UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: March 31, 2002 Or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to _____________ Commission File Number: 000-33187 ATR Search Corporation (Exact name of registrant as specified in its charter) Nevada 91-2105842 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 29 E. 31st Street, 2nd Floor, New York, NY 10016 (Address of principal executive offices) (Zip Code) (212) 725-6150 (Registrant's telephone number, including area code) N/A (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes [ ] No [ ] APPLICABLE ONLY TO CORPORATE ISSUERS: The number of shares outstanding of each of the issuer's classes of common stock as of the most recent practicable date: 21,755,000 /1/ ATR Search Corporation (A Development Stage Company) Table of Contents Page PART I - FINANCIAL INFORMATION Item 1. Financial Statements Balance Sheets March 31, 2002 (unaudited) and December 31, 2001 4 Statements of Operations For the Three Months Ending March 31, 5 2002 (unaudited) and For the Period March 2, 2001 (Inception) to March 31, 2001 (unaudited) and For the Period March 2, 2001 (Inception) to March 31, 2002 (unaudited) Statements of Cash Flows For the Three Months Ending March 31, 6 2002 (unaudited) and For the Period March 2, 2001 (Inception) to March 31, 2001 (unaudited) and For the Period March 2, 2001 (Inception) to March 31, 2002 (unaudited) Notes to Financial Statements 7 Item 2. Management's Discussion and Plan of Operation 10 PART II - OTHER INFORMATION Item 6. Exhibits 13 SIGNATURES 14 /2/ ATR Search Corporation (A Development Stage Company) Consolidated Balance Sheets as of March 31, 2002 (unaudited) and December 31, 2001 and Consolidated Statements of Operations and Cash Flows for the Three Months Ending March 31, 2002 (unaudited) and 2001 (unaudited), and For the Period March 31, 2001 (Inception) to March 31, 2002 (unaudited) /3/ ATR Search Corporation (a Development Stage Company) Consolidated Balance Sheets (unaudited) March 31, December 31, Assets 2002 2001 ---------- ---------- Current assets: Cash and equivalents $ - $ 25,693 Accounts receivable 169,282 168,650 Other current assets 30,766 30,766 ---------- ---------- Total current assets 200,048 225,109 ---------- ---------- Fixed assets, net 10,906 11,362 Acquired technology, net 1,200,000 1,275,000 ---------- ---------- $1,410,954 $1,511,471 ========== ========== Liabilities and Stockholders' Equity (Deficit) Current liabilities: Checks written in excess of cash $ 19,593 $ - Accounts payable 6,990 - Accrued payroll taxes 29,211 - Accrued interest 115,000 86,250 Accrued interest - related party 3,750 2,696 Short-term note payable 50,000 50,000 Current portion of capital lease obligation 120,000 120,000 ---------- ---------- Total current liabilities 344,534 258,946 Capital lease obligation, net of current portion 1,030,000 1,030,000 ---------- ---------- 1,374,534 1,288,946 ---------- ---------- Stockholders' equity (deficit): Common stock, $0.001 par value; 100,000,000 shares authorized, 21,755,000 and 19,180,000 shares issued and outstanding as of 3/31/02 and 12/31/01, respectively 21,755 19,180 Additional paid-in capital 948,645 692,095 Deferred compensation (193,479) - (Deficit) accumulated during development stage (740,501) (488,750) ---------- ---------- 36,420 222,525 ---------- ---------- $1,410,954 $1,511,471 ========== ========== The accompanying Notes are an integral part of these financial statements. /4/ ATR Search Corporation (a Development Stage Company) (unaudited) Consolidated Statements of Operations Three Months March 2, 2001 March 2, 2001 Ending (Inception) to (Inception) to March 31, 2002 March 31, 2001 March 31, 2002 -------------- -------------- -------------- Revenue $ 175,658 $ 93,002 $ 1,116,279 -------------- -------------- -------------- Cost of services: Subcontractors 46,566 29,916 385,074 Consultants 39,252 1,307 246,871 Other costs 14,069 - 50,085 -------------- -------------- -------------- Total costs of services 99,887 31,223 682,030 -------------- -------------- -------------- Gross profit 75,771 61,779 434,249 -------------- -------------- -------------- Expenses: General and administrative expenses 96,735 30,433 463,444 Consulting fees 65,646 - 216,896 Depreciation and amortization 75,456 - 301,063 Organizational costs 59,881 - 72,131 -------------- -------------- -------------- Total expenses 297,718 30,433 1,053,534 -------------- -------------- -------------- Net operating income (loss) (221,947) 31,346 (619,285) Other (expense): Interest expense (28,750) - (117,466) Interest expense - related party (1,054) - (3,750) -------------- -------------- -------------- Net income (loss) $ (251,751) $ 31,346 $ (740,501) ============== ============== ============== Weighted average number of common shares outstanding - basic and fully diluted 20,123,611 16,100,000 ============== ============== Net (loss) per share - basic & fully diluted $ (0.02) $ 0.00 ============== ============== The accompanying Notes are an integral part of these financial statements. /5/ ATR Search Corporation (a Development Stage Company) (unaudited) Consolidated Statements of Cash Flows Three Months March 2, 2001 March 2, 2001 Ending (Inception) to (Inception) to March 31, 2002 March 31, 2001 March 31, 2002 -------------- -------------- -------------- Cash flows from operating activities Net income (loss) $ (251,751) $ 31,346 $ (740,501) Stock issued to acquire technology - 350,000 350,000 Stock issued for services 259,125 - 410,375 Depreciation and amortization 75,456 - 301,063 Adjustments to reconcile net income (loss) to net cash provided by operating activities: (Increase) decrease in accounts receivable (632) (93,002) (169,282) (Increase) in other current assets - - (30,766) Increase in checks written in excess of cash 19,583 - 19,583 Increase in accounts payable 6,990 - 6,990 Increase in accrued payroll 29,211 9,383 29,211 taxes Increase in accrued interest 28,750 - 115,000 Increase in accrued interest - related party 1,054 - 3,750 -------------- -------------- -------------- Net cash provided by operating activities 167,786 297,727 295,423 -------------- -------------- -------------- Cash flows from investing activities Short-term note payable - - 50,000 Long-term debt - 1,150,000 1,150,000 Purchase of fixed assets - - (11,969) Acquired technology - (1,500,000) (1,500,000) -------------- -------------- -------------- Net cash (used) by investing activities - (350,000) (311,969) -------------- -------------- -------------- Cash flows from financing activities Issuances of common stock - 64,500 210,025 Increase in deferred compensation (193,479) - (193,479) -------------- -------------- -------------- Net cash provided (used) by financing activities (193,479) 64,500 16,546 -------------- -------------- -------------- Net increase (decrease) in cash (25,693) 12,227 - Cash - beginning 25,693 - - -------------- -------------- -------------- Cash - ending $ - $ 12,227 $ - ============== ============== ============== Supplemental disclosures: Interest paid $ - $ - $ 329 ============== ============== ============== Income taxes paid $ - $ - $ - ============== ============== ============== Non-cash transactions: Number of shares issued to acquire technology - 3,500,000 3,500,000 ============== ============== ============== Number of shares issued for services 2,575,000 - 1,600,000 ============== ============== ============== The accompanying Notes are an integral part of these financial statements. /6/ ATR Search Corporation (a Development Stage Company) Notes Note 1 - Basis of presentation The consolidated interim financial statements included herein, presented in accordance with United States generally accepted accounting principles and stated in US dollars, have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. These statements reflect all adjustments, consisting of normal recurring adjustments, which, in the opinion of management, are necessary for fair presentation of the information contained therein. It is suggested that these consolidated interim financial statements be read in conjunction with the consolidated financial statements of the Company for the period ended December 31, 2001 and notes thereto included in the Company's Form 10-KSB. The Company follows the same accounting policies in the preparation of consolidated interim reports. Results of operations for the interim periods are not indicative of annual results. Note 2 - Going concern The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the recoverability of assets and the satisfaction of liabilities in the normal course of business. As noted above, the Company is in the development stage and, accordingly, has not yet generated a proven history of operations. Since its inception, the Company has been engaged substantially in financing activities and developing its product line, incurring substantial costs and expenses. As a result, the Company incurred accumulated net losses from March 2, 2001 (inception) through the period ended March 31, 2002 of $(740,501). In addition, the Company's development activities since inception have been financially sustained by capital contributions. The ability of the Company to continue as a going concern is dependent upon its ability to raise additional capital from the sale of common stock and, ultimately, the achievement of significant operating results. The accompanying financial statements do not include any adjustments that might be required should the Company be unable to recover the value of its assets or satisfy its liabilities. Note 3 - Fixed assets As of March 31, 2002 the Company had the following assets: Furniture & fixtures $ 1,969 Leasehold improvements 10,000 -------- $ 11,969 Depreciation expense totaled $456 for the three-month period ended March 31, 2002. Note 4 - Intellectual Property, Patents, and Other Intangibles As of March 31, 2002, the Company had the rights to use technology known as "human resource compiler based search recognition software and hardware" from Sarcor Management, SA, a British Virgin Islands corporation, in exchange for a lease agreement and the issuance of 3,500,000 common shares of stock valued at $350,000. Amortization expense totaled $75,000 for the three-month period ended March 31, 2002. /7/ ATR Search Corporation (a Development Stage Company) Notes Note 5 - Short term note payable On May 5, 2001, the Company executed a promissory note with Robert Cox, the president of the Company, in the amount of $50,000, which is due in 2 years. Interest in accrued on a quarterly basis at an interest rate of 8% per annum. On May 5, 2003, the unpaid balance of principal and accrued interest will convert into common stock at a ratio of one share of the Company's $0.001 par value common stock for each $5. During the three-month period ended March 31, 2002, interest expense was $1,054. As of March 31, 2002 the balance in accrued interest was $3,750. Note 6 - Capital lease and rent obligations 10% capital lease payable to Sarcor Management, SA with monthly interest-only payments beginning in April 2001 of $5,000, increasing to $10,000 in April 2002, $15,000 in April 2003, and $19,100 thereafter, secured by software licensing rights, due March 2011. $1,150,000 Less current portion (120,000) ---------- Total long-term debt $1,030,000 ========== Summary of Future Minimum Lease Payments: Fiscal Year Amount ----------- --------- 2001 $ 15,000 2002 150,000 2003 180,000 2004 229,200 2005 229,200 Thereafter 1,173,000 --------- Total lease payments over the contractual period $1,976,400 Less: Interest (476,400) --------- Original cost 1,500,000 Interest expense for the capital lease totaled $75,000 for the three-month period ended March 31, 2002. As of March 31, 2002 the balance in accrued interest was $115,000. Of which none has been paid as of March 31, 2002. On April 1, 2001, the Company entered into a sublease agreement to rent office space for a period of four years at a rate of $2,502 per month. Rent expense totaled $7,555 for the period ended March 31, 2002. Note 7 - Stockholder's equity On February 17, 2002, the Company executed a business consulting agreement with MLSA whereby the Company issued 1,350,000 shares of its $0.001 par value common stock to Mark Lancaster for consulting services valued at $162,000. The consulting services are to be rendered over a period of 90 days with an automatic three-month renewal provision. Amounts included in expense were $54,000 for the three-month period ended March 31, 2002. As of March 31, 2002, the unamortized amount was included in the accompanying balance sheet as "Deferred compensation." On February 26, 2002, the Company executed a consulting agreement with Qurag, Inc. whereby the Company issued 475,000 shares of its $0.001 par value common stock to Chaim Drizin, a shareholder of the Company, for consulting services valued at $30,875. The consulting services are to be rendered over a period of 90 days with an automatic three-month renewal provision. Amounts included in expense were $10,292 for the three-month period ended March 31, 2002. As of March 31, 2002, the unamortized amount was included in the accompanying balance sheet as "Deferred compensation." /8/ ATR Search Corporation (a Development Stage Company) Notes On March 1, 2002, the Company executed a consulting agreement with Corporate Regulatory Services, LLC (CRS), a shareholder of the Company, whereby the Company issued 250,000 shares of its $0.001 par value common stock to CRS, for consulting services valued at $16,250. The consulting services are to be rendered over a period of approximately 1 year. Amounts included in expense were $1,354 for the three-month period ended March 31, 2002. As of March 31, 2002, the unamortized amount was included in the accompanying balance sheet as "Deferred compensation." On March 27, 2002, the Company executed a consulting agreement with Promark, Inc. whereby the Company issued 500,000 shares of its $0.001 par value common stock to Ken Lowman for consulting services valued at $50,000. The consulting services are to be rendered over a period of 90 days with an automatic three-month renewal provision. There have been no other issuances of common stock. Note 8 - Related party transactions On May 5, 2001, the Company executed a promissory note with Robert Cox, the president of the Company, in the amount of $50,000. (See Note 8 above.) On May 24, 2001, the Company issued 150,000 shares of its $0.001 par value common stock to Mary Lou Cox, mother of Robert Cox, the Company's president, for consulting services valued at $15,000. On February 26, 2002, the Company executed a consulting agreement with Qurag, Inc. whereby the Company issued 475,000 shares of its $0.001 par value common stock to Chaim Drizin, a shareholder of the Company, for consulting services valued at $30,875. The consulting services are to be rendered over a period of 90 days with an automatic three-month renewal provision. Amounts included in expense were $10,292 for the three-month period ended March 31, 2002. As of March 31, 2002, the unamortized amount was included in the accompanying balance sheet as "Deferred compensation." On March 1, 2002, the Company executed a consulting agreement with Corporate Regulatory Services, LLC (CRS), a shareholder of the Company, whereby the Company issued 250,000 shares of its $0.001 par value common stock to CRS, for consulting services valued at $16,250. The consulting services are to be rendered over a period of approximately 1 year. Amounts included in expense were $1,354 for the three-month period ended March 31, 2002. As of March 31, 2002, the unamortized amount was included in the accompanying balance sheet as "Deferred compensation." On March 27, 2002, the Company executed a consulting agreement with Promark, Inc. whereby the Company issued 500,000 shares of its $0.001 par value common stock to Ken Lowman for consulting services valued at $50,000. The consulting services are to be rendered over a period of 90 days with an automatic three-month renewal provision. Note 9 - Warrants As of March 7, 2002, the Company issued 62,500 warrants to CRS, a shareholder of the Company, to purchase the Company's $0.001 par value common stock on a one-for-one basis. The warrant exercise price is $0.10 per share of common stock and substantially all warrants will expire on or before March 7, 2007. As of March 31, 2002, no warrants have been exercised to acquire additional shares of common stock. /9/ Item 2. Management's Discussion and Plan of Operation Forward-Looking Statements This Quarterly Report contains forward-looking statements about our business, financial condition and prospects that reflect our assumptions and beliefs based on information currently available. We can give no assurance that the expectations indicated by such forward-looking statements will be realized. If any of our assumptions should prove incorrect, or if any of the risks and uncertainties underlying such expectations should materialize, our actual results may differ materially from those indicated by the forward-looking statements. The key factors that are not within our control and that may have a direct bearing on operating results include, but are not limited to, acceptance of our services, our ability to expand our customer base, our ability to raise capital in the future, the retention of key employees and changes in the regulation of our industry. There may be other risks and circumstances that we are unable to predict. When used in this Quarterly Report, words such as, "believes," "expects," "intends," "plans," "anticipates," "estimates" and similar expressions are intended to identify forward-looking statements, although there may be certain forward-looking statements not accompanied by such expressions. All forward-looking statements are intended to be covered by the safe harbor created by Section 21E of the Securities Exchange Act of 1934. General We were formed as a Nevada corporation under the name ATR Search Corporation on March 2, 2001. We are a development stage company engaging in the placement of information technology ("IT") professionals with technology sector companies on a temporary or permanent basis. We seek to recruit qualified IT professionals for placement with our clients in a timely manner. These candidates are skilled primarily in the following areas: 1. Computer programming; 2. Project management; 3. System design, analysis and administration; 4. Network and systems management; and 5. Software and documentation development. We provide human capital to IT companies located in the greater New York area, extending into the tri-state area of New York, New Jersey and Connecticut. Our IT consulting services are focused on solving our customer's organizational problems, which typically include: 1. General business and technology consulting; 2. Programming; 3. Organizational analysis; 4. Strategic planning; and 5. Network and systems integration and management. Our recruits provide innovative ideas, insight and experience to address the client's organizational problems, and then work with the client to implement strategic solutions on a temporary or permanent basis. Temporary IT consulting engagements may typically last six months to one year, and require the services of several specialized consultants. We receive compensation on a contracted per project or per hourly fee arrangement for our consulting services. Full time placements of technology personnel are structured as a transactional fee paid by the client, which ranges from 20-30% of the base compensation package afforded to the new employee. /10/ Results of Operations We generated $175,658 in revenues for the three-month period ended March 31, 2002. As our inception date was March 2, 2001, the period ended March 31, 2001 was not a complete quarter and therefore cannot be used for comparative purposes. Our revenues are based entirely on the placement of our IT professionals. Total cost of services, which includes the fees paid to our subcontractors, consultants and other related costs, amounted to $99,887 for the three months ended March 31, 2002 and $682,030 since March 2, 2001 (inception). Total operating expenses for the three months ended March 31, 2002 were $297,718 and $1,053,534 since March 2, 2001 (inception). Total operating expenses for the three-month period ended March 31, 2002 were entirely related to general and administrative expenses, consulting fees, depreciation and amortization, and organizational costs. These expenses were largely incurred as a result of the following: On February 17, 2002, we executed a business consulting agreement with MLSA whereby we issued 1,350,000 shares of our $0.001 par value common stock to Mark Lancaster for consulting services valued at $162,000. These consulting services are to be rendered over a period of 90 days with an automatic three-month renewal provision. Amounts included in expense were $54,000 for the three-month period ended March 31, 2002. As of March 31, 2002, the unamortized amount was included in the accompanying balance sheet as "Deferred compensation." On February 26, 2002, we executed a consulting agreement with Qurag, Inc. whereby we issued 475,000 shares of our $0.001 par value common stock to Chaim Drizin, a shareholder of the Company, for consulting services valued at $30,875. The consulting services are to be rendered over a period of 90 days with an automatic three-month renewal provision. Amounts included in expense were $10,292 for the three-month period ended March 31, 2002. As of March 31, 2002, the unamortized amount was included in the accompanying balance sheet as "Deferred compensation." On March 1, 2002, we executed a consulting agreement with Corporate Regulatory Services, LLC (CRS), a shareholder of the Company, whereby we issued 250,000 shares of our $0.001 par value common stock to CRS, for consulting services valued at $16,250. The consulting services are to be rendered over a period of approximately 1 year. Amounts included in expense were $1,354 for the three-month period ended March 31, 2002. As of March 31, 2002, the unamortized amount was included in the accompanying balance sheet as "Deferred compensation." On March 27, 2002, we executed a consulting agreement with Promark, Inc. whereby we issued 500,000 shares of our $0.001 par value common stock to Ken Lowman for consulting services valued at $50,000. The consulting services are to be rendered over a period of 90 days with an automatic three-month renewal provision. Future Business We have commenced operations, and have begun generating revenues. However, we expect the industry to become increasingly competitive, despite the size and growth expected in the market. We intend to compete by targeting specific market segments such as technology companies whose business cycle may require the permanent or seasonal hiring of additional IT employees, or those in need of IT consulting services. Our main goal is to ensure client satisfaction with our services and to develop an outstanding reputation for client service. If we fail to market and distribute our services and generate sufficient revenues, we may be unable to continue as a going concern. /11/ Liquidity and Capital Resources We believe our projected revenues will be sufficient to fund ongoing fiscal 2002 and 2003 operations and provide for our working capital needs, however, we have negative working capital of $344,534. Our accountant has issued a note concerning our ability to continue as a going concern. As we are still considered to be in the development stage, our prospects of continuing as a going concern are contingent upon our ability to achieve and maintain profitable operations. Revenues generated over and above expenses will be used for further development of our services, to provide financing for marketing and promotion, to secure additional customers, equipment and personnel, and for other working capital purposes. To date, we have financed our cash flow requirements through a public issuance of common stock and through the revenues generated from our IT placement services. During our normal course of business, we will experience net negative cash flows from operations, pending receipt of revenues. Further, we may be required to obtain financing to fund operations through additional common stock offerings and bank borrowings, to the extent available, or to obtain additional financing to the extent necessary to augment our available working capital. All investor inquiries should be directed to Mr. Robert Cox, President, ATR Search Corp. 29 E. 31st Street, 2nd Floor, New York, New York 10016, phone 212-725-6150, fax 212-725-6228. /12/ PART II - OTHER INFORMATION Item 6. Exhibits Exhibit Name and/or Identification of Exhibit Number 3 Articles of Incorporation & By-Laws (a) Articles of Incorporation of the Company filed March 2, 2001. Incorporated by reference to the exhibits to the Company's General Form For Registration Of Securities Of Small Business Issuers on Form 10-SB, previously filed with the Commission. (b) Certificate of Amendment to the Articles of Incorporation of the Company filed May 9, 2001. Incorporated by reference to the exhibits to the Company's General Form For Registration Of Securities Of Small Business Issuers on Form 10-SB, previously filed with the Commission. (c) By-Laws of the Company adopted March 16, 2001. Incorporated by reference to the exhibits to the Company's General Form For Registration Of Securities Of Small Business Issuers on Form 10-SB, previously filed with the Commission. /13/ SIGNATURES Pursuant to the requirements of the Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ATR Search Corporation ----------------------------------------------------------------- (Registrant) Date: May 21, 2002 ------------ By: /s/ Robert Cox --------------------------- Robert Cox, President and CEO /14/