U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(Mark One)
/X/ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended SEPTEMBER 30, 2002
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/ / Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from __________
to ___________.
Commission file number 0-27282
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ATLANTIC TECHNOLOGY VENTURES, INC.
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(Exact name of small business issuer as specified in its charter)
DELAWARE 36-3898269
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
350 FIFTH AVENUE, SUITE 5507, NEW YORK, NEW YORK 10118
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(Address of principal executive offices)
(212) 267-2503
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(Issuer's telephone number)
150 BROADWAY, SUITE 1110, NEW YORK, NEW YORK 10038
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(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 X No
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Number of shares of common stock outstanding as of November 7, 2002: 16,989,596
Transitional Small Business Disclosure Format (check one): Yes No X
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INDEX
Page
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PART I-- FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets (unaudited)
as of September 30, 2002 and December 31, 2001 3
Consolidated Statements of Operations (unaudited)
for the three and nine months ended September 30, 2002 and 2001,
and the period from July 13, 1993 (inception) to September 30, 2002 4
Consolidated Statements of Cash Flows (unaudited)
for the nine months ended September 30, 2002 and 2001, and the
period from July 13, 1993 (inception) to September 30, 2002 5
Notes to Consolidated Financial Statements (unaudited) 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations 11
Item 4 Controls and Procedures 17
PART II-- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 18
SIGNATURES 24
2
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ATLANTIC TECHNOLOGY VENTURES, INC. AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Balance Sheets
(Unaudited)
SEPTEMBER 30, DECEMBER 31,
ASSETS 2002 2001
----------------- ------------------
Current assets:
Cash and cash equivalents $ 375,845 1,591,761
Prepaid expenses 81,614 38,593
----------------- ------------------
Total current assets 457,459 1,630,354
Property and equipment, net 70,237 105,153
Other assets 19,938 22,838
----------------- ------------------
Total assets $ 547,634 1,758,345
================= ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 503,945 508,613
Stockholders' equity:
Preferred stock, $.001 par value. Authorized 10,000,000
shares; 1,375,000 shares designated as Series A
convertible preferred stock -- --
Series A convertible preferred stock, $.001 par value.
Authorized 1,375,000 shares; 379,152 and 346,357 shares issued and
outstanding at September 30, 2002 and December 31, 2001, respectively
(liquidation preference aggregating $4,928,976 and $4,502,641 at
September 30, 2002 and December 31, 2001, respectively) 379 346
Convertible preferred stock warrants, 112,896 issued and outstanding at
September 30, 2002 and December 31, 2001 520,263 520,263
Common stock, $.001 par value. Authorized 50,000,000
shares; 16,989,596 and 15,965,359 shares issued and outstanding
at September 30, 2002 and December 31, 2001, respectively 16,990 15,965
Common stock subscribed. 182 shares at September 30, 2002
and December 31, 2001 -- --
Additional paid-in capital 27,411,259 27,442,106
Deficit accumulated during development stage (27,904,660) (26,728,406)
----------------- ------------------
44,231 1,250,274
Less common stock subscriptions receivable (218) (218)
Less treasury stock, at cost (324) (324)
----------------- ------------------
Total stockholders' equity 43,689 1,249,732
----------------- ------------------
Total liabilities and stockholders' equity $ 547,634 1,758,345
================= ==================
See accompanying notes to unaudited consolidated financial statements.
3
ATLANTIC TECHNOLOGY VENTURES, INC. AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Operations
(Unaudited)
CUMULATIVE
PERIOD FROM
JULY 13, 1993
THREE MONTHS ENDED NINE MONTHS ENDED (INCEPTION) TO
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
------------------------ ------------------------ ---------------
2002 2001 2002 2001 2002
------------ ---------- ---------- ---------- ----------------
Revenues:
Development revenue $ -- $ -- $ -- $ 2,461,922 $ 8,713,720
License revenue -- -- 500,000 -- 3,000,000
Grant revenue -- -- -- 250,000 616,659
------------ ---------- ----------- ------------ --------------
Total revenues -- -- 500,000 2,711,922 12,330,379
------------ ---------- ----------- ------------ --------------
Costs and expenses:
Cost of development revenue -- -- -- 2,082,568 7,084,006
Research and development 125,376 172,257 467,153 774,340 10,858,779
Acquired in-process research and
development -- -- -- -- 2,653,382
General and administrative 462,864 496,294 1,225,201 2,333,567 19,899,834
Compensation expense (benefit) relating to stock
warrants (general and administrative), net -- 35,968 (5,845) 70,634 1,093,631
License fees -- -- -- -- 173,500
------------ ---------- ----------- ------------ -------------
Total operating expenses 588,240 704,519 1,686,509 5,261,109 41,763,132
------------ ---------- ----------- ------------ -------------
Operating loss (588,240) (704,519) (1,186,509) (2,549,187) (29,432,753)
Other (income) expense:
Interest and other income (1,826) (6,266) (10,255) (40,618) (1,303,401)
Gain on sale of Optex assets -- -- -- (2,569,451) (2,569,451)
Loss on sale of Gemini assets -- -- -- 334,408 334,408
Interest expense -- -- -- -- 625,575
Equity in loss of affiliate -- 37,309 -- 58,993 146,618
Distribution to minority shareholders -- -- -- 837,274 837,274
------------ ---------- ----------- ------------ -------------
Total other (income) expense (1,826) 31,043 (10,255) (1,379,394) (1,928,977)
------------ ---------- ----------- ------------ -------------
Net loss $ (586,414) $ (735,562) $(1,176,254) $ (1,169,793) $ (27,503,776)
=========== ========== =========== ============ =============
Imputed convertible preferred stock
dividend -- -- -- 600,000 5,931,555
Dividend paid upon repurchase of Series B -- -- -- 167,127 400,884
Preferred stock dividend issued in
preferred shares 26,598 43,305 65,760 107,449 1,456,272
------------ ---------- ----------- ------------ -------------
Net loss applicable to common shares $ (613,012) $ (778,867) $(1,242,014) $ (2,044,369) $ (35,292,487)
=========== ========== =========== ============ =============
Net loss per common share:
Basic and diluted $ (0.04) $ (0.11)$ (0.07) $ (0.30)
=========== ========== =========== ============
Weighted average shares of common stock outstanding:
Basic and diluted 16,989,596 7,166,090 16,949,797 6,734,788
=========== ========== =========== ============
See accompanying notes to unaudited consolidated financial statements.
4
ATLANTIC TECHNOLOGY VENTURES, INC. AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Cash Flows
(Unaudited)
CUMULATIVE
PERIOD FROM
JULY 13, 1993
NINE MONTHS ENDED SEPTEMBER 30, (INCEPTION) TO
---------------------------------------- SEPTEMBER 30,
2002 2001 2002
----------------- ----------------- ------------------
Cash flows from operating activities:
Net loss $ (1,176,254) (1,169,793) (27,503,776)
Adjustments to reconcile net loss to
net cash used in operating activities:
Acquired in-process research and development -- -- 1,800,000
Expense relating to issuance
of common stock and warrants 13,500 488,100 799,802
Expense relating to the issuance of options -- -- 81,952
Expense related to Channel merger -- -- 657,900
Change in equity of affiliate -- 58,993 146,618
Compensation expense (benefit) relating to
stock options and warrants (5,845) 70,634 1,301,676
Discount on notes payable - bridge financing -- -- 300,000
Depreciation 37,113 55,015 609,844
Gain on sale of Optex assets -- (2,569,451) (2,569,451)
Distribution to Optex minority shareholders -- 837,274 837,274
Loss on sale of Gemini assets -- 334,408 334,408
Loss on disposal of furniture and equipment 493 -- 73,880
Changes in assets and liabilities:
Decrease in accounts receivable -- 192,997 --
Increase in prepaid expenses (43,021) (4,595) (81,614)
Decrease in deferred revenue -- (1,294,615) --
Decrease in accrued expenses (4,668) (664,637) (123,213)
Increase (decrease) in accrued interest -- -- 172,305
Decrease (increase) in other assets 2,900 (19,937) (19,938)
----------------- ----------------- ---------------
Net cash used in operating activities (1,175,782) (3,685,607) (23,182,333)
----------------- ----------------- ---------------
Cash flows from investing activities:
Purchase of furniture and equipment (2,690) (108,250) (924,021)
Investment in affiliate -- -- (146,618)
Proceeds from sale of Optex assets -- 3,000,000 3,000,000
Proceeds from sale of furniture and equipment -- -- 6,100
----------------- ----------------- ---------------
Net cash provided by (used in) investing activities (2,690) 2,891,750 1,935,461
----------------- ----------------- ---------------
Cash flows from financing activities:
Proceeds from exercise of warrants -- -- 5,500
Proceeds from exercise of stock options -- -- 397,098
Proceeds from issuance of demand notes payable -- -- 2,395,000
Repayment of demand notes payable -- -- (125,000)
Proceeds from the issuance of notes payable -
bridge financing -- -- 1,200,000
Proceeds from issuance of warrants -- -- 300,000
Repayment of notes payable - bridge financing -- -- (1,500,000)
Repurchase of common stock -- -- (324)
Preferred stock dividend paid (807) (987) (2,112)
Net proceeds from the issuance of common stock (36,637) -- 9,450,872
Proceeds from issuance of convertible preferred stock -- -- 11,441,672
Repurchase of convertible preferred stock -- (617,067) (1,128,875)
Distribution to Optex minority shareholders -- (811,114) (811,114)
----------------- ---------------- ---------------
Net cash provided by (used in) financing activities (37,444) (1,429,168) 21,622,717
----------------- ---------------- ---------------
Net decrease in cash and cash equivalents (1,215,916) (2,223,025) 375,845
Cash and cash equivalents at beginning of period 1,591,761 2,663,583 --
----------------- ---------------- ---------------
Cash and cash equivalents at end of period $ 375,845 440,558 375,845
================= ================ ===============
Supplemental disclosure of noncash financing activities:
Issuance of common stock in exchange for
common stock subscriptions $ -- -- 7,027
Conversion of demand notes payable and the related
accrued interest to common stock -- -- 2,442,304
Cashless exercise of preferred warrants -- -- 49,880
Conversion of preferred to common stock 40 409 2,889
Preferred stock dividend issued in shares 65,760 107,449 1,299,089
================= =================== ================
See accompanying notes to unaudited consolidated financial statements.
5
ATLANTIC TECHNOLOGY VENTURES, INC. and SUBSIDIARIES
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September 30, 2002
(1) BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America for interim financial information. Accordingly, the
financial statements do not include all information and footnotes required by
accounting principles generally accepted in the United States of America for
complete annual financial statements. In the opinion of management, the
accompanying consolidated financial statements reflect all adjustments,
consisting of only normal recurring adjustments, considered necessary for fair
presentation. Interim operating results are not necessarily indicative of
results that may be expected for the year ending December 31, 2002 or for any
subsequent period. These consolidated financial statements should be read in
conjunction with the Annual Report on Form 10-KSB, as amended, of Atlantic
Technology Ventures, Inc. and its subsidiaries ("Atlantic") as of and for the
year ended December 31, 2001.
(2) LIQUIDITY
Atlantic has reported net losses of $1,734,945, $5,802,478, and
$2,446,515 for the years ended December 31, 2001, 2000 and 1999,
respectively. Atlantic has reported a net loss of $1,176,254 for the nine
months ended September 30, 2002. The net loss from date of inception, July
13, 1993, to September 30, 2002 amounts to $27,503,776. Also, Atlantic has
$375,845 in cash and cash equivalents as of September 30, 2002. Atlantic's
cash reserves are primarily the result of Atlantic's receipt of a licensing
fee of $500,000 in July 2002 resulting from Atlantic's licensing the
exclusive worldwide rights to the CT-3 compound to Indevus Pharmaceuticals,
Inc. Aside from this, Atlantic currently has no revenue-generating activities
which continues to increase Atlantic's working capital deficit. Atlantic
anticipates that its current resources will be sufficient to fund for
approximately the next two months its currently anticipated needs for
operating and capital expenditures. Atlantic plans to achieve this by
deferring payments on currently outstanding obligations to certain service
providers. Atlantic expects that its average monthly cash outlay will be
approximately $130,000. Atlantic does not currently have any committed
sources of financing, and due to the trading price of its common stock it is
not currently able to access funding under its agreement with Fusion Capital
Fund II, LLC. These factors raise substantial doubt about its ability to
continue as a going concern. The consolidated financial statements do not
include any adjustments relating to the recoverability and classification of
reported asset amounts or the amounts or classification of liabilities which
might result from the outcome of this uncertainty.
Atlantic's continued operations will depend on its ability to raise
additional funds through various potential sources such as equity and debt
financing, collaborative agreements, strategic alliances and its ability to
realize the full potential of its technology in development. As stated above,
in June 2002, Atlantic licensed the rights to the CT-3 compound to Indevus
Pharmaceuticals, Inc. in exchange for, among other things, a licensing fee of
$500,000. During December 2001, Atlantic received net proceeds of
approximately $1,848,000 from the private placement of securities with
various individual investors and $100,000 from Fusion Capital. During the
nine months ended September 30, 2002, Fusion also purchased 10,000 shares of
Atlantic common stock for $1,667. Additional funds are currently not
available on acceptable terms and may not become available, and there can be
no assurance that any additional funding that Atlantic does obtain will be
sufficient to meet Atlantic's needs in the short and long term. To date, a
significant portion of Atlantic's financing has been through private
placements of common stock and warrants, the issuance of common stock for
stock options and warrants exercised, debt financing and the licensing of its
technologies. Until Atlantic's operations generate significant revenues,
Atlantic will continue to fund operations from cash on hand and through the
sources of capital previously described.
Atlantic's common stock was delisted from the Nasdaq SmallCap Market
effective at the close of business August 23, 2001 for failing to meet the
minimum-bid-price requirements set forth in the NASD Marketplace Rules. As of
August 23, 2001, Atlantic's common stock trades on the Over-the-Counter Bulletin
Board under the symbol "ATLC.OB". Delisting of Atlantic's common stock from
Nasdaq could have a material adverse effect on its ability to raise additional
capital, its stockholders' liquidity and the price of its common stock.
6
(3) COMPUTATION OF NET LOSS PER COMMON SHARE
Basic net loss per common share is calculated by dividing net loss
applicable to common shares by the weighted-average number of common shares
outstanding for the period plus contingently issuable shares for little or no
consideration. Diluted net loss per common share equals basic net loss per
common share, since common stock equivalents from stock options, stock warrants,
stock subscriptions and convertible preferred stock would have an anti dilutive
effect because Atlantic incurred a net loss during each period presented. The
common stock equivalents from stock options, stock warrants, stock
subscriptions, and convertible preferred stock which have not been included in
the diluted calculations since their effect is antidilutive were 17,705,984 and
3,929,352 for the nine months ended September 30, 2002 and 2001 respectively.
(4) INCOME TAXES
Atlantic incurred a net loss for the nine months ended September 30,
2002 and 2001. In addition, Atlantic does not expect to generate book income for
the year ended December 31, 2002. Therefore, no income taxes have been reflected
for the three- and nine-month periods ended September 30, 2002 and 2001.
(5) PREFERRED STOCK DIVIDEND
On February 7, 2002 and August 15, 2002, Atlantic's board of directors
declared a payment-in-kind dividend of 0.065 of a share of Series A convertible
preferred stock for each share of Series A convertible preferred stock held as
of a specified record date. The estimated fair value of these dividends of
$26,598 and $65,760 was included in Atlantic's calculation of net loss per
common share for the three- and nine-month periods ended September 30, 2002,
respectively. The equivalent dividends for the three- and nine-month periods
ended September 30, 2001 had an estimated fair value of $43,305 and $107,449,
respectively and are recorded in the same manner.
(6) ISSUANCE OF STOCK, STOCK OPTIONS AND WARRANTS
On March 8, 2001, Atlantic entered into an agreement with The Investor
Relations Group, Inc. ("IRG") under which IRG provided Atlantic investor
relations services. Pursuant to this agreement, Atlantic issued to Dian Griesel,
the principal of IRG, warrants to purchase 120,000 shares of its common stock at
an exercise price of $0.875 per share and agreed to pay IRG $7,500 per month.
These warrants vested monthly in 5,000 share increments over a 24-month period.
As part of its effort to reduce expenses, Atlantic concluded the agreement with
IRG as of May 31, 2002 and therefore, the 45,000 unvested warrants have
terminated. In addition, in lieu of paying $15,000 for services rendered in
April and May 2002, IRG agreed to accept 75,000 common shares. The estimated
fair value of these shares of $13,500 was recorded as a general and
administrative expense during the nine months ended September 30, 2002. In
addition, pursuant to EITF Issue No. 96-18, "Accounting for Equity Instruments
That are Issued to Other Than Employees for Acquiring or in Conjunction with
Selling Goods or Services," Atlantic recorded compensation expense of $34,666
for the nine-month period ended September 30, 2001 relating to the original
issuance of the stock warrants to purchase 120,000 shares. As a result of a
decline in Atlantic's common stock price during the nine-month period ended
September 30, 2002 and the termination of 45,000 warrants, the cumulative
expense associated with these warrants was reduced. The reduction in the
estimated fair value of the warrants previously recorded and the current period
expense resulted in a net reversal of compensation expense of $5,845, which
reversal is recorded as a benefit during the nine-month period ended September
30, 2002.
Compensation for these warrants relates to investor relations services
and represents a general and administrative expense (benefit).
During the nine months ended September 30, 2002, Atlantic granted
employees an aggregate of 2,000,000 options outside of the Atlantic
Pharmaceuticals, Inc. 1995 Stock Option Plan. Of these options, 475,000 options
represent the annual issuance of stock options to Atlantic employees on terms
similar to those of prior year. They vest 25% upon issuance and the remaining
options vest in 25% increments on an annual basis. In addition, 950,000 of these
options were issued as incentive options and will vest upon the earlier of the
achievement of certain milestones by Atlantic or five years. The remaining
575,000 options were issued and fully vested in March 2002 as part of voluntary
revisions to compensation arrangements with certain employees which principally
resulted in the
7
employees deferring a significant portion of their salary. This deferred salary
is payable on the earlier of Atlantic's discretion, the employee's termination,
and, in certain cases, at the conclusion of the employee's contracts and as such
Atlantic continues to accrue for those salary costs. The 2,000,000 options were
granted at the stock price on the day of issuance, and are exercisable for a
period of ten years regardless of whether the grantee continues to be employed
by Atlantic.
(7) REDEEMABLE SERIES B PREFERRED SHARES
As described further in Atlantic's Form 10-KSB for the year ended
December 31, 2001, Atlantic entered into a convertible preferred stock and
warrants purchase agreement (the "Purchase Agreement"), with BH Capital
Investments, L.P. and Excalibur Limited Partnership (together, the "Investors"),
for the issuance of Atlantic's Series B convertible preferred stock and
warrants.
Pursuant to Atlantic's subsequent renegotiations with the Investors,
the conversion price per share of the Series B preferred stock on any given day
was amended to be the lower of (1) $1.00 or (2) 90% of the average of the two
lowest closing bid prices on the principal market of the common stock out of the
fifteen trading days immediately prior to conversion. The change in conversion
price upon the renegotiations on January 9, 2001 resulted in a difference
between the conversion price of the Series B preferred stock and the market
price of the common stock on the effective date of the renegotiation. This
amount, estimated at $600,000, was recorded as an imputed preferred-stock
dividend within equity and is deducted from net loss to arrive at net loss
applicable to common shares during the nine-month period ended September 30,
2001.
On January 19, 2001, 41,380 shares of Series B preferred stock were
converted by the Investors into 236,422 shares of Atlantic's common stock. On
March 9, 2001, Atlantic and the Investors entered into a second stock repurchase
agreement pursuant to which Atlantic repurchased from the Investors, for an
aggregate purchase price of $617,067, all 165,518 shares of Atlantic's Series B
preferred stock held by the Investors on March 9, 2001. The carrying amount of
the 165,518 shares was equal to $480,000; therefore the amount in excess of the
carrying amount, plus the estimated fair value of the warrants retained by the
Investors, which equals $167,127, was recorded as a dividend upon repurchase of
shares of Series B preferred stock and is deducted from net loss to arrive at
net loss applicable to common shares.
(8) DEVELOPMENT REVENUE
In accordance with a now-terminated license and development agreement,
Bausch & Lomb Surgical paid Atlantic's subsidiary, Optex Ophthalmologics, Inc.
("Optex"), for developing its Avantix (formerly known as Catarex) technology.
For the nine months ended September 30, 2002, this agreement provided no
development revenue and no related cost-of-development revenue as compared to
$2,461,922 of development revenue (including $1,067,345 in project-completion
bonuses paid out and recognized at the completion of the project in March 2001)
and related cost-of-development revenue of $2,082,568 for the nine months ended
September 30, 2001. The decrease in revenues and related expenses from Bausch &
Lomb over last year was due to the fact that there were no revenues and related
expenses since termination of the agreement in March 2001. With termination of
the above agreement at the conclusion of the sale of substantially all of
Optex's assets (mostly intangible assets with no book value) in March 2001, as
described in note 9 below, Atlantic no longer has the revenues or profits
associated with that agreement.
(9) SALE OF OPTEX ASSETS
Pursuant to an asset purchase agreement dated January 31, 2001, among
Bausch & Lomb Incorporated, a Bausch & Lomb affiliate, Atlantic, and Optex, on
March 2, 2001, Optex sold to Bausch & Lomb substantially all of its assets
(mostly intangible assets with no book value), including all those related to
the Avantix (formerly known as Catarex) technology. The purchase price was $3
million paid at closing (of which approximately $564,000 has been distributed to
Optex's minority shareholders). In addition, Optex is entitled to receive
additional consideration, namely $1 million once Bausch & Lomb receives
regulatory approval to market the Avantix device in Japan, royalties on net
sales on the terms stated in the original development agreement dated May 14,
1998, between Bausch & Lomb and Optex, as amended, and minimum royalties of
$90,000, $350,000, and $750,000 for the first, second, and third years,
respectively, starting on first commercial use of the Avantix device or
January 1, 2004,
8
whichever is earlier. Optex also has the option to repurchase the acquired
assets from Bausch & Lomb at fair value if it ceases developing the Avantix
technology.
Upon the sale of Optex assets, Bausch & Lomb's development agreement
with Optex was terminated and Optex has no further involvement with Bausch &
Lomb. As a result of this transaction, Atlantic recorded a net gain on the sale
of Optex assets of $2,569,451 for the nine-month period ended September 30,
2001. This includes a net loss of $240,000 for the quarter ended June 30, 2001,
as described below. The purchase price of $3,000,000 is nonrefundable and upon
the closing of the asset purchase agreement in March 2001, Optex had no further
obligation to Bausch & Lomb or with regard to the assets sold. In the asset
purchase agreement, Optex agreed to forgo future contingent payments provided
for in the earlier development agreement. Optex has recorded a profit
distribution for the nine months ended September 30, 2001 of $837,274,
representing the minority shareholders' percentage of the cumulative profit from
the Bausch & Lomb development and asset purchase agreements up to and including
proceeds from the sale of Optex's assets. (This figure includes the $564,000
referred to above.)
On May 9, 2001, Atlantic's board of directors, after considering all
the relevant facts and circumstances and consulting counsel agreed to
authorize an aggregate payment of $240,000 to three former employees of Optex
(who became employed by Bausch & Lomb). The payments were made on May 11,
2001, and represented the settlement of claims made by the employees
subsequent to the asset purchase agreement referred to above for severance
monies allegedly due under their employment agreement. Atlantic did not
believe these monies were due pursuant to the terms of the transaction or the
respective employment agreements. The board of directors elected to acquiesce
to the demands of the former employees and resolve the matter in light of the
potential future royalties from Bausch & Lomb and the importance of these
individuals to the ongoing development activities. The payment was recorded
as an expense netted against gain on the sale of Optex assets during the
second quarter of 2001.
(10) PRIVATE PLACEMENT OF COMMON SHARES
On November 6, 2001, Atlantic entered into an agreement with Joseph
Stevens & Company, Inc. in which Joseph Stevens agreed to act as placement agent
for a private placement of shares of Atlantic's common stock. In that private
placement, the price of each share of Atlantic's common stock was $0.24 and the
minimum and maximum subscription amounts were $2,000,000 and $3,000,000,
respectively. In addition, each investor received a warrant to purchase one
share of Atlantic's common stock for every share of Atlantic's common stock
purchased by that investor. The warrants have an exercise price of $0.29 and are
exercisable for five years from the closing date. On December 3, 2001, Atlantic
issued to certain investors an aggregate of 8,333,318 shares of common stock for
the minimum subscription of $2,000,000. In connection with the private
placement, Atlantic paid Joseph Stevens a placement fee of $140,000, equal to 7%
of the aggregate subscription amount, a warrant to purchase 833,331 shares of
Atlantic's common stock, which represented 10% of the number of shares issued to
the investors and 833,331 shares of Atlantic common stock. The term of the
warrant is five years and the per share exercise price is $0.29. In conjunction
with this private placement, Atlantic received net proceeds of approximately
$1,848,000 in December 2001.
(11) SERIES A ANTIDILUTION PROVISION
The conversion price and conversion rate of the Series A preferred
stock is subject to adjustment upon the occurrence of certain events, including
the issuance of common stock at a per-share price less than either the
conversion price or the then market price. Recent issuances of stock, options
and warrants, including in connection with Atlantic's private placement in 2001,
have necessitated that Atlantic adjust the conversion rate and conversion price
of the Series A preferred stock. Accordingly, the conversion price of the Series
A preferred stock was decreased from $3.058 to $1.22, and the conversion rate
has been increased from 3.27 to 8.21 to reflect all recent issuances of stock
options and warrants through December 31, 2001. In connection with these
changes, Atlantic issued 66,666 make-up shares of common stock to certain former
Series A preferred stock holders which are included in the net loss per common
share calculation for the nine months ended September 30, 2002. During the nine
months ended September 30, 2002, the conversion rate was increased further to
8.22 as a result of the issuance of 75,000 shares to IRG and 10,000 shares to
Fusion Capital.
9
(12) LICENSING OF CT-3 TO INDEVUS PHARMACEUTICALS, INC.
On June 28, 2002, Atlantic entered into a license agreement with
Indevus Pharmaceuticals, Inc. in which Atlantic licensed to Indevus the
exclusive worldwide rights to CT-3, its novel anti-inflammatory and analgesic
compound currently in clinical development. Indevus will be responsible for all
further development of CT-3, and Atlantic will have no future involvement with
Indevus or CT-3 other than its rights under the license agreement to royalties
and milestone payments. Under the license agreement, Atlantic received an
initial licensing fee of $500,000. In accordance with SAB No. 101, "Revenue
Recognition," Atlantic recognized $500,000 of licensing revenue during the nine
months ended September 30, 2002, since it has no further obligations under the
license agreement. Atlantic is entitled to additional milestone payments on
occurrence of certain events specified in the license agreement, including
commencement and completion of various clinical trials, the FDA's acceptance for
filing of a New Drug Application, or "NDA," and Indevus securing other
regulatory approvals for CT-3 in the United States and Europe, and Atlantic will
be entitled to royalties once the compound begins to generate revenue.
(13) LICENSING OF ANTIMICROBIAL AGENT ATV-02
Atlantic has licensed from its inventors the worldwide rights to
ATV-02, a potent and broad-spectrum antimicrobial agent for the local treatment
of topical infections. This compound is more commonly known as N-Chlorotaurine,
or "NCT." This compound has completed safety and tolerability studies in a
limited number of subjects and has begun a series of Phase II human clinical
studies for the treatment of several indications, including viral and bacterial
conjunctivitis and acute and chronic sinusitis.
Under the terms of the license agreement, Atlantic has exclusively
licensed the inventors' rights (including the right to sublicense) pertaining to
any novel therapeutic use or formulation of the compound. Atlantic has no
clinical-development obligations under the license agreement, but it plans to
continue developing ATV-02 in Europe in cooperation with the inventors using
their philanthropic funding sources and plans to file an IND in the United
States to develop the compound according to FDA regulations for approval in the
United States. Atlantic was not required to pay a license fee under the license
agreement, but if Atlantic proceeds with clinical development of the compound it
would be required to make payments to the investors upon achieving certain
milestones. Such payments would be payable in cash or company stock, at
Atlantic's discretion. The milestone payments as set forth in the license
agreement include (a) $100,000 upon the first new patent issuance, (b) $250,000
upon successful completion of a Phase III clinical trial, and (c) $1,000,000
upon receiving new drug approval. Atlantic would also be required to pay the
inventors a total royalty of 4% of the net sales of the licensed products sold
by Atlantic and 20% of the royalties which Atlantic receives from sublicensees.
Atlantic is responsible for preparing, filing, prosecuting, and maintaining the
patent applications and patent rights.
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
YOU SHOULD READ THE FOLLOWING DISCUSSION OF OUR RESULTS OF OPERATIONS
AND FINANCIAL CONDITION IN CONJUNCTION WITH OUR ANNUAL REPORT ON FORM 10-KSB, AS
AMENDED FOR THE YEAR ENDED DECEMBER 31, 2001. THIS DISCUSSION INCLUDES
"FORWARD-LOOKING" STATEMENTS THAT REFLECT OUR CURRENT VIEWS WITH RESPECT TO
FUTURE EVENTS AND FINANCIAL PERFORMANCE. WE USE WORDS SUCH AS WE "EXPECT,"
"ANTICIPATE," "BELIEVE," AND "INTEND" AND SIMILAR EXPRESSIONS TO IDENTIFY
FORWARD-LOOKING STATEMENTS. INVESTORS SHOULD BE AWARE THAT ACTUAL RESULTS MAY
DIFFER MATERIALLY FROM OUR EXPRESSED EXPECTATIONS BECAUSE OF RISKS AND
UNCERTAINTIES INHERENT IN FUTURE EVENTS, PARTICULARLY THOSE RISKS IDENTIFIED IN
THE "RISK FACTORS" SECTION OF OUR MOST RECENT ANNUAL REPORT ON FORM 10-KSB, AND
SHOULD NOT UNDULY RELY ON THESE FORWARD LOOKING STATEMENTS.
RESULTS OF OPERATIONS
THREE-MONTH PERIOD ENDED SEPTEMBER 30, 2002 VS. 2001
During the three month periods ended September 30, 2002 and 2001, we
had no revenue.
For the quarter ended September 30, 2002, research and development
expense was $125,376 as compared to $172,257 for the third quarter of 2001.
The decrease is primarily a result of a reduction in patent prosecution fees
of $44,000 resulting from the licensing of our drug CT-3 to Indevus
Pharmaceuticals, Inc. in June of 2002.
For the quarter ended September 30, 2002, general and administrative
expense was $462,864 as compared to $496,294 for the quarter ended September 30,
2001. The decrease is due primarily to a decrease in expenses associated with
payroll and investor relations services of $31,000 and $40,000 respectively. In
addition, in the third quarter of 2001, we had expenses associated with the
issuance of 35,000 shares of our common stock to each of BH Capital Investments,
L.P. and Excalibur Limited Partnership in August 2001 in return for their
commitment to provide us with $3.5 million of financing in connection with an
asset purchase for which we had submitted a bid. We subsequently issued those
shares, but we did not ultimately purchase those assets. Those shares had an
estimated fair value of $44,100 which was recorded as a general and
administrative expense for the three months ended September 30, 2001. There was
no similar expense in the quarter ended September 30, 2002. These reductions in
expenses are offset by increases in expenses associated with tax preparation
services, valuation services and legal services of $32,000, $37,000 and $17,000
respectively.
For the quarter ended September 30, 2002, there was no compensation
expense relating to stock warrants as compared to an expense relating to stock
warrants of $35,968 in the prior year. This expense was associated with warrants
issued to Dian Griesel during March 2001 as partial compensation for investor
relations services provided to us by The Investor Relations Group, Inc. ("IRG").
With the termination of the agreement with IRG as of May 31, 2002, there is no
more vesting of warrants and as a result, we will not incur any additional
compensation expense associated with the Dian Griesel warrants. Compensation
expense relating to these investor relations services represents a general and
administrative expense.
For the third quarter of 2002, interest and other income was $1,826,
compared to $6,266 for the third quarter of 2001. The decrease in interest
income is primarily due to the decline in our cash reserves.
Net loss applicable to common shares for the quarter ended September
30, 2002, was $613,012 as compared to $778,867 for the quarter ended September
30, 2001. This decrease in net loss applicable to common shares is attributable
primarily to a reduction in research and development expenses of $46,881 and a
reduction in general and administrative expenses of $33,430. As a result of the
termination of the investor relations services agreement with IRG, we had a
reduction in compensation expense relating to stock warrants of $35,968. In the
quarter ended September 30, 2001, net loss included our share of the losses of
TeraComm Research, Inc. amounting to $37,309. We had no such expense since
September 30, 2001 since the value of the investment was written down to zero.
We also issued preferred stock dividends on our Series A preferred stock for
which the estimated fair value of $26,598 and $43,305 was included in the net
loss applicable to common shares for the quarters ended September 30, 2002 and
2001, respectively. The decline in the estimated fair value of these dividends
is primarily due to the decrease in our stock price.
11
NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2002 VS. 2001
In the nine-month period ended September 30, 2002, Indevus
Pharmaceuticals, Inc. paid us a $500,000 license fee as part of the
consideration for our having licensed to Indevus, under a license agreement
effective June 28, 2002, exclusive worldwide rights to CT-3, our novel
anti-inflammatory and analgesic compound currently in clinical development.
Indevus will be responsible for all further development of CT-3, and we will
have no future involvement with Indevus or CT-3 other than in connection with
our rights to royalties and milestone payments under the license agreement.
Those milestone payments are contingent on occurrence of certain events
specified in the agreement, including commencement and completion of various
clinical trials, the FDA's acceptance for filing of an NDA, and Indevus securing
other regulatory approvals for CT-3 in the United States and Europe. In
accordance with SAB No. 101, "Revenue Recognition," we recognized $500,000 of
licensing revenue during the nine months ended September 30, 2002, since we have
no further obligations under the license agreement. We will record as additional
revenue any additional payments we receive under the license agreement.
In accordance with a now-terminated license and development agreement,
Bausch & Lomb Surgical paid our subsidiary, Optex Ophthalmologics, Inc.
("Optex"), for developing its Avantix (formerly known as Catarex) technology.
For the nine months ended September 30, 2002, this agreement provided no
development revenue and no related cost-of-development revenue as compared with
$2,461,922 of development revenue (including $1,067,345 in project-completion
bonuses paid out and recognized at the completion of the project in March 2001)
and related cost-of-development revenue of $2,082,568 for the nine months ended
September 30, 2001. The decrease in revenues and related expenses from Bausch &
Lomb over last year is due to the fact that there were no revenues and related
expenses since termination of the agreement in March 2001.
For the nine months ended September 30, 2002, research and development
expense was $467,153 as compared to $774,340 for the nine months ended September
30, 2001. The cessation of research and development activities on our antisense
technology as a result of the sale of the assets of Gemini accounted for
approximately $159,000 of this decrease. In addition, research and development
consulting expense decreased by approximately $86,000 and research and
development salaries decreased by approximately $58,000 primarily as a result
of the sale of substantially all of the assets of Gemini in May of 2001.
For the nine months ended September 30, 2002, general and
administrative expense was $1,225,201 as compared to $2,333,567 for the nine
months ended September 30, 2001. A significant portion of this decrease is a
result of a finder's fee of $120,000 and the $444,000 estimated fair value of
the 600,000 commitment shares we issued to Fusion Capital Fund II, LLC in
conjunction with a common stock purchase agreement with Fusion Capital Fund II,
LLC we entered into during 2001. Fusion's obligation to purchase our shares
under this agreement is subject to certain conditions. A material contingency
that affects our ability to raise funds under this agreement is our stock price.
Currently, our stock price is below the floor price of $0.68 specified in the
Fusion agreement and as a result we are currently unable to draw funds pursuant
to that agreement. As the Fusion agreement is currently structured, we cannot
guarantee that we will be able to draw any funds. In addition, in the nine
months ended September 30, 2001, we had expenses associated with the issuance of
35,000 shares of our common stock to each of BH Capital Investments, L.P. and
Excalibur Limited Partnership in August 2001 in return for their commitment to
provide us with $3.5 million of financing in connection with an asset purchase
for which we had submitted a bid. We subsequently issued those shares, but we
did not ultimately purchase those assets. Those shares had an estimated fair
value of $44,100 which was recorded as a general and administrative expense for
the nine months ended September 30, 2001. The decrease in general and
administrative expenses was also due to reduced spending as a result of
increased efforts to conserve cash as well as reduced levels of general and
administrative activity. We had a decrease in payroll of approximately $96,000
partially as a result of the sale of substantially all of the assets of Gemini
in May of 2001, a decrease in legal expenses of approximately $180,000, a
decrease in investor relations services of about $118,000, a decrease in due
diligence fees and Nasdaq fees of approximately $59,000 and a decrease in travel
and conference expenses of approximately $48,000.
For the nine months ended September 30, 2002, we had a reduction in
previously recognized compensation expense relating to stock warrants of $5,845
as compared to an expense relating to stock warrants of $70,634 in the prior
year. This expense was associated with warrants issued to Dian Griesel during
March 2001 as partial compensation for investor relations services provided to
us by IRG. The reduction of compensation expense associated with these warrants
is due to the decrease in our stock price as compared to 2001 and the reversal
of
12
previously recorded expense associated with 45,000 unvested warrants which
were terminated as of May 31, 2002. Compensation expense relating to these
investor relations services represents a general and administrative expense.
With the termination of the agreement with IRG there will be no more vesting of
warrants and therefore we will not incur any additional compensation expense
associated with the Dian Griesel warrants.
For the nine months ended September 30, 2002, interest and other income
was $10,255, compared to $40,618 for the nine months ended September 30, 2001.
The decrease in interest income is primarily due to the decline in our cash
reserves.
Net loss applicable to common shares for the nine months ended
September 30, 2002, was $1,242,014 as compared to $2,044,369 for the nine months
ended September 30, 2001. This decrease in net loss applicable to common shares
is attributable in part to the recognition of a gain on the sale of the assets
of our subsidiary, Optex during the nine months ended September 30, 2001 in the
amount of $2,569,451, partially offset by a distribution to the minority
shareholders of Optex of $837,274. In addition, with the termination of our
agreement with Bausch & Lomb, we no longer have available to us the revenue or
profits associated with that agreement; as a result, we had no profit from this
agreement for the nine months ended September 30, 2002 as compared with $379,354
of profit for the same period in 2001. We recorded grant revenue of $250,000 for
the nine months ended September 30, 2001 that we did not have in nine months
ended September 30, 2002. In the nine months ended September 30, 2001, we also
recorded a loss of $334,408 on sale of the assets of our subsidiary Gemini.
Partially offsetting the decrease in net loss, we recognized $500,000 of
licensing revenue we recorded in connection with our licensing to Indevus
exclusive worldwide rights to CT-3. The net loss applicable to common shares was
further decreased by a reduction in research and development expenses and
general and administrative expenses, including compensation expense relating to
stock options and warrants of $307,187 and $1,184,845, respectively, for the
nine months ended September 30, 2002 as compared with the nine months ended
September 30, 2001.
Net loss applicable to common shares for the nine months ended
September 30, 2001 also included a beneficial conversion on our Series B
preferred stock in the amount of $600,000 and a dividend of $167,127 paid on
our repurchase of the outstanding Series B preferred stock. We also issued
preferred stock dividends on our Series A preferred stock, for which the
estimated fair value of $65,760 and $107,449 was included in the net loss
applicable to common shares for the nine months ended September 30, 2002 and
2001, respectively. The decrease in the estimated fair value of these
dividends as compared to the prior year is primarily a reflection of a
decline in our stock price.
LIQUIDITY AND CAPITAL RESOURCES
From inception to September 30, 2002, we incurred an accumulated
deficit of $27,904,660, and we expect to continue to incur additional losses
through the year ending December 31, 2002 and for the foreseeable future. This
loss has been incurred primarily through research and development activities
related to the various technologies under our control.
Pursuant to an asset purchase agreement dated January 31, 2001, among
Bausch & Lomb Incorporated, a Bausch & Lomb affiliate, Atlantic, and Optex, on
March 2, 2001, Optex sold to Bausch & Lomb substantially all its assets (mostly
intangible assets with no book value), including all those related to the
Avantix (formerly known as Catarex) technology. As a result of this sale,
Atlantic and Optex no longer have any obligations to Bausch & Lomb in connection
with development of the Avantix technology. The purchase price was $3 million
paid at closing (approximately $564,000 of which was distributed to minority
shareholders). In addition, Optex is entitled to receive additional
consideration, namely $1 million once Bausch & Lomb receives regulatory approval
to market the Avantix device in Japan, royalties on net sales on the terms
stated in the original development agreement dated May 14, 1998, between Bausch
& Lomb and Optex, as amended, and minimum royalties of $90,000, $350,000, and
$750,000 for the first, second, and third years, respectively, starting on first
commercial use of the Avantix device or January 1, 2004, whichever is earlier.
Optex also has the option to repurchase the acquired assets from Bausch & Lomb
if it ceases developing the Avantix technology at fair value. Upon the sale of
Optex assets, Bausch & Lomb's development agreement with Optex was terminated.
In the asset purchase agreement, Optex agreed to forgo future contingent
payments provided for in the earlier development agreement. As a result of this
transaction, we recorded a gain on the sale of Optex assets of $2,569,451.
During the first nine months of 2001, we made a profit distribution of
$837,274 to Optex's minority
13
shareholders, representing their share of the cumulative profit from the
development agreement with Bausch & Lomb and the proceeds from the sale of
Optex' assets. (This figure includes the $564,000 referred to above.)
On November 6, 2001, we entered into an agreement with Joseph Stevens &
Company, Inc. in which Joseph Stevens agreed to act as placement agent for a
private placement of shares of our common stock. In that private placement, the
price of each share of our common stock was $0.24 and the minimum and maximum
subscription amounts were $2,000,000 and $3,000,000, respectively. In addition,
each investor received a warrant to purchase one share of our common stock for
every share of our common stock purchased by that investor. The warrants have an
exercise price of $0.29 and are exercisable for five years from the closing
date. On December 3, 2001, we issued to certain investors an aggregate of
8,333,318 shares of common stock for the minimum subscription of $2,000,000. In
connection with the private placement, we paid Joseph Stevens a placement fee of
$140,000, equal to 7% of the aggregate subscription amount, a warrant to
purchase 833,331 shares of Atlantic's common stock, which represented 10% of the
number of shares issued to the investors and 833,331 shares of our common stock.
The term of this warrant is five years and the per share exercise price is
$0.29. In conjunction with this private placement, we received net proceeds of
approximately $1,848,000 in December 2001.
On June 28, 2002, we licensed to Indevus Pharmaceuticals, Inc. the
exclusive worldwide rights to CT-3 in exchange for a $500,000 licensing fee.
Atlantic is also entitled to additional milestone payments on occurrence of
certain events specified in the license agreement, including commencement and
completion of various clinical trials, the FDA's acceptance for filing of a New
Drug Application, or "NDA," and Indevus securing other regulatory approvals for
CT-3 in the United States and Europe, and Atlantic will be entitled to royalties
once the compound begins to generate revenue. Under the license agreement,
Indevus is responsible for the clinical development, regulatory activities and
commercializing this compound.
We have financed our operations since inception primarily through
equity and debt financing, our now-terminated collaborative arrangement with
Bausch & Lomb and our licensing of CT-3 to Indevus. During the three- and
nine-month periods ended September 30, 2002, we had a net decrease in cash and
cash equivalents of $69,530 (including the receipt of the $500,000 licensing fee
from Indevus in July 2002) and $1,215,916, respectively.
This decrease primarily resulted from net cash used in operating
activities for the nine months ended September 30, 2002 of $1,175,782. Total
cash resources as of September 30, 2002 were $375,845 compared to $1,591,761 at
December 31, 2001.
Our available working capital and capital requirements will depend upon
numerous factors, including progress of our research and development programs,
our progress in and the cost of ongoing and planned pre-clinical and clinical
testing, the timing and cost of obtaining regulatory approvals, the cost of
filing, prosecuting, defending, and enforcing patent claims and other
intellectual property rights, competing technological and market developments,
changes in our existing collaborative and licensing relationships, the resources
that we devote to developing manufacturing and commercializing capabilities,
technological advances, the status of our competitors, our ability to establish
collaborative arrangements with other organizations and our need to purchase
additional capital equipment.
Our current liabilities as of September 30, 2002 were $503,945 compared
to $508,613 at December 31, 2001, a decrease of $4,668. The decrease was
primarily due to reduced spending due to an increased effort to conserve cash.
As of September 30, 2002, our current liabilities exceeded our current assets
and we had a working capital deficit of $46,486. Atlantic currently has no
revenue-generating activities which continues to increase Atlantic's working
capital deficit.
Our continued operations will depend on whether we are able to raise
additional funds through various potential sources, such as equity and debt
financing, other collaborative agreements, strategic alliances, and our ability
to realize the full potential of our technology in development. Such additional
funds may not become available as we need them or be available on acceptable
terms. To date, a significant portion of our financing has been through private
placements of common and preferred stock and warrants, the issuance of common
stock for stock options and warrants exercised, and debt financing. Until our
operations generate significant revenues, we
14
will continue to fund operations from cash on hand and through the similar
sources of capital previously described. We can give no assurances that any
additional capital that we are able to obtain will be sufficient to meet our
needs.
We anticipate that our current resources will be sufficient to fund
for approximately the next two months our currently anticipated needs for
operating and capital expenditures. We plan to achieve this by deferring
payments on currently outstanding obligations to certain service providers.
We expect that our average monthly outlay will be approximately $130,000 per
month (including approximately $35,000 per month for research and preclinical
development expenses and approximately $95,000 for general and administrative
expenses). Our major outstanding contractual obligations relate to our
operating (facilities) leases. Our facilities lease expense in future years
extends through May 2003 at an aggregate rate of approximately $7,700 per
month, net of monthly sublease income of $750 per month which commenced March
2002.
The report of our independent auditors on our 2001 consolidated
financial statements includes an explanatory paragraph that states that our
recurring losses and our limited liquid resources raise substantial doubt about
our ability to continue as a going concern. Our consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
Subsequent to an oral hearing before a Nasdaq Listing Qualifications
Panel, on August 23, 2001, our securities were delisted from the Nasdaq Stock
Market for failing to meet the minimum-bid-price requirements set forth in the
NASD Marketplace Rules, as our common stock had traded for less than $1.00 for
more than 30 consecutive business days. Our common stock trades now on the OTC
Bulletin Board under the symbol "ATLC.OB". Delisting our common stock from
Nasdaq could have a material adverse effect on our ability to raise additional
capital, our stockholders' liquidity and the price of our common stock.
CRITICAL ACCOUNTING POLICIES
In December 2001, the SEC requested that all registrants discuss their
most "critical accounting policies" in management's discussion and analysis of
financial condition and results of operations. The SEC indicated that a
"critical accounting policy" is one which is both important to the portrayal of
the company's financial condition and results and requires management's most
difficult, subjective or complex judgments, often as a result of the need to
make estimates about the effect of matters that are inherently uncertain. Our
significant accounting policies are described in Note 1 to our consolidated
financial statements included in our annual report filed on Form 10-KSB as
amended for the year ended December 31, 2001, however, we believe that none of
them are considered to be critical.
RESEARCH AND DEVELOPMENT ACTIVITIES
OPTEX AND THE AVANTIX(TM) (FORMERLY CATAREX(TM)) TECHNOLOGY
Our majority-owned (81.2%) subsidiary, Optex, is entitled to royalties
and other revenues in connection with commercialization of the Catarex
technology. Bausch & Lomb Incorporated, a multinational ophthalmics company, is
developing this technology under the new trade name "Avantix" to overcome the
limitations and deficiencies of traditional cataract-extraction techniques.
Optex had been the owner of this technology and was developing it under a
development agreement with Bausch & Lomb, but on March 2, 2001, Optex sold to
Bausch & Lomb substantially all of its assets (mostly intangible assets with no
book value), including those related to the Avantix technology, and delivered
2,400 "First-Generation" Avantix hand pieces to Bausch & Lomb for use in human
feasibility studies and clinical trials.
Bausch & Lomb, which has committed over $15 million on the project to
date, has assumed full responsibility for developing and marketing the
technology and will pay Optex royalties on sales of the device and the
associated system. Under the agreement governing Bausch & Lomb's purchase of
Optex's assets, Bausch & Lomb is required to meet certain development
milestones. The next such milestone is completion by December 31, 2002, of a
clinical study designed by Bausch & Lomb to assess the functionality of the
Avantix hand piece in human cataract surgery. We continue to work closely with
Bausch & Lomb to monitor their progress in developing this
15
technology, and, to the extent permitted by our agreement with Bausch & Lomb, we
will report achievement of any development milestones.
CT-3 ANTI-INFLAMMATORY/ANALGESIC COMPOUND
On June 28, 2002, we licensed exclusive worldwide rights of our
proprietary compound CT-3 to Indevus Pharmaceuticals, Inc. CT-3 is a patented
synthetic derivative of carboxylic tetrahydrocannabinol (THC-7C) and is an
alternative to nonsteroidal anti-inflammatory drugs, or "NSAIDs," such as
aspirin and ibuprofen. Over 130 million Americans suffer from chronic pain and
40 million suffer from arthritis. Worldwide prescription sales of
analgesic/anti-inflammatory drugs exceeded $9 billion in 1999. The overall field
of inflammation and pain management is large and not fully satisfied, and a
compound such as CT-3 may have broad applications in these major markets.
CT-3 is being developed as a new medication for painful inflammatory
conditions such as arthritis, post-operative pain, musculoskeletal injuries,
headache and neuropathic pain. In addition, the compound possesses activity in
preclinical models of multiple sclerosis and the cutaneous inflammation
associated with exposure to the chemical warfare blister agent sulfur mustard.
The U.S. Army Medical Research Institute is pursuing further work on this
application.
The principle mechanism of action of the compound appears to be the
potent inhibition of the inflammatory cytokines, particularly interleukin-1 and
TNF-alpha. Preliminary studies have shown that CT-3 demonstrates
analgesic/anti-inflammatory properties at microgram doses without central
nervous system or gastrointestinal side effects and also reduces joint damage
caused by rheumatoid arthritis.
An IND (investigational new drug application) has been filed with the
U.S. Food and Drug Administration for CT-3, and an initial Phase I clinical
trial designed to assess the safety of CT-3 showed that it was well tolerated,
with no clinical significant adverse events and no evidence of psychotropic
activity. The compound is currently being studied in Europe in a small Phase II
study in patients with chronic neuropathic pain.
On acquiring CT-3 Indevus paid us a licensing fee, and under the terms
of our licensing agreement with Indevus it is required to pay us development
milestones and royalties. Indevus will be responsible for developing and
commercializing CT-3 and obtaining any required approvals. A director of Indevus
is one of our shareholders; the transaction was approved by all the
disinterested directors of Indevus.
ATV-02 ANTIMICROBIAL AGENT (N-CHLOROTAURINE/NCT)
We have licensed from its inventors the worldwide rights to the ATV-02,
a potent and broad-spectrum antimicrobial agent for the local treatment of
topical infections. This compound is more commonly known as N-Chlorotaurine or
"NCT." The compound has completed safety and tolerability studies in a limited
number of subjects and has begun a series of phase II human clinical studies for
the treatment of several indications, including viral and bacterial
conjunctivitis and acute and chronic sinusitis.
Under the terms of the agreement, the company has exclusively licensed,
including the right to sublicense, the inventors rights pertaining to any novel
therapeutic use or formulation of N-Chlorotaurine and any of its derivatives or
analogs, including pending and future patent applications for methods of using
N-Chlorotaurine for a variety of clinical indications. Under the terms of the
agreement there was no initial license fee, but we are required to pay the
inventors milestone payments payable in cash or company stock at our discretion
of (a) $100,000 upon the first new patent issuance, (b) $250,000 upon successful
completion of a Phase III clinical trial, and (c) $1,000,000 upon receiving new
drug approval. We are also required to pay the inventors a total royalty of 4%
of the net sales of the licensed products sold by the Company, and 20% of the
royalties, which the company receives from sublicensees. Although the Company
has no clinical development obligations under the license agreement, it plans to
continue developing ATV-02 in Europe in cooperation with the inventors using
their philanthropic funding sources and begin filing an IND in the US to develop
it according to FDA regulations for approval in the US. The Company has assumed
the responsibility for the preparation, filing, prosecution and maintenance of
the patent applications and patent rights.
16
As a broad-spectrum drug with bacterial, virucidal and fungicidal
activity, ATV-02 has the potential to be a viable alternative to the use of
antibiotics for the treatment of local infections. Since their discovery over a
half a century ago, the misuse and overuse of antibiotics has caused a crisis of
antibiotic resistant bacteria. In contrast to antibiotics, ATV-02 is a human
disinfectant that is not expected to promote drug resistant bacteria.
ATV-02 is a long-lived endogenous oxidant that is normally produced in
the body by human granulocytes and monocytes. It demonstrates immune modulatory
properties exerted by down regulation of pro-inflammatory cytokines such as
tumor necrosis factor, nitric oxide, and protaglandins. Oxidants are important
tools that stimulate human phagocytes used to attack and kill pathogens. Besides
its immune controlling function, ATV-02 has demonstrated broad-spectrum
bactericidal, virucidal, fungicidal and vermicidal activity, along with very low
cytotoxicity against human cells and sufficient stability.
All the human clinical studies completed to date have been conducted at
the University of Innsbruck, Austria under the direction of the inventors: Dr.
Waldemar Gottardi, Dr. Markus Nagl and Dr. Andreas Neher. These studies have all
been approved by the Innsbruck Ethics Committee, were registered by the Austrian
Ministry of Health, and funded by various philanthropic sources including the
Austrian Science Fund and the Jubilee Research Fund of the Austrian National
Bank.
The Company will continue to evaluate the safety and efficacy of ATV-02
throughout the completion of the ongoing clinical studies being conducted in
Innsbruck. Upon successful completion of these studies and the filing and
approval of a US IND, the Company plans to initiate a licensing program to
sublicense ATV-02 to a suitable strategic partner to assist in the clinical
development, regulatory approval filing, manufacturing and marketing of ATV-02.
About Sinusitis
Sinusitis, or inflammation of the membrane lining the sinuses, is
usually caused or complicated by a bacterial, viral or fungal infection. It's
the most common reason for office-visit prescription of antibiotics in adults in
the United States, and affects an estimated 14 percent of the population
according to a report published in the June issue of The Journal of Allergy and
Clinical Immunology. It is estimated to result in over 13 million office visits
per year. Figures suggest the total annual direct cost of treatment, including
drugs, office visits to doctors and surgery, is in excess of US $2.4 billion.
About Conjunctivitis
Conjunctivitis, or "pink eye", is a bacterial or viral infection of the
eye's conjunctiva, and is probably the most common infection seen in eye
doctors' offices. It is a very contagious disease and causes symptoms such as
tearing, redness and swelling of the conjunctiva, purulent discharge and light
sensitivity. Conjunctivitis usually takes up to two weeks to run its course, and
there remains no effective treatment to date for viral conjunctivitis.
ITEM 4: CONTROLS AND PROCEDURES
Within 90 days prior to the filing date of this Quarterly Report on
Form 10-QSB, Atlantic's management including the Chief Executive Officer and
Chief Financial Officer carried out an evaluation of the effectiveness of
Atlantic's disclosure controls and procedures as defined in Exchange Act Rule
13a-14. Based upon that evaluation, the Chief Executive Officer and Chief
Financial Officer have concluded that Atlantic's current disclosure controls
and procedures are effective. There have been no significant changes in
Atlantic's internal controls or in other factors that could significantly
affect internal controls subsequent to the date of the evaluation by the
Chief Executive Officer and Chief Financial Officer.
The design of any system of controls and procedures is based in part
upon certain assumptions about the likelihood of future events. There can be no
assurance that any design will succeed in achieving its stated goals under all
potential future conditions, regardless of how remote.
17
PART II -- OTHER INFORMATION
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
EXHIBITS
The following documents are referenced or included in this report.
Exhibit
No. Description
- -------- -----------
3.1(1) Certificate of incorporation of Atlantic, as amended to date.
3.2(1) Bylaws of Atlantic, as amended to date.
3.3(5) Certificate of designations of Series A Convertible Preferred Stock.
3.4(6) Certificate of increase of Series A Convertible Preferred Stock.
3.5(9) Certificate of designations, preferences and rights of Series B
convertible preferred stock of Atlantic, filed on September 28, 2000.
3.6(9) Certificate of amendment of the certificate of designations,
preferences and rights of Series B convertible preferred stock of
Atlantic, filed on November 17, 2000.
3.7(10) Certificate of amendment of the certificate of designations,
preferences and rights of Series B convertible preferred stock of
Atlantic, filed on January 9, 2001.
3.8(10) Certificate of amendment of the certificate of designations,
preferences and rights of Series B convertible preferred stock of
Atlantic, filed on January 19, 2001.
4.2(1) Form of unit certificate.
4.3(1) Specimen common stock certificate.
4.4(1) Form of redeemable warrant certificate.
4.5(1) Form of redeemable warrant agreement by and between Atlantic and
Continental Stock Transfer & Trust Company.
4.6(1) Form of underwriter's warrant certificate.
4.7(1) Form of underwriter's warrant agreement by and between Atlantic and
Joseph Stevens & Company, L.P.
4.8(1) Form of subscription agreement by and between Atlantic and the Selling
Stockholders.
4.9(1) Form of bridge note.
4.10(1) Form of bridge warrant.
4.11(2) Investors' rights agreement by and among Atlantic, Dreyfus Growth and
Value Funds, Inc. and Premier Strategic Growth Fund.
4.12(2) Common stock purchase agreement by and among Atlantic, Dreyfus Growth
and Value Funds, Inc. and Premier Strategic Growth Fund.
18
10.2(1) Employment agreement dated July 7, 1995, between Atlantic and Jon D.
Lindjord.
10.3(1) Employment agreement dated September 21, 1995, between Atlantic and
Dr. Stephen R. Miller.
10.4(1) Employment agreement dated September 21, 1995, between Atlantic and
Margaret A. Schalk.
10.5(1) Letter agreement dated August 31, 1995, between Atlantic and Dr. H.
Lawrence Shaw.
10.6(1) Consulting agreement dated January 1, 1994, between Atlantic and
John K. A. Prendergast.
10.8(1) Investors' Rights agreement dated July 1995, between Atlantic, Dr.
Lindsay A. Rosenwald and VentureTek, L.P.
10.9(1) License and assignment agreement dated March 25, 1994, between Optex
Ophthalmologics, Inc., certain inventors and NeoMedix Corporation,
as amended.
10.10(1) License agreement dated May 5, 1994, between Gemini Gene Therapies,
Inc. and the Cleveland Clinic Foundation.
10.11(1)+ License agreement dated June 16, 1994, between Channel Therapeutics,
Inc., the University of Pennsylvania and certain inventors, as
amended.
10.12(1)+ License agreement dated March 28, 1994, between Channel
Therapeutics, Inc. and Dr. Sumner Burstein.
10.13(1) Form of financial advisory and consulting agreement by and between
Atlantic and Joseph Stevens & Company, L.P.
10.14(1) Employment agreement dated November 3, 1995, between Atlantic and
Shimshon Mizrachi.
10.15(3) Financial advisory agreement between Atlantic and Paramount dated
September 4, 1996 (effective date of April 15, 1996).
10.16(3) Financial agreement between Atlantic, Paramount and UI USA dated
June 23, 1996.
10.17(3) Consultancy agreement between Atlantic and Dr. Yuichi Iwaki dated
July 31, 1996.
10.18(3) 1995 stock option plan, as amended.
10.19(3) Warrant issued to an employee of Paramount Capital, LLC to purchase
25,000 shares of Common Stock of Atlantic.
10.20(3) Warrant issued to an employee of Paramount Capital, LLC to purchase
25,000 shares of Common Stock of Atlantic.
10.21(3) Warrant issued to an employee of Paramount Capital, LLC to purchase
12,500 shares of Common Stock of Atlantic.
10.22(4) Letter agreement between Atlantic and Paramount Capital, Inc. dated
February 26,1997.
10.23(4) Agreement and plan of reorganization by and among Atlantic, Channel
Therapeutics, Inc. and New Channel, Inc. dated February 20, 1997.
10.24(4) Warrant issued to John Prendergast to purchase 37,500 shares of
Atlantic's Common Stock.
19
10.25(4) Warrant issued to Dian Griesel to purchase 24,000 shares of
Atlantic's Common Stock.
10.26(7) Amendment No. 1 to development & license agreement by and between
Optex and Bausch & Lomb Surgical, Inc. dated September 16, 1999.
10.27(8) Financial advisory and consulting agreement by and between Atlantic
and Joseph Stevens & Company, Inc. dated January 4, 2000.
10.28(8) Warrant No. 1 issued to Joseph Stevens & Company, Inc. to purchase
150,000 shares of Atlantic's Common Stock exercisable January 4,
2000.
10.29(8) Warrant No. 2 issued to Joseph Stevens & Company, Inc. to purchase
150,000 shares of Atlantic's Common Stock exercisable January 4,
2001.
10.30(8) Warrant No. 3 issued to Joseph Stevens & Company, Inc. to purchase
150,000 shares of Atlantic's Common Stock exercisable January 4,
2002.
10.31(9) Preferred stock purchase agreement dated May 12, 2000, between
Atlantic and TeraComm Research, Inc.
10.32(9) Warrant certificate issued May 12, 2000, by Atlantic to TeraComm
Research, Inc.
10.33(9) Stockholders agreement dated May 12, 2000, among TeraComm Research,
Inc., the common stockholders of TeraComm, and Atlantic.
10.34(9) Registration rights agreement dated May 12, 2000, between Atlantic
and TeraComm Research, Inc. with respect to shares of TeraComm
preferred stock issued to Atlantic.
10.35(9) Registration rights agreement dated May 12, 2000, between Atlantic
and TeraComm Research, Inc. with respect to shares of Atlantic
common stock issued to TeraComm.
10.36(9) Employment agreement dated as of April 10, 2000, between Atlantic
and A. Joseph Rudick.
10.37(9) Employment agreement dated as of April 3, 2000, between Atlantic and
Frederic P. Zotos.
10.38(9) Employment agreement dated as of April 10, 2000, between Atlantic
and Nicholas J. Rossettos, as amended.
10.39(9) Employment agreement dated as of May 15, 2000, between Atlantic and
Walter Glomb.
10.40(9) Employment agreement dated as of April 18, 2000, between Atlantic
and Kelly Harris.
10.41(10) Amendment dated as of July 18, 2000, to the Preferred Stock Purchase
agreement dated May 12, 2000, between Atlantic and TeraComm
Research, Inc.
10.42(10) Convertible preferred stock and warrants purchase agreement dated
September 28, 2000, among Atlantic, BH Capital Investments, L.P. and
Excalibur Limited Partnership.
10.43(10) Registration rights agreement dated September 28, 2000, among
Atlantic, BH Capital Investments, L.P., and Excalibur Limited
Partnership.
10.44(10) Escrow agreement dated September 28, 2000, among Atlantic, BH
Capital Investments, L.P., and Excalibur Limited Partnership.
20
10.45(10) Form of stock purchase warrants issued on September 28, 2000, to BH
Capital Investments, L.P., exercisable for shares of common stock of
Atlantic.
10.46(10) Form of stock purchase warrants issued on September 28, 2000, to
Excalibur Limited Partnership, exercisable for shares of common
stock of Atlantic.
10.47(10) Amendment No. 1 dated October 31, 2000, to convertible preferred
stock and warrants purchase agreement dated September 28, 2000,
among Atlantic, BH Capital Investments, L.P., and Excalibur Limited
Partnership.
10.48(12) Stock repurchase agreement dated December 4, 2000, among Atlantic,
BH Capital Investments, L.P., and Excalibur Limited Partnership.
10.49(14) Letter agreement dated December 28, 2000, among Atlantic and BH
Capital Investments, L.P., and Excalibur Limited Partnership.
10.50(11) Amendment No. 2 dated January 9, 2001, to convertible preferred
stock and warrants purchase agreement dated September 28, 2000,
among Atlantic, BH Capital Investments, L.P., and Excalibur Limited
Partnership.
10.51(14) Amendment No. 1 dated January 9, 2001, to registration rights
agreement dated September 28, 2000, among Atlantic and BH Capital
Investments, L.P. and Excalibur Limited Partnership.
10.52(11) Amendment No. 3 dated January 19, 2001, to convertible preferred
stock and warrants purchase agreement dated September 28, 2000,
among Atlantic, BH Capital Investments, L.P., and Excalibur Limited
Partnership.
10.53(14) Letter agreement dated January 25, 2001, among Atlantic and BH
Capital Investments, L.P., and Excalibur Limited Partnership.
10.54(13) Stock repurchase agreement No. 2 dated March 9, 2001, among
Atlantic, BH Capital Investments, L.P., and Excalibur Limited
Partnership.
10.55(15) Common stock purchase agreement dated March 16, 2001, between
Atlantic and Fusion Capital Fund II, LLC.
10.56(15) Warrant certificate issued March 8, 2001 by Atlantic to Dian
Griesel.
10.57(16) Common stock purchase agreement dated as of May 7, 2001, between
Atlantic and Fusion Capital Fund II, LLC.
10.58(16) Form of registration rights agreement between Atlantic and Fusion
Capital Fund II, LLC.
10.59(17) Asset purchase agreement dated as of January 31, 2001, between
Bausch & Lomb Incorporated, Bausch & Lomb Surgical, Inc., Optex
Ophthalmologics, Inc. and Atlantic (the "January 31 Asset Purchase
Agreement).
10.60(17) Amendment No. 1 dated March 2, 2001, to the January 31 Asset
Purchase Agreement.
10.61(17) Asset purchase agreement dated as of April 23, 2001, between
Atlantic, Gemini Technologies, Inc., and IFN, Inc.
10.62(18) Securities purchase agreement dated as of November 2, 2001, between
Atlantic and certain investors.
21
10.62(18) Placement agreement dated as of November 6, 2001, between Joseph
Stevens & Company, Inc. and Atlantic.
10.64(19) License agreement dated October 18, 2001, between Dr. Waldemar
Gottardi, Dr. Markus Nagl and Dr. Andreas Neher and Atlantic.
10.65(19)+ License agreement dated June 28, 2002, between Atlantic and Indevus
Pharmaceuticals, Inc.
21.1(1) Subsidiaries of Atlantic.
99.1* Certification of the Chief Executive Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act.
99.2* Certification of the Chief Financial Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act.
- ------
+ Confidential treatment has been granted as to certain portions of
these exhibits.
* Filed herewith.
(1) Incorporated by reference to exhibits of Atlantic's registration
statement on Form SB-2, Registration #33-98478, as filed with the
Securities and Exchange Commission (the "SEC") on October 24, 1995
and as amended by Amendment No. 1, Amendment No. 2, Amendment No. 3,
Amendment No. 4 and Amendment No. 5, as filed with the SEC on
November 9, 1995, December 5, 1995, December 12, 1995, December 13,
1995 and December 14, 1995, respectively.
(2) Incorporated by reference to exhibits of Atlantic's Current Report
on Form 8-K, as filed with the SEC on August 30, 1996.
(3) Incorporated by reference to exhibits of Atlantic's Form 10-QSB for
the period ended September 30, 1996.
(4) Incorporated by reference to exhibits of Atlantic's Form 10-QSB for
the period ended March 31, 1996.
(5) Incorporated by reference to exhibits of Atlantic's Current Report
on Form 8-KSB, as filed with the SEC on June 9, 1997.
(6) Incorporated by reference to exhibits of Atlantic's Registration
Statement on Form S-3 (Registration No. 333-34379), as filed with
the Commission on August 26, 1997, and as amended by Amendment No. 1
as filed with the SEC on August 28, 1997.
(7) Incorporated by reference to exhibits of Atlantic Form 10-QSB for
the period ended September 30, 1999.
(8) Incorporated by reference to exhibits of Atlantic's Form 10-KSB for
the period ended December 31, 1999.
(9) Incorporated by reference to exhibits of Atlantic's Form 10-QSB for
the period ended June 30, 2000.
(10) Incorporated by reference to exhibits of Atlantic's Form 10-QSB for
the period ended September 30, 2000.
22
(11) Incorporated by reference to exhibits of Atlantic's Form 8-K filed
on January 24, 2001.
(12) Incorporated by reference to exhibits of Atlantic's Form 8-K filed
on December 11, 2000.
(13) Incorporated by reference to exhibits of Atlantic's Form 8-K filed
on March 14, 2001.
(14) Incorporated by reference to exhibits of Atlantic's Form 10-KSB
filed on April 17, 2001.
(15) Incorporated by reference to exhibits of Atlantic's Form 10-QSB for
the period ended March 31, 2001.
(16) Incorporated by reference to exhibits of Atlantic's Registration
Statement on Form SB-2 (Registration No. 333-61974), as filed with
the Commission on May 31, 2001, and as amended by Amendment No. 1 as
filed with the SEC on June 29, 2001.
(17) Incorporated by reference to exhibits of Atlantic's Form 10-QSB for
the period ended September 30, 2001.
(18) Incorporated by reference to exhibits of Atlantic's Form 8-K filed
on December 6, 2001.
(19) Incorporated by reference to exhibits of Atlantic's Form 10-QSB for
the period ended June 30, 2002.
REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter for which this
report is filed.
23
SIGNATURES
In accordance with the requirements of the Exchange Act, Atlantic
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ATLANTIC TECHNOLOGY VENTURES, INC.
Date: November 7, 2002 /s/ FREDERIC P. ZOTOS
----------------------------------
Frederic P. Zotos
President and Chief Executive Officer
Date: November 7, 2002 /s/ NICHOLAS J. ROSSETTOS
---------------------------------
Nicholas J. Rossettos
Chief Financial Officer
24
CERTIFICATIONS
I, Frederic P. Zotos, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Atlantic
Technology Ventures, Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
/s/ FREDERIC P. ZOTOS
-----------------------------------
Frederic P. Zotos
President and Chief Executive Officer
November 7, 2002
25
I, Nicholas J. Rossettos, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Atlantic
Technology Ventures, Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
/s/ NICHOLAS J. ROSSETTOS
--------------------------------
Nicholas J. Rossettos
Chief Financial Officer
November 7, 2002
26
Exhibit 99.1
CERTIFICATION OF THE
CHIEF EXECUTIVE OFFICER OF
ATLANTIC TECHNOLOGY VENTURES, INC.
In connection with the Quarterly Report of Atlantic Technology Ventures, Inc.
on Form 10-QSB for the period ending September 30, 2002 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I,
Frederic P. Zotos, Chief Executive Officer of Atlantic, certify, pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to Sectiion 906 of the
Sarbanes-Oxley Act of 2002, that:
1. the Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities and Exchange Act of 1934; and
2. the information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of
Atlantic.
/s/ FREDERIC P. ZOTOS
----------------------------------
Frederic P. Zotos
President and Chief Executive Officer
November 7, 2002
Exhibit 99.2
CERTIFICATION OF THE
CHIEF FINANCIAL OFFICER OF
ATLANTIC TECHNOLOGY VENTURES, INC.
In connection with the Quarterly Report of Atlantic Technology Ventures, Inc. on
Form 10-QSB for the period ending September 30, 2002 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I,
Nicholas J. Rossettos, Chief Financial Officer of Atlantic, certify, pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to Sectiion 906 of the
Sarbanes-Oxley Act of 2002, that:
1. the Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities and Exchange Act of 1934; and
2. the information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of
Atlantic.
/s/ NICHOLAS J. ROSSETTOS
-------------------------------
Nicholas J. Rossettos
Chief Financial Officer
November 7, 2002
