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 1934
Date of Report (Date of earliest event reported):
March 20, 2000
Advanced Knowledge, Inc.
(Exact name of issuer as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
0-25247 95-4675095
(Commission File Number) (IRS Employer Identification No.)
17337 Ventura Boulevard, Suite 224, Encino, CA 91316 (Address of
principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (818) 878-0040
1
<PAGE>
Item 1. Changes in Control of Registrant.
As described more fully in Item 2, on March 20, 2000, Advanced
Knowledge, Inc. ("Advanced Knowledge") acquired all of the outstanding common
shares of Soccer Magic Inc., a privately owned Ontario corporation ("Soccer
Magic"), in exchange for 10,000,000 newly issued shares of Advanced Knowledge
common stock. As a result of this transaction, there may be deemed to have been
a change in control of Advanced Knowledge.
Prior to the acquisition, Buddy Young was a director and the President,
Chief Executive Officer and Chief Financial Officer of Advanced Knowledge, and
he beneficially owned 1,976,147 shares of Advanced Knowledge common stock,
representing 32.94% of the 6,000,000 shares then outstanding. Effective at the
closing of the acquisition, Mr. Young and each of the other directors and
officers of Advanced Knowledge resigned from their positions with the company.
As a result of the issuance of Advanced Knowledge common stock to the former
shareholders of Soccer Magic in connection with the acquisition, Mr. Young's
beneficial ownership was reduced to 12.35% of the 16,000,000 shares now
outstanding.
At the closing of the acquisition, Manny Gross, Myron Grunberg and
Brian Rattenbury -- all of whom are directors, officers and former shareholders
of Soccer Magic -- were appointed to serve as the new directors and officers of
Advanced Knowledge. The table below lists the offices to which they were
appointed, as well as the number of shares and percentage of the class of
Advanced Knowledge common stock over which they acquired beneficial ownership as
a result of the acquisition:
Number of Shares Percentage
Name Office Beneficially Owned of Class
---- ------ ------------------ ----------
Manny Gross Chief Executive 2,852,084(1) 17.83%
Officer
Myron Grunberg President 2,112,084(2) 13.20%
Brian Rattenbury Chief Financial 1,387,500 8.67%
Officer
All directors and
officers as a group
(3 persons) 6,351,668 39.70%
- ------------------
(1) Does not include 693,750 shares which Mr. Gross has the right to
acquire, upon satisfaction of certain conditions, from an entity
controlled by Mr. Rattenbury. Such shares are included in the total
number of shares listed as beneficially owned by Mr. Rattenbury.
(2) Includes a total of 1,372,084 shares which Mr. Grunberg owns as trustee
for the benefit of his children. Does not include 740,000 shares which
are owned of record by Mr. Grunberg's spouse (4.63% of the class), as
to which he disclaims beneficial ownership.
2
<PAGE>
Item 2. Acquisition or Disposition of Assets.
On March 20, 2000, pursuant to an agreement dated as of December 14,
1999 (the "Acquisition Agreement"), Advanced Knowledge purchased all of the
outstanding shares of Soccer Magic through an exchange of 0.84244082 of its
shares for each share of Soccer Magic. The exchange ratio was negotiated based
on management's evaluation of the strategic position and prospects of Soccer
Magic in its industry. Advanced Knowledge issued a total of 10,000,000 shares of
its common stock to the former shareholders of Soccer Magic in the transaction.
As a result of the acquisition, Soccer Magic became a wholly owned subsidiary of
Advanced Knowledge. Under reverse takeover accounting principles, Soccer Magic
is deemed to be the accounting acquirer in the transaction.
Soccer Magic was incorporated in Canada under the laws of the Province
of Ontario on January 29, 1997. Soccer Magic designs, constructs, owns and
operates modern multi-recreational and family oriented facilities, with soccer
as its primary venue. These facilities also serve a variety of other field
sports such as touch football, rugby, lacrosse, field hockey and golf. The
facilities can accommodate both seasoned and novice players of these sports.
Soccer Magic currently operates two such facilities through wholly owned
subsidiaries in Kingston and London, Ontario, but is positioned to acquire
additional facilities capitalizing on the growing demand for indoor soccer
facilities. Soccer Magic's business strategy for company owned locations is to
be the first entrant in each target market satisfying an identifiable local
demand for indoor facilities. Each target market will be selected based on the
presence of a significant soccer playing population and its relation with the
local soccer association. Soccer Magic competes on the basis of its distinctive
facility design, superior quality, and pricing strategy.
Going forward, Advanced Knowledge plans to focus its business
exclusively on the continuation and expansion of Soccer Magic's business.
Accordingly, Advanced Knowledge plans to change its name to Sporting Magic Inc.
as soon as possible, after obtaining shareholder approval.
In furtherance of its change of business, on March 20, 2000, following
the Soccer Magic acquisition, Advanced Knowledge sold all of the assets and
liabilities related to its workforce training video business to Becor Internet
Inc. ("Becor"), a corporation controlled by Buddy Young, who is a significant
shareholder and, at the time of the sale, was a director and executive officer
of Advanced Knowledge. The sale was made pursuant to an Asset Sale Agreement
dated as of March 16, 2000, which was unanimously approved by the disinterested
directors of Advanced Knowledge. The assets transferred included all rights to
the "Advanced Knowledge" name; the advancedknowledge.com web site; four
workforce training videos; and all cash, accounts receivable, inventory,
equipment, personal property, and rights under production and distribution
agreements held by Advanced Knowledge as of March 20, 2000. In exchange for the
assets, Becor assumed, and both Becor and Mr. Young agreed to indemnify Advanced
Knowledge with respect to, all of the liabilities incurred or accrued by
Advanced Knowledge prior to March 20, 2000. According to the unaudited balance
sheet of Advanced Knowledge as of March 20, 2000, Advanced Knowledge had total
assets of $117,848 and total liabilities of $300,983 at that date. The total
liabilities as of such date included approximately $204,995 of principal and
interest owed to Mr. Young under a secured promissory note.
3
<PAGE>
In the Asset Sale Agreement, Advanced Knowledge covenanted not to (i)
use the Advanced Knowledge name after the asset sale has been completed, except
for using the corporate name for general corporate purposes until it is able to
change its corporate name; (ii) change the transfer agent for its common stock
for two years after March 20, 2000; (iii) engage in any recapitalization,
reorganization, or reverse split or consolidation of shares for two years after
March 20, 2000; or (iv) issue more than 6,000,000 shares of common stock, or
other securities which may be converted into or exercised for the purchase of
shares of common stock, between March 20, 2000 and the Deadline, as hereinafter
defined.
Some of the assets and liabilities which Advanced Knowledge transferred
to Becor were acquired by Advanced Knowledge through the August 26, 1998 merger
of Advanced Knowledge, Inc., a privately held company ("AKIP"), with and into
DMA-Radtech, Inc. At the time of the merger, Mr. Young was an officer, director
and principal stockholder of AKIP. Through the merger, Advanced Knowledge
acquired assets from AKIP valued at $37,000 and liabilities from AKIP valued at
$35,000. The liabilities acquired represented principal and interest owed by
AKIP to Mr. Young. In connection with the merger, AKIP also paid $25,000 to the
parent of DMA- Radtech.
The acquisition of Soccer Magic's stock is subject to automatic
rescission and unwinding at 5:00 p.m. Pacific Time on June 30, 2000 (the
"Deadline") unless, prior to the Deadline, Advanced Knowledge completes a
private placement of common stock raising gross proceeds for Advanced Knowledge
of at least $2,700,000 and Advanced Knowledge is then current in its filing
obligations with the SEC. To facilitate any rescission, the shares and other
items delivered by the parties at the closing of the acquisition were deposited
in an escrow, with an independent third party serving as escrow agent. If there
is a rescission, the Soccer Magic shares acquired by Advanced Knowledge will be
returned to the current Soccer Magic shareholders, and the Advanced Knowledge
shares issued to the Soccer Magic shareholders will be returned to Advanced
Knowledge for cancellation.
Item 4. Change in Registrant's Certifying Accountants.
(a) Farber & Hass LLP ("Farber & Hass") has served as the principal
accountants to audit Advanced Knowledge's financial statements. Due to the
Soccer Magic acquisition, Advanced Knowledge has dismissed Farber & Hass as its
principal accountants effective upon the filing of this report. Neither of the
reports of Farber & Hass on Advanced Knowledge's financial statements for the
past two years contained an adverse opinion or disclaimer of opinion, or was
modified as to audit scope or accounting principles. The opinion on the
financial statements for the year ended August 31, 1999, contained an
explanatory paragraph which raised substantial doubt about the Company's ability
to continue as a going concern. The decision to dismiss Farber & Hass was
approved by the board of directors of Advanced Knowledge on April 3, 2000. There
were no disagreements with Farber & Hass on any matter of accounting principles
or practices, financial statement disclosure, or auditing scope or procedure
which, if not resolved to such firm's satisfaction, would have caused it to make
reference to the subject matter of the disagreement in connection with its
report.
Advanced Knowledge has provided Farber & Hass with a copy of this
disclosure and has requested that they furnish Advanced Knowledge with a letter
addressed to the Commission stating whether they agree with this disclosure and,
if not, stating the respects in which they do not agree. Farber & Hass's letter
to the Commission is included herewith as Exhibit 16.
4
<PAGE>
(b) Effective upon the filing of this report, Advanced Knowledge has
engaged Grant Thornton LLP ("Grant Thornton"), the principal accountants to
Soccer Magic, as its new principal accountants. Prior to the filing of this
report, Grant Thornton was not consulted on any of the matters requiring
disclosure under Item 304(a)(2) of Regulation S-B, except that Grant Thornton
was consulted generally about the preparation of the pro forma financial
information included pursuant to Item 7 of this report. Farber & Hass was not
consulted in that regard.
Advanced Knowledge has requested Grant Thornton to review this
disclosure and has given them the opportunity to furnish a letter addressed to
the Commission containing any new information, clarification of the views
expressed herein, or any respects in which Grant Thornton does not agree with
the statements made in response to this item. Any such letter, if furnished,
will be filed as an exhibit to this report.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Businesses Acquired. The historical
financial statements of Soccer Magic will be filed by
amendment hereto, as permitted by Item 7(a)(4) of Form 8-K.
(b) Pro Forma Financial Information. Pro forma financial
information reflecting the Soccer Magic acquisition and
subsequent sale of assets is appended at the end of this
report.
(c) Exhibits. The following exhibits are provided in accordance
with the provisions of Item 601 of Regulation S-B:
Exhibit No. Document Description
2.1 Form of Acquisition Agreement by and between Advanced
Knowledge and Soccer Magic dated as of December 14, 1999.(1)
2.2 Escrow Agreement dated as of March 16, 2000 by and among
Advanced Knowledge, Soccer Magic and Jack L. Chegwidden, a
professional corporation, as escrow agent.
The following attachment to the Escrow Agreement will be
provided to the Commission upon request:
Attachment Description
---------- -----------
Schedule A Addresses of SMI Shareholders
2.3 Asset Sale Agreement dated as of March 16, 2000 by and among
Advanced Knowledge, Becor Internet, Inc. and Buddy Young and
ratified and approved by Soccer Magic.
The following attachments to the Asset Sale Agreement will be
provided to the Commission upon request:
Attachment Description
---------- -----------
Exhibit A Schedule of Trademarks, Patents and Copyrights
Exhibit B Schedule of Personal Property
Exhibit C Schedule of Equipment Leases
Exhibit D Schedule of Contracts, Accounts Receivable and
Inventory
Exhibit E Schedule of Other Events
Exhibit F Schedule of Assumed Liabilities
5
<PAGE>
2.4 Form of Purchase and Sale Agreement dated as of December 1999
by and between Advanced Knowledge and each of the former
shareholders of Soccer Magic.
2.5 Representation letter from Buddy Young to Soccer Magic and its
former shareholders.
2.6 Amendment Agreement dated as of February 14, 2000 by and among
Advanced Knowledge; Soccer Magic; Becor Internet, Inc.; Jack
L. Chegwidden, a professional corporation, as escrow agent;
officers of Advanced Knowledge; officers of Soccer Magic; and
Buddy Young, Manny Gross, Myron Grunberg and Brian Rattenbury,
as individuals.
16 Letter of Farber & Hass LLP on change in certifying
accountant.
- ---------------------
(1) Previously filed as an exhibit to Advanced Knowledge's Form 10-QSB
filed with the Commission on December 12, 1999 for the period ended
November 30, 1999 and incorporated herein by reference.
Item 8. Change in Fiscal Year.
As explained in Note 2 to the pro forma balance sheet included in this
report, under reverse takeover accounting principles, the post-reverse
acquisition historical financial statements of the legal acquirer, Advanced
Knowledge, are those of the legal acquiree, Soccer Magic (the accounting
acquirer). Because Advanced Knowledge's historical financial statements are now
those of Soccer Magic, Advanced Knowledge's fiscal year end has also changed
from August 31 to October 31 (Soccer Magic's fiscal year end). Advanced
Knowledge will file a quarterly report on Form 10-QSB for the pre-acquisition
quarter ended February 29, 2000. Thereafter, as a result of the change in fiscal
year, Advanced Knowledge will file quarterly reports on Form 10-QSB for the
quarters ending April 30, 2000 and July 31, 2000 and will file its next annual
report on Form 10-KSB for the year ending October 31, 2000.
6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
ADVANCED KNOWLEDGE, INC.
(Registrant)
Date: April 3, 2000 By: /s/ Myron Grunberg
------------------
Myron Grunberg
President
7
<PAGE>
Item 7(b)
ADVANCED KNOWLEDGE, INC.
CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS
FEBRUARY 29, 2000
(UNAUDITED)
The following pro forma financial information is prepared in connection with the
transaction between Advanced Knowledge, Inc. and Soccer Magic Inc. through the
acquisition of 100% of the outstanding capital stock of Soccer Magic Inc. by
Advanced Knowledge, Inc. The closing of the transaction occurred on March 20,
2000 effective as of the same date. The financial statements forming the basis
of the following pro forma financial information are the audited financial
statements of Advanced Knowledge, Inc. for the fiscal period ending August 31,
1999, the unaudited financial statements of Soccer Magic Inc. for the fiscal
period ending October 31, 1999, the unaudited financial statements of Advanced
Knowledge, Inc. for the six month period ending February 29, 2000 and the
unaudited financial statements of Soccer Magic Inc. for the three month period
ending January 31, 2000, respectively.
8
<PAGE>
<TABLE>
Advanced Knowledge, Inc.
Consolidated Pro Forma Balance Sheet
as at February 29, 2000
(Unaudited - in US$ and US GAAP)
<CAPTION>
Advanced
Soccer Knowledge, Elimina- Pro Forma
Magic Inc. Inc. tions Consolidated
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Current
Cash ................. ($ 3,714) $ 13,931 ($ 13,931) ($ 3,714)
Accounts receivable
Trade ............ 10,993 55,423 (55,423) 10,993
GST .............. 3,212 -- -- 3,212
Employee advances 8,270 -- -- 8,270
Inventory ............ -- 47,444 (47,444) --
Prepaid expenses ..... 53,814 1,050 (1,050) 53,814
- --------------------------------------------------------------------------------
72,575 117,848 (117,848) 72,575
- --------------------------------------------------------------------------------
Fixed assets (Note 3)
Site development costs 217,278 -- -- 217,278
Dome installation &
equipment ........ 303,662 -- -- 303,662
Dome structure ....... 610,322 -- -- 610,322
Modular buildings .... 325,741 -- -- 325,741
FieldTurf ............ 222,061 -- -- 222,061
Boards, netting and
equipment ........ 247,848 -- -- 247,848
- --------------------------------------------------------------------------------
1,926,912 -- -- 1,926,912
Less: Accumulated
depreciation ..... (409,352) -- -- (409,352)
- --------------------------------------------------------------------------------
1,517,560 -- -- 1,517,560
- --------------------------------------------------------------------------------
$ 1,590,135 $ 117,848 ($ 117,848) $ 1,590,135
================================================================================
LIABILITIES
Current
Trade payables ....... $ 312,334 $ 113,021 ($ 113,021) $ 312,334
Source deductions .... 5,792 -- -- 5,792
Advances from share-
holders .......... -- 187,962 (187,962) --
Deferred revenue ..... 87,799 -- -- 87,799
Current portion of
long term debt ... 179,633 -- -- 179,633
- --------------------------------------------------------------------------------
585,558 300,983 (300,983) 585,558
- --------------------------------------------------------------------------------
Long term
Bank loan ............ 167,785 -- -- 167,785
Lease obligations .... 582,058 -- -- 582,058
Advances from share-
holders .......... 1,842,418 -- -- 1,842,418
- --------------------------------------------------------------------------------
2,592,261 -- -- 2,592,261
- --------------------------------------------------------------------------------
3,177,819 300,983 (300,983) 3,177,819
- --------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Capital stock (Note 5) . 413 6,000 (413) 6,000
Paid in capital ........ -- 222,000 (222,000) --
Cumulative translation
adjustment ....... 101,519 -- -- 101,519
Deficit ................ (1,689,616) (411,135) 405,548 (1,695,203)
- --------------------------------------------------------------------------------
(1,587,684) (183,135) 183,135 (1,587,684)
- --------------------------------------------------------------------------------
$ 1,590,135 $ 117,848 ($ 117,848) $ 1,590,135
================================================================================
</TABLE>
9
<PAGE>
<TABLE>
Advanced Knowledge, Inc
Consolidated Pro Forma Statement of Net Loss and Deficit
Six months ended February 29, 2000
(Unaudited - in US$ and US GAAP)
<CAPTION>
Advanced
Soccer Knowledge, Elimina- Pro Forma
Magic Inc. Inc. tions Consolidated
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES
League play, tournaments
and field rentals ..... $ 201,466 -- -- $ 201,466
Golf .................... 7,084 -- -- 7,084
Other income ............ 31,870 -- -- 31,870
- --------------------------------------------------------------------------------
240,419 -- -- 240,419
- --------------------------------------------------------------------------------
EXPENSES
Depreciation ............ 99,031 -- -- 99,031
Interest - long term .... 57,252 -- -- 57,252
Interest - short term ... 1,128 -- -- 1,128
Maintenance and supplies 25,207 -- -- 25,207
Marketing ............... 32,667 -- -- 32,667
Miscellaneous ........... 45,659 -- 5,587 51,246
Office and occupancy
costs ................. 28,772 -- -- 28,772
Rent .................... 27,586 -- -- 27,586
Salaries and wages ...... 96,983 -- -- 96,983
Taxes ................... 27,989 -- -- 27,989
Utilities ............... 27,262 -- -- 27,262
- --------------------------------------------------------------------------------
469,536 -- 5,587 475,123
- --------------------------------------------------------------------------------
Net loss ................ (229,117) -- (5,587) (234,704)
Deficit, beginning of
period ................ (1,460,499) -- -- (1,460,499)
- --------------------------------------------------------------------------------
Deficit, end of period .. ($1,689,616) -- ($ 5,587) ($1,695,203)
================================================================================
</TABLE>
10
<PAGE>
<TABLE>
Advanced Knowledge, Inc.
Consolidated Pro Forma Balance Sheet
as at August 31, 1999
(Unaudited - in US$ and US GAAP)
<CAPTION>
Advanced
Soccer Knowledge, Elimina- Pro Forma
Magic Inc. Inc. tions Consolidated
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Current
Cash ................. $ 33,024 $ 10,859 ($ 10,859) $ 33,024
Accounts receivable
Trade ............ 35,565 28,568 (28,568) 35,565
GST .............. 5,673 -- -- 5,673
Employee advances 7,920 -- -- 7,920
Inventory ............ -- 49,444 (49,444) --
Prepaid expenses ..... 23,366 1,050 (1,050) 23,366
- --------------------------------------------------------------------------------
105,548 89,921 (89,921) 105,548
- --------------------------------------------------------------------------------
Fixed assets (Note 3)
Site development costs 214,236 -- -- 214,236
Dome installation &
equipment ........ 299,412 -- -- 299,412
Dome structure ....... 601,780 -- -- 601,780
Modular buildings .... 321,182 -- -- 321,182
FieldTurf ............ 218,953 -- -- 218,953
Boards, netting and
equipment ........ 243,400 -- -- 243,400
- --------------------------------------------------------------------------------
1,898,963 -- -- 1,898,963
Less: Accumulated
depreciation ..... (354,389) -- -- (354,389)
- --------------------------------------------------------------------------------
1,544,574 -- -- 1,544,574
- --------------------------------------------------------------------------------
$ 1,650,122 $ 89,921 ($ 89,921) $ 1,650,122
================================================================================
LIABILITIES
Current
Trade payables ....... $ 265,990 $ 59,617 ($ 59,617) $ 265,990
Source deductions .... 6,832 -- -- 6,832
Advances from share-
holders .......... -- 127,962 (127,962) --
Deferred revenue ..... 163,925 -- -- 163,925
Current portion of
long term debt ... 182,375 -- -- 182,375
- --------------------------------------------------------------------------------
619,122 187,579 (187,579) 619,122
- --------------------------------------------------------------------------------
Long term
Bank loan ............ 181,743 -- -- 181,743
Lease obligations .... 594,520 -- -- 594,520
Advances from share-
holders .......... 1,768,825 -- -- 1,768,825
- --------------------------------------------------------------------------------
2,545,088 -- -- 2,545,088
- --------------------------------------------------------------------------------
3,164,210 187,579 (187,579) 3,164,210
- --------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Capital stock (Note 5) . 408 4,000 (408) 4,000
Paid in capital ........ -- 99,000 (99,000) --
Cumulative translation
adjustment ....... (53,997) -- -- (53,997)
Deficit ................ (1,460,499) (200,658) 197,066 (1,464,091)
- --------------------------------------------------------------------------------
(1,514,088) (97,658) 97,658 (1,514,088)
- --------------------------------------------------------------------------------
$ 1,650,122 $ 89,921 ($ 89,921) $ 1,650,122
================================================================================
</TABLE>
11
<PAGE>
<TABLE>
Advanced Knowledge, Inc.
Consolidated Pro Forma Statement of Net Loss and Deficit
Year ended August 31, 1999
[Unaudited - in US$ and US GAAP)
<CAPTION>
Advanced
Soccer Knowledge, Elimina- Pro Forma
Magic Inc. Inc. tions Consolidated
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES
League play, tournaments
and field rentals ..... $ 310,369 -- -- $ 310,369
Golf .................... 16,839 -- -- 16,839
Other income ............ 9,017 -- -- 9,017
- --------------------------------------------------------------------------------
336,225 -- -- 336,225
- --------------------------------------------------------------------------------
EXPENSES
Depreciation ............ 193,426 -- -- 193,426
Interest - long term .... 115,751 -- -- 115,751
Interest - short term ... 3,225 -- -- 3,225
Maintenance and supplies 39,105 -- -- 39,105
Marketing ............... 53,087 -- -- 53,087
Miscellaneous ........... 48,547 -- 3,592 52,139
Office and occupancy
costs ................. 47,875 -- -- 47,875
Rent .................... 53,914 -- -- 53,914
Salaries and wages ...... 193,294 -- -- 193,294
Taxes 64,945 ............ -- -- 64,945
Utilities ............... 50,971 -- -- 50,971
- --------------------------------------------------------------------------------
864,140 -- 3,592 867,732
- --------------------------------------------------------------------------------
Net loss ................ (527,914) -- (3,592) (531,506)
Deficit, beginning of
period ................ (932,585) -- -- (932,585)
- --------------------------------------------------------------------------------
Deficit, end of period .. ($1,460,499) -- ($ 3,592) ($1,464,091)
================================================================================
</TABLE>
12
<PAGE>
NOTES TO PRO FORMA BALANCE SHEET
Note 1 Organization and Description of Business
The Company, incorporated as EKS RN CON Inc. under the laws of the State of
Delaware on January 2, 1987 changed its name to Advanced Knowledge, Inc.
following a reorganization and merger with Advanced Knowledge, Inc., a privately
held Delaware corporation on August 26, 1998.
On January 7, 2000, pursuant to an agreement dated September 14, 1999, the
Company issued 2,000,000 common shares as consideration for consulting services
provided by four individuals.
On March 20, 2000, the Company purchased all the outstanding shares of Soccer
Magic Inc. through an exchange of 0.84244082 of its shares for each share of
Soccer Magic Inc. Following that transaction, on March 20, 2000, the Company
sold all the assets and liabilities related to its workforce training video
business to Becor Internet Inc., a company controlled by Mr. Buddy Young who is
a significant shareholder and former director and officer of the Company. The
Company plans to change its name to Sporting Magic Inc. which will require
approval of its shareholders.
Soccer Magic Inc., was incorporated under the laws of the Province of Ontario of
Canada on January 29, 1997. Soccer Magic Inc. designs, constructs, owns and
operates modern multi- recreational and family oriented facilities with soccer
as its primary venue. These facilities also serve a variety of other field
sports such as touch-football, rugby, lacrosse, field hockey and golf. Soccer
Magic Inc. currently operates two such facilities through wholly owned
subsidiaries in Kingston and London, Ontario.
Note 2 Significant Accounting Policies
These financial statements have been prepared in accordance with generally
accepted accounting principles in the United States.
Significant accounting policies are outlined below:
a) Recapitalization
On March 20, 2000, the Company purchased all of the outstanding shares of Soccer
Magic Inc. through an exchange of 0.84244082 of its shares for each share of
Soccer Magic Inc. (the "Acquisition"). As a result of the Acquisition, the
shareholders of Soccer Magic Inc. owned approximately 63% of the outstanding
shares of the Company and, accordingly, the purchase of Soccer Magic by the
Company is accounted for as a reverse takeover transaction under generally
accepted accounting principles.
Under generally accepted accounting principles, the Acquisition is considered to
be a capital transaction in substance, rather than a business combination. That
is, the Acquisition is equivalent to the issuance of stock by Soccer Magic Inc.
for the net monetary assets of the
13
<PAGE>
Company, accompanied by a recapitalization, and is accounted for as a change in
capital structure. Accordingly, the accounting for the Acquisition is identical
to that resulting from a reverse acquisition, except that no goodwill is
recorded. Under reverse takeover accounting, the post reverse-acquisition
comparative historical financial statements of the "legal acquirer" (the
Company), are those of the "legal acquiree" (Soccer Magic Inc.) (i.e. the
accounting acquirer).
Accordingly, the pro forma consolidated financial statements of the Company as
at February 29, 2000, are the historical financial statements of Soccer Magic
Inc. for the same period adjusted for the following transactions contained in
the Share Exchange Agreement executed at the consummation of the Acquisition.
The basic structure and terms of the Acquisition, together with the applicable
accounting effects, is as follows:
i. The Company acquired all of the outstanding shares of Common stock of
Soccer Magic Inc. from various shareholders in exchange for 10,000,000
shares of newly issued Common stock of the Company. The Common stock
exchange, in addition to the Company's existing shares outstanding,
collectively resulted in the recapitalization of the Company.
ii. The consolidated financial statements of the combined entity are
issued under the name of the legal parent, Advanced Knowledge, Inc.,
but are considered a continuation of the financial statements of the
legal subsidiary, Soccer Magic Inc.;
iii. As Soccer Magic Inc. is deemed to be the acquirer for accounting
purposes, its assets and liabilities are included in the consolidated
financial statements at their historical carrying values;
iv. Any comparative numbers are those of Soccer Magic Inc.; and,
v. For purposes of the accounting for the Acquisition, control of the net
assets and operations of the Company is deemed to have been acquired
by Soccer Magic Inc. effective February 29, 2000. The sale of the net
assets and liabilities related to the workforce video training
business is deemed to have occurred immediately after the acquisition
of the Soccer Magic Inc. shares, resulting in an accumulative net
deficit of $5,587. This net deficit has been applied to increase the
expenses of Soccer Magic Inc. immediately after the reverse takeover.
The corresponding amount included in the pro forma information for the
August 31, 1999 period is $3,592.
b) Capital assets
Capital assets are recorded at the lower of cost less accumulated
amortization and net recoverable amount. All capital assets are amortized
at rates of 10% and 20% annually on a declining balance basis.
14
<PAGE>
c) 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
disclosure of contingent assets and liabilities at the date of financial
statements and reported amounts of expenses during the reporting period.
Actual results could differ from those estimates.
d) Foreign currency translation
The functional currency of the Company is the Canadian dollar. The
financial statements are presented in U.S. dollars using the principles set
out in Statement of Financial Accounting Standards No. 52 "Foreign Currency
Translation" (SFAS No. 52). Assets and liabilities are translated at the
rate of exchange in effect at the close of the period. Revenues and
expenses are translated at the weighted average of exchange rates in effect
during the period. The future effects of exchange rate fluctuations on
translating foreign currency assets and liabilities into U.S. dollars will
be included as part of the accumulated other comprehensive loss component
of shareholders' equity.
e) Accounting for leases
A lease that transfers substantially all the benefits and risks incident to
ownership of property is treated as a capital lease, otherwise the lease is
accounted for as an operating lease.
Note 3 Capital Assets
Fixed assets are amortized on a declining balance basis at the following rates:
Site development costs 10%
Dome installation & equipment 10%
Dome structure 10%
Modular buildings 10%
Field Turf 10%
Boards and netting and equipment 10% and 20%
Note 4 Commitments
The company leases its land in London and Kingston under long term operating
leases and its buildings and air supported structures under capital leases.
Future minimum lease payments under capital and operating leases are as follows:
15
<PAGE>
<TABLE>
<CAPTION>
Capital Operating
Leases Leases
- --------------------------------------------------------------------------------
<S> <C> <C>
2000 $160,601 $54,305
2001 160,601 55,518
2002 160,601 55,732
2003 112,834 56,800
2004 103,280 57,047
Subsequently 318,377 157,577
-------------------------------
Net minimum lease payments 1,016,294 $436,979
Less: Amount representing interest (320,755) ========
Present value of minimum lease payments 695,539
Less: Current portion (113,481)
---------
$582,058
=========
</TABLE>
Note 5 Share Capital
<TABLE>
<CAPTION>
<S> <C>
Authorized and Issued Share Capital
Authorized common shares
$0.001 par value 25,000,000
Issued and outstanding as at November 30, 1999 4,000,000
Issued pursuant to consulting agreements,
January 7, 2000 (see Note 1) 2,000,000
----------
6,000,000
Issued pursuant to Acquisition (see Note 2a) 10,000,000
----------
Issued and outstanding as at March 20,2000 16,000,000
==========
</TABLE>
The number of issued and outstanding shares of the Company prior to the
Acquisition (see note 2a) was 6,000,000, including 2,000,000 shares
issued on January 7, 2000 pursuant to consulting agreements dated
September 14, 1999.
16
EXHIBIT 2.2
ESCROW AGREEMENT
This Escrow Agreement ("Agreement") is made and entered into as of the
16th day of March, 2000, by and among Advanced Knowledge, Inc., a Delaware
corporation ("AKI"), Soccer Magic Inc., an Ontario corporation ("SMI") (acting
for the benefit of all of the holders of the outstanding common shares of SMI
(the "SMI Shareholders")), and Jack L. Chegwidden, a professional corporation,
as escrow agent (the "Escrow Agent"). All capitalized terms herein which are not
otherwise defined shall have the meanings given to them in that certain
Acquisition Agreement dated as of December 14, 1999 by and between AKI and SMI
(the "Acquisition Agreement").
WHEREAS, AKI has entered into the Acquisition Agreement with SMI and
related Purchase and Sale Agreements ("P&S Agreements") with each of the SMI
Shareholders, pursuant to which AKI has agreed to acquire SMI (the
"Acquisition") by purchasing from the SMI Shareholders all of the outstanding
common shares of SMI (the "SMI Shares") in exchange for a total of 10,000,000
newly issued shares of AKI common stock (the "AKI Shares");
WHEREAS, the terms of the Acquisition Agreement and the P&S Agreements
provide that certain items be placed in an escrow (the "Escrow") at the Closing
of the Acquisition to establish a means for rescinding the Acquisition if
certain post-closing conditions are not satisfied by June 30, 2000; and
WHEREAS, AKI and SMI each desire that the Escrow Agent serve as escrow
agent, and the Escrow Agent is willing to serve as escrow agent, on the terms
and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and obligations
herein contained, the parties hereby agree as follows:
1. Appointment of Escrow Agent. AKI and SMI hereby appoint the Escrow
Agent, and the Escrow Agent hereby accepts such appointment, to serve as escrow
agent on the terms and conditions set forth in this Agreement. As consideration
for the Escrow Agent's services hereunder, AKI and SMI shall each pay US$250 to
the Escrow Agent (for a total fee of US$500) at or before the Closing of the
Acquisition.
2. Establishment of Escrow. The Escrow Agent agrees to accept delivery
at the Closing of the following items (collectively, the "Escrowed Items") and
to hold them in the Escrow until required by the terms of Section 3 hereof to
release and deliver them:
(a) The certificates representing the SMI Shares and the
accompanying stock powers or other documentation transferring ownership of the
SMI Shares from the SMI Shareholders to AKI (the "SMI Escrowed Items"), delivery
of which the Escrow Agent shall receive for purposes of the Closing of the
Acquisition as agent for AKI pursuant to Article Three of the Acquisition
Agreement.
17
<PAGE>
(b) The certificates representing the AKI Shares (the "AKI Escrowed
Items"), delivery of which the Escrow Agent shall receive for purposes of the
Closing of the Acquisition as agent for SMI pursuant to Article Three of the
Acquisition Agreement.
(c) The conditional written resignations of each of the New AKI
Directors, as defined in Section 3.04 of the Acquisition Agreement (the "New
Director Resignations"), which shall become effective only as provided in
Section 3(b)(iv) of the Escrow Agreement.
(d) The conditional written resignations of each of the New AKI
Officers, as defined in Section 3.05 of the Acquisition Agreement (the "New
Officer Resignations"), which shall become effective only as provided in Section
3(b)(v) of the Escrow Agreement.
(e) The conditional Successor Director Resolutions, as defined in
Section 3.02(a)(v) of the Acquisition Agreement (the "Successor Director
Resolutions"), which will become effective only as contemplated by Section
3(b)(ii) hereof. Delivery to the Escrow Agent of the Successor Director
Resolutions shall be deemed to occur immediately after the Effective Time, i.e.,
after the appointment of the New AKI Directors has become effective.
(f) The Successor Director Acceptances, as defined in Section
3.02(a)(vi) of the Acquisition Agreement, which shall become effective only as
contemplated by Section 3(b)(ii) hereof.
3. Release and Delivery from Escrow. The Escrow Agent agrees to release
and deliver the Escrowed Items as provided below:
(a) No Rescission. If the Private Placement (as defined in Section
3(c)(i) hereof) is completed prior to the Private Placement Deadline (as defined
in Section 3(c)(ii) hereof) and AKI is then current in making all required
filings with the U.S. Securities and Exchange Commission under Sections 13(a)
and 14 of the Securities Exchange Act of 1934, as amended, the president and
secretary of AKI shall jointly certify such facts in writing to the Escrow Agent
(the "Joint Certification"). In such an event, if the Escrow Agent does not
receive, by 5:00 p.m. Pacific Time on the fifth business day after receipt of
the Joint Certification, any written objection from either party or any notice
of pending or threatened legal action by either party, then the Escrow Agent
shall promptly release the Escrowed Items in the manner described below and
shall thereafter be completely and fully released by the parties from any and
all liability whatsoever related to his role as escrow agent under this
Agreement:
(i) The Escrow Agent shall release the SMI Escrowed Items and
deliver them, at the address shown in Section 4 hereof for delivery of notices
to SMI, to the president of AKI;
(ii) The Escrow Agent shall release the AKI Escrowed Items and
deliver them to the SMI Shareholders at their respective addresses as set forth
on Schedule A attached hereto and incorporated by reference herein;
(iii) The Escrow Agent shall release the New Director
Resignations, each prominently marked "canceled," and deliver them, at the
address shown in Section 4 hereof for delivery of notices to SMI, to the
president of AKI;
18
<PAGE>
(iv) The Escrow Agent shall release the New Officer
Resignations, each prominently marked "canceled," and deliver them, at the
address shown in Section 4 hereof for delivery of notices to SMI, to the
president of AKI; and
(v) The Escrow Agent shall release the conditional Successor
Director Resolutions and Successor Director Acceptances (which shall not become
effective) and deliver them, at the address shown in Section 4 hereof for
delivery of notices to SMI, to the president of AKI.
(b) Rescission. If the Escrow Agent does not receive a Joint
Certification from the president and secretary of AKI prior to the Private
Placement Deadline, then the Acquisition shall be rescinded, as provided in the
Acquisition Agreement. In such an event, if the Escrow Agent does not receive,
by 5:00 p.m. Pacific Time on the fifth business day after the Private Placement
Deadline, any written objection from either party or any notice of pending or
threatened legal action by either party, then the Escrow Agent shall promptly
release the Escrowed Items in the manner described below and shall thereafter be
completely and fully released by the parties from any and all liability
whatsoever related to his role as escrow agent under this Agreement:
(i) The Escrow Agent shall release the SMI Escrowed Items and
deliver them to the SMI Shareholders at their respective addresses as set forth
in Schedule A hereto;
(ii) The Escrow Agent shall release the Successor Director
Resolutions and Successor Director Acceptances (which shall then become
effective) and deliver them, at the address shown in Section 4 hereof for
delivery of notices to AKI, to the person named in the Successor Director
Resolutions as the Successor Chairman of AKI's board of directors.
(iii) The Escrow Agent shall release the AKI Escrowed Items and
deliver them for cancellation, at the address shown in Section 4 hereof for
delivery of notices to AKI, to the person named in the Successor Director
Resolutions as the Successor Chairman of AKI's board of directors;
(iv) The Escrow Agent shall release the New Director
Resignations (which shall then become effective) and deliver them, at the
address shown in Section 4 hereof for delivery of notices to AKI, to the person
named in the Successor Director Resolutions as the Successor Chairman of AKI's
board of directors; and
(v) The Escrow Agent shall release the New Officer Resignations
(which shall then become effective) and deliver them, at the address shown in
Section 4 hereof for delivery of notices to AKI, to the person named in the
Successor Director Resolutions as the Successor Chairman of AKI's board of
directors.
(c) Definitions. For purposes of this Agreement, the terms listed below
shall be defined as follows:
(i) "Private Placement" shall mean a private placement of newly
issued shares of AKI common stock made by the New AKI Officers which raises
gross proceeds for AKI of at least US$2,700,000.
19
<PAGE>
(ii) "Private Placement Deadline" shall mean 5:00 p.m. Pacific
Time on June 30, 2000.
(d) Rescission Remedy for False Representation and Warranty. Under
Section 7.11 of the Acquisition Agreement, AKI is required to deliver to SMI at
the Closing of the Acquisition a Representation Letter, in which Buddy Young
makes and gives a representation and warranty to SMI that all of AKI's
representations and warranties in Article Five of the Acquisition Agreement are
true in all material respects at the time of the Closing. Section 3.06 of the
Acquisition Agreement provides that if, after the Effective Time and before the
Private Placement Deadline, SMI believes that Mr. Young's representation and
warranty in the Representation Letter was untrue in any material respect when
AKI delivered the Representation Letter to SMI at the Closing, SMI may submit
the issue to arbitration pursuant to Section 14.05 of the Acquisition Agreement.
Section 3.06 provides further that, if the arbitrator finds, based on the
evidence presented to it, that such representation and warranty in the
Representation Letter was, in fact, untrue in any material respect at the time
of the Closing, SMI may deliver or cause to be delivered to the Escrow Agent a
certified written report of the arbitrator's finding to that effect, whereupon
the Acquisition shall be rescinded. Upon receiving such a report, the Escrow
Agent shall release all of the Escrowed Items and deliver them as set forth in
Section 3(b) of this Agreement.
(e) Notice to Transfer Agent. In the event that the Acquisition is
rescinded pursuant to Section 3 of this Agreement, the Escrow Agent shall
promptly send written notice of the rescission to AKI's stock transfer agent,
attention: Mr. Richard Brown, by certified mail to U.S. Stock Transfer
Corporation, 1745 Gardena Avenue, 2nd Floor, Glendale, California 91204, and by
facsimile transmission to (818) 502-1737.
4. Procedure for Replacement of New AKI Directors. Section 13.04 of the
Acquisition Agreement provides that, if any New AKI Director resigns, is
removed, or otherwise ceases to serve as a director of AKI prior to the Private
Placement Deadline, the vacancy thereby created on the AKI board of directors
may be filled by the election or appointment of a new director prior to any
release of Escrowed Items pursuant to Section 3 of this Agreement only if the
person who is to become a director delivers his or her conditional written
resignation to the Escrow Agent in substantially the same form as the New
Director Resignations received by the Escrow Agent from the New AKI Directors at
the Closing. In such a case, Section 13.04 of the Acquisition Agreement further
provides that such person's conditional written resignation shall for all
purposes be deemed to be a New Director Resignation and shall become effective
in the event of a rescission as provided in Section 3(b)(iv) of this Agreement.
The Escrow Agent shall accept delivery into escrow of any such conditional
written resignation and shall thereafter treat it as a New Director Resignation
as contemplated by Section 13.04.
5. Notices. Any notice, communication or delivery required or permitted
to be given or made hereunder shall be in writing and shall be delivered either
by hand or by a courier service that guarantees next-business-day delivery,
addressed as follows:
20
<PAGE>
If to SMI, to:
Mr. Manny Gross
10 Planchet Road, Unit #21
Concord, Ontario L4K 2C8
If to AKI, to:
Mr. Buddy Young
17337 Ventura Boulevard, Suite 224
Encino, California 91316
If to the Escrow Agent, to:
Jack L. Chegwidden, a Professional Corporation
17337 Ventura Boulevard, Suite 224
Encino, California 91316
or to such other address as the person to whom notice is to be given may have
previously furnished to the others in the above-referenced manner. All such
notices shall be deemed effective upon delivery.
6. Provisions Relating to the Escrow Agent. To induce the Escrow Agent
to act hereunder, it is further agreed by AKI and SMI that:
(a) The Escrow Agent shall not be under any duty to give the
Escrowed Items held by it hereunder any greater degree of care than it gives its
own similar property.
(b) This Agreement expressly sets forth all the duties of the
Escrow Agent with respect to any and all matters pertinent hereto. No implied
duties or obligations shall be read into this Agreement against the Escrow
Agent. The Escrow Agent shall not be bound by the provisions of any agreement
among the other parties hereto except this Agreement.
(c) The Escrow Agent shall not be liable for any act or omission
under this Agreement unless his act or omission constitutes gross negligence or
willful misconduct. Other than claims based upon such gross negligence or
willful misconduct that are successfully asserted against the Escrow Agent, the
other parties hereto shall jointly and severally indemnify and hold harmless the
Escrow Agent from and against any and all losses, liabilities, claims, actions,
damages and expenses, including reasonable attorneys' fees and disbursements,
arising out of and in connection with this Agreement.
(d) The Escrow Agent shall be entitled to rely upon any order,
judgment, certification, demand, notice, instrument or other writing delivered
to it hereunder without being required to determine the authenticity or the
correctness of any fact stated therein or the propriety or validity of the
service thereof. The Escrow Agent may act in reliance upon any instrument or
signature believed by it in good faith to be genuine and may assume, if in good
faith, that any person purporting
21
<PAGE>
to give notice or to execute any certification or other document in connection
with the provisions hereof has been duly authorized to do so.
(e) The Escrow Agent may act pursuant to the advice of counsel with
respect to any matter relating to this Escrow Agreement and shall not be liable
for any action taken or omitted in good faith and in accordance with such
advice.
(f) The Escrow Agent does not have any interest in the Escrowed
Items deposited hereunder and is serving as escrow agent only.
(g) The Escrow Agent makes no representation as to the validity,
value, genuineness of any security or other document or instrument held by or
delivered to him.
(h) After the Effective Time, AKI and SMI may not, either
individually or together, take any action that would have the effect of amending
this Agreement or of terminating the Escrow Agent's duties and obligations
hereunder (referred to hereinafter as a "termination"), except by jointly
petitioning a court of competent jurisdiction for good cause shown. The Escrow
Agent may at any time resign by giving written notice of resignation to AKI and
SMI (referred to hereinafter as a "resignation"). Upon any such termination or
resignation, the Escrow Agent shall deliver the Escrowed Items to a court of
competent jurisdiction, whereupon the Escrow Agent shall be discharged of and
from any and all further obligations arising in connection with this Escrow
Agreement. Such court shall act as successor to the Escrow Agent until such time
(if ever) that the court appoints a successor to the Escrow Agent.
(i) In the event that the Escrow Agent is, in good faith, in doubt
about what action it should take under this Agreement, or if any adverse claim
or demand is made with respect to any of the Escrowed Items, the Escrow Agent
shall be entitled to retain any or all of the Escrowed Items until the Escrow
Agent shall have received a final, non-appealable order of a court of competent
jurisdiction directing delivery of the Escrowed Items. Upon receiving such a
court order, the Escrow Agent shall act promptly in accordance with the order.
(j) AKI and SMI jointly and severally agree to reimburse the Escrow
Agent for all of his reasonable expenses, disbursements and advances incurred or
made in the performance of his duties hereunder.
(k) AKI and SMI hereby irrevocably (i) submit to the jurisdiction
of any California state or federal court sitting in the County of Los Angeles in
any action or proceeding arising out of or relating to this Agreement, (ii)
agree that all claims with respect to such action or proceeding shall be heard
and determined in such California state or federal court, and (iii) waive, to
the fullest extent possible, the defense of an inconvenient forum. AKI and SMI
hereby consent to and grant any such court jurisdiction over the persons of such
parties and over the subject matter of any such dispute and agree that delivery
or mailing of process or other papers in connection with any such action or
proceeding in the manner provided herein, or in such other manner as may be
permitted by law, shall be valid and sufficient service thereof.
22
<PAGE>
7. Miscellaneous.
(a) This Agreement shall be binding upon and inure solely to the
benefit of the parties hereto and the SMI Shareholders, as well as their
respective successors and assigns, heirs, administrators and representatives,
and shall not be enforceable by or inure to the benefit of any other third
party. No party may assign any of its rights or obligations under this Agreement
except as provided in Section 5(h) with respect to the termination or
resignation of the Escrow Agent.
(b) This Agreement shall be governed by and construed in accordance
with the internal law of the State of California, without reference to its rules
as to conflicts of law.
(c) This Agreement may be modified after the Effective Time only in
the manner permitted by Section 5(h) hereof. Prior to the Effective Time, this
Agreement may be modified only by a writing signed by all of the parties hereto
and consented to by any SMI Shareholders adversely affected by such
modifications. No waiver hereunder shall be effective unless in a writing signed
by the party to be charged.
(d) This Agreement shall terminate upon the delivery pursuant to
Section 3 hereof of all Escrowed Items.
(e) The section headings in this Agreement are for convenience only
and shall not affect the construction hereof. Unless otherwise indicated,
references to sections are to sections contained in this Agreement.
(f) This Agreement constitutes the entire agreement and
understanding between the parties with respect to the subject matters herein and
supersedes and replaces any prior agreements and understandings, whether oral or
written, between them with respect to such matters.
(g) This Agreement may be executed in one or more counterparts, but
all such separate counterparts shall constitute one and the same instrument.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
23
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date and year first above written.
ADVANCED KNOWLEDGE, INC.
By: /s/ Buddy Young
--------------------
Name: Buddy Young
Title: President and Chief Executive Officer
SOCCER MAGIC INC.
By: /s/ Manny Gross
--------------------
Name: Manny Gross
Title: Chief Executive Officer
"ESCROW AGENT"
/s/ Jack L. Chegwidden
------------------------
Name: Jack L. Chegwidden, a professional corporation
24
EXHIBIT 2.3
ASSET SALE AGREEMENT
This Asset Sale Agreement ("Agreement") is made and entered into as
of the 16th day of March, 2000, by and among Advanced Knowledge, Inc., a
Delaware corporation ("Seller"), Becor Internet, Inc., a Delaware corporation
("Purchaser"), and Buddy Young, an individual ("BY"), and is ratified and
approved by Soccer Magic Inc., an Ontario corporation ("Soccer Magic").
RECITALS
WHEREAS, Seller is a company engaged in the business of producing and
distributing workforce training videos (the "Business");
WHEREAS, Soccer Magic is a company engaged in the design, construction,
ownership and operation of indoor soccer facilities;
WHEREAS, Seller has entered into an Acquisition Agreement dated as of December
14, 1999 (the "Acquisition Agreement") with Soccer Magic, pursuant to which
Seller has agreed to acquire all of the outstanding common shares of Soccer
Magic (the "Soccer Magic Acquisition");
WHEREAS, after acquiring the common shares of Soccer Magic, Seller will be
controlled by the principals of Soccer Magic and intends, thereafter, to focu
exclusively on the business of Soccer Magic;
WHEREAS, Seller therefore wishes to sell, immediately after the Effective Time
(as that term is defined in the Acquisition Agreement) of the Soccer Magic
Acquisition, all of its assets, other than the common shares of Soccer Magic, as
they shall exist at the Effective Time (the "Assets");
WHEREAS, Seller wishes to sell the Assets to Purchase and Purchaser wishes to
purchase the Assets from Seller in exchange for Purchaser's assumption o all of
Seller's debts, liabilities and obligations, whether contingent, contractual or
otherwise, incurred or accrued before the Effective Time, and regardless of
whether or not such debts, liabilities and obligations are related to or concern
or arise out of the Business or the Assets (the "Liabilities");
WHEREAS, Purchaser is owned or controlled by BY;
WHEREAS, the parties desire to set forth in this Agreement the terms of the sale
and purchase of the Assets and the assumption of the Liabilities;
WHEREAS, the Assets to be sold include all rights to Seller's name and the
Internet web domain name "advancedknowledge.com," and the parties therefore wish
to clarify their respective rights and obligations with respect to the transfer
and use of such names.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereby agree as follows:
25
<PAGE>
1. TRANSFER, ASSIGNMENT AND ASSUMPTION.
1.1 Transfer and Assignment of Assets. Effective at the
Closing, Seller hereby grants, conveys, sells, transfers, assigns and delivers
to Purchaser all of its right, title and interest in, to and under all of the
Assets, including, but not limited to, the Assets referred to in Paragraphs
1.1.1 through 1.1.6 below. THE ASSETS ARE TRANSFERRED "AS IS," AND THE SELLER
MAKES NO WARRANTY AS TO THE SUITABILITY OF THE ASSETS FOR ANY PARTICULAR
PURPOSE.
1.1.1 Intellectual Property. All of those
trademarks, trade names, service marks, Internet domain names, patents, licenses
and copyrights listed in the Schedule of Trademarks, Patents and Copyrights
attached hereto as Exhibit A and incorporated herein by reference (the
"Intellectual Property");
1.1.2 Personal Property. All items of furniture,
fixtures, production equipment, computer equipment, hardware and other tangible
personal property listed on the Schedule of Personal Property attached hereto as
Exhibit B and incorporated herein by reference (the "Personal Property");
1.1.3 Equipment Leases. All of Seller's right,
title and interest as lessee in and to the properties leased to Seller under
those certain equipment leases listed on the Schedule of Equipment Leases
attached hereto as Exhibit C and incorporated herein by reference (the
"Equipment Leases");
1.1.4 Contracts, Accounts Receivable and
Inventory. All of Seller's contracts, accounts receivable and inventory relating
exclusively to the Business which are listed on the Schedule of Contracts
attached hereto as Exhibit D (the "Contracts");
1.1.5 All Other Assets. All of Seller's other
Assets described in the Schedule of Other Assets attached hereto as Exhibit E
and incorporated herein by reference, whether or not specifically referred to in
any of the preceding paragraphs of this Section 1.1.
1.2 Assumption of Liabilities. Effective at the Closing,
Purchaser hereby accepts the grant, conveyance, sale, transfer, assignment and
delivery of the Assets as provided in Section 1.1, and in exchange for Seller's
transfer of Assets, Purchaser hereby irrevocably and unconditionally assumes all
of Seller's Liabilities (including taxes), including, but not limited to, each
of the Liabilities described on the Schedule of Assumed Liabilities attached as
Exhibit F and incorporated herein by reference. Effective at the Closing, each
of BY and Purchaser hereby releases and forever discharges Seller from all
liabilities now or ever owed by Seller to BY or Purchaser, including, but not
limited to, all amounts of principal, interest and other charges payable by
Seller to BY under that certain Secured Promissory Note dated August 18, 1998,
as amended to date. Purchaser and BY shall each jointly and severally indemnify,
defend and hold harmless Seller and its officers, directors, representatives and
agents from and against, any and all loss, damage, or liability due to, arising
out of, or in any manner related to the Liabilities. Seller does not have in
effect:
26
<PAGE>
1.2.1 any collective bargaining agreements; or
1.2.2 any employee benefit plan as defined in
ERISA.
1.3 The Closing. The closing (the "Closing") of the
transactions described in Sections 1.1 and 1.2 shall occur immediately after the
"Effective Time," as that term is defined in the Acquisition Agreement. The
Closing shall take place at such place or places as the parties may agree. At
the Closing, Seller shall deliver to Purchaser those Assets that are in the
possession or control of Seller.
2. No Further Conveyance Necessary. Except as otherwise required by
law, this Agreement shall effectively assign, transfer and convey all of the
interest in the Assets from Seller to Purchaser without any further documents of
conveyance, and this Agreement shall fully evidence the assumption of all of the
Assumed Liabilities by Purchaser without any further instrument of conveyance or
assumption.
3. Representations of Purchaser. Purchaser represents and warrants as
of the date hereof and at the Closing as follows:
3.1 Authority. Purchaser has full power, authority, and legal
right to purchase the Assets from Seller, and Purchaser's execution of this
Agreement does not require the consent of, or notice to, any party not
previously obtained or given.
3.2 Enforceability. This Agreement constitutes the legal and
binding obligation of Purchaser and is valid and enforceable against Purchaser
and Purchaser's successors and permitted assigns in accordance with its terms
except as enforcement may be limited by applicable bankruptcy, insolvency or
other similar laws affecting creditors' rights generally and except that the
remedies of specific performance, injunction and other forms of equitable relief
may be subject to equitable defenses and to the equitable discretion of the
court before which any proceeding therefor may be brought.
3.3 Acknowledgment of "As Is" Transfer. Purchaser is owned or
controlled by BY, who is currently an officer and director of Seller and is
familiar with the Assets and the Liabilities. Purchaser understands that the
Assets are being transferred to Purchaser pursuant to the terms of this
Agreement in "as is" condition. PURCHASER UNDERSTANDS AND ACKNOWLEDGES THAT
SELLER MAKES NO REPRESENTATIONS OR WARRANTIES TO PURCHASER CONCERNING THE
SUITABILITY OF THE ASSETS FOR ANY PARTICULAR PURPOSE.
3.4 No Reliance on Seller's Advisers. Purchaser acknowledges
that Seller's legal, tax, accounting and other advisers do not represent
Purchaser with respect to this Agreement or the transactions contemplated by
this Agreement, and Purchaser has, if desired, obtained legal, tax, accounting
and other advice from Purchaser's own advisers.
27
<PAGE>
4. Representations of BY. BY represents and warrants as of the
date hereof and at the Closing as follows: 4.1 Authority. BY's execution of this
Agreement does not require the consent of, or notice to, any party not
previously obtained or given.
4.2 Enforceability. This Agreement constitutes the legal and
binding obligation of BY and is valid and enforceable against BY and BY's
successors and permitted assigns in accordance with its terms except as
enforcement may be limited by applicable bankruptcy, insolvency or other similar
laws affecting creditors' rights generally and except that the remedies of
specific performance, injunction and other forms of equitable relief may be
subject to equitable defenses and to the equitable discretion of the court
before which any proceeding therefor may be brought.
4.3 No Reliance on Seller's Advisers. BY acknowledges that
Seller's legal, tax, accounting and other advisers do not represent BY with
respect to this Agreement or the transactions contemplated by this Agreement,
and BY has, if desired, obtained legal, tax, accounting and other advice from
BY's own advisers.
5. Access to Information. Purchaser and its legal, tax,
accounting and other personal advisers shall have full access during normal
business hours to all properties, books, accounts, records, contracts and
documents of or relating to the Business, Assets and Liabilities of Seller, and
Seller shall furnish to Purchaser and its advisers all information concerning
the Business, Assets and Liabilities that Purchaser reasonably requests in
connection with the transactions contemplated hereby.
6. Covenants of Seller.
6.1 Covenant Regarding Names and Domain Names. Seller agrees
that, after the Closing, Seller and every business or entity in which Seller has
an ownership interest or financial stake shall not use or register for use in
commerce any form of the name "Advanced Knowledge," including any trade name,
trademark, service mark or Internet domain name that is identical or similar to
the name "Advanced Knowledge"; provided, however, that Seller may continue to
use the corporate name "Advanced Knowledge, Inc." for non-commercial, general
corporate purposes until such time as Seller is able to change its corporate
name. Seller agrees to use its best efforts to promptly change Seller's name to
a name that is consistent with the business done by Soccer Magic.
6.2 Covenant to Maintain Existing Transfer Agent. For two
years after the Effective Time, Seller covenants and agrees not to change the
transfer agent for its common stock. Currently, the transfer agent for Seller's
common stock is U.S. Stock Transfer Company, 1745 Gardena Avenue, Glendale,
California.
6.3 Covenant to Maintain Existing Equity Capitalization. For
two years after the Effective Time, Seller covenants and agrees not to engage in
any recapitalization, reorganization, or reverse split or consolidation of
shares. The foregoing sentence shall not, however, preclude Seller from
authorizing and issuing additional shares of common stock.
28
<PAGE>
6.4 Covenant to Limit Number of Shares Issued. During the
period after the Effective Date and prior to the Private Placement Deadline (as
defined in the Acquisition Agreement), Seller covenants and agrees not to issue
more than a total of 6,000,000 shares of its common stock or other securities
which may be converted into or exercised for the purchase of shares of common
stock. This total of 6,000,000 shares includes 2,000,000 shares which Seller is
required to issue pursuant to existing consulting agreements.
6.5 Covenant to Facilitate Rule 144 Sales. Seller agrees that
it will use its best efforts to facilitate in a timely manner, and will not
unreasonably prevent, proposed sales by Purchaser or any other person, pursuant
to Rule 144 under the Securities Act of 1933, of those shares of Seller's common
stock which were issued in connection with the August 26, 1998 merger of
Advanced Knowledge, Inc. with and into DMA-Radtech, Inc.
7. Covenants of Purchaser and BY. Purchaser and BY each jointly and
severally covenant and agree to pay to Miller & Holguin all legal fees and costs
for services rendered as counsel to Seller in connection with the transactions
contemplated by this Agreement and the Acquisition Agreement and which are not
paid by Soccer Magic at the closing of the Soccer Magic Acquisition.
8. Indemnification. Seller agrees to indemnify and hold harmless
Purchaser and BY, and Purchaser and BY each jointly and severally agree to
indemnify and hold Seller harmless, as follows:
8.1 Seller shall indemnify, defend and hold harmless
Purchaser and BY from any and all loss, cost, expense and liability (including
attorneys' fees) incurred in connection with any claim or asserted claim which
may be made against Purchaser or BY and which arises directly or indirectly from
any breach of this Agreement by Seller.
8.2 Purhaser shall indemnify, defend and hold harmless
Seller from any and all loss, cost, expense and liability (including attorneys'
fees) incurred in connection with any claim or asserted claim which may be made
against Seller and which arises directly or indirectly from any breach of this
Agreement by Purchaser or in respect of the Liabilities.
8.3 BY shall indemnify, defend and hold harmless Seller
from any and all loss, cost, expense and liability (including attorneys' fees)
incurred in connection with any claim or asserted claim which may be made
against Seller and which arises directly or indirectly from any breach of this
Agreement by BY or in respect of the Liabilities.
8.4 Promptly after receipt of notice of the commencement
of any action in respect of which indemnity may he sought against either party
under this Agreement, the indemnified party will notify the other party in
writing of the commencement thereof and the other party shall, subject to the
provisions stated below, assume the defense of such action (including the
employment of counsel who shall be counsel reasonably satisfactory to the
indemnified party and shall not be counsel to the other party), and the payment
of expenses insofar as such action shall relate to any alleged liability in
respect of which indemnity as available. The indemnified party shall have the
29
<PAGE>
right to employ separate counsel in any action and to participate in the defense
thereof, but the fees and expenses of its counsel shall not be at the expense of
the other party unless the employment of that counsel has been specifically
authorized by the other party.
9. Miscellaneous.
9.1 Inurement. This Agreement shall be binding upon each
of the parties, and it shall benefit, respectively, each of the parties and
their respective successors and permitted assigns. There are no third party
beneficiaries to this Agreement.
9.2 Assignment. No assignment or transfer of any
interest, right or obligation of any party hereunder shall be allowed without
the prior written consent of each of the parties to this Agreement.
9.3 Amendments. This Agreement may not he amended,
supplemented or otherwise modified except in a writing signed by or on behalf of
each party hereto.
9.4 Further Assurances. Each of the parties hereto agrees
that, from and after the date hereof, upon the reasonable request of the other
party hereto and without further consideration, such party shall execute and
deliver to such other party such documents and shall take such other actions as
such other party may reasonably request in order to carry out the purposes and
intentions of this Agreement, including, without limitation, the vesting in
Purchaser of the title to the Assets in accordance with the terms of this
Agreement and the correction of any errors and defects.
9.5 Notice. All notices, requests, demands, directions
and other communications ("Notices") required or permitted in this Agreement
shall be in writing and shall be mailed or delivered personally or sent by
telecopier or facsimile to the applicable party at the address of such party set
forth below. When mailed, each such Notice shall be sent by prepaid first class
certified mail, return receipt requested, and shall be effective on the third
business day after it has been deposited in the mail. When delivered personally,
each such Notice shall be effective when delivered to the address for the
respective party set forth below. When sent by telecopier or facsimile, each
such Notice shall be effective on the first business day on which or after which
it is sent to the number set forth below. Each such Notice shall be addressed to
the party to be notified as shown below:
Purchaser: Becor Internet, Inc.
c/o Buddy Young
17337 Ventura Boulevard, Suite 224
Encino, California 91316
Facsimile No.: (818) 784-8660
30
<PAGE>
Seller: Advanced Knowledge, Inc.
Attention: Secretary
17337 Ventura Boulevard, Suite 224 (Before Closing)
Encino, California 91316
Facsimile No.: (818) 784-8660
10 Planchet Road, Unit #21 (After Closing)
Concord, Ontario L4K 2C8
Facsimile No: (905) 738-8804
BY: Buddy Young
17337 Ventura Boulevard, Suite 224
Encino, California 91316
Facsimile No.: (818) 784-8660
9.6 Survival. The representations, warranties and
covenants of each party shall survive for two years after the execution of this
Agreement and the performance of each respective party's obligations under this
Agreement.
9.7 Headings. The headings to this Agreement are for
convenience only and shall not be considered in the interpretation of this
Agreement.
9.8 Severability. In the event that any provision of this
Agreement shall be held to be invalid, illegal or unenforceable, in whole or in
part, such invalidity, illegality or unenforceability shall not in any way
affect the validity of the other provisions of this Agreement, and such other
provisions shall remain in full force and affect.
9.9 Counterparts. This Agreement may be executed in one
or more counterparts, all of which taken together shall constitute a single
instrument.
9.10 Entire Agreement. This Agreement constitutes the
entire agreement between the parties with respect to the subject matter hereof.
9.11 Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of California.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
31
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
SELLER:
ADVANCED KNOWLEDGE, INC., a Delaware corporation
By: /s/ Stephen Albright
---------------------------------------------
L. Stephen Albright, Secretary and Director
PURCHASER:
BECOR INTERNET, INC., a Delaware corporation
By: /s/ Buddy Young
----------------------------------------------
Buddy Young, President and Chief Executive Officer
BY:
/s/ Buddy Young
--------------------------------------------------
Buddy Young, an individual
RATIFIED AND APPROVED:
SOCCER MAGIC:
SOCCER MAGIC INC., an Ontario corporation
By: /s/ Manny Gross
------------------------------------
Manny Gross, Chief Executive Officer
32
EXHIBIT 2.4
THE SECURITIES TO WHICH THIS AGREEMENT RELATES HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER ANY
STATE SECURITIES LAWS ("STATE LAWS") OR ANY SECURITIES LAWS OF JURISDICTIONS
OUTSIDE OF THE UNITED STATES, AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED IN THE UNITED STATES OR TO A "U.S. PERSON" (AS DEFINED HEREIN)
EXCEPT (1) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FILED UNDER THE
SECURITIES ACT COVERING THE SECURITIES, OR (2) UPON DELIVERY TO THE ISSUER OF AN
OPINION OF U.S. COUNSEL REASONABLY SATISFACTORY TO THE ISSUER THAT THE
SECURITIES MAY BE TRANSFERRED WITHOUT REGISTRATION PURSUANT TO (A) RULE 144 OR
RULE 904 OF REGULATION S PROMULGATED UNDER THE SECURITIES ACT OR (B) ANY OTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS
OF THE SECURITIES ACT. IN ADDITION, HEDGING TRANSACTIONS INVOLVING THE
SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES ACT.
PURCHASE AND SALE AGREEMENT
This Purchase and Sale Agreement ("Agreement") is made and entered into
as of the _____ day of December, 1999, by and between Advanced Knowledge, Inc.
("AKI") and the undersigned shareholder of Soccer Magic Inc. ("SMI")
(hereinafter referred to as the "undersigned").
R E C I T A L S
A. AKI and SMI have entered into an acquisition agreement (the
"Acquisition Agreement") which sets forth terms and conditions for the
acquisition by AKI (the "Acquisition") of all of the outstanding common shares
of SMI (the "SMI Shares") in exchange for a total of 10,000,000 newly issued
shares of AKI common stock (the "AKI Shares"). All capitalized terms appearing
in this Agreement which are not otherwise defined herein shall have the meanings
given them in the Acquisition Agreement.
B. As a condition to the Closing of the Acquisition, the
Acquisition Agreement requires that each of the shareholders of SMI execute a
Purchase and Sale Agreement in the form of this Agreement, signifying such
shareholder's agreement to subscribe for and receive AKI Shares in exchange for
all of the SMI Shares owned by such shareholder.
C. The undersigned is a shareholder of SMI who owns that number
of SMI Shares which is set forth on the signature page of this Agreement. The
undersigned and AKI desire to enter into this Agreement with each other for the
purposes contemplated by the Acquisition Agreement.
NOW, THEREFORE, in consideration of the mutual promises herein
contained, the parties agree as follows:
33
<PAGE>
1. Sale and Purchase of SMI Shares. On the terms and subject to
the conditions set forth herein and in the Acquisition Agreement, the
undersigned hereby agrees to sell to AKI, and AKI agrees to purchase from the
undersigned, all of the SMI Shares owned by the undersigned.
2. Purchase and Sale of AKI Shares. On the terms and subject to
the conditions set forth herein and in the Acquisition Agreement, the
undersigned hereby agrees to purchase from AKI, and AKI agrees to sell to the
undersigned, that number of the AKI Shares which is determined as follows:
2.1 Calculation of Exchange Ratio. The number of AKI
Shares to be issued to each of the SMI Shareholders for their respective SMI
Shares shall be calculated in accordance with the formula in Section 2.2, using
an exchange ratio of 0.8424408206385 (the "Exchange Ratio"). The Exchange Ratio
was derived by dividing the total number of AKI Shares to be issued (10,000,000)
by the total number of SMI Shares (11,870,270).
2.2 Calculation of AKI Shares to Be Issued. The number of
AKI Shares to be issued to each of the SMI Shareholders for their respective
shares shall be calculated by (i) multiplying (a) the total number of SMI Shares
held by each SMI Shareholder by (b) the Exchange Ratio and (ii) rounding the
product to the nearest whole number (subject to other reasonable adjustments
needed to maintain the total number of AKI Shares to be issued at 10,000,000).
No fractional shares of AKI common stock shall be issued in connection with the
Acquisition.
3. Escrow Agreement; Possible Automatic Rescission. The
undersigned acknowledges and understands that, as more particularly set forth in
Section 3.02 of the Acquisition Agreement and in the Escrow Agreement referenced
in Section 3.02, certain items (the "Escrowed Items") will be placed in an
escrow with an Escrow Agent at the Closing of the Acquisition; that such
Escrowed Items will include the certificates representing the SMI Shares sold by
the undersigned and the certificates representing the AKI Shares purchased by
the undersigned; and the Escrowed Items will remain in escrow until either of
the following events occurs:
3.1 No Rescission. The president and secretary of AKI
jointly certify in writing to the Escrow Agent that (a) AKI has completed the
Private Placement of newly issued shares of AKI common stock for gross proceeds
of at least $3,000,000 prior to the Private Placement Deadline, which is 5:00
p.m. Pacific Time on the date which is six months after the Effective Time of
the Acquisition, and (b) AKI is then current in making all required filings with
the U.S. Securities and Exchange Commission under Sections 13(a) and 14 of the
Securities Exchange Act of 1934, as amended (the "Joint Certification"). In this
event, the Escrow Agent shall be required to release all of the Escrowed Items
and deliver them in accordance with Section 3(a) of the Escrow Agreement,
including delivery to the undersigned of the certificates representing the AKI
Shares purchased by the undersigned pursuant to this Agreement.
34
<PAGE>
3.2 Rescission. If the Escrow Agent does not receive a
Joint Certification from the president and secretary of AKI prior to the Private
Placement Deadline, then the Acquisition shall be rescinded and the Escrow Agent
shall release all of the Escrowed Items and deliver them in accordance with
Section 3(b) of the Escrow Agreement, including delivery to the undersigned of
the certificates representing the SMI Shares sold by the undersigned pursuant to
this Agreement. Rescission may also occur under Section 3.06 of the Acquisition
Agreement.
4. Representations and Warranties of the Undersigned. Unless the
context otherwise requires, all references in this section to AKI Shares shall
mean those AKI Shares which are being purchased by the undersigned pursuant to
this Agreement. The undersigned hereby represents and warrants to AKI that:
4.1 Investment Intent. The undersigned is acquiring the
AKI Shares solely for the undersigned's own account for investment purposes, and
not with a view to, or for offer or sale in connection with, any distribution of
the AKI Shares in violation of the Securities Act.
4.2 Access to Information. The undersigned has received
copies of the Acquisition Agreement, the Escrow Agreement and AKI's annual
report on Form 10-KSB for the year ended August 31, 1999 (the "Annual Report")
and has reviewed them carefully. If desired, the undersigned has also sought and
obtained from management of AKI such additional information concerning the
business, management and financial affairs of AKI as the undersigned has deemed
necessary or appropriate in evaluating an investment in AKI and determining
whether or not to purchase the AKI Shares. Further, the undersigned has also had
full access from the management of SMI to all desired information concerning the
business, management and financial affairs of SMI.
4.3 Preexisting Relationship; Knowledge and Experience.
The undersigned has a preexisting personal and/or business relationship with AKI
and certain of its officers, directors and/or controlling persons, or has such
knowledge and experience in financial and business matters that the undersigned
is capable of evaluating the merits and risks of an investment in the AKI Shares
and of protecting its interests in connection with such an investment.
4.4 Suitability. The undersigned has carefully considered
and has, to the extent the undersigned deems it necessary, discussed with the
undersigned's own professional legal, tax and financial advisers the suitability
of an investment in the AKI Shares for the undersigned's particular tax and
financial situation, and the undersigned has determined that the AKI Shares are
a suitable investment for the undersigned.
4.5 Illiquidity; Ability to Bear Risk of Loss. The
undersigned has no need for liquidity in its investment in the AKI Shares, is
financially able to hold the AKI Shares subject to restrictions on transfer for
an indefinite period of time, and is capable of bearing the economic risk of
losing up to the entire amount of its investment in the AKI Shares.
35
<PAGE>
4.6 Private Offering. The offer of the AKI Shares was
directly communicated to the undersigned by AKI or by AKI through
representatives of SMI. At no time was the undersigned presented with or
solicited by any leaflet, newspaper or magazine article, radio or television
advertisement, or any other form of general advertising or solicited or invited
to attend a promotional meeting otherwise than in connection and concurrently
with such directly communicated offer.
4.7 Truth and Accuracy. All representations and
warranties made by the undersigned in this agreement are true and accurate as of
the date hereof and shall be true and accurate as of the date AKI issues the AKI
Shares. If at any time prior to the issuance of the AKI Shares any
representation or warranty shall not be true and accurate in any respect, the
undersigned shall so notify AKI.
4.8 Authority. If the undersigned is an entity, the
individual executing and delivering this agreement on behalf of the undersigned
has been duly authorized to execute and deliver this agreement on behalf of the
undersigned, the signature of such individual is binding upon the undersigned,
the undersigned is duly organized and subsisting under the laws of the
jurisdiction in which is was organized, and the undersigned was not formed for
the specific purpose of acquiring the AKI Shares.
4.9 No Violation. The execution and delivery of this
agreement and the consummation of the transactions or performance of the
obligations contemplated by this agreement do not and will not violate any term
of the undersigned's organizational documents (if the undersigned is an entity)
and will not result in a breach of any term of, or constitute a default under,
any statute, indenture, mortgage, other agreement or instrument to which the
undersigned is a party or by which it is bound, or any order, writ, judgment or
decree.
4.10 Enforceability. The undersigned has duly executed and
delivered this agreement and (subject to its execution by AKI) it constitutes a
valid and binding agreement of the undersigned enforceable in accordance with
its terms against the undersigned, except as such enforceability may be limited
by principles of public policy, and subject to laws of general application
relating to bankruptcy, insolvency and the relief of debtors and rules of law
governing specific performance, injunctive relief or other equitable remedies.
4.11 Reliance on Own Advisers. In connection with the
undersigned's investment in the AKI Shares, the undersigned has not relied upon
AKI or its advisers for legal or tax advice, and has, if desired, in all cases
sought the advice of the undersigned's own legal counsel and tax advisers.
4.12 No Directed Selling Efforts. The undersigned is not
aware of any Directed Selling Efforts (as hereinafter defined) having been made
in the United States with respect to the AKI Shares by AKI, its affiliates, or
any person acting on behalf of any of the foregoing. In addition, the
undersigned, its affiliates, and persons acting on behalf of the foregoing have
not made and will not make any Directed Selling Efforts in the United States
with respect to the AKI Shares. For purposes of this Agreement, "Directed
Selling Efforts" means any activity undertaken for the purpose of, or that could
reasonably be expected to have the effect of, conditioning the market in the
United States for the AKI Shares, including, but not limited to, the placement
of an
36
<PAGE>
advertisement in a publication with a general circulation in the United States
that refers to the offering of the AKI Shares.
4.13 Offshore Transaction. The offer and sale of the AKI
Shares to the undersigned qualifies as an Offshore Transaction. For purposes of
this Agreement, the term "Offshore Transaction" means that:
(a) The undersigned was outside the United
States at the time the AKI Shares were offered for sale to the undersigned; and
(b) The undersigned was outside the United
States at the time the undersigned originated the buy order for the AKI Shares,
including, but not limited to, the time when the undersigned signed and
delivered this Agreement and otherwise offered or agreed to purchase the AKI
Shares.
In this Agreement, the term "United States" means the United States of America,
its territories and possessions, any State of the United States, and the
District of Columbia. Notwithstanding the foregoing definition of "Offshore
Transaction," the offer and sale of the AKI Shares to the undersigned shall not
constitute an "Offshore Transaction" if the undersigned is acquiring the AKI
Shares for the account or benefit of any specifically targeted, identifiable
group of U.S. citizens abroad, such as members of the U.S. armed forces serving
overseas, but shall constitute an "Offshore Transaction" if the undersigned is a
person excluded from the definition of "U.S. Person" pursuant to Section
4.14(b)(6) of this Agreement or is a person holding an account excluded from the
definition of "U.S. Person" pursuant to Section 4.14(b)(1) of this Agreement,
solely in its capacity as a holder of such an account.
4.14 Non-U.S. Person. The undersigned is not a U.S.
Person, as such term is defined below, and is not acquiring the AKI Shares for
the account or benefit of any U.S. Person.
(a) Definition of U.S. Person. For purposes of
this Agreement, the term "U.S. Person" means:
(1) Any natural person resident in the
United States;
(2) Any partnership or corporation
organized or incorporated under the laws of the United States;
(3) Any estate of which any executor or
administrator is a U.S. Person;
(4) Any trust of which any trustee is a
U.S. Person;
(5) Any agency or branch of a foreign
entity located in the United States;
(6) Any non-discretionary account or
similar account (other than an estate or trust) held by a dealer or other
fiduciary for the benefit or account of a U.S. Person;
37
<PAGE>
(7) Any discretionary account or
similar account (other than an estate or trust) held by a dealer or other
fiduciary organized, incorporated, or (if an individual) resident in the United
States; and
(8) Any partnership or corporation if
organized or incorporated under the laws of any foreign jurisdiction and formed
by a U.S. Person principally for the purpose of investing in securities not
registered under the Securities Act, unless it is organized or incorporated, and
owned, by accredited investors (as defined in Rule 501(a) under the Securities
Act), who are not natural persons, estates or trusts.
(b) Exclusions from Definition. Notwithstanding
the foregoing definition of "U.S. Person":
(1) Any discretionary account or
similar account (other than an estate or trust) held for the benefit or account
of a non-U.S. Person by a dealer or other professional fiduciary organized,
incorporated, or (if an individual) resident in the United States shall not be
deemed a U.S. Person.
(2) Any estate of which any
professional fiduciary acting as executor or administrator is a U.S. Person
shall not be deemed a U.S. person if an executor or administrator of the estate
who is not a U.S. Person has sole or shared investment discretion with respect
to the assets of the estate, and the estate is governed by foreign law.
(3) Any trust of which any professional
fiduciary acting as trustee is a U.S. Person shall not be deemed a U.S. Person
if a trustee who is not a U.S. Person has sole or shared investment discretion
with respect to the trust assets, and no beneficiary of the trust (and no
settlor if the trust is revocable) is a U.S. Person.
(4) An employee benefit plan
established and administered in accordance with the law of a country other than
the United States and customary practices and documentation of such country
shall not be deemed a U.S. Person.
(5) Any agency or branch of a U.S.
Person located outside the United States shall not be deemed a U.S. Person if
the agency or branch operates for valid business reasons, and the agency or
branch is engaged in the business of insurance or banking and is subject to
substantive insurance or banking regulation, respectively, in the jurisdiction
where located.
(6) The International Monetary Fund,
the International Bank for Reconstruction and Development, the Inter-American
Development Bank, the Asian Development Bank, the African Development Bank, the
United Nations, and their agencies, affiliates and pension plans, and any other
similar international organizations, their agencies, affiliates and pension
plans shall not be deemed U.S. Persons.
38
<PAGE>
5. AKI's Representations and Warranties. AKI hereby represents
and warrants to the undersigned that:
5.1 Authority. The individual executing and delivering
this agreement on behalf of AKI has been duly authorized to execute and deliver
this agreement on behalf of AKI, the signature of such individual is binding
upon AKI, and AKI is duly organized and subsisting under the laws of the
jurisdiction in which it was organized.
5.2 Enforceability. AKI has duly executed and delivered
this agreement and (subject to its execution by the undersigned) it constitutes
a valid and binding agreement of AKI enforceable in accordance with its terms
against AKI, except as such enforceability may be limited by principles of
public policy, and subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and rules of law governing
specific performance, injunctive relief or other equitable remedies.
5.3 Capitalization.
(a) AKI has no outstanding capital stock other
than common stock as of the date of this agreement. AKI is authorized to issue
25,000,000 shares of common stock, of which 4,000,000 shares are issued and
outstanding. All of the outstanding shares of common stock of AKI have been duly
and validly issued and are fully paid, non-assessable and not subject to any
preemptive or similar rights; and the AKI Shares have been duly authorized and,
when issued and delivered to the undersigned against payment therefor as
provided by this agreement, will be validly issued, fully paid and
non-assessable, and the issuance of such AKI Shares will not be subject to any
preemptive or similar rights.
(b) To AKI's knowledge, the legal and beneficial
ownership of the common and preferred stock of AKI is as set forth in the Annual
Report. Except as set forth in the Annual Report, AKI is not a party to or
otherwise bound by any agreement, arrangement or understanding relating to the
issuance, sale or transfer of any securities of AKI (including, without
limitation, as relates to options, warrants, or similar rights).
5.4 No Violation. The issuance and sale of the AKI Shares
to the undersigned as contemplated hereby will not violate or conflict with
AKI's Certificate of Incorporation or By-laws or any agreements to which AKI is
a party or by which it is otherwise bound or, to AKI's knowledge, any statute,
rule or regulation (federal, state, local or foreign) to which it is subject.
5.5 Annual Report. AKI has provided the Annual Report to
the undersigned. As of the date hereof, the Annual Report does not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. The financial
statements of AKI included in the Annual Report have been prepared in accordance
with generally accepted accounting principles applied on a consistent basis
during the periods involved (except as may be indicated in the notes thereto)
and fairly present the financial position of AKI as of the dates thereof and the
results of its operations and cash flows for the periods then ended. AKI has
included in the Annual Report all material agreements, contracts and other
documents that it reasonably believes are required to be filed as exhibits to
the Annual Report.
39
<PAGE>
5.6 Incorporation by Reference of Other Representations
and Warranties. Each of the representations and warranties given and made by AKI
to SMI in Article Five of the Acquisition Agreement is incorporated herein by
this reference as representations and warranties given and made by AKI to the
undersigned.
6. Restrictions on Transfer.
6.1 Resale Restrictions. The undersigned understands that
the offer and sale of the AKI Shares to the undersigned has not been registered
or qualified under the Securities Act, any State Laws, or any laws of
jurisdictions outside of the United States. The undersigned agrees not to offer,
sell or otherwise transfer the AKI Shares, or any interest in the AKI Shares,
and agrees that AKI shall be required by this Agreement to refuse to register
any transfer of the AKI Shares, unless made (i) in accordance with the
provisions of Regulation S promulgated under the Securities Act, (ii) pursuant
to registration under the Securities Act, or (iii) pursuant to an available
exemption from registration. The undersigned understands and agrees that AKI may
require the undersigned to furnish an opinion of U.S. counsel reasonably
satisfactory to AKI that the requirements of the preceding sentence have been
satisfied. The undersigned further understands and agrees that hedging
transactions involving the AKI Shares may not be conducted unless in compliance
with the Securities Act.
6.2 Restrictive Legend. The undersigned understands and
agrees that a legend in substantially the following form will be placed on the
certificate representing the AKI Shares:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
UNDER ANY STATE SECURITIES LAWS OR ANY SECURITIES LAWS OF JURISDICTIONS
OUTSIDE OF THE UNITED STATES AND MAY NOT BE OFFERED, SOLD, PLEDGED OR
OTHERWISE TRANSFERRED IN THE UNITED STATES OR TO A "U.S. PERSON," AS
THAT TERM IS DEFINED IN REGULATION S UNDER THE SECURITIES ACT, EXCEPT
(1) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FILED UNDER THE
SECURITIES ACT COVERING THE SECURITIES, OR (2) UPON DELIVERY TO THE
ISSUER OF AN OPINION OF U.S. COUNSEL REASONABLY SATISFACTORY TO THE
ISSUER THAT THE SECURITIES MAY BE TRANSFERRED WITHOUT REGISTRATION
PURSUANT TO (A) RULE 144 OR RULE 904 OF REGULATION S OR (B) ANY OTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS OF THE SECURITIES ACT."
6.3 No Registration; Illiquid Investment. AKI is under no
obligation and has no intention of registering any resale of the AKI Shares by
the undersigned. The undersigned acknowledges that it must bear the economic
risk of its investment in the AKI Shares for an indefinite period of time, until
such time, if ever, that an exemption from registration is available. The
undersigned acknowledges that the soonest that the Rule 144 exemption from
registration could become available would be after the undersigned has paid for
and held the AKI Shares for one year.
40
<PAGE>
7. Reliance. The undersigned understands and agrees that AKI and
its officers, directors, employees and agents may, and will, rely on the
accuracy of the undersigned's representations and warranties in this agreement
to establish compliance with applicable securities laws. The undersigned agrees
to indemnify and hold harmless all such parties against all losses, claims,
costs, expenses and damages or liabilities which they may suffer or incur caused
or arising from their reliance on such representations and warranties.
8. Miscellaneous.
8.1 Survival. The representations and warranties made in
this agreement shall survive the closing of the transactions contemplated by
this agreement.
8.2 Assignment. This Agreement is not transferable or
assignable.
8.3 Execution and Delivery of Agreement. AKI shall be
entitled to rely on delivery by facsimile transmission of an executed copy of
this agreement, and acceptance by AKI of such facsimile copy shall create a
valid and binding agreement between the undersigned and AKI.
8.4 Titles. The titles of the sections and subsections of
this agreement are for the convenience of reference only and are not to be
considered in construing this agreement.
8.5 Severability. The invalidity or unenforceability of
any particular provision of this agreement shall not affect or limit the
validity or enforceability of the remaining provisions of this agreement.
8.6 Entire Agreement. This agreement constitutes the
entire agreement and understanding between the parties with respect to the
subject matters herein and supersedes and replaces any prior agreements and
understandings, whether oral or written, between them with respect to such
matters.
8.7 Waiver and Amendment. Except as otherwise provided
herein, the provisions of this agreement may be waived, altered, amended or
repealed, in whole or in part, only upon the mutual written agreement of the
undersigned and AKI.
8.8 Counterparts. This agreement may be executed in any
number of counterparts, each of which shall be an original, but all of which
together shall constitute one and the same instrument.
8.9 Governing Law. This agreement is governed by and
shall be construed in accordance with the internal law of the State of
California without reference to its rules as to conflicts of law.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
41
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
agreement as of the date first above mentioned.
THE "ISSUER" THE "UNDERSIGNED"
ADVANCED KNOWLEDGE, INC. -------------------------------------------
Name of the undersigned (please type or print)
By:___________________________ -------------------------------------------
Buddy Young, President and Signature and, if applicable, title of person
Chief Executive Officer signing
-------------------------------------------
Number of SMI Shares to be exchanged for AKI
Shares
-------------------------------------------
The undersigned's street address
-------------------------------------------
City, state/province, country and postal code
-------------------------------------------
The undersigned's telephone number
-------------------------------------------
The undersigned's Tax ID Number (if any)
Delivery. The address for delivery of the
certificate representing the AKI Shares is as
follows:
------------------------------------------
------------------------------------------
------------------------------------------
------------------------------------------
42
EXHIBIT 2.5
March 16, 2000
Soccer Magic Inc. and the SMI Shareholders
10 Planchet Road, Unit #21
Concord, Ontario L4K 2C8
Re: Acquisition Agreement by and between Advanced Knowledge, Inc.
and Soccer Magic Inc. dated as of December 14, 1999 (the
"Acquisition Agreement")
Ladies and Gentlemen:
I hereby represent and warrant that all of the representations and
warranties made and given by AKI in Article Five of the Acquisition Agreement
are true, accurate and complete in all material respects as of the date hereof,
except with respect to the effect of transactions in the ordinary course of
business and transactions contemplated or permitted by the Acquisition
Agreement.
Unless otherwise defined, all capitalized terms contained in this
letter shall have the meanings given them in the Acquisition Agreement.
By countersigning below, SMI agrees, for itself and on behalf of its
shareholders, that the remedy of rescission as described in Section 3.06 of the
Acquisition Agreement shall constitute the only available remedy in the event
that the above representation and warranty made and given by me in my individual
capacity in this letter agreement is not true and correct; provided, however,
that this letter agreement shall not be deemed to restrict or qualify the
availability of any remedies for breaches of the representations and warranties
made and given by AKI in the Acquisition Agreement. This letter agreement shall
become effective only upon SMI's acceptance (for itself and on behalf of its
shareholders) by countersigning below.
Sincerely,
/s/ Buddy Young
-------------------
Buddy Young
ACCEPTED AND AGREED this March 16, 2000:
Soccer Magic Inc.
By: /s/ Manny Gross
---------------------
Manny Gross
Chief Executive Officer
43
EXHIBIT 2.6
AMENDMENT AGREEMENT
This Amendment Agreement is dated as of February 14, 2000. Except as
otherwise defined, all terms used herein are as defined in that certain
Acquisition Agreement dated as of December 14, 1999 by and between Advanced
Knowledge, Inc., a Delaware corporation ("AKI"), and Soccer Magic Inc., an
Ontario corporation ("SMI").
1. The documents listed in Section 3 below (the "Documents"),
each of which was executed by one or more of the undersigned as shown in Section
3, was originally prepared with the date "January 14, 2000" for purposes of a
planned closing, which had been scheduled to occur on such date, of the
transactions contemplated by the Acquisition Agreement (the "Transactions"). The
planned closing of the Transactions did not occur on such date, and the
undersigned now wish to change the date of each of the Documents to facilitate a
later closing of the Transactions.
2. The undersigned, as signatories of the Documents as described
in Section 3, hereby agree that the date of each of the Documents of which they
are signatories shall be amended hereby and changed from January 14, 2000 to
March 16, 2000. No other provision of any of the Documents is amended hereby.
3. The Documents and their respective signatories are listed
below:
The Documents Signatories
------------- -----------
Escrow Agreement AKI by Buddy Young
SMI by Manny Gross
Jack L. Chegwidden, a professional
corporation, by Jack L. Chegwidden
Asset Sale Agreement AKI by L. Stephen Albright
Becor Internet, Inc. by Buddy Young
Buddy Young, an individual
SMI by Manny Gross
New Director Resignations Manny Gross, an individual
and New Officer Myron Grunberg, an individual
Resignations described in Brian Rattenbury, an individual
Section 3.02(a)(iii) and (iv)
[REST OF PAGE INTENTIONALLY BLANK]
44
<PAGE>
Closing bringdown Buddy Young, an officer of AKI
certificate described in L. Stephen Albright, an officer of AKI
Section 8.01 of the
Acquisition Agreement
Closing bringdown Manny Gross, an officer of SMI
certificate described in Brian Rattenbury, an officer of SMI
Section 9.01 of the
Acquisition Agreement
Certified resolutions L. Stephen Albright, an officer of AKI
described in Section
8.13 of the Acquisition
Agreement
Certified resolutions Manoj Pundit, an officer of SMI
described in Section
9.11 of the Acquisition
Agreement
Certificate of incumbency Buddy Young, an officer of AKI
described in Section 8.15 L. Stephen Albright, an officer of AKI
of the Acquisition
Agreement
Certificate of incumbency Manny Gross, an officer of SMI
described in Section 9.15
of the Acquisition
Agreement
Officers' Certificate Buddy Young, an officer of AKI
made in connection with L. Stephen Albright, an officer of AKI
an opinion of Miller &
Holguin
Certificate to Chitiz Pundit Manny Gross, an officer of SMI
Pathak & Sokoloff in
support of legal opinions
4. This Amendment Agreement may be executed in one or more
counterparts, each of which may be deemed an original but all of which together
shall constitute one and the same instrument. Delivery of this Amendment
Agreement may be made by facsimile transmission, and the acceptance of such
facsimile transmission shall create a valid and binding agreement.
45
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Amendment
Agreement to be executed as of the day and year first above written.
ADVANCED KNOWLEDGE, INC. SOCCER MAGIC INC.
By: /s/ Buddy Young By: /s/ Manny Gross
--------------------------- -------------------------
Name: Buddy Young Name: Manny Gross
Title: President and Chief Executive Officer Title: Chief Executive Officer
By: /s/ L. Stephen Albright By: /s/ Myron Grunberg
--------------------------- -------------------------
Name: L. Stephen Albright Name: Myron Grunberg
Title: Secretary Title: President
BECOR INTERNET, INC. Jack L. Chegwidden,
a professional corporation
By: /s/ Buddy Young By: /s/ Jack Chegwidden
--------------------------- -------------------------
Name: Buddy Young Name: Jack L. Chegwidden
Title: President and Chief Executive Officer
Signing as officers of AKI: Signing as officers of SMI:
- -------------------------- --------------------------
/s/ Buddy Young /s/ Manny Gross
- -------------------------------- ------------------------------
Buddy Young, President and Manny Gross
Chief Executive Officer Chief Executive Officer
/s/ L. Stephen Albright /s/ Myron Grunberg
- -------------------------------- ------------------------------
L. Stephen Albright, Secretary Myron Grunberg, President
Signing as individuals:
----------------------
/s/ Buddy Young /s/ Myron Grunberg
- -------------------------------- ------------------------------
Buddy Young Myron Grunberg
/s/ Manny Gross /s/ Brian Rattenbury
- -------------------------------- ------------------------------
Manny Gross Brian Rattenbury
46
EXHIBIT 16
April 3, 2000
Securities and Exchange Commission
Division of Corporate Finance
450 5th Street, N.W.
Washington, D.C. 20549
Dear Sir/Madame:
We are addressing this letter in connection with the filing of a Form
8-K to reflect our dismissal as principal accountants for Advanced Knowledge,
Inc., a Delaware corporation, in compliance with Item 304(a)(3) of Regulation
S-B. We agree with the statements made by the Registrant in response to Item
304(a)(1) Regulation S-B as set forth in the attached 8-K.
Sincerely,
/s/ Farber & Hass LLP
Farber & Hass LLP
47
