. The Company
intends to market the new specialties by demonstrating the DOCUMENTPLUS
systems at seminars and trade shows for each medical specialty during the
year. The Company will also advertise in trade publications for each
specialty.
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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.
TVC is also seeking to market its products nationwide through trade
publications and seminars. TVC has retained three national distributors to
assist in marketing and promoting TVC believes that increased sales from this
national exposure will begin in the second or third quarter of 1996. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." No government approvals are required for the Company to market
its products.
The business plan currently being pursued by the Company is based on
information available to Management at the time of its preparation. The
Company and TVC recognize that difficulties could arise that could have an
adverse effect on TVC's ability to successfully implement its business plan.
There could be delays in getting new products to market. One potential source
for delay is the availability of independent medical professionals to devote
sufficient time to assist in the development of these new products. TVC could
experience cost overruns in the development and marketing of new products.
Because TVC is heavily dependent on others to supply the basic components of
its products, any increase in the costs of supplies may have an adverse effect
on sales and/or profitability. While TVC believes that there is a viable
market for computer generated medical records and it has a superior product to
those currently on the market, there can be no assurance that TVC's products
will be accepted by enough medical practitioners to support profitability. In
addition, the competitive advantage that TVC believes it currently enjoys may
prove to be illusory or easily overcome by a competitor in the future. In
short, TVC cannot anticipate the myriad of things that may occur that could
have an adverse impact on its ability to successfully implement its business
plan.
Product: Documentplus. TVC's main product is the DOCUMENTPLUS system.
DOCUMENTPLUS is a comprehensive computer system designed to reduce the time
healthcare practitioners and their staff spend preparing paperwork,
documentation and correspondence. A complete DOCUMENTPLUS system consists of a
microcomputer, a printer, an optical mark scanner, one or more of the
DOCUMENTPLUS modules, a word processing program and copyrighted DOCUMENTPLUS
optical mark scannable forms. If the practitioner already owns an IBM
compatible computer and a word processing program (compatible with TVC's
proprietary software), a separate computer and word processing program are
normally not purchased. At the present time, TVC's software is compatible with
several word processing programs. As part of its service, TVC offers its
customers hardware products including microcomputers and Scantron optical
scanners, as well as the AmiPro word processing program.
DOCUMENTPLUS provides the healthcare practitioner with automatic patient
letter generating capabilities which TVC believes are needed today to promote
informed consent and reduce legal exposure. Today's healthcare practitioner is
acutely aware of the need for documentation in the area of patient
communications.
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However, because of the considerable time and cost involved with such
documentation, patient communications are primarily oral and create a
significant potential for misunderstanding and inadequate retention. Such
misunderstandings can create unnecessary malpractice exposure.
DOCUMENTPLUS is a computer based product designed to generate individualized
correspondence and reports to patients and referring and consulting
physicians, dentists and chiropractors quickly, accurately and efficiently.
TVC believes that effective patient communication is essential for maintaining
and expanding a medical, dental or chiropractic practice and for maintaining a
record of diagnosis and recommended treatment that can be used in the defense
of malpractice or similar claims. DOCUMENTPLUS is designed to provide
clinicians with a comprehensive and time efficient means of communicating
essential clinical information to the patient, referring healthcare
practitioners and insurance companies.
Using DOCUMENTPLUS scannable forms for patient and clinician input in
conjunction with DOCUMENTPLUS software, a microcomputer and an optical mark
scanner, Documentplus generates individualized correspondence from the
healthcare practitioner to the patient, referring and/or consulting
physicians, dentists, chiropractors, insurance companies and others. TVC's
copyrighted optical mark scannable forms ("OMS forms"), including Patient
Health Questionnaires, Clinical Evaluation forms, Clinical Radiographic
Findings forms, Clinical Re-evaluation and Treatment forms, Daily SOAP Note
forms (SOAP stands for subjective, objective, assessment and plan, and
represents the four parts of a written account of the health problem made by a
doctor) and Patient Outcome Assessment forms, are filled out by patients and
clinicians and input into the DOCUMENTPLUS software by an optical mark
scanner. The DOCUMENTPLUS program uses the data read by the optical scanning
device to generate customized letters from the physician, dentist or
chiropractor to patients explaining objectives and treatment recommendations.
Except for such copyrights, the Company does not own or possess any patents or
trademarks for it products or its business line.
DOCUMENTPLUS is comprised of various submodules. Each submodule provides the
healthcare practitioner with customized written communications for the
practitioner's specialty area in order to better inform the patient, the
patient's referring or consulting clinicians and the insurance providers of
the status of the patient's condition.
DOCUMENTPLUS begins with OMS forms designed by TVC with assistance from
medical, dental or chiropractic practitioners. Each submodule requires a
series of OMS forms designed to manage a patient throughout his or her
association with the physician, dentist or chiropractor. The OMS forms include
a medical history of the patient, which the patient completes during his/her
initial visit, an examination and evaluation OMS form completed by the
clinician, a radiographic diagnosis and treatment OMS form completed by the
clinician and/or staff member, and periodic progress OMS forms completed by
the clinician or staff member.
The OMS forms contain a series of questions answered by darkening with a
pencil a round circle or "bubble" adjacent to the appropriate response on the
OMS form. The OMS forms are designed to provide a logical flow of information
and clinical findings from the general to the very specific. The division of
information on the OMS forms provides a readable, understandable and efficient
means of case evaluation and diagnosis. The OMS form is completed as the
physician, dentist or chiropractor, or an assistant, examines the patient or
evaluates other data, such as x-rays or results from laboratory tests. The use
of OMS forms provides the healthcare practitioner with a method for
standardizing the examination and diagnostic procedures for all new patients,
thereby providing a comprehensive and accurate record from the beginning of
treatment.
DOCUMENTPLUS also generates progress letters once the patient is under a
physician's, dentist's or chiropractor's care. The healthcare practitioner
determines the desired interval for the progress letter, then marks the
appropriate response adjacent to the clinical description on the OMS form,
after which DOCUMENTPLUS generates a letter of treatment status to the
patient.
Referral letters also can be generated by DOCUMENTPLUS to advise referring
doctors, dentists or chiropractors of the recommended treatment for patients.
Simultaneously, clinicians being consulted concerning contributing problems
are notified as to the specific reason the patient has been referred to them.
25
<PAGE>
Using an OMS form with the DOCUMENTPLUS software, the healthcare
practitioner also can generate billing and information narratives for the
patient's insurance company with specific diagnosis and treatment plan and
charges billed to the patient.
All correspondence generated by DOCUMENTPLUS can be reviewed and edited
prior to being printed in final form.
The OMS forms used with DOCUMENTPLUS are manufactured by Scantron and NCS.
Completed OMS forms are scanned by an optical mark scanner. DOCUMENTPLUS has
been developed for use with a Scantron optical mark scanner and a NCS optical
mark scanner. These scanners read the data on the OMS form by identifying the
darkness of each mark. Light transmitted through the OMS form allows the
scanner to read accurately both sides 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 Health Questionnaire summarizes the information the patient has
provided
Patient Initial Letter summarizes the patient's initial visit and
outlines planned treatment
Doctor Initial Letter to referring clinician summarizing patient's
initial visit and planned treatment
Medical Summary to consulting clinician summarizing findings
after medical history, clinical exam, and
radiographic findings
Informed Consent indicates informed consent for specific
procedures on behalf of patient
Progress Reports summarizes progress and expected developments
during various phases of treatment
Insurance Letter provides information to the insurance company
using proper diagnosis and treatment coding
Patient Complete Letter includes additional information from lab test
reports
Doctor Complete Letter to referring doctor with additional information
from lab test
Medico-legal Letter to patient's attorney with information regarding
patient's history and treatment procedures
TVC introduced the Chiropractic module in September 1994 and has sold and
installed over 200 systems since the introduction. These sales were the result
of TVC's participation in seminars under the direction of Markson Management
Services, Inc., as well as other independent chiropractic trade shows, during
1995. TVC plans to continue to attend trade shows as a method of product
distribution and promotion.
26
<PAGE>
TVC has identified 38 additional specialty areas to be developed as
specialty authors, who are healthcare practitioners and other experts
consulted to develop modules, are selected and funding is available. Some of
the additional specialties slated for early development include cardiology,
neurology, orthopedics, dermatology, ophthalmology and podiatry. In order to
develop a new module, TVC ordinarily would retain a doctor or dentist who is a
specialist in a particular field of practice to consult with TVC as it designs
the module relating to their area of specialty. In return for these consulting
services, TVC may pay a percentage of the gross revenues received by TVC from
the sale of the module. TVC does not have any consulting agreement with any
person with respect to additional modules for the DOCUMENTPLUS system.
BENEFITS OF DOCUMENTPLUS. The Company believes that the DOCUMENTPLUS system
has the following benefits:
IMPROVES PATIENT EDUCATION AND COMMUNICATION. Creates an environment for
attracting and developing new patients through the use of an effective,
written personal patient education and communication program.
INCREASES PATIENT CONFIDENCE. Intended to increase patient confidence in the
clinician by educating patients about their particular needs through written
communications.
IMPROVES COMMUNICATION BETWEEN CLINICIANS. Develops a mutually beneficial
relationship between referring and consulting clinicians through detailed
correspondence relating to patient treatment and needs.
ELIMINATES ROUTINE DICTATION. Eliminates most of the requirements for
routine dictation, thus allowing for an increased patient load or redirection
of time to developing the practice.
EFFECTIVE TIME MANAGEMENT. Reduces consultation time and improves the
quality of care by providing an easy-to-use diagnostic tool and standardized
comprehensive records, documentation, and correspondence from initial visit
through on-going treatment.
ENHANCES MARKETING. Creates an on-line records and documentation research
data bank for patient call backs as new techniques, procedures and treatments
become available for their conditions.
INCREASES REVENUES. Enhances insurance claims turnaround and improves cash
flows by providing complete documentation and correspondence for insurance
companies.
REDUCES MALPRACTICE EXPOSURE. Provides added protection against possible
litigation with comprehensive documentation supporting the diagnosis,
treatment and informed consent of the patient.
IMPROVES ADMINISTRATION. Provides systems which improve financial planning,
processing of insurance claims and communications.
WARRANTIES AND TRAINING. TVC warrants its products for 90 days. After the
expiration of the initial warranty period, TVC will provide continuing
technical support for its software for an additional annual maintenance fee.
The actual amount of the annual maintenance fee depends upon the software
purchased by the customer. The optical mark scanners are sold by TVC for use
with DOCUMENTPLUS and are warranted by Scantron or NCS for a period of 90 days
after shipment. A maintenance agreement for the scanners is available directly
from Scantron or NCS.
Training of the clinician's staff to use TVC's products is provided by TVC.
TVC will provide users with a video tape and an instruction manual for
installation of the DOCUMENTPLUS system. Additional training is available if
requested by users. If on-site training is requested, the clinician is
responsible for all expenses incurred by TVC's personnel.
COMPETITION. Many firms have developed independent software applications
which are designed to solve only a portion of the problems facing
medical/dental/chiropractic practices. Accordingly, the medical, dental and
27
<PAGE>
chiropractic market is very fragmented in its approach to office management
systems. As a result, TVC believes there is a need for a single software
system that will combine and/or integrate groups of individual applications
and technologies to create a comprehensive approach for managing office
paperwork.
As with any new product, the extent to which the targeted community will
perceive a need for TVC's products is uncertain. The computer software
industry is highly competitive. TVC competes with other entities that have
established marketing and distribution networks, greater resources and
capabilities, and wider name recognition in the marketplace, including Scribe
Systems, Inc. (maker of Comp-U-Scribe Narrative Report Writer) and Cornerstone
Systems (maker of Narrative Power). TVC's competitors could develop products
which are functionally equivalent or superior to TVC's system, in which case
TVC's perceived competitive advantage concerning the nature of its products
would be lost.
Scribe Systems and Cornerstone Systems have had products in the marketplace
for a much longer period of time than the Company. Scribe System's product is
used by more customers in the western part of the United States than TVC's
because TVC has just recently begun advertising on a national level. The other
products both utilize keyboard input to feed the information into the computer
whereby DOCUMENTPLUS uses automated optical scanning technology. The TVC
scanning technology is quicker and less prone to data entry error than the
method used by either product. DOCUMENTPLUS is more expensive initially than
either of the other two; however, it is less expensive to utilize because it
is automated, performs the tasks quickly and more efficiently and does not
require additional personnel to handle increased paperwork.
MARKETING. TVC's potential market includes over 600,000 physicians, dentists
and chiropractors in private practice covering approximately 38 specialties in
the United States. TVC's products are designed to provide clinicians with a
comprehensive and efficient means of providing quality services to patients,
developing a large referral/consulting clinician base, processing accurate and
timely insurance claims and operating a practice with lower expenses.
The present marketing plan of TVC consists of the following elements:
(1) To utilize experienced medical/dental/chiropractic clinicians to
develop specific patient communications packages that relate to particular
specialties in their particular fields.
(2) To demonstrate DOCUMENTPLUS at symposiums, regional and national
trade shows (for each medical, dental or chiropractic specialty and their
specific associations) and study club groups.
(3) To introduce and incorporate DOCUMENTPLUS as part of the formal
curriculum where healthcare practitioners receive their training. Previous
versions of the Orthodontic and TMD modules have been used at Marquette
University and Tufts University.
(4) To develop a product "users" group to assist TVC in monitoring the
target specialties in medicine, dentistry and chiropractic as well as
responding to the needs of clinicians.
The Company has not undertaken any market feasibility studies to date.
In order to successfully market its products, TVC will need to penetrate and
depend heavily on established medical/dental/chiropractic distribution
networks. TVC intends to develop an initial network of distributors. Primary
distribution will be through direct and indirect sales channels, with special
large marketing opportunities requiring direct sales representation, and
indirect sales to be made by dealers or distributors. Each salesperson and
distributor will be required to attend a training program that will include
computer technical basics, demonstration techniques, and specific product
features, functions and benefits. TVC has negotiated marketing contracts for
its chiropractic system with Markson Management, Inc. ("Markson Management")
and Activator Methods, Inc. ("Activator Methods"), two unaffiliated
chiropractic management companies that conduct seminars for healthcare
practitioners on how to operate their offices more efficiently, and two other
marketing and distribution companies.
28
<PAGE>
Among other things, Markson Management conducts trade shows for the
chiropractic industry. Healthcare practitioners associated with Markson
Management provided input in the development of the software and OMS forms
used with the chiropractic DOCUMENTPLUS system and Markson Management provides
TVC with access to its seminars and trade shows. In exchange, TVC is obligated
to pay Markson Management a royalty of 25% of the software sales price of the
chiropractic software and five percent of the revenue from the sales of all
chiropractic OMS forms, irrespective of whether such sales result from the
efforts of Markson Management.
Activator Methods is an Arizona corporation that sponsors conferences and
produces a publication targeted to the chiropractic industry. Activator
Methods has agreed to recommend DOCUMENTPLUS and provide booth space at its
conferences, assist in the development of OMS forms, refer potential users of
the chiropractic DOCUMENTPLUS system to TVC and promote DOCUMENTPLUS through
advertising in its publication. In exchange, TVC is obligated to pay Activator
Methods booth rental fees in the amount of $500 for each sale of the
chiropractic software made at its conferences. In addition, after the first 20
chiropractic software units are sold by Activator Methods, TVC is obligated to
pay to Activator Methods five percent of the revenue from OMS forms sold to
customers that purchase the chiropractic software because of the efforts of
Activator Methods. This agreement runs from year to year unless terminated by
either TVC or Activator Methods after 30 days notice.
The two other marketing and distribution companies sponsor conferences and
provide publications targeted to the medical community. They have national
exposure. They have agreed to recommend DOCUMENTPLUS and provide booth space
at their conferences, assist in the development of OMS forms, refer potential
users of the DOCUMENTPLUS system to TVC and promote DOCUMENTPLUS through
advertising in their publications. In exchange, TVC is obligated to pay booth
rental fees in the amount of $500 for each sale of the medical software made
at their conferences. These agreements run from year to year unless terminated
by either TVC or the marketing and distribution companies after 30 days
notice.
SILVER RIDGE SOFTWARE INC.
Silver Ridge Software Inc. was incorporated in 1993 as a computer consulting
and software engineering firm.
Services. SRS provides customized computer software solutions and contract
engineering services to companies in areas ranging from insurance and finance
to embedded control systems and telecommunications. SRS develops custom
software for its clients and has no immediate plans to develop or market
products for the general public at this time.
In order to satisfy the software development needs of its clients, SRS
maintains an internal development team trained in areas of software design,
network support and training, systems evaluation, technical writing and
project management. SRS personnel are trained in multiple programming
languages including Assembler, C, C++, Focus, Foxpro, Clipper, Access,
Powerbuilder, Visual Basic, and Visual C++. SRS also provides on-site
contractors for clients who want the participation of their own personnel in
the development process.
In its first year of operations, SRS has obtained a broad client base
ranging from small to medium size entities with annual revenues of $10 million
to $250 million. Currently, SRS's largest client is Courier Dispatch
constituting approximately 20% of SRS's revenues. SRS has developed and
implemented a client/server based system for Courier to replace its aging
mainframe system. In addition, SRS has developed, implemented, and maintained
numerous software systems in fields as diverse as manufacturing, distribution,
and communications.
Market. As the software development marketplace is highly competitive, SRS
is aligning itself to meet current trends of "user friendly" software and
systems. SRS intends to market its services through direct mail advertising,
radio advertising and newspaper advertising. There are many software
development companies in competition with SRS. The Company provides no
assurance that SRS will be able to compete successfully in such an
environment.
29
<PAGE>
LEGAL PROCEEDINGS
The Company was a defendant in an action in Pineallas County Court, Florida
entitled Gregory S. Roe v. Hale Spiegelberg, et al. The plaintiff claimed, on
behalf of his wife, that the Company was responsible to pay a $10,000 note due
from Millennium Global Inc. ("MGI") under the theory that the Company
purchased MGI and all of its debts as well as its assets. The action was
settled in December 1995 and the Company agreed to pay Mr. Roe a total of
$2,000, payable in ten consecutive equal monthly installments.
The Company was a party to an action in Fulton County Superior Court,
Georgia entitled Fiberoptic Atlanta Inc. v. Atlanta Technology Group, Inc., et
al. On June 13, 1995, the parties entered into a settlement agreement whereby
all lawsuits were dismissed and the parties agreed to share costs. There are
no ongoing obligations in connection with this settlement.
The Company may be subject, from time to time, to various legal proceedings
relating to claims arising out of its operations in the ordinary course of its
business. The Company, currently is not party to any legal proceedings, the
adverse outcome of which, individually or in the aggregate, management
believes would have a material adverse effect on the business, financial
condition or results of operations of the Company.
EMPLOYEES
As of December 31, 1995, the Company had 19 full-time employees and two
part-time employees. There are seven full-time employees in research and
development; two full-time and 1 part-time employees in training and support,
five full-time employees in sales and marketing, and five full-time and one
part-time employees in administration.
FACILITIES
Silver Ridge Software Inc. is leasing approximately 3,000 sq. feet at 400
Embassy Row, Atlanta, Georgia. The lease for this space expires in 1999. The
monthly lease payment for this space is approximately $3,900. The lessor is an
unaffiliated party, the US Post Office. The Company shares this space with
Silver Ridge Software Inc. and Time Value Corporation on a rent-free basis.
The Company believes that the lease payments are comparable to lease payments
for commercial space leased in the area. The Company currently intends to
retain its existing facilities to house its customer product operations.
MANAGEMENT AND CONTROL PERSONS
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The present executive officers, and members of the Board of Directors, are
as follows:
<TABLE>
<CAPTION>
NAME AGE POSITIONS
---- --- ---------
<S> <C> <C>
Hale R. Spiegelberg............... 45 Chief Executive Officer, Chief
Financial Officer, Secretary, Director
James Cassidy..................... 63 President, Director
Gregory W. L. Richter............. 33 Director
Herbert W. Browne................. 69 Director
</TABLE>
The number of directors may be fixed from time to time by the Board of
Directors. The Board of Directors presently consists of four directors. Each
of the Company's directors has been elected to a one year term, expiring at
certain dates throughout 1996. Vacancies in the Board of Directors are filled
by a majority vote of the remaining directors or by a shareholder vote called
expressly for such purpose. The Company has agreed that, upon completion of
the Offering, the Board of Directors will increase its size to five, of which
a majority shall be outside directors. The Company also has agreed to appoint
Daniel C. Montano, of Brookstreet Securities Corporation, to the Board of
Directors of the Company.
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<PAGE>
MR. HALE R. SPIEGELBERG has been Chief Executive Officer and a director of
ATG since its inception, and has been actively involved in optical mark
scanning, and other high technology industries, for the past six years.
Currently, he is a full-time employee of ATG, and is committed to managing ATG
on a full-time basis. Since 1994, he has served as a director of Avionics One,
Inc., a company organized to design and develop an aircraft navigational
system. In 1994, he served as a director of Fiberoptic Atlanta, Inc. Since
1991, he has served as President of Total Software, Inc., a computer software
system and hardware set-up company. Since 1989, he has been a director of
Patient Communications Systems, Inc., a company that developed software for
the dental profession using an optical mark scanning system. Patient
Communications Systems, Inc. is currently inactive. In 1989, he served as
director of Human Performance Corporation, a company engaged in the
development of computer controlled exercise and rehabilitation equipment.
Since 1987, he has been the sole officer and director of Capital Placement
Corporation, a holding company organized to engage in capitalization of high
technology companies, and since 1991 he has been director of Acquisition
Advisors, Inc., a company formed to provide consulting services on mergers and
acquisitions. Mr. Spiegelberg estimates that the time required of him with
regard to affiliations other than the Company is minimal (i.e., approximately
two hours per week). During the same time period he has served as an officer
or director of several financial companies, including Norris Hirshberg (1991)
and Masters Financial Group, Inc. (1991). While at Masters Financial Group,
Inc., Mr. Spiegelberg was suspended by the NASD for five years, without
admitting or denying fault, for allegedly being involved in certain violations
of NASD rules and regulations for failing to keep paperwork current and
failing to register employees with the NASD.
MR. JAMES CASSIDY has been a director of ATG since December 1995 and
President since March 15, 1996. He is Chairman of CPG, Inc., an engineering
consulting firm, and President of Ye Olde Cookie Company. Mr. Cassidy has been
associated with Ye Olde Cookie Company since 1987. He has been a consultant to
Durham Temporary Services since 1990. All three of these companies are located
in Atlanta, Georgia. From 1988 until 1990, Mr. Cassidy served as Chairman of
Patient Communication Systems Inc. in Atlanta. From 1960 until his retirement
in 1987, Mr. Cassidy held various positions at Sears Roebuck & Co. From 1980
to 1987 he assumed responsibility for facilities planning operations in the
Southeast, Southwest and Puerto Rican regions. In 1978 he was named National
Sales Manager. Mr. Cassidy graduated from Mt. St. Mary's College in 1960 with
a degree in Business Administration.
MR. GREGORY W. L. RICHTER was ATG's President from October 1993 to March 15,
1996. Currently, Mr. Richter is being retained by SRS as an outside
consultant. In 1986, Mr. Richter founded Blue Mountain Software, Inc., a
software consulting firm located in Atlanta. Mr. Richter was the President of
Blue Mountain Software, Inc. until it was bought by Fisher Business Systems,
Inc. in late 1992. He was employed by Fisher Business Systems, Inc. from the
time he sold Blue Mountain Software, Inc. until his employment by the Company.
A graduate of Georgia Tech with a degree in Electrical Engineering, Mr.
Richter studied computer design as a Grumman Aerospace scholar.
MR. HERBERT W. BROWNE has been a consultant to Noramco, Inc., a Johnson &
Johnson company marketing various chemicals to the pharmaceutical industry
since 1986. Prior to his retirement in 1985 from McNeil Laboratories, a
Johnson & Johnson company, Mr. Browne served as Senior Vice President (1978-
1985), Vice President, Marketing (1974-1979), Director of Sales Promotion
(1967-1974), District Manager of the Charlotte, North Carolina District (1964-
1967) and a salesman in the Birmingham, Alabama area where he established a
record of leading his company in sales for seven consecutive years. Mr. Browne
presently serves as Chairman of PRIDE, the nation's oldest and largest
association dedicated to fighting drug abuse. He has served on the Boards of
the Suburban General Hospital and the University of Pennsylvania Medical
Center in Philadelphia. He has also served on the Board and the Executive
Committee of the National Pharmaceutical council and the Steering Committee of
the marketing section of the Pharmaceutical Manufacturers Association, both
located in Washington, D.C. Mr. Browne is a graduate of the University of
Alabama with a degree in Chemistry.
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
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<PAGE>
of over 20 publicly-traded companies. Mr. Montano is 47 years old, and
received a B.S. in Business from California State University at Los Angeles
and an MBA from the University of Southern California. He is subject to a
cease and desist order pursuant to Section 8A, Section 5(b)(1) and Sections
17(a)(2) and (3) of the Securities Act. The order was agreed to by Mr. Montano
without admitting or denying fault, and requires him to refrain from making
fraudulent statements in connection with a securities offering.
EXECUTIVE COMPENSATION
Mr. Spiegelberg received no remuneration for his services between 1993 and
1995, and there were no executives of the Company whose aggregate cash and
cash equivalent forms of remuneration were in excess of $100,000 between 1993
and 1995. Mr. Richter received $51,934.61 for his services in 1995. It is not
expected that the office of the President will receive more than $100,000 in
compensation in 1996. It is expected that Mr. Spiegelberg will receive no
remuneration for his services in 1996.
No officer or director of ATG has ever been granted any stock options or
awards under a Long Term Incentive Plan. ATG does not have a defined benefit,
pension, profit sharing or other retirement plan. The Company will not grant
options and warrants to officers, directors, employees, 5% shareholders or
affiliates in excess of 15% of the outstanding shares for a period of one year
from the date of this Prospectus. In addition, any options or warrants granted
to officers, directors, employees, 5% shareholders or affiliates will have an
exercise price no less than 85% of the fair market value of the Common Stock
on the date of the grant.
ATG does not pay its directors for attending meetings of the Board of
Directors. ATG has no standard arrangement pursuant to which directors are
compensated for any services provided as a director or for committee
participation or special assignments.
ATG does not have any written employment contracts with respect to any of
its executive officers, and does not have any compensatory plan or arrangement
that results or will result from the resignation, retirement or any other
termination of any executive officer's employment with ATG or from a change in
control of ATG or a change in an executive of officer's responsibilities
following a change in control.
LOANS TO OFFICERS AND DIRECTORS
In 1994, Gregory W. L. Richter, Director and former President of the
Company, received a loan from the Company in the amount of $12,000. In
December 1995, the Company accepted computer equipment from Mr. Richter as
payment of this loan. There are no loans currently outstanding to any Officer
or Director of the Company.
Any future loans or advances will be for a bona fide business purpose and
approved by a majority of the disinterested directors. The Company has agreed
with certain state regulatory authorities that so long as the Company's
securities are registered in such states, or one year from the date of this
Prospectus, whichever is longer, the Company will not make loans to its
officers, directors, employees, or principal shareholders, except for loans
made in the ordinary course of business, such as travel advances, expense
account advances, relocation advances, or reasonable salary advances.
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<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The only class of voting securities of ATG is the Common Stock. The
following table sets forth information concerning beneficial ownership of the
Common Stock, as of December 31, 1995, of ATG by (i) each person (including
any "group" as that term is defined in Section 13(d)(3) of the Exchange Act)
known by ATG to own beneficially more than five percent of such Common Stock,
(ii) each officer and director of ATG, and (iii) all directors and executive
officers as a group. The table also sets forth the beneficial ownership of
each person listed after the Offering, assuming the Underwriters do not
exercise their overallotment option.
<TABLE>
<CAPTION>
PERCENT OF CLASS
-----------------
NAME AND ADDRESS AMOUNT AND NATURE BEFORE AFTER
TITLE OF CLASS OF BENEFICIAL OWNER OF BENEFICIAL OWNER OFFERING OFFERING
-------------- ------------------- ------------------- -------- --------
<C> <S> <C> <C> <C>
Common Stock Hale R. Spiegelberg 1,578,317(1) 56.36% 37.58%
6065 Roswell Rd.
#2267
Atlanta, GA 30328
Common Stock Gregory W.L. Richter 346,500(3) 12.3% 8.25%
400 Embassy Row
#570
Atlanta, GA 30328
Common Stock Pollution Research and Control 400,000 14.3% 9.52%
Corp.
515 W. Colorado St.
Glendale, CA 91204
Common Stock Total Software Inc. 644,948(2) 23.1% 15.35%
2131 Pleasant Hill Rd.
Suite 151-175
Duluth, GA 30136
Common Stock Einzelhaft Partners, A.G. 350,000(2) 12.52% 8.33%
P.O. Box 1062
Grand Cayman
Cayman Islands
Common Stock Axis Capital, A.G. 250,000(4) 8.9% 5.95%
P.O. Box 1062
Grand Cayman
Cayman Islands
Common Stock Acquisition Advisors, Inc. 568,832(2) 20.3% 13.54%
6065 Roswell Road
Suite 2267
Atlanta, GA 30328
Common Stock All Executive Officers and 1,504,817 53.74% 35.83%
Directors as a Group
</TABLE>
- --------
(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 Inc., 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.
33
<PAGE>
Total Software Inc. and Acquisition Advisors Inc. are both owned by
Einzelhaft Partners A.G. Mr. Spiegelberg is the President of Total Software
Inc. and a director of Acquisition Advisors Inc. Mr. Spiegelberg has the right
to name the beneficiaries of the trust that owns Einzelhaft Partners A.G. but
is not the beneficiary of the trust. Mr. Spiegelberg is not an officer,
director, shareholder or trustee of Einzelhaft Partners A.G. nor a director of
the trust.
Total Software Inc. had previously performed R & D consulting work for
Pollution Research and Control Corporation. Total Software Inc. and
Acquisition Advisors In. were shareholders of Pollution Research and Control
Corporation in the past.
Mr. Richter has the right to name the beneficiaries of the trust that owns
Axis Capital A.G. but is not the beneficiary of the trust. Mr. Richter is not
an officer, director, shareholder or trustee of Axis Capital A.G. nor a
director of the trust.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In January 1993, the Company accepted 65,114 shares of Pollution Research
and Control Corp.'s ("PRCC") restricted common stock as payment for the
remaining principal balance of a note receivable from a PRCC subsidiary and
forgave all interest due on the note.
In February 1993, the Company exercised an Underwriters Unit Purchase
Warrant of PRCC acquired in December 1992. As payment for the exercise price,
the Company surrendered warrants allowing for the purchase of 42,500 shares of
PRCC common stock. As a result of this transaction, the Company received
175,502 shares of PRCC common stock and warrants for the purchase of an
additional 217,502 shares of PRCC's common stock. In February 1993, the
Company sold 15,000 shares of PRCC's common stock and 150,000 PRCC warrants at
its cost to Total Software, Inc. ("TSI") for $112,500 in cash. Between January
and June 1993, the Company sold 91,400 PRCC warrants on the open market for
approximately $43,623 and purchased 24,000 warrants for $9,900. In addition,
the company sold 11,000 shares of PRCC's common stock for approximately
$22,546. In addition, 14,002 shares of PRCC common stock were sold to
Acquisition Advisors, Inc. ("AAI") for $28,004.
In December 1993, ATG and its affiliates, TSI and AAI, agreed to convert the
amounts owed by TVC to TSI ($134,797) and AAI ($86,467) into shares of the
Company's common stock at the rate of $3.00 of debt for each share of stock.
As a result, ATG issued 44,948 shares of Common Stock to TSI and 28,832 shares
of Common Stock to AAI.
Between November 1993 and January 1994, ATG sold 75,334 shares of Common
Stock in a private placement for $3.00 per share. AAI purchased 40,000 shares
of the Common Stock in this private placement. Total net proceeds from the
offering amounted to $202,000, after deducting costs of $25,243 applicable to
the offering.
In December 1994, ATG sold 100,000 shares of Pollution Research and Control
Corp. ("PRCC") restricted Common Stock to PRCC at market price for $55,000
cash and the removal of the trading restriction on the remaining 5,114 shares
of stock held by ATG. ATG realized a loss of approximately $92,000.
In 1994, Gregory W. L. Richter, Director and former President of the
Company, received a loan from the Company in the amount of $12,000. In
December 1995, the Company accepted computer equipment from Mr. Richter as
payment of this loan.
In February 1995, the Company sold 5,114 shares of PRCC common stock on the
open market for approximately $3,350.
34
<PAGE>
As of December 31, 1995, the Company owed $24,500 to TSI and $143,720 to
AAI. Substantially all of the assets of SRS, approximately $171,000, were
subject to a security interest in favor of TSI as a result of the Company's
loans from TSI.
On March 15, 1996, the SRS entered into a consulting agreement with Gregory
W.L. Richter, Director and former President of the Company, whereby Mr.
Richter would provide computer software engineering and design services in
exchange for compensation of $6,250 per month payable on the first of each
month services are desired.
The Company's Management believes that the terms of these transactions are
no less favorable to the Company than would have been obtained from an
unaffiliated third party in similar transactions.
DESCRIPTION OF ATG SECURITIES
DESCRIPTION OF CAPITAL STOCK
Common Stock. The Company is authorized to issue 10,000,000 shares of Common
Stock, $0.001 par value. As of March 31, 1996, the Company had 2,800,275
shares of Common Stock issued and outstanding. Holders of Common Stock are
each entitled to cast one vote for each share held of record on all matters
presented to shareholders. Cumulative voting is not allowed; hence, the
holders of a majority of the outstanding Common Stock can elect all directors.
Holders of Common Stock are entitled to receive such dividends as may be
declared by the Board of Directors out of funds legally available therefor
and, in the event of liquidation, to share pro rata in any distribution of the
Company's assets after payment of liabilities. The Board of Directors is not
obligated to declare a dividend and it is not anticipated that dividends will
be paid in the foreseeable future.
Holders of Common Stock do not have preemptive rights to subscribe to
additional shares if issued by the Company. There are no conversion,
redemption, sinking fund or similar provisions regarding the Common Stock. All
of the outstanding shares of Common Stock are fully paid and non-assessable
and all of the shares of Common Stock offered hereby will be, upon issuance,
fully paid and non-assessable.
Preferred Stock. The Company is authorized to issue 1,000,000 shares of
Preferred Stock. Under Delaware law, the rights, preferences, and limitations
of the Preferred Stock may be established from time to time by the Company's
Board of Directors. The Company's Certificate of Incorporation provides that
the Board of Directors has the authority to divide the Preferred Stock into
series and, within the limitations provided by Delaware statute, to fix by
resolution the voting power, designation preferences, relative participation,
optional or other special rights, and the qualifications, limitations or
restrictions of the shares of any series so established.
The Board of Directors is authorized to issue, without shareholders'
approval, Preferred Stock with voting or conversion rights that may adversely
affect the voting power of the Common Stock shareholders. The provisions
relating to the Company's Preferred Stock may make more difficult the removal
of management even if such removal would be considered beneficial to
shareholders generally, and may have the effect of limiting shareholder
participation in certain transactions such as mergers or tender offers whether
or not such transactions are favored by incumbent management. Because the
Board of Directors has authority to establish the terms of the Preferred
Stock, it could be issued to defend against an attempted takeover of the
Company.
The Company does not have any present plans to issue shares of Preferred
Stock to any person.
Anti-Takeover Law. The Company is currently subject to Section 203 of the
Delaware General Corporation Law ("Section 203"), which restricts certain
transactions and business combinations between a corporation and an
"Interested Stockholder" owning 15% or more of the corporation's outstanding
voting stock, for a period of three years from the date the stockholder
becomes an Interested Stockholder. Subject to certain
35
<PAGE>
exceptions, unless the transaction is approved by the board of directors and
the holders of at least 66.667% of the outstanding voting stock of the
corporation (excluding shares held by the Interested Stockholder), Section 203
prohibits significant business transactions such as a merger with, disposition
of assets to or receipt of disproportionate financial benefits by the
Interested Stockholder, or any other transaction that would increase the
Interested Stockholder's proportionate ownership of any class or series of the
corporation's stock. The statutory ban does not apply if, upon consummation of
the transaction in which any person becomes an Interested Stockholder, the
Interested Stockholder owns at least 85% of the outstanding voting stock of
the corporation (excluding shares held by persons who are both directors and
officers or by certain employee stock plans). The Company plans to amend its
Certificate of Incorporation by stockholder vote in June 1996, to expressly
elect not to be governed by Section 203. Approval will require an affirmative
vote of a majority of the shares entitled to vote. Management believes that it
controls sufficient shares to assure passage of the proposal.
Limitation of Liability and Indemnification of Directors and Officers. The
Delaware Corporation Law and ATG's Certificate of Incorporation and Bylaws
authorize indemnification of a director, officer, employee or agent of the
Company against expenses incurred by him in connection with any action, suit,
or proceeding to which he is named a party by reason of his having acted or
served in such capacity, except for liabilities arising from his own
misconduct or negligence in performance of his duty. In addition, even a
director, officer, employee or agent of the Company who was found liable for
misconduct or negligence in the performance of his duty may obtain such
indemnification if, in view of all the circumstances in the case, a court of
competent jurisdiction determines such person is fairly and reasonably
entitled to indemnification. Insofar as indemnification for liabilities
arising under the Securities Act may be permitted to directors, officers, or
persons controlling the Company pursuant to the foregoing provisions, the
Company has been informed that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable.
Stock Transfer Agent. The transfer agent for the Common Stock is OTR,
Incorporated 1130 S.W. Morrison Street, Suite 250, Portland, Oregon 97205,
telephone 503-225-0375.
36
<PAGE>
UNDERWRITING
The following is a summary of the principal terms of the Underwriting
Agreement among ATG and the underwriters named below (the "Underwriters"). The
form of the Underwriting Agreement is filed as an exhibit to the Registration
Statement, of which this Prospectus forms a part. This summary does not
purport to be complete and is subject to, and qualified in its entirety by
reference to, all of the provisions of the Underwriting Agreement, including
the definitions therein of certain terms, which provisions and definitions are
incorporated herein by reference. Subject to the terms and conditions of the
Underwriting Agreement, ATG has agreed to sell to the Underwriters, for whom
Brookstreet Securities Corporation is acting as representative (in such
capacity, the "Representative"), and the Underwriters have agreed to purchase,
on a firm commitment basis, the number of shares of Common Stock set forth
opposite their names below.
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF COMMON STOCK
NAME TO BE PURCHASED
---- ----------------
<S> <C>
Brookstreet Securities Corporation..........................
---------
Total..................................................... 1,400,000
=========
</TABLE>
ATG has granted an option to the Underwriters, exercisable during the 30 day
period commencing on the date of this Prospectus, to purchase an aggregate of
up to an additional 210,000 shares of Common Stock at the public offering
price less underwriting discounts and commissions, for the sole purpose of
covering overallotments, if any. The Underwriters may exercise such
overallotment option in whole or in part. The shares of Common Stock are being
sold by the Company and offered by the Underwriters on a "firm commitment"
basis, subject to prior sale, when, as and if accepted by the Underwriters,
and subject to certain conditions. The Underwriters reserve the right to
withdraw, cancel or modify such offer and to reject orders in whole or in
part.
The Underwriters are responsible for paying all fees and expenses incurred
by them. ATG, however, has agreed to pay the Underwriters a non-accountable
expense allowance equal to three percent of the gross proceeds received by ATG
from the sale of the shares of the Common Stock being offered hereby
(including from the sale of any shares sold as a result of the Underwriters'
exercise of the overallotment option). ATG has advanced to the Representative,
on a non-refundable basis, $42,000 to be applied against the non-accountable
expense allowance.
The Company shall increase its Board of Directors to at least five, of which
a majority shall be outside directors. All directors must have such
qualifications as would generally be found for directors of similarly situated
public companies. Upon the closing of the offering, the Board of Directors of
ATG has agreed to appoint Daniel C. Montano, of Brookstreet Securities
Corporation, to the Board of Directors of the Company.
ATG has agreed to indemnify the Underwriters, any controlling person of an
Underwriter, and other persons related to the Underwriters and identified in
the Underwriting Agreement, against certain liabilities, including liabilities
arising (i) under the Securities Act, (ii) out of any untrue statement or
material fact contained in the Registration Statement, this Prospectus, any
amendments thereto, and certain other documents, or (iii) out of any
37
<PAGE>
omission of a material fact required to be stated therein or necessary to make
the statements therein not misleading, unless the statement or omission is
made in reliance upon and in conformity with written information furnished to
ATG by or on behalf of the Underwriters for use in the document in which it
was used.
In connection with the Offering, ATG has agreed to sell to the
Representative (in its individual capacity and not as representative of the
Underwriters), for nominal consideration, warrants ("Representative Warrants")
to purchase 140,000 shares of the Common Stock at $3.60 per share, subject to
adjustment upon the occurrence of certain events, including stock splits and
combinations, reclassifications, exchanges and substitutions relating to the
Common Stock. Such adjustments are not intended to give the Representative
greater rights or protection than given to public purchasers of the Common
Stock. The Representative Warrants are exercisable for a period of four years
commencing one year from the date of this Prospectus. The Representative
Warrants grant to the holders thereof certain rights with respect to the
registration under the Securities Act of the securities issuable upon exercise
of the Representative Warrants. From these Representative Warrants, counsel to
the Representative, Horwitz, Cutler & Beam ("HCB"), will receive warrants to
purchase $10,000 of the Common Stock at $3.60 per share and otherwise subject
to the same conditions as the Representative Warrants. The Representative
Warrants are nontransferable by the Representative for one year from the date
of this Prospectus, except to persons who are both officers and shareholders
of the Representative or transfers occurring by operation of law. The
Representative Warrants received by HCB are nontransferable by HCB for one
year from the date of this Prospectus, except to persons who are partners in
HCB or transfers occurring by operation of law.
The directors, officers and employees of ATG who are also shareholders of
ATG have entered into a contractual agreement with Brookstreet Securities
Corporation that restricts, for a period of two years from the effective date
of the registration statement for the Common Stock being offered hereby, their
ability to sell the Common Stock beneficially owned by them including stock
registered pursuant to any form SB-2 Registration Statement.
In general, the rules of the Commission will prohibit the Underwriters from
making a market in the Common Stock during the "cooling off" period
immediately preceding the commencement of sales in the offering. The
Commission has, however, adopted exemptions from these rules that permit
passive market making under certain conditions. These rules permit an
underwriter to continue to make a market subject to the conditions, among
others, that its bid not exceed the highest bid by a market maker not
connected with the offering and that its net purchases on any one trading day
not exceed prescribed limits. Pursuant to these exemptions, certain
Underwriters, selling group members (if any) or their respective affiliates
intend to engage in passive market making in the Common Stock during the
cooling off period.
The Company paid to Brookstreet Securities Corporation $17,000 in connection
with its efforts to solicit investors in the Company's 1995 Private
Placements. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources."
38
<PAGE>
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Common Stock has traded on the over-the-counter-market on the National
Association of Securities Dealers, Inc.'s Electronic Bulletin Board since May
12, 1994. The following table sets forth the quarterly high and low bid prices
of ATG's Common Stock as quoted by the NASD's Electronic Bulletin Board. These
quotations represent the prices between dealers in securities, do not include
retail mark-ups, mark-downs or commissions and do not necessarily represent
actual transactions.
<TABLE>
<CAPTION>
COMMON STOCK HIGH LOW VOLUME
- ------------ ------ ------ -------
<S> <C> <C> <C>
Fiscal Quarter Ended:
June 30, 1994........................................... $10.19 $ 4.19 164,500
September 30, 1994...................................... $12.00 $ 4.00 75,600
December 31, 1994....................................... $12.00 $ 3.00 47,600
March 31, 1995.......................................... $ 3.75 $ 0.25 25,000
June 30, 1995........................................... $ 4.50 $ 1.00 56,000
September 30, 1995...................................... $ 1.00 $ 1.00 22,900
December 31, 1995....................................... $ 1.00 $0.377 9,100
March 31, 1996.......................................... $ 1.25 $ 0.38 49,800
</TABLE>
As of March 31, 1996, there were 718 holders of record of the Common Stock.
Because some of the shares of Common Stock are held in street name, the number
of beneficial holders of common stock may be much higher.
Holders of common stock are entitled to dividends when, and if, declared by
the Board of Directors out of funds legally available for such purpose. No
dividends have been declared or paid with respect to the Common Stock, and no
cash dividends are anticipated to be declared or paid in the foreseeable
future.
LEGAL MATTERS
The legality of the Common Stock being offered hereby will be passed upon
for the Company by Thelen, Marrin, Johnson & Bridges, 333 South Grand Avenue,
34th Floor, Los Angeles, California 90071. Certain legal matters will be
passed upon for the Underwriters by Horwitz, Cutler & Beam, Irvine,
California.
EXPERTS
The audited financial statements of the Company as of December 31, 1994 and
December 31, 1995, and for the years then ended have been examined by Allen P.
Fields, Certified Public Accountant, for the periods and to the extent set
forth in the reports and have been included herein in reliance upon such
reports of said accountant given on his authority as an expert in accounting
and auditing.
39
<PAGE>
SEC POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
The Delaware Corporation Law and ATG's Articles of Incorporation and Bylaws
authorize indemnification of a director, officer, employee or agent of ATG
against expenses incurred by him in connection with any action, suit, or
proceeding to which he is named a party by reason of his having acted or
served in such capacity, except for liabilities arising from his own
misconduct or negligence in performance of his duty. In addition, even a
director, officer, employee or agent of ATG who was found liable for
misconduct or negligence in the performance of his duty may obtain such
indemnification if, in view of all the circumstances in the case, a court of
competent jurisdiction determines such person is fairly and reasonably
entitled to indemnification. Insofar as indemnification for liabilities
arising under the Securities Act may be permitted to directors, officers, or
persons controlling ATG pursuant to the foregoing provisions, ATG has been
informed that in the opinion of the Commission, such indemnification is
against public policy as expressed in the Securities Act and is therefore
unenforceable.
In the event that a claim for indemnification against such liabilities
(other than payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the Company in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication
of such issue.
40
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditor's Report............................................. F-2
Consolidated Balance Sheets as of December 31, 1995, and 1994 (audited)
and three month period ended March 31, 1996 and 1995 (unaudited)........ F-4
Consolidated Statement of Operations for each of the two years ended
December 31, 1995 and 1994 (audited) and three month period ended March
31, 1996 and 1995 (unaudited)........................................... F-6
Consolidated Statement of Stockholders' Equity for each of the two years
ended December 31, 1995 and 1994 (audited) and three month period ended
March 31, 1996 (unaudited).............................................. F-7
Consolidated Statements of Cash Flows for each of the two years ended
December 31, 1995 and 1993 (audited) and three month period ended March
31, 1996 and 1995 (unaudited)........................................... F-8
Notes to Consolidated Financial Statements for the two years ended
December 31, 1994 and 1995.............................................. F-9
</TABLE>
F-1
<PAGE>
ALLEN P. FIELDS
CERTIFIED PUBLIC ACCOUNTANT
1801 PIEDMONT AVENUE, SUITE 103
ATLANTA, GEORGIA 30324
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Atlanta Technology Group, Inc.:
I have audited the accompanying consolidated balance sheets of Atlanta
Technology Group, Inc. and Subsidiaries (formerly Time Value Corporation) (the
"Company") as of December 31, 1995 and 1994 and the related consolidated
statements of operations, stockholders' equity and cash flows for the years
then ended. These financial statements are the responsibility of the
Company'smanagement. My responsibility is to express an opinion on these
financial statements based on my audits.
I conducted my audits in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. I believe that my audits provide a reasonable basis
for my opinion.
In my opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Company as of December
31, 1995 and 1994 and the results of its operations and its cash flows for
each of the two years then ended in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 3 to the
financial statements, the Company has incurred losses from operations during
each year since inception that raise substantial doubt about its ability to
continue as a going concern. Management's plans in regards to these matters
are also described in Note 3. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Allen P. Fields
March 18, 1996
F-2
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
F-3
<PAGE>
ATLANTA TECHNOLOGY GROUP, INC.
(FORMERLY TIME VALUE CORPORATION)
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, MARCH 31, MARCH 31,
1995 1994 1995 1996
------------ ------------ ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS (Note 3)
Current Assets
Cash....................... $ 53,187 $ 21,994 $ 27,375 $ 32,170
Accounts receivable--trade,
net of allowance for
doubtful accounts of
$12,000 at December 31,
1995 and 1994 and March
31, 1995 and 1996,
respectively.............. 166,481 214,754 106,262 201,016
Inventory.................. 19,513 10,435 5,564 20,550
Due from officer and
director.................. -- 12,000 12,000 --
Other current assets
(Note 4).................. 5,755 21,000 19,865 5,037
---------- -------- -------- ----------
Total Current Assets..... 244,936 280,183 171,066 258,773
Equipment, Fixtures, and
Computers
Equipment, fixtures and
Computers, net of
accumulated depreciation
of $104,516, and $61,578,
at December 31, 1995 and
1994 and $57,058 and
$114,052 for March 31,
1995 and 1996, respectively 130,136 133,256 144,663 123,912
Other Assets
Software development costs,
net of accumulated
amortization of $84,787,
$27,889 at December 31,
1995 and 1994 and $40,348
and $101,743 for March 31,
1995 and 1996, respectively,
(Notes 2 and 5)............. 451,617 511,256 558,617 547,860
Investments (Note 6)....... -- -- -- --
Deferred offering costs
(Note 12)................. 130,025 -- -- 139,851
Other Assets (Note 9)...... 69,817 20,465 28,467 26,140
---------- -------- -------- ----------
Total Assets............. $1,026,531 $945,160 $902,813 $1,096,536
========== ======== ======== ==========
</TABLE>
See notes to financial statements.
F-4
<PAGE>
ATLANTA TECHNOLOGY GROUP, INC.
(FORMERLY TIME VALUE CORPORATION)
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, MARCH 31, MARCH 31,
1995 1994 1995 1996
------------ ------------ ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Notes payable--(10%)
(Note 7)............. $ 160,000 -- -- $ 160,000
Notes payable--(12%)
(Note 7)............. 350,000 -- -- 400,000
Notes payable--other
(Note 7)............. 82,800 $ 15,000 -- 156,200
Notes payable to
affiliates (Note
1C).................. 168,220 200,700 $ 249,380 151,152
Accounts payable--
trade.................. 221,827 193,590 130,768 305,883
Accrued salaries and
payroll taxes payable.. 26,090 54,489 67,604 18,672
Accrued interest
payable................ 27,509 450 -- 19,500
Other current
liabilities............ 75,447 12,200 -- 115,253
----------- ----------- ----------- -----------
Total Current
Liabilities........ 1,111,893 476,429 447,752 1,326,660
Note Payable--Non-
current (Note 7)....... 50,000 -- 85,000 --
Minority Interests (Note
1B).................... -- 66,667 66,667 --
----------- ----------- ----------- -----------
Commitments and
Contingencies (Notes 10
and 11)................ -- --
----------- ----------- ----------- -----------
Stockholders' Equity
(Notes 1, 2, 9 and 12)
Common stock.......... 2,800 2,795 2,795 2,800
Additional paid-in
capital.............. 2,520,783 2,371,338 2,371,338 2,520,783
Retained earnings
(deficit)............ (2,658,945) (1,972,069) (2,070,739) (2,755,707)
----------- ----------- ----------- -----------
Total Stockholders'
Equity............. (135,362) 402,064 303,394 (232,124)
----------- ----------- ----------- -----------
Total Liabilities
and Stockholders'
Equity............. $ 1,026,531 $ 945,160 $ 902,813 $ 1,096,536
=========== =========== =========== ===========
</TABLE>
See notes to financial statements.
F-5
<PAGE>
ATLANTA TECHNOLOGY GROUP, INC.
(FORMERLY TIME VALUE CORPORATION)
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED QUARTER ENDED
------------------------- -----------------------
DECEMBER 31, DECEMBER 31, MARCH 31 MARCH 31
1995 1994 1995 1996
------------ ------------ ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Revenues..................... $1,559,701 $ 1,023,414 $ 274,850 $ 410,476
Cost of Sales................ 649,426 539,970 120,526 162,134
Gross Profit................. 910,275 483,444 154,324 248,342
Operating Expenses
Selling, general and
administrative............ 1,501,544 1,145,129 249,880 249,204
Research and development... -- 169,737 -- --
Depreciation and
amortization.............. 110,409 33,416 4,779 76,400
Interest................... 51,865 594 -- 19,500
---------- ----------- --------- ---------
Total Operating Expenses..... 1,663,818 1,348,876 254,659 345,104
---------- ----------- --------- ---------
Loss from operations......... (753,543) (865,432) (100,335) (96,762)
Other income
(Loss) gain on sale of
securities................ -- (325,947) -- --
Loss before taxes, minority
interests and investments
accounted for under the
equity method............. (753,543) (1,191,379) (100,335) (96,762)
Provision for taxes (Notes 2
and 8)...................... -- -- -- --
Loss before minority
interests and investments
accounted for under the
equity method............. (753,543) (1,191,379) (100,335) (96,762)
Minority interests........... 66,667 82,630 -- --
Loss before investments
accounted for under the
equity method............. (686,876) (1,108,749) (100,335) (96,762)
Loss from investments
accounted for under the
equity method............... -- (105,000) -- --
Net loss..................... $ (686,876) $(1,213,749) $(100,335) $ (96,762)
========== =========== ========= =========
Weighted average number of
common shares outstanding... 2,948,525 2,732,525 2,795,275 2,949,581
========== =========== ========= =========
Loss per common share (Note
2).......................... $ (.23) $ (.44) $ (.04) $ (.03)
========== =========== ========= =========
</TABLE>
See notes to financial statements.
F-6
<PAGE>
ATLANTA TECHNOLOGY GROUP, INC.
(FORMERLY TIME VALUE CORPORATION)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995 AND 1994
(AUDITED)
AND
THREE MONTH PERIOD ENDED MARCH 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS TOTAL
------ ---------- ----------- -----------
<S> <C> <C> <C> <C>
Balance, January 1, 1994........... 2,669 $1,802,084 $ (758,320) $ 1,046,433
------ ---------- ----------- -----------
Issuance of 10,000 shares in a
private placement............... 10 29,990 30,000
Issuance of 2,000 shares in
exchange for research and
development services............ 2 8,378 8,380
Issuance of 114,000 shares upon
the exercise of employee stock
options......................... 114 529,886 530,000
Cancellation of costs charged
against equity in prior year
relating to private placement... 1,000 1,000
Net loss......................... (1,213,749) (1,213,749)
------ ---------- ----------- -----------
Balance, December 31, 1994......... 2,795 2,371,338 (1,972,069) 402,064
Issuance of 5,000 shares in
exchange for marketing
services........................ 5 14,995 15,000
Issuance of 171,996 warrants to
purchase common stock........... 134,450 134,450
Net loss......................... (686,876) (686,876)
Balance, December 31, 1995......... 2,800 2,520,783 (2,658,945) (135,362)
------ ---------- ----------- -----------
Net loss......................... (96,762) (96,762)
------ ---------- ----------- -----------
Balance, March 31, 1996............ $2,800 $2,520,783 $(2,755,707) $ (232,124)
====== ========== =========== ===========
</TABLE>
See notes to financial statements.
F-7
<PAGE>
ATLANTA TECHNOLOGY GROUP, INC.
(FORMERLY TIME VALUE CORPORATION)
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED QUARTER ENDED
------------------------- -----------------------
DECEMBER 31, DECEMBER 31, MARCH 31 MARCH 31
1995 1994 1995 1996
------------ ------------ ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net Loss.................... $(686,876) $(1,213,749) $(100,335) $ (96,762)
Adjustments to reconcile
net loss to net cash
provided (used) by
operating activities:
Depreciation and
amortization............ 367,307 398,478 17,238 93,157
Minority interest share
of loss................. (66,667) (82,630) -- --
Realized loss on
investments............. -- 325,947 -- --
Loss incurred in
connection with the
rescission of a former
subsidiary.............. -- 119,000 -- --
Changes in operating
assets and liabilities
Decrease (Increase) in
accounts receivable-
trade net.............. 48,273 (184,055) 108,492 (34,534)
Increase in account
payable-trade, net..... 28,237 147,939
Decrease (Increase) in
other assets........... 19,579 (6,566) 7,671 (319)
Increase in other
liabilities............ 61,907 21,136 (61,907) 110,434
--------- ----------- --------- ---------
Net cash used by
operating activities.. (228,240) (474,500) (28,841) 71,976
--------- ----------- --------- ---------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Decrease in marketable
securities and
investments............... 3,095 47,705
Additions to equipment,
fixtures, and computers... (39,818) (103,430) (16,186) (3,312)
Additions to software
development costs......... (197,259) (240,035) (59,820) (113,199)
Increase (decrease) in
other noncurrent assets... -- -- (8,002) 12
--------- ----------- --------- ---------
Net cash used by
investing activities.. (233,982) (295,760) (84,008) (116,499)
--------- ----------- --------- ---------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from the issuance
of notes payable, net..... 604,800 -- -- 73,400
Proceeds from the issuance
of common stock........... 15,000 568,380 -- --
Proceeds from the payment
of stock subscriptions.... -- 45,000 -- --
Costs associated with
common stock offering..... (107,025) -- -- (32,826)
Decrease (increase) in
borrowing from
affiliates................ (32,480) 185,150 -- --
Decrease in loans to
officers.................. 12,000 (12,000) -- --
Payments on notes to
affiliates................ (118,230) (17,068)
Other equity changes....... 1,120 1,000 -- --
--------- ----------- --------- ---------
Net cash provided
(used) by financing
activities............ 493,415 787,530 (118,230) (23,506)
--------- ----------- --------- ---------
Net increase (decrease) in
cash........................ 31,193 17,270 5,381 (21,017)
Cash at beginning of
period.................... 21,994 4,724 21,994 53,187
--------- ----------- --------- ---------
Cash at end of period...... $ 53,187 $ 21,994 $ 27,375 $ 32,170
========= =========== ========= =========
SUPPLEMENTAL DISCLOSURE OF
CASH FLOWS
Taxes paid during the
period.................... 0 0 0 0
Interest paid during the
period.................... 24,000 594 19,500
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES: See Notes
1, 2, 9 and 11 of Notes to Financial Statements
</TABLE>
See notes to financial statements
F-8
<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 transactions was accounted for as a pooling of
interests and, accordingly, the financial statements have been restated for
all periods presented. SRS, a software development and consulting firm, was
previously an affiliate of the Company. The Company and SRS shared common
management and office facilities during 1995 and 1994 (Note 8).
SRS was incorporated in August 1993 under the laws of the state of Georgia
by Axis Capital, AG and Einzelhaft Partners, AG, which contributed certain
computer software technology in exchange for the SRS shares. In September
1993, SRS incorporated Avionics One, Inc. ("AVI") as a wholly-owned subsidiary
and transferred a portion of the computer technology to AVI in exchange for
all of the outstanding common stock of AVI.
SRS then exchanged one third of its ownership in AVI for 133,333 shares of
the common stock of the Company (prior to the Company's stock becoming
publicly traded). SRS then sold the 133,333 shares of the Company to an
unrelated third party for 78,750 shares of US Pawn Inc., whose shares are
traded on the NASDAQ exchange. The value of 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 on-line computer
service, in exchange for all of the issued and outstanding stock of MGI. In
September 1994, the Company rescinded the acquisition of MGI, returned the MGI
stock to the former owners and received in return the 100,000 shares of the
Company's common stock previously issued.
F-9
<PAGE>
ATLANTA TECHNOLOGY GROUP, INC.
(FORMERLY TIME VALUE CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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 the computer hardware and software, in exchange for the cancellation
of certain notes held by the Company totaling approximately $125,000. The
assets acquired by the Company were recorded at their fair market value at the
time of acquisition (approximately $6,000) and the excess of the purchase
price over the fair market value has been charged against earnings.
In February 1994, SRS acquired 47.5% of the issued and outstanding shares of
Lightwave Technology Inc. (which subsequently changed its name to Fiberoptic
Atlanta, Inc. ("FOA") for $100,000 in cash for the purpose of developing and
manufacturing plastic optical fiber for use in communications and data
transmissions. Since FOA has not begun to generate revenues, the Company has
assigned a zero basis to its investment.
(C) AFFILIATED COMPANIES AND RELATED PARTIES
Hale R. Spiegelberg is Chairman of the Board and Chief Executive Office of
the Company. He is also the President and sole director of Total Software Inc.
("TSI") and Acquisition Advisors Inc. ("AAI"), affiliates and shareholders of
the Company with whom the Company has had numerous business transactions.
During 1994, the Company borrowed $333,000 and repaid $150,000 to these two
affiliates. During 1995, the Company borrowed $14,000 and repaid $46,000 to
these two affiliates. At December 31, 1995, substantially all of the assets of
SRS, approximating $171,000 were subject to a security interest in favor of
TSI.
TSI currently owns a total of 644,948 shares or 23% of the issued and
outstanding shares of the Company. Pollution Research and Control Corp.
("PRCC"), a publicly traded company with whom the Company has had numerous
business dealing, owns 400,000 shares or 14.3% of the issued and outstanding
shares. AAI currently owns a total of 568,832 shares or 20.3% of the issued
and outstanding stock of the Company. Axis Capital AG and Einzelhaft Partners
AG, the former shareholders of SRS, own a combined total of 600,000 shares or
21.4% of the issued and outstanding shares of the Company. In addition, Axis
Capital has entered into a consulting agreement with SRS whereby Axis Capital
agreed to furnish certain computer software engineering services to support
the development of an on-line information system for SRS. The term of this
contract is for one year, beginning June 1, 1994 at a total cost of $62,496.
In September 1993, Hale R. Spiegelberg and Greg Richter (President of SRS)
entered into contracts with an unrelated third party to develop and design
certain computer software and hardware systems. The work was performed by
employees of SRS or by independent contractors paid by SRS. Upon completion of
the contract in January 1994, Messrs. Spiegelberg and Richter paid to SRS the
entire amount received as compensation under the contracts. Mr. Richter
resigned as President of the Company and as President of SRS effective March
15, 1996.
(D) OPERATIONS AND INDUSTRY CONCENTRATION
The Company currently operates through its two subsidiaries, TVC and SRS,
which are about equal in size based on sales. TVC products include a computer
generated system for healthcare practitioners using a microcomputer, printer,
optical mark scanner, and scannable forms to generate individualized
correspondence, reports to patients, doctors, and insurance companies and to
maintain a record of diagnosis and recommended treatment. TVC currently sells
this product to chiropractors, neck and back pain clinics, and spinal clinics
throughout the United States. SRS is a computer consulting and software
engineering firm that provides customized software solutions and contract
engineering services to customers throughout the United States in a wide
variety of industries.
F-10
<PAGE>
ATLANTA TECHNOLOGY GROUP, INC.
(FORMERLY TIME VALUE CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
TVC currently purchases all its optical mark scanner from one supplier and
its scannable forms from two suppliers. Although there is a limited number of
suppliers of these products, management believes that other suppliers could
provide similar products on comparable terms. However, a change in suppliers
could cause a delay in shipments, and a possible loss of sales which would
adversely effect operations.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Accrual accounting
The Company uses the accrual method of accounting for financial accounting
reporting purposes.
Marketable Securities
Effective January 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" ("SFAS 115"). Under SFAS 115, securities held principally
for the purpose of selling them in the near future are classified as "trading
securities" and are reported a fair market value as of the balance sheet date.
All realized and unrealized gains and losses during the period are included in
the consolidated statement of operations. Securities classified as "available
for sale securities" are reported at fair market value as of the balance sheet
date with unrealized gains and losses excluded from the consolidated statement
of operations and reported as a separate component of shareholders' equity.
Inventories
Inventories are stated at the lower of cost (first-in, first-out basis) or
market and consist primarily of optical scanning forms.
Depreciation of Equipment, Fixtures, and Computers
Equipment, Fixtures and Computers are recorded at cost and depreciation is
provided using the straight-line method by charges to operations over the
estimated useful lives of the various classes of depreciable assets ranging
from three to five years.
Capitalized Software Development Costs
Capitalized software development costs are amortized on a product-by-product
basis by charges to operations beginning when a product becomes available for
sale. Amortization is computed either 1) on a straight-line method over the
remaining economic useful life of the product (estimated to be five years) or,
2) the amount computed using the ratio that current gross revenues for a
product bear to the total of current and anticipated future gross revenues for
that product, whichever is greater.
Revenue Recognition
Revenues from the sale of computer hardware and software products are
recognized upon delivery to customers (provided that collection of the
receivable is deemed probable) since the Company has no significant remaining
obligation subsequent to delivery. Insignificant obligations remaining after
delivery are accrued. Revenues from annual customer maintenance fees are
recognized ratably over the period of the maintenance contracts.
F-11
<PAGE>
ATLANTA TECHNOLOGY GROUP, INC.
(FORMERLY TIME VALUE CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Income Taxes
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS") which
requires an asset and liability approach to financial accounting and reporting
for income taxes. Under SFAS 109, deferred tax assets and liabilities are
provided for differences between the financial statement and tax bases of
assets and liabilities that will result in future taxable or deductible
amounts. The deferred tax assets and liabilities are measured using the
enacted tax laws and rates applicable to the periods in which the differences
are expected to affect taxable income. Income tax expense is computed as the
tax payable or refundable for the period plus or minus the change during the
period in deferred tax assets and liabilities.
Earnings (loss) per share
Earnings or loss per share are computed by dividing the net income or loss
by the weighted average number of common stock and common stock equivalents
outstanding during the period. Common stock equivalents have been excluded
from the computation if the effect of their inclusion would be anti-dilutive.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
Change in Presentation
Certain amounts in the prior year statements have been reclassified to
conform with the 1995 presentation.
3. GOING CONCERN DISCLOSURE
The Company has incurred losses since its inception and has a negative net
worth and negative working capital at December 31, 1995. Since the Company has
no long-term financing in place, it must rely on its own financial resources
and those of its affiliates and/or its stockholders to provide the necessary
funds to sustain operations until the Company begins to make its products on a
profitable basis. Management has developed a plan to achieve profitability and
projects that the Company will break-even in May 1996. Management's plan
includes 1) diversification of existing product lines, 2) enhancement of
existing product lines, 3) expansion of the geographical area in which it
operates and 4) raising capital through securities offerings (Note 12).
Management believes that its profitability plan will provide sufficient funds
to meet the Company's cash requirements during the next twelve months.
4. MARKETABLE SECURITIES
Marketable securities (included in other current assets) are as follows:
<TABLE>
<CAPTION>
1995 1994
---- ------
<S> <C> <C>
PRCC Underwriter's Unit Purchase Warrant Equal to 102 warrants
in 1995 and 1994............................................. $ 37 $ 12
PRCC common stock, 5,114 share in 1994........................ -- 3,119
---- ------
Total....................................................... $ 37 $3,132
==== ======
</TABLE>
F-12
<PAGE>
ATLANTA TECHNOLOGY GROUP, INC.
(FORMERLY TIME VALUE CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
During 1994, SRS sold the 78,750 shares of US Pawn Inc. received in exchange
for 133,333 shares of common stock of the Company for a total of $103,700 and
realized a loss of approximately $39,000.
In February 1994, the Company sold 1,000 shares of Pacific Animated Imaging
Corp. for its approximate cost.
In December 1994, the Company sold 100,000 shares of PRCC restricted stock
to PRCC for $55,000 and the removal of the trading restriction on the
remaining 5,114 shares held by the Company. The Company realized a loss of
approximately $92,000 on the sale of the PRCC shares. In February 1995, the
Company sold the 5,114 shares of PRCC at its approximate carrying value.
5. CAPITALIZED SOFTWARE DEVELOPMENT COSTS
Capitalized software development costs represent expenses incurred in
producing and enhancing product masters subsequent to establishing the
"technological feasibility" of the products, as that term is defined in the
Statement of Financial Accounting Standards No. 86. Capitalization of costs
ceases when a product is available for general release to customers. The
Company produces a complete working model of the product to establish
technological feasibility. The Company is currently distributing three product
modules to customers, two of which are fully amortized. Amortization included
in cost of sales during 1995 and 1994 amounted to $256,898 and $117,171
respectively.
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 its
original cost of $195,000 to zero with a corresponding charge to income. Since
this security is not publicly traded, its fair market value is not readily
determinable.
7. NOTES PAYABLE
During 1995, the Company borrowed $560,000 in two separate private placement
offerings. The first offering, ending in August 1995, included $160,000 in
notes payable bearing interest at 10% per annum and due 18 months from the
date of issuance. One of these notes in the amount of $50,000 is due in
February 1997 and, accordingly, is classified as a noncurrent liability at
December 31, 1995. In connection with this transaction, the Company issued to
the noteholders warrants to purchase 38,000 shares of common stock at $5.00
per share for a total consideration of $320. In January 1996, the Company
exchanged a warrant to purchase 10,000 shares of common stock at $5 per share
with a warrant to purchase 16,666 shares of common stock for $100.
The second private placement, ending in September 1995, included $400,000 in
notes payable bearing interest at 12% per annum and due six months from the
date of issuance. Noteholders were also issued a warrant to purchase a
Convertible Adjustable Secured Bond ("CAS Bonds") in the amount of $50,000 for
a total consideration of $800. In January 1996, the Company exchanged each
warrant to purchase CAS Bonds in the face amount of $50,000 for a warrant to
purchase 16,666 shares of common stock for $100.
Costs associate with these private placements amounting to $47,000 have been
capitalized as deferred offering costs and are being amortized over the term
of the notes to interest expense. The amount charged to income was $24,000 in
1995. Also included in deferred offering costs in the consolidated balance
sheet are expenses incurred in connection with the Company's proposed common
stock offering amounting to $107,025 (See Note 12).
F-13
<PAGE>
ATLANTA TECHNOLOGY GROUP, INC.
(FORMERLY TIME VALUE CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Notes payable--other is comprised of the following:
<TABLE>
<S> <C>
10% demand note payable to an employee............................ $15,000
8.5% note payable to Supermail International Inc. due May 22,
1995............................................................. $30,000*
Settlement agreement with Gregory Row, payable in ten equal
monthly installments without interest............................ $ 1,800
Non-interest bearing note due March 19, 1996...................... $36,000
-------
Total........................................................... $82,800
=======
</TABLE>
- --------
* Supermail International Inc. has verbally extended the maturity date until
the effective date of the public offering (See Note 12).
8. INCOME TAXES
At December 31, 1995 and 1994, the Company has approximately $2,820,000 and
$2,066,000 respectively, of net operating losses for income tax purposes which
are available for offset against future taxable income, subject to certain
limitations. Such losses expire in the years 1006 through 2010. At December
31, 1995 and 1994, deferred tax assets of approximately $231,500 and $405,000
exist principally with respect to these net operating losses. Based on an
assessment of all available evidence as of December 31, 1995, management has
concluded that these deferred tax assets should be reduced by valuation
allowances equal to the amounts of the deferred tax assets. No tax benefits
are recognized in the financial statements presented since the realization of
future taxable income cannot be assured.
9. COMMON STOCK
The Company is authorized to issue up to 10,000,000 shares of common stock,
par value $.001. At December 31, 1995 and December 31, 1994, 2,800,275 shares
and 2,795,275 shares were issued and outstanding. Each share is fully paid and
nonassessable and entitled to one vote. Stockholders do not have cumulative
voting rights for the election of directors, nor do they have any preemptive
rights to receive additional shares, should any be issued.
In November 1993, the Company completed a private stock placement by
offering up to 250,00 shares of its common stock to potential investors at an
offering price of $3.00 per share. As of December 31, 1993, subscriptions for
65,334 share were received, of which 50,334 were fully paid and 15,000
remained unpaid (these were subsequently paid for in January 1994. Total net
proceeds from the offering amounted to $202,000, after deducting costs of
$25,243 applicable to the offering.
In May 1994, the Company acquired SRS and issued 500,000 shares of its
common stock to the former owners of SRS in exchange for all the issued and
outstanding common stock of that company. (Note 1B).
In August 1994, the Company, in connection with the rescission of MGI,
issued 2,000 shares of its common stock to one of the owners of MGI in
exchange for certain computer software not included in the Asset Purchase
Agreement. (Note 1B). This transaction was recorded at the fair market value
on the date of issuance by a charge against income.
F-14
<PAGE>
ATLANTA TECHNOLOGY GROUP, INC.
(FORMERLY TIME VALUE CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following table summarizes the issuance of shares of common stock
pursuant to an option agreement with an employee during 1994.
<TABLE>
<CAPTION>
OPTION EXERCISE PRICE
------------------------
NUMBER OF OPTIONS PER SHARE TOTAL
----------------- ------------------------
<S> <C> <C> <C>
Outstanding January 1, 1994.. $0 $ 0
Granted...................... 20,000 3 60,000
Granted...................... 180,000 5 900,000
Exercised.................... (20,000) 3 (60,000)
Exercised.................... (94,000) 5 (470,000)
------- --------
Outstanding December 31,
1994........................ 86,000 430,000
Outstanding December 31,
1995........................ 86,000 430,000
</TABLE>
At December 31, 1995, all of the outstanding options were exercisable and
expire on May 10, 1999. At December 31, 1995, there were warrants outstanding
to purchase 171,996 shares of common stock, which expire on various dates
through January 2001. (Note 7). The warrants were recorded by a credit to
Paid-in Capital in the amount of $134,000, the approximately fair market value
at dates of issuance with a corresponding charge to Other Noncurrent Assets.
This amount is being amortized over the life of the loans received from the
warrant holders. Amortization for 1995 amounted to approximately $67,000.
10. COMMITMENTS AND CONTINGENCIES
The Company has two operating leases currently in effect. One expires in May
1996 and the other in December 1999. Rental expense under these operating
leases amounted to $93,638 and $84,461 for 1995 and 1994, respectively. Future
minimum rental payments are as follows: 1996-$60,970; 1997 through 1999-
$46,330 per year.
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
costs in the amount of $6,000 has been accrued at December 31, 1994. During
1995, no additional costs were incurred relating to the sale of these assets.
During 1995, the Company was the defendant in an action in Pinellas County
Court, Florida entitled Gregory S. Roe vs. Hale Spiegelberg and Atlanta
Technology Group, Inc. This action was settled in December 1995 and the
Company agreed to pay Mr. Roe a total of $2,000 payable in ten consecutive
monthly payments to settle this suit. At December 31, 1995, all remaining
payments have been accrued. The Company is not currently involved in any other
significant legal proceedings.
F-15
<PAGE>
ATLANTA TECHNOLOGY GROUP, INC.
(FORMERLY TIME VALUE CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
12. SUBSEQUENT EVENTS
On January 12, 1996, the Company filed a registration statement with the
Securities and Exchange Commission to register 1,610,000 shares of common
stock at $3.00 per share pursuant to a public offering of common stock. In
connection with this registration statement, the Company has incurred costs of
$130,025 which are shown as Deferred Offering Costs on the Consolidated
Balance Sheet. Upon the successful completion of the offering, these costs
will be charged against the proceeds received. If the offering is not
completed, these costs will be expensed by a charge in the Consolidated
Statement of Operations.
In February 1996, the Company borrowed $24,000 from an unaffiliated third
party, without interest, due in May 1996.
In February 1996, the Company also borrowed $50,000 on a 12% promissory note
due in August 1996.
Through February 1996, the Company repaid $7,000 to Acquisition Advisors,
Inc., an affiliate.
F-16
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION IN CONNECTION WITH THE OFFER CONTAINED IN THIS PROSPECTUS
UNLESS PRECEDED OR ACCOMPANIED BY THIS PROSPECTUS NOR HAS ANY PERSON BEEN
AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN
THOSE CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED IN
THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR
SOLICITATION IN ANY JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE
HEREOF. HOWEVER, IF ANY MATERIAL CHANGE OCCURS WHILE THIS PROSPECTUS IS
REQUIRED BY LAW TO BE DELIVERED, THIS PROSPECTUS WILL BE AMENDED OR
SUPPLEMENTED ACCORDINGLY.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 4
Summary Financial Data................................................... 5
Risk Factors............................................................. 6
Use of Proceeds.......................................................... 13
Penny Stock Regulation................................................... 14
Dividend Policy.......................................................... 14
Capitalization........................................................... 15
Dilution................................................................. 15
Management Discussion and Analysis of Financial Condition and Results of
Operations.............................................................. 17
The Company.............................................................. 22
Management and Control Persons........................................... 30
Certain Relationships and Related Transactions........................... 34
Description of ATG Capital Stock......................................... 35
Underwriting............................................................. 37
Market for Common Equity and Related Stockholder Matters................. 39
Legal Matters............................................................ 39
Experts.................................................................. 39
SEC Position on Indemnification for Securities Act Liabilities........... 40
Index to Financial Statements............................................ F-1
</TABLE>
Until , 1996 (25 days after the date of this Prospectus), all dealers
effecting transactions in the Common Stock , whether or not participating in
this distribution, may be required to deliver a Prospectus. This delivery
requirement is in addition to the obligations of dealers to deliver a
Prospectus when acting as Underwriters and with respect to their unsold
allotments or subscriptions.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
ATLANTA TECHNOLOGY
GROUP, INC.
1,400,000 SHARES OF COMMON STOCK
---------------
PROSPECTUS
---------------
BROOKSTREET SECURITIES CORPORATION
, 1996
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
ATLANTA TECHNOLOGY GROUP, INC.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Delaware Corporation Law and the Company's Certificate of Incorporation
and Bylaws authorize indemnification of a director, officer, employee or agent
of the Company against expenses incurred by him in connection with any action,
suit, or proceeding to which he is named a party by reason of his having acted
or served in such capacity, except for liabilities arising from his own
misconduct or negligence in performance of his duty. In addition, even a
director, officer, employee or agent of the Company who was found liable for
misconduct or negligence in the performance of his duty may obtain such
indemnification if, in view of all the circumstances in the case, a court of
competent jurisdiction determines such person is fairly and reasonably
entitled to indemnification. Insofar as indemnification for liabilities
arising under the Securities Act of 1933 (the "Act") may be permitted to
directors, officers, or persons controlling the Company pursuant to the
foregoing provisions, the Company has been informed that in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Act and is therefore unenforceable.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION*
<TABLE>
<S> <C>
SEC Registration Fee............................................ $ 1,839.31
NASD Fee........................................................ $ 6,000.00
Representative Non-Accountable Expense Allowance................ $126,000.00
Accounting Fees and Expenses.................................... $ 3,000.00
Legal Fees and Expenses......................................... $ 86,000.00
Printing Expenses............................................... $ 10,000.00
Blue Sky Fees and Expenses...................................... $ 10,000.00
Miscellaneous................................................... $ 7,500.00
-----------
Total....................................................... $250,339.31
===========
</TABLE>
- --------
* These are estimated expenses.
ITEM 26. 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 shares 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").
II-1
<PAGE>
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 by an issuer not involving any public
offering.
On May 10, 1994, the Company granted a consultant, as payment for 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 transaction 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 by an issuer 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.
II-2
<PAGE>
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 the Net City Inc. As of
October 15, 1995 there have been no options issued to Rubix for its services.
The options to be issued in the transaction described above are 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 above and 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 the 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 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 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 12% per annum and due six months from
the date of issuance, and one warrant to purchase 16,666 shares of 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 Commission, 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.
II-3
<PAGE>
On December 19, 1995, the Company issued a promissory note in the face
amount of $36,000, bearing interest at 10% 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 12% 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, bearing interest at 10% per annum 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 person. 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.
II-4
<PAGE>
ITEM 27. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
-------
<C> <S>
1.1 Underwriting Agreement (form)
1.2 Agreement Among Underwriters (form)
3.1 Articles of Incorporation of Time Value Corporation, a Delaware
corporation*
3.2 Certificate of Amendment of Certificate of Incorporation of Time
Value Corporation, a Delaware corporation, to Change Name to
Atlanta Technology Group*
3.3 By-Laws of Time Value Corporation, a Delaware corporation*
3.4 Action By the Unanimous Written Consent of the Board of Directors
of Atlanta Technology Group, Inc. to amend its By-Laws*
5 Opinion of Thelen, Marrin, Johnson & Bridges re legality of
shares*
10.1 Authorship and Booth Rental Agreement between Markson Management
and Time Value Corporation, a Georgia corporation*
10.2 Authorship and Booth Rental Agreement between Activator Methods,
Inc. and Time Value Corporation, a Georgia corporation*
10.3 Consulting Agreement between Gregory Richter, Atlanta Technology
Group, Inc. and Silver Ridge Software Inc.*
11 Statement regarding Computation of Per Share Earnings*
13.1 Form 10-KSB for the period ended December 31, 1994*
13.2 Form 10-QSB for the period ended March 31, 1995*
13.3 Form 10-QSB/A for the period ended June 30, 1995*
13.4 Form 10-QSB/A for the period ended September 30, 1995*
21 Subsidiaries of the Registrant**
23 Consents of Experts and Counsel***
(a) Consent of Thelen, Marrin, Johnson & Bridges
(b) Consent of Allen P. Fields, CPA dated January 9, 1996
(c) Consent of Allen P. Fields, CPA dated March 6, 1996
(d) Consent of Daniel C. Montano
(e) Consent of Allen P. Fields dated May 29, 1996
24 Power of Attorney (see signature page)****
28 Specimen of Common Stock Certificate of Atlanta Technology Group,
Inc.
</TABLE>
- --------
* Previously filed.
** Previously filed as Exhibit 22
*** Previously filed as Exhibit 24
**** Previously filed as Exhibit 25
II-5
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM SB-2 AND HAS DULY CAUSED THIS AMENDMENT NO. 2
TO REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN THE CITY OF ATLANTA, STATE OF GEORGIA, ON MAY
29, 1996.
Atlanta Technology Group, Inc.
/s/ Hale R. Spiegelberg
By __________________________________
HALE R. SPIEGELBERG, CHAIRMAN OF
THE BOARD
POWER OF ATTORNEY
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ Hale R. Spiegelberg Chairman of the May 29, 1996
- ------------------------------------- Board of Directors,
HALE R. SPIEGELBERG Chief Executive
Officer, Chief
Financial Officer,
Secretary
James Cassidy* President, Director May 29, 1996
- -------------------------------------
JAMES CASSIDY
Herbert W. Browne* Director May 29, 1996
- -------------------------------------
HERBERT W. BROWNE
Gregory W. L. Richter* Director May 29, 1996
- -------------------------------------
GREGORY W.L. RICHTER
</TABLE>
*By /s/ Hale R. Spiegelberg
---------------------------
Hale R. Spiegelberg, Attorney-in-
Fact
II-6
<PAGE>
EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
-------
<C> <S>
1.1 Underwriting Agreement (form)
1.2 Agreement Among Underwriters (form)
21 Subsidiaries of the Registrant
23 Consent of Experts and Counsel
(a) Consent of Thelen, Marrin, Johnson & Bridges
(b) Consent of Allen P. Fields, CPA dated January 9, 1996
(c) Consent of Allen P. Fields, CPA dated March 6, 1996
(d) Consent of Daniel C. Montano
(e) Consent of Allen P. fields dated May 29, 1996
24 Power of Attorney (previously filed)
</TABLE>
<PAGE>
EXHIBIT 1.1
UNDERWRITING AGREEMENT
_________, 1996
BROOKSTREET SECURITIES CORPORATION
2361 Campus Drive, Suite 210
Irvine, California 92715
Dear Ladies and Gentlemen:
Atlanta Technology Group, Inc., a Delaware corporation (the "Company"),
proposes to issue and sell 1,400,000 shares of its Common Stock for $3.00 per
share, for a principal amount of $4,200,000, on a firm commitment basis (the
"Offering") (exclusive of an Over-Allotment Option granted to the underwriters
to purchase an additional 210,000 shares of the Common Stock at the public
offering price, as described below). The Company confirms as follows its
agreement with you.
1. Registration Statement and Prospectus: The Company has prepared and
--------------------------------------
filed with the Securities and Exchange Commission (the "Commission") in
accordance with the Securities Act of 1933, as amended (the "Act") and the rules
and regulations of the Commission promulgated thereunder (the "Rules and
Regulations"), a registration statement on Form SB-2, including a preliminary
prospectus, relating to the Securities. As used in this Agreement, the term
"Registration Statement" means such registration statement, including exhibits,
financial statements and schedules, as amended, when it becomes effective and
any information (if any) contained in the prospectus subsequently filed with the
Commission pursuant to Rule 424(b) under the Act, and the term "Prospectus"
means such prospectus in the final form filed on behalf of the Company with the
Commission pursuant to Rule 424(b) under the Act.
2. Agreement to Sell and Purchase: Upon the basis of the
-------------------------------
representations, warranties and agreements herein contained and subject to all
the terms and conditions of this Agreement, the Company agrees to sell to you
and you agree to purchase from the Company the aggregate principal amount of
Securities at the purchase price set forth opposite your name:
Principal Amount Purchase Price
Name of Securities of Securities
- ---- ---------------- --------------
Brookstreet Securities $4,200,000 $3,780,500
<PAGE>
It is understood that you currently intend to execute an Agreement
Among Underwriters providing for the purchase of a portion of this $4,200,000
principal amount, at whatever price you may elect, at your own discretion (the
"Agreement Among Underwriters").
The Company agrees to pay to you a non-accountable expense allowance
equal to 3% of the aggregate principal amount of Securities sold, of which
$42,000 has been advanced to you. In the event that the Company's public
offering of the Securities is terminated for any reason, you may retain the
$42,000 expense advancement.
The Company hereby grants an option to you exercisable within 30 days
of the effective date of the Registration Statement to purchase up to 210,000
Shares of Common Stock at the public offering price, less underwriting discounts
and commissions (the "Over-Allotment Option"). Such additional Securities shall
be identical in all respects to the Securities to be offered pursuant to the
Prospectus. In accordance with the Agreement Among Underwriters, to the extent
that any underwriter exercises the Over-Allotment Option, it shall have the
right, subject to certain conditions, to purchase the same percentage of such
additional Securities as the principal amount of Securities to be purchased and
offered by it pursuant to the Agreement Among Underwriters.
In addition to the sums payable to you, as provided elsewhere herein,
Brookstreet Securities Corporation, in its individual capacity and not as
representative of the several Underwriters, shall be entitled to receive, as
partial compensation for its services, warrants (the "Warrants") for the
purchase of 140,000 shares of Common Stock of the Company. The Warrants shall
be issued pursuant to the Underwriter's Warrant in the form of Exhibit B
attached hereto and shall be exercisable, in whole or in part, for a period of
four years commencing one year from the date of the completion of the Offering
at an exercise price of $3.60 per share. The Warrants shall be non-exercisable
for one year from the issuance of the Warrants, and non-transferable (whether by
sale, transfer, assignment, or hypothecation) except for (i) transfers to
officers of Brookstreet Securities Corporation who are also shareholders of
Brookstreet Securities Corporation; and (ii) transfers occurring by operation of
law.
3. Delivery and Payment: Delivery of and payment for any securities
---------------------
purchased in accordance with the $4,200,000 firm commitment component of the
Securities shall be made at 10:00 A.M., California time, on [____], 1996 or at
such other time and date as may be agreed between you and the Company, but not
less than seven nor more than ten full business days after the effective date of
the Registration Statement (such time and date are referred to herein as the
"Closing Date"). Delivery of and payment for any securities purchased in
accordance with the $630,000 Over-Allotment Option component of the Securities
shall be made at 10:00 A.M., California time, on the first and fifteenth date of
each month after the effective date of the Registration Statement, until
______________ (each, an "Option Closing Date"), at which time the offering
shall be terminated, unless otherwise agreed between you and the Company.
Delivery of and payment for the Securities shall take place at the office of
Brookstreet Securities Corporation, 2361 Campus Drive, Suite 210, Irvine,
California 92715.
2
<PAGE>
The Closing Date, the Option Closing Date and the place of delivery of and
payment for the Securities may be varied by agreement between you and the
Company.
Delivery of the Securities (in temporary or definitive form and
registered in such names and in such denominations as you shall request at least
two business days prior to the Closing Date or any Option Closing Date by
written notice to the Company) shall be made to you against payment of the
purchase price therefor in good (same day) funds, to the order of the Company.
For the purpose of expediting the checking and packaging of the Securities, the
Company agrees to make such Securities available for inspection at least 24
hours prior to the Closing Date.
4. Agreements of the Company: The Company agrees with you as follows:
-------------------------
(a) The Company shall use its best efforts to cause the Registration
Statement and any amendments to become effective as promptly as
practicable and will not at any time, whether before or after the
effective date of the Registration Statement, file any amendment to
the Registration Statement or supplement to the Prospectus or file any
document under the Act or the Securities Exchange Act of 1934, as
amended (the "Exchange Act") before termination of the offering of the
Securities by you of which you and your counsel shall not previously
have been advised and furnished with a copy, or to which you or your
counsel shall have objected (except if deemed necessary by counsel for
the Company, in which case you shall have the right to terminate this
Agreement upon prompt notice to the Company), or which is not in
compliance with the Act, the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), or the Rules and Regulations.
As soon as the Company is advised or obtains knowledge thereof, the
Company will advise you, and as soon as practicable, confirm in writing,
(i) when the Registration Statement, as amended, becomes effective and, if
the provisions of Rule 430A promulgated under the Act will be relied upon,
when the Prospectus has been filed in accordance with said Rule 430A and
when any post-effective amendment to the Registration Statement becomes
effective, (ii) of the issuance by the Commission of any stop order or of
the initiation, or the threatening, of any proceeding suspending the
effectiveness of the Registration Statement or any order preventing or
suspending the use of any preliminary prospectus or the Prospectus, or any
amendment or supplement thereto, or the institution of proceedings for that
purpose, (iii) of the issuance by the Commission or by any state securities
commission of any proceedings for the suspension of the qualification of
any Securities for offering or sale in any jurisdiction or of the
initiation, or the threatening, of any proceeding for that purpose, (iv) of
the receipt of any comments from the Commission, and (v) of any request by
the Commission for any amendment to the Registration Statement or any
amendment or supplement to the Prospectus or for additional information.
If the Commission or any state securities commission shall enter a stop
order or suspend such qualification at any
3
<PAGE>
time, the Company will make every effort to obtain promptly the lifting of
such order or suspension.
(b) The Company will furnish to you, without charge, three signed
copies of the Registration Statement and any post-effective amendment
thereto, including financial statements and schedules, and all
exhibits.
(c) The Company will give you advance notice of its intention to file
any amendment to the Registration Statement or any amendment or
supplement to the Prospectus, and will not file any such amendment or
supplement to which you shall reasonably object in writing or which is
not in compliance with the Act.
(d) From the date hereof, and thereafter from time to time, the
Company will deliver to you, without charge, as many copies of the
Prospectus, or any amendment or supplement thereto as you may
reasonably request. The Company consents to the use of the Prospectus
or any amendment or supplement thereto by you and by all dealers to
whom the Securities may be sold, both in connection with the offering
or sale of the Securities and for such period of time thereafter as
the Prospectus is required to be delivered under the Act in connection
therewith. If during such period of time any event shall occur which
in the reasonable judgment of the Company or your counsel should be
set forth in the Prospectus in order to make the statements therein,
in the light of the circumstances under which they were made, not
misleading, or if it is necessary to supplement or amend the
Prospectus to comply with law, the Company will forthwith prepare and
duly file with the Commission an appropriate supplement or amendment
thereto and will deliver to you, without charge, such number of copies
thereof as you may reasonably request.
(e) Prior to any public offering of the Securities by you, the Company
will cooperate with you and your counsel in connection with the
registration or qualification of the Securities for offer and sale
under the securities or Blue Sky laws of such jurisdictions as you
request. The Company will pay all reasonable fees and expenses
(including reasonable fees and expenses of counsel) relating to
qualification of the Securities under such securities or Blue Sky laws
and in connection with the determination of the eligibility of the
Securities for investments under the laws of such jurisdictions as you
may designate, including the reasonable expenses of any opinion of
local counsel required by any state securities or Blue Sky
authorities.
(f) So long as any of the Securities remain outstanding, the Company
will furnish to its securityholders, as soon as practicable, annual
reports (including financial statements audited by independent public
accountants), and will deliver to you, as representative for the
underwriters:
4
<PAGE>
(i) concurrently with furnishing such quarterly reports to its
securityholders, statements of income of the Company for each
quarter in the form furnished to the Company's securityholders
and certified by the Company's principal financial or accounting
officer;
(ii) concurrently with furnishing such annual reports to its
securityholders, a balance sheet of the Company as at the end of
the preceding fiscal year, together with statements of
operations, stockholders' equity and cash flows of the Company
for such fiscal year, accompanied by a copy of the report thereon
of independent certified public accountants;
(iii) as soon as they are available, copies of all reports
(financial or other) mailed to stockholders;
(iv) as soon as they are available, copies of all reports and
financial statements furnished to or filed with the Commission,
any state securities commission, NASDAQ/SCMS, the NASD or any
securities exchange;
(v) every press release and every material news item regarding
each of the Company and the Subsidiaries or their respective
affairs which was released or prepared by or on behalf of the
Company or any of the Subsidiaries; and
(vi) any additional information of a public nature concerning the
Company or any of the Subsidiaries (and any future subsidiaries)
or their respective businesses which you may request.
During such period, if the Company has active subsidiaries, the
foregoing financial statements will be on a consolidated basis to the
extent that the accounts of the Company and its subsidiaries are
consolidated, and will be accompanied by similar financial statements for
any significant subsidiary which is not so consolidated.
(g) The Company will pay all expenses in connection with (1) the
preparation, printing and filing of the Registration Statement, each
preliminary prospectus, the Prospectus, any legal investment memoranda
and the Blue Sky Survey, (2) the issuance and delivery of the
Securities (other than transfer taxes),(3) the rating of the
Securities by rating agencies, (4) furnishing such copies of the
Registration Statement, the Prospectus and any preliminary prospectus,
all amendments and supplements thereto, as may reasonably be requested
for use in connection with the offering and sale of the Securities by
you or by dealers to whom Securities may be sold, and (5) filings with
the National Association of Securities Dealers, Inc. ("NASD").
5
<PAGE>
(h) The Company will use the net proceeds from the sale of the
Securities in the manner specified in the Prospectus under the caption
"Use of Proceeds". No portion of the net proceeds will be used,
directly or indirectly, to acquire or redeem any securities issued by
the Company.
(i) The Company will appoint and retain, while any of the Securities
remain outstanding, a transfer agent for the Securities, and, if
necessary, a registrar for the Securities (who may be the transfer
agent), and will make arrangements to have available at the offices of
the transfer agent certificates for the Securities in such quantities
as may, from time to time, be necessary. As of the date of this
Agreement, the transfer agent for the securities of the Company.
(j) For a period of five years from the date hereof, the Company shall
use its best efforts to maintain the listing of its common stock on
the National Association of Securities Dealers, Inc. Automated
Quotation Systems ("NASDAQ") over-the-counter market.
(l) Neither the Company nor any of the Subsidiaries nor any of their
respective executive officers, directors, principal stockholders or
affiliates (within the meaning of the Rules and Regulations) will
take, directly or indirectly, any action designed to, or which might
in the future reasonably be expected to cause or result in,
stabilization or manipulation of the price of any securities of the
Company in violation of the Exchange Act.
(m) Until the completion of the distribution of the Securities,
neither the Company nor any of the Subsidiaries shall, without prior
written consent of you and your counsel, issue, directly or
indirectly, any press release or other communication or hold any press
conference with respect to the Company, any of the Subsidiaries, their
respective activities or the offering contemplated hereby, other than
trade releases issued in the ordinary course of the Company's business
consistent with past practices with respect to the Company's
operations.
5. Representations and Warranties of the Company: The Company
----------------------------------------------
represents and warrants to you that:
(a) Each preliminary prospectus filed as part of any Registration
Statement as originally filed or as part to any amendment thereto, or
filed pursuant to Rule 424 under the Act, complied when so filed in
all material respects with the Act, and when the Registration
Statement becomes effective and at all times subsequent thereto up to
the Closing Date, the Registration Statement and the Prospectus, and
any supplements or amendments thereto, will comply in all material
respects with the provisions of the Act and the Registration Statement
and the Prospectus, and any such supplement or amendment thereto, at
all such times will not contain an untrue statement of a material fact
or omit to state a
6
<PAGE>
material fact required to be stated herein or necessary to make the
statements therein not misleading, except that this representation and
warranty does not apply to statements or omissions in the Registration
Statement or the Prospectus or any preliminary prospectus made in
reliance upon information furnished to the Company in writing by you
expressly for use therein.
(b) This Agreement has been duly authorized and validly executed and
delivered by the Company and constitutes a legal, valid and binding
agreement of the Company, enforceable in accordance with its terms,
except that (i) the enforceability hereof may be subject to
bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect, relating to creditors' rights
generally, (ii) the enforceability thereof may be limited by the
application of equitable principles (whether such enforceability is
considered in a proceeding at law or in equity) and (iii) rights to
indemnity and contribution hereunder may be limited by Federal or
state securities laws.
(c) The Securities have been duly authorized, validly issued, fully
paid and nonassessable, and the Company has duly authorized and
reserved for issuance the number of shares of common stock required
for the firm commitment offering and the over-allotment option. The
Securities are not and will not be subject to any preemptive or other
similar rights of any security holder of the Company or any of the
Subsidiaries (as defined below); the holders thereof will not be
subject to any liability for the Company's acts or omissions solely as
such holders; all corporate action required to be taken for the
authorization, issuance and sale of the Securities has been duly and
validly taken; and the certificates representing the Securities will
be in due and proper form. Upon the issuance and delivery of the
Securities pursuant to the terms of this Agreement, you will acquire
good and marketable title thereto free and clear of any lien, charge,
claim, encumbrance, pledge, security interest, defect or other
restriction or equity of any kind whatsoever resulting from the
affirmative act of the Company or from a judgment or nonconsentual
lien rendered against the Company.
(d) The Company is a corporation duly incorporated and validly
existing in good standing under the laws of the State of Delaware.
The Company and each of its subsidiaries listed on Exhibit A hereto
(the "Subsidiaries") have full corporate power and authority to own
and occupy its properties and carry on its business as presently
conducted and as described in the Prospectus and holds all licenses
and permits and is duly registered or qualified to conduct business,
and is in good standing, in each jurisdiction in which it owns or
leases property or transacts business and in which such licensing,
registration or qualification is necessary except where the failure to
be so licensed, registered or qualified would not have a material
adverse effect on the Company and its Subsidiaries, taken as a whole.
The Company has a duly authorized, issued and outstanding
capitalization as set forth in the Registration Statement. All of the
outstanding
7
<PAGE>
capital stock or other equity securities of the Company and each of
the Subsidiaries has been duly and validly authorized and issued, is
fully paid and nonassessable; the holders thereof have no rights of
rescission with respect thereto and are not subject to personal
liability for the Company's acts or omissions solely by reason of
being such holders; and none of such securities were issued in
violation of the preemptive rights of any security holder of the
Company or any of the Subsidiaries or similar contractual rights
granted by the Company or any of the Subsidiaries. There are no
outstanding rights, warrants or options to acquire, or instruments
convertible into or exchangeable for, or agreements or understandings
with respect to the sale or issuance of, any shares of capital stock
or other equity interest in any Subsidiary. Neither the Company nor
any of the Subsidiaries is a party to or bound by any material
instrument, agreement or other arrangements, including, but not
limited, to any voting trust agreement, stockholders' agreement or
other agreement or instrument, affecting the securities or options,
warrants or rights or obligations of security holders of the Company
or any of the Subsidiaries or providing for any of them to issue,
sell, transfer or acquire any capital stock, rights, warrants, options
or other securities of the Company or any of the Subsidiaries, except
for this Agreement and as described or referred to in the Registration
Statement and the Prospectus.
(e) There are no legal or governmental proceedings pending, or to the
knowledge of the Company, threatened or contemplated to which the
Company or any of its Subsidiaries is a party or of which the business
or property of the Company or any of its Subsidiaries is the subject
which are material to the Company and its Subsidiaries, taken as whole
and which are not disclosed in the Registration Statement and the
Prospectus, and there is no contract or document concerning the
Company or any of its Subsidiaries of a character required to be
described in the Registration Statement or the Prospectus or to be
filed as an exhibit to the Registration Statement which is not
described or filed as required.
(f) Neither the Company nor any of its Subsidiaries is in violation of
its charter or by-laws or is in default in any respect in the
performance of any obligation, agreement or condition contained in any
bond, debenture, note or any other evidence of indebtedness or in any
indenture, mortgage, deed of trust or any other agreement or
instrument of the Company or of any such Subsidiary, which default
would be material to the Company and its Subsidiaries, taken as a
whole and there exists, and at the Closing Date and any Option Closing
Date shall exist, no condition which, with the passage of time or
otherwise, would constitute a default under any such document or
instrument or result in the imposition of any penalty or acceleration
of any indebtedness which would be material to the Company and its
Subsidiaries, taken as a whole. The execution and delivery by the
Company of this Agreement, the authorization, issuance and sale of the
Securities, the fulfillment by the Company of this Agreement and the
consummation by the Company of the transactions contemplated by this
Agreement will not conflict with or constitute a breach of,
8
<PAGE>
or default (with the passage of time or otherwise) under, or result in
the imposition of a lien on any properties of the Company or its
Subsidiaries or an acceleration of indebtedness pursuant to, the
certificate of incorporation or by-laws of the Company or any of its
Subsidiaries, or any bond, debenture, note or any other evidence of
indebtedness or any indenture, mortgage, deed of trust or any other
material agreement or instrument to which the Company or any of its
Subsidiaries is a party or by which it or any of them is bound or to
which any of the property or assets of the Company or any of its
Subsidiaries is subject, or any law, administrative regulation or
order of any court or governmental agency or authority applicable to
the Company or any of its Subsidiaries which in any event would be
material to the Company and its Subsidiaries, taken as a whole. No
consent, approval, authorization or other order of any regulatory
body, administrative agency, or other governmental body is legally
required by the Company or its Subsidiaries for the valid issuance and
sale of the Securities, except such as may be required by the NASD or
under the Act or the securities or blue sky laws of any jurisdiction.
(g) The consolidated financial statements of the Company and its
Subsidiaries together with the related notes and schedules included in
the Registration Statement and Prospectus comply in all material
respects with the requirements of the Act and fairly present the
financial position, income, change in stockholder's equity, cash flow
and the results of operations of the Company and the Subsidiaries at
the respective dates and for the respective periods to which they
apply. There has been no adverse change or development involving a
material prospective change in the condition, financial or otherwise,
or in the earnings, business affairs, position, prospects, value,
operation, properties, business or results of operations of the
Company or any of the Subsidiaries, whether or not arising in the
ordinary course of business, since the date of the financial
statements included in the Registration Statement and the Prospectus,
except as set forth in the Registration Statement and the Prospectus,
and the outstanding debt, the property, both tangible and intangible,
and the businesses of each of the Company and the Subsidiaries
described in the Registration Statement and the Prospectus conform in
all material respects to the descriptions thereof contained in the
Registration Statement and the Prospectus. Such consolidated
financial statements (including the related notes and schedules) have
been prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods
involved except as otherwise stated therein.
(h) Each of the Company and the Subsidiaries (i) has paid all federal,
state and local taxes for which it is currently liable, including, but
not limited to, withholding taxes and amounts payable under Chapters
21 through 24 of the Internal Revenue Code of 1986, as amended (the
"Code"), and has furnished all information returns it is required to
furnish pursuant to the Code, (ii) has established adequate reserves
for such taxes that are not due and payable and
9
<PAGE>
(iii) does not have any tax deficiency or claims outstanding, proposed
or assessed against its respective business or assets.
(i) Each of the Company and the Subsidiaries maintains insurance
policies, including, but not limited to, general liability, property
and product liability insurance and surety bonds which insures the
Company and the Subsidiaries and their respective professional staffs
against such losses and risks generally insured against by comparable
businesses. Neither the Company nor any of the Subsidiaries (A) has
failed to give notice or present any insurance claim with respect to
any matter, including, but not limited to, the Company's or any of the
Subsidiaries' businesses, property or professional staff under any
insurance policy or surety bond in a due and timely manner, (B) has
any disputes or claims against any underwriter of such insurance
policies or surety bonds or has failed to pay any premiums due and
payable thereunder or (C) has failed to comply with all conditions
contained in such insurance policies and surety bonds. The Company
has not received notice or facts or circumstances under any insurance
policy or surety bond which would relieve any insurer of its
obligation to satisfy in full any valid claim of the Company or any of
the Subsidiaries.
(j) Subsequent to the respective dates as of which information is set
forth in the Registration Statement and Prospectus, and except as may
otherwise be indicated or contemplated herein or therein, neither the
Company nor any of the Subsidiaries has (i) entered into any material
transaction other than in the ordinary course of business or (ii)
declared or paid any dividend or made any other distribution on or in
respect of its capital stock of any class and there has not been any
change in the capital stock, debt (long or short term) or liabilities
or any material change in or affecting the general affairs,
management, financial operations, stockholders' equity or results of
operations of the Company or any of the Subsidiaries.
(k) Each of the Company and its Subsidiaries is in material compliance
with all federal, state, local and foreign laws and regulations
respecting employment and employment practices, terms and conditions
or employment and wages and hours. The Company has not received notice
of any pending investigations involving the Company or any of the
Subsidiaries by the U.S. Department of Labor or any other governmental
agency responsible for the enforcement of such federal, state, local
or foreign laws and regulations. The Company has not received notice
of any unfair labor practice charge or complaint against the Company
or any of the Subsidiaries pending before the National Labor Relations
Board or any strike, picketing, boycott, dispute, slowdown or stoppage
pending or threatened against or involving the Company or any of the
subsidiaries or any predecessor entity of the Company or any of the
Subsidiaries, and none has ever occurred. No collective bargaining
agreement or modification thereof is currently being negotiated by the
Company or any of
10
<PAGE>
the Subsidiaries. No material labor dispute with the employees of the
Company or any of the Subsidiaries exists, or to the best of the
Company's knowledge, is imminent.
(l) The Company hereby agrees that it will not nor shall it permit any
of the Subsidiaries to, for a period of twelve months from the
effective date of the Registration Statement, adopt, propose to adopt
or otherwise permit to exist any employee, officer, director,
consultant or other benefit or compensation plan or arrangement (i)
permitting the grant, issue, sale or entry into any agreement to
grant, issue or sell any capital stock at a price that is less than,
or permitting the grant, issue, sale or entry into any agreement to
grant, issue or sell any option, warrant or other contract right with
respect to capital stock at an exercise price that is less than, the
greater of (x) the market price of the Company's common stock on the
effective date of the Registration Statement (being $__ per share)
and (y) the fair market value per share of common stock on the date of
grant or sale or to any of its or the Subsidiaries' executive officers
or directors or to any holder of five percent or more of the common
stock; (ii) permitting the maximum number shares of common stock or
other securities of the Company purchasable at any time pursuant
options, warrants or other contract rights issued or granted by the
Company to exceed shares of common stock; (iii) permitting the payment
for the securities covered thereby with any form of consideration
other than cash; or (iv) permitting the existence of stock
appreciation rights, phantom options or similar arrangements.
(m) Each of the Company and the Subsidiaries (i) has not received any
notice of infringement of or conflict with asserted rights of others
with respect to any copyrights, trademarks, service marks and trade
names, together with all applications for any of the foregoing,
presently used or held for use by it in connection with its businesses
as described in the Registration Statement, which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or
finding, might have a material adverse effect on the condition,
financial or otherwise, or the business taken as a whole, and (ii) is
not obligated or under any liability whatsoever to make any material
payments by way of royalties, fees or otherwise to any owner or
licensee of, or other claimant to, any trademark, service mark, trade
name or copyright or other intangible asset with respect to the use
thereof or in connection with the conduct of its business or
otherwise.
(n) The Company is not an "investment company" within the meaning of
the Investment Company Act of 1940.
6. Indemnification: The Company agrees to indemnify you and hold
----------------
you harmless, and each person, if any, who controls you, within the meaning of
either Section 15 of the Act or Section 20 of the Exchange Act from and against
any and all losses, claims, damages, liabilities and expenses (including
reasonable costs of investigation) arising out of or
11
<PAGE>
based upon any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement or the Prospectus or in any amendment or
supplement thereto or in any preliminary prospectus, or arising out of or based
upon any omission or alleged omission to state therein a material fact required
to be stated herein or necessary to make the statements therein not misleading.
If any action or proceeding (including any governmental investigation)
shall be brought or asserted against you or any person controlling you in
respect of which indemnity may be sought from the Company, you or such
controlling person shall promptly notify the Company in writing, and the Company
shall assume the defense thereof, including the employment of counsel reasonably
satisfactory to you or such controlling person, as the case may be and the
payment of all expenses. You or any such controlling person shall have the
right to employ separate counsel in any such action and to participate in the
defense thereof at your own cost. The Company shall not be liable for any
settlement of any such action or proceeding effected without its written
consent, but if settled with its written consent, or if there be a final
judgment for the plaintiff in any such action or proceeding, the Company agrees
as provided in the preceding paragraph to indemnify you and hold you or such
controlling person harmless from and against any loss or liability by reason of
such settlement or judgment.
You agree, severally and not jointly, to indemnify and hold harmless
the Company, its directors and officers, and each person, if any, who controls
the Company within the meaning of either Section 15 of the Act or Section 20 of
the Exchange Act, to the same extent as the foregoing indemnity from the Company
to you, but only with respect to information furnished in writing by you or on
your behalf expressly for use in the Registration Statement, the Prospectus, or
any amendment or supplement thereto, or any preliminary prospectus. In case
any action or proceeding shall be brought against the Company or its directors
or officers or any such controlling person, in respect of which indemnity may be
sought against you, you shall have the rights and duties given to the Company,
and the Company or its directors or officers or such controlling person shall
have the rights and duties given to you, by the preceding paragraph.
7. Conditions of Your Obligations: Your obligations hereunder shall
-------------------------------
be subject to the continuing accuracy of the representations and warranties of
the Company herein as of the date hereof and as of the Closing Date and each
Option Closing Date, if any, as if they had been made on and as of the Closing
Date or each Option Closing Date, as the case may be; the accuracy on and as of
the Closing Date or each Option Closing Date, if any, of the statements of
officers of the Company made pursuant to the provisions hereof; and the
performance by the Company on and as of the Closing Date and each Option Closing
Date, if any, of its covenants and obligations hereunder and to the following
further conditions:
(a) Notification that the Registration Statement has become effective
and that the Prospectus has been filed with the Commission on a timely
basis pursuant to Rule 424(b) under the Act shall be received by you;
12
<PAGE>
(b) No stop order suspending the effectiveness of the Registration
Statement shall have been issued and no proceedings for that purpose
shall be pending or contemplated by the Commission; and you shall have
received a certificate, dated the Closing Date and signed by the
Chairman or President of the Company (who may, as to proceedings
contemplated, rely upon the best of his information and belief), to
that effect and to the effect set forth in clause (g) of this Section
7;
(c) On or prior to the Closing Date, you shall have received from
Underwriters' Consel, such opinion or opinions with respect to the
organization of the Company, the validity of the Securities, the
Registration Statement, the Prospectus and other related mattes as you
may request and Underwriters' Consel shall have received such papers
and information as they request to enable them to pass upon such
matters.
(d) At Closing Date, you shall have received from Thelen, Marrin,
Johnson & Bridges counsel to the Company, dated the Closing Date,
addressed to the Underwriters in the form attached hereto as Exhibit
C. In rendering such opinion, such counsel may rely: (A) as to
matters involving the application of laws other than the laws of the
United States and jurisdictions in which they are admitted, to the
extent such counsel deems proper and to the extent specified in such
opinion, if at all, upon an opinion or opinions (in form and substance
satisfactory to Underwriters' Counsel) of other counsel acceptable to
Underwriters' Counsel, familiar with the applicable laws; and (B) as
to matters of facts, to the extent they deem proper, on certificates
and written statements of responsible officers of the Company and
certifactes or other written statements of officers of departments of
various jurisdictions having custody of docments respecting the
corporate existence or good standing of the Company and the
Subsidiaries, provided copies of any such statements or certificates
shall be delivered to Underwriters' Counsel if requested. The opinion
of such counsel for the Company shall state that the opinion of any
such other counsel is in form satisfactory to such counsel and that
the Underwriters and they are justified in relying thereon. At each
Option Closing, if any, the Underwriters shall have received the
favorable opinion of Thelen, Marrin, Johnson & Bridges, counsel to the
Company, dated such Option Closing Date, addressed to the Underwriters
and in form consistent with Exhibit C confirming as of such Option
Closing Date the statements made by Thelen, Marrin, Johnson & Bridges
in their opinion delivered on the Closing Date.
(e) At the time this Agreement is executed, you shall have received a
letter, dated such date, addressed to you in form and substance
satisfactory in all respects (including the nonmaterial nature of the
changes or decreases, if any, referred to in clause (iii) below) to
you and your counsel, from Allen P. Fields, Certified Public
Accountant:
13
<PAGE>
(i) confirming that they are independent certified public
accountants with respect to the Company within the meaning of the
Act and the Exchange Act and the applicable Rules and
Regulations;
(ii) stating that it is their opinion that the consolidated
financial statements and supporting schedules of the Company and
the Subsidiaries, as applicable, included in the Registration
Statement comply as to form in all material respects with the
applicable accounting requirements of the Act and the Exchange
Act and the Rules and Regulations thereunder;
(iii) and stating that, on the basis of a limited review which
included a reading of the latest available unaudited interim
consolidated financial statements of the Company and the
Subsidiaries, as applicable, (with an indication of the date of
the latest available unaudited interim consolidated financial
statements of the Company and the Subsidiaries, as applicable), a
reading of the latest available minutes of the stockholders and
board of directors and the various committees of the board of
directors or each of the Company and the Subsidiaries,
consultations with officers and other employees of each of the
Company and the Subsidiaries responsible for financial and
accounting matters and other specified procedures and inquiries,
nothing has come to their attention which would lead them to
believe that (A) the unaudited consolidated financial statements
and supporting schedules of the Company and the Subsidiaries, as
applicable, included in the Registration Statement do not comply
as to form in all material respects with the applicable
accounting requirements of the Act and the Exchange Act and the
Rules and Regulations or are not fairly presented in conformity
with generally accepted accounting principles applied on a basis
substantially consistent with that of the audited consolidated
financial statements and supporting schedules of the Company and
the Subsidiaries, as applicable, included in the Registration
Statements, (B) at a specified date not more than five days prior
to the later of the date of this Agreement or the effective date
of the Registration Statement, there has been any change in the
capital stock or long-term debt of the Company or any of the
Subsidiaries, or any decrease in the stockholders' equity or net
current assets or net assets of the Company, as compared with
amounts shown in the _______________, 199_ balance sheet included
in the Registration Statement other than as set forth in or
contemplated by the Registration Statement, or, if there was any
change or decrease, setting forth the amount of such change or
decrease, and (C) during the period from _______________, 199_ to
a specified date not more than five days prior to the later of
the date of this Agreement or the effective date of the
Registration Statement, there was any decrease in net revenues,
net earnings or net earnings per common share
14
<PAGE>
of the Company and its consolidated Subsidiaries or any of the
Company's unconsolidated Subsidiaries, in each case as compared
with the corresponding period beginning _______________, 199_,
other than as set forth in or contemplated by the Registration
Statement, or, if there was any such decrease, setting forth the
amount of such decrease;
(iv) stating that they have compared specific dollar amounts,
numbers of shares, percentages of revenues and earnings,
statements and/or other financial information pertaining to the
Company and the Subsidiaries set forth in the Prospectus in each
case to the extent that such amounts, numbers, percentages,
statements and information may be derived from the general
accounting records, including work sheets, of the Company and/or
the Subsidiaries and excluding any questions requiring an
interpretation by legal counsel, with the results obtained from
the application of specified readings, inquiries and other
appropriate procedures (which procedures need not constitute an
examination in accordance with generally accepted auditing
standards) set forth in the letter and found them to be in
agreement; and
(v) statements as to such other matters incident to the
transaction contemplated hereby as you may reasonably request.
(f) At the Closing Date and each Option Closing Date, if any, you
shall have received from Allen P. Fields, Certified Public Accountant,
a letter, dated as of the Closing Date or such Option Closing Date, as
the case may be, to the effect that they reaffirm that statements made
in the letter furnished pursuant to subsection (f) of this Section 7,
except that the specified date referred to shall be a date not more
than five days prior to the Closing Date or such Option Closing Date,
as the case may be, and, if the Company has elected to rely on Rule
430A of the Rules and Regulations, to the further effect that they
have carried out procedures as specified in clause (v) of subsection
(f) of this Section 7 with respect to certain amounts, percentages and
financial information as specified by you and deemed to be a part of
the Registration Statement pursuant to Rule 430A(b) and have found
such amounts, percentages and financial information to be in agreement
with the records specified in such clause (v).
(g) At each of the Closing Date and each Option Closing Date, if any,
you shall have received a certificate of the Company signed by the
principal executive officer and by the chief financial or chief
accounting officer of the Company, dated the Closing Date or Option
Closing Date, as the case may be, to the effect that each of such
persons has examined the Registration Statement, the Prospectus, and
this Agreement, and that:
(i) the representations and warranties of the Company in this
Agreement are true and correct, as if made on and as of the
Closing
15
<PAGE>
Date or such Option Closing Date, as the case may be, and
the Company has complied with all agreements and covenants and
satisfied all conditions contained in this Agreement on its part
to be performed or satisfied at or prior to the Closing Date or
such Option Closing Date, as the case may be;
(ii) no stop order suspending the effectiveness of the
Registration Statement or any part thereof has been issued, and
no proceedings for that purpose have been instituted or are
pending or, to the best of each of such person's knowledge after
due inquiry, are contemplated or threatened under the Act;
(iii) the Registration Statement and the Prospectus and, if any,
each amendment and each supplement thereto, contain all
statements and information required to be included therein, and
none of the Registration Statement, the Prospectus or any
amendment or supplement thereto includes any untterurue statement
of a material fact or omits to state any material fact required
to be stated therein or necessary to make the statements therein
not misleading and none of the Preliminary Prospectus or any
supplement thereto included any untrue statement of a material
fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading; and
(iv) subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus: (a)
neither the Company nor any of the Subsidiaries has incurred up
to and including the Closing Date or the Option Closing Date, as
the case may be, other than in the ordinary course of its
business, any material liabilities or obligations, direct or
contingent (except as otherwise contemplated in subclause (d) of
this clause (iv)); (b) neither the Company nor any of the
Subsidiaries has paid or declared any dividends or other
distributions on its capital stock; (c) neither the Company nor
any of the Subsidiaries has entered into any material
transactions not in the ordinary course of business (except as
otherwise contemplated in subclause (d) of this clause (iv)); (d)
there has not been any material change in the capital stock or
long-term debt or any increase in the short-term borrowings
(other than any increase in the short-term borrowings in the
ordinary course of business) of the Company or any of the
Subsidiaries; (e) neither the Company nor any of the Subsidiaries
has sustained any material loss or damage to its property or
assets, whether or not insured; (f) there is no material
litigation which is pending or, to the best of the Company's
knowledge, threatened against the Company, any of the
Subsidiaries or any affiliated party of any of the foregoing
which is required to be set forth in an amended or supplemented
Prospectus which has not been set
16
<PAGE>
forth; and (g) there has occurred no event required to be set
forth in an amended or supplemented Prospectus which has not been
set forth.
References to the Registration Statement and the Prospectus in this
Subsection (h) are to such documents as amended and supplemented at the
date of such certificates.
(h) The Company shall increase its Board of Directors to at least five
of which a majority shall be outside directors. The Company shall
cause such persons to be nominated, and to use its best efforts to
cause them to be elected to its Board. The Company will have an
authorized number of directors totaling five as of the date of the
filing of the Registration Statement. All directors must have such
qualifications as would generally be found for directors of similarly
situated public companies. Upon the closing of the offering, the Board
of Directors of the Company has agreed to appoint Daniel C. Montano,
of Brookstreet Securities Corporation, to the Board of Directors of
the Company.
(i) Prior to each of Closing Date and each Option Closing Date, if
any: (i) there shall have been no materially adverse change nor
development involving a prospective change in the condition, financial
or otherwise, prospects, stockholders' equity or the business
activities of the Company and the Subsidiaries taken as a whole,
whether or not in the ordinary course of business, from the latest
dates as of which such condition is set forth in the Registration
Statement and Prospectus; (ii) there shall have been no transaction,
not in the ordinary course of business, entered into by the Company or
any of the Subsidiaries, from the latest date as of which the
financial condition of the Company and the Subsidiaries is set forth
in the Registration Statement and Prospectus which is adverse to the
Company and the Subsidiaries taken as a whole; (iii) neither the
Company nor any of the Subsidiaries shall be in material default under
any provision of any instrument relating to any outstanding
indebtedness; (iv) neither the Company nor any of the Subsidiaries
shall have issued any securities (other than the Securities or
underlying common stock from the exercise of options or warrants) or
declared or paid any dividend or made any distribution in respect of
its capital stock of any class and there has not been any change in
the capital stock, or any change in the debt (long or short term) or
liabilities or obligations (contingent or otherwise) of the Company or
any of the Subsidiaries; (v) no material amount of the assets of the
Company or any of the Subsidiaries shall have been pledged or
mortgaged other than in the ordinary course of the Company's business,
except as set forth in the Registration Statement and Prospectus; (vi)
no action, suit or proceeding, at law or in equity, shall have been
pending or, to the best of the Company's knowledge, threatened against
the Company or any of the Subsidiaries, or affecting any of their
respective properties or businesses, before or by any court or
federal, state or foreign commission, board or other administrative
agency wherein an unfavorable decision, ruling or finding may
materially adversely affect the business, operations, prospects,
financial condition or income of the
17
<PAGE>
Company and the Subsidiaries taken as a whole, except as set forth in
the Registration Statement and Prospectus; and (vii) no stop order
shall have been issued under the Act and no proceedings therefor shall
have been initiated, threatened or contemplated by the Commission or
any state regulatory authority.
(j) At the Closing Date and the Option Closing Date, if any, you
shall have received a letter from Allen P. Fields, Certified
Public Accountant, dated as of the Closing Date or such Option Closing
Date, as the case may be, substantially in the form heretofore
approved by you.
If any condition to your obligations hereunder to be fulfilled prior to or
at the Closing Date or the relevant Option Closing Date, as the case may be, is
not so fulfilled you may terminate this Agreement or, if you so elect, you may
waive any such conditions which have not been fulfilled or extend the time for
their fulfillment. In the event you so elect to terminate, you shall have no
recourse against the Company for expenses except to retain the $42,000 paid to
you pursuant to Section 2 hereof. In addition, the Company shall remain liable
for all reasonable Blue Sky counsel fees of the Company and expenses and Blue
Sky filing fees of the Company.
8. Effective Date of Agreement: This Agreement shall become effective
----------------------------
(i) if Rule 430A under the Act is not used, when you shall have received
notification of the effectiveness of the Registration Statement or (ii) if Rule
430A under the Act is used, when the parties hereto have executed and delivered
this Agreement.
9. Notice: Notice given pursuant to any of the provisions of this
------
Agreement shall be in writing and shall be mailed or delivered (a) to the
Company at its office at 11176 Perimeter Center West, Suite N-316, Atlanta,
Georgia 30338, Attention: Hale R. Spiegelberg (b) to you, at 2361 Campus Drive,
Suite 210, Irvine, California 92715, Attention: Daniel C. Montano. Any notice
under Section 7(a) hereof may be given by facsimile or telephone, but if so
given shall be subsequently confirmed in writing.
10. Termination.
-----------
(a) Subject to Subsection (b) of this Section 10, you shall have the right
to terminate this Agreement (i) if any domestic or international event or
act or occurrence has or in your reasonable opinion will in the immediate
future have a material adverse effect on the Company or the securities
market in general or (ii) if trading on the New York Stock Exchange, the
American Stock Exchange or in the over-the-counter market shall have been
suspended, or minimum or maximum prices for trading shall have been fixed,
or maximum ranges for prices for securities shall have been required on the
over-the-counter market by the NASD or by order of the Commission or any
other government authority having jurisdiction; or (iii) if the United
States shall have become involved in a war or major hostilities, or there
shall have been an escalation in an existing war or major hostilities, or a
national emergency shall have been declared in the United States; or (iv)
if a banking moratorium has been declared by a state or federal authority;
or (v) if a moratorium in foreign exchange trading has been declared; or
(vi) if the Company or any of the Subsidiaries shall have sustained a loss
material or
18
<PAGE>
substantial to the Company or any of the Subsidiaries by fire, flood,
accident, hurricane, earthquake, theft, sabotage or other calamity or
malicious act which, whether or not such loss shall have been insured,
will, in your reasonable opinion, make it inadvisable to proceed with the
delivery of the Securities; or (vii) if there shall have been such a
material adverse change in the conditions or prospects of the Company or
any of the Subsidiaries, or such material adverse change in the general
market, political or economic conditions in the United States or elsewhere,
as in your judgment would make it inadvisable to proceed with the offering,
sale and/or delivery of the Securities; or (viii) if Hale R. Speigelberg
shall no longer serve the Company in his present capacity.
(b) If this Agreement is terminated by you in accordance with the
provisions of Section 4(a), Section 10(a)(i), 10(a)(ii), Section
10(a)(iii), Section 10(a)(iv), Section 10(a)(v), Section 10(a)(vi), Section
10(a)(vii), Section 10(a)(viii) or Section 11 or if this Agreement shall
not be carried out within the time specified herein, or any extension
thereof granted to you, by reason of any failure on the part of the Company
to perform any material undertaking or satisfy any material condition of
this Agreement by it to be performed or satisfied (including without
limitation, pursuant to Section 7, Section 10(a) or Section 11), then you
shall be entitled to retain as sole recourse against the Company the
$42,000 advanced to you pursuant to Section 2 hereof. In addition, the
Company shall remain liable for all reasonable Blue Sky counsel fees of the
Company and expenses and Blue Sky filing fees of the Company.
Notwithstanding any contrary provision contained in this Agreement, any
election hereunder or any termination of this Agreement (including, without
limitation, pursuant to Sections 7, 10 and 11 hereof), and whether or not
this Agreement is otherwise carried out, the provisions of Section 6 shall
not be in any way affected by such election or termination or failure to
carry out the terms of this Agreement or any part hereof.
(c) In the event the Company has been advised by the SEC that no further
comments shall be forthcoming and you choose to postpone the effective date
for more than four weeks thereafter, the Company shall be free to terminate
this Agreement without any liability or penalty other than the retention by
you of the $42,000 paid to you pursuant to Section 2 hereof.
11. Default by the Company. If the Company shall fail at the Closing Date
----------------------
or any Option Closing Date, as applicable, to sell and deliver the number of
Securities which it is obligated to sell hereunder on such date, then this
Agreement shall terminate (or, if such default shall occur with respect to any
Option Securities to be purchased on an Option Closing Date, you may, at your
option, by notice from you to the Company, terminate your obligation to purchase
Option Securities from the Company on such date) without any liability on the
part of any non-defaulting party other than pursuant to Sections 5, 7 and 10
hereof. No action taken pursuant to this Section 11 shall relieve the Company
from liability, if any, in respect of such default.
19
<PAGE>
12. Representations and Agreements to Survive Delivery. All
--------------------------------------------------
representations, warranties and agreements contained in this Agreement or
contained in certificates of officers of the Company submitted pursuant hereto
shall be deemed to be representations, warranties and agreements at the Closing
Date and each Option Closing Date, as the case may be, and such representations,
warranties and agreements of the Company and the respective indemnity agreements
contained in Section 6 hereof shall remain operative and in full force and
effect as of such dates, regardless of any investigation made by or on behalf of
you, the Company, any of the Subsidiaries or any controlling person, and shall
survive termination of this Agreement or the issuance and delivery of the
Securities to you.
13. Entire Agreement; Amendments. This Agreement constitutes the entire
----------------------------
agreement of the parties hereto and supersedes all prior written or oral
agreements, understandings and negotiations with respect to the subject matter
hereof. This Agreement may not be amended except in a writing signed by you and
the Company.
14. Miscellaneous. This Agreement has been and is made solely for the
-------------
benefit of you and the Company and of the controlling persons, directors and
officers referred to in Section 6 hereof, and their respective successors and
assigns, and no other person shall acquire or have any right under or by virtue
of this Agreement. The term "successors and assigns" as used in this Agreement
shall not include a purchaser, as such purchaser, of Securities from you.
This Agreement may be signed in various counterparts which together shall
constitute one and the same agreement.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF CALIFORNIA APPLICABLE TO AGREEMENTS MADE AND TO BE
PERFORMED ENTIRELY WITHIN SUCH STATE.
Please confirm that the foregoing correctly sets forth the agreement
between the Company and you.
Very truly yours,
ATLANTA TECHNOLOGY GROUP, INC.
BY:
---------------------------------------------
20
<PAGE>
Confirmed as of the date first above mentioned:
BROOKSTREET SECURITIES CORPORATION
BY:
------------------------------------
Daniel C. Montano, Director
EXHIBIT A
SUBSIDIARIES
------------
<TABLE>
<CAPTION>
PERCENTAGE OF CAPITAL
STATE IN WHICH STOCK OWNED BY
NAME INCORPORATED ATLANTA TECHNOLOGY GROUP, INC.
---- -------------- ------------------------------
<S> <C> <C>
1. Time Value Corporation Delaware (active) 100%
2. Silver Ridge Software, Inc Georgia (inactive since ___) 100%
3. Net City, Inc. Georgia (active) 100%
</TABLE>
21
<PAGE>
EXHIBIT B
ATLANTA TECHNOLOGY GROUP, INC.
(A Delaware Corporation)
Underwriter's Warrant ("Warrant") to Purchase
Shares of Common Stock
NEITHER THIS WARRANT NOR THE COMMON STOCK UNDERLYING THIS WARRANT HAVE BEEN
REGISTERED UNDER EITHER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY
STATE. CONSEQUENTLY, NEITHER THIS WARRANT NOR THE COMMON STOCK UNDERLYING THIS
WARRANT MAY NOT BE SOLD, PLEDGED, TRANSFERRED OR OTHERWISE HYPOTHECATED IN THE
ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE APPLICABLE
SECURITY OR AN EXEMPTION THEREFROM, ACCOMPANIED BY AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
1. Grant of Warrant. For value received in connection with the offering
----------------
(the "Offering") of 1,400,000 shares of its Common Stock (the "Securities"),
Atlanta Technology Group, Inc., a Delaware corporation ("ATG" or the "Company"),
hereby grants to Brookstreet Securities Corporation, a California corporation,
or its registered assigns ("Holder"), the right to purchase from the Company
("Warrant") 140,000 shares of ATG Common Stock (the "Shares"), no par value,
("Common Stock") upon the Closing Date (as defined in Section 3 of the
Underwriting Agreement, dated _____________, 199_, between the Company and
Brookstreet Securities Corporation, as representative of the several
Underwriters named in Schedule I thereto) of the Offering on the terms and
conditions set forth herein. The Exercise Price for such Warrant shall be $3.60
per share. The Exercise Price is subject to adjustment as provided in Section 6
below.
2. Right and Manner of Exercise. This Warrant shall be exercisable at any
----------------------------
time from and after the first anniversary of the date hereof and ending at 5:00
p.m. California time on the fifth anniversary of the date hereof (the "Exercise
Period"). The Holder may elect to exercise this Warrant anytime during the
Exercise Period as to any or all of the Shares by delivering written notice, or
successive written notices, of exercise to the Company (as provided in Section
11) in the form attached hereto as Exhibit A accompanied by payment of an
amount equal to the product of (i) the number of Shares being purchased and
(ii) the Exercise Price, as each may have been adjusted pursuant to the terms
of this Agreement.
3. Issuance of Shares and New Warrant. If the purchase rights evidenced by
----------------------------------
this Warrant are exercised in whole or in part, one or more certificates for the
Shares so purchased shall be issued at the Company's expense as soon as
practicable thereafter to the Holder exercising such rights. Such Holder shall
also be issued at such time at the Company's expense a new Warrant on the same
terms and conditions as this Warrant, but representing the
<PAGE>
number of Shares (if any) for which the purchase rights under this Warrant
remain unexercised.
4. Privilege of Stock Ownership. The Holder shall for all purposes be
----------------------------
deemed to have become the holder of record of Shares issued upon an exercise of
this Warrant on, and the certificate evidencing such Shares shall be dated, the
date upon which the Holder presents to the Company each of notice of an intent
to exercise this Warrant pursuant to Section 2 and payment of the Exercise
Price. Holder shall receive good and marketable title to all Shares that Holder
purchases and the Company delivers upon the exercise of any or all of the
Warrants. Prior to exercise of this Warrant, the Holder shall not be entitled to
any rights as a shareholder of the Company, including (without limitation) the
right to vote, receive dividends or other distributions, exercise preemptive
rights or be notified of shareholder meetings, and such Holder shall not be
entitled to any notice or other communication concerning the business or affairs
of the Company except as otherwise provided herein.
5. Reservation and Availability of Shares. The Company will at all times
--------------------------------------
reserve and keep available, free from preemptive rights, out of the aggregate of
its authorized but unissued shares of Stock for the purpose of enabling it to
satisfy any obligation to issue Shares upon exercise of this Warrant, the full
number of Shares deliverable upon the exercise or conversion of the entire
outstanding amount of this Warrant. Before taking any action which would cause
an adjustment pursuant to Section 6 reducing the Exercise Price, the Company
will take any corporate action which may, in the opinion of its counsel, be
necessary in order that the Company may validly and legally issue fully paid and
non-assessable Shares at the Exercise Price as to adjusted. The Company
covenants that all Shares which may be issued upon exercise of this Warrant
will, upon issue, be fully paid and non-assessable, free and clear of all voting
and other trust arrangements, liens, encumbrances, equities and claims
whatsoever, and the Company shall have paid all taxes, if any, in respect of the
issuance thereof.
6. Adjustment of Exercise Price/Anti-Dilution. The Exercise Price and the
------------------------------------------
number and kind of securities purchasable upon the exercise of this Warrant
shall be subject to adjustment from time to time upon the happening of the
events enumerated in this Section 6.
6.1 Stock Splits and Combinations. If the Company shall at any time
-----------------------------
subdivide or combine its outstanding Common Stock, or fix a record date for
payment of a dividend in Common Stock or other securities of the Company
exercisable, convertible or exchangeable for Common Stock (in which latter event
the maximum number of shares of Common Stock issuable upon the exercise,
conversion or exchange of such securities shall be deemed to have
been distributed), after that subdivision, combination or dividend, the number
of Shares subject to purchase shall be adjusted to that number of Shares which
is determined by (A) multiplying the number of shares of Common Stock
purchasable immediately prior to such adjustment by the Exercise Price in effect
immediately prior to such adjustment, and then (B) dividing that product by the
Exercise Price in effect immediately after such adjustment. If the Company shall
at any time subdivide the outstanding shares of Common Stock or fix a record
date for payment of a dividend in Common Stock or other securities exercisable,
2
<PAGE>
convertible or exchangeable into Common Stock, the Exercise Price then in effect
immediately before that subdivision or dividend shall be proportionately
decreased, and, if the Company shall at any time combine the outstanding shares
of Common Stock, then the Exercise Price in effect immediately before that
combination shall be proportionately increased. Any adjustment under this
Section 6.1 shall become effective at the close of business on the date the
subdivision or combination becomes effective or the dividend is distributed.
6.2 Reclassification, Exchange and Substitution. If the Shares
-------------------------------------------
issuable upon exercise of the Warrant shall be changed into the same or a
different number of shares of any other class or classes of securities, whether
by capital reorganization, reclassification, or otherwise (other than a
subdivision or combination or payment of dividend of securities provided for
above), the Holder of this Warrant shall, on its exercise, be entitled to
purchase for the same aggregate consideration, in lieu of the Shares which the
Holder would have become entitled to purchase but for such change, a number of
shares of such other class or classes of securities which such Holder would have
been entitled to receive as the holder of that number of Shares subject to
purchase by the Holder on exercise of this Warrant immediately before that
change.
6.3 Reorganizations, Mergers, Consolidations or Sales of Assets. If
-----------------------------------------------------------
at any time there shall be a capital reorganization of the Common Stock (other
than a subdivision, combination, payment of dividend, reclassification or
exchange of Common Stock provided for above), or merger or consolidation of the
Company with or into another corporation, or the sale of the Company's
properties and assets as, or substantially as, an entirety to any other person,
then, as a part of such reorganization, merger, consolidation or sale, lawful
provision shall be made so that the Holder of this Warrant shall thereafter be
entitled to receive upon exercise of this Warrant, during the period specified
in this Warrant and upon payment of the Exercise Price then in effect, the
number of Shares or other securities or property of the Company, or of the
successor corporation resulting from such merger or consolidation, to which a
Holder of the Shares issuable upon exercise of this Warrant would have been
entitled in such capital reorganization, merger, or consolidation or sale if
this Warrant had been exercised immediately before that capital reorganization,
merger, consolidation, or sale. In any such case, appropriate adjustment (as
determined in good faith by the Company's Board of Directors) shall be made in
the application of the provisions of this Warrant with respect to the rights and
interests of the Holder of this Warrant after the reorganization, merger,
consolidation, or sale such that the provisions of this Warrant (including
adjustment of the Exercise Price then in effect and number and kind of
securities purchasable upon exercise of this Warrant) shall be applicable after
that event in relation to any securities purchasable after that event upon
exercise of this Warrant.
6.4 Minimum Exercise Price Adjustment. No adjustment in the Exercise
---------------------------------
Price shall be required unless such adjustment would require in increase or
decrease of at least one-half of one percent (0.5%) or more of the Exercise
Price, provided, however, that any adjustments which by reason of this
Subsection 6.4 are not required to be made shall be carried forward and taken
into account in any subsequent adjustment. All calculations under
3
<PAGE>
this Section 6 shall be made to the nearest cent or to the nearest one-hundredth
of a Share as the case may be.
7. Notices to Holder. Upon any adjustment of the Exercise Price pursuant
-----------------
to Section 6, the Company within 20 days thereafter shall cause to be given to
the Holder pursuant to Section 11 hereof written notice of such adjustment,
which notice shall set forth in a brief statement of the facts requiring such
adjustment and setting forth the computation by which such adjustment was made.
Where appropriate, such notice may be given in advance and included as a part of
the notice required to be mailed under the other provisions of this Section 7.
In the event of any of the following:
7.1 the Company shall authorize the issuance of its holders of shares
of Common Stock of rights or warrants to subscribe for or purchase shares of
Common Stock or of any other subscription rights or warrants; or
7.2 the Company shall authorize the distribution to all holders of
shares of Common Stock of evidences of its indebtedness or assets (other than
cash dividends not exceeding [$_______] per share of Common Stock payable during
any three-month period or distributions or dividends payable in shares of Common
Stock); or
7.3 any consolidation or merger to which the Company is a party and
for which approval of any shareholder of the Company is required, or of the
conveyance or transfer of the properties and assets of the Company as, or
substantially as, an entirety, or of any reclassification or change of
outstanding shares of Common Stock issuable upon exercise of this Warrant (other
than a change in par value, or from par value to no par value, or from no par
value to par value, or as a result of a subdivision or combination); or
7.4 the voluntary or involuntary dissolution, liquidation or winding
up of the Company; or
7.5 the Company proposes to take any action (other than actions of
the character described in Subsection 6.1 except as required under Subsection
7.3 above) which would require an adjustment of the Exercise Price pursuant to
Section 6;
then the Company shall cause to be given to the Holder, at least 20 days (or ten
days in any case specified in Subsections 7.1 and 7.2 above) prior to the
applicable record date hereinafter specified, a written notice stating (I) the
date as of which the holders of record of shares of Common Stock to be entitled
to receive any such rights, warrants, or distribution are to be determined, or
(ii) the date on which any such consolidation, merger, conveyance, transfer,
dissolution, liquidation, or winding up is expected to become effective, and the
date as of which it is that holders of record of shares of Common Stock shall be
entitled to exchange their shares of Common Stock for securities or other
property, if any, deliverable upon such reclassification, consolidation, merger,
conveyance, transfer, dissolution, liquidation, or
4
<PAGE>
winding up. The failure to give the notice required by this Section 7 or any
defect therein shall not affect the legality or validity of any distribution,
right, warrant, consolidation, merger, conveyance, merger, dissolution,
liquidation, or winding up, or the vote upon any such action.
8. Transfers. The Holder acknowledges and agrees that this Warrant and
---------
the Common Stock underlying this Warrant may not be sold, pledged, assigned,
transferred or otherwise hypothecated without registration under the Act except
in certain limited circumstances where an exemption from registration exists,
supported by an opinion of counsel satisfactory to the Company and its counsel
that registration is not required thereunder. The Warrants are non-transferable
(whether by sale, transfer, assignment or hypothecation) except for
(I) transfers to officers of Brookstreet Securities Corporation who are also
shareholders of Brookstreet Securities Corporation, (ii) transfers occurring by
operation of law.
9. Fractional Shares. No fractional shares of Common Stock shall be
-----------------
issued in connection with any exercise of this Warrant. In lieu of the issuance
of such fractional share, the Company shall make a cash payment equal to the
then fair market value of such fractional share as determined in good faith by
the Company's Board of Directors.
10. Successors and Assign. The terms and provisions of this Warrant shall
---------------------
inure to the benefit of, and be binding upon the Company and the Holder hereof
and their respective successors and assigns.
11. Notices. All notices, requests, demands and other communications
-------
(collectively, "Notices") under this Warrant shall be in writing and shall be
deemed to have been duly given on the date of service if served personally on
the party to whom Notice is to be given, or on the third business day after the
date of mailing if mailed to the party to whom Notice is to be given, by first
class mail, registered to the Holder, at his address as shown in the Company
records; and if to the Company, at its principal office. Any party may change
its address for purposes of this Section by giving the other party written
Notice of the new address in the manner set forth above.
12. Registration Rights. The Holder shall have registration rights with
-------------------
respect to the Shares as set forth in Appendix I attached hereto.
13. Governing Law. This Warrant shall be governed by and construed in
-------------
accordance with the laws of the State of Arizona without regard to principles of
conflicts of laws.
14. Loss or Mutilation of Warrant. Upon receipt of evidence reasonably
-----------------------------
satisfactory to the Company regarding the loss, theft, mutilation or destruction
of this Warrant and upon delivery of appropriate indemnification with respect
thereto or upon surrender or
5
<PAGE>
cancellation of the mutilated Warrant, the Company will make and deliver to the
Holder a new Warrant of like tenor.
ATLANTA TECHNOLOGY GROUP, INC.
By:
--------------------------
Attest:
- --------------------------
, Secretary
6
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, ________________ hereby sell(s), assign(s), and transfer(s)
unto ____________, of _____________, the right to purchase Shares evidenced by
the within Warrant, and does hereby irrevocable constitute and appoint ________
to transfer such right on the books on the Company, with full power of
substitution.
DATED: ___________, 199__
__________________________
SIGNATURE
________________________________________________________________________________
NOTICE:
This Warrant or the Common Stock underlying the Warrant, have not been
registered under the Securities Act of 1933 (the "Act") or any states'
securities laws (the "laws") and may not be sold, pledged, transferred or
otherwise disposed of in the absence of an effective registration statement
covering these securities under the Act or laws, or an available exemption
therefrom, accompanied by an opinion of counsel satisfactory to the Company and
its counsel that registration is not required thereunder.
The signature to this Assignment must correspond with the name as written upon
the fact of the within Warrant, in every particular, without alteration or
enlargement, or any change whatsoever.
7
<PAGE>
EXHIBIT A
EXERCISE NOTICE
Atlanta Technology Group, Inc.
1117 Perimeter Center West, Suite N-316
Atlanta, Georgia 30338
Gentlemen:
(the "Undersigned") hereby elects to purchase,
---------------------------
pursuant to the provisions of the Atlanta Technology Group, Inc. Underwriter's
Warrant dated , held by the undersigned, shares of the
-------------------- -----
Common Stock of Atlanta Technology Group, Inc.
As an inducement to your acceptance hereunder, the undersigned certifies
that the Common Stock is being purchased for the undersigned's own account, for
investment purposed, and not with a view toward a public distribution in
violation of the registration requirements of the Securities Act of 1933, as
amended.
Payment of the purchase price of $ per share of Common Stock is
------------
being purchased for the undersigned's own account, for investment purposed, and
not with a view toward a public distribution in violation of the registration
requirements of the Securities Act of 1933, as amended.
Payment of the purchase price of $ per share of Common Stock in
------------
U.S. funds required under such Warrant accompanies this subscription.
DATED: , 199
-------------- --
Company:
-------------------
Signature:
-------------------
Address:
-------------------
-------------------
8
<PAGE>
Appendix I
Registration Rights
-------------------
This Appendix I ("Appendix") is attached to an Underwriter's Warrant
("Warrant") of Atlanta Technology Group, Inc., a Delaware corporation (the
"Company"), issued in favor of Brookstreet Securities Corporation, a California
Corporation (the "Holder").
1. Definitions. For purposes of this Appendix:
-----------
1.1 The term "register," "registered," and registration" refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act of 1933, as amended (the
"1933 Act"), and the declaration or ordering of effectiveness of such
registration statement or document by the Securities and Exchange Commission
("SEC");
1.2 The term "Registerable Securities" means any common stock of the
Company ("Common Stock") issued upon an exercise of the Warrant;
1.3 The number of shares of "Registerable Securities then
outstanding" shall be determined by the number of shares of Common Stock
outstanding which are, and the number of shares of Common Stock issuable
pursuant to any unexercised portion of the Warrant which are, Registerable
Securities;
1.4 The term "Holder" means any person owning or having the right to
Registerable Securities or any assignee thereof in accordance with the
provisions of Section 11 of this Appendix; and
1.5 The term "Applicable Form" means such registration form under the
1933 Act as in effect on the date hereof or any registration form under the Act
subsequently adopted by the Securities and Exchange Commission ("SEC") that may
be used by the Company for the registration of its securities.
1.6 The term "Offering" means any offering of Common Stock of the
Company pursuant to a registration statement filed with the SEC under the 1933
Act.
1.7 All other capitalized terms contained herein shall have the
meaning ascribed to them in the attached Warrant.
2. Registration of Registerable Securities.
---------------------------------------
2.1 If the Company intends to conduct an Offering on or before the
seventh anniversary of the date of the Warrant (including for the purpose of a
registration effected by the Company for shareholders other than the Holder) of
any of its Common Stock or other securities under the 1933 Act in connection
with the public offering of such securities solely
9
<PAGE>
for cash (other than a registration relating either to (I) the sale of
securities to participants in a Company stock option, stock purchase or similar
plan, or (ii) a registration on any form which does not include substantially
the same information as would be required to be included in a registration
statement covering the sale of the Registerable Securities), the Company shall,
at such time, promptly give the Holder written notice of such proposed
registration pursuant to Section 11 of the Warrant. Upon the written request of
Brook street Securities Corporation only, regardless of whether it has assigned
any portion of the Warrants, given to the Company within 20 days after deemed
receipt of such notice from the Company, the Company shall, subject to the
provisions of Section 6 of this Appendix, cause to be registered under the 1933
Act not less than all of the Registerable Securities. The Company shall be
entitled to postpone the inclusion of the Shares in the Registration Statement
for a reasonable time if the underwriter in the Offering reasonably determines
that registration of the Shares would render the Offering impracticable or
infeasible.
2.2 If (a) the Company has not conducted an Offering on or before the
seventh anniversary of the Warrant or (b) the Company has conducted an Offering
on or before the seventh anniversary of the Warrant but, notwithstanding the
request of the Holder in accordance with Section 2.1, the Registerable Shares
were not registered, then for a period a one (1) year from such date, the Holder
may, by written notice to the Company pursuant to Section 11 of the Warrant,
demand that the Company file a registration statement covering not less than all
of the Holder's Registerable Securities on such form as shall be appropriate
under the 1933 Act for the sale of such Registerable Securities. The Company
shall file the applicable registration statement within 60 days of receipt of
such notice (or such longer period as may be agreed to by Holder).
2.3 The registration rights granted pursuant to this Section 2 may
not be exercised more than once (provided, however, than any request made
pursuant in this Section 2 which does not result in the declaration of
effectiveness of a registration statement covering the Registerable Securities
owned by the Holder, whether as a result of the withdrawal of the registration
statement by the Company, through other action or inaction of the Company, a
postponement by the underwriters in the Offering or otherwise, shall not
constitute the exercise of Holder's rights pursuant to this Section 2 and such
rights shall remain intact pursuant to Section 2.1 or Section 2.2, as
applicable.)
3. Obligations of the Company. Whenever required under this Appendix to
--------------------------
effect the registration of any Registerable Securities, the Company shall, as
expeditiously as reasonably possible:
3.1 Prepare and file with the SEC a registration statement with
respect to such Registerable Securities and use its best efforts to cause such
registration statement to become effective, and, upon the request of the Holder,
keep such registration statement effective for up to 120 days;
10
<PAGE>
3.2 Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
1933 Act with respect to the disposition of all securities covered by such
registration statement;
3.3 Furnish to the Holder such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
1933 Act, and such other documents as the Holder may reasonably request in order
to facilitate the disposition of Registerable Securities owned by the Holder;
3.4 Use its best efforts to register and qualify the securities
covered by such registration statement (i) under such other securities or Blue
Sky laws of such jurisdictions as shall be reasonably requested by the Holder
and (ii) with (or obtain the approval of) such other governmental agencies or
authorities as may be necessary by virtue of the nature and business of the
Company to enable the Holder or any underwriter to consummate the disposition of
Registerable Securities so registered; provided that the Company shall not be
required in connection with or as a condition thereto to qualify to do business
or to file a general consent to service or process in any such state or
jurisdictions;
3.5 In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter of such offering, including, but not limited
to, making such representations, and warranties to such underwriter and using
the best efforts to cause Company counsel to render such opinions to such
underwriter as such under writer may reasonably request;
3.6 Notify the Holder of Registerable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the 1933 Act of the happening of any event as a
result of which the prospectus included in such registration statement, as then
in effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing, and
promptly prepare and file with the SEC an appropriate amendment or supplement in
form satisfactory to the Holder;
3.7 Furnish, at the request of the Holder, if such Holder has
requested registration of Registerable Securities pursuant to this Appendix, on
the date that such Registerable Securities pursuant to this Appendix, on the
date that such Registerable Securities are delivered to the underwriters for
sale in connection with a registration pursuant to this Appendix if such
securities are being sold through underwriters, or, if such securities are not
being sold through underwriters, on the date that the registration statement
with respect to such securities becomes effective, (i) an opinion, dated such
date, of counsel representing the Company for the purpose of such registration,
in form and substance as is customarily given to underwriters in an underwritten
public offering, addressed to the underwriters, if any, and to the Holder
requesting registration of Registerable Securities, and (ii) a letter dated such
date,
11
<PAGE>
from the independent certified public accountants of the Company, in form and
substance as is customarily given by independent certified public accountants to
underwriters in an underwritten public offering, addressed to the underwriters,
if any, and to the Holder requesting registration of Registerable Securities;
3.8 Promptly notify the Holder (i) when the registration statement
or any amendment to the registration statement or the prospectus used in
connection therewith may be filed, and with respect to the registration
statement and any post-effective amendment thereto, when the same has become
effective, (ii) of any request by the SEC for amendments or supplements to the
registration statement or prospectus or for additional information, (iii) of the
issuance by the SEC of any stop order suspending the effectiveness of the
registration statement or the prospectus or the initiation of any proceedings
for that purpose, and (iv) of the receipt by the Company of any notification
with respect to the suspension of the qualification of the Registerable
Securities for sale in any jurisdiction or the initiation or threatening of any
proceedings for that purpose;
3.9 Make every reasonable effort to obtain the withdrawal of any
order suspending the effectiveness of the registration statement at the earliest
possible moment;
3.10 Furnish to counsel for the Holders of Registerable Securities
without charge, at least one copy of the registration statement and any post-
effective amendment thereto, including financial statements and schedules and
all documents incorporated therein by reference; and
3.11 Make generally available to Holder as soon as practicable, but
not later than the first day of the eighteenth full calendar month following the
effective date of the registration statement, an earnings statement (which need
not be certified by independent public or independent certified public
accountants unless required by the 1933 Act or the rules and regulations
promulgated thereunder, but which shall satisfy the provisions of Section 11(a)
of the 1933 Act) covering a period of at least twelve months beginning after the
effective date of the registration statement.
4. Furnish Information. It shall be a condition precedent to the
-------------------
obligations of the Company to take any action pursuant to this Appendix with
respect to the Registerable Securities of the Holder that such Holder shall
furnish to the Company such information regarding itself, and the Registerable
Securities held by it, and the intended method of disposition of such securities
as shall be required to effect the registration of Holder's Registerable
Securities.
5. Expenses of Registration. The Company shall bear and pay expenses
------------------------
incurred in connection with any registration, filing or qualification of
Registerable Securities with respect to registration pursuant to Section 2 or
Section 10 of this Appendix for the Holder (which right may be assigned as
provided in Section 11 of this Appendix), including (without limitation) all
registration, filing, and qualification fees (including those fees with
respect to filings required to be made with the NASD and fees and expenses of
compliance with state
<PAGE>
securities or blue sky laws), printers and accounting fees relating or
apportionable thereto, but excluding the fees and disbursements of counsel for
the Holder and underwriting discounts and commissions relating to Registerable
Securities.
6. Underwriting Requirements. In connection with any Offering pursuant to
-------------------------
Section 2.1 hereof, involving an underwriting of shares being issued by the
Company, the Company shall not be required under Section 2 of this Appendix to
include any of the Holders' Registerable Securities in such underwriting unless
the Holder accepts the terms of the underwriting as agreed upon between the
Company and the underwriters selected by it, and then only in such quantity as
will not, in the opinion of the underwriters, jeopardize the success of the
offering by the Company. If the total amount of securities, including
Registerable Securities, requested by Holders to be included in such offering
exceeds the amount of securities sold other than by the Company that the
underwriters reasonably believe compatible with the success of the offering,
then the Company shall be required to include the offering only that number of
such securities, including Registerable Securities, which the underwriters
believe will not jeopardize the success of the offering (the securities so
included to be apportioned pro rata among the selling Holders according to the
total amount of securities entitled to be included therein owned by each Holder
or in such other proportions as shall mutually be agreed to by such selling
Holders). If all of the Holders' Registerable Securities have not been
registered for sale due to the provisions of this Section 6, the provisions of
Section 2.3 shall control.
7. Agreements by Holder. Whenever required under this Appendix to effect
--------------------
the registration of any Registerable Securities, the Holder shall, as
expeditiously as reasonably possible:
7.1 Furnish the Company all material information requested by the
Company concerning Holder and Holder's holdings of securities of the Company and
the proposed method of sale or other disposition of the Registerable Securities
and such other information and undertakings as shall be reasonably required in
connection with the preparation and filing of any such registration statement
covering all or part of the Registerable Securities and in order to ensure full
compliance with the 1933 Act;
7.2 Cooperate in good faith with the Company and its underwriters, if
any, in connection with such registration, including performing its obligations
under any underwriting agreement and placing the Registerable Securities to be
included in such registrations statement in escrow or custody to facilitate the
sale and distribution thereof.
8. Indemnification. In the event any Registerable Securities are included
---------------
in a registration statement under this Appendix:
8.1 To the extent permitted by law, the Company will indemnify and
hold harmless the Holder, any underwriter (as defined in the 1933 Act) for such
Holder and each person, if any, who controls such Holder or underwriter within
the meaning of the 1933 Act or the Securities Exchange Act of 1934, as amended
(the "1934 Act"), against any losses, claims,
<PAGE>
damages, or liabilities (joint or several) to which they may become subject
under the 1933 Act, the 1934 Act or other federal or state laws, insofar as such
losses, claims, damages, or liabilities (or actions in respect thereof) arise
out of or are based upon any of the following statements, omissions or
violations (collectively a "Violation"); (i) any untrue statement of a material
fact by the Company or alleged untrue statement of a material fact contained in
such registration statement, including prospectus or final prospectus contained
therein or any amendments or supplements thereto, (ii) the omission or alleged
omission by the Company to state therein a material fact required to be stated
therein, or necessary to make the statements therein not misleading, or
(iii) any violation or alleged violation by the Company of the 1933 Act, the
1934 Act, any state securities law or any rule or regulation promulgated under
the 1933 Act, the 1934 Act or any state securities law. The Company will pay as
incurred to such Holder, underwriter or controlling person, any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided, however,
that the indemnity agreement contained in this Section 8.1 shall not apply to
amounts paid in settlement of any loss, claim, damage, liability, or action if
such settlement is effected without the consent of the Company (which consent
shall not be unreasonably withheld) nor shall the Company be liable in any such
case for any such loss, claim, damage, liability, or action to the extent that
it arises out of or is based upon a Violation which occurs in reliance upon and
in conformity with written information furnished expressly for use in connection
with such registration by the Holder, underwriter or controlling person.
8.2 To the extent permitted by law, the Holder will indemnify and
hold harmless the Company, each of its directors, each officer who has signed
the registration statement, each person, if any, who controls the Company within
the meaning of the 1933 Act, any underwriter, any other holder selling
securities in such registration statement and any controlling person of any such
underwriter or other holder, against any losses, claims, damages, or liabilities
(joint or several) to which any of the foregoing persons may become subject
under the 1933 Act, the 1934 Act or other federal or state law, insofar as such
losses, claims, damages, or liabilities (or actions in respect thereto) arise
out of or are base upon any Violation, in each case to the extent (and only to
the extent) that such Violation in reliance upon and in conformity with
information furnished by the Holder expressly for use in connection with such
registration; and the Holder will pay, as incurred, any legal or other expenses
reasonably incurred by any person intended to be indemnified pursuant to this
Section 8.2 in connection with investigating or defending any such loss, claim,
damage, liability, or action; provide, however, that the indemnity agreement
contained in this Section 8.2 shall not apply to amounts paid in settlement of
any such loss, claim, damage, liability or action if such settlement is effected
without the consent of the Holder (which consent shall not be unreasonably
withheld); provided, that in no event shall any indemnity under this Section 8.2
exceed the gross proceeds from the offering received by such Holder.
8.3 Promptly after receipt by an indemnified party under this Section
8 of notice of the commencement of any action (including any governmental
action), such indemnified party will if a claim in respect thereof is to be made
against any indemnifying party a written notice of the commencement thereof and
the indemnifying party shall have the
14
<PAGE>
right to participate in and, to the extent the indemnifying party so desires,
jointly with any other indemnifying party similarly noticed, to assume the
defense thereof with counsel mutually satisfactory to the parties provided that
an indemnified party shall have the right to retain its own counsel, with the
fees and expenses to be paid by the indemnifying party, if representation of
such indemnified party by the counsel retained by the indemnifying party would
be inappropriate due to actual or potential differing interests between such
indemnified party and any other party represented by such counsel in such
proceeding. The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action, if prejudicial
to its ability to defend such action, shall relieve such indemnifying party of
any liability to the indemnified party under this Section 8, but the omission so
to deliver written notice to the indemnifying party will not relieve it of any
liability that it may have to any indemnified party other than under this
Section 8.
8.4 If the indemnification provided for in this Section 8 is
unavailable to an indemnified party in respect of any losses, claims, damages,
liability or expenses referred to herein, then an indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages,
liabilities or expenses (i) in such proration as is appropriate to reflect the
relative benefits received by the Company, the Holder and any underwriter from
the offering at issue, or (ii) if the allocation by clause (i) above is not
permitted by law, in such proration as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Company, the Holder and any underwriter in connection with the statements or
omissions that resulted in such losses, claims, damages, liabilities or
expenses, as well as an other relevant equitable considerations. The relative
fault of the Company, the Holder and any underwriter shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company, or with respect to the Holder or
any underwriter, information supplied by such person for inclusion in documents
relating to the offering and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
Notwithstanding the provisions of this Section 8.4, the Holder shall not be
obligated to contribute hereunder any amount which in the aggregate exceeds the
amount for which it would have been liable pursuant to Section 8.2 in respect of
such loss, claim, damage, liability or action had indemnification been available
under Section 8.2. The Company and the Holder agree that it would not be just
and equitable if contribution pursuant to this Section 8.4 were determined by as
a pro rata allocation or by any other method of allocation that does not take
account of the equitable considerations referred to above in this Section 8.4.
The amount paid or payable by any party as a result of the losses, claims,
damages, liabilities and expenses referred to in this Section 8.4 shall be
deemed to include, subject to the limitations set forth above, any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating any claim or defending any such action, suit or proceeding. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the 1933 Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
15
<PAGE>
8.5 Any losses, claims, damages liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 8 shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 8 shall remain
operative and in full force and effect regardless of (i) any investigation made
by or on behalf of any entity, (ii) acceptance of any securities and payment
therefor, and (iii) any termination of the provisions of this Appendix.
9.1 make and keep public information available, as those terms
are understood and defined in Rule 144, at all times after 90 days following the
closing of the Company of an Offering:
9.2 take such action, including the voluntary registration of
its Common Stock under Section 12 of the 1934 Act, as is necessary to enable the
Holder to utilize any applicable Form for the sale of Registerable Securities,
such action to be taken as soon as practicable after the end of the fiscal year
in which the Company closes an Offering:
9.3 file with the SEC in as a timely manner all reports and
other documents required of the Company under the 1933 Act and the 1934 Act; and
9.4 furnish to the Holder, so long as the Holder owns any
Registerable Securities, forthwith upon request (I) a written statement by the
Company that it has complied with the reporting requirements of Rule 144 (at any
time after 90 days following the closing by the Company of an Offering), the
1933 Act and the 1934 Act (at anytime after it has become subject to such
reporting requirements), or that it qualifies as a registrant whose securities
may be resold pursuant to the Applicable Form (at any time after it so
qualifies), (ii) a copy of the most recent annual or quarterly report of the
Company filed with the SEC and such other reports and comments so filed by the
Company, and (iii) such other information as may be reasonably requested in
availing the Holder of any rule or regulation of the SEC which permits the
selling of any securities without registration or pursuant to any Applicable
Form.
10. Assignment of Registration Rights. The rights to cause the Company to
---------------------------------
register Registerable Securities pursuant to this Appendix may be assigned by
the Holder to a transferee or assignee of at least twenty-five percent (25%) of
the shares such securities (appropriately adjusted to reflect any stock
dividend, distribution, stock split or combination, reclassification,
recapitalization or other similar event affecting the number of shares of Common
Stock after ___________________); provided the Company is, within a reasonable
time after such transfer, furnished with written notice of the name and address
of such transferee or assignee and the securities with respect to which such
registration rights are being assigned; provided, further, that such assignment
shall be effective only if immediately following such transfer the further
disposition of such securities by the transferee or assignee is restricted under
the 1933 Act and the transfer otherwise complies with all applicable provisions
under applicable federal and state securities laws.
16
<PAGE>
11. Amendment of Registration Rights. Any provision of this Appendix may
--------------------------------
be amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Holders of a majority of the Registerable
Securities then outstanding.
12. Termination of Registration Rights. No person shall be entitled to
----------------------------------
exercise any right relating to registration provided for in this Appendix after
the seventh anniversary of the date of the Warrant.
17
<PAGE>
EXHIBIT 1.2
1,400,000 SHARES OF
THE COMMON STOCK OF
ATLANTA TECHNOLOGY GROUP, INC.
FOR $3.00 PER SHARE
AGREEMENT AMONG UNDERWRITERS
January __, 1996
Brookstreet Securities Corporation
2361 Campus Drive, Suite 210
Irvine, California 92715
Ladies and Gentlemen:
1. Underwriting Agreement. We understand, Atlanta Technology Group, Inc.
(the "Company"), proposes to enter into an underwriting agreement in
substantially the form attached hereto as Exhibit A (the "Underwriting
Agreement") with Brookstreet Securities Corporation (the "Lead Underwriter")
providing for the purchase by the Lead Underwriter and certain other
underwriters (collectively, the "Underwriters") of 1,400,000 shares of the
Company's Common Stock at $3.00 per share (the "Securities") on a firm
commitment basis, and the option to acquire an additional 210,000 shares of
Common Stock pursuant to an option (the "Over-Allotment Option") all upon the
terms stated in the Underwriting Agreement. We agree in accordance with the
terms thereof to purchase from the Company the amount of Securities set forth
opposite our name in Exhibit B hereto, subject to increase as provided in the
Underwriting Agreement. The amount of Securities to be purchased by us pursuant
to the Underwriting Agreement is herein referred to as "our Securities", which
term shall include Securities sold pursuant to the Over-Allotment Option, in the
event it is exercised.
2. Registration Statement and Prospectus. The Securities are described in a
registration statement relating thereto filed with the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended (the
"Securities Act"). One or more amendments to such registration statement have
been or will be filed in which, with our consent hereby confirmed, we have been
named as one of the Underwriters of the Securities. A copy of the registration
statement as filed and of each amendment as filed (excluding exhibits) has
heretofore been delivered to us. The registration statement and the related
prospectus may be further amended or supplemented, but no such amendment or
supplement shall release or affect our obligations hereunder or under the
Underwriting Agreement. The registration statement as
<PAGE>
amended at the time when it becomes effective and the final prospectus
relating to the Securities as filed by the Company with the Commission pursuant
to Rule 424(b) under the Securities Act are hereinafter respectively referred to
as the "Registration Statement" and the "Prospectus".
We hereby agree to deliver all preliminary and final prospectuses required
for compliance with the provisions of Rule 15c2-8 under the Securities Exchange
Act of 1934, as amended (the "1934 Act"). The Company has heretofore delivered
to us such preliminary prospectuses as have been requested by us, receipt of
which is hereby acknowledged.
We represent to you that we have taken all action on our part required to
have been taken to satisfy the applicable rules and regulations under the
Securities Act, including the distribution of copies of the preliminary
prospectus dated ___________, relating to the Securities (or, if you have so
requested, copies of any amended preliminary prospectus) to all persons to whom
we expect to mail confirmations of sale. We understand that we are not
authorized to give any information or to make any representations in connection
with the sale of the Securities other than as contained the Prospectus.
3. Authority of the Representative. We authorize you as our representative
(the "Representative"): (a) to complete, execute and deliver the Underwriting
Agreement in substantially the form attached hereto as Exhibit A, with such
changes, if any, as in your judgment are appropriate, provided that the amount
of Securities set forth opposite our name in Schedule I thereto shall not be
increased without our consent (our consent being hereby specifically granted to
an increase in such amount of Securities equal to our pro rata portion of the
Over-Allotment Option, which Securities you are hereby authorized to purchase on
our behalf if such purchase appears appropriate to you), except as provided
herein and in the Underwriting Agreement; (b) to waive any conditions to the
obligations of the Underwriter under the Underwriting Agreement; and (c) to take
such action as in your discretion may be necessary or advisable to carry out the
Underwriting Agreement, this Agreement and the transactions for the accounts of
the several Underwriters contemplated thereby and hereby, including the date the
Securities are to be released for sale to the public. We also authorize you to
determine all matters relating to the public advertisement of the Securities,
including the determination of the form and manner of any public advertisement,
and we agree that we will not commence any public advertising until you shall
have done so and that any such advertisement we may then make will be on our own
responsibility and at our own expense.
4. Public Offering. You agree to sell the amount of Securities set forth
adjacent to the name of each of the Underwriters in Exhibit A hereto, at the
price set forth in Exhibit A hereto. It is agreed that such pricing shall
include all Securities sold pursuant to the $4,200,000 firm commitment, and the
$630,000 Over-Allotment Option referenced in the Underwriting Agreement.
After notice from you that the Securities are released for sale to the
public, we will offer to the public, in conformity with the terms of the
offering set forth in the Prospectus, such of our Securities as you advise us
are not reserved. We authorize you after the Securities are released
<PAGE>
for sale to the public, in your discretion, to change at any time and from time
to time the public offering price of the Securities.
5. Purchase Price to Underwriters, Payment and Delivery. It is understood
that the Securities shall be sold at a price equal to the initial offering
price, less a total concession to you not in excess of $0.30 per share with
respect to the total Securities so sold of which $0.15 per share will be the
selling concession to the Underwriters. As compensation to you for your
services to each of the Underwriters in connection herewith, each Underwriter
agrees to pay to you the management fee set forth in Section 8 hereof.
At your request, we will deliver to you the funds needed to make payment
pursuant to the Underwriting Agreement for the Securities being purchased by us
in such manner, at such time and place, and in such form as you may advise, and
we authorize you to deliver such funds, or otherwise make payment for such
Securities, pursuant to the Underwriting Agreement. It is understood that the
current closing date for sales of the Securities shall be as follows:
(a) The $4,200,000 firm commitment component of the Securities shall
be closed as soon as practicable after the effective date of the Registration
Statement;
(b) The $630,000 Over-allotment Option shall be closed in multiple
closings on the first and fifteenth of each month after the effective date of
the Registration Statement, until , at which time the offering shall be
terminated, unless otherwise agreed among the Underwriters.
Unless we notify you at least three full business days prior to the initial
closing date and the closing date with respect to the exercise of the
Over-Allotment Option, to make other arrangements, you may, in your discretion,
advise the Company to prepare certificates for our Securities in our name and,
so far as possible, in denominations to be determined by you. If you have not
received our funds as required, you may in your discretion make such payment on
our behalf, in which event we will reimburse you promptly. Any such payment by
you shall not relieve us from any of our obligations hereunder or under the
Underwriting Agreement.
We authorize you for our account to accept delivery of our Securities from
the Company and to hold such of our Securities as you have reserved for sale to
Dealers and others and to deliver such Securities against such sales. You will
deliver to us our unreserved Securities as promptly as practicable.
As promptly as practicable after you receive payment for reserved
Securities sold for our account, you will remit to us the purchase price paid by
us for such Securities and credit or debit our account with the difference
between the sale price and such purchase price.
6. Authority to Borrow. In connection with the transactions contemplated
in the Underwriting Agreement or this Agreement, we authorize you, in your
discretion, to advance your own funds for our account, charging current interest
rates, and to arrange loans for our account, and in connection therewith to
execute and deliver any notes or other instruments and
3
<PAGE>
hold or pledge as security any of the Shares, Warrants or Securities purchased
for our account. Any lender may rely upon your instructions in all matters
relating to such loan.
Any of our Securities purchased for our account and held by you may, from
time to time, be delivered to us for carrying purchases, and any such securities
will be redelivered to you upon demand.
7. Stabilization and Other Matters. We authorize you, in your
discretion, to make purchases and sales of the Securities and the Shares in the
open market or otherwise, for long or short account, on such terms and at such
prices as you may determine, and to over-allot in arranging for sales of the
Securities to retail purchasers and Dealers. We authorize you, during the term
of this Agreement or for such longer period as you may determine, to cover any
short position incurred pursuant to this section by purchasing Securities or
shares of the Common Stock of the Company on such terms and in such manner as
you deem advisable. All purchases and sales under this section shall be made for
the accounts of the several Underwriters as nearly as practicable in proportion
to their respective underwriter obligations. On demand by you, we will take up
and pay for at cost any Securities purchased for our account, deliver any
Securities, or shares of common stock so sold or over-allotted for our account,
and we will pay you on demand by you the amount of any losses or expenses
incurred for our account pursuant to this section. In the event of default by
one or more Underwriters in respect to their obligations under this section,
each non-defaulting Underwriter shall assume its proportionate shares of the
obligations of such defaulting Underwriter without relieving such defaulting
Underwriter of its liability hereunder. The existence of this provision is no
assurance that the price of the Securities or the Shares will be stabilized or
that stabilizing, if commenced, may not be discontinued at any time.
We agree to advise you, from time to time upon your request, during the
term of this Agreement, of the number of Shares retained by us remaining
unsold, and will, upon your request, sell to you for the accounts of one or more
of the several Underwriters, the number of such Securities as you may designate
at a price, not less than the net price to Dealers no more than the public
offering price as you may determine.
If any Securities sold by us (otherwise than through you), shall be
purchased or contracted for purchase by you during the term of this Agreement,
you are authorized in your discretion to charge our account with an amount equal
to the Dealer's concession with respect to such Securities, or to require us to
repurchase such Securities at a price equal to the total cost of your purchase,
including commission and transfer taxes on the redelivery.
In the event you effect any stabilizing purchase pursuant to this section,
you will notify us promptly of the date and time when the first stabilizing
purchase is effected and the date and time when stabilizing is terminated. We
agree that if stabilizing is effected we will, not later than five business days
following the day on which stabilizing is terminated, file in duplicate with you
all documentation required by the Commission pursuant to the 1934 Act. We
authorize you to file with the Commission any such documentation (not as
manager) and any notices and reports which may be required as a result as a
result of any transactions made by you for the accounts of the Underwriters
pursuant to this section.
4
<PAGE>
We represent that we have not effected any transaction in violation of the
provisions of Rule 10b-6 under the 1934 Act applicable to this offering. We and
you agree, during the term of this Agreement, not to bid for, purchase, attempt
to induce others to purchase, or sell, directly or indirectly, any Securities
or Shares of the Company: (a) except offers to sell or the solicitation of
offers to buy Securities or Shares to be acquired by an Underwriter pursuant to
the Underwriting Agreement; (b) except as brokers pursuant to unsolicited
orders; (c) except that with your consent any of the Underwriters may make
purchases and sales of Securities or Shares from or to any of the other
Underwriters; and (d) except as otherwise provided in this Agreement.
8. Settlement. It is agreed that you shall retain from your account an
amount equal to $______ per $3.00 share purchased by us which amount represents
your management fee in connection with the services provided to each Underwriter
pursuant to the transaction contemplated hereby as well as any and all expenses
incurred by you in performing hereunder, including, but not limited to: (a) all
transfer taxes on Securities purchased by us pursuant to the Underwriting
Agreement and sold by you for our account; (b) any and all expenses incurred by
you as our Representative, in connection with the purchase, carrying, offering,
sale and distribution of the Securities for our account; and (c) all expenses
incurred by you under this Agreement and in connection with the purchase,
carrying, offering, sale and distribution of the Securities. Your determination
of the amount and allocation of such expenses shall be conclusive. In the event
of the default of any Underwriter in carrying out its obligations hereunder, as
well as any additional losses or expenses arising from such default, you may
proportionately charge against the other Underwriters not so defaulting,
without, however, relieving such defaulting Underwriter from its liability
therefor.
As soon as practicable after termination of this Agreement, the accounts
established hereunder will be settled, but you may reserve for distribution such
amount as you may deem necessary to cover possible additional expenses. You may
at any time make partial distributions of credit balances or call for payment
of debit balances. Any of our funds in your hands may be held with your general
funds without accountability for interest. Notwithstanding the termination of
this Agreement or any settlement, we will pay: (a) our proportionate share
(based on our underwriting obligation) of all expenses and liabilities which
may be incurred by or for the accounts of the Underwriters, including any
liability based on the claim that the Underwriters constitute a partnership or
an association, unincorporated business or other separate entity, and of any
expenses incurred by you or any other Underwriter with your approval in
contesting any such claim or liability; and (b) any transfer taxes paid after
such settlement on account of any sale or transfer for our account.
9. Termination. This Agreement shall terminate 30 business days after
the earlier to occur of either: (a) a written notice sent by you of your
intention to terminate the offering of the Securities; (b) _____________, 1996;
or (c) the sale of $4,830,000 in Securities pursuant to the Prospectus. You may
in your discretion, on notice to us prior to such time, terminate the
effectiveness of this Agreement or any portion of it. You are authorized to
extend this Agreement for an addition period or periods not exceeding an
aggregate of 30 business days with the concurrence of a majority in interest of
the Underwriters (including you).
5
<PAGE>
10. Default by Underwriters. Default by one or more Underwriters in respect
of their obligations hereunder or under the Underwriting Agreement shall not
release us from any of our obligations or in any way affect the liability of any
defaulting Underwriter to the other Underwriters for damages resulting from such
default. In case of such default by one or more Underwriters, you are
authorized to arrange, but shall not be obligated to arrange, for the purchase
by other persons, who may include you or other Underwriters, of all or a portion
of any Securities not purchased. In the event any such arrangements are made, or
if non-defaulting Underwriters are required pursuant to the provisions of this
Agreement to purchase Securities not purchased by defaulting Underwriters, the
respective number of Securities to be purchased by the non-defaulting
Underwriters and by any such other persons shall be taken as the basis for the
underwriting obligations under this Agreement.
11. Position of the Representative. Except as in this Agreement otherwise
specifically provided, you shall have full authority to take such action as you
may deem advisable in respect of all matters pertaining to the Underwriting
Agreement and this Agreement and in connection with the purchase, carrying, sale
and distribution of the Securities (including authority to terminate the
Underwriting Agreement or to prevent it from becoming effective as provided
therein), but you shall not be under any liability to us except for your own
want of good faith, for obligations expressly assumed by you in this Agreement
and for any liabilities imposed upon you by the Securities Act or applicable
rules, laws or regulations. No obligations on your part shall be implied or
inferred herefrom. Authority with respect to matters to be determined by you, or
by you and the Company, pursuant to the Underwriting Agreement, shall survive
the termination of this Agreement.
Nothing herein contained shall constitute the several Underwriters a
partnership, association, unincorporated business or other separate entity, and
the rights and liabilities of the Underwriters (including you) are several and
not joint.
12. Acknowledgment of Registration Statement, Etc. We hereby confirm that
we have examined the Registration in Statement (including all amendments
thereto) relating to the Securities as heretofore filed with the Commission,
that we are familiar with the amendment or amendments to the Registration
Statement and the final form of the Prospectus proposed to be filed, that we are
willing to accept the responsibilities of an Underwriter thereunder, and that we
are willing to proceed as therein contemplated. We further reconfirm that the
statements made under the heading "Underwriting" in such proposed final form of
the Prospectus are correct and we authorize you so to advise the Company on our
behalf. We understand that the aforementioned documents are subject to further
change and that we will be supplied with copies of any amendment or amendments
to the Registration Statement and of any amended prospectus promptly, if and
when received by you, but the making of such changes and amendments will not
release us or affect our obligations hereunder or under the Underwriting
Agreement.
13. Indemnification. We agree to indemnify and hold harmless each other
Underwriter (including you) and each person, if any, who controls such
Underwriter within the meaning of Section 15 of the Securities Act or Section 20
of the 1934 Act to the extent,
<PAGE>
for any and all liabilities related to or arising from our performance
hereunder, including, but not limited to, liabilities arising under the federal
and state securities laws.
In the event that at any time any claim or claims shall be asserted against
you, as Representative, or otherwise involving the Underwriters generally,
relating to any preliminary prospectus relating to the Securities, the
Prospectus, the Registration Statement, the public offering of the Securities,
or any of the transactions contemplated by this Agreement, we authorize you to
make such investigation, to retain such counsel and to take such other action as
you may deem necessary or desirable under the circumstances, including
settlement of any such claim or claims if such course of action shall be
recommended by counsel retained by you. We agree to pay to you, on request, our
proportionate share (based on our underwriting obligations) of all expenses
incurred by you (including, but not limited to, the disbursements and fees of
counsel retained by you) in investigating and defending against such claim or
claims, and our proportionate share (based on our underwriting obligations) of
any liability incurred by you in respect of such claim or claims, whether such
liability shall be the result of a judgment against you, as a result of any such
settlement or otherwise.
14. Capital Requirements. We confirm that our ratio of aggregate
indebtedness to net capital is such that we may, in accordance with and pursuant
to Rule 15c3-1 promulgated by the Commission under the 1934 Act and in
accordance with the "net capital" rules of each governmental and self-regulatory
agency having jurisdiction over us for such purposes, agree to purchase the
number of Shares we may be obligated to purchase under any provision of this
Agreement.
15. NASD Membership. Each of us represents that it is a member in good
standing of the NASD or that we are exempt from the rules and regulations of
NASD and will, in making sales of Securities, comply with the Rules of Fair
Practice of NASD. In connection with our sale of the Securities, and without
limiting the foregoing, we specifically agree to comply with Section 24 Article
III of the NASD Rules of Fair Practice.
16. Underwriter's Questionnaire. Each Underwriter represents and warrants
that all of the information contained in the Underwriters' Questionnaire which
it has furnished in connection with the offering of the Securities, as updated
pursuant to the terms of the Questionnaire, is true and correct as of the date
hereof.
17. Notices, etc. Any notice from you to us shall be duly given if mailed
or telegraphed to us at our address as set forth in the Underwriters'
Questionnaire previously furnished by us to you. This Agreement shall be
governed by, and construed and enforced in accordances with the laws of the
State of California.
This instrument may be signed by the Underwriters in various counterparts
which together shall constitute one and the same agreement among all the
Underwriters and shall become effective at such time as all the Underwriters
shall have signed such counterparts and you shall have confirmed all such
counterparts. Such confirmations may be by facsimile signature.
7
<PAGE>
Please confirm that the foregoing correctly states the understanding
between us by signing and returning to us a counterpart hereof.
Very truly yours,
BROOKSTREET SECURITIES CORPORATION
By:
-------------------------------
Title:
----------------------------
Confirmed as of the date
first above written:
NAME OF UNDERWRITER:
---------------------------------------------------
By:
-----------------------------
Title:
-----------------------
8
<PAGE>
EXHIBIT 21
LIST OF SUBSIDIARIES
Atlanta Technology Group, Inc. owns 100% of the following corporations:
TIME VALUE CORPORATION
1117 Perimeter Center West
Suite N 316 Atlanta, GA 30338
Incorporated in June 1991 in the State of Georgia
Acquired in October 1993
SILVER RIDGE SOFTWARE INC.
400 Embassy Row
Suite 570
Atlanta, GA 30328
Incorporated in August 1993 in the State of Georgia
Acquired in May 1994
Silver Ridge Software Inc. owns 2/3 of a Georgia corporation named Avionics One,
Inc.
Avionics One is not currently operational.
Silver Ridge Software Inc. also owns 47.5% of a Georgia corporation Fiberoptic
Atlanta, Inc. which is also not presently operating.
NET CITY INC.
1117 Perimeter Center West
Suite N 316
Atlanta, GA 30338
<PAGE>
EXHIBIT 23(a)
CONSENT OF COUNSEL
We hereby consent to the use of our name under the heading "Legal Matters" in
the Prospectus forming a part of this Registration Statement.
/s/ Thelen, Marrin, Johnson & Bridges
THELEN, MARRIN, JOHNSON & BRIDGES
Los Angeles, California
January 11, 1996
<PAGE>
EXHIBIT 23(b)
ALLEN P. FIELDS
CERTIFIED PUBLIC ACCOUNTANT
1801 Piedmont Avenue, N.E.
Suite 103
Atlanta, Georgia 30324
I hereby consent to reference my firm under the caption "Experts" and
to the use of my report on the consolidated financial statements of Atlanta
Technology Group, Inc. and Subsidiaries dated July 5, 1995 in this Registration
Statement (Form SB-2) and related Prospectus of Atlanta Technology, Inc. for the
registration of 1,400,000 shares of its common stock for $3.00 per share.
/s/ Allen P. Fields
Allen P. Fields, C.P.A.
Atlanta, Georgia
January 9, 1996
<PAGE>
EXHIBIT 23(c)
ALLEN P. FIELDS
CERTIFIED PUBLIC ACCOUNTANT
1801 PIEDMONT AVENUE, N.E.
SUITE 103
ATLANTA, GEORGIA 30324
I hereby consent to reference my firm under the caption "Experts" and
to the use of my report on the consolidated financial statements of Atlanta
Technology Group, Inc. and Subsidiaries dated March 18, 1996 in this Amendment
No. 1 to the Registration Statement (Form SB-2) filed January 12, 1996 and
related Prospectus of Atlanta Technology, Inc. for the registration of 1,400,000
shares of its common stock for $3.00 per share.
/s/ Allen P. Fields
Allen P. Fields, C.P.A.
Atlanta, Georgia
March 26, 1996
<PAGE>
EXHIBIT 23(d)
CONSENT OF PERSON ABOUT TO BECOME DIRECTOR
DANIEL C. MONTANO
I consent to reference to my name under the caption "Management and Control
Persons - Directors, Executive Officers, Promoters and Control Persons" in this
Amendment No. 1 to the Registration Statement (Form SB-2) and related Prospectus
of Atlanta Technology, Inc. for the registration of 1,400,000 shares of its
common stock for $3.00 per share.
/s/ Daniel C. Montano
Daniel C. Montano
Irvine, California
March 25, 1996
<PAGE>
EXHIBIT 23(e)
ALLEN P. FIELDS
CERTIFIED PUBLIC ACCOUNTANT
1801 Piedmont Avenue
Suite 103
Atlanta, GA 30324
I hereby consent to reference my firm under the caption "Experts" and to the use
of my report on the consolidated financial statement of Atlanta Technology
Group, Inc. and Subsidiaries dated March 18, 1996 in this Amendment No. 2 to the
Registration Statement (Form SB-2) filed January 12, 1996 and related Prospectus
of Atlanta Technology Group, Inc. for the registration of 1,400,000 shares of
its common stock for $3.00 per share.
Allen P. Fields
May 29, 1996
<PAGE>
EXHIBIT 24
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form SB-2 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Atlanta, State of Georgia, on January 10, 1996.
ATLANTA TECHNOLOGY GROUP, INC.
By /s/ Hale R. Spiegelberg
------------------------------------------
Hale R. Speigelberg, Chairman of the Board
POWER OF ATTORNEY
Each person whose signature appears appoints Hale R. Speigelberg, his
agent and attorney-in-fact, with full power of substitution to execute for him
and in his name, in any and all capacities, all amendments (including post-
effective amendments) to this Registration Statement to which this power of
attorney is attached.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Hale R. Spiegelberg Chairman of the Board of January 10, 1996
- ----------------------------- Directors, Chief Executive
Hale R. Speigelberg Officer, Chief Financial
Officer, Secretary
/s/ Gregory W.L. Richter President, Director January 10, 1996
- -----------------------------
Gregory W.L. Richter
/s/ Herbert W. Browne Director January 9, 1996
- -----------------------------
Herbert W. Browne
/s/ James Cassidy Director January 10, 1996
- -----------------------------
James Cassidy
</TABLE>
