SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1933
Date of Report: April 17, 2000
Commission File Number: 0-29183
RICHMOND SERVICES, INC.
Nevada 76-0430898
(Incorporation) (IRS Number)
34700 Pacific Coast Highway, Suite 300, Capistrano Beach, CA 92624
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (949) 248-8933
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: 5,047,991
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ITEM 1. CHANGE OF CONTROL OF REGISTRANT
On February 29, 2000, we approved a Plan of Reorganization by which we
would acquire as a wholly owned subsidiary, eKnowledge Group, Inc., a private
Nevada state corporation engaged in providing supplemental, distance learning
over the internet. This acquisition involved a change of control of our
corporation.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On February 29, 2000, we approved a Plan of Reorganization by which we
would acquire as a wholly owned subsidiary, eKnowledge Group, Inc., a private
Nevada state corporation engaged in providing supplemental, distance learning
over the internet. The acquisition was approved by shareholders on April 17,
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2000. We acquired 100% of eKnowledge Group, Inc., as a wholly-owned subsidiary,
for the issuance of 15,155,556 new investment shares of common stock; and will
change of our corporate name to eKnowledge Group, Inc.
The current Internet media convergence creates a compelling opportunity to
dramatically alter and enhance the way in which supplemental, for-profit
education is taught and delivered. The eKnowledge Group management team has
successfully exploited this opportunity, capturing 4% market share, with the
introduction of its initial supplemental learning course, Home LSAT, a test
preparatory course for takers of the Law School Admission Test (LSAT) delivered
via the Internet and in video/audio format. eKnowledge will further develop its
unique value proposition by providing students of all levels with on-demand
access to courses delivered via streaming video over the Internet and including
downloadable written materials. Spending in this market is near $80 billion
annually with substantial room for growth and markets tapped will be in both the
business-to-business and business-to-consumer space. Management will leverage
its successful test preparation experience, marketing savvy, and technological
know-how to create the dominant brand name in lifelong online supplemental
education.
The initial eKnowledge product line consists of test preparatory courses
for students studying for the LSAT, SAT (Scholastic Assessment Test), PSAT
(Preliminary SAT), ACT (American College Testing Assessment), TOEIC (Test of
English for International Communication), TOEFL (Test of English as a Foreign
Language), GRE (Graduate Record Examination), and GMAT (Graduate Management
Admission Test). Home LSAT has been successfully launched and the SAT, TOEIC,
and ACT courses are scheduled to launch within the next 60 days. In addition,
eKnowledge will develop corporate training and compliance courses and K-12 after
school tutorials as its primary course offerings. Once these core products have
been successfully launched, eKnowledge will create additional adult education
courses as well as literature reviews and college study aids. All offerings are
and will be integrated educational courses delivered via the Internet as
supplemental learning tools in these six categories and under the various dot
com name brands as follows:
Test preparation eTestPrep.com
Corporate training & compliance eCorpEd.com
K-12 after school learning eAfterSchool.com
Adult education eLifeEd.com
Literature reviews eClassicNotes.com
College study aids eCollegeNotes.com
eKnowledge launched Home LSAT in September 1998 in video/audio format and
then offered it electronically via the Internet beginning in December 1998. The
company was the first to offer the equivalent of a live test preparation course
delivered via the Internet and effectively captured 4% of the 50,000 annual LSAT
test preparatory taker market through sales and beta testers by the second
quarter of 1999. Using a distance learning technology model of streaming video
and downloadable written study materials, eKnowledge capitalizes on the appeal
of both the Internet and distance learning. The company offers students
convenience, ease, and accessibility of the Internet as the medium through which
to receive educational content.
All courses incorporate high-quality, digital image-based streaming video
lectures, convenient access available anytime/anywhere, tracking and status
reports, simulated practice tests and quizzes, a multi-media format displaying
text with hyperlinks to answer questions, links to definitions and relevant
portions of the study materials, multi-cast streaming capabilities for special
live events, and web-based course support including chat rooms, bulletin
boards, and other resource links.
ITEM 5. OTHER EVENTS
The terms and conditions of this acquisition are that Richmond Services,
Inc. would issue 15,155,556 shares (post reverse split) of the common stock of
the Company. These shares will not have been registered under the Securities Act
of 1933, and may not be resold unless the shares are registered under the Act or
an exemption from such registration is available. They would be Restricted
Securities subject to the holding periods of Rule 144. These shares shall be
issued to the shareholders of eKnowledge Group, Inc. As a part of the proposed
reorganization and acquisition, the representatives of eKnowledge Group, Inc.
with our cooperation will attempt to consummate a private placement offering on
behalf of the to-be-reorganized Company, of up to 500,000 new investment shares
of our common stock on a post-reverse stock split basis, by which approximately
$500,000 in funding would be obtained.
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ITEM 6. CHANGES OF REGISTRANT'S DIRECTORS
MARK ZOUVAS was previously our Sole Officer and Director. He was elected
August 12, 1999 and was re-elected. Mr. Zouvas is 37 years old. He was appointed
to the Board of Directors of the Company on October 5, 1999. He serves as the
Company s Chief Financial Officer, a position he has held since September, 1997.
From September 1993 to September, 1997, Mr. Zouvas worked for Vantage Capital
Management Company in Chicago, Illinois. Mr. Zouvas has a BA from the University
of California at Berkeley (Accounting and Real Estate). As a staff auditor with
Price Waterhouse, he performed services for clients in the banking and real
estate industries. Mr. Zouvas has been involved in several venture capital
transactions over the past five years. He is a Licensed Real Estate Broker and
an Accountant in California. Mr. Zouvas is currently a principal in Delphi
Consulting Group that specializes in taking companies public through
reverse-merger acquisitions. Mr. Zouvas is also the Chief Financial Officer of
Power Exploration, Inc., a publicly traded oil exploration firm located in Fort
Worth, Texas.
The following persons have been elected to augment our Board of Directors,
to serve until the next Meeting of Shareholders. Mr. Zouvas, our existing
director is recommended to remain on the Board of Directors. The new additional
Directors represent the management team of eKnowledge Group, Inc.
GARY S. SAUNDERS is the President and Chief Executive Officer of
eKnowledge. Prior to starting eKnowledge, Mr. Saunders was the President of
Longacre/White Patent Education ( LWPE ), a company that offers Patent Bar
Review courses. He is widely credited with taking LWPE to the number one market
share position in less than a year in the face of stiff competition, a mature
market, and a company undergoing a name change. Mr. Saunders has produced an
Online Bar Exam Review Program for Practicing Law Institute, the Nation s
leading Continuing Legal Education provider. Mr. Saunders was also the Director
of Operations for the Western United States for West Publishing s West Bar
Review, Vice President of Bar Review Operations for American Professional
Testing Services, Inc., the parent company of Barpassers bar review, and on the
management team that oversaw the Sum & Substance product line, a line of
supplemental study aids for law students. Prior to APTS, Mr. Saunders was the
Director of GRE/GMAT/LSAT/MCAT Operations for the Western United States for
Bar/bri s Professional Testing Centers, then a market leader in the field. A
leading expert in both test preparation and sales and marketing to the student
market, Mr. Saunders has participated in the start up of two other companies. He
is a member of the State Bar of California, a graduate of Brigham Young
University and University of San Diego School of Law, and is one of the
principal lecturers in eKnowledge s initial Home LSAT program as well as the
eTestprep.com SAT program.
SCOTT HILDEBRANDT is the author and a principal lecturer in the Home LSAT
program and a co-author and lecturer in the eTestprep SAT program. Mr.
Hildebrandt is the Senior Vice President of Academics for eKnowledge as well as
a partner in the Silicon Valley law firm of Hildebrandt and Welker. Mr.
Hildebrandt formerly created the curriculum for a San Francisco test preparation
company, Columbia Review Course. When he taught for Bar/bri s Professional
Testing Centers he was the Western United States top rated lecturer. Mr.
Hildebrandt is also the author of a line of study aids for law students. Mr.
Hildebrandt is a member of the State Bar of California, a graduate of Brigham
Young University and its J. Reuben Clark Law School.
CHRIS DESANTIS is currently the Director of the Online Bar Review Program
at Practicing Law Institute. PLI, a non-profit organization founded in 1933, is
the nation s premier provider of continuing legal education programs. Prior to
PLI, Mr. DeSantis was with The Washington Post s Kaplan Division working in both
the Test Preparation and Online Law School areas. As Director of Kaplan CPA
Review, Mr. DeSantis introduced the concept of Online Test Preparation for those
taking the CPA examination. He was on the management team that designed and
implemented the first Online Law School, Concord. Prior to Kaplan, Mr. DeSantis
was a Director for West Bar Review. A graduate of Swarthmore College and
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California Western University School of Law, Mr. DeSantis is licensed to
practice law in California, New Jersey, New York, and Pennsylvania.
WAYNE SAUNDERS began his career in Consumer and Commercial Finance, rising
to the level of President of Universal Finance. From Finance, Saunders went to
Manufacturing in the Plumbing and Air Conditioning Industries leading Wright
Manufacturing to the market share leader position. Saunders has successfully
started many businesses including, Life Insurance, Manufacturing, Equipment
Rental, Commodities Investment, Oil Development, and Real Estate Development
companies. Saunders is credited with starting TuneMatic, the quick auto tune up
with a 6 month or 6,000 mile guarantee that he originated and sold to Andy
Granatelli. Tune-up Masters continues to lead the tune up industry. Saunders is
a graduate of St. Mary s with a BA in Business Administration.
UN-NUMBERED ITEM: FINANCIAL INFORMATION
Provided herewith, as Attachment hereto, are December 31, 1999 audited
financial statements of eKnowledge Group, as acquired.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
April 17, 2000
RICHMOND SERVICES, INC.
by
/s/
William Stocker
special securities counsel
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- --------------------------------------------------------------------------------
FINANCIAL INFORMATION
AUDITED
FOR THE PERIOD ENDING DECEMBER 31, 1999
- --------------------------------------------------------------------------------
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Table of Contents
Independent Auditors' Report 8
Financial Statements
Balance Sheet 9
Statement of Operations 10
Statement of Stockholders' Equity 11
Statement of Cash Flows 12
Notes to Financial Statements 13
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INDEPENDENT AUDITORS' REPORT
To the Owners:
eKnowledge Group, Inc.
We have audited the accompanying balance sheet of EKNOWLEDGE GROUP, INC. (a
Nevada corporation) as December 31, 1999, and the related statements of
operations, stockholder's equity, and cash flows for the period from inception
(June 1, 1999) to December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material-
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of EKNOWLEDGE GROUP, INC. as of
December 31, 1999, and the results of its operations and its cash flows for the
initial period then ended, in conformity with generally accepted accounting
principles.
/s/
Haynie & Company
Certified Public Accountants
Salt Lake City, Utah
March 29,2000
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eKnowledge Group, Inc.
Balance Sheet
December 31, 1999
<TABLE>
<CAPTION>
<S> <C>
CURRENT ASSETS:
Cash $ 36
Inventory 14,221
TOTAL CURRENT ASSETS 14,257
PROPERTY AND EQUIPMENT:
Furniture and equipment 2,057
Less accumulated depreciation 411
PROPERTY AND EQUIPMENT, NET 1,646
OTHER ASSETS:
Intangible assets, net 15,988
TOTAL ASSETS $ 31,891
========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable $ 12,022
Deposits payable 2,400
Income tax payable 800
Note payable 9,500
TOTAL CURRENT LIABILITIES 24,722
STOCKHOLDER'S EQUITY:
Common Stock, $.025 par value; 1,000,000 shares 25,000
authorized, issued and outstanding
Additional paid-in capital 1,618
Accumulated deficit (19,449)
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 31,891
- ----------------------------------------------- ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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eKnowledge Group, Inc.
Statement of Operations
For the Period from Inception, (June 1, 1999) to December 31, 1999
<TABLE>
<CAPTION>
<S> <C>
SALES $ 46,256
COSTS OF SALES 14,537
GROSS PROFIT 31,719
GENERAL AND ADMINISTRATIVE EXPENSES:
Payroll 8,246
Commissions 180
Phone 1,086
Utilities 266
Legal and professional 2,250
Rent 1,339
Shipping 5,784
Printing 2,095
Taxes 106
Supplies 242
Depreciation and amortization 1,253
Advertising 6,167
Travel and entertainment 10,372
Consulting fee 10,000
Other 982
TOTAL GENERAL AND ADMINISTRATIVE 50,368
(LOSS) BEFORE INCOME TAXES (18,649)
PROVISION FOR INCOME TAXES 800
Net (Loss) $(19,449)
- ------------------------------------- =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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eKnowledge Group, Inc.
Statement of Stockholders' Equity
For the period from Inception, (June 1, 1999) to December 31, 1999
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Additional Total
Common Stock Paid-in Accumulated Stockholders'
Description Shares Amount Capital Deficit Equity
- --------------------------------- ------------ ------- ----------- ------------- ---------------
STOCK ISSUED AT $.025 ON
JUNE 1, 1999 1,000,000 $25,000 $ 1,618 $ 0 $ 26,618
Net (loss) for the initial period
ended December 31, 1999 0 0 0- (19,449) (19,449)
BALANCE, DECEMBER 31, 1999 1,000,000 $25,000 $ 1,618 $ (19,449) $ 7,169
- --------------------------------- ============ ======= =========== ============= ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
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eKnowledge Group, Inc.
Statement of Cash Flows
For the period from Inception, (June 1, 1999) to December 31, 1999
<TABLE>
<CAPTION>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) $(19,449)
ADJUSTMENTS TO RECONCILE NET INCOME TO
NET CASH (USED) BY OPERATING ACTIVITIES:
Depreciation and amortization 1,253
(INCREASE) DECREASE IN CURRENT ASSETS:
Inventory 5,086
INCREASE (DECREASE) IN CURRENT LIABILITIES:
Accounts payable (1,031)
Income tax payable 800
NET CASH (USED) BY OPERATING ACTIVITIES (13,341)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock and contributed capital 3,877
Proceeds from note payable 9,500
NET CASH PROVIDED BY FINANCING ACTIVITIES 13,377
NET CHANGE IN CASH 36
Cash at beginning of year -
CASH AT END OF YEAR $ 36
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
SCHEDULE OF NONCASH INVESTING AND FINANCING TRANSACTIONS:
Acquisition of assets in exchange for the assumption
of liabilities and issuance of common stock:
Assets acquired:
Inventory acquired $ 19,306
Furniture and equipment acquired 2,057
Intangible assets acquired 16,830
Liabiliies assumed and common stock issued:
Accounts payable assumed (13,052)
Deposits payable assumed (2,400)
Common stock issued to acquire assets (22,741)
$ 0
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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1. ORGANIZATION AND BUSINESS
- -------------------------------
ETESTPREP, INC. (THE COMPANY) WAS INCORPORATED IN THE STATE OF NEVADA ON JUNE 1,
1999 FOR THE PURPOSE OF PROVIDING EDUCATIONAL TRAINING COURSES OVER THE INTERNET
AND THROUGH OTHER MEDIA SOURCES. ON JUNE 17, 1999, THE PRINCIPAL STOCKHOLDER OF
ETESTPREP, INC. ACQUIRED ALL RIGHTS, TITLE, AND INTEREST IN THE COURSE KNOWN AS
THE HOME-LSAT COURSE ALONG WITH OTHER RELATED ASSETS FROM HOME EDUCATION, INC.
IN EXCHANGE HIS STOCK IN HOME EDUCATION, INC. ALONG WITH THE ASSUMPTION OF
RELATED LIABILITIES. THE PRINCIPAL STOCKHOLDER CONTRIBUTED THE ASSETS AND
RELATED LIABILITIES TO THE COMPANY IN EXCHANGE FOR 1,000,000 SHARES OF COMMON
STOCK. ON NOVEMBER 16, 1999, ETESTPREP, INC. CHANGED ITS NAME TO EKNOWLEDGE
GROUP, INC.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS
- ----------------------------
CASH AND CASH EQUIVALENTS ARE DEFINED AS CASH AND INVESTMENTS THAT HAVE A
MATURITY LESS THAN THREE MONTHS.
INVENTORY
- ---------
INVENTORY AT DECEMBER 31, 1999 CONSISTED OF BROCHURES, POSTERS, BANNERS,
T-SHIRTS, HANDOUTS, AUDIOTAPES, AND OTHER RELATED MATERIALS. INVENTORY IS
VALUED AT THE LOWER OF COST OR MARKET. COST IS DETERMINED USING FIRST-IN-FIRST
OUT (FIFO) METHOD.
INTANGIBLE ASSETS
- ------------------
INTANGIBLE ASSETS INCLUDE THE COURSE NAMES AND LICENSES INCLUDING, HOME
EDUCATION, HOME LSAT, THE WORLD WIDE WEB ADDRESS OF HOME-LSAT.COM, MAILING LISTS
AND CONTACTS, AND A LICENSE FROM LAW SCHOOL ADMISSIONS COUNCIL, INC. FOR THE USE
OF PRIOR TESTING QUESTIONS. MANAGEMENT ESTIMATES THE USEFUL LIFE OF THESE
ASSETS TO BE APPROXIMATELY 10 YEARS. AMORTIZATION EXPENSE FOR THE PERIOD ENDED
DECEMBER 31, 1999, WAS $842.
MANAGEMENT ESTIMATES
- ---------------------
THE PREPARATION OF FINANCIAL STATEMENTS IN CONFORMITY WITH GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES REQUIRES MANAGEMENT TO MAKE ESTIMATES AND ASSUMPTIONS THAT
AFFECT THE REPORTED AMOUNTS OF ASSETS AND LIABILITIES AND DISCLOSURES OF
CONTINGENT ASSETS AND LIABILITIES AT THE DATE OF THE FINANCIAL STATEMENTS AND
THE REPORTED AMOUNTS OF REVENUE AND EXPENSES DURING THE REPORTING PERIOD.
ACTUAL RESULTS COULD DIFFER FROM THOSE ESTIMATES.
REVENUE AND EXPENSE RECOGNITION
- ----------------------------------
Revenues are recognized from the sale of course publications using the accrual
basis.
Cost of sales includes the cost of production, development and related course
materials. Such costs include professional consultation, printing, copying, and
related promotional materials and costs.
General and administrative expenses include amounts incurred by the Company
including salaries and wages, advertising, accounting and legal expenses,
telephone, and other amounts directly identifiable to the operations of the
Company.
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2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
- -------------------------------------------------------------
PROPERTY AND EQUIPMENT
- ------------------------
PROPERTY AND EQUIPMENT ARE RECORDED AT COST. DEPRECIATION AND AMORTIZATION
EXPENSE FOR THE YEAR IS CALCULATED BY THE STRAIGHT-LINE METHOD OVER THEIR
ESTIMATED USEFUL LIVES.
ADVERTISING
- -----------
THE COMPANY EXPENSES ADVERTISING COSTS AS THEY ARE INCURRED. ADVERTISING
EXPENSES FROM INCEPTION ON JUNE 1, 1999 THROUGH DECEMBER 31, 1999 WERE $6,167.
INCOME TAXES
- -------------
THE COMPANY ACCOUNTS FOR INCOME TAXES IN ACCORDANCE WITH THE ASSET AND LIABILITY
METHOD OF ACCOUNTING FOR INCOME TAXES PROSCRIBED BY STATEMENT OF FINANCIAL
ACCOUNTING STANDARDS NO. 109, ACCOUNTING FOR INCOME TAXES. UNDER THE ASSET AND
LIABILITY METHOD OF STATEMENT 109, DEFERRED TAX ASSETS AND LIABILITIES ARE
RECOGNIZED FOR THE FUTURE TAX CONSEQUENCES ATTRIBUTABLE TO DIFFERENCES BETWEEN
THE FINANCIAL STATEMENT CARRYING AMOUNTS OF EXISTING ASSETS AND LIABILITIES AND
THEIR RESPECTIVE TAX BASES AND OPERATING AND CAPITAL LOSS CARRYFORWARDS, NET OF
VALUATION ALLOWANCES. DEFERRED TAX ASSETS AND LIABILITIES ARE MEASURED USING
ENACTED TAX RATES EXPECTED TO APPLY TO THE TAXABLE INCOME IN THE YEARS IN WHICH
THOSE TEMPORARY DIFFERENCES ARE EXPECTED TO BE RECOVERED OR SETTLED.
3. CONVERTIBLE PROMISSORY NOTES
- ----------------------------------
THE COMPANY ENTERED INTO A CONVERTIBLE PROMISSORY NOTE AGREEMENT WITH AN
INDIVIDUAL FOR $20,000 FOR CONSULTING SERVICES. THE NOTE BEARS INTEREST AT 5
PERCENT PER ANNUM. PRINCIPLE AND ANY ACCRUED INTEREST SHALL BE DUE AND PAYABLE
UPON THE CLOSING OF A SUBSEQUENT EQUITY FINANCING UNDERTAKEN FOR THE PURPOSE OF
RAISING PROCEEDS, OR OCTOBER 12, 2001 IF NO SUBSEQUENT FINANCING TAKES PLACE.
THE PROVISIONS FOR CONVERSION ARE AVAILABLE UPON THE CLOSING OF A SUBSEQUENT
FINANCING PRIOR TO OCTOBER 12, 2001, AND PROVIDE THAT THE HOLDER MAY CHOOSE TO
HAVE THE BALANCE DUE OF THIS NOTE PLUS ALL ACCRUED AND UNPAID INTEREST THEREON
AUTOMATICALLY CONVERTED INTO SHARES OF THE COMPANY'S STOCK. AS OF DECEMBER 31,
1999, THE COMPANY HAD INCURRED EXPENSES ON THE CONTRACT IN THE AMOUNT OF
$10,000, OF WHICH $500 HAD BEEN PAID PRIOR TO YEAR END.
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4. RELATED PARTY TRANSACTIONS
- --------------------------------
INCLUDED IN ACCOUNTS PAYABLE AT DECEMBER 31, 1999, WAS $4,940 DUE TO THE
STOCKHOLDER FOR THE REIMBURSEMENT OF EXPENSES.
5. INCOME TAXES
- -----------------
THE PROVISION FOR INCOME TAXES FROM INCEPTION ON JUNE 1, 1999 THROUGH DECEMBER
31, 1999, CONSIST OF THE FOLLOWING:
<TABLE>
<CAPTION>
<S> <C>
Current:
Federal $ -
- ------------------------------------ --------
State 800
- ------------------------------------ --------
Total current 800
- ------------------------------------ --------
Deferred income taxes 6,613
--------
Valuation allowance (6,613)
- ------------------------------------ --------
Total deferred -
- ------------------------------------ --------
Provision for income taxes $ 800
- ------------------------------------ ========
</TABLE>
The income tax provision differs from the expense that would result from
applying federal statutory rates to income before taxes due to the valuation
allowance described below.
Provision for deferred income taxes of $6,613, have been made for temporary
differences existing in the recognition of a net operating loss being carried
forward for tax and financial statement purposes. The Company has established a
valuation allowance for the deferred tax asset related to the net operating loss
carryforward of $6,613, due to the start-up nature of the Company.
The Company has a net loss carryforward of approximately $19,449 at December 31,
1999. The net operating loss expires in 2019.
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<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
EKNOWLEDGE GROUP, INC
FINANCIAL STATEMENTS
SUMMARY BALANCE SHEET
FYE 12/31/98 THROUGH 12/31/99
COMBINED
ACCOUNT DESCRIPTION 12/31/98 05/24/99 12/31/99 (ALL YEARS)
- ------------------------------ --------- --------- --------- -----------
Net Sales 18,089 41,399 48,108 107,596
Cost of Sales 135,288 - 13,661 148,949
--------- --------- --------- -----------
Gross Profit (117,199) 41,399 34,447 (41,353)
Operating Expenses:
Wages & Salaries 34,038 19,090 6,813 59,941
Advertising/Marketing 64,486 1,672 6,167 72,325
Other Operating Expenses 52,415 102,972 22,500 177,887
--------- --------- --------- -----------
Operating Expenses 150,939 123,734 35,480 310,153
--------- --------- --------- -----------
Operating Income (loss) (268,138) (82,335) (1,033) (351,506)
Other Income/Expenses 14,721 (4,099) - 10,622
-----------
NET INCOME (LOSS) (253,417) (86,434) (1,033) (340,884)
========= ========= ========= ===========
</TABLE>
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