UNITED STATES OF AMERICA before the SECURITIES AND EXCHANGE COMMISSION SECURITIES EXCHANGE ACT OF 1934 RELEASE NO. 37932 / November 8, 1996 ACCOUNTING AND AUDITING ENFORCEMENT RELEASE NO. 855 / November 8, 1996 ADMINISTRATIVE PROCEEDING File No. 3-9127 ------------------------------- : In the Matter of : : Atlantis Group, Inc., : ORDER MAKING FINDINGS AND (f/k/a Microterra, Inc.) : IMPOSING CEASE-AND-DESIST ORDER Richard Fox, and : James E. Sidbury, : : Respondents. : : : ------------------------------- I. In these public cease-and-desist proceedings instituted on September 30, 1996 by the Securities and Exchange Commission ("Commission") pursuant to Section 21C of the Securities Exchange Act of 1934 ("Exchange Act"), Respondents Atlantis Group, Inc. (formerly known as Microterra, Inc. and referred to herein as "Microterra"), Richard Fox ("Fox") and James E. Sidbury ("Sidbury") have submitted Offers of Settlement ("Offers") which the Commission has determined to accept. Solely for the purpose of these proceedings and any other proceedings brought by or on behalf of the Commission, or in which the Commission is a party, prior to a hearing pursuant to the Commission's Rules of Practice, and without admitting or denying the findings contained herein, except as to the jurisdiction of the Commission over them and over the subject matter of this proceeding and as to the findings contained in Section II paragraphs A and B, below, which are admitted, the Company, Fox and Sidbury, by their Offer, consent to the entry of findings and cease and desist order set forth below. ==========================================START OF PAGE 2====== II. On the basis of this Order Making Findings and Imposing Cease and Desist Order ("Order"), the Order Instituting Public Proceedings and the Offers, the Commission finds that:-[1]- A. Microterra, a Delaware corporation, registered its common stock with the Commission pursuant to Section 12(g) of the Exchange Act on July 18, 1988. B. Microterra filed periodic reports with the Commission on Forms 10-K and 10-Q during the period March 1991 through April 1994. C. Richard Fox ("Fox"), an attorney from Delray Beach, Florida, was the chief executive officer, president, secretary, treasurer, interim chief financial officer and/or a director of Microterra during the relevant time period described herein. D. James E. Sidbury ("Sidbury") was the chief financial officer, treasurer and/or a director of Microterra from approximately March 1991 through February 1994. E. During the period from in or about March 31, 1991 until April 15, 1994, respondents Microterra, Fox and Sidbury violated Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, in that, in connection with the purchase and sale of certain securities, namely, Microterra common stock, by use of the means and instrumentalities of interstate commerce, and the mails, respondents Microterra, Fox and Sidbury, directly or indirectly, employed devices, schemes, and artifices to defraud; made untrue statements of material facts and omitted to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; and engaged in acts, practices and a course of business which would and did operate as a fraud and deceit. As part of the aforesaid conduct, Microterra, through Fox and Sidbury, filed with the Commission and disseminated to the public, periodic reports on Forms 10-K for fiscal years ended December 31, 1991, December 31, 1992 and December 31, 1993, and Forms 10-Q for the quarters ended March 31, 1991, June 30, 1991, September 30, 1991, March 31, 1992, June 30, 1992, September 30, 1992, March 31, 1993, June 30, 1993 and September 30, 1993, which contained false and misleading financial statements which materially overstated the value of a certain licensing agreement, equipment -- a "Thagard Fluid Wall Reactor", and/or a "digital myograph machine" patent. These ---------FOOTNOTES---------- -[1]- The findings herein are made pursuant to Microterra's, Fox's and Sidbury's Offers of Settlement and are not binding on any other person or entity in this or any other proceeding. ==========================================START OF PAGE 3====== assets were overstated in amounts ranging in total from approximately $2,400,000 to $5,365,000, which overstatements, depending on the particular report, represented approximately 20% to 71% of Microterra's total assets. F. During the period from in or about March 31, 1991 until April 15, 1994, respondent Microterra violated, and respondents Fox and Sidbury caused Microterra's violations of, Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-13 thereunder, by filing with the Commission periodic reports on Forms 10-K and 10-Q which contained false and misleading information. As part of the aforesaid conduct, Microterra, through Fox and Sidbury, filed the false and misleading Forms 10- K and 10-Q as detailed in Section II. paragraph E., above. G. During the period from in or about March 31, 1991 until April 15, 1994, respondent Microterra violated, and respondents Fox and Sidbury caused Microterra's violations of, Section 13(b)(2)(A) of the Exchange Act, by failing to make and keep books, records and accounts which, in reasonable detail, accurately and fairly reflected the transactions and dispositions of its assets. As part of the aforesaid conduct, Microterra recorded on its books the licensing agreement, "Thagard Fluid Wall Reactor" and "digital myograph machine" patent at grossly overstated values. H. During the period from in or about March 31, 1991 until April 15, 1994, respondents Fox and Sidbury violated Rule 13b2-1 of the Exchange Act by falsifying or causing to be falsified Microterra's books, records and accounts. As part of the aforesaid conduct, Fox and Sidbury caused Microterra to make and keep books, records and accounts which inaccurately recorded the value of the licensing agreement, "Thagard Fluid Wall Reactor" and "digital myograph machine" patent. I. During the period from in or about March 31, 1991 until April 15, 1994, respondents Fox and Sidbury violated Rule 13b2-2 of the Exchange Act by making materially false and misleading statements and omitting to state material facts necessary in order to make statements made, in light of the circumstances under which such statements were made, not misleading to an accountant in connection with the audit of Microterra's financial statements required to be made pursuant to the Rules and Regulations of the Exchange Act and the preparation and filing of documents and reports required to be filed with the Commission pursuant to the Rules and Regulations of the Exchange Act. As part of the aforesaid conduct, in connection with the audit of Microterra's financial statements for the fiscal year ended December 31, 1991, Fox and Sidbury failed to disclose to the independent accountant the inoperable condition of the "Thagard Fluid Wall Reactor," the failures of marketing the digital ==========================================START OF PAGE 4====== myograph machine, and the nature of and correct value of the stock given in consideration for the licensing agreement. ==========================================START OF PAGE 5====== III. In view of the foregoing the Commission deems it appropriate and in the public interest to impose the sanctions specified in the Offer submitted by Microterra, Fox, and Sidbury. Accordingly, IT IS ORDERED THAT, pursuant to Section 21C of the Exchange Act, that: A. Microterra cease and desist from committing or causing any violation or future violation of Sections 10(b), 13(a) and 13(b)(2)(A) of the Exchange Act and Rules 10b-5, 12b-20, 13a-1 and 13a-13 thereunder. B. Fox and Sidbury cease and desist from committing or causing any violation or future violation of Sections 10(b) and 13(b)(2)(A) of the Exchange Act and Rules 10b-5, 12b-20, 13b2-1 and 13b2-2 thereunder, and from causing any violation of Section 13(a) of the Exchange Act and Rules 13a-1 and 13a-13 thereunder. For the Commission by its Secretary, pursuant to delegated authority. Jonathan G. Katz Secretary