UNITED
STATES
SECURITIES
AND EXCHANGE
COMMISSION
WASHINGTON,
DC 20549
FORM
10-QSB
(Mark
one)
x
|
QUARTERLY
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the
quarterly period ended September 30, 2007
o
|
TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE
ACT
|
For
the
transition period from __________ to __________
ATLAS
TECHNOLOGY GROUP, INC.
(Exact
Name of Small Business Issuer as Specified in Its Charter)
Delaware
|
|
94-3370795
|
(State
or Other Jurisdiction of
Incorporation
or Organization)
|
|
(I.R.S.
Employer
Identification
No.)
|
2001
152nd
AVENUE NE
REDMOND,
WASHINGTON 98052
|
(Address
of Principal Executive Offices)
|
|
(425)
458-2360
|
(Issuer’s
Telephone Number, Including Area Code)
|
|
|
(Former
Name, Former Address and Former Fiscal Year, if Changed Since Last
Report)
|
Check
whether the issuer (1) filed all reports required to be filed by Section 13
or
15(d) of the Exchange Act during the past 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.
Yes
xNo
o
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes o
No
x
As
of the
close of business on November 16, 2007, there were 33,856,805 shares outstanding
of the issuer’s common stock, par value $0.0004 per share.
Transitional
Small Business Disclosure Format: Yes o
No
x
ATLAS
TECHNOLOGY GROUP, INC.
(Formerly
Tribeworks, Inc.)
FORM
10-QSB FOR THE QUARTER ENDED SEPTEMBER 30, 2007
TABLE
OF CONTENTS
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PAGE
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FINANCIAL
INFORMATION
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3
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Item
1. Financial Statements
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3
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UNAUDITED
CONSOLIDATED BALANCE SHEET
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3
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UNAUDITED
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
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4
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UNAUDITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
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5
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NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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6
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Item
2. Management’s Discussion and Analysis or Plan of
Operation
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17
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Item
3. Controls and Procedures
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23
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PART
II OTHER INFORMATION
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24
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Item
1. Legal Proceedings
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24
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Item
2. Unregistered Sales of Equity Securities and Use of
Proceeds
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24
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Item
3. Defaults Upon Senior Securities
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24
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Item
4. Submission of Matters to a Vote of Security Holders
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24
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Item
5. Other Information
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24
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Item
6. Exhibits
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25
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SIGNATURES
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26
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Exhibits
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27
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Certification
of Chief Executive Officer
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Certification
of Chief Financial Officer
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Certification
of Chief Executive Officer Pursuant to Section 906
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Certification
of Chief Financial Officer Pursuant to Section 906
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Exhibits
Certification
of CEO Pursuant to Rule 13a-14(a)
Certification
of CFO Pursuant to Rule 13a-14(a)
Certification
of CEO Pursuant to Section 906
Certification
of CFO Pursuant to Section 906
PART
I - FINANCIAL INFORMATION
Item
1. Financial
Statements.
ATLAS
TECHNOLOGY GROUP, INC.
(Formerly
Tribeworks, Inc.)
CONSOLIDATED
BALANCE SHEETS
SEPTEMBER
30, 2007
|
|
September
30,
2007
|
|
December
31,
2006
|
|
|
|
(unaudited)
|
|
|
|
ASSETS
|
|
|
|
|
|
Current
Assets
|
|
|
|
|
|
Cash
|
|
$
|
163,375
|
|
$
|
130,991
|
|
Cash
Escrow Deposit
|
|
|
4,028,265
|
|
|
—
|
|
Accounts
receivable
|
|
|
65,436
|
|
|
10,229
|
|
VAT
receivable
|
|
|
21,100
|
|
|
40,705
|
|
Prepaid
expenses
|
|
|
39,343
|
|
|
23,731
|
|
Total
Current Assets
|
|
|
4,317,519
|
|
|
205,656
|
|
|
|
|
|
|
|
|
|
Other
Assets
|
|
|
|
|
|
|
|
Equipment
and furniture, net
|
|
|
233,144
|
|
|
209,854
|
|
Software
development, net
|
|
|
688,132
|
|
|
421,727
|
|
IT
Technology, net
|
|
|
1,256,126
|
|
|
835,192
|
|
Customer
list and Trademarks, net
|
|
|
463,229
|
|
|
—
|
|
Total
Other Assets
|
|
|
2,640,631
|
|
|
1,466,773
|
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
$
|
6,958,150
|
|
$
|
1,672,429
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
912,321
|
|
$
|
552,971
|
|
Accrued
expenses
|
|
|
396,079
|
|
|
150,999
|
|
Income
taxes payable
|
|
|
2,391
|
|
|
5,440
|
|
Loans
payable, related parties
|
|
|
121,869
|
|
|
70,582
|
|
Loan
payable
|
|
|
129,000
|
|
|
120,000
|
|
Total
Current Liabilities
|
|
|
1,561,660
|
|
|
899,992
|
|
|
|
|
|
|
|
|
|
Term
Liabilities
|
|
|
|
|
|
|
|
Term
Loan (net of unamortized discount of $4,115,168)
|
|
|
884,832
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Commitments
and Contingencies
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Stockholders’
Equity
|
|
|
|
|
|
|
|
Common
stock: $.0004 par value, 200,000,000 shares authorized, at September
30,
2007- 33,856,805 (and at December 31, 2006 - 25,081,805) shares issued
and
outstanding respectively
|
|
|
13,534
|
|
|
10,024
|
|
Additional
paid-in capital
|
|
|
16,144,644
|
|
|
6,272,168
|
|
Accumulated
(deficit)
|
|
|
(11,398,773
|
)
|
|
(5,510,539
|
)
|
Other
comprehensive income (loss)
|
|
|
(247,747
|
)
|
|
784
|
|
Total
Stockholders’ Equity
|
|
|
4,511,658
|
|
|
772,437
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
$
|
6,958,150
|
|
$
|
1,672,429
|
|
The
accompanying notes are an integral part of these consolidated interim financial
statements.
ATLAS
TECHNOLOGY GROUP, INC.
(Formerly
Tribeworks, Inc.)
UNAUDITED
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE
LOSS
|
|
Nine
Months Ended September 30,
|
|
Three
Months Ended September 30,
|
|
|
|
2007
|
|
2006
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
REVENUES
|
|
$
|
409,584
|
|
$
|
24,734
|
|
$
|
127,868
|
|
$
|
24,734
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COST
OF SALES
|
|
|
269,091
|
|
|
—
|
|
|
75,400
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS
PROFIT
|
|
|
140,493
|
|
|
24,734
|
|
|
52,468
|
|
|
24,734
|
|
|
|
|
|
|
|
|
|
|
|
|
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OPERATING
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IT
software development and support
|
|
|
1,021,404
|
|
|
656,130
|
|
|
379,068
|
|
|
282,034
|
|
Sales
and marketing
|
|
|
204,840
|
|
|
80,009
|
|
|
72,909
|
|
|
35,485
|
|
Depreciation
and amortization
|
|
|
261,400
|
|
|
—
|
|
|
126,922
|
|
|
—
|
|
General
and administrative
|
|
|
885,168
|
|
|
654,662
|
|
|
307,312
|
|
|
278,291
|
|
|
|
|
2,372,812
|
|
|
1,390,801
|
|
|
886,211
|
|
|
595,810
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME
(LOSS) FROM OPERATIONS
|
|
|
(2,232,319
|
)
|
|
(1,366,067
|
)
|
|
(833,743
|
)
|
|
(571,076
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
28,094
|
|
|
7,439
|
|
|
26,028
|
|
|
6,318
|
|
Interest
expense
|
|
|
(84,219
|
)
|
|
—
|
|
|
(53,357
|
)
|
|
(411
|
)
|
Other
financing charges and amortization
|
|
|
(3,599,486
|
)
|
|
—
|
|
|
(2,184,305
|
)
|
|
—
|
|
|
|
|
(3,655,611
|
)
|
|
7,439
|
|
|
(2,211,634
|
)
|
|
5,907
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME
(LOSS) BEFORE INCOME TAXES
|
|
|
(5,887,930
|
)
|
|
(1,358,628
|
)
|
|
(3,045,377
|
)
|
|
(565,169
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME
TAXES
|
|
|
(304
|
)
|
|
(1,902
|
)
|
|
(
279
|
)
|
|
(1,877
|
)
|
NET
INCOME (LOSS) AFTER TAXES from continuing operations
|
|
|
(5,888,234
|
)
|
|
(1,360,530
|
)
|
|
(3,045,656
|
)
|
|
(567,046
|
)
|
Gain
from discontinued operations
|
|
|
—
|
|
|
192,685
|
|
|
—
|
|
|
192,685
|
)
|
OTHER
COMPREHENSIVE INCOME (LOSS)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
Exchange translation gains (losses)
|
|
|
(248,531
|
)
|
|
—
|
|
|
(102,457
|
)
|
$
|
—
|
|
COMPREHENSIVE
INCOME (LOSS)
|
|
$
|
(6,136,765
|
)
|
$
|
(1,167,845
|
)
|
$
|
(3,148,113
|
)
|
$
|
(374,361
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EARNINGS
(LOSS) PER COMMON SHARE, BASIC AND DILUTED
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing
Operations
|
|
$
|
(0.21
|
)
|
$
|
(0.06
|
)
|
$
|
(0.09
|
)
|
$
|
(0.03
|
)
|
Discontinued
Operations
|
|
$
|
—
|
|
$
|
0.01
|
|
$
|
—
|
|
$
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING, BASIC AND
DILUTED
|
|
|
29,401,805
|
|
|
22,329,420
|
|
|
33,853,472
|
|
|
22,329,420
|
|
The
accompanying notes are an integral part of these consolidated interim financial
statements.
ATLAS
TECHNOLOGY GROUP, INC.
(Formerly
Tribeworks, Inc.)
UNAUDITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
Nine
Months Ended
September
30,
|
|
|
|
2007
|
|
2006
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
Net
(Loss)
|
|
|
(5,888,234
|
)
|
|
(1,360,628
|
)
|
Net
gain after taxes from discontinued operations
|
|
|
—
|
|
|
284,032
|
)
|
|
|
|
(5,888,234
|
)
|
|
(1,076,596
|
)
|
Adjustments
to reconcile net loss to net cash (used) by operating
activities:
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
261,400
|
|
|
—
|
|
Equity
issued for financing expense
|
|
|
3,599,486
|
|
|
—
|
|
Changes
in assets and liabilities
|
|
|
|
|
|
|
|
(Increase)
decrease in accounts receivable
|
|
|
(55,207
|
)
|
|
25,812
|
|
(Increase)
decrease in VAT receivable
|
|
|
19,605
|
|
|
—
|
|
(Increase)
decrease in prepaid expenses
|
|
|
(15,612
|
)
|
|
(6,859
|
)
|
Increase
(decrease) in accounts payable
|
|
|
359,350
|
|
|
(410,780
|
)
|
Increase
(decrease) in accrued expenses
|
|
|
245,080
|
|
|
—
|
|
Increase
(decrease) in taxes payable
|
|
|
(3,049
|
)
|
|
(5,539
|
)
|
Total
adjustments
|
|
|
4,411,053
|
|
|
(397,366
|
)
|
Net
cash provided (used) by operating activities
|
|
|
(1,477,181
|
)
|
|
(1,473,962
|
)
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
Cash
acquired in acquisition of assets
|
|
|
414
|
|
|
—
|
|
Purchase
of equipment
|
|
|
(24,723
|
)
|
|
(
89,067
|
)
|
Software
development costs
|
|
|
(329,222
|
)
|
|
(312,581
|
)
|
Net
cash provided (used) by investing activities
|
|
|
(353,531
|
)
|
|
(401,648
|
)
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
Term
loans
|
|
|
5,000,000
|
|
|
—
|
|
Restricted
cash
|
|
|
(4,028,265
|
)
|
|
—
|
|
Short
term loans
|
|
|
51,287
|
|
|
181,233
|
|
Increase
in note payable, net
|
|
|
9,000
|
|
|
—
|
|
Net
proceeds from issue of shares and application monies received
|
|
|
1,012,000
|
|
|
1,715,985
|
|
Net
cash provided (used) by financing activities
|
|
|
2,044,022
|
|
|
1,897,218
|
|
|
|
|
|
|
|
|
|
NET
INCREASE (DECREASE) IN CASH
|
|
|
213,310
|
|
|
21,608
|
|
Gain
(Loss) on foreign exchange
|
|
|
(180,926
|
)
|
|
92,281
|
|
CASH,
BEGINNING OF PERIOD
|
|
|
130,991
|
|
|
177,799
|
|
|
|
|
|
|
|
|
|
CASH,
END OF PERIOD
|
|
$
|
163,375
|
|
$
|
291,688
|
|
SUPPLEMENTAL
CASH FLOW INFORMATION:
|
|
Sept.
30, 2007
|
|
Sept.
30, 2006
|
|
Interest
paid
|
|
$
|
11,749
|
|
$
|
3,898
|
|
Income
taxes paid
|
|
$
|
3,299
|
|
$
|
|
|
NON-CASH
TRANSACTIONS:
|
|
|
|
|
|
|
|
Acquisition
of IT Technology
|
|
$
|
505,121
|
|
$
|
835,192
|
|
Acquisition
of customer list and trademarks
|
|
$
|
555,312
|
|
$
|
—
|
|
The
accompanying notes are an integral part of these consolidated interim financial
statements.
ATLAS
TECHNOLOGY GROUP, INC.
(Formerly
Tribeworks, Inc.)
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2007
NOTE
A — PRINCIPLES OF PRESENTATION AND GOING CONCERN
The
accompanying unaudited financial statements of Atlas Technology Group, Inc.
(formerly Tribeworks, Inc.) (the “Company”)
have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-QSB.
Accordingly, they do not include all of the information and footnotes required
by U.S. generally accepted accounting principles for complete financial
statements, although the Company believes that the disclosures are adequate
to
make the information presented not misleading. In the opinion of management,
all
adjustments necessary for a fair presentation of the Company’s financial
position at September 30, 2007, and its results of operations for the three
and
nine months ended September 30, 2007 and 2006, and the operations and cash
flows
for the nine months ended September 30, 2007 have been made. However, operating
results for the interim periods noted are not necessarily indicative of the
results that may be expected for the year ending December 31, 2007. This report
should be read in conjunction with the Company’s financial statements and notes
thereto contained in the Company’s Annual Report on Form 10-KSB for the year
ended December 31, 2006.
Following
the acquisition of Atlas Technology Group Holdings Ltd. (see Note B below),
the
services performed by the Company have been considered our new operating
business. The services previously offered by the Company that were transferred
into the Tribeworks Development Corporation (“TDC”)
and
later sold on September 14, 2006 have been treated as discontinued operations.
As the acquisition of Atlas Technology Group Holdings Ltd. took place on January
20, 2006 all of the 2006 comparative figures relate to the parent company,
previously called Tribeworks, Inc. and the new Atlas Technology Group Holdings
Ltd. line of business are hereinafter collectively described as “AtlasTG”.
On
January 26, 2007 the Company acquired all of the assets (but not the
liabilities) including its IT technology, trademarks and 700 customers of BLive
Networks Inc., (“BLive”) in
exchange for the issuance of 1,150,000 shares of restricted common stock of
the
Company (the “Common
Stock”).
150,000 of these shares of Common Stock were for an M&A Advisory Fee.
Additionally, in consideration of the payment by Petroleum Corp. of Canada
Inc.
(“Petroleum
Corp.”)
of
$100,010, the Company agreed to issue to Petroleum Corp. 100,000 fully paid
shares of Common Stock and a warrant to purchase 300,000 shares of Common Stock
exercisable for a period of two years at a strike price of $1.25 per share.
Included in the assets acquired from BLive Networks Inc was 49% of a Canadian
company called InfoBuild Networks (Canada) Inc., and subsequent to the initial
acquisition an option to purchase the remaining 51% of InfoBuild Networks
(Canada) Inc was exercised. The assets acquired have been transferred into
InfoBuild Networks (Canada) Inc. and the name of InfoBuild Networks (Canada)
Inc
it has been changed to BLive Networks Inc. The assets acquired have been
consolidated into these financial statements along with the results of BLive
from January 26, 2007.
The
accompanying consolidated financial statements have been prepared in conformity
with generally accepted accounting principles, which contemplate the
continuation of the Company as a going concern. The Company reported net losses
in both calendar years 2006 and 2005 and had a working capital deficiency of
$694,336 and $365,431 for year’s ended December 31, 2006 and 2005, respectively.
The Company has reported a further operating loss of $2,232,319 for the first
nine months of 2007 and an operating loss of $833,743 for the third quarter
ended September 30, 2007, compared to losses of $613,091 and $785,485 for the
first and second quarters of 2007 for the continuing business.
The
recoverability of the recorded assets and satisfaction of the liabilities
reflected in the accompanying balance sheets is dependent upon continued
operation of the Company, which is in turn dependent upon the Company’s ability
to succeed in its future operations. There can be no assurance that management
will be successful in implementing its plans. The accompanying consolidated
financial statements do not include any adjustments that might result from
the
outcome of this uncertainty.
In
June
2007 the Company entered into a Securities Purchase Agreement (the “Securities
Purchase Agreement”)
with
West Coast Opportunity Fund, LLC, a Delaware limited liability company
(“WCOF”).
Pursuant to the terms of the Securities Purchase Agreement, a subsidiary of
the
Company, issued to WCOF two senior secured non-convertible promissory notes
totalling $5,000,000 with $4,000,000 being placed in escrow with Wells Fargo
Bank, N.A. until the Company or any of its subsidiaries enters into contracts
with certain entities. $1,500,000 will be released from escrow upon the
Company entering into contracts with certain entities totalling $1,000,000
in annual, non-contingent future revenues prior to 5:00 p.m. on December 31,
2007. An additional $2,500,000 will be released from escrow upon the Company
entering into contracts with certain entities totalling $5,000,000 in annual,
non-contingent revenues prior to 5:00 P.M. on December 31, 2007. The first
promissory note for $2,500,000 was made on June 15, 2007, with $1,500,000 placed
in escrow and the second promissory note for $2,500,000 was made on July 11,
2007, and all of these funds were placed in escrow. This is further explained
in
Note D.
As
a
result of the transaction with WCOF, which had both a loan and equity component,
and other equity placements explained in Notes D and F, the Company had an
equity surplus of $4,511,658 at September 30, 2007, which is an increase from
December 31, 2006, when the equity surplus was $772,437 and the equity surplus
of $3,594,696 held at June 30, 2007. Having entered into the Securities Purchase
Agreement with WCOF and provided the conditions of the escrow can be met, the
Company should have sufficient funding for the next twelve months to complete
the development of its suite of software tools and market these to sufficient
customers to achieve the Company’s revenue targets.
NOTE
B - NATURE OF BUSINESS
The
Company acquired Atlas Technology Group Holdings Ltd, a Malta Corporation that
was established in September 2004, to provide external Information Technology
(“IT”)
application support services for organizations with large IT functions, as
a
wholly owned subsidiary on January 20, 2006. At the annual general meeting
of
the Company on July 12, 2007, the name of the Company was changed from
Tribeworks, Inc. to Atlas Technology Group, Inc.
Our
old
line of services provided through our TDC subsidiary during 2006 was sold to
its
former management on September 14, 2006.
Our
initial support centers are based in Malta and Wellington, New Zealand, with
technical support from a small staff in Redmond, Washington, creating
“follow-the-sun” 24 hour coverage. As business grows, additional locations will
be added to increase capacity, as needed. State of the art VoIP, call tracking
and monitoring technology provide each employee with leverage needed to maximize
support delivery to the fullest possible extent.
The
Company continues to test and harden its new software tools and is now beginning
to implement its plan of selling software support services, and is pursuing
sales in the western US, the European Union (“EU”),
specifically the United Kingdom and Italy. The Company now has support contracts
with four customers in the US. The Company will continue to target customers
in
Italy, the UK and the west coast of the US before it later expands its sales
efforts worldwide. The Company is initially marketing to four targeted groups
of
potential clients:
|
1) |
Directly
to initial pilot customers, who will serve as final beta test
opportunities for the Company’s systems, software monitoring and incident
management systems;
|
|
2) |
Agent
companies, who are strategic partners and will represent the Company
in
specific regions in defining strategic reseller and onboarding
partners;
|
|
3) |
Onboarding
partners who have the internal capabilities to select and technically
audit, harden, stress-test and document complex software systems;
and
|
|
4) |
Reseller
channel partners who will be the backbone of the Company’s sales strategy.
With existing large customer bases of large and complex software
systems,
resellers will be provided the advanced AtlasTG tools and systems
to
monitor and support highly complex software systems on an ongoing
basis.
|
On
January 26, 2007 the Company acquired all of the assets and 700 customers of
BLive, further expanding the Company’s capability of delivering high quality
outsourced support into the annual IT Support market. Prior to our acquisition
of BLive, BLive developed and operated interactive support tools for companies
providing IT support worldwide. Utilizing proprietary technology, BLive’s
systems are used by companies for remote technical support and sales, both
externally, and for internal corporate ‘Helpdesk’ support departments. This
technology enables service providers to deliver faster response times and a
personal connection with users and is complimentary to the tools developed
by
the Company and is generating revenue.
NOTE
C — BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Basis
of Consolidation
The
financial statements of the Company are presented on a consolidated basis and
include the Company and its wholly owned subsidiaries, TDC (sold September
14,
2006), and since the first quarter of 2006, Atlas Technology Group Holdings
Limited (formerly TakeCareofIT Holdings Limited), a Malta corporation;
TakeCareofIT Limited, a Malta corporation; Atlas Technology Group (NZ) Limited,
a New Zealand corporation; Atlas Technology Group (US), Inc., a Delaware
corporation; and Atlas Technology Group Consulting Inc., a Delaware corporation.
Following the acquisition of Atlas Technology Group Holdings Ltd. the
consolidated income statement has included the income and expenses of both
the
old TDC business and the newly acquired business. As the acquisition of AtlasTG
business was January 20, 2006, the 2006 comparative figures include the AtlasTG
business, while the business and assets of TDC have been treated as discontinued
operations.
On
January 26, 2007 the Company acquired all of the assets (but not the
liabilities), (including IT Technology, trademarks and 700 customers of BLive
Networks Inc.) in exchange for 1,150,000 shares of Common Stock of the Company.
Included in these assets purchased from BLive Networks Inc was 49% of a Canadian
company called InfoBuild Networks (Canada) Inc., and subsequent to the initial
acquisition an option to purchase the remaining 51% of InfoBuild Networks
(Canada) Inc was exercised. The assets acquired have been injected into this
company and the name of it has been changed to BLive Networks Inc. and the
business has continued to trade through this company and this business is
referred to as “BLive”.
The
assets acquired have been consolidated into these financial statements and
the
results of BLive from January 26, 2007.
All
material intercompany transactions have been eliminated.
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 the 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 those estimates. Estimates and assumptions
are
reviewed periodically and the effects of revisions are reflected in the
consolidated financial statements in the period they are
determined.
Foreign
Currency Translation
The
Company reports in United States Dollars (“USD”) but through its
subsidiaries does business in the USA, Malta, and New Zealand. BLive does
business both in US and Canadian dollars, but primarily in USD. The Company
seeks to borrow in USD to match with the reporting currency, but business units
outside of the US receive some revenue and incur expenses and credit in foreign
currencies. Transactions denominated in foreign currencies are translated at
the
rates of exchange ruling on the dates of the transactions. Monetary assets
and
liabilities expressed in foreign currencies are translated at the rates of
exchange prevailing at the end-of-period exchange rates and the translation
differences are reported as other comprehensive income.
Net
Earnings (Loss) Per Share of Common Stock
Basic
earnings per share (“EPS”)
is
computed based on net income (loss) divided by the weighted average number
of
shares of Common Stock outstanding. Diluted EPS is computed based on net income
(loss) divided by the weighted average number of shares of common stock and
potential common stock equivalents outstanding.
Software
Development Costs
From
January 1, 2006, the Board of Directors has adopted Statement of Financial
Accounting Standards No. 86, “Accounting for the Costs of Computer Software to
Be Sold, Leased, or Otherwise Marketed” (“SFAS
86”)
and
has capitalized certain development costs that meet the requirements of SFAS
86.
As
a
result of the adoption of SFAS 86, $293,222 of development costs have been
capitalized for the first nine months ended September 30, 2007 (as compared
to
$312,581 for the nine months ended September 30, 2006). These capitalized costs
will be amortized over three years from the date on which the software goes
into
full commercialization. Not all of the development costs for the period meet
the
requirements of SFAS 86, and those costs which do not meet the criteria to
be
capitalized have been expensed in the period as part of IT software development
and support as shown in the Consolidated Statement of Operations and
Comprehensive Loss.
IT
Technology
As
part
of the acquisition of Atlas Technology Group Holdings Ltd, the Company acquired
various software that had been developed at the date of acquisition. This
software was valued at $835,192 and treated as IT Technology and will be
amortized over three years from the date on which the new software support
business goes into full commercialization. In addition with the acquisition
of
BLive, the Company acquired IT Technology valued at $505,121. As BLive had
already commercialized their IT technology and is generating revenue, the IT
Technology acquired from BLive will be amortized over the next three
years.
Customer
List and Trademarks
As
part
of the acquisition of BLive, the Company acquired 700 customers and various
trademarks and has valued this customer list and trademarks by way of the value
of the future revenue these customers can generate over the next three years
with an allowance for their diminishing value. Again as BLive had already
commercialized their technology and is generating revenue, this customer list
and trademarks acquired from BLive will be amortized over the next three
years.
The
Company’s intangible assets are summarized as follows:
|
|
September
30, 2007
|
|
December
31,
2006
|
|
Software
Development
|
|
|
748,164
|
|
|
454,942
|
|
IT
Technology Acquired
|
|
|
1,340,313
|
|
|
835,192
|
|
Customer
List and Trademarks
|
|
|
555,312
|
|
|
—
|
|
Less:
Accumulated Amortization
|
|
|
(236,302
|
)
|
|
(33,215
|
)
|
|
|
$
|
2,407,487
|
|
$
|
1,256,919
|
|
Stock-Based
Awards
Previously
the Company had accounted for stock based awards to employees under its “Equity
Incentive Plan” as compensatory in accordance with Accounting Principles Board
Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB
25”).
The
Company also issues stock-based awards for services performed by consultants
and
other non-employees and accounts for them in accordance with Statement of
Financial Accounting Standards No. 123, “Accounting for Stock-Based
Compensation” (“SFAS
123”). In
December 2002, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 148, “Accounting for Stock-Based Compensation
- Transition and Disclosure” (hereinafter “SFAS
No. 148”).
SFAS
No. 148 amends SFAS No. 123, “Accounting for Stock-Based Compensation,” to
provide alternative methods of transition for a voluntary change to the fair
value based method of accounting for stock-based employee compensation. In
addition, the statement amends the disclosure requirements of SFAS No. 123
to
require prominent disclosure in both annual and interim financial statements
about the method of accounting for stock-based employee compensation and the
effect of the method used on reported results. The provisions of the statement
are effective for financial statements for fiscal years ending after December
15, 2002. The Company has adopted SFAS No 123(R).
The
Company did not grant any options to purchase shares of the Company’s Common
Stock during the three months ended September 30, 2007, or during the same
period in 2006.
NOTE
D — LOANS, ADVANCES AND NOTE PAYABLE
On
March
30, 2005, the Company announced a plan of reorganization, intended to allow
the
Company to maintain its public reporting requirements, reduce its debt, and
explore new business directions. The plan of reorganization included the
transfer of most assets and liabilities to the Company’s operating subsidiary,
TDC. As part of this initial reorganization the balance of an earlier Note
issued on January 21, 2001 was acquired by a financier who agreed to provide
under a new note agreement (“Note”)
which
provided for unsecured borrowing at 4% in an amount of up to $100,000 to help
cover reorganization costs.
During
2006, the Note was renegotiated with the lender agreeing to take 100,000 shares
of Common Stock of the Company at $1.00 per share plus a warrant to purchase
50,000 shares of Common Stock of the Company exercisable for two years at a
price of $1.25 per new share as part repayment with the balance plus accrued
interest then owing, with the balance being converted into a new note issued
for
$120,000 repayable on March 30, 2007. This repayment date has subsequently
been extended to September 30, 2007 in exchange for the issuance of 25,000
fully
paid shares of Common Stock of the Company and a warrant exercisable for two
years to purchase 50,000 shares of Common Stock of the Company at an exercise
price of $1.00 per share. As a result of these issuances of shares and warrants,
a financing charge of $35,275 was accrued and half of this was expensed in
the
three months ended June 30, 2007 and the other half will be expensed in the
three months ending September 30, 2007. This Note was further extended at
September 30, 2007 as a term of the previous renegotiation with the accrual
of
$9,000 of penalty interest (increasing the total amount outstanding at September
30, 2007 to $129,000) and interest will continue to accrue at 10% per annum
until the Note is repaid from the funds released from the WCOF
Escrow.
The
loans
repayable of $121,869 comprise advances from stockholders and related parties
and have no fixed repayment dates, but are considered to be of a short-term
nature.
An
advance of $150,000 was made to the Company by an existing stockholder on March
29, 2007, and two further advances of $225,000 and $250,000 were made during
the
three months ended June 30, 2007. These advances initially incurred a 5%
arrangement fee and were evidenced by promissory notes totalling $656,250.
The
holder of these promissory notes converted $500,000 of the debt into 650,000
shares of Common Stock and a warrant exercisable for three years to purchase
650,000 shares of Common Stock of the Company at an exercise price of $1.30
per
share. As a result of these transactions the Company took expense financing
charges totalling $314,917 in the June quarter. The remaining $156,250 of debt
was repaid in cash.
On
June
15, 2007, Atlas Technology Group (US), Inc., a Delaware corporation
(“Atlas
US”),
and a
wholly -owned subsidiary of the Company, entered into a Securities Purchase
Agreement with WCOF. Pursuant to the terms of the Securities Purchase Agreement,
Atlas US agreed to issue and sell to WCOF two senior secured non-convertible
promissory notes in the initial amount of $2,500,000 (the “Initial
Note”)
which
was issued on June 15, 2007 and a second promissory note in the amount of
$2,500,000 (the “Second
Note”
and
together with the Initial Note, the “Promissory
Notes”),
which
was issued on July 11, 2007.
Interest
on the Promissory Notes will be calculated at an annual rate of 5% and is due
and payable bi-annually. The Promissory Notes must be repaid in full by November
30, 2008.
In
connection with the issuance of the Initial Promissory Note, pursuant to the
Securities Purchase Agreement, the Company issued WCOF a warrant to purchase
3,250,000 shares of Common Stock of the Company and upon the issuance of the
Second Promissory Note, the Company issued WCOF an additional warrant for the
purchase of 3,250,000 shares of Common Stock of the Company. These warrants
are
exercisable for a period of five years at a price of $2.60 per share. The
Company is also permitted to force the exercise of these warrants if the Common
Stock of the Company closes at a price above $10.00 per share for 20 out of
30
days, certain trading volume requirements are satisfied and the resale of the
Common Stock underlying these warrants have been registered with the U.S.
Securities and Exchange Commission (the “SEC”)
and
such registration statement has been declared effective.
NOTE
D — LOANS, ADVANCES AND NOTE PAYABLE (Continued)
In
connection with the issuance of the Promissory Notes, the Company and all of
its
subsidiaries (other than Atlas US) signed a Guaranty Agreement (the
“Guaranty”)
that
provides WCOF with a guarantee to repay the Promissory Notes on behalf of Atlas
US if Atlas US fails to repay the Promissory Notes. In addition to the Guaranty,
the Company and all of its subsidiaries provided WCOF a first lien security
interest in all of each entity’s assets pursuant to the terms of a Pledge and
Security Agreement (the “Security
Agreement”).
Of
the
$2,500,000 paid by WCOF for the Initial Note on June 15, 2007, Atlas US received
$1,000,000 less certain fees and expenses and $1,500,000 was placed into escrow
pursuant to the terms of an escrow agreement (the “Escrow
Agreement”)
between Atlas US, WCOF and Wells Fargo Bank, N.A. Pursuant to the terms of
the
Escrow Agreement, the amount of $1,500,000 will not be released from escrow,
unless Atlas US, the Company or any of its subsidiaries enters into contracts
with certain customer entities, totalling $1,000,000 in annual, non-contingent
future revenues prior to 5:00 p.m. on December 31, 2007. In addition, the
entire proceeds of the Second Note were also placed into the escrow account
and
will not be released from escrow, unless Atlas US, the Company or any of its
subsidiaries enters into contracts with certain customer entities, totalling
$5,000,000 in non-contingent future revenues prior to 5:00 p.m. on December
31,
2007.
In
the
event that Atlas US, the Company or any of its subsidiaries has not entered
into
the contracts described above, the amounts in the escrow account will be
returned to WCOF and will be applied to the repayment of the Promissory Notes.
Subject
to certain grace periods, the Promissory Notes provide the following events
of
default (among others):
·
|
Failure
of Atlas US to enter into contracts with certain entities, totalling
$1,000,000 in annual, non-contingent
future revenues to any of Atlas US, the Company or any of its subsidiaries
prior to
5:00 p.m. Redmond, Washington time on December 31,
2007;
|
·
|
Failure
of Atlas US to pay principal and interest when
due;
|
·
|
Any
form of bankruptcy or insolvency proceeding is instituted by or against
Atlas US, the Company or
any of its subsidiaries that is not withdrawn within 90
days;
|
·
|
A
breach by the Company or Atlas US of any material representation
or
warranty made in the Securities Purchase
Agreement;
|
·
|
An
uncured breach by the Company or Atlas US of any material covenant,
term
or condition in the Securities
Purchase Agreement or the Promissory Notes;
and
|
·
|
Any
event of default set forth in the Security
Agreement.
|
Subject
to certain grace periods, the Security Agreement provides the following events
of default (among others):
·
|
Any
event of default set forth in the Promissory
Notes;
|
·
|
A
breach by Atlas US, the Company or any of its subsidiaries of any
material
representation or warranty made in the Security Agreement;
and
|
·
|
Failure
of Atlas US, the Company or any of its subsidiaries to observe or
perform
any of its obligations
under the Security Agreement.
|
NOTE
D — LOANS, ADVANCES AND NOTE PAYABLE (Continued)
Upon
the
occurrence of an event of default, the payment of the principal amounts under
the Promissory Notes may be accelerated and the interest rate applicable to
the
principal amounts is increased to 7.5% per annum during the period the default
exists.
As
further consideration for the purchase of the Initial Note, the Company issued
and sold 3,250,000 shares of Common Stock of the Company to WCOF, for a purchase
price of $1,000 pursuant to the terms of the Securities Purchase Agreement.
Upon
the issuance of the Second Note, the Company issued and sold an additional
3,250,000 shares of Common Stock to WCOF for a purchase price of $1,000.
As
a
result of the issuance of these shares of Common Stock and warrants associated
with the Initial Note the Company and Atlas US incurred and expensed financing
charges of $854,375 for the three months ended June 30, 2007 and also booked
as
discount on debt of $2,429,775. With the drawdown of the Second Note on July
11,
2007 a further $1,082,071 of financing charges were taken up in the three months
ended September 30, 2007 and $814,606 of the total discount of $5 million
dollars was amortized. The remaining discount of $4,115,168 will be amortized
over the remaining term of the loan to the repayment date of November 30, 2008
and the net effect is shown in the Consolidated Balance Sheet at September
30,
2007. The corresponding credit was booked to additional paid-in capital and
is
included in the Stockholder’s equity in the balance sheet.
Members
of the Company’s management team and certain of its stockholders executed a
lock-up agreement with WCOF that prohibits them from selling any of their
holdings of Common Stock until ninety (90) days following the repayment of
the
Promissory Notes.
The
Company paid its placement agent, Equity Source Partners, LLC (“ESP”),
an
NASD member investment firm, cash commissions of approximately $80,000 on the
closing date for the Initial Note and issued 5 year warrants to purchase 30,769
shares of common stock of the Company on equal terms to the warrants issued
to
WCOF. Atlas US also agreed to pay the legal fees of counsel to WCOF in an amount
not to exceed $15,000. ESP will receive further commissions equal to 8% of
any
funds released from escrow and issued warrants on similar terms as for the
first
funds release. The Company has also reimbursed ESP for its reasonable expenses
incurred in connection with the WCOF financing transaction.
NOTE
E — FAIR VALUE OF FINANCIAL INSTRUMENTS
The
Company’s financial instruments include cash, loans payable and income taxes
payable for which the Company believes that the fair value approximates their
carrying amounts.
NOTE
F — COMMON STOCK AND WARRANT ISSUANCES
During
the quarter ended September 30, 2007, the Company issued:
|
a)
|
3,250,000
shares of Common Stock and a warrant exercisable for five years to
purchase 3,250,000 shares of Common Stock at an exercise price of
$2.60
per share were issued to WCOF as part of the Securities Purchase
Agreement. The warrant expires on July 11, 2012. This transaction
is
described in more detail on our Current Report on Form 8-K filed
on June
19, 2007.
|
|
b)
|
10,000
shares of Common Stock with regard to the exercise of 10,000
warrants.
|
|
c)
|
25,000
shares of Common Stock and a warrant exercisable for two years to
purchase
50,000 shares of Common Stock at an exercise price of $1.00 per share
were
issued with regard to the extension of the repayment terms of a Note
Payable. The warrant expires on July 26,
2009.
|
In
addition $200,000 was paid to the Company on September 28, 2007 for 571,429
shares of Common Stock and a Warrant exercisable for three years to purchase
285,715 shares of Common Stock at an exercise price of $0.70 per share. These
warrants expire on September 28, 2010. Financing charges of $273,003 were booked
with regard to these shares and warrant in the three months ended September
30,
2007.
The
fair
value for warrants was estimated at the issuance date based upon using a
Black-Scholes option pricing model with the following assumptions: risk free
interest rate of 4-5%, expected volatility of 48%, expected option life of
3-5
years and dividend yield of $0.00
As
of
September 30, 2007 the total number of shares of Common Stock issued and
outstanding was 33,856,805.
The
Company also entered into a registration rights agreement with WCOF (the
“Registration
Rights Agreement”)
requiring the Company to register the resale of the shares of Common Stock
and
the resale of the shares underlying the warrants (the “Registrable
Securities”) issued
to
WCOF under the Securities Act of 1933, as amended (the “Securities
Act”).
Pursuant to the terms of the Registration Rights Agreement, the Company must
file a registration statement to register the Registrable Securities with the
SEC within ninety (90) days of June 15, 2007. In addition, the registration
statement must be declared effective by the Securities and Exchange Commission
no later than one hundred-fifty (150) days after June 15, 2007. In the event
that the registration statement is not filed within ninety (90) days of June
15,
2007 or the effectiveness of the registration statement is not maintained,
the
Company is obligated to pay to WCOF certain payments described in the
Registration Rights Agreement. The Registration Rights Statement covering a
portion of WCOF’s registrable securities has been filed with the SEC and was
declared effective on November 7, 2007.
NOTE
G — DEFERRED COMPENSATION ARRANGEMENT, DISPUTE WITH FORMER EMPLOYEE AND SALE OF
TDC
Effective
July 1, 2004, the Company entered into one-year compensation arrangements with
two of its then executive officers. The arrangements provide for annualized
salaries of $120,000 and $110,000 for the Company’s Chief Executive Officer and
Chief Financial Officer, respectively. As part of the arrangement, any of this
compensation accrued but not paid can be converted, at the option of the
applicable executive officer, into shares of Common Stock of the Company at
any
time through June 30, 2007. The conversion rate is equal to the accrued amount
divided by the average closing bid of the Company’s Common Stock for the 20
trading days previous to the election date. The Company will hold any issued
shares in escrow for one year following the date of conversion. Termination
of
employment during the one-year period causes the issued stock to be forfeited
and returned to the Company and, as such, the outstanding salary underlying
the
forfeited stock is no longer owed.
On
April
12, 2006, Robert Davidorf, a former director and officer of the Company, and
on
that date a director and officer of TDC, resigned. In his letter of resignation,
Mr. Davidorf made certain claims for payment of approximately $130,000 in
accrued salaries (including $95,388 relating to the above deferred compensation
arrangement) and expenses allegedly owed to him. This matter was settled without
payment of any extra compensation as part of the sale of the Company’s wholly
owned subsidiary, TDC, which was completed on September 14, 2006 by way of
a
sale to 541368 LLC, a California limited liability company, purchasing 100%
of
the stock of TDC for an aggregate consideration of $100 and the settlement
of
certain disputes between the Company and certain members of the management
of
541368 LLC, who formerly served as the management of the Company and TDC. In
addition, the Company agreed to make a one-time cash payment of $44,500 to
TDC
in full satisfaction of the Company’s obligations under an existing Support
Agreement dated as of August 1, 2005 between the Company and TDC, and the
Support Agreement was terminated pursuant to the sale agreement. The sale
agreement also contained customary representations, warranties, covenants and
mutual indemnity provisions.
The
assets and liabilities disposed of from the discontinued operations of TDC
at
June 30, 2006 (the financial statements used in the sale) are as
follows:
Assets:
|
|
|
|
Accounts
Receivable
|
|
|
108,661
|
|
Prepayments
|
|
|
4,291
|
|
Computers
and equipments, net
|
|
|
811
|
|
Total
assets
|
|
|
113,763
|
|
Liabilities:
|
|
|
|
|
Bank
overdraft
|
|
|
14,810
|
|
Accounts
payable and accruals
|
|
|
373,676
|
|
Total
Liabilities
|
|
|
388,486
|
|
In
June
2002, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 146, “Accounting for Costs Associated with Exit or
Disposal Activities” (hereinafter “SFAS
No. 146”).
SFAS
No. 146 addresses significant issues regarding the recognition, measurement,
and
reporting of costs associated with exit and disposal activities, including
restructuring activities. SFAS No. 146 also addresses recognition of certain
costs related to terminating a contract that is not a capital lease, costs
to
consolidate facilities or relocate employees, and termination benefits provided
to employees that are involuntarily terminated under the terms of a one-time
benefit arrangement that is not an ongoing benefit arrangement or an individual
deferred-compensation contract. SFAS No. 146 was issued in June 2002, effective
December 31, 2002 with early adoption encouraged. The effect on the Company’s
financial statement of the adoption of SFAS No. 146 is reflected in discontinued
operations.
The
Company’s financial results of prior periods have been reclassified to reflect
the discontinued operations of TDC. Condensed results of discontinued segments
are as follows:
|
|
September
30,
2006
|
|
December
31,
2005
|
|
Net
Sales
|
|
$
|
122,370
|
|
$
|
401,614
|
|
Net
Income (Loss)
|
|
$
|
192,685
|
|
$
|
(12,555
|
)
|
In
August
2001, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 144, “Accounting for the Impairment or Disposal of
Long-Lived Assets” (hereinafter “SFAS No. 144”). SFAS No. 144 replaces SFAS No.
121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of.” This standard establishes a single accounting model
for long-lived assets to be disposed of by sale, including discontinued
operations to include a “component of an entity” (rather than a segment of a
business). A component of an entity comprises operations and cash flows that
can
be clearly distinguished, operationally and for financial reporting purposes,
from the rest of the entity. A component of an entity that is classified as
held
for sale, or has been disposed of, is presented as a discontinued operation
if
the operations and cash flows of the component will be (or have been) eliminated
from the ongoing operations of the entity and the entity will not have any
significant continuing involvement in the operations of the
component.
In
accordance with SFAS No. 144 effective August 1, 2001, the operating results
of
TDC, which was disposed of during the third quarter of 2006, are included in
discontinued operations. Assets and liabilities of TDC have been removed from
the financial statements for the period ended September 30, 2006 as sold and
restated as net assets and liabilities from discontinued operations for the
period ended December 31, 2005.
NOTE
H — CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On
January 20, 2006 the Company acquired Atlas Technology Group Holdings Ltd.
and
its subsidiaries, which had over the previous 18 months been developing its
new
software system for providing external IT application support services for
organizations with large IT functions. This work is being carried out by both
employees of the Company and specialist consultants engaged to prepare modules
of this new system. Some of these consultants are engaged through WebConsult
Inc., a registered Microsoft vendor, and they continue to carry out such work
on
normal commercial terms. Robert Altinger a director of the Company was formerly
a consultant to WebConsult Inc. Robert Altinger’s wife is an officer of
WebConsult Inc.
Since
the
beginning of the second quarter of 2006 the three executive directors of the
Company have been paid or had fees accrued of $10,000 (or in one case 10,000
Euros) each per month to themselves or to their consulting companies in lieu
of
salary as compensation for their time until contracts are negotiated. In July
2006, Michael Murphy was engaged as COO and the three executive directors plus
the COO have together been paid or had accrued a total of $428,000 for the
nine
months to September 30, 2007.
NOTE
I — ACQUISITION OF ATLAS TECHNOLOGY GROUP
On
January 20, 2006, the Company acquired 100 percent of the issued capital of
TakeCareofIT Holdings Limited (now renamed Atlas Technology Group Holdings
Limited), a Malta corporation, and its subsidiaries, who have been collectively
doing business as Atlas Technology Group for $37,235 in cash and assumed
$1,143,780 of current liabilities (of which $1,073,744 plus interest was due
to
Tribeworks). Atlas Technology Group Holdings Limited was established in
September 2004 to provide external Information Technology (IT) application
support services for organizations with large IT functions. See Note B
above.
The
acquisition was accounted for using the purchase method of accounting. The
purchase price was allocated to the tangible and intangible net assets acquired
based on the management’s evaluation of their respective replacement values on
the acquisition date in accordance with SFAS No. 141. Upon acquisition, Atlas
Technology Group Holdings Limited became a wholly owned subsidiary of
Tribeworks, Inc.
The
purchase price was allocated as follows:
Cash
|
|
$
|
93,273
|
|
VAT
receivable
|
|
|
22,596
|
|
Deposits/Prepaids
|
|
|
4,924
|
|
Equipment
|
|
|
225,030
|
|
IT
Technology
|
|
|
835,192
|
|
|
|
$
|
1,181,015
|
|
NOTE
J — ACQUISITION OF BLIVE
On
January 19, 2007, the Company entered into an Asset and Stock Purchase Agreement
(the “BLive
Agreement”)
with
BLive, Forte Finance Limited, a Maltese limited liability company (“Forte”)
and
Petroleum Corporation of Canada Limited, an Alberta corporation (“Petroleum
Corp.”),
pursuant to which the Company purchased substantially all of the assets of
BLive
in exchange for 1,000,000 fully paid shares of Common Stock in the Company.
This
agreement was closed on January 26, 2007.
Additionally,
in consideration of the payment by Petroleum Corp. of $100,010, the Company
agreed to issue to Petroleum Corp. 100,000 fully paid shares of the Company’s
Common Stock and a warrant to purchase 300,000 shares of Common Stock of the
Company at $1.25 per share exercisable for a period of two years. The shares
issued in connection with this transaction have been issued to Petroleum Corp.,
as a creditor of BLive. In addition, 150,000 shares of Common Stock have been
issued to Forte as an M&A fee for the transaction (“Advisory
Shares”).
The
shares issued in connection with this transaction are “restricted securities”
(as defined in the Securities Act of 1933, as amended, (the “Act”)).
In
connection with the BLive Agreement, the Company also entered into an escrow
agreement with the following parties with the following terms: (a) an Escrow
Agreement between Petroleum Corp. and the Company, whereby 300,000 shares of
Common Stock will be held in escrow until the receipt of certain Canadian tax
refunds owed to InfoBuild (refunds since received); and (b) an Escrow
Indemnification Agreement between Forte and the Company, whereby the 150,000
shares of Common Stock issued to Forte will be held in escrow until the
expiration of a twelve month indemnity period that was signed pursuant to an
agreement with Forte, dated January 19, 2007.
As
part
of the BLive Agreement, the Company has also acquired a 49% ownership interest
in BLive’s Canadian affiliate, InfoBuild Networks (Canada) Inc. InfoBuild
Networks (Canada) Inc has subsequently been renamed BLive Networks Inc., and
the
business is now trading through this entity. The Company subsequently exercised
an option agreement to purchase the remaining 51%.
The
offering of these unregistered securities were exempt from registration pursuant
to Rule 506 promulgated under the Securities Act of 1933. Each of these
investors represented to us, in writing, that it was an “accredited investor” as
that term is defined in Rule 501(a) of Regulation D promulgated under the
Securities Act of 1933. The proceeds from these sales of unregistered securities
are being used for general working capital purposes.
The
purchase price was allocated as follows:
Cash
|
|
$
|
414
|
|
Accounts
Receivable, net (since collected)
|
|
|
150,520
|
|
Computer
equipment
|
|
|
57,204
|
|
Customer
list and Trademarks
|
|
|
555,312
|
|
IT
Technology
|
|
|
505,121
|
|
|
|
|
1,268,571
|
|
Less
Creditors
|
|
|
(6,448
|
)
|
|
|
$
|
1,262,123
|
|
NOTE
K — SUBSEQUENT EVENTS
There
have been no material events subsequent to September 30, 2007.
Item
2. Management’s Discussion and Analysis or Plan of
Operation.
SPECIAL
NOTE REGARDING FORWARD LOOKING STATEMENTS
In
addition to historical information, the following discussion contains statements
that plan for or anticipate the future. These forward-looking statements include
statements about our future business plans and strategies, future actions,
future performance, costs and expenses, interest rates, outcome of
contingencies, financial condition, results of operations, liquidity, objectives
of management, and other such matters, as well as certain projections and
business trends, and most other statements that are not historical in nature,
that are "forward-looking" within the meaning of the Private Securities
Litigation Reform Act of 1995.
The
Private Securities Litigation Reform Act of 1995 provides a “safe harbour” for
forward-looking information to encourage companies to provide prospective
information about themselves without fear of litigation so long as that
information is identified as forward-looking and is accompanied by meaningful
cautionary statements identifying important factors that could cause actual
results to differ materially from those projected in the information.
Forward-looking information may be included in this Quarterly Report or may
be
incorporated by reference from other documents we have filed with the Securities
and Exchange Commission (the “SEC”).
You
can identify these forward-looking statements by the use of words like “may,”
“will,” “could,” “should,” “project,” “believe,” “anticipate,” “expect,” “plan,”
“estimate,” “forecast,” “potential,” “intend,” “continue” and variations of
these words or comparable words. Forward-looking statements do not guarantee
future performance, and because forward-looking statements involve future risks
and uncertainties, there are factors that could cause actual results to differ
materially from those expressed or implied. These risks and uncertainties
include, without limitation, those detailed from time to time in our filings
with the SEC.
We
have
based the forward-looking statements relating to our operations on management's
current beliefs expectations, estimates, and projections about us and the
industry in which we operate, as well as assumptions and information currently
available to us. These statements are not guarantees of future performance
and
involve risks, uncertainties and assumptions that we cannot predict. In
particular, we have based many of these forward-looking statements on
assumptions about future events that may prove to be inaccurate. Because
forward-looking statements involve future risks and uncertainties, there are
several important factors that could cause actual results to differ materially
from historical results and percentages and from the results anticipated by
these forward-looking statements.
For
example, a few of the uncertainties that could affect the accuracy of
forward-looking statements include, without limitation:
·
|
Whether
or not our products are accepted by the marketplace and the pace
of any
such acceptance;
|
·
|
Our
ability to continue to grow our Tools and Enterprise
businesses;
|
·
|
Improvements
in the technologies of our
competitors;
|
·
|
Changing
economic conditions; and
|
·
|
Other
factors, some of which will be outside of our
control.
|
Our
business model is primarily focused on delivering IT support services. We are
leveraging the recent advances in software, IT monitoring systems, and
communications, to build a new, leading edge, global support infrastructure,
providing 24x7 software support to large and medium sized companies. The new
application onboarding and monitoring processes that we have developed should
allow for cost savings over existing IT service providers. We believe the IT
support offerings offered using our software, systems and processes will provide
a quality product to a wide range of business enterprises and provide a maximum
return on our investment.
RISK
FACTORS
We
wish
to caution you that there are risks and uncertainties that could cause our
actual results to be materially different from those indicated by
forward-looking statements that we make from time to time in filings with the
SEC, news releases, reports, proxy statements, registration statements and
other
written communications, as well as oral forward-looking statements made from
time to time by representatives of our Company. These risks and uncertainties
include, but are not limited to, those listed in the Company’s Annual Report on
Form 10-KSB for the year ended December 31, 2006. These risks and uncertainties
and additional risks and uncertainties not presently known to us or that we
currently deem immaterial may cause our business, financial condition, operating
results and cash flows to be materially adversely affected. Except for the
historical information contained herein, the matters discussed in this analysis
are forward-looking statements that involve risks and uncertainties, including
but not limited to general business conditions, the impact of competition,
and
other factors which are often beyond the control of the Company. The Company
does not undertake any obligation to update forward-looking statements except
as
required by law. You should refer to and carefully review the information in
future documents we file with the SEC.
FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
We
experienced a net operating loss (EBIT) of $833,743 for the quarter ended
September 30, 2007 compared to a net operating loss of $571,076 from continuing
operations for the same quarter in 2006. This brings us to a net operating
loss
(EBIT) of $2,232,319 for the nine months ended September 30, 2007 compared
to a
net operating loss from continuing operations of $1,366,067 for the first nine
months of 2006.
2006
was
a transitional year for us with the acquisition of AtlasTG on January 20, 2006
and the sale of our previous business, operated from within TDC, on September
14, 2006. With the sale of TDC the results of TDC for the first half of 2006
have been treated as discontinued operations in the first nine months of 2006
financial statements and as a result the net gain from the sale of TDC of
$192,685 has not been included in the comparative operating loss of $1,366,067
above. The results of operations from TDC will be included in comparative
figures stated below and comment will be made about the impact of the now
discontinued revenues and expenses of TDC where appropriate.
On
January 26, 2007 the Company acquired all of the assets (but not the
liabilities) and 700 customers of BLive Networks, Inc., for a consideration
of
1,150,000 shares of common stock of the Company (“Common
Stock”).
Additionally, in consideration of the payment by Petroleum Corp. of Canada
of
$100,010, the Company issued to Petroleum Corp 100,000 fully paid shares of
the
Company’s Common Stock and a warrant to purchase 300,000 shares of Common Stock
of the Company at $1.25 per share exercisable for a period of two years (see
Note J to the consolidated interim financial statements located elsewhere in
this report for further detail of this acquisition). Included with these assets
was a Canadian company called InfoBuild Networks (Canada) Inc. and the assets
acquired have been injected into this company and the name of it has been
changed to BLive Networks Inc. (“BLive”)
and
the business has continued to trade through this company. The assets acquired
have been consolidated into these financial statements and the results of BLive
from January 26, 2007 have been included after making adjustments for certain
pre-acquisition and post-acquisition events.
At
the
annual general meeting of the Company on July 12, 2007, the name of the Company
was changed from Tribeworks, Inc. to Atlas Technology Group, Inc. and as of
August 16, 2007, the Company’s Common Stock now trades under the ticker
symbol ATYG.OB with the new CUSIP number of 049432 107 and new ISIN number
of US0494321070.
Revenues
Total
revenues were $409,584 for the nine months ended September 30, 2007, compared
to
$24,734 for the nine months ended September 30, 2006. It should be noted that
$24,734 was our first revenue of the new business stream and was all booked
in
the third quarter of 2006).
The
revenue of $409,584 can be split into three categories: a) revenue from
consulting services and placing consultants with third parties of $183,944;
b)
sales support services software through our BLive operations of $63,406 for
the
eight months following the acquisition of BLive; and c) $162,234 of onboarding
and support sales. The onboarding and support revenue in the current year is
the
first revenue generated by our new mainstream business and will build over
coming months as new customers are onboarded and become mainstream support
customers. The consulting services are being provided to potential software
support customers from our Redmond office and the provision of consultants
is
through a joint venture with Breard LLC where we are operating a staff
augmentation consulting service for potential support customers as a first
step
in developing a relationship with these potential customers.
While
the
revenue in the first quarter came from the provision of consulting services
and
from our new BLive operation, the bulk of the increase in our revenue for the
second and third quarters came primarily from onboarding and support to our
first IT support customers that we began providing services to in March 2007.
We
completed the onboarding to our first customer, Mobile Content Networks, Inc.
(“MCN”),
in
Palo Alto, California in March 2007. MCN provides real-time mobile search
solutions to 3GSM mobile telephone networks such as D2 of Japan and Total Access
Communications Plc (“DTAC”)
of
Thailand. At the end of 2006, D2 Communications, the largest mobile advertising
agency in the world, released its FM Radio Search service to DoCoMo handset
users providing listeners of FM radio with one click access to ringtones, music
downloads, CDs and DVDs through MCN’s MobileSearch.net platform. MCN is
currently working with over twenty partners in ten countries who are developing
solutions based on its platform.
We
are
currently onboarding our third, fourth and fifth IT application support
customers, Shoe Pavilion Inc (“Shoe
Pavilion”),
Operative, Inc (“Operative”)
and
PayPlusBenefits, Inc (“PayPlus”),
using
our own staff, and we expected to start generating support revenue from these
customers before year end.
Shoe
Pavilion is a Sherman Oaks, CA, based independent off-price footwear
retailer with 108 stores in locations in the Western and South-western United
States. Operative is a New York, NY, provider of ad operations software,
technology and outsourcing services. PayPlus is a Pasco, WA, based
nationally recognized, award-winning Professional Employer Organization,
who outsources human resources administration and payroll functions
for companies.
We
are
also in discussions with a major international IT company to provide our
application support services and will hopefully enter into a preliminary
agreement with this company in the fourth quarter of 2007.
We
anticipate that revenue from our new IT support services will increase during
the year as new customers are recruited and onboarded by our newly appointed
sales and onboarding partners. To date, we have appointed Universal Information
Technology Group, Ltd (“UniTech”)
and PA
Consulting from the UK and the Italian IT consulting company Bizmatica Sistemi
s.r.l., as onboarding partners for our software services and IT support. We
are
currently negotiating with another party in Europe and are close to finalizing
an agreement with a large international consulting firm to also become our
onboarding partner in the United States.
With
the
acquisition of the business of BLive in January 2007, we acquired 700 customers
and an established annual revenue base of approximately $250,000. We are
planning to integrate the BLive business and proprietary support tools to
strengthen our remote technical support and sales, both externally, and for
our
internal corporate Helpdesk support departments and to upgrade the BLive
product. BLive targets users within the worldwide Helpdesk support market,
which
diversifies our revenue base.
Cost
of Sales
Our
cost
of sales for the nine months of 2007 was $269,091 compared to $193,691 for
the
first six months to June 30, 2007 and $83,711 in the first three months to
March
31, 2007. There are no comparable cost of sales for 2006 as AtlasTG was still
developing its software tools and BLive was acquired in January 2007. Cost
of
sales includes an allocation of salary costs related to the consulting work
performed and BLive support services provided, as well as the salaries and
engagement fees for the consultants provided to third parties and the share
of
income for our joint venture partner. The salary costs for our mainstream
support services are included under operating expenses with the IT software
development and support line.
While
the
Gross Margin for the nine months to September 30, 2007 was $140,493 (Nil for
2006) as we are still getting systems established it is too early to predict
what gross margin percentages of revenue will be going forward.
Operating
Expenses
During
the 2006 year, we developed our new software tools for onboarding and monitoring
of our customer’s software applications. Part of these costs have been
capitalized in accordance with Statement of Financial Accounting Standards
No.
86, “Accounting for the Costs of Computer Software to Be Sold, Leased, or
Otherwise Marketed” (“SFAS
86”)
and
the balance has been treated as an operating expense. In the first nine
months of 2007, $293,222 was capitalized (compared to $312,581 in the first
nine
months of 2006) with $1,021,404 of IT development and support costs being
expensed compared to $656,130 in the first nine months of 2006. In the third
quarter of 2007, $379,068 was expensed compared to $282,034 in the third quarter
of 2006. With our software now going into production with real-time customers,
the amount being capitalized in future periods will substantially decline in
future periods as more of our costs will be directed at our support functions
rather than development functions. Also during 2007 and more particularly in
the
second and third quarters of 2007, as the value of the US dollar has fallen
against both the Euro and the New Zealand dollar, the cost of our operations
in
both Malta and New Zealand have increased in US dollar terms and adversely
impacted our results, even though the local costs in Malta and New Zealand
have
not increased substantially.
Sales
and
marketing expenses for the nine months ended September 30, 2007 were $204,840
(which is in line with the level of expenditure in the first two quarters of
2007) compared to $80,009 for the nine months ended September 30, 2006. Sales
and marketing expenses for the quarter ended September 30, 2007 were $72,909
compared to $35,485 for the quarter ended September 30, 2006 and increased
in
the quarter as we employed additional staff resource into this area. Sales
and
marketing expense consists primarily of compensation and benefits for our sales
and marketing team, plus advertising expenses which are primarily the costs
incurred in the design, development, and printing of our literature and
marketing materials. We expense all advertising expenditures as incurred. Sales
and marketing expenses will continue to grow as we move into the growth stage
and as we continue to expand our market presence in 2007.
Depreciation
and amortization expense increased substantially in the second and third
quarters and for the nine months ended September 30, 2007 it was $261,400 with
$176,273 ($88,137 in the previous quarter) being amortized off the IT technology
and customer lists that we purchased as part of the BLive assets, which are
being amortized over the next three years. When this is deducted, the
remaining depreciation charge for the nine months ended September 30, 2007
at
$85,127, which is in line with the depreciation charge for the first two
quarters of 2007. There are no relevant comparables for 2006 as the business
and
software were in the development phase. As we move into the full support phase
in the coming months, the amortization of the capitalized software over three
years will begin and this will also become a significant expense in future
periods, which will offset the increase in revenue from our application support
operations.
General
and administrative expenses consist primarily of compensation and benefits,
fees
for professional services such as legal and audit, as well as overhead. General
and administrative expenses were $885,168 for the nine months ended September
30, 2007 compared to $654,662 for the nine months ended September 30, 2006.
General and administrative expenses were $307,312 for the quarter ended
September 30, 2007 compared to $278,291 for the quarter ended September 30,
2006. The differences between the two years is attributed to an increase in
administrative costs associated with an increasing number of executives;
additional costs that are attributed to an increase in employees and rental
expenses associated with our additional operating location we added in Redmond,
Washington, in the middle of 2006 and additional legal expense associated with
the WCOF financing transaction. In addition, three members of the executive
team
worked without compensation in the first quarter of 2006. It is expected that
general and administrative costs will be reduced from the present level during
the remainder of 2007.
Loss
from Operations
The
loss
from operations for the continuing business for the nine months ended September
30, 2007 was $2,232,319 compared to a loss of $1,366,067 for the nine months
ended September 30, 2006. This increased loss was due to additional support
cost, sales and marketing expense and depreciation and amortization as detailed
above. For the quarter ended September 30, 2007 the loss was $833,743 compared
to a loss of $571,076 for the third quarter of 2006. Again the main factors
causing the increased loss were additional support cost, sales and marketing
expense and depreciation and amortization. As revenue increases the loss from
operations will reduce as we have sufficient office space in all three locations
to accommodate our immediate needs and to accommodate additional staff we need
to hire. In addition general and administrative costs will remain at the same
levels as we build up revenue over the coming twelve months.
Interest
Income, Expense and other financing charges
Interest
expense was $84,219 for the nine months ended September 30, 2007 and $53,357
for
the quarter ended September 30, 2007. The increase is due to the accrual of
interest on the WCOF term loan and also the accrual of $9,000 of penalty
interest on the Note Payable that fell due on September 30, 2007 when the
repayment date was extended.
Interest
income the nine months ended September 30, 2007 was $28,094 compared to $7,439
for the first nine months of 2006. Interest income for the three months ended
September 30, 2007 was $26,028 compared to $6,318 in the third quarter of 2006.
The increase in the third quarter of 2007 is primarily attributable to the
accrual of interest on the $4,000,000 borrowed from WCOF as detailed in Note
D
to the financial statements above and held in the escrow deposit. Interest
expense will be an increasing cost for the remainder of 2007 as interest expense
is accrued and paid on the full WCOF facility of $5 million at an interest
rate
of 5%. Some of this expense will be offset by interest income on the escrow
deposit which accounted for the bulk of the interest income in the
period.
Following
the issuance to WCOF of 6,500,000 shares of Common Stock in the form of “yield
enhancement shares” and the warrants exercisable for five years to purchase
6,500,000 shares of Common Stock at an exercise price of $2.60 per share (see
Notes D and F to the financial statements above) and other associated
transactions, we have been required to carry out a series of Black-Scholes
valuations to fair value the various securities that have been issued and then
to account for them as additional paid in capital that has then been either
expensed as to $1,082,071 (in addition to the $769,150 expensed in the second
quarter) plus the amortization of the capitalized amounts of $814,607 during
the
quarter ended September 30, 2007 ($70,225 in the second quarter of 2007) .
In
total
$3,599,486 of other financing charges have been expensed or amortized during
the
nine months ended September 30, 2007 (nil 2006), with $2,184, 305 of these
being
expensed or amortized during the three months ended September 30, 2007,
$1,893,678 relates to the WCOF financing transaction. These prepaid financing
charges are being amortized over the 17 months to the repayment date of the
WCOF
debt on November 30, 2008.
The
offering of these unregistered securities were exempt from registration pursuant
to Rule 506 promulgated under the Securities Act of 1933. WCOF represented
to us
in writing that it was an “accredited investor” as that term is defined in Rule
501(a) of Regulation D promulgated under the Securities Act of 1933.
The
proceeds from the sale of unregistered securities are being used for general
working capital purposes as will the WCOF Escrow once it is released from
Escrow.
Provision
for Income Taxes
Income
taxes for the nine months ended September 30, 2007 were $304 (being State income
taxes and withholding taxes deducted from interest income). The comparative
figures for the nine months ended September 30, 2006 were $1,902 and again
primarily State taxes. Income tax for the three months ended September 30,
2007
was $279 compared to $1,877 for the three months ended September 30,
2006.
Net
Income (Loss)
In
summary and discussed above, we experienced a net operating loss (EBIT) of
$2,232,319 for the nine months ended September 30, 2007 compared to a net
operating loss of $1,366,067 for the first nine months of 2006. The net
operating loss for the quarter ended September 30, 2007 was $833,743 compared
with a net operating loss of $571,076 for the quarter ended September 30, 2006.
When our net operating loss is added to our net interest and other financing
charges of $3,655,611, taxes of $304 and foreign exchange translation losses
of
$248,531, our comprehensive loss for the nine months ended September 30, 2007
is
$6,136,765 compared to a comprehensive loss of $1,167,845 for the nine months
ended September 30, 2006. The comprehensive net loss for the quarter ended
September 30, 2007 was $3,148,113 compared with a comprehensive loss from
continuing operations of $567,046 for the quarter ended September 30, 2006.
We
do not expect to be profitable during 2007, but we expect our level of operating
losses to reduce as we gain new application support customers and increase
our
revenue throughout the year.
Liquidity
and Capital Resources
At
September 30, 2007 we had total cash resources of $163,375 compared to $581,470
at June 30, 2007, $214,766 at March 31, 2007 and $130,991 at December 31, 2006.
Cash has been used to finance the losses incurred by the Company as it gets
its
new business stream established. At September 30, 2007, the Company also had
$4,028,265 of restricted cash in a restricted escrow account at Wells
Fargo N.A.
The
WCOF
facility yielded us a medium term loan in the amount of $5,000,000 which is
repayable on November 30, 2008. $4,000,000 of this loan was placed into an
escrow account with Wells Fargo Bank, N.A. and has accrued interest income
of
$28,265. Pursuant to the terms of the Escrow Agreement, the amount of $1,500,000
will not be released from escrow, unless one of our subsidiaries enters into
contracts with certain customer entities, totalling $1,000,000 in annual,
non-contingent future revenues prior to 5:00 p.m. on December 31, 2007. In
addition, the entire proceeds of the Second Note were also placed into the
escrow account and will not be released from escrow, unless Atlas US, the
Company or any of its subsidiaries enters into contracts with certain customer
entities, totalling $5,000,000 in non-contingent future revenues prior to 5:00
p.m. on December 31, 2007.
This
arrangement is further detailed in Note D to the financial statements
above.
We
arranged a further $200,000 of new equity from an existing stockholder at the
end of the third quarter. The funds were held as subscription monies at
September 30, 2007 and the shares will be issued during the fourth quarter
of
2007.
Related
Party Transactions
As
of
September 30, 2007, we have not entered into any contractual arrangements with
related parties other than as shown in Note H of the consolidated financial
statements above and a short term advance from a stockholder who is a director.
There are no other currently proposed transactions, or series of the same,
to
which we are a party, in which the amount involved exceeds $60,000 and in which,
to our knowledge, any director, executive officer, nominee, 5% stockholder
or
any member of the immediate family of any of the foregoing persons have or
will
have a direct or indirect material interest.
Recently
Issued Financial Accounting Pronouncements
None.
Off-Balance
Sheet Arrangements
We
have
no off-balance sheet arrangements that have or are reasonably likely to have
a
current or future effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources that is material to investors.
Item
3. Controls
and Procedures
Our
Chief
Executive Officer and Chief Financial Officer have concluded, based on their
evaluation required by Rule 13a-15(b) promulgated under the Exchange Act, that
as of September 30, 2007 our disclosure controls and procedures (as defined
in
Rule 13a-15(e) promulgated under the Exchange Act) are effective in alerting
them on a timely basis to material information relating to us (including our
consolidated subsidiaries) required to be included in our periodic filings
under
the Exchange Act, and include controls and procedures designed to ensure that
information required to be disclosed by us in such periodic filings is
accumulated and communicated to our management, including our Chief Executive
Officer, as appropriate to allow timely decisions regarding required disclosure.
Since September 30, 2007, there have not been any significant changes in our
disclosure controls and procedures or in other factors that could significantly
affect such controls.
There
were no significant changes in our internal control over financial reporting
identified in connection with the evaluation required by Rule 13a-15(d)
promulgated under the Exchange Act that occurred during the fiscal quarter
ended
September 30, 2007 that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.
PART
II — OTHER INFORMATION
Item
1. Legal
Proceedings
None.
Item
2. Unregistered
Sales of Equity Securities and Use of Proceeds.
During
the quarter ended June 30, 2007 the Company issued:
|
a)
|
3,250,000
shares of Common Stock and a warrant exercisable for five years to
purchase 3,250,000 shares of Common Stock at an exercise price of
$2.60
per share were issued to WCOF as part of the Securities Purchase
Agreement, dated July 11, 2007, between the Company, all of its
subsidiaries and WCOF. These warrants expire on July 11, 2012. This
transaction is described in more detail on our Current Report on
Form 8-K
filed on June 19, 2007.
|
|
b)
|
25,000
shares of Common Stock and a warrant exercisable for two years to
purchase
50,000 shares of Common Stock at an exercise price of $1.00 per share
were
issued in exchange for the extension of the repayment terms of a
Note
Payable. These warrants expire on July 26,
2009.
|
|
c)
|
10,000
shares of Common Stock were issued upon the exercise of a warrant
exercisable at $1.00 per share
|
The
offering of these securities were exempt from registration pursuant to Rule
506
promulgated under the Securities Act of 1933. Each of these investors
represented to us, in writing that it was an “accredited investor” as that term
is defined in Rule 501(a) of Regulation D promulgated under the Securities
Act
of 1933. The proceeds from these sales of unregistered securities are being
used
for general working capital purposes.
Item
3. Defaults
upon Senior Securities.
None.
Item
4. Submission
of Matters to a Vote of Security Holders.
The
following table summarizes the votes at the Annual Meeting of our stockholders
held on July 12, 2007:
Matter
|
|
For
|
|
Against
|
|
Withheld
|
|
Abstain
|
|
Non-Vote
|
|
Election
of Directors:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert
Altinger.
|
|
|
18,132,829
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
—
|
|
Andrew
Berger
|
|
|
18,132,829
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
—
|
|
W.
Gordon Blankstein
|
|
|
18,132,829
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
—
|
|
Robert
C. Gardner
|
|
|
18,132,829
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
—
|
|
Peter
B. Jacobson
|
|
|
18,132,829
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
—
|
|
B.S.P.
Marra
|
|
|
18,132,829
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
—
|
|
Ratification
of the appointment of Williams & Webster, P.S. as Independent Auditors
for the Company for 2007
|
|
|
18,132,829
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
—
|
|
Amendment
of the Company’s Certificate of Incorporation for Purposes of Changing the
Name of the Company to Atlas Technology Group, Inc.
|
|
|
18,132,829
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
—
|
|
Item
5. Other
Information.
None.
Item
6. Exhibits.
(a)
The
following exhibits are included in this report or incorporated by reference
into
this report:
EXHIBIT
NUMBER
|
|
DESCRIPTION
OF EXHIBITS
|
10.1
|
|
Securities
Purchase Agreement, dated June 15, 2007 by and among Tribeworks,
Inc., all
of its subsidiaries and West Coast Opportunity Fund, LLC (incorporated
by
reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K
filed June 19, 2007)*
|
|
|
|
10.2
|
|
Form
of Senior Secured Non-Convertible Promissory Note, dated July 11,
2007,
issued by Atlas Technology Group (US), Inc. to West Coast Opportunity
Fund, LLC (incorporated by reference to Exhibit 10.2 to the Registrant’s
Current Report on Form 8-K filed June 19, 2007)*
|
|
|
|
10.3
|
|
Pledge
and Security Agreement, dated June 15, 2007, by and among Tribeworks,
Inc., all of its subsidiaries and West Coast Opportunity Fund, LLC
(incorporated by reference to Exhibit 10.3 to the Registrant’s Current
Report on Form 8-K filed June 19, 2007)*
|
|
|
|
10.4
|
|
Secured
Guaranty, dated June 15, 2007, by and among Tribeworks, Inc. all
of its
subsidiaries except Atlas Technology Group (US), Inc. and West Coast
Opportunity Fund, LLC (incorporated by reference to Exhibit 10.4
to the
Registrant’s Current Report on Form 8-K filed June 19,
2007)*
|
|
|
|
10.5
|
|
Escrow
Agreement, dated June 15, 2007, by and among Atlas Technology Group
(US),
Inc., West Coast Opportunity Fund, LLC and Wells Fargo Bank, National
Association (incorporated by reference to Exhibit 10.5 to the Registrant’s
Current Report on Form 8-K filed June 19, 2007)*
|
|
|
|
10.6
|
|
Registration
Rights Agreement, dated June 15, 2007, between Tribeworks, Inc. and
West
Coast Opportunity Fund, LLC (incorporated by reference to Exhibit
10.6 to
the Registrant’s Current Report on Form 8-K filed June 19,
2007)*
|
|
|
|
10.7
|
|
Form
of Warrant, dated July 11, 2007, to purchase 3,250,000 shares of
Common
Stock of Tribeworks, Inc. issued to West Coast Opportunity Fund,
LLC
(incorporated by reference to Exhibit 10.7 to the Registrant’s Current
Report on Form 8-K filed June 19, 2007)*
|
|
|
|
10.8
|
|
Form
of Lock-Up Agreement, dated June 15, 2007, between West Coast Opportunity
Fund, LLC and certain stockholders of Tribeworks, Inc. (incorporated
by
reference to Exhibit 10.8 to the Registrant’s Current Report on Form 8-K
filed June 19, 2007)*
|
|
|
|
31.1
|
|
Certification
of Chief Executive Officer Pursuant to Rule 13a-14(a) and
15d-14(a).
|
|
|
|
31.2
|
|
Certification
of Chief Financial Officer Pursuant to Rule 13a-14(a) and
15d-14(a).
|
|
|
|
32.1
|
|
Certification
of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley
Act.
|
|
|
|
32.2
|
|
Certification
of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley
Act.
|
SIGNATURES
In
accordance with the requirements of the Exchange Act, the registrant caused
this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
|
|
|
|
TRIBEWORKS,
INC.,
|
|
a
Delaware corporation
|
|
|
|
Date:
November 14, 2007
|
By:
|
/s/
Peter B Jacobson
|
|
Peter
B Jacobson
|
|
Chief
Executive Officer
|
|
|
|
|
|
|
Date:
November 14, 2007
|
By:
|
/s/
B. S. P. Marra
|
|
B.
S. P. Marra
|
|
Chief
Financial Officer
|
Index
to Exhibits
EXHIBIT
NUMBER
|
|
DESCRIPTION
OF EXHIBITS
|
10.1
|
|
Securities
Purchase Agreement, dated June 15, 2007 by and among Tribeworks,
Inc., all
of its subsidiaries and West Coast Opportunity Fund, LLC (incorporated
by
reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K
filed June 19, 2007)*
|
|
|
|
10.2
|
|
Form
of Senior Secured Non-Convertible Promissory Note, dated July 11,
2007,
issued by Atlas Technology Group (US), Inc. to West Coast Opportunity
Fund, LLC (incorporated by reference to Exhibit 10.2 to the Registrant’s
Current Report on Form 8-K filed June 19, 2007)*
|
|
|
|
10.3
|
|
Pledge
and Security Agreement, dated June 15, 2007, by and among Tribeworks,
Inc., all of its subsidiaries and West Coast Opportunity Fund, LLC
(incorporated by reference to Exhibit 10.3 to the Registrant’s Current
Report on Form 8-K filed June 19, 2007)*
|
|
|
|
10.4
|
|
Secured
Guaranty, dated June 15, 2007, by and among Tribeworks, Inc. all
of its
subsidiaries except Atlas Technology Group (US), Inc. and West Coast
Opportunity Fund, LLC (incorporated by reference to Exhibit 10.4
to the
Registrant’s Current Report on Form 8-K filed June 19,
2007)*
|
|
|
|
10.5
|
|
Escrow
Agreement, dated June 15, 2007, by and among Atlas Technology Group
(US),
Inc., West Coast Opportunity Fund, LLC and Wells Fargo Bank, National
Association (incorporated by reference to Exhibit 10.5 to the Registrant’s
Current Report on Form 8-K filed June 19, 2007)*
|
|
|
|
10.6
|
|
Registration
Rights Agreement, dated June 15, 2007, between Tribeworks, Inc. and
West
Coast Opportunity Fund, LLC (incorporated by reference to Exhibit
10.6 to
the Registrant’s Current Report on Form 8-K filed June 19,
2007)*
|
|
|
|
10.7
|
|
Form
of Warrant, dated July 11, 2007, to purchase 3,250,000 shares of
Common
Stock of Tribeworks, Inc. issued to West Coast Opportunity Fund,
LLC
(incorporated by reference to Exhibit 10.7 to the Registrant’s Current
Report on Form 8-K filed June 19, 2007)*
|
|
|
|
10.8
|
|
Form
of Lock-Up Agreement, dated June 15, 2007, between West Coast Opportunity
Fund, LLC and certain stockholders of Tribeworks, Inc. (incorporated
by
reference to Exhibit 10.8 to the Registrant’s Current Report on Form 8-K
filed June 19, 2007)*
|
|
|
|
31.1
|
|
Certification
of Chief Executive Officer Pursuant to Rule 13a-14(a) and
15d-14(a).
|
|
|
|
31.2
|
|
Certification
of Chief Financial Officer Pursuant to Rule 13a-14(a) and
15d-14(a).
|
|
|
|
32.1
|
|
Certification
of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley
Act.
|
|
|
|
32.2
|
|
Certification
of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley
Act.
|