UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10
GENERAL
FORM FOR REGISTRATION OF SECURITIES
Pursuant
to Section 12(b) or 12(g) of the Securities Exchange Act of
1934
ATLANTIS
INTERNET GROUP, CORP.
(Exact
name of registrant as specified in its charter)
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Nevada
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33-0919693
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(State
or other jurisdiction of incorporation or organization)
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(IRS
Employer Identification No.)
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3960
Howard Hughes Parkway, Ste. 500
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Las
Vegas, Nevada
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89169
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(Address
of principal executive offices)
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(Zip
Code)
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Registrant’s
telephone number, including area code (702)
990-3535
Copies
to:
William
B. Barnett, Esq.
Law
Offices of William B. Barnett, P.C.
21550
Oxnard Street, Suite 200
Woodland
Hills, California 91367
(818)
595-7717
Securities
to be registered pursuant to Section 12(b) of the Act:
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Title
of each class
to
be so registered
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Name
of each exchange on which
each
class is to be registered
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None.
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Not
applicable.
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Securities
to be registered pursuant to Section 12(g) of the Act:
Common
Stock, par value $0.001
(Title of
Class)
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See definition of “large accelerated filer,” “accelerated
filer” and “smaller reporting company” in Rule 12b-2 of the Exchange
Act. (Check one):
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Large
accelerated filer
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Accelerated
filer
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Non-accelerated
filer
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¨
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Smaller reporting company
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x
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(Do
not check if a smaller reporting company)
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Item
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Page
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Item
1.
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Business
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3
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Item
1A.
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Risk
Factors
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8
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Item
2.
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Financial
Information
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12
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Item
3.
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Properties
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14
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Item
4.
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Security
Ownership of Certain Beneficial Owners and Management
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14
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Item
5.
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Directors
and Executive Officers
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15
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Item
6.
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Executive
Compensation
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16
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Item
7.
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Certain
Relationships and Related Transactions, and Director
Independence
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17
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Item
8.
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Legal
Proceedings
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17
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Item
9.
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Market
Price of and Dividends on the Registrant’s Common Stock and Related
Stockholder Matters
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17
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Item
10.
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Recent
Sales of Unregistered Securities
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18
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Item
11.
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Description
of Registrant’s Securities to be Registered
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18
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Item
12.
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Indemnification
of Directors and Officers
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19
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Item
13.
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Financial
Statements and Supplementary Data
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20
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Item
14.
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Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure
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20
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Item
15.
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Financial
Statements and Exhibits
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20
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Index
to Financial Statements
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F-1
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As used
in this Form 10, unless the context otherwise requires the terms “we,” “us,”
“our,” “ATIG”, “Company” and “Atlantis” refer to Atlantis Internet Group Corp.,
a Nevada corporation.
FORWARD
LOOKING STATEMENTS
The
statements contained in this document that are not purely historical are
“forward-looking statements” within the meaning of Section 27A of the Securities
Act of 1933, as amended (the “Securities Act”), and Section 21E of the
Securities Exchange Act of 1934, as amended (the “Exchange
Act”). Although we believe that the expectations reflected in such
forward-looking statements, including those regarding future operations, are
reasonable, we can give no assurance that such expectations will prove to be
correct. Forward-looking statements are not guarantees of future
performance and they involve various risks and
uncertainties. Forward-looking statements contained in this document
include statements regarding our proposed services, market opportunities and
acceptance, expectations for revenues, cash flows and financial performance, and
intentions for the future. Such forward-looking statements are
included under Item 1. “Business” and Item 2. “Financial
Information - Management’s Discussion and Analysis of Financial Condition and
Results of Operation.” All forward-looking statements included in
this document are made as of the date hereof, based on information available to
us as of such date, and we assume no obligation to update any forward-looking
statement. It is important to note that such statements may not prove
to be accurate and that our actual results and future events could differ
materially from those anticipated in such statements. Among the
factors that could cause actual results to differ materially from our
expectations are those described under Item 1. “Business,” Item 1A.
“Risk Factors” and Item 2. “Financial Information - Management’s
Discussion and Analysis of Financial Condition and Results of
Operations.” All subsequent written and oral forward-looking
statements attributable to us or persons acting on our behalf are expressly
qualified in their entirety by this section and other factors included elsewhere
in document.
In
connection with our intended listing on the OTCBB, we plan to implement a
reverse stock split, in a range from one-for-ten (1-for-10) to one-for-twenty
(1-for-20), inclusive. If we effect the reverse stock split, all
share and per share numbers in this Form 10 will be affected, and we will at
that time adjust our reporting of such numbers in our filings with the
SEC.
Overview
We were incorporated in the State of
Delaware in 2000 and re-domiciled in the State of Nevada on December 31,
2004. We are engaged in creating and developing online gaming
products, slot products, gaming networks, and casinos. We offer a
variety of gaming products from online casino games, casino management software,
central server systems and slot machine software both to a United States and
International gaming market.
Our
business objective is to create the first public gaming and entertainment
corporation to incorporate the technology and marketing of both the Internet and
Land based casino industries in the development, lease and sale of server based
products with musical and sports themes designed for online gaming products,
slot products, gaming networks and casinos. Our management utilizes the
experience of gaming executives from traditional land based casinos incorporated
with the technology from programmers of online games, slots and server based
technology. Together they make use of criteria from the Nevada and New
Jersey gaming jurisdictions in the development of the state-of-the-art online
games, gaming networks and slot technology, a first in gaming. This
team has bridged the gap between online and traditional casinos and will allow
its investors to take advantage of the billions of dollars in the traditional
casinos and internet gaming industries.
ATIG
Business Model
ATIG has
capitalized on a specific niche in Gaming and Entertainment by
developing musical or sports related themes in all of our gaming
products and facilities. Our business model is to select the most
entertaining areas of gaming as its key focus. ATIG has established what many of
its competitors have not; an adult oriented theme to its casino
products.
In
October 2006, the United States Congress passed the Unlawful Internet Gaming
Enforcement Act (“UIGEA”) that banned the acceptance of funds from bettors by
operators of off-shore online gambling websites that were engaged in the
business of betting or wagering. It also made it illegal for online
gambling operators to accept most forms of funds to be used by U.S. players to
gamble on the operators’ websites. The ban applied to the use of
credit cards, electronic funds transfers, any check, draft or similar instrument
and the proceeds of any other form of financial transaction as the Secretary of
Treasury and the Federal Reserve Board may jointly prescribe by regulation,
which involves a financial institution as a payer on behalf of or for the
benefit of such other person. Excluded from the coverage of “unlawful
Internet gambling” were online bets made solely on or among Indian tribal lands
under enabling laws adopted by the affected tribes and approved by the National
Indian Gaming Commission (“NIGC”). As of December 31, 2010 there were
450 tribal casinos in 28 states approved by the NIGC under this
exclusion.
The UIGEA
that bans U.S. players from using credit cards on off-shore gaming sites has
given Indian Gaming and States the opportunity to offer the first legalized
Internet Gaming within the Unites States. UIGEA gave Indian Gaming
the opportunity to link Indian Casinos across the United States as long as it is
operated on Indian Lands and has been approved by the National Indian Gaming
Commission (NIGC), the Federal Gaming Commission which licenses all Indian
Casinos nationwide. ATIG has developed the patent pending "Casino
Gateway Network", (a private gaming network which is designed to offer Class
III, Class II and Online Games in Commercial Casinos throughout a State and the
"Tribal Gaming Network," the Indian version, which links Indian Casinos
nationwide).
Class II Gaming
encompasses
(a) the game of chance commonly known as bingo (whether or not electronic,
computer, or other technologic aids are used in connection therewith, (b) which
is played for prizes, including monetary prizes and (c) card games that are
explicitly authorized by the laws of the State.
Class III
Gaming
is all
other gaming, including casino gaming and electronic or electromechanical
facsimiles of any game of chance and any house banking card game.
Our
Casino Gateway
Network
is the first of
its kind gaming network which has been approved by the National Indian Gaming
Commission (NIGC):
http://www.nigc.gov/LinkClick.aspx?fileticket=81X0n5TqWgs%3d&tabid=789
, and will offer the first legal form
of Internet Gaming within the United States. UIGEA also
created the opportunity for ATIG to develop the first state to state Wide
Area Progressive (“WAP”) Jackpots, only the second nationwide Progressive
Lottery game, namely “Thunderball,” ATIG's Indian version of the "Powerball."
ATIG has also developed "Quarterback Draw Football" and "Bango Football," the
first legal nationwide simulated Sportsbook and Bingo game in the United States:
http://www.nigc.gov/LinkClick.aspx?fileticketFao%3
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Products
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Quarterback
Draw Football
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Tribal
Gaming Network Poker
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Product
Distribution License: The Company’s subsidiary Atlantis Gaming International,
(Australia) is licensed in the Northern Territory of Australia to distribute
Gaming Equipment:
http://www.nt.gov.au/justice/licenreg/gaming/suppliers_providers. The Company
intends to secure the requisite licenses within the United States gaming
market.
Marketing
and Sales Strategy
ATIG is
targeting several customers segments initially through the Indian Gaming market
with its Tribal Gaming Network which includes Casino games, Lottery games, Poker
games, Tournament games, Sports related games, & Musical games geared to
musical fans and sports fans in Indian casinos and then Commercial
casinos. With current States considering Internet Gaming Legislation,
as of February 1, 2011 no States have officially passed any Intrastate Internet
Gaming legislation. Even though many consider Pari-Mutuel Horse
Racing Amendment of 2000 to be a form of Internet Gaming, no other form of
Internet Gaming has been approved for use in the US except the Tribal Gaming
Network (A private gaming network linking Indian Casinos nationwide offering
Class III, Class II and online gaming on Indian Lands). As mentioned
above, this Network was approved for use in Indian Casinos nationwide by the
NIGC.
The
marketing and sales strategy for promoting ATIG will stem from a mix of
aggressive advertising, attractive promotions of Musical Entertainers in our
Jukebox Slots products and Sports Celebrities such as former Superbowl
Quarterbacks that will be featured in Quarterback Draw Football and Bango
Football, and a different product mix to traditional gaming
sites. The goal is not to reach a “high visitor rate” but a high
client rate that plays and wagers on games consistently.
Advertising,
Promotion and Publicity
Although
it has been proven that there is a low success rate with Internet publicity,
however, we believe that with the expansion of social networking, we will be
able to utilize the celebrities incorporated in our products to help sell and
promote the Tribal Gaming Network World-Wide. ATIG plans to launch an
aggressive advertising campaign by partnering with an Internet Media company to
supply the distribution channel. A campaign will be developed using
music and sports.
Since
Indian Lands within the United States are considered sovereign lands, it is our
future objective to link the Tribal Gaming Network to other legal foreign gaming
jurisdictions, something States are not allowed to do. This will
create a critical mass for many of the games found on the Tribal Gaming Network
and will become the only pure form of Internet Gaming in the United States since
the ban in 2006. Although the entertainment site has broad appeal
Worldwide, the goal is to target specific Countries through dedicated
advertising based on gaming, music and sports. The content and the
games included will target primarily the following countries:
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Europe:
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The
UK, (England, Northern Ireland, Scotland and Wales)
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Italy
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Spain
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Netherlands
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Belgium
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America
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Canada
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The
United States of America
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México
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Brazil
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Argentina
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Venezuela
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Peru
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Asia
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India
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China
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Australia
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New
Zealand
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Within
these countries, the Tribal Gaming Network should have a broad appeal because it
will include a large Internet Gaming market by including the US, which has
limited overall Internet Gaming revenues since Internet Gaming was banned in
2006 by US Congress. With the Tribal Gaming Network it will create a
larger critical mass for many games because the US was considered by many
analyses to be 60% of the World’s Internet Gaming market.
Land
Based Casinos
ATIG will
offer casino games to compliment a new and old gambling market, covering the
spectrum for gamblers who like progressive games, the speed of online games, the
privacy of online game. As for the slot market, Jukebox Slots creates
new mature themes other than cartoons, such as music. For those
gamblers who like Sports, but are looking for a new twist or the faster pace
games like Quarterback Draw Football creates a new alternative by offering
simulated sports action. Competition among Internet casinos is more
intense, and there will be many product alternatives. The Tribal
Gaming Network products will target young adults, male and female, with
flash-type casino games. We believe and there has been some research
that shows that there is a marked preference of males for table games and a
preference for slots machines in women.
Industry
Overview
The
Tribal Gaming Network the Indian version of the Casino Gateway Network was
approved for use in Indian Casinos by a favorable opinion granted to us by the
National Indian Gaming Commission (NIGC). The NIGC is the Federal
Gaming Commission that licenses all Indian Casinos in the United
States. Since the Tribal Gaming Network operates on Indian Lands only
and abides by all IRGA laws it is classified by the NIGC as legal
gaming. Games found on the Tribal Gaming Network will all be tested
by a certified game testing agency within the US such as GLI or
BBM. Many of the games have already been tested by
BMM. The Tribal Gaming Network must also comply with all State
Compacts and the Regulatory Indian Gaming agencies where the games are
operated.
Nationwide
237 Indian tribes in 28 states use Indian gaming to create new jobs, fund
essential government services and rebuild communities. In 2009,
tribal governments generated $26.2 Billion in gross revenues from Indian gaming
and $3.2 Billion in gross revenues from related hospitality and entertainment
services (resorts, hotels, restaurants, entertainment centers,
etc.). The revenues from Indian gaming were generated from both Class
II and Class III gaming operations. There are currently 198 tribes
that have gaming compacts for class II gaming, out of 558 federally recognized
tribes and there are 450 tribal casinos in 28 states approved by the NIGC for
gambling.
Competition
Since the
Tribal Gaming Network operates in over 28 States many Internet Gaming companies
such as Party Poker, Playtec as of January 1, 2011 have not been granted
permission to operate in the United States officially by any State Gaming
Commission.
Our
patent pending
Casino Gateway
Network
is the only network designed to offer Class II, Class III and
Online Games on a private network, that links Commercial Casinos throughout a
state and the Indian version (The Tribal Gaming Network), that links Indian
casinos nationwide, that is approved by the NIGC. In the opinion of
the NIGC “the UIGEA does not prohibit the use of the Casino Gateway Network in
or between licensed Indian gaming facilities to administer wide-area progressive
jackpots or to play Atlantis’s Bango games, bingo or other Class 11
games”.
We are a
relatively small developmental company and there is no assurance that other
companies with resources far greater than us will not enter this field of Indian
gaming.
Intellectual
Property and Other Technology Protections
Our
success will depend in large part on our ability to:
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Maintain
and obtain patent and other proprietary protection for products, processes
and uses of our products;
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Preserve
trade secrets; and
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Operate
without infringing the patents and proprietary rights of third
parties.
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We intend
to seek appropriate patent protection for our proprietary technologies by filing
patent applications when possible in the United States and other select
countries. Currently, one U.S. patent has been issued and is in
force. We also have one patent application currently pending in the
United States.
We also
rely on trade secrets and proprietary know-how related to the production and
testing of our products, especially when we do not believe that patent
protection is appropriate or can be obtained. Our policy is to
require each of our employees, consultants and advisors to execute a
confidentiality and inventions agreement prohibiting the disclosure of our
confidential information before they begin a relationship with us.
Governmental
Regulations
Indian
gaming is subject to more stringent regulation and security controls than any
other type of gaming in the United States.
Gaming
activities are subject to extensive statutory and regulatory control in the
United States by State and Internationally by various government
authorities. All 50 states currently have statutes or regulations
restricting gaming activities, and three states do not permit gaming at
all. Federal and State statutes and regulations are likely to be
significantly affected by any changes in the political climate and economic and
regulatory policies. These changes could affect our proposed
operations in a materially adverse way.
The
Indian Gaming Regulatory act of 1988 provided for a thorough system of
regulation of Indian gaming. The Act divides gaming into three
categories:
Class I Gaming
, which is
social or traditional and cultural forms of Indian gaming, conducted for minimal
prizes, is solely regulated by the tribes.
Class II Gaming
is regulated
by the National Indian Gaming Commission and through Tribal Gaming Commissions
(“TGC”). The TGC’s are established and operated by Indian Nations to regulate
gaming activities on Indian reservations. There are some 186 Tribal
Gaming Commissions in full operation nationwide.
Class III
Gaming is regulated according to the terms of compacts tribes negotiate with the
governments of the states wherein they are located. These compacts
often give TGC’s the primary on-site responsibilities. Certain other
compacts may give the states the responsibility with the TGC.
On
October 13,2006, Congress passed the Unlawful Internet Gambling Enforcement Act
of 2006 (the “Act”), which, among other things, prohibits the acceptance of
credit cards, electronic funds transfers, checks, or the proceeds of other
financial transactions by persons engaged in unlawful betting or wagering
businesses of online gambling Websites. However, the Act specifically
excludes from the definition of
Unlawful Internet Gambling
“online bets made solely on or among Indian tribal lands under enabling laws
adopted by the affected tribes and approved by the National Indian Gaming
commission.” On November 12, 2008, the Department of Treasury and the federal
Reserve Board jointly published the official rule implementing the
UIGEA.
In
addition to the above, Tribal gaming operations are regulated, to some extent,
by state governments, the U.S. Justice Department and the U.S. Department of
Interior. Agencies with oversight relationships to gaming include the
FBI, the IRS, the U.S. Attorneys, the U.S. Marshalls, Attorney General, Secret
Service and the Bureau of Indian affairs.
Indian
Nations have established their own gaming commissions and developed tribal
police forces and court systems to combat crimes. They have invested
heavily in high-tech surveillance equipment and because Indian gaming (Class
III) is an emerging industry, only new “state of the art” electronic equipment
and machines are in use. Indian Nations have established Industry
Standards and Internal Controls. As of August 1, 1996, Indian Nations
must comply with the Title 31 (Bank Secrecy Act). Thus, they have
established compliance offices. Tribes have more personnel by far
regulating tribal casinos than regulate Nevada casinos. Additionally,
Indian Nations have created extensive security and surveillance networking to
exchange intelligence and monitor casinos.
Compacts
between states and tribes give states some regulatory power with Indian gaming
through IGRA recognizes that the federal government has primary responsibility
for government-to-government relations with sovereign Indian
Nations. Most states have a state gaming office providing the
regulation of gamin in the state. This varies from state to
state.
Employees
As of
January 31, 2011, we have 2 full time employees and 3 clerical and
accounting part-time employees. The Company utilizes various independent
contractors for marketing, sales and product design and
programming.
WHERE
YOU CAN FIND MORE INFORMATION
Upon the effectiveness of this Form 10,
we will be subject to the information reporting requirements of the Exchange
Act, and we will file reports with the SEC, including annual reports on Form
10-K, quarterly reports on Form 10-Q and current reports on Form
8-K. You can read our SEC filings, including this Form 10 and its
exhibits, over the Internet at the SEC's website at
http://www.sec.gov
. You may also read and copy any document we file with the SEC at its
public reference facilities at 100 F Street, N.E., Washington, D.C.
20549. You may also obtain copies of these documents at prescribed
rates by writing to the Public Reference Section of the SEC at 100 F
Street, N.E., Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330 for further information on the operation of the public
reference facilities. We also intend to maintain a website at
www.atlantisinternetgroup.com
, which is currently under reconstruction. The information contained
in, or that can be accessed through, our website is not part of, and is not
incorporated into, this Form 10.
We have limited capital resources and
cannot ensure access to additional capital if needed.
Our
historical operating losses have required us to seek additional capital through
the issuance of our common stock on a number of occasions. If we
continue to sustain operating losses in future periods, we may be forced to seek
additional capital to fund our operations. We do not know whether we
will be able to obtain additional capital if needed, or on what terms the
capital would be available, if at all. Depending on market conditions
and our prospects, additional financing may not be available or may result in
significant dilution to our current stockholders.
Our independent registered public
accounting firm has issued a “going concern” opinion raising substantial doubt
about our financial viability.
The
accompanying consolidated financial statements for the years ended December 31,
2009 and 2008 have been prepared on a basis that contemplates the realization of
assets and the satisfaction of liabilities and commitments in the normal course
of business. We have continuing net losses and negative cash flows from
operating activities. In addition, we have deficiencies in working capital and
stockholders’ equity as of the balance sheet dates. These conditions
raise substantial doubt about our ability to continue as a going concern. Our
consolidated financial statements do not include any adjustments to the amounts
and classification of assets and liabilities that may be necessary should we be
unable to continue as a going concern. These circumstances caused our
independent registered public accounting firm to include an explanatory
paragraph in its report dated November 15, 2010 regarding their concerns about
our ability to continue as a going concern. Substantial doubt about our ability
to continue as a going concern may create negative reactions to the price of the
common shares of our stock and we may have a more difficult time obtaining
financing.
We were
initially incorporated in December 2000 and reincorporated in December
2004. From January 2004 to the present, our business operations
primarily consisted of efforts to create, develop and market online casino
services for Indian Land based casinos. As a result,
there is a very limited operating history upon which an evaluation of our
Company can be based. Our future prospects are subject to risks and
uncertainties that are generally encountered by newly operational companies in
new and rapidly evolving markets. These risks include, but are not
limited to:
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Whether
we can successfully market and execute our business model for internet
gambling for Indian Land based
casinos;
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Whether
the demand for our proposed services will grow to a level sufficient to
support our operations;
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Whether
governing laws, regulations or regulatory initiatives will force us to
discontinue or alter certain business operations or
practices;
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Whether
our technology partners can respond effectively to market
changes;
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Whether
we and our strategic partners can develop and maintain products and
services that are equal or superior to the services and products of
competitors;
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Whether
we can maintain strong alliances with those to whom we outsource our data
and technology needs; and
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Whether
we can generate the funds as needed to sell the services we intend to
offer, and attract, retain, and motivate qualified
personnel.
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There can
be no assurance that we can be successful in addressing these
risks. Our limited operating history and the uncertain nature of the
markets for our proposed services make the prediction of future results of
operations extremely difficult. As a result of the foregoing factors
and the other factors identified herein, there can be no assurance that we will
ever operate profitably on a quarterly or annual basis.
We are
currently subject to U.S. regulation under the Unlawful Internet Gaming
Enforcement Act (“UIGEA”) and its agency, the National Indian Gaming Commission
(“NIGC”). We believe that by operating within Indian Lands and casinos,
which are exempted from the UIGEA regulations, our current operations are
lawful. However, due to the increasing usage of the internet and concerns
about online gaming in general, it is possible that a number of laws and
regulations may be adopted in the future that would affect our conducting
business over the internet. Presently, there are few laws or
regulations that apply specifically to the sale of goods and services on the
internet. Any new legislation applicable to us could expose us to
substantial liability, including significant expenses necessary to comply with
these laws and regulations. Furthermore, the growth and development
of the market for electronic commerce may promote more stringent consumer
protection and privacy laws that may impose additional burdens on companies
conducting business online, including us. The adoption of additional
laws or regulations may decrease the growth of the internet or other online
services, which could, in turn, decrease the demand for our services and
increase our cost of doing business. For example, we may become
subject to some or all of the following sources of regulation: state or federal
banking regulations; federal money laundering regulations; international
banking, financial services or gaming regulations or laws governing other
regulated industries; or U.S. and international regulation of internet
transactions. The application to us of existing laws and regulations
relating to issues such as banking, currency exchange, online gaming, pricing,
taxation, quality of services, electronic contracting, and intellectual property
ownership and infringement is unclear. In addition, we may become
subject to new laws and regulations directly applicable to the internet and our
activities. If we are found to be in violation of any current or
future regulations, we could be exposed to financial liability, including
substantial fines which could be imposed on a per transaction basis; forced to
change our business practices; or forced to cease doing business altogether or
with the residents of one or more states or countries.
We must adapt to new regulations
governing the transmission, use and processing of personal information in
electronic commerce.
Our
services involve handling, transmitting, verifying and processing personal
information of customers that we service. As electronic commerce
continues to evolve, federal, state and foreign governments may adopt laws and
regulations covering user privacy. New laws regulating the
solicitation, collection or processing of personal or consumer information could
adversely affect our business.
Our
future success and our ability to expand our operations will depend on our
ability to retain highly qualified management and employees. As a
newly operational company, we may have difficulty or be unable to retain or
attract highly qualified management and employees. Failure to attract
and retain personnel will make it difficult for us to manage our business and
meet our objectives, and will likely have a material adverse effect on our
business operations. We do not carry key person life insurance on any
of our senior management personnel. The loss of the services of any
of our executive officers or other key employees may have a material adverse
effect on our business.
We have not sought to protect our
intellectual property through registration. Our inability to protect
our intellectual property rights may force us to incur unanticipated
costs.
Our
inability to protect our intellectual property could reduce the value of our
products and services. Various events outside of our control pose a threat to
our intellectual property rights as well as to our products and
services. For example, effective intellectual property protection may
not be available in every country in which our products and services are
distributed or made available through the internet. Also, the efforts we have
taken to protect our proprietary rights may not be sufficient or effective. Any
significant impairment of our intellectual property rights could harm our
business or our ability to compete. Also, protecting our intellectual property
rights is costly and time consuming. Any increase in the unauthorized use of our
intellectual property could make it more expensive to do business and harm our
operating results.
Although
we may seek to obtain patent protection for our innovations, it is possible we
may not be able to protect some of these innovations. Changes in patent law,
such as changes in the law regarding patentable subject matter, can also impact
our ability to obtain patent protection for our innovations. In addition, given
the costs of obtaining patent protection, we may choose not to protect certain
innovations that later turn out to be important. Furthermore, there is always
the possibility, despite our efforts, that the scope of the protection gained
will be insufficient or that an issued patent may be deemed invalid or
unenforceable.
We may
also seek to maintain certain intellectual property as trade secrets. The
secrecy could be compromised by outside parties, or by our employees, which
would cause us to lose the competitive advantage resulting from these trade
secrets.
We
plan to implement a reverse stock split, which may reduce our trading volume and
the attractiveness of our common stock as an investment.
In
connection with our intended listing on the OTCBB, we plan to implement a
reverse stock split, in a range from one-for-ten (1-for-10) to one-for-twenty
(1-for-20), inclusive. The reverse stock split is being implemented
due to the low selling price of our common stock and the large number of shares
of common stock that we have outstanding. The reverse stock split
must be approved by our stockholders, and there is no guarantee that such
approval will be obtained. If such approval is obtained and the
reverse stock split is implemented, there is no guarantee that the reverse stock
split will increase our share price. We also cannot guarantee that
any increase in the price of our common stock resulting from the reverse split
will be proportionate to the reverse split ratio, prevail in the market for any
specific period of time, increase the trading volume of our shares, or increase
our ability to raise capital through the sale of our shares. If the
reverse stock split fails to increase our share price proportionate to the
reverse stock split ratio, holders of our common stock will be adversely
affected.
Our
internal control over financial reporting does not currently meet the standards
required by Section 404 of the Sarbanes-Oxley Act of 2002, and failure to
achieve and maintain effective internal control over financial reporting in
accordance with Section 404 of the Sarbanes-Oxley Act could have a material
adverse effect on our business and stock price.
We have
not maintained internal control over financial reporting in a manner that meets
the standards of publicly traded companies required by Section 404 of the
Sarbanes-Oxley Act of 2002. The rules governing the standards that
must be met for our management to assess our internal control over financial
reporting are complex and require significant documentation, testing and
possible remediation. We expect to begin the process of reviewing,
documenting and testing our internal control over financial reporting after the
effectiveness of this Form 10, including potentially hiring additional key
management. There is no assurance that we will successful in being
able to attract additional management. We might also encounter
problems or delays in completing the implementation of any changes necessary to
make a favorable assessment of our internal control over financial
reporting. If we cannot favorably assess the effectiveness of our
internal control over financial reporting, investors could lose confidence in
our financial information and the price of our common stock could
decline.
Being
a public company will increase our administrative costs and might further strain
our resources and distract our management.
Upon the
effectiveness of this Form 10, we will become a public reporting
company. In complying with the Sarbanes-Oxley Act of 2002 and other
rules implemented by the SEC, we will incur significant legal, accounting and
other expenses that we did not incur as a non-registered company. For
example, we will be required to comply with additional internal control
requirements, we may pay higher rates for director and officer liability
insurance, and we will incur internal and external costs to prepare and
distribute periodic public reports in compliance with our obligations under the
securities laws. These additional costs will lower our earnings and
increase our ongoing need for capital.
Risks
Relating To Ownership of ATIG Common Stock
There
is a Limited Trading Market For ATIG Common Stock, Thereby Limiting a
Shareholder’s Opportunity To Sell Such Common Stock.
Currently,
only a limited trading market exists for ATIG's common stock. The common stock
trades on the "Pink Sheets" under the symbol "ATIG.PK." The Pink Sheets is a
limited market and subject to substantial restrictions and limitations in
comparison to the NASDAQ system. Any broker/dealer that makes a market in the
Company's stock or other person that buys or sells ATIG stock could have a
significant influence over its price at any given time. ATIG cannot assure its
shareholders that a greater market for ATIG's common stock will be sustained.
There is no assurance that ATIG's common stock will have any greater liquidity
than shares that do not trade on a public market. A shareholder may be required
to retain their shares for an indefinite period of time, and may not be able to
liquidate their shares in the event of an emergency or for any other
reasons.
The
Regulation Of Penny Stocks By the SEC and FINRA May Discourage The Tradability
of Our Securities.
We are a
"penny stock" company. Our securities currently trade on the Pink Sheets market
and are subject to a Securities and Exchange Commission rule that imposes
special sales practice requirements upon broker-dealers who sell such securities
to persons other than established customers or accredited investors. For
purposes of the rule, the phrase "accredited investors" means, in general terms,
institutions with assets in excess of $5,000,000, or individuals having a net
worth in excess of $1,000,000 or having an annual income that exceeds $200,000
(or that, when combined with a spouse's income, exceeds $300,000). For
transactions covered by the rule, the broker-dealer must make a special
suitability determination for the purchaser and receive the purchaser's written
agreement to the transaction prior to the sale. Effectively, this discourages
broker-dealers from executing trades in penny stocks. Consequently, the rule
will affect the ability of purchasers in this offering to sell their securities
in any market that might develop therefore because it imposes additional
regulatory burdens on penny stock transactions.
In
addition, the Securities and Exchange Commission has adopted a number of rules
to regulate "penny stocks". Such rules include Rules 3a51-1, 15g-1, 15g-2,
15g-3, 15g-4, 15g-5, 15g-6, 15g-7, and 15g-9 under the Securities and Exchange
Act of 1934, as amended. Because our securities constitute "penny stocks" within
the meaning of the rules, the rules would apply to us and to our securities. The
rules will further affect the ability of owners of shares to sell our securities
in any market that might develop for them because it imposes additional
regulatory burdens on penny stock transactions.
Shareholders
should be aware that, according to Securities and Exchange Commission, the
market for penny stocks has suffered in recent years from patterns of fraud and
abuse. Such patterns include (i) control of the market for the security by one
or a few broker-dealers that are often related to the promoter or issuer; (ii)
manipulation of prices through prearranged matching of purchases and sales and
false and misleading press releases; (iii) "boiler room" practices involving
high-pressure sales tactics and unrealistic price projections by inexperienced
sales persons; (iv) excessive and undisclosed bid-ask differentials and markups
by selling broker-dealers; and (v) the wholesale dumping of the same securities
by promoters and broker-dealers after prices have been manipulated to a desired
consequent shareholder losses. Our management is aware of the abuses that have
occurred historically in the penny stock market. Although we do not expect to be
in a position to dictate the behavior of the market or of broker-dealers who
participate in the market, management will strive within the confines of
practical limitations to prevent the described patterns from being established
with respect to our securities.
We
are unlikely to pay dividends on our common stock for the foreseeable
future.
We have
never declared or paid cash dividends on our capital stock. We
currently intend to retain all available funds and any future earnings for use
in the operation and expansion of our business. We do not anticipate
paying any cash dividends in the foreseeable future, and it is unlikely that
investors will derive any current income from ownership of our common
stock. This means that the potential for economic gain from ownership
of our stock depends on appreciation of our common stock price and will only be
realized by a sale of the common stock at a price higher than your purchase
price.
Rule
144 Sales In the Future May Have a Depressive Effect on ATIG Stock
Price.
All of
the outstanding shares of common stock that are held by ATIG present officers,
directors, and affiliate stockholders are "restricted securities" within the
meaning of Rule 144 under the Securities Act of 1933, as amended. As restricted
Shares, these shares may be resold only pursuant to an effective registration
statement or under the requirements of Rule 144 or other applicable exemptions
from registration under the Act and as required under applicable state
securities laws. Rule 144 provides in essence that a person who has held
restricted securities for six months may, under certain conditions, sell every
three months, in brokerage transactions, a number of shares that does not exceed
the greater of 1.0% of a company's outstanding common stock or the average
weekly trading volume during the four calendar weeks prior to the sale. There is
no limit on the amount of restricted securities that may be sold by a
non-affiliate after the owner has held the restricted securities for a period of
two years. A sale under Rule 144 or under any other exemption from the Act, if
available, or pursuant to subsequent registration of shares of common stock of
present stockholders, may have a depressive effect upon the price of the common
stock in any market that may develop.
ATIG
Investors May Suffer Future Dilution Due To Issuances of Shares for Various
Considerations in the Future.
There may
be substantial dilution to ATIG shareholders as a result of future decisions of
the Board to issue shares without shareholder approval for cash, services, or
acquisitions.
ATIG
Stock Will in all Likelihood be Thinly Traded and as a Result an Investor May be
Unable to Sell at or Near Ask Prices or at all if the Investor Needs to
Liquidate Shares.
The
shares of ATIG's common stock is thinly-traded in the Pink Sheets, meaning that
the number of persons interested in purchasing ATIG common shares at or near ask
prices at any given time may be relatively small or non-existent. This situation
is attributable to a number of factors, including the fact that ATIG is a small
company which is relatively unknown to stock analysts, stock brokers,
institutional investors and others in the investment community that generate or
influence sales volume, and that even if ATIG came to the attention of such
persons, they tend to be risk-averse and would be reluctant to follow an
unproven, early stage company such as ATIG or purchase or recommend the purchase
of any of ATIG's securities until such time as ATIG becomes more seasoned and
viable. As a consequence, there may be periods of several days or more when
trading activity in ATIG securities is minimal or non-existent, as compared to a
seasoned issuer which has a large and steady volume of trading activity that
will generally support continuous sales without an adverse effect on securities
price. ATIG cannot give you any assurance that a broader or more active public
trading market for ATIG common securities will develop or be sustained, or that
any trading levels will be sustained. Due to these conditions, ATIG can give
investors no assurance that they will be able to sell their shares at or near
ask prices or at all if the investor needs money or otherwise desires to
liquidate the securities of ATIG.
Trading
In Our Shares In the Public Market Will Most Likely Be Volatile Because of
Factors Beyond Our Control.
There can
be no assurance that our shares will continue to be quoted on the Pink Sheets or
that they will be accepted for trading on the OTC Bulletin Board or other
recognized trading market, or that if they are, there will be an active trading
market for the shares. Accordingly, it could be difficult for holders of our
common stock to liquidate their shares.
The
market price of our common stock could be subject to significant fluctuations
and the market price could be subject to any of the following
factors:
o our
failure to achieve and maintain profitability;
o changes
in earnings estimates and recommendations by financial analysts;
o actual
or anticipated variations in our quarterly and annual results of
operations;
o changes
in market valuations of similar companies;
o
announcements by us or our competitors of significant contracts, new services,
acquisitions, commercial relationships, joint ventures or capital
commitments;
o loss of
significant clients or customers;
o loss of
significant strategic relationships; and
o general
market, political and economic conditions.
In the
past, following periods of extreme volatility in the market price of a company's
securities, securities class action litigation has often been instituted. A
securities class action suit against us could result in substantial costs and
divert our management's time and attention, which would otherwise be used to
benefit our business.
Management’s
Discussion and Analysis of Financial Condition and Results of
Operation
Discussion
of Operating Results
The
following discussion of our operating results explains material changes in our
results of operations for the three and nine months ended September 30, 2010 and
years ended December 31, 2009 and 2008, compared to their respective prior
periods. The discussion should be read in conjunction with the financial
statements and related notes included elsewhere in this Form 10.
We are in the on-line gaming software
business. Our goal is to license on-line gaming software to tribal casinos, so
that patrons can legally play poker and other on-line gaming products. At this
point in time we are still in the development stage and have no significant
revenues.
During
the three and the nine months ended September 30, 2010 and 200 and the
years ended 2009 and 2008, we devoted substantially all of our resources to
supporting our efforts to promote our products to the Indian gaming
community.
Critical
Accounting Policies
Critical
accounting policies are those which are both important to the presentation of a
company's financial condition and require management's judgments. Our critical
accounting policies are:
* revenue
recognition - which includes consulting and the licensing of our on-line gaming
products
*
share-based payment expense - we recognize share-based equity compensation
in our financial statements of operations at the grant-date fair value of our
stock.
Results
of Operations for the Three Months Ended September 30, 2010 and
2009
There
were no revenues the three months ended September 30, 2010 or 2009.
Operating
expenses for the three months ended September 20, 2010 were up 44% (from
$146,498 to $211,095) principally from increases in payroll and travel costs. We
expect our costs to fluctuate until we are able to license our
products.
Net loss
also increased by 44% during the three months ended September 30,
2010.
Results
of Operations for the Nine Months Ended September 31, 2010 and 2009
Revenues
decreased in the nine months ended September 30 from $11,500 of consulting
in 2009 to no revenues in 2010. We do not expect any consulting revenues, but
are in the process of licensing our on-line gaming products.
Operating
expenses for the nine months ended September 30, 2010 increased by 106% (from
$274,240 to $564,722) principally from increases in payroll and travel costs. We
expect our costs to fluctuate until we are able to license our
products.
Net loss
for the nine months ended September 30, 2010 increased by 115%.
Equity
and Capital Resources
Cash
decreased by $79,665 to $8,084 during the nine months ended September 30, 2010.
Cash provided from the issuance of common stock increased from $171,181 to
$262,668 during the nine months ended September 30, 2010, and accrued payroll
increased by $235,520.
Results
of Operations for the Years Ended December 31, 2009 and 2008.
Revenues decreased
in the year ended December 31, 2009 from $30,800 to $11,600 (63%) due mainly to
the Company stopping all Website consulting business.
Operating
expenses for the year ended December 31, 2009 increased by 310%
(from $637,458 to $1,978,675) principally from increases in consulting and
professional expenses. We expect our costs to fluctuate until we begin to
generate revenues.
Net loss
for the year ended December 31, 2009 increased by 324% over 2008, due
principally to increased expenditures in marketing.
Cash increased
by $86,509 to $87,749 during the year ended December 31, 2009. Cash provided
from the issuance of common stock for cash increased from $27,403 to $564,300
during the year ended December 31, 2009.
Effects
of Inflation
We do not
believe that inflation has had a material impact on our business.
Critical
Accounting Estimates and Policies
The preparation of financial statements
in conformity with generally accepted accounting principles (“GAAP”) requires
management to make estimates and assumptions that affect the amounts reported in
the financial statements and judgments related to the application of certain
accounting policies.
While we
base our estimates on historical experience, current information and other
factors deemed relevant, actual results could differ from those
estimates. We consider accounting estimates to be critical to our
reported financial results if (i) the accounting estimate requires us to make
assumptions about matters that are uncertain and (ii) different estimates that
we reasonably could have used for the accounting estimate in the current period,
or changes in the accounting estimate that are reasonably likely to occur from
period to period, would have material impact on our financial
statements.
Fair
Value of Financial Instruments
The
carrying amounts reported in the balance sheets for current assets and current
liabilities approximate fair value due to their short-term nature. The carrying
amounts reported for long-term debt approximate fair value because the
underlying instruments bear interest rates which approximate current market
rates for obligations with similar terms.
Trade
Accounts Receivable
Accounts
receivable are stated at the amount we expect to collect. We
regularly review our accounts receivable and make provisions for potentially
uncollectible balances. Uncollectible balances are written off
against the allowance after extensive efforts of collection and when balances
are deemed uncollectible. Recoveries of trade receivables previously
written off are recorded when cash is received. A trade receivable is
considered to be past due if any portion of the receivable balance has not been
received by is within its normal terms.
Property
and equipment is stated at cost less accumulated depreciation. Depreciation is
computed using the straight-line method over the estimated useful lives of the
asset, which range from six to ten years.
Maintenance
and repairs of equipment are charged to operations and major improvements are
capitalized. Upon retirement, sale, or other disposition of equipment, the cost
and accumulated depreciation are eliminated from the accounts and gain or loss
is included in operations.
Impairment
of Long-lived Assets
We
periodically review the carrying value of our long-lived assets in relation to
historical results, as well as management’s best estimate of future trends,
events and overall business climate. If such reviews indicate that the carrying
value of such assets may not be recoverable, we will then estimate the future
cash flows generated by such assets (undiscounted and without interest charges).
If such future cash flows are insufficient to recover the carrying amount of the
assets, then impairment is triggered and the carrying value of any impaired
assets would then be reduced to fair value.
The cost
of all share-based awards to employees, including grants of employee stock
options and restricted stock, is recognized in the financial statements based on
the fair value of the awards at grant date. The fair value of stock option
awards is determined using the Black-Scholes valuation model on the date of
grant. The fair value of restricted stock awards is equal to the market price of
our common stock on the date of grant. The fair value of share-based awards is
recognized as stock-based compensation expense on a straight-line basis over the
requisite service period from the date of grant.
Income
Taxes
We
recognize an asset or liability for the deferred tax consequences of all
temporary differences between the tax bases of assets or liabilities and their
reported amounts in the financial statements. Temporary differences
will result in taxable or deductible amounts in future years when the amounts
reported in the financial statements are recovered or settled. These deferred
tax assets or liabilities are measured using the tax rates that are anticipated
to be in effect when the differences are expected to reverse. Deferred tax
assets are reviewed periodically for recoverability and a valuation allowance is
provided as necessary.
Liquidity
and Capital Resources
The
accompanying consolidated financial statements for the years ended December 31,
2009 and 2008 have been prepared on a basis that contemplates the realization of
assets and the satisfaction of liabilities and commitments in the normal course
of business. We have continuing net losses and negative cash flows from
operating activities. In addition, we have deficiencies in working capital and
stockholders’ equity as of the balance sheet dates. These conditions
raise substantial doubt about our ability to continue as a going concern. Our
consolidated financial statements do not include any adjustments to the amounts
and classification of assets and liabilities that may be necessary should we be
unable to continue as a going concern. These circumstances caused our
independent registered public accounting firm to include an explanatory
paragraph in their report dated November 15, 2010, regarding their concerns
about our ability to continue as a going concern. Our ability to continue as a
going concern depends on our ability to deploy technology for our core
businesses that generates sufficient revenue and cash flows to meet our
obligations and on our ability to obtain additional financing or sell assets as
may be required to fund current operations. Management’s plans include
generating income from our internet networks and operational programs to permit
us to generate sufficient cash flows to continue as a going concern. There is no
assurance these plans will be realized.
To date, we have financed our
operations primarily through private placements of the sale of our common stock
and the issuance of convertible notes in private offering transactions that were
exempt from the registration requirements of the Securities
Act. During the nine months ended September 30, 2010, we raised $ -0-
from borrowings and $262,658 from the sale of common stock. During
the nine months ended September 30, 2009, we raised $ -0- from
borrowings. We used cash in operating activities of $312,333 and
$123,803 during the nine months ended September 30, 2010 and 2009,
respectively. During the years ended December 31, 2009 and 2008, we
raised $-0- from borrowings and $576,100 and $850,000 from issuance of common
stock, respectively. We used cash in operating activities of $515,196
and $60,703 during the years ended December 31, 2009 and 2008,
respectively. Our working capital and other capital requirements for the
next twelve months will vary based upon a number of factors, including the
period required to bring our proposed services to commercial viability, the
level of sales and marketing costs for our products and services, and the
amounts we invest in strategic relationships. However, because
several factors related to the growth of our operations remain outside of our
control, there can be no assurance we will achieve commercial viability on our
anticipated timeline.
Off-Balance
Sheet Arrangements
None.
We do not
own any real property. We lease approximately 400 sq, ft. of office
space in Las Vegas, NV, at a monthly rent of $350.00. The term of the lease is
month to month. We believe that there is sufficient office space available at
favorable leasing terms both to replace existing office space and to satisfy any
additional needs we may have as a result of future expansion.
The following table shows the
beneficial ownership of shares of our common stock as of January 4, 2011
known by us through transfer agent records, held by: (i) each person who
beneficially owns 5% or more of the shares of common stock then outstanding;
(ii) each of our directors; (iii) each of our named executive officers; and (iv)
all of our directors and executive officers as a group.
The
information in this table reflects “beneficial ownership” as defined in Rule
13d-3 of the Exchange Act. To our knowledge and unless otherwise
indicated, each stockholder has sole voting power and investment power over the
shares listed as beneficially owned by such stockholder, subject to community
property laws where applicable. Percentage ownership is based on
907,779,359 shares of common stock outstanding as of January 31,
2011.
|
|
|
Number of Shares (1)
|
|
|
Percentage of Class (2)
|
|
|
|
|
|
|
|
|
|
|
Donald
Bailey(4)
3960
Howard Hughes Parkway, Ste. 500
Las
Vegas, NV 89169
|
|
|
118,603,941
|
(3)
|
|
|
13.06
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Linda
Bailey(4)
3960
Howard Hughes Parkway, Ste. 500
Las
Vegas, NV 89169
|
|
|
44,777,777
|
|
|
|
4.93
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Directors
and Officers as a Group (2)
|
|
|
163,381,718
|
|
|
|
17.99
|
%
|
* Less
than 1%.
|
(1)
|
Beneficial
ownership as a percentage of the class for each person holding options,
warrants or other rights exercisable within 60 days of January 31, 2011
has been calculated as though shares of our common stock subject to such
options were outstanding. However, such shares have not been
deemed outstanding for the purpose of calculating the percentage of the
class owned by any other person.
|
|
|
The
percentage indicated represents the number of shares of our common stock,
warrants and options exercisable within 60 days held by the indicated
stockholder divided by the sum of (a) the number of shares subject to
warrants and options exercisable by such stockholder within 60 days and
(b) 907,779,359 which is the number of shares of our common stock issued
and outstanding as of January 4,
2011.
|
|
(3)
|
Does
not include Warrants to purchase 100,000,000 shares of our common stock,
at an exercise price of $0.01 per share. The Warrants are exercisable for
a period of six months after the Company files it form 10-K for the
year 2010.
|
|
(4)
|
Donald
and Linda Bailey are husband and wife and each of them has beneficial
ownership and control of each others
shareholdings.
|
Directors
and Executive Officers
Each director serves until the next
annual meeting of the stockholders and until his successor is duly elected and
qualified. Information regarding our directors and executive officers
is set forth below:
|
NAME
|
|
AGE
|
|
POSITION
|
|
Donald
L. Bailey
|
|
55
|
|
President,
Chief Financial Officer, Director
|
|
Linda
I. Bailey
|
|
47
|
|
Executive
Vice President, Secretary,
Director
|
Donald L. Bailey
has served as
president chief financial officer and a member of the board of directors since
its inception in December 2000. A business graduate and football
athlete from Tulane University in Louisiana with over 30 years experience in
business management and architectural computer design and
development. Mr. Bailey founded a casino management corporation
consisting of online and traditional gaming executives. These fellow
individuals serve as a think tank for the gaming industry. Mr. Bailey
specialized in computer design with past clients such as Mobil Oil, Walt Disney
Corporation, Los Angeles Department of Water & Power and other Fortune 500
corporations. In 1996, Mr. Bailey utilized his computer and
management experience and created one of the first Internet Casinos introduced
on the Internet (Atlantis-Gaming). Over the years, Mr. Bailey has
been known for his innovative ideas and designs. As a pioneer of
Internet gaming software platforms, Mr. Bailey is the original designer for all
Atlantis products and designs ranging from numerous Internet Casinos
and ), Casino Gateway Network(an Online Gaming System). Other designs
include Web Directory Assistance (an operator assisted search engine
technology), Good-as-Gold (an online ATM, to Architectural Casino Hotel Designs
& Development. To his credit he developed an architectural design
that received numerous awards including an exhibit at the 1984 World’s Fair in
New Orleans, Louisiana titled “Amphibious Community Design” (a totally
self-sufficient floating development on water aka one of the first barge-based
casino designs).
Linda I. Bailey
has served as
executive vice president, secretary and a member of the board of directors since
its inception in December 2000. A business and marketing major from
Santa Monica College in California. Over 10 years of experience in
Executive Administration in the overall operations of an Internet Gaming and
Software development corporation. Responsible for the coordination of
communications between ATIG’s executive office and technological personnel as it
applies to the marketing, development and implementation of Internet technology
to the gaming industry. Mrs. Bailey was an Executive Assistant &
Public Relations representative for CEO’s and Vice Presidents at Tenet
Healthcare Corporation for over 10 years. Other experience included
working in the legal field with the Pennsylvania Governor’s Office of General
Counsel for Gov. Richard Thornburg and Gov. Robert Casey.
Donald
and Linda Bailey are husband and wife.
AUDIT
COMMITTEE
We do not
presently have an Audit Committee and the entire Board acts in such capacity for
the immediate future due to the limited size of the Board. The Company intends
to increase the size of its Board in the future, at which time it may appoint an
Audit Committee.
In lieu
of an Audit Committee the Board is empowered to make such examinations as are
necessary to monitor the corporate financial reporting and the external audits
of the Company, to provide to the Board of Directors (the "Board") the results
of its examinations and recommendations derived there from, to outline to the
Board improvements made, or to be made, in internal control, to nominate
independent auditors, and to provide to the Board such additional information
and materials as it may deem necessary to make the Board aware of significant
financial matters that require Board attention.
COMPENSATION
COMMITTEE
We do not
presently have a Nominating Committee and the Board acts in such capacity for
the immediate future due to the limited size of the Board. We intend to increase
the size of its Board in the future, at which time it may appoint a Compensation
Committee.
The
Compensation Committee will be authorized to review and make recommendations to
the Board regarding all forms of compensation to be provided to the executive
officers and directors of Atlantis, including stock compensation, and bonus
compensation to all employees.
NOMINATING
COMMITTEE
We do not
have a Nominating Committee and the Board acts in such capacity.
COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT
Upon
becoming registered under the Securities Exchange Act of 1934 (the “Exchange Act
of 1934”), Section 16(a) of the Exchange Act of 1934, will require that our
directors and executive officers and persons who beneficially own more than ten
percent (10%) of a registered class of its equity securities, file with the SEC
reports of ownership and changes in ownership of its common stock and other
equity securities. Executive officers, directors, and greater than ten percent
(10%) beneficial owners are required by SEC regulation to furnish us with copies
of all Section 16(a) reports that they file.
Summary Compensation
Table
The
following table sets forth all compensation awarded to, paid to or earned by the
following types of executive officers (the “Named Executive Officers”) for each
of our last two completed fiscal years: (i) each individual who served as, or
acted in the capacity of, our principal executive officer for the fiscal year
ended December 31, 2009; and (ii) each of our other most highly compensated
executive officers whose total annual compensation and bonus exceeded $100,000
for the fiscal year ended December 31, 2009.
Summary Compensation Table
|
|
|
|
|
|
Name and Principal Position
|
|
Year
|
|
Salary ($)
|
|
Option Awards
($)
|
|
Total ($)
|
|
|
Donald
Bailey
|
|
2009
|
|
|
210,000
|
|
|
|
|
210,000
|
|
|
|
|
2008
|
|
|
150,000
|
|
|
|
|
150,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Linda
Bailey
|
|
2009
|
|
|
150,000
|
|
|
|
|
150,000
|
|
|
|
|
2008
|
|
|
75,000
|
|
|
|
|
75,000
|
|
The Company does not have any written
employment agreements with its officers or other employees.
Stock
option plan
We do not
have a stock option plan and we have not issued any warrants, options or other
rights to acquire our securities. However, we intend to adopt an incentive and
non-statutory stock option plan during the first half of the year
2010.
Employee
Pension, Profit Sharing or other Retirement Plans
We do not
have a defined benefit, pension plan, profit sharing or other retirement plan,
although we may adopt one or more of such plans in the future.
Director's
compensation
At
present we do not pay our directors compensation for attending meetings of our
Board of Directors, although we expect to adopt a director compensation policy
by the end of the year 2011. We have no standard arrangement pursuant to which
our directors are compensated for any services provided as a director or for
committee participation or special assignments, but may reimburse Directors for
reasonable expenses incurred in attending meetings.
Certain
Relationships and Related Transactions
During
the period from January, 2008 through September, 2010, the
two officers and Directors of the Company, Donald and Linda Bailey, made a
series of loans to the Company in a principal amount totaling $353,940 to help
fund cash-flow deficiencies from the Company’s operations. These
loans accrue no interest and are payable upon demand..
During
the period from January, 2008 through September 2010 the Company had deferred
payment of salaries due to its two officers in the aggregate amount of
$1,221,917. No interest was accrued with respect to these deferred
salary amounts. On July 9, 2009, the Company issue 23,809,524 shares
of its common stock, valued at $500,000 to Donald Bailey, reducing the remaining
deferred salary owed to them to $1,221,917, as of September
30,2010.
Director
Independence
Our Board
has determined that none of our directors are independent under the NSASDAQ
Stock Market listing rules.
None.
Market
Information
Transactions
in our common stock are currently reported in the United States under the symbol
“ATIG.PK” on the “Pink Sheets”, a quotation service that displays real-time
quotes, last-sale prices, and volume information in over-the-counter equity
securities. The following table sets forth the range of high and low
bids reported in the over-the-counter market for our common
stock. The prices shown below represent prices in the market between
dealers in securities; they do not include retail markup, markdown or
commissions, and do not necessarily represent actual
transactions. The “Pink Sheets” is neither a stock exchange nor a
self-regulatory organization and is not regulated by either Financial Industry
Regulatory Authority or the SEC.
|
|
|
LOW
|
|
|
HIGH
|
|
|
Quarter
ended March 31, 2008
|
|
$
|
0.005
|
|
|
$
|
0.03
|
|
|
Quarter
ended June 30, 2008
|
|
$
|
0.008
|
|
|
$
|
0.025
|
|
|
Quarter
ended September 30, 2008
|
|
$
|
0.002
|
|
|
$
|
0.016
|
|
|
Quarter
ended December 31, 2008
|
|
$
|
0.0025
|
|
|
$
|
0.08
|
|
|
Quarter
ended March 31, 2009
|
|
$
|
0.0025
|
|
|
$
|
0.02
|
|
|
Quarter
ended June 30, 2009
|
|
$
|
0.009
|
|
|
$
|
0.04
|
|
|
Quarter
ended September 30, 2009
|
|
$
|
0.015
|
|
|
$
|
0.08
|
|
|
Quarter
ended December 31, 2009
|
|
$
|
0.016
|
|
|
$
|
0.065
|
|
|
Quarter
ended March 31, 2010
|
|
$
|
0.008
|
|
|
$
|
0.0245
|
|
|
Quarter
ended June 30, 2010
|
|
$
|
0.0075
|
|
|
$
|
0.0175
|
|
|
Quarter
ended September 30, 2010
|
|
$
|
0.0025
|
|
|
$
|
0.017
|
|
|
Quarter
ended December 31, 2010
|
|
$
|
0.001
|
|
|
$
|
0.007
|
|
Outstanding
Shares and Number of Stockholders
As of
January 31, 2011, the number of shares of common stock outstanding was
907,779,359. As of that date, there were approximately 122 record
holders of our shares of issued and outstanding common stock. This
figure does not include holders of shares held in securities position
listings. As of January 31, 2011, we have not issued any shares of
preferred stock.
Dividends
We have never declared or paid
dividends on our common stock. Moreover, we currently intend to
retain any future earnings for use in our business and, therefore, do not
anticipate paying any dividends on our common stock in the foreseeable
future.
On May24, 2005, we issued a Warrant to
purchase 25,000,000 shares of our common stock at an exercise price of $0.01 per
share, to a consultant. The Warrant expires two years after the
Company becomes a reporting company with the SEC.
Between January 5 and December 3, 2008,
we issued 15,050,000 shares of our common stock at prices between $0.012 and
$0.05 per share, for an aggregate amount of $253,600, to 15 consultants and
third party contractors.
On February 20 and November 26, 2008,
we sold a total of 1,666,666 shares of our common stock at $0.016 per share and
warrants, for an aggregate amount of $50,000, to three investors.
Between February 23 and December 24,
2009, we sold 36,282,745 shares of our common stock to investors at prices
between $0.0025 and $0.02 per share, for an aggregate amount of
$564,300.
On August 31, 2009, we issued 2,166,666
shares of our common stock to an investor, upon his exercise of a Warrant at an
exercise price of $0.015 per share, for an aggregate amount of
$32,500.
Between May 12 and December 2, 2009, we
issued 27,991,664 shares of our common stock, valued at $1,232,494, to 22
consultants and third party contractors.
Between June 2 and December 9, 2009, we
sold 8,166,662 Units to 11 “accredited” investors, at prices between $0.015 and
$0.03 per unit, for an aggregate value of $130,000. Each unit
consisted of one share of our common stock and a warrant to purchase one share
of our common stock at an exercise price of $0.02 per share. The warrants expire
two years after the date of investment.
On September 22, 2009, we issued
10,000,000 shares of our common stock, valued at $650,000 to Grant Bettingen,
Inc., as consulting fees.
On July 9, 2009, we issued 23,809,524
shares of our common stock, valued at $500,000, to Donald Bailey, our President,
upon conversion of deferred salary owed to him by Atlantis.
Between January 12 and December 28,
2010, we sold 228,781,635 shares of our common stock at prices between $0.0011
and $0.022 per share, for an aggregate amount of $492,850.
Between August 13 and November 23, 2010
we issued 33,000,000 shares of our common stock, valued at $660,000, to four
consultants and third party contractors.
We believe that all of the foregoing
issuances qualified for exemption under Section 4(2) of the Securities act of
1933, as amended.
|
|
Description
of Registrant’s Securities to be
Registered
|
As
amended, our Articles of Incorporation authorize the issuance of 1,000,000,000
shares of common stock, par value $.001 per share, and 5,000,000 shares of
preferred stock, par value $.001 per share. As of January 31, 2011, there were
907,779,359 shares of common stock issued and outstanding, and no shares of
preferred stock outstanding.
Description
of Common Stock
Except as
otherwise required by law, each share of common stock entitles the stockholder
to one vote on each matter which stockholders may vote on at all meetings of
stockholders. Holders of common stock are not entitled to cumulate votes in the
election of directors. Holders of common stock do not have preemptive,
subscription or conversion rights, and there are no redemption or sinking fund
provisions applicable thereto. Subject to any prior rights of the preferred
stock, holders of common stock are entitled to share ratably in dividends paid
from the funds legally available for the payment thereof, when, and if declared
by our board of directors. The declaration of dividends, however, is subject to
the discretion of our board of directors. Subject to any prior rights of the
preferred stock, holders of common stock are also entitled to share ratably in
the assets of the company available for distribution to holders of common stock
after payment of our liabilities upon the liquidation or dissolution of the
company whether voluntary or involuntary.
Description of Preferred
Stock
Our
preferred stock is what is known as “blank check” preferred. This means that our
board of directors is authorized to fix, prior to the issuance of any shares of
each particular series of preferred stock, the designation, powers, preferences,
and relative, participating, optional and other rights, and the qualifications,
limitations and restrictions thereof, if any, of such series.
Proposed
Reverse Stock Split
In
connection with our intended listing on the OTCBB, we plan to implement a
reverse stock split, in a range from one-for-ten (1-for-10) to one-for-twenty
(1-for-20), inclusive. The reverse stock split is being implemented
due to the low selling price of our common stock and the large number of shares
of common stock that we have outstanding. The reverse stock split
must be approved by our stockholders, and there is no guarantee that such
approval will be obtained. If such approval is obtained and the
reverse stock split is implemented, there is no guarantee that the reverse stock
split will increase our share price. We also cannot guarantee that
any increase in the price of our common stock resulting from the reverse split
will be proportionate to the reverse split ratio, prevail in the market for any
specific period of time, increase the trading volume of our shares, or increase
our ability to raise capital through the sale of our shares. If the
reverse stock split fails to increase our share price proportionate to the
reverse stock split ratio, holders of our common stock will be adversely
affected.
Registration
Rights
Holders
of the aggregate of 8,166,662 shares of our common stock and 8,166,662 shares
issuable upon exercise of warrants may require us to register their shares for
resale under the Securities Act if we ever file a registration statement for the
public sale of our securities with the SEC (other than any registration of
securities on forms on which shares of selling shareholders may not be
registered, such as Form S-4 or Form S-8). Registration of these
shares under the Securities Act would result in the shares becoming freely
tradable without restrictions under the Securities Act immediately upon the
effectiveness of such registration. Any sales of securities by these
stockholders could adversely affect the trading prices of our common stock and
other securities.
Transfer
Agent
The
transfer agent for our common stock is Holladay Stock Transfer, 2939 N. 67
th
Place,
#C, Scottsdale, AZ 85251. Telephone number is (480)
481-3940.
|
|
Indemnification
of Directors and Officers
|
Our
Articles of Incorporation in effect as of the date hereof, (the “Articles”)
provide that a director will not be liable to us or our stockholders for
monetary damages or breach of fiduciary duty as a director, except to the extent
such exemption from liability or limitation thereof ifs not permitted under the
Revised Statutes of Nevada as currently in effect or as the same may be
amended. Under the Statutes, the directors have a fiduciary duty to
us that is not eliminated by this provision of the Articles and, in appropriate
circumstances, equitable remedies such as injunctive or other forms of
non-monetary relief will remain available. In addition, each director will
continue to be subject to liability under the Statutes for breach of the
director’s duty of loyalty to us for acts or omissions which are found by a
court of competent jurisdiction to not be in good faith or involving intentional
misconduct, for knowing violations of law, for actions leading to improper
personal benefit to the director, and for payment of dividends or approval of
stock repurchases or redemptions that are prohibited by the Statutes. This
provision also does not affect the directors’ responsibilities under any other
laws, such as the Federal securities laws or state or Federal environmental
laws.
The
Statutes provide that a corporation may, and our Articles and Bylaws provide
that we shall, indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (an “Action”), by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation or is or was serving at its request in such capacity in another
corporation, partnership, joint venture, trust or other enterprise (the
“Indemnified Party”), against expenses (including attorney’s fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith and in
a manner he reasonably believed to be in or not opposed to the best interests of
the corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful; provided, however, no
indemnification shall be made in respect of any action or suit by or in the
right of the corporation if the Indemnified Party shall have been adjudged to be
liable to the corporation, unless and only to the extent that the court shall
determine that, despite the adjudication of liability but in view of all
circumstances, such person is fairly and reasonably entitled to indemnity.
Furthermore, the Statutes and our Bylaws provide that determination of an
Indemnified Party’s eligibility for indemnification by us shall be made on a
case-by-case basis by: (i) the stockholders; (ii) the board of directors by a
majority vote of a quorum consisting of directors who were not parties to the
act, suit or proceeding; (iii) if a majority vote of a quorum consisting of
directors who were not parties to the act, suit or proceeding so orders, by
independent legal counsel in a written opinion; or (iv) if a quorum consisting
of directors who were not parties to the act, suit or proceeding cannot be
obtained, by independent legal counsel in a written opinion.
The
Statutes also provide that the allowed indemnification will not be deemed
exclusive of any other rights to which the directors, officers and others may be
entitled under our Bylaws, any agreement, a vote of stockholders or otherwise.
The
financial statements and report of independent auditors are filed as a separate
part of this report on pages F-1 through F-42.
None
(a) Our
financial statements are attached hereto beginning at page F-1.
(b) Exhibits
The
following documents are filed as exhibits hereto unless otherwise
indicated:
|
Exhibit No.
|
|
Description
|
|
3.1
|
|
Articles
of Incorporation, dated December 30, 2004.
|
|
3.2
|
|
Certificate
of Amendment to Articles of Incorporation, dated April 23,
2007.
|
|
3.3
|
|
Bylaws,
dated December 30, 2004.
|
|
4.1
|
|
Form
of Stock Certificate
|
|
10.3
|
|
License
Agreement dated October 27, 2009 between the Company and EMI Entertainment
World, Inc.
|
|
21
|
|
Subsidiaries
of the Registrant.
|
ATLANTIS
INTERNET GROUP CORP.
INDEX
TO FINANCIAL STATEMENTS
|
|
|
Page No.
|
|
|
|
|
|
Audited Financial
Statements
:
|
|
|
|
|
|
|
|
Report
of Independent Registered Public Accounting Firm
|
|
F-2
|
|
|
|
|
|
Balance
Sheets as of December 31, 2009 and 2008
|
|
F-3
|
|
|
|
|
|
Statements
of Operations for the Years Ended December 31, 2009 and
2008
|
|
F-4
|
|
|
|
|
|
Statements
of Stockholders’ Deficit and Comprehensive Loss for the Years Ended
December 31, 2009 and 2008
|
|
F-5
|
|
|
|
|
|
Statements
of Cash Flows for the Years Ended December 31, 2009 and
2008
|
|
F-6
|
|
|
|
|
|
Notes
to Financial Statements
|
|
F-7
|
|
|
|
|
|
Unaudited
Financial Statements:
|
|
|
|
|
|
|
|
Balance
Sheets as of September 30, 2010 and December 31, 2009
(unaudited)
|
|
F-14
|
|
|
|
|
|
Statements
of Operations For the Three and Nine Months Ended September 30, 2010
and 2009 (unaudited)
|
|
F-15
|
|
|
|
|
|
Statement
of Stockholders’ Deficit and Comprehensive Loss For the Nine Months Ended
September 30, 2010 (unaudited)
|
|
F-16
|
|
|
|
|
|
Statements
of Cash Flows For the Nine Months Ended September 30, 2010 and 2009
(unaudited)
|
|
F-17
|
|
|
|
|
|
Notes
to Financial Statements (unaudited)
|
|
F-18
|
Atlantis
Internet Group Corporation
Balance
Sheets
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
87,749
|
|
|
$
|
1,240
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
current assets
|
|
|
87,749
|
|
|
|
1,240
|
|
|
|
|
|
|
|
|
|
|
|
|
Equipment,
net
|
|
|
2,777
|
|
|
|
9,444
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Assets
|
|
|
|
|
|
|
|
|
|
License
|
|
|
110,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
200,526
|
|
|
$
|
10,684
|
|
|
|
|
|
|
|
|
|
|
Liabilities
and Stockholders’ Equity
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
$
|
602,755
|
|
|
$
|
555,535
|
|
|
Accrued
payroll – related parties
|
|
|
986,397
|
|
|
|
1,342,327
|
|
|
Due
to stockholders – related parties
|
|
|
353,940
|
|
|
|
218,632
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
current liabilities
|
|
|
1,943,092
|
|
|
|
2,116,494
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments
and contingencies
|
|
|
|
|
|
|
|
|
|
Stockholders’
Deficit
|
|
|
|
|
|
|
|
|
|
Common
stock, $0.001 par value, 1,000,000,000 shares authorized; 704,221,059 and
613,970,460 shares issued and outstanding at December 31, 2009 and 2008,
respectively
|
|
|
554,222
|
|
|
|
463,970
|
|
|
Additional
paid-in capital
|
|
|
8,133,229
|
|
|
|
5,904,562
|
|
|
Accumulated
deficit
|
|
|
(10,430,017)
|
|
|
|
(8,474,342)
|
|
|
|
|
|
|
|
|
|
|
Total
stockholders’ deficit
|
|
|
(1,742,566)
|
|
|
|
(2,105,810)
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders’ deficit
|
|
$
|
200,526
|
|
|
$
|
10,684
|
|
See
accompanying notes to financial statements.
Atlantis
Internet Group Corporation
Statements
of Operations
|
|
|
|
|
|
For the Year
|
|
|
|
|
For the Year
Ended December 31,
2009
|
|
|
Ended
December
31,
2008
|
|
|
|
|
|
|
|
|
|
|
Contract
revenue
|
|
$
|
11,500
|
|
|
$
|
30,800
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
Consulting
expense
|
|
|
1,430,479
|
|
|
|
257,635
|
|
|
Payroll
and benefits expense
|
|
|
364,831
|
|
|
|
248,320
|
|
|
Depreciation
expense
|
|
|
6,667
|
|
|
|
6,667
|
|
|
Travel
and business entertainment expense
|
|
|
90,373
|
|
|
|
24,930
|
|
|
General
and administrative expense
|
|
|
74,825
|
|
|
|
99,906
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
operating expenses
|
|
|
1,967,175
|
|
|
|
637,458
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(1,955,675
|
)
|
|
$
|
(606,658
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss per common share, basic and diluted
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of common shares outstanding
–
basic and diluted
|
|
|
660,515,520
|
|
|
|
611,453,122
|
|
See
accompanying notes to financial statements.
Atlantis
Internet Group Corporation
Statement
of Stockholders’ Deficit and Comprehensive Loss
For
the Years Ended December 31, 2009 and 2008
|
|
|
Common
Shares
|
|
|
Stock
Amount
|
|
|
Additional
Paid-In
Capital
|
|
|
Accumulated
Deficit
|
|
|
Total
Stockholders’
Equity
(Deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at December 31, 2007
|
|
|
597,253,794
|
|
|
$
|
447,253
|
|
|
$
|
5,611,589
|
|
|
$
|
(7,867,684
|
)
|
|
$
|
(1,808,842
|
)
|
|
Issuance
of common stock for cash
|
|
|
1,666,666
|
|
|
|
1,667
|
|
|
|
25,736
|
|
|
|
–
|
|
|
|
27,403
|
|
|
Issuance
of stock warrants for cash
|
|
|
–
|
|
|
|
–
|
|
|
|
22,597
|
|
|
|
–
|
|
|
|
22,597
|
|
|
Issuance
of common stock for services
|
|
|
15,050,000
|
|
|
|
15,050
|
|
|
|
238,550
|
|
|
|
–
|
|
|
|
253,600
|
|
|
Imputed
interest on loans
|
|
|
–
|
|
|
|
–
|
|
|
|
6,090
|
|
|
|
–
|
|
|
|
6,090
|
|
|
Net
loss for the period
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(606,658
|
)
|
|
|
(606,658
|
)
|
|
Balance
at December 31, 2008
|
|
|
613,970,460
|
|
|
$
|
463,970
|
|
|
$
|
5,904,562
|
|
|
$
|
(8,474,342
|
)
|
|
$
|
(2,105,810
|
)
|
|
Issuance
of common stock for cash
|
|
|
36,282,745
|
|
|
|
36,283
|
|
|
|
528,017
|
|
|
|
–
|
|
|
|
564,300
|
|
|
Finders
fees
|
|
|
-
|
|
|
|
-
|
|
|
|
(20,700
|
)
|
|
|
–
|
|
|
|
(20,700
|
)
|
|
Exercise
of stock warrants for cash
|
|
|
2,166,666
|
|
|
|
2,167
|
|
|
|
30,333
|
|
|
|
–
|
|
|
|
32,500
|
|
|
Issuance
of common stock for conversion of liabilities
|
|
|
23,809,524
|
|
|
|
23,810
|
|
|
|
476,190
|
|
|
|
–
|
|
|
|
500,000
|
|
|
Issuance
of common stock for services
|
|
|
27,991,664
|
|
|
|
27,992
|
|
|
|
1,204,502
|
|
|
|
–
|
|
|
|
1,232,494
|
|
|
Imputed
interest on loans
|
|
|
–
|
|
|
|
–
|
|
|
|
10,325
|
|
|
|
–
|
|
|
|
10,325
|
|
|
Net
loss for the period
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(1,955,675
|
)
|
|
|
(1,955,675
|
)
|
|
Balance
at December 31, 2009
|
|
|
704,221,059
|
|
|
$
|
554,222
|
|
|
$
|
8,133,229
|
|
|
$
|
(10,430,017
|
)
|
|
$
|
(1,742,566
|
)
|
See
accompanying notes to financial statements.
Atlantis
Internet Group Corporation
Statements
of Cash Flows
For
the Years Ended December 31, 2009 and 2008
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
Operating
activities
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(1,955,675
|
)
|
|
$
|
(606,658
|
)
|
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
6,667
|
|
|
|
6,667
|
|
|
Issuance
of stock for conversion of accrued payroll
|
|
|
500,000
|
|
|
|
|
|
|
Issuance
of stock in lieu of cash for services
|
|
|
1,232,494
|
|
|
|
253,600
|
|
|
Imputed
interest
|
|
|
10,325
|
|
|
|
6,090
|
|
|
Changes
in operating assets and liabilities
|
|
|
|
|
|
|
|
|
|
Increase
in accounts payable
|
|
|
47,220
|
|
|
|
42,022
|
|
|
(Decrease)
increase in accrued payroll
|
|
|
(356,227
|
)
|
|
|
237,576
|
|
|
Net
cash used in operating activities
|
|
|
(515,196
|
)
|
|
|
(60,703
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Investing
activities
|
|
|
|
|
|
|
|
|
|
Purchase
of license
|
|
|
(110,000
|
)
|
|
|
|
|
|
Net
cash (used in) investing activities
|
|
|
(110,000
|
)
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing
activities
|
|
|
|
|
|
|
|
|
|
Net
proceeds from issuance of common stock
|
|
|
543,600
|
|
|
|
50,000
|
|
|
Net
proceeds from exercise of stock warrants
|
|
|
32,500
|
|
|
|
–
|
|
|
Net
borrowings from stockholders
|
|
|
135,605
|
|
|
|
8,350
|
|
|
Net
cash provided by financing activities
|
|
|
711,705
|
|
|
|
58,350
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in cash and cash equivalents
|
|
|
86,509
|
|
|
|
(2,353
|
)
|
|
Cash
and cash equivalents at beginning of period
|
|
|
1,240
|
|
|
|
3,593
|
|
|
Cash
and cash equivalents at end of period
|
|
$
|
87,749
|
|
|
$
|
1,240
|
|
See accompanying notes to financial
statements.
Atlantis
Internet Group Corporation
Notes
to Financial Statements
December 31,
2009
1. Basis of Presentation and Summary
of Significant Accounting Policies
Business
Description
Atlantis
Internet Group Corporation (“Atlantis” or the “Company”) is in the on-line
gaming software business. Atlantis was incorporated in State of
Delaware in 2000. In 2004, the Company re-domiciled in the
State of Nevada.
During
2009, the Company was issued a patent from the Unites States Patent Office for
our Jukebox Slots. Also during 2009, the Federal Gaming Commission
(National Indian Gaming Commission) granted approval of the Company’s
Casino Gateway Network, the first and only nationwide gaming network offering
Class III, Class II and online games as well as approval of Quarterback Draw
Football and Bango Football the first nationwide simulated Football and Bingo
games. The Company was also approved as a Class III, Class II and
Bingo provider.
Going Concern
The
financial statements have been prepared assuming the Company will continue as a
going concern. Atlantis has experienced net losses and negative cash flows from
operations since its inception and expects its losses to continue as the Company
awaits for current United States laws to be changed and permit on-line gaming.
As of December 31, 2009, the Company had negative working capital of
($1,855,343), an accumulated deficit of ($10,430,017). These
conditions raise substantial doubt about the Company’s ability to continue as a
going concern. Management plans to raise additional capital in order to fund is
operations, and therefore believes it is appropriate for the financial
statements to be prepared on a going concern basis. The financial statements do
not contain any adjustments that might result from the outcome of this
uncertainty.
Use of Estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual amounts may differ from those
estimates.
Concentration of Credit and Other
Risks and Uncertainties
Financial
instruments which potentially subject the Company to concentration of credit
risk consist primarily of cash, cash equivalents and short-term investments. The
Company’s cash and cash equivalents are generally invested in deposit accounts
or money market accounts with U.S banks, and deposits may exceed the amount
covered by insurance for loss. As of December 31, 2009 and 2008, the
Company did not have any amounts of uninsured cash.
Fair Value of Financial
Instruments
For
financial instruments consisting of cash and cash equivalents, short-term
investments, prepaid expenses and other assets, accounts payable and accrued
liabilities included in the financial statements, the carrying amounts are
reasonable estimates of the fair value due to their short maturities. The fair
value of other short-term and long-term obligations is estimated based on
current interest rates available for debt instruments with similar terms,
degrees of risk and remaining maturities. The carrying values of these
obligations approximate their fair values.
Revenue
Recognition
Revenue
is recognized in accordance with the provisions of ASC Topic 605: Revenue
Recognition, which codified the criteria for the recognition of revenue by
companies. As current U.S. laws prohibit on-line gaming, the Company
has earned revenues from consulting services.
Cash and Cash
Equivalents
The
Company classifies all highly liquid investments with a maturity period of three
months or less at the time of acquisition to be cash equivalents.
Equipment
Equipment
is stated at cost and depreciated on a straight-line basis over the estimated
useful lives of the related assets, which is generally three years. Upon sale or
retirement of the assets, the costs and related accumulated depreciation are
removed from the accounts and the resulting gain or loss is reflected in the
statement of operations. Repair and maintenance expenses are charged to the
statement of operations as they are incurred. Depreciation expense for the years
ended December 31, 2009 and 2008 was $6,667 and $6,667,
respectively.
Impairment of Long-Lived
Assets
The
Company reviews long-lived assets for impairment whenever events or changes in
business circumstances indicate that the carrying amount of the assets may not
be fully recoverable. An impairment loss would be recognized when future
estimated undiscounted cash flows expected to result from use of the asset, and
its eventual disposition, are less than the carrying amount of the asset. The
impairment loss would be based on the excess of the carrying value over its
respective fair value. For the years ended December 31, 2009 and 2008, the
Company has not recorded any impairment losses.
Patents
The
Company has applied for a patent on its internally developed Casino Gateway
Network technology. Research and development costs associated with
the internally developed technology are expensed as incurred, until such time as
the technology achieves technological feasibility. Such achievement
has not yet occurred. Legal fees, if any, incurred for the protection
and defense of the technology are capitalized. As of December 31,
2009, no costs have been capitalized related to such technologies.
General and Administrative
Expenses
The
Company’s general and administrative expenses include administrative personnel
costs, insurance, accounting and legal expenses.
Stock-based
Compensation
Stock
options issued to employees are accounted for in accordance with FASB ASC Topic
718, using an estimate of the fair value of the stock option on the date it is
granted. The estimated fair value on the grant date is recognized in the
statement of operations on a straight-line basis over the vesting period of the
underlying stock options. During the years ended December 31, 2009 and 2008, the
Company has not issued any stock options to employees.
Income Taxes
The
Company uses the balance sheet method of accounting for income taxes, and
determines deferred tax assets and liabilities based on differences between the
financial reporting and tax reporting basis of assets and liabilities. The
Company measures these assets and liabilities using enacted tax rates and laws
that are scheduled to be in effect when the differences are expected to reverse.
Because the realization of deferred tax assets is dependent on future earnings,
if any, and the Company’s future earnings are uncertain, all of the Company’s
net deferred tax assets have been fully offset by a valuation
allowance.
Net Loss per Share and Anti-dilutive
Securities
Net loss
per share has been computed using the weighted average number of shares of
common stock outstanding during the period. During the years ended
December 31, 2009, and 2008, potentially dilutive stock warrants,
exercisable into stock aggregating 207,999,996 and 202,000,000 shares,
respectively, were outstanding and not considered in the loss per share
computation because their effect would have been antidilutive.
2.
Recent Accounting Pronouncements
On July
1, 2009, the FASB officially launched the FASB ASC 105“Generally Accepted
Accounting Principles”, which established the FASB Accounting Standards
Codification (“the Codification”), as the single official source of
authoritative, nongovernmental, U.S. GAAP, in addition to guidance issued by the
Securities and Exchange Commission. The Codification is designed to
simplify U.S. GAAP into a single, topically ordered structure. All
guidance contained in the Codification carries an equal level of
authority. The Codification is effective for interim and annual
periods ending after September 15, 2009. Accordingly, the Company
refers to the Codification in respect of the appropriate accounting standards
throughout this document as “FASB ASC”. Implementation of the
Codification did not have any impact on the Company’s consolidated financial
statements.
2. Recently
Issued Accounting Pronouncements (continued)
In August
2009, the FASB issued Accounting Standard Update “ASU” No. 2009-05 “Fair Value
Measurements and Disclosures (Topic 820) – Measuring Liabilities at Fair
Value”. This ASU clarifies the fair market value measurement of
liabilities. In circumstances where a quoted price in an active
market for the identical liability is not available, a reporting entity is
required to measure fair value using one or more of the following techniques: a
technique that uses quoted price of the identical or a similar liability or
liabilities when traded as an asset or assets, or another valuation technique
that is consistent with the principles of Topic 820 such as an income or market
approach. ASU No. 2009-05 was effective upon issuance and it did not
result in any significant financial impact on the Company upon
adoption.
In
September 2009, the FASB issued ASU No. 2009-12 “Fair Value Measurements and
Disclosures (Topic 820) – Investments in Certain Entities That Calculate Net
Asset Value per Share (or its equivalent)”. This ASU permits use of a
practical expedient, with appropriate disclosures, when measuring the fair value
of an alternative investment that does not have a readily determinable fair
value. ASU No. 2009-12 is effective for interim and annual periods
ending after December 15, 2009, with early application
permitted. Since the Company does not currently have any such
investments, it does not anticipate any impact on its financial statements upon
adoption.
In June
2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation No.
46(R)”. SFAS No. 167 addresses the effect on FASB Interpretation
46(R), “Consolidation of Variable Interest Entities” of the elimination of the
qualifying special-purpose entity concept of SFAS No. 166, “Accounting for
Transfers of Financial Assets”. SFAS No. 167 also amends the
accounting and disclosure requirements of FASB Interpretation 46(R) to enhance
the timeliness and usefulness of information about an enterprise’s involvement
in a variable interest entity. This Statement shall be effective as of the
Company’s first interim reporting period that begins after November 15, 2009.
Earlier application is prohibited. The Company does not anticipate
any significant financial impact from adoption of SFAS No. 167. As of December
31, 2009, SFAS No. 167 has not been added to the Codification.
In May
2009 and as updated February 2010, the FASB issued FASB ASC 855, “Subsequent
Events”. This Statement addresses accounting for and disclosure of
events that occur after the balance sheet date but before financial statements
are issued or available to be issued. FASB ASC 855 requires
disclosure of the date through which an entity has evaluated subsequent events
and the basis for that date, the date issued. The Company adopted
this Statement in 2009. As a result the date through which the
Company has evaluated subsequent events and the basis for that date have been
disclosed in Note 17.
In April
2009, the FASB issued an update to FASB ASC 820, “Fair Value Measurements and
Disclosures”, related to providing guidance on when the volume and level of
activity for the asset or liability have significantly decreased and identifying
transactions that are not orderly. The update clarifies the
methodology to be used to determine fair value when there is no active market or
where the price inputs being used represent distressed sales. The
update also reaffirms the objective of fair value measurement, as stated in FASB
ASC 820, which is to reflect how much an asset would be sold in and orderly
transaction, and the need to use judgment to determine if a formerly active
market has become inactive, as well as to determine fair values when markets
have become inactive. The Company adopted this Statement in 2009
without significant financial impact.
In
December 2007, the FASB issued an update to FASB ASC 810, “Consolidation”, which
establishes accounting and reporting standards for ownership interests in
subsidiaries held by parties other than the parent, the amount of consolidated
net income attributable to the parent and to the non-controlling interest,
changes in a parent’s ownership interest, and the valuation of retained
non-controlling equity investments when a subsidiary is deconsolidated. SFAS 160
also establishes disclosure requirements that clearly identify and distinguish
between the interests of the parent and the interests of non-controlling owners.
The Company adopted this update in 2009 without significant impact on the
consolidated financial position, results of operations, and
disclosures.
In June
2009, ASC 810.10,
Amendments
to FASB Interpretation No. 46(R)
, was issued. The objective of ASC
810.10 is to amend certain requirements of ASC 860 (revised December
2003),
Consolidation of
Variable Interest Entities,
or ASC 860 to improve financial
reporting by enterprises involved with variable interest entities and to provide
more relevant and reliable information to users of financial statements. ASC 810
carries forward the scope of ASC 860, with the addition of entities previously
considered qualifying special-purpose entities, as the concept of these entities
was eliminated in ASC 860,
Accounting for Transfers of Financial Assets.
ASC 810.10
nullifies FASB Staff Position ASC 860,
Disclosures by Public Entities
(Enterprises) about Transfers of Financial Assets and Interests in Variable
Interest Entities.
The principal objectives of these new
disclosures are to provide financial statement users with an understanding
of:
|
|
a.
|
The
significant judgments and assumptions made by an enterprise in determining
whether it must consolidate a variable interest entity and/or disclose
information about its involvement in a variable interest
entity;
|
|
|
b.
|
The
nature of restrictions on a consolidated variable interest entity’s assets
and on the settlement of its liabilities reported by an enterprise in its
statement of financial position, including the carrying amounts of such
assets and liabilities;
|
|
|
c.
|
The
nature of, and changes in, the risks associated with an enterprise’s
involvement with the variable interest entity;
and
|
|
|
d.
|
How
an enterprise’s involvement with the variable interest entity affects the
enterprise’s financial position, financial performance and cash
flows.
|
ASC 810
is effective as of the beginning of each reporting entity’s first annual
reporting period that begins after November 15, 2009. Earlier application
is prohibited. The provisions of ASC 810 need not be applied to immaterial
items.
3.
Related Parties
The
Company has two employees, whom are deemed related parties based on significant
stock ownership, which earn an aggregated annual amount of $360,000 and $240,000
for the years ended December 31, 2009 and 2008, respectively. Due to
inadequate cash positions of the Company for several years, the Company made
only partial payments to the employees. As of December 31, 2009 and
2008, aggregate accrued balances due the employees were $986,397 and $1,342,327,
respectively. During 2009, the employees settled $500,000 of the
liabilities due them in exchange for approximately 24,800,000 shares of the
Company’s common stock.
The
Company’s two employees, related parties, have continuously granted loans to the
Company based on the cash flow needs of the Company. The loans are
non-interest bearing and due on demand. Amounts due to the related
parties in aggregate as of December 31, 2009 and 2008 are approximately $353,900
and $218,600, respectively. The balances due include imputed interest
of approximately $33,000 and $23,000 respectively. The imputed
interest has been recorded as components of additional paid-in capital in the
respective years.
During 2007, as part of a joint venture
with a now defunct partner, the Company issued 150,000,000 shares of common
stock to the partner as an investment in property and assets of the
partner. Due to the impairment of the assets and the termination of
the joint venture, no value was assigned to the shares issued. During
2009, these shares were cancelled. The issuance of these shares
resulted in the partner being a greater than 20% shareholder during the year
ended December 31, 2008.
4. Warrants
In
February 2008, in connection with a certain sale of common stock agreement, the
Company issued warrants to one investor for the purchase of 1,000,000 shares of
common stock. The exercise period for these warrants is a six month
period from the date of the filing of the Company’s initial Form 10-K with the
SEC for the year ended December 31, 2008. The warrants have an
exercise price of $0.03 per share.
During 2009, in connection with certain
sales of common stock, the Company issued warrants to investors for the purchase
of 8,166,662 shares of common stock. The exercise period for these
warrants is a six month period from the date of the filing of the Company’s
initial Form 10-K with the SEC for the year ended December 31,
2009. The warrants have an exercise price range between $0.015 and
$0.03 per share.
As of the
date of this report, no SEC filings have occurred and 2,166,666 of these
warrants have been exercised for an aggregate value of $32,500.
Information
regarding the warrants outstanding, expired, and status is included within
footnote 5.
5. Equipment
Equipment
primarily consists of computer software. The table below identifies
the cost and accumulated depreciation of the assets as of December 31, 2009 and
2008. Depreciation expense for the years ended December 31, 2009 and
2008 were $6,667 and $6,667, respectively.
|
|
|
2009
|
|
|
2008
|
|
|
Computer
software
|
|
$
|
20,000
|
|
|
$
|
20,000
|
|
|
Accumulated Depreciation
|
|
|
17,223
|
|
|
|
10,556
|
|
|
Net
|
|
$
|
2,777
|
|
|
$
|
9,444
|
|
6. License
During
the year ended December 31, 2009, the Company paid $110,000 for the use of a
software license. The license is for an indefinite period of
time. In accordance with FASB ASC 350, Intangibles – Goodwill and
Other, the Company has not recorded amortization of the license, and does test
the asset for impairment at least annually. As of December 31, 2009,
no impairment has been recognized of the license.
7. Leases
During
the year ended December 31, 2009, the Company entered into two leases for office
space. The first office leased is in Las Vegas,
Nevada. The lease is for 1 year, and began in June
2009. The monthly rent for the lease is $325. The second
office lease is in Newport Bluff, California. This six month lease
began in November 2009 for a monthly expense of $3,160.
The table
below shows the future minimum lease payments associated with the
leases:
|
Year
|
|
Minimum payments
under leases
|
|
|
2010
|
|
$
|
14,265
|
|
|
Thereafter
|
|
|
-
|
|
|
Total
|
|
$
|
14,625
|
|
8. Stockholders’
Equity
Rights of Common
Stockholders
The
Company has only common stock issued and outstanding. Accordingly, all
outstanding shares are of the same class and have equal liquidation, preference
and adjustment rights. Each share of common stock entitles the holder to one
vote on all matters submitted to a vote of the Company’s
stockholders.
Issuances of Common
Stock
2008
During
2008, the Company issued 1,666,666 shares of common stock to investors for an
aggregate amount of $50,000.
During
2008, the Company issued 15,050,000 shares of common stock to consultants for
services performed during the year. The aggregate value of the shares
issued was $253,600.
2009
During
2009, the Company issued 36,282,745 shares of common stock to investors for an
aggregate amount of $564,300.
During
2009, the Company issued 27,991,664 shares of common stock to consultants for
services performed during the year. The aggregate value of the shares
issued was $1,232,494.
During
2009, the Company issued 2,166,666 shares of common stock as a result of the
exercise of stock warrants. The aggregate amount of $32,500 was
received by the Company in these transactions.
During
2009, the Company issued $23,809,524 shares of common stock to settle $500,000
of accrued liabilities due to related parties.
Warrants for the purchase of Common
Stock
Financial
Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic
718, Stock Compensation provides that the Company value the issuance of stock
options and warrants based on the fair value of the options or warrants at their
respective grant dates. The Company has elected to use the
Black-Scholes option-pricing model (the “Black-Scholes model”) as its method of
valuing the issuance of warrants to purchase shares of common stock. The
Black-Scholes model requires assumptions to be made regarding expected
volatility, expected term, risk-free interest rate and dividend yield of the
security into which the warrants can be exercised.
The
following were the weighted average assumptions used to value the Company’s
stock warrants:
|
|
|
Warrants Granted During the
|
|
|
|
|
Years Ended December 31
|
|
|
|
|
2008
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected
volatility
|
|
|
162.11
|
%
|
|
|
161.24
|
%
|
|
Expected
term
|
|
|
2
years
|
|
|
|
2
years
|
|
|
Risk-free
interest rate
|
|
|
1.970
|
%
|
|
|
1.970
|
%
|
|
Dividend
yield
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
fair value of options
|
|
$
|
0.02
|
|
|
$
|
0.016
|
|
The
expected volatility was determined by the Company based on the historical
volatility of the Company’s stock price. The expected term was determined as the
time from the issuance of the warrants through the expected filing date of the
Company’s initial Form 10-K filed with the SEC plus the 6 month expiration term
of the warrants. The risk-fee interest rate was based upon the U.S. Treasury
yield for expected life of the Company’s stock options on the date of grant. The
dividend rate was based on the Company’s projections that show it will not be
able to pay dividends for the foreseeable future.
Stock
warrant transactions, as discussed in footnote 3, for the years 2009 and 2008
are summarized as follows:
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
Number of
|
|
|
Exercise
|
|
|
|
|
Shares
|
|
|
Price
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
at December 31, 2007
|
|
|
201,000,000
|
|
|
$
|
0.03
|
|
|
Granted
|
|
|
1,000,000
|
|
|
|
0.03
|
|
|
Outstanding
at December 31, 2008
|
|
|
202,000,000
|
|
|
|
0.03
|
|
|
Granted
|
|
|
8,166,662
|
|
|
|
0.03
|
|
|
Exercised
|
|
|
(2,166,666)
|
|
|
|
0.02
|
|
|
Outstanding
at December 31, 2009
|
|
|
207,999,996
|
|
|
$
|
0.03
|
|
The
following table summarizes information about stock warrants outstanding and
exercisable as of December 31, 2009:
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
|
Number
|
|
|
Remaining
|
|
|
|
|
|
Remaining
|
|
|
|
|
Of
Warrants
|
|
|
Contractual
|
|
|
Number
|
|
|
Contractual
|
|
|
Exercise
Price
|
|
Outstanding
|
|
|
Life
(Years)
|
|
|
Exercisable
|
|
|
Life
(Years)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$0.05
|
|
|
100,000,000
|
|
|
|
3
|
|
|
|
100,000,000
|
|
|
|
3
|
|
|
$0.03
|
|
|
102,166,666
|
|
|
|
3
|
|
|
|
102,166,666
|
|
|
|
3
|
|
|
$0.02
|
|
|
1,000,000
|
|
|
|
3
|
|
|
|
1,000,000
|
|
|
|
3
|
|
|
$0.015
|
|
|
4,833,330
|
|
|
|
3
|
|
|
|
4,833,330
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
207,999,996
|
|
|
|
3
|
|
|
|
207,999,996
|
|
|
|
3
|
|
.
The
aggregate intrinsic value of the warrants outstanding as of December 31,
2009 was $0, and the aggregate intrinsic value of the warrants that were
exercisable was $24,167, based on a closing stock price of $.02 per
www.pinksheets.com.
9. Income Taxes
The
Company is subject to income taxes in the United States based on its
operations.
There is
no provision for income taxes because the Company has incurred operating losses.
Realization of deferred tax assets is dependent upon future earnings, if any,
the timing and amount of which are uncertain; therefore the net deferred tax
assets have been fully offset by a valuation allowance. For 2009, and 2008, the
valuation allowance increased by $1,835,675 and $606,658,
respectively.
The
significant components of the Company’s deferred tax assets are as
follows:
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
|
2008
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
operating loss carryforwards
|
|
$
|
8,463,786
|
|
|
$
|
10,292,794
|
|
|
Depreciation
|
|
|
10,556
|
|
|
|
17,223
|
|
|
|
|
|
8,474,342
|
|
|
|
10,310,017
|
|
|
|
|
|
|
|
|
|
|
|
|
Valuation
allowance
|
|
|
(8,474,342)
|
|
|
|
(10,310,017)
|
|
|
|
|
$
|
—
|
|
|
$
|
—
|
|
At
December 31, 2009, the Company’s federal net operating loss carrryforwards
were $10,292,794, which expire in the years 2022-2023. The
availability of the Company’s net operating loss carryforwards may be subject to
limitations based on ownership changes as defined in the tax codes, which could
prevent the Company from realizing some or all of its net operating loss
carryforwards.
10. Subsequent
events
The
Company has evaluated the impact of subsequent events through October 22, 2010,
and has determined that the following events and transactions require disclosure
within these financial statements.
In August
2010, the Company signed an agreement with Cake Gaming NV to supply poker and
transaction processing on the Tribal Gaming Network. The deal marks the first
legal Poker Network in the United States.
Balance
Sheets
|
|
|
September 30
|
|
|
December 31,
|
|
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
2,059
|
|
|
$
|
87,749
|
|
|
Total
current assets
|
|
|
2,059
|
|
|
|
87,749
|
|
|
|
|
|
|
|
|
|
|
|
|
Property
and equipment, net
|
|
|
27,985
|
|
|
|
2,777
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Assets
|
|
|
|
|
|
|
|
|
|
License
|
|
|
110,000
|
|
|
|
110,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
140,044
|
|
|
$
|
200,526
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
and Stockholders’ Equity
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
$
|
614,832
|
|
|
$
|
602,755
|
|
|
Accrued
payroll – related parties
|
|
|
1,221,917
|
|
|
|
986,397
|
|
|
Due
to stockholders – related parties
|
|
|
353,940
|
|
|
|
353,940
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
current liabilities
|
|
|
2,190,689
|
|
|
|
1,943,092
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments
and contingencies
|
|
|
|
|
|
|
|
|
|
Stockholders’
Equity
|
|
|
|
|
|
|
|
|
|
Common
stock, $0.001 par value, 1,000,000,000 shares authorized; 704,221,059 and
758,178,214 shares issued and outstanding at December 31, 2009 and
September 30, 2010, respectively
|
|
|
608,179
|
|
|
|
554,222
|
|
|
Additional
paid-in capital
|
|
|
8,341,940
|
|
|
|
8,133,229
|
|
|
Accumulated
deficit
|
|
|
(11,000,764)
|
|
|
|
(10,430,017)
|
|
|
Total
stockholders’ equity
|
|
|
(2,050,645)
|
|
|
|
(1,742,566)
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders’ equity
|
|
$
|
140,044
|
|
|
$
|
200,526
|
|
The
accompanying notes are an integral part of these financial
statements
Atlantis
Internet Group Corporation
Statements
of Operations
For
the Three and Nine Months Ended September 30,
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
11,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulting
and professional expense
|
|
|
62,687
|
|
|
|
95,696
|
|
|
|
113,191
|
|
|
|
139,566
|
|
|
Payroll
and benefits expense
|
|
|
90,636
|
|
|
|
19,040
|
|
|
|
274,539
|
|
|
|
63,815
|
|
|
Depreciation
expense
|
|
|
3,682
|
|
|
|
1,667
|
|
|
|
4,792
|
|
|
|
5,000
|
|
|
Travel
and business entertainment expense
|
|
|
39,798
|
|
|
|
20,885
|
|
|
|
112,042
|
|
|
|
40,250
|
|
|
General
and administrative expense
|
|
|
20,317
|
|
|
|
9,210
|
|
|
|
66,183
|
|
|
|
25,609
|
|
|
Total
operating expenses
|
|
|
217,120
|
|
|
|
146,498
|
|
|
|
570,747
|
|
|
|
274,240
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(217,120
|
)
|
|
$
|
(146,498
|
)
|
|
|
(570,747
|
)
|
|
$
|
(262,740
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss per share – basic and diluted
|
|
|
(0.00
|
)
|
|
|
(0.00
|
)
|
|
|
(0.00
|
)
|
|
|
(0.00
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average shares outstanding
|
|
|
729,275,345
|
|
|
|
633,418,661
|
|
|
|
729,275,345
|
|
|
|
633,418,661
|
|
The
accompanying notes are an integral part of these financial
statements
Atlantis
Internet Group Corporation
Statement
of Stockholders’ Deficit and Comprehensive Loss
For
the Nine Months Ended September 30, 2010
|
|
|
Common
Shares
|
|
|
Stock
Amount
|
|
|
Additional
Paid-In
Capital
|
|
|
Accumulated
Deficit
|
|
|
Total
Stockholders’
Equity
(Deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at December 31, 2009
|
|
|
704,221,059
|
|
|
$
|
554,222
|
|
|
$
|
8,133,229
|
|
|
$
|
(10,430,017
|
)
|
|
$
|
(1,742,566
|
)
|
|
Issuance
of common stock for cash
|
|
|
53,957,155
|
|
|
|
53,957
|
|
|
|
208,711
|
|
|
|
–
|
|
|
|
262,668
|
|
|
Net
loss for the period
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(570,747
|
)
|
|
|
(570,747
|
)
|
|
Balance
at September 30, 2010
|
|
|
758,178,214
|
|
|
$
|
608,179
|
|
|
$
|
8,341,940
|
|
|
$
|
(11,000,764
|
)
|
|
$
|
(2,050,645
|
)
|
The
accompanying notes are an integral part of these financial
statements
Atlantis
Internet Group Corporation
Statements
of Cash Flows
For
the Nine Months Ended September 30
|
|
|
2010
|
|
|
2009
|
|
|
Operating
activities
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(570,747
|
)
|
|
$
|
(262,740
|
)
|
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
4,792
|
|
|
|
5,000
|
|
|
Changes
in operating assets and liabilities
|
|
|
|
|
|
|
|
|
|
Increase
in accounts payable
|
|
|
12,077
|
|
|
|
-
|
|
|
Increase
in accrued payroll
|
|
|
235,520
|
|
|
|
133,937
|
|
|
Net
cash (used in) operating activities
|
|
|
(318,358
|
)
|
|
|
(123,803
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Investing
activities
|
|
|
|
|
|
|
|
|
|
Purchase
of property
|
|
|
(30,000
|
)
|
|
|
-
|
|
|
Net
cash (used in) investing activities
|
|
|
(30,000
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing
activities
|
|
|
|
|
|
|
|
|
|
Net
proceeds from issuance of common stock
|
|
|
262,668
|
|
|
|
171,181
|
|
|
Net
cash provided by financing activities
|
|
|
262,668
|
|
|
|
171,181
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(decrease) in cash and cash equivalents
|
|
|
(85,690
|
)
|
|
|
47,378
|
|
|
Cash
and cash equivalents at beginning of period
|
|
|
87,749
|
|
|
|
1,240
|
|
|
Cash
and cash equivalents at end of period
|
|
$
|
2,059
|
|
|
|
48,618
|
|
The
accompanying notes are an integral part of these financial
statements
Atlantis
Internet Group Corporation
Notes
to Financial Statements
1. Basis of Presentation and Summary
of Significant Accounting Policies
Business
Description
Atlantis
Internet Group Corporation (“Atlantis” or the “Company”) is in the on-line
gaming software business. Atlantis was incorporated in State of
Delaware in 2000. In 2004, the Company re-domiciled in the
State of Nevada.
During
2009, the Company was issued a patent from the Unites States Patent Office for
our Jukebox Slots. Also during 2009, the Federal Gaming Commission
(National Indian Gaming Commission) granted approval of the Company’s
Casino Gateway Network, the first and only nationwide gaming network offering
Class III, Class II and online games as well as approval of Quarterback Draw
Football and Bango Football the first nationwide simulated Football and Bingo
games. The Company was also approved as a Class III, Class II and
Bingo provider.
Going Concern
The
financial statements have been prepared assuming the Company will continue as a
going concern. However, the Company is currently signing licensing agreements to
allow patrons in tribal casinos in more than 30 states to play poker online
legally. Atlantis has experienced net losses and negative cash flows from
operations since its inception and expects its losses to continue as the Company
awaits for current United States laws to be changed and permit on-line gaming.
As of September 30, 2010, the Company had negative working capital of
($2,182,605), an accumulated deficit of ($10,994,739). These
conditions raise substantial doubt about the Company’s ability to continue as a
going concern. Management plans to raise additional capital in order to fund is
operations, and therefore believes it is appropriate for the financial
statements to be prepared on a going concern basis. The financial statements do
not contain any adjustments that might result from the outcome of this
uncertainty.
Use of Estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual amounts may differ from those
estimates.
Concentration of Credit and Other
Risks and Uncertainties
Financial
instruments which potentially subject the Company to concentration of credit
risk consist primarily of cash, cash equivalents and short-term investments. The
Company’s cash and cash equivalents are generally invested in deposit accounts
or money market accounts with U.S banks, and deposits may exceed the amount
covered by insurance for loss. As of September 30, 2010 and December 31,
2009, the Company did not have any amounts of uninsured cash.
Fair Value of Financial
Instruments
For
financial instruments consisting of cash and cash equivalents, short-term
investments, prepaid expenses and other assets, accounts payable and accrued
liabilities included in the financial statements, the carrying amounts are
reasonable estimates of the fair value due to their short maturities. The fair
value of other short-term and long-term obligations is estimated based on
current interest rates available for debt instruments with similar terms,
degrees of risk and remaining maturities. The carrying values of these
obligations approximate their fair values.
Revenue
Recognition
Revenue
is recognized in accordance with the provisions of ASC Topic 605: Revenue
Recognition, which codified the criteria for the recognition of revenue by
companies. As current U.S. laws prohibit on-line gaming, the Company
has earned revenues from consulting services.
Cash and Cash
Equivalents
The
Company classifies all highly liquid investments with a maturity period of three
months or less at the time of acquisition to be cash equivalents.
Condo and
Equipment
Condo and
equipment is stated at cost and depreciated on a straight-line basis over the
estimated useful lives of the related assets. The estimated useful
life of the condo and equipment is 10 and 3 years, respectively. Upon sale or
retirement of the assets, the costs and related accumulated depreciation are
removed from the accounts and the resulting gain or loss is reflected in the
statement of operations. Repair and maintenance expenses are charged to the
statement of operations as they are incurred.
Impairment of Long-Lived
Assets
The
Company reviews long-lived assets for impairment whenever events or changes in
business circumstances indicate that the carrying amount of the assets may not
be fully recoverable. An impairment loss would be recognized when future
estimated undiscounted cash flows expected to result from use of the asset, and
its eventual disposition, are less than the carrying amount of the asset. The
impairment loss would be based on the excess of the carrying value over its
respective fair value.
Patents
The
Company has applied for a patent on its internally developed Casino Gateway
Network technology. Research and development costs associated with
the internally developed technology are expensed as incurred, until such time as
the technology achieves technological feasibility. Such achievement
has not yet occurred. Legal fees, if any, incurred for the protection
and defense of the technology are capitalized. As of September 30,
2010, no costs have been capitalized related to such technologies.
General and Administrative
Expenses
The
Company’s general and administrative expenses include administrative personnel
costs, insurance, accounting and legal expenses.
Stock-based
Compensation
Stock
options issued to employees are accounted for in accordance with FASB ASC Topic
718, using an estimate of the fair value of the stock option on the date it is
granted. The estimated fair value on the grant date is recognized in the
statement of operations on a straight-line basis over the vesting period of the
underlying stock options. During the nine months and year ended September 30,
2010 and December 31, 2009, respectively, the Company has not issued any stock
options to employees.
Income Taxes
The
Company uses the balance sheet method of accounting for income taxes, and
determines deferred tax assets and liabilities based on differences between the
financial reporting and tax reporting basis of assets and liabilities. The
Company measures these assets and liabilities using enacted tax rates and laws
that are scheduled to be in effect when the differences are expected to reverse.
Because the realization of deferred tax assets is dependent on future earnings,
if any, and the Company’s future earnings are uncertain, all of the Company’s
net deferred tax assets have been fully offset by a valuation
allowance.
Net Loss per Share and Anti-dilutive
Securities
Net loss
per share has been computed using the weighted average number of shares of
common stock outstanding during the period. During the year ended
December 31, 2009, potentially dilutive stock warrants, exercisable into
stock aggregating 207,999,996 shares, were outstanding and not considered in the
loss per share computation because their effect would have been
antidilutive.
2.
Recent Accounting Pronouncements
On July
1, 2009, the FASB officially launched the FASB ASC 105“Generally Accepted
Accounting Principles”, which established the FASB Accounting Standards
Codification (“the Codification”), as the single official source of
authoritative, nongovernmental, U.S. GAAP, in addition to guidance issued by the
Securities and Exchange Commission. The Codification is designed to
simplify U.S. GAAP into a single, topically ordered structure. All
guidance contained in the Codification carries an equal level of
authority. The Codification is effective for interim and annual
periods ending after September 15, 2009. Accordingly, the Company
refers to the Codification in respect of the appropriate accounting standards
throughout this document as “FASB ASC”. Implementation of the
Codification did not have any impact on the Company’s consolidated financial
statements.
In August
2009, the FASB issued Accounting Standard Update “ASU” No. 2009-05 “Fair Value
Measurements and Disclosures (Topic 820) – Measuring Liabilities at Fair
Value”. This ASU clarifies the fair market value measurement of
liabilities. In circumstances where a quoted price in an active
market for the identical liability is not available, a reporting entity is
required to measure fair value using one or more of the following techniques: a
technique that uses quoted price of the identical or a similar liability or
liabilities when traded as an asset or assets, or another valuation technique
that is consistent with the principles of Topic 820 such as an income or market
approach. ASU No. 2009-05 was effective upon issuance and it did not
result in any significant financial impact on the Company upon
adoption.
In
September 2009, the FASB issued ASU No. 2009-12 “Fair Value Measurements and
Disclosures (Topic 820) – Investments in Certain Entities That Calculate Net
Asset Value per Share (or its equivalent)”. This ASU permits use of a
practical expedient, with appropriate disclosures, when measuring the fair value
of an alternative investment that does not have a readily determinable fair
value. ASU No. 2009-12 is effective for interim and annual periods
ending after December 15, 2009, with early application
permitted. Since the Company does not currently have any such
investments, it does not anticipate any impact on its financial statements upon
adoption.
2. Recently
Issued Accounting Pronouncements (continued)
In June
2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation No.
46(R)”. SFAS No. 167 addresses the effect on FASB Interpretation
46(R), “Consolidation of Variable Interest Entities” of the elimination of the
qualifying special-purpose entity concept of SFAS No. 166, “Accounting for
Transfers of Financial Assets”. SFAS No. 167 also amends the
accounting and disclosure requirements of FASB Interpretation 46(R) to enhance
the timeliness and usefulness of information about an enterprise’s involvement
in a variable interest entity. This Statement shall be effective as of the
Company’s first interim reporting period that begins after November 15, 2009.
Earlier application is prohibited. The Company does not anticipate
any significant financial impact from adoption of SFAS No. 167. As of December
31, 2009, SFAS No. 167 has not been added to the Codification.
In May
2009 and as updated February 2010, the FASB issued FASB ASC 855, “Subsequent
Events”. This Statement addresses accounting for and disclosure of
events that occur after the balance sheet date but before financial statements
are issued or available to be issued. FASB ASC 855 requires
disclosure of the date through which an entity has evaluated subsequent events
and the basis for that date, the date issued. The Company adopted
this Statement in 2009. As a result the date through which the
Company has evaluated subsequent events and the basis for that date have been
disclosed in Note 17.
In April
2009, the FASB issued an update to FASB ASC 820, “Fair Value Measurements and
Disclosures”, related to providing guidance on when the volume and level of
activity for the asset or liability have significantly decreased and identifying
transactions that are not orderly. The update clarifies the
methodology to be used to determine fair value when there is no active market or
where the price inputs being used represent distressed sales. The
update also reaffirms the objective of fair value measurement, as stated in FASB
ASC 820, which is to reflect how much an asset would be sold in and orderly
transaction, and the need to use judgment to determine if a formerly active
market has become inactive, as well as to determine fair values when markets
have become inactive. The Company adopted this Statement in 2009
without significant financial impact.
In June
2009, ASC 810.10,
Amendments
to FASB Interpretation No. 46(R)
, was issued. The objective of ASC
810.10 is to amend certain requirements of ASC 860 (revised December
2003),
Consolidation of
Variable Interest Entities,
or ASC 860 to improve financial
reporting by enterprises involved with variable interest entities and to provide
more relevant and reliable information to users of financial statements. ASC 810
carries forward the scope of ASC 860, with the addition of entities previously
considered qualifying special-purpose entities, as the concept of these entities
was eliminated in ASC 860,
Accounting for Transfers of Financial Assets.
ASC 810.10
nullifies FASB Staff Position ASC 860,
Disclosures by Public Entities
(Enterprises) about Transfers of Financial Assets and Interests in Variable
Interest Entities.
The principal objectives of these new
disclosures are to provide financial statement users with an understanding
of:
|
|
a.
|
The
significant judgments and assumptions made by an enterprise in determining
whether it must consolidate a variable interest entity and/or disclose
information about its involvement in a variable interest
entity;
|
|
|
b.
|
The
nature of restrictions on a consolidated variable interest entity’s assets
and on the settlement of its liabilities reported by an enterprise in its
statement of financial position, including the carrying amounts of such
assets and liabilities;
|
|
|
c.
|
The
nature of, and changes in, the risks associated with an enterprise’s
involvement with the variable interest entity;
and
|
|
|
d.
|
How
an enterprise’s involvement with the variable interest entity affects the
enterprise’s financial position, financial performance and cash
flows.
|
ASC 810
is effective as of the beginning of each reporting entity’s first annual
reporting period that begins after November 15, 2009. Earlier application
is prohibited. The provisions of ASC 810 need not be applied to immaterial
items.
3.
Related Parties
The
Company has two employees, whom are deemed related parties based on significant
stock ownership, which earn an aggregated annual amount of $270,000 and $360,000
for the nine months and year ended September 30, 2010 and December 31, 2009,
respectively. Due to inadequate cash positions of the Company for
several years, the Company made only partial payments to the
employees. As of September 30, 2010, aggregate accrued balances due
the employees was $1,221,917. During 2009, the employees settled
$500,000 of the liabilities due them in exchange for approximately 23,800,000
shares of the Company’s common stock.
The
Company’s two employees, related parties, have continuously granted loans to the
Company based on the cash flow needs of the Company. The loans are
non-interest bearing and due on demand. Amounts due to the related
parties in aggregate as of September 30, 2010 and December 31, 2009 are
approximately $353,900 and $353,900, respectively. The balances due
include imputed interest of approximately $25,000 and $33,000
respectively. The imputed interest has been recorded as components of
additional paid-in capital in the respective periods.
The
Company has not had adequate cash to make regular salary payments for the
employees. Payments made to the employees are first applied against
the accrued compensation, with any payments beyond the accrued compensation
balance against the outstanding loans. During the 9 months ended
September 30, 2010 and 2009, all such payments have been applied against the
accrued compensation balances.
During 2007, as part of a joint venture
with a now defunct partner, the Company issued 150,000,000 shares of common
stock to the partner as an investment in property and assets of the
partner. Due to the impairment of the assets and the termination of
the joint venture, no value was assigned to the shares issued. During
2009, these shares were cancelled. The issuance of these shares
resulted in the partner being a greater than 20% shareholder during the year
ended December 31, 2008.
4. Warrants
During
2009, in connection with certain sales of common stock, the Company issued
warrants to investors for the purchase of 8,166,662 shares of common
stock. The exercise period for these warrants is a six month period
from the date of the filing of the Company’s initial Form 10-K with the SEC for
the year ended December 31, 2009. The warrants have an exercise price
range between $0.015 and $0.03 per share.
As of the
date of this report, no SEC filings have occurred and 2,166,666 of these
warrants have been exercised for an aggregate value of $32,500.
Information
regarding the warrants outstanding, expired, and status is included within
footnote 8.
5. Equipment
Equipment
primarily consists of computer software. The table below identifies
the cost and accumulated depreciation of the assets as of September 30, 2010 and
December 31, 2009. Depreciation expense for the nine months ended
September 30, 2010 2009 was $4,792 and $5,000, respectively.
|
|
|
2010
|
|
|
2009
|
|
|
Computer
software
|
|
$
|
20,000
|
|
|
$
|
20,000
|
|
|
Condo
|
|
|
30,000
|
|
|
|
0
|
|
|
Accumulated Depreciation
|
|
|
22,015
|
|
|
|
17,223
|
|
|
Net
|
|
$
|
27,985
|
|
|
$
|
2,777
|
|
6. License
During
the year ended December 31, 2009, the Company paid $110,000 for the use of a
software license. The license is for an indefinite period of
time. In accordance with FASB ASC 350, Intangibles – Goodwill and
Other, the Company has not recorded amortization of the license, and does test
the asset for impairment at least annually. As of September 30, 2010,
no impairment has been recognized of the license.
7. Leases
During
the year ended December 31, 2009, the Company entered into two leases for office
space. The first office leased is in Las Vegas,
Nevada. The lease is for 1 year, and began in June
2009. The monthly rent for the lease is $325. The second
office lease is in Newport Bluff, California. This six month lease
began in November 2009 for a monthly expense of $3,160.
The table
below shows the future minimum lease payments associated with the
leases:
|
Year
|
|
Minimum payments
under leases
|
|
|
2010
|
|
$
|
-
|
|
|
Thereafter
|
|
|
-
|
|
|
Total
|
|
$
|
-
|
|
8. Stockholders’
Equity
Rights of Common
Stockholders
The
Company has only common stock issued and outstanding. Accordingly, all
outstanding shares are of the same class and have equal liquidation, preference
and adjustment rights. Each share of common stock entitles the holder to one
vote on all matters submitted to a vote of the Company’s
stockholders.
Issuances of Common
Stock
2009
During
2009, the Company issued 36,282,745 shares of common stock to investors for an
aggregate amount of $564,300.
During
2009, the Company issued 27,991,664 shares of common stock to consultants for
services performed during the year. The aggregate value of the shares
issued was $1,232,494.
During
2009, the Company issued 2,166,666 shares of common stock as a result of the
exercise of stock warrants. The aggregate amount of $32,500 was
received by the Company in these transactions.
During
2009, the Company issued 23,809,524 shares of common stock to settle $500,000 of
accrued liabilities due to related parties.
2010
During
2010, the Company issued 53,957,155 shares of common stock to investors for an
aggregate amount of $262,668.
Warrants for the purchase of Common
Stock
Financial
Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic
718, Stock Compensation provides that the Company value the issuance of stock
options and warrants based on the fair value of the options or warrants at their
respective grant dates. The Company has elected to use the
Black-Scholes option-pricing model (the “Black-Scholes model”) as its method of
valuing the issuance of warrants to purchase shares of common stock. The
Black-Scholes model requires assumptions to be made regarding expected
volatility, expected term, risk-free interest rate and dividend yield of the
security into which the warrants can be exercised.
The
following were the weighted average assumptions used to value the Company’s
stock warrants:
|
|
|
Warrants
Granted During the
|
|
|
|
|
Nine Months Ended September
30,
|
|
|
|
|
2009
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected
volatility
|
|
|
161.24
|
%
|
|
|
N/A
|
|
|
Expected
term
|
|
2
years
|
|
N/A
|
|
Risk-free
interest rate
|
|
|
1.970
|
%
|
|
|
N/A
|
|
|
Dividend
yield
|
|
|
0.0
|
%
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
fair value of options
|
|
$
|
0.016
|
|
|
$
|
N/A
|
|
The
expected volatility was determined by the Company based on the historical
volatility of the Company’s stock price. The expected term was determined as the
time from the issuance of the warrants through the expected filing date of the
Company’s initial Form 10-K filed with the SEC plus the 6 month expiration term
of the warrants. The risk-fee interest rate was based upon the U.S. Treasury
yield for expected life of the Company’s stock options on the date of grant. The
dividend rate was based on the Company’s projections that show it will not be
able to pay dividends for the foreseeable future.
Stock
warrant transactions, as discussed in footnote 3, for the nine months ended
September 30, 2010 and 2009 are summarized as follows:
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
Number of
|
|
|
Exercise
|
|
|
|
|
Shares
|
|
|
Price
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
at December 31, 2008
|
|
|
202,000,000
|
|
|
$
|
0.03
|
|
|
Granted
|
|
|
8,166,662
|
|
|
|
0.03
|
|
|
Exercised
|
|
|
(2,166,666)
|
|
|
|
0.03
|
|
|
Outstanding
at December 31, 2009
|
|
|
207,999,996
|
|
|
|
0.03
|
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
Outstanding
at September 30, 2010
|
|
|
207,999,996
|
|
|
$
|
0.03
|
|
The
following table summarizes information about stock warrants outstanding and
exercisable as of September 30, 2010:
|
|
|
|
Weighted
|
|
|
|
Weighted
|
|
|
|
|
|
Average
|
|
|
|
Average
|
|
|
|
Number
|
|
Remaining
|
|
|
|
Remaining
|
|
|
|
Of
Warrants
|
|
Contractual
|
|
Number
|
|
Contractual
|
|
|
Exercise
Price
|
Outstanding
|
|
Life
(Years)
|
|
Exercisable
|
|
Life
(Years)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$0.05
|
100,000,000
|
|
|
3
|
|
100,000,000
|
|
|
3
|
|
|
$0.03
|
102,166,666
|
|
|
3
|
|
102,166,666
|
|
|
3
|
|
|
$0.02
|
1,000,000
|
|
|
3
|
|
1,000,000
|
|
|
3
|
|
|
$0.015
|
4,833,330
|
|
|
3
|
|
4,833,330
|
|
|
3
|
|
|
|
207,999,996
|
|
|
3
|
|
207,999,996
|
|
|
3
|
|
The
aggregate intrinsic value of the warrants outstanding as of September 30, 2010
was $0, and the aggregate intrinsic value of the warrants that were exercisable
was $24,167, based on a closing stock price of $.02 per
www.pinksheets.com.
9. Commitments
As part
of a consulting agreement with a former associate, the Company is obligated to
pay the individual $250,000 when the Company’s net revenues reach
$1,000,000.
10. Subsequent
events
The
Company has evaluated the impact of subsequent events through January 17, 2011,
and has determined that no material events or transactions require disclosure
within these financial statements.
SIGNATURES
Pursuant
to the requirements of Section 12 of the Securities Exchange Act of 1934, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized.
|
|
ATLANTIS
INTERNET GROUP INC.
|
|
|
|
|
Date:
February 14, 2011
|
By:
|
/s/ Donald Bailey
|
|
|
|
Name:
|
Donald
Bailey
|
|
|
|
Title:
|
President
|
INDEX
OF EXHIBITS
|
Exhibit
No.
|
|
Description
|
|
|
|
|
|
3.1
|
|
Articles
of Incorporation, dated December 30, 2004.
|
|
|
|
|
|
3.2
|
|
Certificate
of Amendment to Articles of Incorporation, dated April 23,
2007.
|
|
|
|
|
|
3.3
|
|
Bylaws,
dated December 30, 2004.
|
|
|
|
|
|
4.1
|
|
Form
of Stock Certificate
|
|
|
|
|
|
10.3
|
|
License
Agreement dated October 27, 2009 between the Company and EMI Entertainment
World, Inc.
|
|
|
|
|
|
21
|
|
Subsidiaries
of the Registrant.
|
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