U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
/X/ Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period ended May 31, 1999
/ / Transition Report under Section 13 or 15(d) of the Exchange Act for the
Transition Period from ________ to ___________
Commission File Number: 0-25247
ADVANCED KNOWLEDGE, Inc.
(Exact name of small business issuer as specified in its charter)
Delaware 95-4675095
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
17337 Ventura Boulevard, Suite 224
Encino, California 91316
Issuer's Telephone Number: (818) 784-0040
(Address and phone number of principal executive offices)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or 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/ / No/X/
The Registrant has 4,000,000 shares of Common stock, par value $.001
per share issued and outstanding as of May 31, 1999.
Traditional Small Business Disclosure Format (check one) Yes/ / No/X/
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INDEX TO QUARTERLY REPORT
ON FORM 10-QSB
PART I FINANCIAL INFORMATION
Page
Item 1. Financial Statements 3
Balance Sheet (unaudited) 4
Statements of Operations (unaudited) 5
Statements of Cash Flows (unaudited) 6
Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis of Plan
of Operation 9
PART II OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 2. Changes in Securities and Use of Proceeds 10
Item 3. Defaults upon Senior Securities 10
Item 4. Submission of Matters to a Vote
of Security Holders 10
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 11
2
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PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
(Financial Statements Commence on Following Page)
3
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<TABLE>
ADVANCED KNOWLEDGE, INC.
BALANCE SHEETS
- --------------------------------------------------------------------------------
<CAPTION>
May 31, 1999 August 31,
(Unaudited) 1998
------------ ---------
<S> <C> <C>
ASSETS
CASH $ 19,658 $ 10,918
ACCOUNTS RECEIVABLE 35,031 6,836
VIDEO INVENTORY AND PRODUCTION COSTS 52,069 33,285
PREPAID EXPENSES 4,500 2,000
----------- ----------
TOTAL ASSETS $ 111,258 $ 53,039
=========== ==========
LIABILITIES AND SHAREHOLDERS' DEFICIT
LIABILITIES:
Accrued expenses $ 41,686 $ 64,472
Note payable to shareholder 102,962 72,212
Accrued interest due to shareholder 6,518
----------- ----------
Total liabilities 151,166 136,684
----------- ----------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' DEFICIT:
Common stock, par value - $.001,
25,000,000 shares authorized,
4,000,000 and 3,000,000 shares
issued and outstanding at May 31,
1999 and August 31, 1998, respectively 4,000 3,000
Additional paid-in capital 99,000
Accumulated deficit (142,908) (86,645)
----------- ----------
Total shareholders' deficit (39,908) (83,645)
----------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT $ 111,258 $ 53,039
=========== ==========
See accompanying notes to financial statements.
</TABLE>
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<TABLE>
ADVANCED KNOWLEDGE, INC.
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
FOR THE THREE MONTHS AND NINE MONTHS ENDED MAY 31, 1999
- --------------------------------------------------------------------------------
<CAPTION>
Three Months Nine Months
Ended Ended
May 31, 1999 May 31, 1999
------------ ------------
<S> <C> <C>
REVENUES $ 46,616 $ 134,131
COST OF SALES 14,306 49,340
---------- ----------
GROSS PROFIT 32,310 84,791
---------- ----------
EXPENSES:
Selling and marketing 7,029 25,216
General and administrative 20,384 48,552
Professional fees 15,727 59,868
Interest expense 2,859 6,518
---------- ----------
Total expenses 45,999 140,154
---------- ----------
LOSS BEFORE INCOME TAXES (13,689) (55,363)
INCOME TAXES 900
---------- ----------
NET LOSS $ (13,689) (56,263)
==========
ACCUMULATED DEFICIT AT SEPTEMBER 1, 1998 (86,645)
----------
ACCUMULATED DEFICIT AT MAY 31, 1999 $ (142,908)
==========
BASIC LOSS PER SHARE $ N/A $ (.02)
========== ==========
COMMON SHARES OUTSTANDING 4,000,000 3,355,556
========== ==========
See accompanying notes to financial statements.
</TABLE>
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<TABLE>
ADVANCED KNOWLEDGE, INC.
STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED MAY 31, 1999
- --------------------------------------------------------------------------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (56,263)
Adjustments to reconcile net loss to net cash
used by operating activities:
Amortization 3,333
Changes in operating assets and liabilities:
Accounts receivable (28,195)
Inventory (22,117)
Prepaid expenses (2,500)
Accrued expenses (16,268)
---------
Net cash used by operating activities (122,010)
---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of common stock 100,000
Net borrowings from shareholder 30,750
---------
Net cash provided by financing activities 130,750
---------
NET DECREASE IN CASH 8,740
CASH, BEGINNING OF PERIOD 10,918
---------
CASH, END OF PERIOD $ 19,658
=========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ -0-
Cash paid for income taxes $ 900
See notes to financial statements.
</TABLE>
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ADVANCED KNOWLEDGE, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Item
310(b) of Regulation S-B. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included.
Operating results for the nine-month period ended May 31, 1999, are not
necessarily indicative of the results that may be expected for the year
ended August 31, 1999. For further information, refer to the financial
statements and footnotes thereto included in the company's report on
Form 10-SB for the year ended August 31, 1998.
The balance sheet at August 31, 1998, has been derived from the audited
financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
General Information - At a special meeting held on June 30, 1998, the
shareholders of DMA-Radtech, Inc. ("DMA"); a wholly-owned subsidiary of
Electro-Kinetic Systems, Inc. ("EKSI"), approved a plan of merger and
reorganization, as set forth in an Agreement and Plan of Merger and
Reorganization dated as of June 30, 1998, with Advanced Knowledge, Inc.
("AKIP"). DMA issued 2,700,000 shares of its common stock in exchange
for all outstanding shares of Advanced Knowledge, Inc. Concurrent with
the agreement, DMA changed its name to Advanced Knowledge, Inc. ("AK").
DMA, a Delaware corporation, was incorporated under the laws of the
State of Delaware in January 1987. During the nine months ended May 31,
1999, the Company sold 1,000,000 shares of its common stock for
$100,000.
The financial statements for the three-months and nine-months ended May
31, 1998 have not been included herein as the Company was effectively
dormant during the period.
The current core business of Advanced Knowledge is the production and
marketing of business training videos.
7
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Going Concern - The Company experienced significant operating losses
for the period ended August 31, 1998 and through May 31, 1999. The
financial statements have been prepared assuming the Company will
continue to operate as a going concern which contemplates the
realization of assets and the settlement of liabilities in the normal
course of business. No adjustment has been made to the recorded amount
of assets or the recorded amount or classification of liabilities which
would be required if the Company were unable to continue its
operations. As discussed in Note 2, management has developed an
operating plan which they believe will generate sufficient cash to meet
its obligations in the normal course of business. In addition, the
Company has an agreement with its President and majority shareholder
which provides for borrowings up to $300,000.
Unclassified Balance Sheet - In accordance with the provisions of SFAS
No. 53, the Company has elected to present an unclassified balance
sheet.
Video Inventory - Video inventory consists of video tapes, demos,
training manuals and film production costs. Inventory is stated at the
lower of cost or estimated net realizable value and is amortized in the
ratio of the current year's gross revenues to management's estimate of
remaining gross revenues. Accumulated amortization at May 31, 1999
totalled $3,750.
Loss Per Share - The Company adopted the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share"
that established standards for the computation, presentation and
disclosure of earnings per share ("EPS"), replacing the presentation of
Primary EPS with a presentation of Basic EPS. It also requires dual
presentation of Basic EPS and Diluted EPS on the face of the income
statement for entities with complex capital structures. The Company did
not present Diluted EPS since it has a simple capital structure.
The loss per share for the three months ended May 31, 1999 has been
indicated as "N/A" (not available) since the amount is less than $0.01
per share.
2. MANAGEMENT PLANS
During the nine months ended May 31, 1999, the Company commenced
shipping of its new training videos. Management expects that the
forecasted higher sales and cash flow from operations will be adequate
to finance the 1999 cash flow requirements. Management has developed
plans which include but are not limited to, merging with another
company and obtaining additional equity and financing sources.
8
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
PLAN OF OPERATION
The Company will continue to devote its resources to marketing its workforce
training video library and related training materials. At this time these
efforts are focused on four titles, "Twelve Angry Men: Teams That Don't Quit",
"The Cuban Missile Crisis: A Case Study In Decision Making And Its
Consequences", "What It Really Takes To Be A World Class Company", and "It's A
Wonderful Life: The Leader As Servant". In addition, the Company anticipates
spending some of its resources on the production of additional training videos,
and the acquisition of distribution rights to training videos produced by other
companies.
Marketing expenses and production costs during the fiscal year ending August 31,
1999 are estimated to approximate $225,000. Management expects that sales of its
videos and training materials, along with available funds under an agreement
with its President and majority shareholder, and the sale of equity should
satisfy its cash requirements over the next year. However, there can be no
assurance that its President will continue to supply funds pursuant to such
agreement, nor that the Company will be successful in raising capital through
the sale of equity. The Company's marketing expenses and the production of new
training videos will be adjusted accordingly.
During the quarter ended May 31, 1999 the Company sold 800,000 shares of its
common stock for $80,000. The Company used $40,000 from the sale of these shares
to partially reduce the Company's outstanding debt to its President.
The Company currently has 2 employees. These employees received no compensation
through May 31, 1999. If cash resources permit, the Company plans to increase
its employees to 6 during calendar 1999, (2 administrative, 4 sales).
RESULTS OF OPERATIONS
During the period March 1, 1999 through May 31, 1999, the Company had revenues
of $46,616 and expended approximately $60,000 in the production and development
of its workforce training video and materials and in general and administrative
expenses in establishing its corporate business. These expenses included
$15,727 in professional fees and $2,859 in interest expenses due its President.
The Company has an agreement with its President and majority shareholder to
provide, at the President's discretion, up to $300,000 at 8% interest. Repayment
is to be made when funds are available with the balance of principal and
interest due December 31, 2001. The Company has borrowed approximately $103,000
through May 31, 1999.
The Company has no material commitments for capital expenditures nor does it
foresee the need for such expenditures over the next year. In connection with
the production of its video and training materials, the Company has an agreement
with the co-producer of the video, 12 Angry Men, and The Cuban Missile Crisis to
pay a royalty based on a specified formula, which has averaged to approximately
35% of gross sales.
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The Company was effectively dormant during the nine months ended May 31, 1998,
expending only $758 in order to maintain its corporate status.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not a party to any legal proceedings.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the quarter ended May 31, 1999, no matters were
submitted to the Company's security holders.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ADVANCED KNOWLEDGE, INC.
(Registrant)
Dated: July 8, 1999 /s/ Buddy Young
--------------------------------------------
Buddy Young, President and Chief
Executive Officer
11
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> AUG-31-1999
<PERIOD-END> MAY-31-1999
<CASH> 19,658
<SECURITIES> 0
<RECEIVABLES> 35,031
<ALLOWANCES> 0
<INVENTORY> 52,069
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 111,258
<CURRENT-LIABILITIES> 151,166
<BONDS> 0
0
0
<COMMON> 4,000
<OTHER-SE> (43,908)
<TOTAL-LIABILITY-AND-EQUITY> 111,258
<SALES> 134,131
<TOTAL-REVENUES> 134,131
<CGS> 49,340
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 133,636
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,518
<INCOME-PRETAX> (55,363)
<INCOME-TAX> 900
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (56,263)
<EPS-BASIC> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>
