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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
BECOR COMMUNICATIONS, INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
DELAWARE 7200 95-4766094
(STATE OR JURISDICTION (PRIMARY STANDARD INDUSTRIAL (IRS EMPLOYER
OF INCORPORATION OR CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
ORGANIZATION)
17337 VENTURA BOULEVARD, SUITE 224
ENCINO, CALIFORNIA 91316
(818) 784-0040
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES AND
PRINCIPAL PLACE OF BUSINESS)
BUDDY YOUNG
17337 VENTURA BOULEVARD, SUITE 224
ENCINO, CALIFORNIA 91316
(818) 784-0040
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
COPIES OF COMMUNICATIONS TO:
J. BRAD WIGGINS , ESQ.
CHRISTINA LYCOYANNIS, ESQ.
TORRIE BYERS, ESQ.
MILLER & HOLGUIN
1801 CENTURY PARK EAST, SEVENTH FLOOR
LOS ANGELES, CALIFORNIA 90067
(310) 556-1990
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT
IF THIS FORM IS FILED TO REGISTER ADDITIONAL SECURITIES FOR AN OFFERING
PURSUANT TO RULE 462(B) UNDER THE SECURITIES ACT, PLEASE CHECK THE FOLLOWING BOX
AND LIST THE SECURITIES ACT REGISTRATION STATEMENT NUMBER OF THE EARLIER
EFFECTIVE REGISTRATION STATEMENT FOR THE SAME OFFERING. / /
IF THIS FORM IS A POST-EFFECTIVE AMENDMENT FILED PURSUANT TO RULE 462(C)
UNDER THE SECURITIES ACT, CHECK THE FOLLOWING BOX AND LIST THE SECURITIES ACT
REGISTRATION STATEMENT NUMBER OF THE EARLIER EFFECTIVE REGISTRATION STATEMENT
FOR THE SAME OFFERING. / /
IF THIS FORM IS A POST-EFFECTIVE AMENDMENT FILED PURSUANT TO RULE 462(D)
UNDER THE SECURITIES ACT, CHECK THE FOLLOWING BOX AND LIST THE SECURITIES ACT
REGISTRATION STATEMENT NUMBER OF THE EARLIER EFFECTIVE REGISTRATION STATEMENT
FOR THE SAME OFFERING. / /
IF DELIVERY OF THE PROSPECTUS IS EXPECTED TO BE MADE PURSUANT TO RULE 434,
PLEASE CHECK THE FOLLOWING BOX. / /
<PAGE>
CALCULATION OF REGISTRATION FEE
-------------------------------------------------------------------------------
PROPOSED PROPOSED
TITLE OF MAXIMUM MAXIMUM
EACH CLASS OFFERING AGGREGATE AMOUNT OF
OF SECURITIES AMOUNT PRICE OFFERING REGISTRATION
TO BE REGISTERED TO BE REGISTERED PER UNIT PRICE FEE
--------------------------------------------------------------------------------
Common stock 3,200,000 shares $0.20 $640,000 $168.96
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
PROSPECTUS
Dated September 20, 2000 Subject to Completion
$600,000
BECOR COMMUNICATIONS, INC.
3,000,000 SHARES OF COMMON STOCK
We are offering up to 3,000,000 shares of our common stock for $0.20 per
share. This is the initial public offering of our common stock. Our sole
stockholder is also offering up to an additional 200,000 shares of common stock
in private transactions at negotiated prices. We will not receive any proceeds
from the sale of those shares.
We are making this offering on a best-efforts basis and are not required to
sell any minimum number or dollar amount of shares. Investor funds will not be
deposited in any escrow, trust or similar account and will be available for our
immediate use. We do not plan to use any underwriter or broker-dealer to assist
in this offering. The offering may continue for up to two years from the date of
this prospectus.
There is no public market for our common stock. We plan to seek to have our
common stock quoted for trading on either the OTC Bulletin Board or the Pink
Sheets Electronic Quotation Service, but we cannot guarantee that our
applications will be accepted or that an active trading market for our common
stock will ever develop.
Our principal office is located at 17337 Ventura Boulevard, Suite 224,
Encino, California 91316, and our telephone number is (818) 784-0040.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE
MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE.
AN INVESTMENT IN THESE SECURITIES IS RISKY. YOU SHOULD PURCHASE THESE
SECURITIES ONLY IF YOU CAN AFFORD TO LOSE YOUR ENTIRE INVESTMENT. SEE "RISK
FACTORS" BEGINNING ON PAGE 3 FOR A DISCUSSION OF FACTORS YOU SHOULD CONSIDER
BEFORE YOU INVEST IN THESE SECURITIES.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF DISCLOSURES IN THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
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PRICE TO OFFERING PROCEEDS
PURCHASERS EXPENSES TO COMPANY
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Per share........................ $0.20 $0.02 $0.18
Aggregate(1)..................... $600,000 $60,000 $540,000
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(1) Assumes the sale of all 3,000,000 shares of common stock we are offering.
Does not include the 200,000 shares of common stock offered by the selling
stockholder.
This prospectus is dated ________, 2000.
1
<PAGE>
TABLE OF CONTENTS
PAGE
Risk Factors .............................................................. 3
Caution About Forward-Looking Statements .................................. 6
Use of Proceeds ........................................................... 7
Dilution .................................................................. 8
Market for Common Equity and Related Stockholder Information .............. 9
Determination of Offering Price ........................................... 10
Unaudited Pro Forma Consolidated Statements of Operations ................. 11
Management's Discussion and Analysis or Plan of Operation ................. 13
Business .................................................................. 15
Management ................................................................ 24
Certain Relationships and Related Transactions ............................ 27
Principal Stockholders and Selling Stockholder ............................ 28
Plan of Distribution ...................................................... 29
Description of Securities ................................................. 30
Disclosure of Commission Position on Indemnification for
Securities Act Liabilities .............................................. 30
Legal Matters ............................................................. 30
Experts ................................................................... 31
Where You Can Find More Information ....................................... 31
Index to Consolidated Financial Statements ................................ F-1
We have not authorized anyone to give you any information or make any
representations other than those contained in this prospectus. You should rely
only on the information and representations given in this prospectus.
The information included in this prospectus is subject to change; however,
we will be required to provide you with an amended prospectus or a prospectus
supplement to inform you of any change that is material to an investment
decision.
We reserve the right to reject any offer to purchase shares.
This prospectus is not an offer to sell or a solicitation of an offer to
buy securities in any state or other jurisdiction where such an offer or
solicitation would be unlawful. Shares will be distributed in this offering only
in the State of New York and in the Province of Ontario.
DEALER PROSPECTUS DELIVERY OBLIGATION
UNTIL ________, 2000 [90 DAYS AFTER THE DATE OF THIS PROSPECTUS], ALL
DEALERS EFFECTING TRANSACTIONS IN THESE SECURITIES, WHETHER OR NOT PARTICIPATING
IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION
TO THE DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS
AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
2
<PAGE>
RISK FACTORS
An investment in shares of Becor Communications common stock involves a
high degree of risk. You should carefully consider the following factors and the
other information contained in this prospectus before deciding to invest.
OUR LIMITED OPERATIONS AND OPERATING HISTORY MAKE IT DIFFICULT TO PREDICT
WHETHER OR NOT WE WILL BE SUCCESSFUL. We have had limited operations and a brief
operating history, which will make it more difficult and riskier for you to try
to gauge our prospects for success. We formed our company on June 7, 1999 and
commenced operations on March 20, 2000, when we acquired substantially all of
the assets and liabilities relating to the workforce training video business of
Sporting Magic Inc., formerly known as Advanced Knowledge, Inc. Before we
acquired the assets and liabilities of Sporting Magic, that company had been
controlled by our sole stockholder and had had the same officers and directors
that we now have. Sporting Magic began its workforce training video business
operations in January 1998 and therefore also had only a brief operating history
prior to the time we acquired its assets and liabilities. We have included in
this prospectus the financial statements of Sporting Magic, under its former
name, as of August 31, 1999 and for the fiscal years ended August 31, 1999 and
1998 and as of February 29, 2000 and for the three months and six months ended
February 29, 2000 and 1999. You should evaluate our chances of operational and
financial success in view of the risks, uncertainties, delays and difficulties
associated with developing and expanding a new business, many of which may be
beyond our control.
OUR HISTORY OF LIMITED REVENUES AND SIGNIFICANT NET LOSSES IS LIKELY TO
CONTINUE AND COULD JEOPARDIZE OUR ABILITY TO CONTINUE AS A GOING CONCERN. For
the fiscal year ended May 31, 2000, we received total revenues of $35,596 and
had a net loss of $227,545. Giving effect to the acquisition of Sporting Magic's
assets and liabilities as if it had taken place on June 1, 1999, our pro forma
total revenues for the same period were $212,856 and our pro forma net loss for
the same period was $388,986. Before we acquired our assets and liabilities from
Sporting Magic, Sporting Magic also had a history of significant losses. As we
continue to develop our business, our expenses are likely to continue to exceed
our revenues for an indeterminate period. Until such time, if ever, that we are
able to become profitable, our ability to continue as a going concern will
depend on our ability to continue to obtain financing from our sole stockholder,
from this offering, and from other sources. Accordingly, the report of our
independent auditors contains a "going concern" qualification.
OUR OPERATIONS WILL REQUIRE OUTSIDE FINANCING THAT MAY NOT BE AVAILABLE TO
US OR MAY NOT BE AVAILABLE ON FAVORABLE TERMS. We believe that revenues from our
operations, together with the proceeds from this offering, will be sufficient to
fund our operations for at least the next 12 months, provided that we meet sales
expectations and are able to sell all of the shares that we propose to sell in
this offering. If we sell fewer shares than we are offering, we anticipate that
we will still be able to satisfy our current cash requirements by receiving
voluntary advances from our president under an existing $300,000 credit
facility. However, since our president is not legally required to advance funds
under the credit facility and does so strictly on a voluntary basis, we cannot
be certain that we will receive any needed financing from that source. If our
president is unable or unwilling to advance additional funds under the credit
facility, we may be required to seek additional equity or
3
<PAGE>
debt financing from other sources, which may not be available on favorable terms
or at all. Any equity financing we might obtain could cause substantial dilution
to our existing stockholders. Any debt financing we might obtain would increase
our leverage and add to our need for cash to service the debt. If funding is not
available from any of these sources to meet our needs, we may be required to
scale back our planned operations accordingly.
OUR ABILITY TO ACHIEVE A PROFIT COULD BE IMPEDED BY COMPETITIVE PRICING
WITHIN OUR INDUSTRY AND BY OUR LIMITED NAME RECOGNITION. Many of our current and
potential competitors have substantially greater financial, technical, sales,
marketing and managerial resources, as well as greater name recognition, than we
do. Many competitors are therefore better positioned to succeed in the workforce
training market than we are, because they are better known and have the means to
adapt to competitive pricing within our industry. We expect to face increasing
price pressures from competitors as company training managers demand more value
for their training budgets. These conditions could prevent us from ever
achieving profitability.
WE MAY NOT BE ABLE TO ADAPT SUCCESSFULLY TO MEET EVOLVING MARKET DEMANDS
WITHIN OUR INDUSTRY. Traditionally, many of our customers have used instructors,
written materials or videos to conduct workplace training classes and seminars.
We expect that some of our customers will rely increasingly on technology-based
delivery methods such as CD-ROM, intranets, the Internet and other
distance-based media. If we are unable to anticipate and keep pace with
technological changes in our industry, our ability to compete could diminish and
our operating results could decline.
THE GROWTH OF OUR BUSINESS DEPENDS ON THE CONTINUING VIABILITY AND
EFFECTIVENESS OF OUR DIRECT MAIL AND TELEMARKETING SALES SYSTEMS. Our marketing
and promotion programs rely heavily on direct mail programs and telephone
solicitation. An interruption in mail delivery or telephone service could
significantly reduce our marketing efforts and could have a material adverse
impact on our operating results. Additionally, although telemarketing as a form
of direct marketing has grown significantly in the last several years, advances
in new forms of direct marketing, such as the development of interactive
commerce through television, computer networks (including the Internet) and
other media, could have an adverse effect on the effectiveness of telemarketing.
In addition, the effectiveness of both direct mail and telemarketing as direct
marketing tools may decrease as a result of consumer saturation and consumer
resistance in general. Any material decline in the effectiveness of direct mail
and telemarketing advertising in reaching our targeting market or in generating
responses from prospective customers would have a material adverse effect on our
business and results of operations.
OUR BUSINESS COULD BE DISPROPORTIONATELY AFFECTED BY GENERAL DOWNTURNS IN
THE ECONOMY. If there is a general economic downturn or a recession in the
United States, we anticipate that one of the first measures that our customers
and potential customers might take is to reduce their budgets for, or delay
implementation of, workforce training instruction programs. This could have a
disproportionate impact on our business.
IF WE WERE TO LOSE THE SERVICES OF OUR CURRENT MANAGEMENT, WE MIGHT NOT BE
ABLE TO FIND SUITABLE REPLACEMENTS. Our future success depends in large part on
the continued service of Buddy Young, our president and chief executive officer,
and Howard Young, our vice president.
4
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The loss of the services of these key individuals could have a material adverse
effect on our business. Competition for qualified personnel is intense and there
are a limited number of people with knowledge of and experience in the workforce
training video industry. If we were to lose the services of these key people, we
might not be able to find qualified replacements and could be required to make
significant changes to our business.
WE MAY NOT BE ABLE TO ADEQUATELY PROTECT OUR RIGHTS TO THE TRAINING VIDEOS
THAT WE PRODUCE AND DISTRIBUTE, WHICH COULD SUBJECT US TO UNFAIR COMPETITION AND
PROHIBITIVE LEGAL COSTS. We regard the content of our videos as proprietary and
rely on a combination of statutory and common law copyright, trademark and trade
secret laws, confidentiality procedures, and contractual provisions to protect
our proprietary rights. Despite these precautions, a third party could copy or
otherwise obtain our training videos and use them without authorization, or
could develop videos independently which are substantially similar to ours. If
any third party were to violate our intellectual property rights, we could
suffer from their unfair competition in the marketplace, and we may not be able
to take effective legal action against them to defend our rights because the
cost of doing so could be prohibitive.
WE MAY BE SUBJECT TO LAWSUITS ALLEGING THAT WE HAVE INFRINGED ON THE
PROPRIETARY RIGHTS OF OTHERS. Third parties may claim that our current or future
workforce training products infringe on the proprietary rights of others. The
risk of an infringement claim is increasing as the number of workforce training
products and competitors increases. Defensive litigation regarding intellectual
property rights could be expensive and time consuming for our management,
diverting their attention from our regular business.
YOU MAY NOT BE ABLE TO SELL SHARES THAT YOU BUY IN THIS OFFERING, BECAUSE A
PUBLIC TRADING MARKET FOR OUR STOCK CURRENTLY DOES NOT EXIST AND MAY NEVER
DEVELOP. Before this offering, no public trading market existed for our common
stock. We plan to seek to have our stock quoted for trading on either the OTC
Bulletin Board or the Pink Sheets Electronic Quotation Service, but we cannot
guarantee that our applications will be accepted or that, if accepted, an active
trading market in our stock will develop. The failure to develop an active
trading market could also result in volatile prices for our stock. If we are
unable to develop an active, stable public trading market for our common stock
on the OTC Bulletin Board, the Electronic Quotation System or otherwise, you may
not be able to resell the common stock you buy in this offering.
OUR COMMON STOCK IS SUBJECT TO "PENNY STOCK" REGULATION, WHICH COULD MAKE
IT MORE DIFFICULT FOR AN ACTIVE, LIQUID MARKET TO DEVELOP IN THE STOCK AND COULD
PREVENT YOU FROM SELLING ANY SHARES YOU BUY IN THIS OFFERING. Penny stocks are
equity securities that have a price of less than $5.00 and are not registered on
certain national securities exchanges or quoted on the Nasdaq system. Our common
stock is currently a penny stock and will probably remain a penny stock for the
foreseeable future, because the offering price of the common stock in this
offering is substantially less than $5.00 per share and we do not qualify for an
exemption from the SEC's penny stock rules. The penny stock rules regulate
broker-dealer practices in connection with transactions in penny stock. These
regulations could make it more difficult for an active, liquid market in our
common stock to develop and could prevent you from selling shares you purchase
in this offering. These rules require any broker-dealer engaging in transactions
in penny stocks to first provide to its customer a series of disclosures and
documents, including:
5
<PAGE>
o a standardized risk disclosure document identifying the risks inherent
in investment in penny stocks;
o all compensation received by the broker-dealer in connection with the
transaction;
o current quotation prices and other relevant market data; and
o monthly account statements reflecting the fair market value of the
securities.
In addition, these rules require that a broker-dealer obtain financial and other
information from its customer, determine that transactions in penny stocks are
suitable for the customer, and deliver a written statement to the customer
setting forth the basis for that determination. These extensive requirements
could cause some broker-dealers and their customers to limit their involvement
in penny stock transactions or to avoid them altogether.
CAUTION ABOUT FORWARD-LOOKING STATEMENTS
This prospectus contains statements that are forward-looking statements as
defined in Section 21E of the Securities Exchange Act of 1934 and Section 27A of
the Securities Act of 1933. The words "expect," "estimate," "anticipate,"
"predict," "believe," "plan," "intend" and similar expressions and variations of
these words are intended to identify forward-looking statements. These
forward-looking statements appear in a number of places in this prospectus and
include statements regarding:
o our intent or current expectations regarding our strategies, plans and
objectives;
o our ability to develop and market products;
o our product release schedules; and
o the ability of our products to achieve or maintain commercial
acceptance.
Forward-looking statements are not guarantees of future performance and
involve risks and uncertainties. Actual results may differ materially from those
projected in this prospectus, for the reasons, among others, described in the
Risk Factors beginning on page 3. You should read the Risk Factors carefully and
should not place undue reliance on any forward-looking statements, which speak
only as of the date of this prospectus.
6
<PAGE>
USE OF PROCEEDS
The following table describes how we plan to allocate the proceeds of this
offering, assuming we sell all of the 3,000,000 shares of common stock we are
offering:
Gross proceeds $600,000
Estimated offering expenses (e.g.,
printing and mailing costs,
legal and accounting fees, SEC
registration fee, and blue sky fees) 60,000
--------
Estimated net proceeds 540,000
Estimated uses of proceeds
Production of new videos $200,000
Marketing and sales expenses 150,000
General working capital 190,000
---------
$540,000
========
If we sell fewer than 3,000,000 shares, we plan to allocate the net
proceeds toward each proposed use in about the same proportions as we would if
we sold the entire offering.
Assuming the sale of 3,000,000 shares in the offering, we believe that the
net proceeds of the offering will be sufficient to cover our existing capital
needs for at least the next twelve months. If we sell fewer than 3,000,000
shares, we may be required to seek financing from other sources or scale back
our business plans accordingly.
7
<PAGE>
DILUTION
The following table shows the differences in total consideration paid and
average price per share of common stock paid by our existing stockholder and by
new investors in this offering. The table assumes that we sell various
percentages of the shares offered. Although our existing stockholder plans to
sell up to 200,000 of its shares under this prospectus, the sale of those shares
will not result in any dilution to new investors who purchase common stock from
Becor Communications in this offering.
<TABLE>
<CAPTION>
PERCENTAGE AVERAGE
TOTAL OF TOTAL PRICE
PERCENT CONSIDER- CONSIDER- PAID
NUMBER OF OF SHARES ATION ATION PER
SHARES PURCHASED PAID PAID SHARE
--------- --------- -------- ---------- -------
<S> <C> <C> <C> <C> <C>
If we sell
1,000,000 (33%
of the Shares
-------------
Existing stockholder . 1,250,000 55.6% $100,250 33.3% $0.08
New investors ........ 1,000,000 44.4% $200,000 66.7% $0.20
Total ........... 2,250,000 100.0% $300,250 100.0% $0.13
If we sell
2,000,000 (67%
of the Shares
-------------
Existing stockholder . 1,250,000 38.5% $100,250 20.0% $0.08
New investors ........ 2,000,000 61.5% $400,000 80.0% $0.20
Total ........... 3,250,000 100.0% $500,250 100.0% $0.15
If we sell
3,000,000 (100%
of the Shares
-------------
Existing stockholder . 1,250,000 29.4% $100,250 14.3% $0.08
New investors ........ 3,000,000 70.6% $600,000 85.7% $0.20
Total ........... 4,250,000 100.0% $700,250 100.0% $0.16
</TABLE>
The following table shows the dilution of net tangible book value per share
assuming we sell different numbers of shares of common stock in this offering.
Net tangible book value per share represents the amount of our total assets
($69,921 as of May 31, 2000) less the amount of our intangible assets and
liabilities ($197,216 as of May 31, 2000), divided by the number of shares of
common stock outstanding (1,250,000 as of May 31, 2000).
8
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES SOLD
---------------------
1,000,000 2,000,000 3,000,000
--------- --------- ---------
<S> <C> <C> <C>
Offering price per share of common stock .... $ 0.20 $ 0.20 $ 0.20
Net tangible book value per share
as of May 31, 2000 ...................... $ (0.10) $ (0.10) $ (0.10)
Increase in net tangible book value
per share attributable to new investors . $ 0.13 $ 0.18 $ 0.21
Pro forma net tangible book value per share
as of May 31, 2000 after the offering ... $ 0.03 $ 0.08 $ 0.11
Per share immediate dilution of net tangible
book value per share to new investors ... $ 0.17 $ 0.12 $ 0.09
</TABLE>
MARKET FOR COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
NO PUBLIC MARKET
There is currently no public market for our common stock. When we receive
notice from the SEC that this registration statement has become effective, we
will seek to have our stock quoted for trading on either the NASD's
over-the-counter Bulletin Board system or the Pink Sheets Electronic Quotation
Service. There can be no assurance that this registration statement will be
declared effective by the Commission or that we will qualify to have our stock
quoted on the OTC Bulletin Board system, the Pink Sheets Electronic Quotation
System or any stock exchange or stock market.
REVERSE SPLIT
On August 30, 2000, we completed a one-for-four reverse split of our common
stock. The 5,000,000 shares that had been outstanding on that date were
converted into a total of 1,250,000 shares as a result of the reverse split.
Unless otherwise indicated, all references in this prospectus to shares of our
common stock have been restated to give effect to the reverse split.
HOLDERS
The Young Family Trust is the sole owner of our common stock. As of August
31, 2000, a total of 1,250,000 shares of our common stock were outstanding. We
currently have no outstanding options or warrants for the purchase of our common
stock and have no securities outstanding which are convertible into common
stock. We have not yet adopted or developed any plans to adopt any stock option,
stock purchase or similar plan for our employees.
The shares held by the Trust may become eligible for resale pursuant to
Rule 144 under the Securities Act in limited quantities beginning as early as
April 4, 2001, provided that adequate current public information about us is
available at that time as required by Rule 144.
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<PAGE>
DIVIDEND POLICY
We have not declared or paid any cash dividends on our common stock and do
not anticipate paying dividends in the foreseeable future.
DETERMINATION OF OFFERING PRICE
We have arbitrarily set the offering price for our common stock. The
offering price does not bear any direct relationship to our book value,
contemplated earnings or any other objective standard of worth. No public market
exists for shares of our common stock, and so we have no history of market
prices to use as a measure of the value of the shares we are offering.
The selling stockholder will offer its shares of common stock at arbitrary
prices (which may include sales for no cash consideration) in individually
negotiated transactions.
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<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
The unaudited pro forma consolidated statements of operations presented
below are based on our consolidated financial statements, giving effect to the
assumption and adjustment set forth in the footnote. The pro forma statements of
operations have been prepared by management based on our historical financial
statements and the historical financial statements of Sporting Magic Inc.,
formerly known as Advanced Knowledge, Inc., as of and for the period ended May
31, 2000, adjusted where necessary to reflect our acquisition of substantially
all of the workforce training assets and liabilities of Sporting Magic, which
occurred on March 20, 2000, and related operations as if the acquisition had
been consummated at the beginning of the period presented. The pro forma
consolidated financial information is presented for illustrative purposes and it
does not purport to represent what our consolidated results of the operations
for the periods presented would have been had the acquisition been consummated
as of such dates and is not indicative of the results that may be obtained in
the future.
<TABLE>
<CAPTION>
Sporting
Becor Magic(1)
Communications, Period
Inc. June 1, Year Ended
Year Ended 1999 to Business May 31, 2000
May 31, 2000 March 19, Combination Pro Forma
Actual 2000 Adjustment Combined
-------------- --------- ----------- -------------
<S> <C> <C> <C> <C>
Net sales ............... $ 35,596 $ 177,260 $ 212,856
Cost of goods sold ...... 8,053 58,164 66,217
--------- --------- ---------
Gross profit ............ 27,543 119,096 146,639
--------- --------- ---------
Selling and
marketing expenses ... 21,883 101,394 123,277
General and
administrative
expenses ............. 27,062 273,912 300,974
--------- --------- ---------
Total expenses .......... 48,945 375,306 424,251
--------- --------- ---------
Operating loss .......... (21,402) (256,210) (277,612)
---------
Interest and other
expense, net ......... (205,343) (10,516) $ 106,785(2) (109,074)
--------- --------- ---------
Loss before income
tax provision ........ (226,745) (266,726) (386,686)
Income tax provision .... 800 1,500 2,300
--------- --------- ---------
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Sporting
Becor Magic(1)
Communications, Period
Inc. June 1, Year Ended
Year Ended 1999 to Business May 31, 2000
May 31, 2000 March 19, Combination Pro Forma
Actual 2000 Adjustment Combined
-------------- -------- ----------- -------------
<S> <C> <C> <C> <C>
Net loss ................ $(227,545) $(268,226) $(388,986)
========= ========= =========
Basic loss per share .... $ (0.31)
=========
Weighted average
common shares
outstanding - basic ... 1,250,000
=========
-----------------
(1) Formerly known as Advanced Knowledge, Inc.
(2) Gives effect to the reduction in impairment of goodwill, as if the
acquisition of Sporting Magic Inc.'s assets and liabilities had taken place
on June 1, 1999.
</TABLE>
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION
GENERAL
On August 30, 2000, we completed a one-for-four reverse split of our common
stock. Unless otherwise indicated, all references in this prospectus to shares
of our common stock have been restated to give effect to the reverse split.
We have set forth below our plan of operation, because we have been in
existence for only one fiscal year and therefore are not able to provide any
period-to-period comparison of results of operations or changes in financial
condition.
PLAN OF OPERATION
We will continue marketing the workforce video library that we purchased
from Sporting Magic Inc. in March 2000. During the current fiscal year we plan
to expand our video library by devoting a significant portion of our available
resources toward the production and marketing of up to three new training
videos. We estimate that our marketing and production costs during fiscal 2001
will be approximately $350,000. During the fiscal year, we also plan to increase
the number of our full-time employees from two to four and the number of our
part-time employees from one to two. Currently, we are actively engaged in the
development of our sales force for educational/training videos in order to
generate sales, income and revenue.
We also intend to seek potential business opportunities with a view toward
enhancing stockholder value. Such opportunities might include acquisitions,
mergers, joint ventures or other transactions, whether in related or unrelated
businesses. Currently we have no written or oral agreement, plan, arrangement or
understanding to enter into any such transaction.
LIQUIDITY
We are a development stage company with a limited operating history and a
history of net losses. Sporting Magic, the company from which we acquired our
business, also had a limited history and experienced significant net losses. Our
auditors have indicated in their report that our losses raise substantial doubt
about our ability to continue as a going concern.
We have a credit arrangement with our president, pursuant to which he has
agreed to advance, at his discretion, up to $300,000 for our operating expenses
and the production of training videos, under the terms of an 8% secured
promissory note and a related security agreement. As of August 31, 2000, we owed
our president a total of $184,990 in principal and interest under the note. The
note is collateralized by all of our right, title and interest in and to our
video productions and projects, regardless of their stage of production,
including all related contracts, licenses, and accounts receivable. Any unpaid
principal and interest under the Note will be due and payable on December 31,
2001.
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We expect that cash from operations and proceeds from the sale of common
stock in this offering will be sufficient to satisfy our budgeted cash
requirements for at least the next 12 months, provided that we meet sales
expectations and are able to sell all of the shares of common stock that we are
offering. If we sell fewer shares than offered, we may still be able to satisfy
our current cash requirements by borrowing additional funds under the note from
our president. However, if our president is unable or unwilling to advance
additional funds under the note, we may be required to seek additional equity or
debt financing from other sources, which may not be available on acceptable
terms. Further, our ability to pursue any business opportunity that requires us
to make a cash payment would also depend on the amount of funds that we can
secure from these various sources. If funding is not available from any of these
sources to meet our needs, we will either delay production of one or more of our
planned videos, delay any business transaction requiring the payment of cash, or
both.
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BUSINESS
DEVELOPMENT OF BUSINESS
We were incorporated in Delaware on June 7, 1999 under the name "Becor
Internet Inc." and changed our name to "Becor Communications, Inc." on May 15,
2000. We were an inactive shell corporation until March 20, 2000, when we
purchased from Sporting Magic Inc. (formerly known as Advanced Knowledge, Inc.)
all of the assets relating to its business of producing and distributing
workforce training videos. Sporting Magic sold us those assets after acquiring a
new business and new management. Our directors and officers served as directors
and officers of Sporting Magic before the asset sale.
The assets we purchased from Sporting Magic included all rights to the
"Advanced Knowledge" name; the advancedknowledge.com web site; three workforce
training videos entitled "Twelve Angry Men: Teams That Don't Quit," "The Cuban
Missile Crisis: A Case Study in Decision Making and Its Consequences," and "It's
a Wonderful Life: Leading Through Service;" and all cash, accounts receivable,
inventory, equipment, personal property, and rights under production and
distribution agreements held by Sporting Magic as of the effective time of the
acquisition. In exchange for the assets, we assumed all of the liabilities
incurred or accrued by Sporting Magic before the effective time of the
acquisition.
We have assigned all of the Sporting Magic assets and liabilities to our
wholly-owned Delaware subsidiary, which we formed on March 24, 2000 and which
has adopted the Advanced Knowledge name. Our subsidiary currently focuses
exclusively on the workforce training video business.
We plan to continue to develop our business through continued internal
growth and also by seeking possible business opportunities, such as mergers,
acquisitions, and joint ventures. However, we currently have no agreement, plan
or proposal for any specific business opportunity.
DESCRIPTION OF BUSINESS
Our core business is the development, production and distribution of
creatively unique management and general workforce training videos for use by
businesses throughout the world.
Hathaway Group Production Agreement
We have assumed all of the rights and obligations of Sporting Magic under
an agreement with The Hathaway Group, which provides for the joint production of
a series of six corporate training videos based on either classic Hollywood
motion pictures or historical world events. The Hathaway Group is an
award-winning, leading supplier of corporate training videos for such clients as
IBM, Polaroid, 3M, Digital Equipment Corp., Du Pont, ITT/Hartford Insurance and
various divisions of Citicorp. Among the many videos produced by The Hathaway
Group is the best selling and critically acclaimed training video entitled "Work
Teams and The Wizard of Oz."
We own the distribution rights to the first three training videos in the
series, which were previously produced under this agreement. The agreement
requires us to finance 50% of the
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production cost of three additional videos in the series and to pay a royalty to
The Hathaway Group based on a specified percentage of revenues derived from
sales of each video in the series.
The first video in the series is entitled "Twelve Angry Men: Teams That
Don't Quit." The video, based on the classic film starring Henry Fonda, utilizes
12 minutes of clips from the film, licensed under an agreement with MGM/UA, and
features Dr. Margaret J. Wheatley as the on-camera personality. Dr. Wheatley,
formerly an Associate Professor of Management at the Marriott School of
Management, Brigham Young University, is a respected author whose work includes
the best selling "Leadership and the New Sciences." Dr. Wheatley also serves as
a management consultant to major corporations.
The second video in the series is entitled "The Cuban Missile Crisis: A
Case Study in Decision Making and Its Consequences." This video is based on the
decision making process of President Kennedy and his Cabinet during the Cuban
missile crisis.
The third video in the series, entitled "It's a Wonderful Life: Leading
Through Service," features film clips from the classic motion picture It's a
Wonderful Life, starring Jimmy Stewart, along with on-camera commentary by Dr.
Wheatley.
The fourth video, which is currently in production, is entitled "Own It"
(i.e., "own" your job) and will focus on three main themes: customer service,
productivity and teamwork.
AIMS Multimedia Distribution Agreement
We have also assumed all of the rights and obligations of Sporting Magic
under an agreement with AIMS Multimedia, a recognized leader in the production
and distribution of educational and training films. Under this agreement, we
hold non-exclusive distribution rights to the AIMS Multimedia Business and
Industry library. The film library contains more than 200 titles, many of which
have won awards. The programs cover a broad spectrum of topics, ranging from
management training and development to safety in the workplace. We will pay AIMS
a 45% royalty on all revenues derived from the sale of titles in the Business
and Industry library.
Other Distribution Agreements
In addition to the AIMS Multimedia distribution agreement described above,
we have some non-exclusive distribution agreements with a variety of training
video producers and distributors. In general, we have agreed to pay a
marketing/distribution fee when they sell our video training products. In some
instances, we have mutual non-exclusive distribution agreements to market/
distribute their products for a fee. Currently, we have 24 domestic distribution
agreements and 22 international distribution agreements.
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WORKFORCE TRAINING INDUSTRY OVERVIEW
General
According to a report published by Lakewood Publications in the October
1999 issue of its respected industry publication, "Training Magazine:"
o $62.5 billion was budgeted for formal training in 1999 by U.S.
organizations with 100 or more employees.
o $15 billion of that $62.5 billion was expected to be spent on outside
providers of products and services in 1999 and of this $15 billion,
$23 billion will be spent on "off-the-shelf" materials (which category
includes our videos and work books).
o U.S. organizations with 100 or more employees were expected to spend
3% more for formal training in 1999 than in 1998.
o Approximately 95% of U.S. organizations employing 100 or more
employees offered some training to their employees in 1999.
o Since 1993, total training budgets have increased by 24% while budgets
for "off-the-shelf" materials have increased by 29%.
o Of all training, 69% is still conducted via videotape. The only two
other methods/media which were used more are "classroom programs -
live" at 90% and "workbooks/manuals" at 74%.
During the past several years, large and small corporations throughout the
world have sought to remain competitive and to prosper in today's information
age and knowledge-orientated economy by allocating an increasing amount of
resources to the training of their employees. No longer is workforce training
restricted to senior managers. Among other categories of employees who now
receive training paid for by their employers are middle managers, salespeople,
first line supervisors, production workers, administrative employees, customer
service representatives, and information technology personnel.
"Soft-Skill" training and Information Technology training represent the
industry's two major, distinct sources of revenue. Soft-Skill training includes
management skills/development, supervisory skills, communication skills, new
methods and procedures, customer relations/services, clerical/secretarial
skills, personal growth, employee/labor relations, and sales. Information
Technology training includes client/server systems, internet/intranet
technologies, computer networks, operating systems, databases, programming
languages, graphical user interfaces, object-oriented technology and IT
management.
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The Soft Skill Training Market
As reported in the October 1999 issue of "Training Magazine," Soft Skill
training represents 67% of the $62.5 billion spent by U.S. companies in the
training of their employees. Management believes that the Soft-Skill training
market is rapidly expanding mainly as a result of realization by organizations
throughout the world that in order to remain competitive and manage for success,
they must continuously invest in the training of their employees. Demand for
quality training products and services is not only stemming from organizations,
but from millions of workers who are seeking advanced training to keep up with
the job skills required by today's more competitive global economy.
As further reported by "Training Magazine," there were thirty different
specific Soft-Skill training subjects utilized by organizations in 1999 to
increase employee productivity. The top ten subjects were: new-employee
orientation, leadership, sexual harassment, new-equipment orientation,
performance appraisals, team-building, safety, problem-solving/decision-making,
train-the-trainer, and product knowledge.
We have produced and are marketing training tapes which address three
categories of the top ten categories listed in "Training Magazine." These three
tapes address: leadership (ranked 2nd) for which 81% of the employers provided
training; team-building (ranked 6th) for which 77% of the employers provided
training; and problem solving/decision-making (ranked 8th) for which 76% of the
employers provided training. These three categories match the focus of the three
tapes in our current library. New-employee orientation ranked first with 92%,
sexual harassment ranked third with 81% and new-equipment orientation ranked
fourth at 80%. We intend to develop and produce sexual harassment tapes in the
near future. Currently, we believe that new-employee orientation and
new-equipment orientation require too much individualized modification to merit
any effort to enter those markets.
Although many organizations continue to maintain in-house training
departments, more and more of the training function is being filled by outside
suppliers and contractors. "Training Magazine" reported in its October 1999
issue that since 1993, expenditures for outside training products and services
have increased from $9.9 billion to $15 billion in 1999. The trend for
organizations to increasingly outsource the training function is expected to
continue as a result of the broad range of subjects that must be part of an
effective employee training program and the cost of developing and maintaining
internal training courses in the rapidly changing workplace.
The Information Technology Market
Of all formal training in U.S. organizations with ten or more employees,
33% of that training is devoted to teaching computer skills. We believe that the
market for Information Technology continues to be driven by technological
change. As the rate of this change accelerates, organizations find themselves
increasingly hampered in their ability to take advantage of the latest
information technologies because their information technology professionals lack
up-to-date knowledge and skills. We believe that the increasing demand for
training information technology professionals is a result of several key
factors, including:
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o the proliferation of computers and networks throughout all levels of
organizations;
o the shift from mainframe systems to new client/server technologies;
o the continuous introduction and evolution of new client/server
hardware and software technologies;
o the proliferation of internet and intranet applications; and
o corporate downsizing.
All of the foregoing have resulted in increased training requirements for
employees who must perform new job functions or multiple job tasks that require
knowledge of varied software applications, technologies, business specific
information and other training topics. Furthermore, since many businesses use
hardware and software products provided by a variety of vendors, their
information technology professionals require training on an increasing number of
products and technologies which apply across vendors, platforms and operating
systems.
While approximately 63% of the training for information technology
professionals continues to be provided by internal training departments, an
increase from 55% in the prior year, this percentage remains constant regardless
of company size or industrial categories. Further, the 37% delivered by outside
sources is consistent with almost one-third outsourcing of all training sources
in 1999. A proportion which has remained constant since 1997.
PRODUCTS AND SERVICES
Currently, and for at least the next twelve months, we anticipate devoting
our limited resources to the development, production and distribution of
workforce training videos. We will continue such efforts under our agreement
with The Hathaway Group, and we are also exploring possibilities for producing
and distributing videos financed solely by us. If we are successful in our
efforts to raise substantial additional capital, management will seek to
develop, produce and distribute other training products and services, such as
publications, audiocassettes and training packages. However, if we are not
successful in raising substantial additional capital, we will be unable to
pursue the development, production and distribution of these other products and
services.
Accompanying each of the videos produced by us is a workbook that is
designed to be given to all employees participating in the training program.
These workbooks are written for us by training professionals and serve to
reinforce and enhance the lasting effectiveness of the video. In addition to the
workbook, we plan to offer an audiocassette that gives the trainee a general
orientation to the training material and serves to reinforce the video's salient
points. We believe that the trainees will significantly benefit by being able to
use the audio cassette to strengthen and review their comprehension of the
information covered in the video during periods when it would be impossible to
view a video, such as drive-time.
Training videos typically have a running time of 20 to 35 minutes. The
price range for training videos is between $250 and over $895 per video. The
wide variance in the pricing structure is due
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to such factors as quality of production, on-camera personality, source of
material, sophistication of graphics, and accompanying reference materials. The
market continues to demonstrate its willingness to purchase high-end videos.
Therefore, our strategy is to concentrate on producing high caliber videos
utilizing elements and production values that will generate sales at the higher
end of the price range, where profit margins are greater.
The price differential between a corporate training video and a standard
consumer video is justified by the fact that an organization will purchase a
video and utilize it to train hundreds of employees over many years. A
successful video may generate revenues of as much as $1 million a year. There
are numerous examples of this in the industry, including: "Paradigm Shift," by
Charthouse Learning; "Remember Me and Abilene Paradox," by CRM Films; "More Than
a Gut Feeling," by American Media; "The Guest," by Media Partners; and "Subtle
Sexual Harassment," by Quality Media.
SALES AND MARKETING
In most cases, the sale of management training products involves direct
mail solicitation, preview request fulfillment, and telemarketing. We begin our
sales effort by identifying prospective buyers and soliciting them through
direct mail appeals that offer the recipient a free preview. In addition, we
market and distribute our work force training videos via our web site at
"advancedknowledge.com."
Preview request fulfillment represents a major part of our sales plan. Most
professional trainers will not purchase a training video until they have
previewed it in its entirety, affording them an opportunity to evaluate the
video's applicability to their specific objective and to judge its effectiveness
as a training tool. When requests are received, a preview copy is immediately
sent to the prospective buyer. To enhance sales potential, we send preview
copies in the form of video catalogues. Each video catalogue will include
several titles in the same general subject area, as the prospect may be
interested in acquiring other videos that deal with similar issues. Within a
short period of time following the shipment of the preview copy, a telemarketing
representative will call the prospective buyer to get their comments and to
ascertain their level of interest. As a result of having to send preview copies
to potential customers, the sales cycle may take as little as a week or as long
as several months.
Understanding that the principal competitive factors in the training
industry are quality, effectiveness, client service, and price, we have
developed a marketing campaign that emphasizes our commitment to these key
points, and in addition, serves to establish a positive image and brand value
for our products. We utilize the following marketing methods to reach and
motivate buyers of training products and services.
Branding
The reason management has made brand development a key strategy of our
business plan is that a brand is the intentional declaration of "who we are,"
"what we believe" and "why you should put your faith in our products and
services." Above all, corporate branding is a promise a company can keep to its
customers, the trade and its own employees.
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To be effective, a corporate brand should be understood by key audiences:
customers, vendors, analysts, the media, employees and all other groups that
determine the viability of a business. We anticipate that our corporate brand
will grow to be our most valuable business asset. Familiarity leads to
favorability. People who know our company are likely to feel more positive
toward it than a lesser-known company.
In order to build brand name recognition, we will strive to ensure that all
corporate, brand, and trade advertising carrying the corporate name and other
company-wide communications have a demonstrably positive impact on familiarity
and favorability. In addition, we anticipate strengthening our brand identity by
expanding the scope of our products and services through partnerships with
highly regarded training institutions and professional associations.
Direct Mail
We believe the most cost efficient way of generating sales is through the
direct mailing of product catalogues to the purchaser of training products and
materials at organizations having 100 or more employees. This is our prime
target. According to Dun & Bradstreet, there are over 135,000 organizations in
the United States with at least 100 people.
To reach the target buyer, we utilize mailing lists purchased from, among
others, the industry's most prestigious trade association, the American Society
of Training and Development. Other sources of mailing lists include various
trade associations and companies that sell mailing lists, such as Hugo Dunhill
Mailing Lists, Inc.
In addition to being cost effective, direct mail represents the most
accurate way of measuring sales and marketing efforts. Each response received by
us is tracked through a database for the purpose of determining the highest
"pulling" list and to measure the effectiveness of a specific marketing
campaign. In addition, by evaluating response rates, management is also in a
position to determine what level of direct mail is needed to reach sales goals,
and to alter its product line in accordance with marketplace feedback. Our
intention is to incorporate state-of-the-art design in the production of our
catalogues that will not only serve to generate sales for specific products, but
will also help in building our brand value. This will be accomplished by
highlighting the quality and effectiveness of our product line through the
showcasing of customer endorsements. We believe that brand values have a strong
tangible effect on the results of any direct mail effort, and therefore we will
utilize all of our marketing materials to enhance our image as a reliable and
competitive provider of quality training products and services.
Telemarketing
We manage our telemarketing efforts by utilizing trained telephone
representatives who focus primarily on following-up leads that have been
generated through direct mail solicitation.
Our telemarketers are provided with information on a customer's buying
history and past needs, which are entered into our proprietary database.
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Realizing that the buyers of training products and services are highly
educated executives who have multiple pressures and needs, the telemarketers
that we employ are trained in high-level, sophisticated selling skills. Using a
step-by-step telemarketing process, developed by us, the representative attempts
to establish a consultative relationship with potential customers. He or she
then will be able to use that relationship in conjunction with information
provided by our database to help generate additional sales or preview requests.
COMPETITION
Both the Soft-Skills and Information Technology sectors of the training
market are highly fragmented, with low barriers to entry and no single
competitor accounting for a dominant market share. Our competitors are primarily
the internal training departments of companies and independent education and
training companies
Internal Training Departments
Internal training departments generally provide companies with the most
control over the method and content of training, enabling them to tailor the
training to their specific needs. However, we believe that industry trends
toward downsizing and outsourcing continue to reduce the size of internal
training departments and increase the percentage of training delivered by
external providers. Because internal trainers find it increasingly difficult to
keep pace with new training concepts and technologies, and lack the capacity to
meet demand, organizations increasingly supplement their internal training
resources with externally supplied training in order to meet their requirements.
Independent Training Providers
Ranging in size, independent training providers include publishers of
texts, training manuals and newsletters, as well as providers of videos,
software packages, training programs and seminars.
Independent training providers are the main beneficiaries of the
organizational outsourcing trend. As a result of the increased demand for
external training products and services, many large corporations have entered
the field by establishing corporate training divisions. Among the larger
competitors are: Times Mirror Corporation, Sylvan Learning Systems, Inc.,
Berkshire Hathaway, and Harcourt General. Additional competitors currently
producing training products include: Blanchard Training & Development, Career
Track, American Media, Pfeiffer & Company, CRM Films, AIMS Multimedia,
Charthouse International and Learning Works.
In all cases, the companies listed above have established credibility
within the training industry, and compared to us, have substantially greater
name recognition and greater financial, technical, sales, marketing and
managerial resources.
The workforce training market is characterized by significant price
competition, and we expect to face increasing price pressures from competitors
as company training managers demand more value for their training budgets. There
can be no assurance that we will be able to provide products that compare
favorably with workforce instructor led training techniques, interactive
training
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software or other video programs, or that competitive pressures will not require
us to reduce our prices significantly.
EMPLOYEES
Our employee staffing levels are consistent with existing workload and
business opportunities. Currently, we have two full-time employees and one
part-time employee, as well as one independent sales representative. We
regularly utilize the services of independent consultants for our business
affairs and marketing activities.
DESCRIPTION OF PROPERTY
We lease office space from an unaffiliated third party for $2,305 per
month, located at 17337 Ventura Boulevard, Suites 224 and 326, Encino,
California 91316. The lease terminates February 28, 2001. We anticipate that we
will be able to renew the lease, and that this space, consisting of a total of
approximately 1,540 square feet, will be adequate for our operations through the
end of our current fiscal year.
LEGAL PROCEEDINGS
As of the date hereof, we are not a party to any material legal
proceedings, and we are not aware of any such claims being contemplated against
us.
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MANAGEMENT
The following table sets forth the current officers and directors of Becor
Communications:
NAME AGE POSITION
---- --- --------
Buddy Young 65 President, Chief Executive
Officer, Chief Financial
Officer and Chairman
L. Stephen Albright 48 Secretary and Director
Dennis Spiegelman 54 Director
Howard Young 42 Vice President
Buddy Young has served as president, chief executive officer, chief
financial officer and chairman of the board of directors of Becor Communications
since he founded the company in June 1999, and served in the same positions with
Sporting Magic Inc. from 1997 until March 2000. Since August 1997, Mr. Young has
also been engaged in a privately owned merger and acquisition business which
does business under the name of Advantage Mergers and Acquisitions. From March
1998 until July 1999, Mr. Young served as president, executive officer and a
director of MGPX Ventures, Inc., a company whose stock traded on the OTC
Bulletin Board system. Mr. Young assisted MGPX Ventures in registering with the
SEC as a reporting company, adopting a new business plan and recruiting new
management. From 1992 until July 1996, Mr. Young served as president and chief
executive officer of Bexy Communications, Inc., a publicly held company whose
stock traded on the OTC Bulletin Board system. Bexy's core business was the
production, financing and distribution of television programming. During Mr.
Young's tenure at Bexy, Bexy produced and distributed a number of television
programs, including a two-hour special, "Heartstoppers . . . Horror at the
Movies," hosted by George Hamilton, and a 26 episode half-hour television series
entitled "Feelin' Great," hosted by Dynasty's John James. From June 1983 until
December 1991, Mr. Young was president, chief executive officer and a director
of Color Systems Technology, Inc., a publicly held company whose stock traded on
The American Stock Exchange. Color Systems' major line of business is the use of
its patented computer process for the conversion of black and white motion
pictures to color. Prior to joining Color Systems, Mr. Young served from 1965 to
1975 as Director of West Coast Advertising and Publicity for United Artists
Corporation, from 1975 to 1976 as Director of Worldwide Advertising and
Publicity for Columbia Pictures Corp., from 1976 to 1979 as Vice President of
Worldwide Advertising and Publicity for MCA/Universal Pictures, Inc., and from
1981 to 1982 as a principal in the motion picture consulting firm of Powell &
Young, which represented some of the industry's leading film makers. For over
twenty-five years, Mr. Young has been an active member of The Academy of Motion
Picture Arts and Sciences and has served on a number of industry-wide
committees.
L. Stephen Albright has served as a director and as secretary of Becor
Communications since March 2000 and April 2000, respectively, and served in the
same positions with Sporting Magic
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Inc. from September 1998 until March 2000. Since July 2000, Mr. Albright has
also served as a consultant and counsel to Advantage Mergers and Acquisitions, a
merger and acquisition business owned by Buddy Young. Mr. Albright received his
undergraduate degree in business administration and marketing from West Virginia
University in 1975. Following careers in sales and new home construction, Mr.
Albright entered Whittier College School of Law in 1980. Mr. Albright was
admitted to practice law in the State of California in 1983. Mr. Albright spent
approximately half of his legal career in private practice, where he has been
primarily engaged in transactional work, business litigation, and providing
general legal business advice to clients. Mr. Albright also spent seven years as
in-house counsel, vice president, general counsel and secretary to Color Systems
Technology, Inc., a publicly-held company whose stock traded on The American
Stock Exchange. While with Color Systems, Mr. Albright was responsible for all
aspects of the company's annual shareholder's meetings; preparation and filing
of the company's proxy materials, annual reports on Form 10-K, and quarterly
reports on Form 10-Q; and drafting and negotiating lease agreements,
distribution and licensing agreements and debt and equity funding arrangements.
Dennis Spiegelman has served as a director of Becor Communications since
March 2000 and of Sporting Magic Inc. beginning in September 1998. Mr.
Spiegelman is an experienced sales and marketing executive with a successful
track record in many aspects of the entertainment industry. He is currently
senior vice president, sales and marketing at Axium Entertainment, a company
specializing in providing payroll services to the entertainment industry. Before
joining Axium, he held similar positions with AP Services, Inc. and IDC
Entertainment Services. During his career of more than 25 years, Mr. Spiegelman
has held various other senior positions, including director of operations at
Heritage Entertainment, and president and director of All American Group, Inc.
While at these companies, Mr. Spiegelman was mainly responsible for the sale of
feature films to foreign theatrical, video, and television markets. In addition,
Mr. Spiegelman has served as executive producer of the theatrical motion picture
entitled Nobody's Perfect and is a past president of Financial, Administrative,
and Management Executives in Entertainment, a 50- year-old networking
organization for entertainment industry executives.
Howard Young has served as vice president of Becor Communications since
March 2000. He served as vice president of Sporting Magic Inc. from September
1998 until March 2000 and as Director of Marketing for Sporting Magic from June
to September 1998. Mr. Young started his business career at Columbia Pictures in
1983 as a motion picture sales trainee. Shortly thereafter he was promoted to
salesman and was responsible for sales and exhibitor relations in the Seattle -
Portland territory. In 1985 Mr. Young joined one of Hollywood's leading
advertising agencies, JP Advertising. While there he served in a number of
positions relating to the marketing of motion pictures. In 1992 he was named a
Senior Vice President of the agency, and was responsible for supervising client
accounts. Among others, the agency's accounts included The Walt Disney Company,
20th Century Fox, Columbia Pictures and Paramount Pictures. Along with his
client responsibilities, Mr. Young supervised the administrative operations of
the agency. During his tenure at JP Advertising, Mr. Young worked on the
marketing campaigns of such films as Titanic, Speed, 101 Dalmatians, Men in
Black, and True Lies. In addition to his responsibilities with Becor
Communications, he serves as a consultant to a number of companies in the
marketing of their products and services and is active as a graduate assistant
in the Dale Carnegie Course Program. Mr. Young is a graduate of Redlands
University and is the son of Buddy Young.
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Directors are elected in accordance with our bylaws to serve until the next
annual stockholders meeting and until their successors are elected and qualified
or until their earlier resignation or removal.
Officers are elected by the board of directors and hold office until the
meeting of the board of directors following the next annual meeting of
stockholders and until their successors shall have been chosen and qualified.
Any officer may be removed, with or without cause, by the board of directors.
Any vacancy in any office may be filled by the board of directors.
Except as disclosed above with respect to Howard Young and Buddy Young,
there is no family relationship between any director or executive officer and
any other director or executive officer of Becor Communications.
COMPENSATION OF OFFICERS AND DIRECTORS
As a result of our current limited available cash, no officer or director
of Becor Communications or its subsidiary received compensation during the
fiscal year ended May 31, 2000. We intend to pay salaries when cash flow
permits. No officer or director received stock options or other non-cash
compensation during the fiscal year ended May 31, 2000. We currently have no
employment agreement with any officer of Becor Communications.
26
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On March 20, 2000, in a transaction that was unanimously approved by the
disinterested directors of Sporting Magic Inc., we purchased all of Sporting
Magic's assets relating to its business of producing and distributing workforce
training videos. These assets 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 Sporting Magic as of
March 20, 2000. In exchange for the assets, we assumed, and we and Buddy Young
respectively agreed to indemnify Sporting Magic with respect to, all of the
liabilities incurred or accrued by Sporting Magic prior to March 20, 2000.
According to the unaudited balance sheet of Sporting Magic as of March 20, 2000,
Sporting Magic had total assets of $117,848 and total liabilities of $300,983 at
that date.
At the time of the acquisition, our sole stockholder, the Young Family
Trust, owned 1,976,147 shares of Sporting Magic common stock, and Buddy and
Rebecca Young also beneficially owned these shares as co-trustees of the Trust.
Their percentage ownership of the class was reduced from 32.94% prior to the
acquisition to only 12.35% as a result of a second transaction on the same date
whereby Sporting Magic acquired all of the outstanding shares of an unrelated
business in exchange for 10,000,000 newly-issued shares of Sporting Magic common
stock. Mr. Young, our president, chief executive officer, chief financial
officer and chairman, served in the same positions for Sporting Magic prior to
the asset sale. Effective at the closing, Mr. Young and each of the other
directors and officers of Sporting Magic resigned from their positions with that
company.
In connection with our asset purchase, we assumed Sporting Magic's rights
and obligations under a credit arrangement pursuant to which Mr. Young had
agreed to advance, at his discretion, up to $300,000 for that company's
operating expenses and the production of training videos, under the terms of an
8% secured promissory note and a related security agreement. As of March 20,
2000, Sporting Magic owed Mr. Young a total of $204,995 in principal and
interest under the note. The note is collateralized by all of our right, title
and interest in and to our video productions and projects, regardless of their
stage of production, including all related contracts, licenses, and accounts
receivable. Any unpaid principal and interest under the Note will be due and
payable on December 31, 2001.
On April 5, 2000, we issued 1,250,000 shares of our common stock to the
Young Family Trust in exchange for the cancellation of $100,000 of indebtedness
under the note to Mr. Young. As of August 31, 2000, we owed $160,212 principal
and $24,778 interest to Mr. Young under the note.
27
<PAGE>
PRINCIPAL STOCKHOLDERS AND SELLING STOCKHOLDER
The following table sets forth information about the beneficial ownership
of our outstanding common stock by each person beneficially owning more than 5%
of the shares, by each of our directors and officers, and by all of our
directors and officers as a group. The table shows the number and percentage of
shares held by each person as of September 20, 2000, before the offering
described in this prospectus. The table also shows the number of shares
beneficially owned by each person which are offered for sale in this offering,
as well as the number and percentage of shares that will be held by each person
after the completion of this offering. The address of each person listed in the
table is 17337 Ventura Boulevard, Suite 224, Encino, California 91316.
<TABLE>
<CAPTION>
Number Percentage Number Number Percentage
of Shares of Class of Shares of Shares of Class
Owned Owned Offered Owned Owned
Before the Before the by This After the After the
Name and Address Offering Offering Prospectus Offering Offering
---------------- -------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C>
Young Family Trust . 1,250,000(1) 100.0% 200,000 1,050,000(2) 24.7%(3)
Buddy Young and
Rebecca Young ...... 1,250,000(1) 100.0% 200,000 1,050,000(2) 24.7%(3)
Stephen Albright ... -0- -- -- -0- --
Dennis Spiegelman .. -0- -- -- -0- --
Howard Young ....... -0- -- -- -0- --
All officers and
directors as a group
(4 persons) ........ 1,250,000(1) 100.0% 200,000 1,050,000(2) 24.7%(3)
----------
(1) All of the shares beneficially owned by the Young Family Trust are also
beneficially owned by Buddy Young and Rebecca Young, who, as co-trustees of
the Trust, share voting and investment power over the shares. Buddy Young
is a director and executive officer of Becor Communications and was also a
director and executive officer of Sporting Magic Inc. The Trust was also a
principal stockholder of Sporting Magic.
(2) Assumes that all 200,000 of the shares offered by the Young Family Trust
are sold in this offering.
(3) Assumes that all 3,000,000 of the shares offered by Becor Communications
are sold in this offering. If we sold none of those shares, then the
percentages shown in this column would increase from 24.7% to 84.0%.
</TABLE>
28
<PAGE>
PLAN OF DISTRIBUTION
This is a best-efforts offering. We are not required to sell any minimum
number of dollar amount of shares. Investor funds will not be deposited in any
escrow, trust or similar account and will be available for our immediate use.
Both we and the selling stockholder will commence this offering promptly
and will make the offering on a continuous basis for up to two years from the
date of this prospectus or until earlier completion or termination. We are
making this offering only in the State of New York and in the Province of
Ontario.
Neither we nor the selling stockholder have entered into, nor do we intend
to enter into, any agreement, understanding or arrangement with any underwriter
or broker-dealer regarding the sale of common stock in this offering, nor is
there an underwriter or coordinating broker acting on our behalf in connection
with this offering. For purposes of Section 2(a)(11) of the Securities Act of
1933, the selling stockholder may be deemed an "underwriter" of the shares of
common stock that its sells in this offering.
We have advised the selling stockholder that it is required to deliver
this prospectus in connection with any offer or sale of its shares. We have also
advised the selling stockholder of the relevant cooling off period specified by
Regulation M and of the restrictions under Regulation M that apply to the
selling stockholder until it completes its participation in the offering.
When the offering commences, the selling stockholder will be subject to
Section 16 of the Exchange Act and the rules and regulations thereunder. Those
provisions may restrict the timing of the selling stockholder's sales of shares
in the offering and the prices at which the selling stockholder may sell the
shares.
We have agreed to pay all expenses of this offering, including legal and
accounting fees, SEC filing fees, expenses of compliance with state and
provincial securities laws, and printing costs.
29
<PAGE>
DESCRIPTION OF SECURITIES
We have one class of common stock authorized for issuance. Of the
25,000,000 shares of common stock authorized, 1,250,000 shares are currently
issued and outstanding. We do not have any preferred stock authorized for
issuance.
Holders of common stock are entitled to receive such dividends as the
board of directors may from time to time declare out of funds legally available
for the payment of dividends. To date we have not paid any dividends on our
common stock, and we do not anticipate paying any dividends in the foreseeable
future.
Each share of our common stock is entitled to one vote. Our stockholders
have no preemptive rights.
The transfer agent for our common stock is U.S. Stock Transfer
Corporation, 1745 Gardena Avenue, 2nd Floor, Glendale, California 91204.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Section 145 of the Delaware General Corporation Law authorizes us to
indemnify any director or officer under prescribed circumstances and subject to
certain limitations against certain costs and expenses, including attorneys'
fees actually and reasonably incurred in connection with any action, suit or
proceedings, whether civil, criminal, administrative or investigative, to which
such person is a party by reason of being one of our directors or officers if it
is determined that the person acted in accordance with the applicable standard
of conduct set forth in such statutory provisions. Article Seventh of our
certificate of incorporation provides for the indemnification of directors and
officers to the full extent permitted by Delaware law.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
Becor Communications pursuant to the foregoing provisions, or otherwise, we have
been advised that, in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in such Act and is,
therefore, unenforceable.
LEGAL MATTERS
Certain legal matters in connection with the issuance of the securities
offered hereby will be passed upon for Becor Communications by Miller & Holguin,
attorneys at law, Los Angeles, California.
30
<PAGE>
EXPERTS
The consolidated financial statements of Becor Communications, Inc.
(formerly Becor Internet Inc.) as of May 31, 2000 and for the period from June
7, 1999 (inception) to May 31, 2000 have been included in this prospectus in
reliance on the report of Farber & Hass LLP, independent certified public
accountants, given on the authority of that firm as experts in accounting and
auditing.
The consolidated financial statements of Sporting Magic Inc. (under its
former name of Advanced Knowledge, Inc.) as of August 31, 1999 and for the
fiscal years ended August 31, 1998 and 1999 have been included in this
prospectus in reliance on the report of Farber & Hass LLP, independent certified
public accountants, given on the authority of that firm as experts in accounting
and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement with the Securities and Exchange
Commission pursuant to the Securities Act of 1933 which includes both a copy of
this prospectus and additional information. Following the date of this
prospectus, we will also be required to file periodic reports and other
information with the SEC pursuant to the Securities Exchange Act of 1934. You
may access and copy our registration statement and any other documents that we
file with the SEC by visiting the SEC's Web site on the Internet at
http://www.sec.gov. You may also read and copy any document we file at the SEC's
public reference rooms located at Room 1024, Judiciary Plaza, 450 5th Street,
N.W., Washington, D.C. 20549, 7 World Trade Center, Suite 1300, New York, New
York 10048, and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. You may obtain information on the operation of the SEC's
public reference rooms by calling the SEC at 1-800-SEC-0330.
You should rely only on the information provided in this prospectus. We
have not authorized anyone else to provide you with different information. You
should not assume that the information in this prospectus is accurate as of any
date after the date of this prospectus.
31
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGES
BECOR COMMUNICATIONS, INC. F-2
Independent Auditors' Report F-2
Consolidated Year-End Financial Statements:
Consolidated Balance Sheet as of May 31, 2000 F-3
Consolidated Statement of Operations for the period
from June 7, 1999 (inception) to May 31, 2000 F-4
Consolidated Statement of Shareholders' Deficit for
the period from June 7, 1999 (inception) to
May 31, 2000 F-5
Consolidated Statement of Cash Flows for the period
from June 7, 1999 (inception) to May 31, 2000 F-6
Notes to Consolidated Financial Statements F-8
SPORTING MAGIC INC. (under its former name of Advanced
Knowledge, Inc.) F-12
Independent Auditors' Report F-13
Year-End Financial Statements:
Balance Sheets as of August 31, 1999 and 1998 F-14
Statements of Operations for the years ended August
31, 1999 and 1998 F-15
Statements of Shareholders' Deficit for the years
ended August 31, 1999 and 1998 F-16
Statements of Cash Flows for the years ended August
31, 1999 and 1998 F-17
Notes to Financial Statements F-18
Unaudited Interim Financial Statements:
Balance Sheets as of February 29, 2000 and August
31, 1999 F-19
Statements of Operations for the three months and
six months ended February 29, 2000 and
February 28, 1999 F-20
Statements of Cash Flows for the six months ended
February 29, 2000 and February 28, 1999 F-23
Notes to Financial Statements F-24
F - 1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Becor Communications, Inc.:
We have audited the accompanying consolidated balance sheet of Becor
Communications, Inc. (formerly Becor Internet Inc.) (the "Company") as of May
31, 2000 and the related consolidated statements of operations, shareholder
deficit and cash flows for the period June 7, 1999 (date of inception) to May
31, 2000. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements present fairly, in all
material respects, the financial position of the Company at May 31, 2000, and
the consolidated results of its operations and cash flows for the period June 7,
1999 (date of inception) to May 31, 2000 in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Company has suffered losses from
operations since inception that raise substantial doubt about the Company's
ability to continue as a going concern. Management's plans in regard to this
matter are described in Note 5. The consolidated financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
/s/ Farber & Hass LLP
Oxnard, California
July 28, 2000
F - 2
<PAGE>
<TABLE>
<CAPTION>
BECOR COMMUNICATIONS, INC.
(FORMERLY BECOR INTERNET INC.)
CONSOLIDATED BALANCE SHEET
May 31, 2000
--------------------------------------------------------------------------------
<S> <C>
ASSETS
CURRENT ASSETS:
Cash ......................................................... $ 3,605
Accounts receivable, less allowance of $36,390 ............... 19,290
Video inventory and production costs, less
accumulated amortization of $3,174 ......................... 38,963
Prepaid expenses ............................................. 1,050
---------
Total current assets ......................................... 62,908
---------
PROPERTY AND EQUIPMENT, less accumulated
depreciation of $161 ....................................... 4,663
---------
SECURITY DEPOSITS ............................................ 2,350
---------
TOTAL ASSETS ................................................. $ 69,921
=========
LIABILITIES AND SHAREHOLDER DEFICIT
CURRENT LIABILITIES:
Accounts payable and accrued expenses ........................ $ 12,405
Accrued royalties ............................................ 24,348
Accrued interest to shareholder .............................. 20,751
---------
Total current liabilities .................................... 57,504
---------
NOTE PAYABLE TO SHAREHOLDER .................................. 139,712
---------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDER DEFICIT:
Common stock, par value - $.001, 25,000,000
shares authorized; 1,250,000 shares issued
and outstanding ............................................ 1,250
Additional paid-in capital ................................... 99,000
Accumulated deficit .......................................... (227,545)
---------
Total shareholder deficit .................................... (127,295)
---------
TOTAL LIABILITIES AND SHAREHOLDER DEFICIT .................... $ 69,921
=========
See independent auditors' report and accompanying notes to consolidated
financial statements.
</TABLE>
F - 3
<PAGE>
<TABLE>
<CAPTION>
BECOR COMMUNICATIONS, INC.
(FORMERLY BECOR INTERNET INC.)
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIOD JUNE 7, 1999
(DATE OF INCEPTION) TO MAY 31, 2000
--------------------------------------------------------------------------------
<S> <C>
REVENUES:
Rental income ............................................. $ 2,250
Sales ..................................................... 30,274
Royalty income ............................................ 3,072
-----------
Total revenues ............................................ 35,596
-----------
COST OF GOODS SOLD ........................................ 8,053
-----------
GROSS MARGIN .............................................. 27,543
-----------
OPERATING EXPENSES:
Selling and marketing ..................................... 21,883
General and administrative ................................ 24,835
Research and development .................................. 2,227
-----------
Total operating expenses .................................. 48,945
-----------
LOSS FROM OPERATIONS ...................................... (21,402)
-----------
OTHER INCOME (EXPENSE):
Interest expense .......................................... (2,578)
Other income .............................................. 1,678
Goodwill impairment ....................................... (204,443)
-----------
Other expense, net ........................................ (205,343)
-----------
LOSS BEFORE INCOME TAXES .................................. (226,745)
INCOME TAXES .............................................. 800
-----------
NET LOSS .................................................. $ (227,545)
===========
BASIC AND DILUTED LOSS PER COMMON SHARE ................... $ (.18)
===========
WEIGHTED AVERAGE SHARES OUTSTANDING ....................... 1,250,000
===========
See independent auditors' report and accompanying notes to consolidated
financial statements.
--------------------------------------------------------------------------------
</TABLE>
F - 4
<PAGE>
<TABLE>
BECOR COMMUNICATIONS, INC.
(FORMERLY BECOR INTERNET INC.)
CONSOLIDATED STATEMENT OF SHAREHOLDER DEFICIT
FOR THE PERIOD JUNE 7, 1999 (DATE OF INCEPTION)
TO MAY 31, 2000
-----------------------------------------------------------------------------------------------
<CAPTION>
COMMON STOCK ADDITIONAL
--------------------- PAID-IN SHAREHOLDER
SHARES AMOUNT CAPITAL (DEFICIT) TOTAL
--------- ------ ------- ---------- ----------
<S> <C> <C> <C> <C> <C>
BALANCE, JUNE 7, 1999 ....... -0- $ -0- $ -0- $ -0- $ -0-
(Date of Inception)
CONTRIBUTION OF CAPITAL ..... 250 250
REDUCTION OF NOTE PAYABLE
TO SHAREHOLDER ............ 1,250,000 1,250 98,750 100,000
NET LOSS .................... (227,545) (227,545)
--------- ------ ------- ---------- ----------
BALANCE, MAY 31, 2000 ....... 1,250,000 $1,250 $99,000 $(227,545) $(127,295)
========= ====== ======= ========== ==========
See independent auditors' report and accompanying notes to consolidated
financial statements.
-----------------------------------------------------------------------------------------------
</TABLE>
F - 5
<PAGE>
<TABLE>
<CAPTION>
BECOR COMMUNICATIONS, INC.
(FORMERLY BECOR INTERNET INC.)
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD JUNE 7, 1999
(DATE OF INCEPTION) TO MAY 31, 2000
--------------------------------------------------------------------------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ..................................................... $(227,545)
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation ............................................... 161
Amortization ............................................... 3,174
Changes in operating assets and liabilities:
Accounts receivable .................................... (19,290)
Video inventory and production costs ................... (42,137)
Prepaid expenses ....................................... (1,050)
Accounts payable and accrued expenses .................. 57,504
Security deposits ...................................... (2,350)
---------
Net cash used by operating activities ........................ (231,533)
---------
CASH FLOWS FROM INVESTING ACTIVITIES - Capital
expenditures ............................................... (4,824)
---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Contributed capital .......................................... 250
Borrowings from shareholder .................................. 239,712
---------
Net cash provided by financing activities .................... 239,962
---------
NET INCREASE IN CASH ......................................... 3,605
CASH, BEGINNING OF PERIOD .................................... -0-
---------
CASH, END OF PERIOD .......................................... $ 3,605
=========
(Continued)
</TABLE>
F - 6
<PAGE>
<TABLE>
<CAPTION>
BECOR COMMUNICATIONS, INC.
(FORMERLY BECOR INTERNET INC.)
CONSOLIDATED STATEMENT OF CASH FLOWS - CONTINUED
FOR THE PERIOD JUNE 7, 1999
(DATE OF INCEPTION) TO MAY 31, 2000
--------------------------------------------------------------------------------
<S> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest .............................................. $ 2,578
Income taxes .......................................... $ -0-
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
The Company issued 1,250,000 shares of its common stock in satisfaction of
$100,000 of a note payable to the Company's sole shareholder.
See independent auditors' report and accompanying notes to consolidated
financial statements.
--------------------------------------------------------------------------------
</TABLE>
F - 7
<PAGE>
BECOR COMMUNICATIONS, INC.
(FORMERLY BECOR INTERNET INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS DESCRIPTION - Becor Communications, Inc. (formerly Becor Internet
Inc.) (the "Company"), through its wholly-owned subsidiary, is engaged in
the development, production and distribution of training and educational
products and services.
In March 2000, the Company formed Web Star Training, Inc. as a wholly-owned
subsidiary, incorporated under the laws of Delaware, authorized to issue
1,000 shares of no par value common stock. In April 2000, the Board voted
to change the name of this subsidiary to Advanced Knowledge, Inc.
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include
the accounts of the Company and its wholly-owned subsidiary, Advanced
Knowledge, Inc. All significant intercompany accounts and transactions have
been eliminated.
GOODWILL IMPAIRMENT - In March 2000, the Company acquired substantially all
assets and liabilities of Sporting Magic Inc. (then known as Advanced
Knowledge, Inc.), including all rights to the Advanced Knowledge name, and
assigned these assets and liabilities to the Company's wholly-owned
subsidiary, which has adopted and is now doing business under the Advanced
Knowledge, Inc. name. The assets and liabilities were recorded at their
book value at the time of the acquisition as they were acquired from a
related business controlled by the Company's shareholder. The difference
between the book value of the net assets and liabilities acquired was
recorded as goodwill. Company management has determined that the goodwill
was fully impaired as of May 31, 2000 and recorded a charge to earnings in
the consolidated statement of operations.
GOING CONCERN - The Company has experienced significant operating losses
since inception. The consolidated financial statements have been prepared
assuming the Company will continue to operate as a going concern, which
contemplates the realization of assets and the settlement of liabilities in
the normal course of business. No adjustment has been made to the recorded
amount of assets or the recorded amount or classification of liabilities
which would be required if the Company were unable to continue its
operations. As discussed in Note 5, management has developed an operating
plan, which they believe will generate sufficient cash to meet its
obligations in the normal course of business. In addition, the Company has
an agreement with its President and majority shareholder, which provides
for borrowings up to $300,000 (see Note 2).
VIDEO INVENTORY AND PRODUCTION COSTS - Video Inventory and Production Costs
consists of videotapes, demos, training manuals and film production costs.
Inventory is stated at the lower
F - 8
<PAGE>
of cost or estimated net realizable value and is amortized in the ratio of
the current year's gross revenues to management's estimate of remaining
gross revenues.
PERVASIVENESS OF 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 the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
INCOME TAXES - The Company accounts for its income taxes under the
provisions of Statement of Financial Accounting Standards 109 ("SFAS 109").
The method of accounting for income taxes under SFAS 109 is an asset and
liability method. The asset and liability method requires the recognition
of deferred tax liabilities and assets for the expected future tax
consequences of temporary differences between tax bases and financial
reporting bases of other assets and liabilities. The provision for income
taxes in 2000 represents the California corporate minimum franchise tax.
RESEARCH AND DEVELOPMENT - Company-sponsored research and development costs
related to both present and future products are expensed currently as a
separate line item in the accompanying statements of operations.
FAIR VALUE OF FINANCIAL INSTRUMENTS - The carrying value of all financial
instruments potentially subject to valuation risk (principally consisting
of accounts receivable, accrued expenses and note payable) approximates
fair value due to the short term maturities of such instruments.
CONCENTRATION OF CREDIT RISK - Financial instruments which potentially
subject the Company to concentrations of credit risk consist principally of
accounts receivable. Accounts receivable are unsecured and the Company is
at risk to the extent such amount becomes uncollectible. As of May 31,
2000, two customers comprised approximately 17% and 16% of accounts
receivable.
SIGNIFICANT CUSTOMER - During the period ended May 31, 2000, one customer
accounted for approximately 24% of the Company's net sales.
PROPERTY AND EQUIPMENT - Property and equipment are stated at cost.
Depreciation is computed using the straight-line method over an estimated
useful life of five years. Property and equipment consists solely of a
telephone system costing $4,824.
NET LOSS PER SHARE - The Company adopted the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share"
("EPS") that established standards for the computation, presentation and
disclosure of earnings per share, replacing the presentation of Primary EPS
with a presentation of Basic EPS. It also requires dual presentation of
Basic EPS and Diluted EPS on the face of the income statement for entities
with complex capital structures. Basic EPS is based on the weighted average
number of common shares
F - 9
<PAGE>
outstanding during the period. The Company did not present Diluted EPS,
since the result was anti-dilutive.
STOCK SPLIT - During August 2000, the Board of Directors approved a reverse
stock split of 4 to 1. The reverse stock split has been retroactively
reflected in the financial statements.
NEW ACCOUNTING PRONOUNCEMENTS - The Company adopted SFAS No. 130,
"Reporting Comprehensive Income", which establishes standards for reporting
and displaying comprehensive income and its components in financial
statements; however, the adoption of this statement had no impact on the
Company's net loss or shareholders' deficit.
2. NOTE PAYABLE TO SHAREHOLDER
The Company entered into an agreement with its President and sole
shareholder to borrow up to $300,000 (at the discretion of the President)
with interest at 8.0%. Repayment shall be made when funds are available and
the balance of principal and accrued interest is due December 31, 2001.
3. INCOME TAXES
The Company has net operating loss carryforwards totaling approximately
$25,000 for Federal income tax purposes available to offset future taxable
income through 2020.
Deferred tax assets consist substantially of the net operating loss
carryforward. The Company has made a 100% valuation allowance against the
deferred tax asset. In assessing the realizability of deferred tax assets,
management considers whether it is more likely than not that some portion
or all of the deferred tax assets will not be realized. The ultimate
realization of deferred tax assets is dependent upon the generation of
future taxable income during the periods in which those temporary
differences become deductible. Management considered the scheduled reversal
of deferred tax liabilities, projected future taxable income and tax
planning strategies in making this assessment.
4. COMMITMENTS AND CONTINGENCIES
The Company has agreements with companies to pay a royalty on sales of
certain videos. The royalty is based on a specified formula, which averages
approximately 35% to 45% of gross sales.
The Company leases its operating facility for $1,653 per month in Encino,
California under a non-cancelable operating lease, which expires in
February 2001. The Company expects to renew the lease under similar terms.
5. MANAGEMENT'S PLANS
Management's forecast of higher sales and cash flows from operations will
be adequate to finance the next fiscal year's cash flow requirements.
Management also plans on obtaining
F - 10
<PAGE>
additional financing sources consisting of equity and debt to fund working
capital and product development.
--------------------------------------------------------------------------------
F - 11
<PAGE>
FINANCIAL STATEMENTS OF SPORTING MAGIC INC.
under its former name of Advanced Knowledge, Inc.
as of August 31, 1999 and for the years ended August 31, 1999 and 1998,
and as of February 29, 2000 and for the three months and six months
ended February 29, 2000 and February 28, 1999
F - 12
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Advanced Knowledge, Inc.:
We have audited the accompanying balance sheets of Advanced Knowledge, Inc. (the
"Company") as of August 31, 1999 and 1998 and the related statements of
operations, shareholders' deficit and cash flows for the two years then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company at August 31, 1999 and 1998, and
the results of its operations and its cash flows for the two years then ended in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has suffered significant losses from
operations that raise substantial doubt about the Company's ability to continue
as a going concern. Management's plans in regard to these matters are also
described in Note 4. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
/s/ Farber & Hass LLP
Oxnard, California
October 11, 1999
F - 13
<PAGE>
<TABLE>
ADVANCED KNOWLEDGE, INC.
BALANCE SHEETS
AUGUST 31, 1999 AND 1998
--------------------------------------------------------------------------------
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
ASSETS
CASH ............................................. $ 10,859 $ 10,918
ACCOUNTS RECEIVABLE .............................. 28,568 6,836
VIDEO INVENTORY AND PRODUCTION COSTS ............. 49,444 33,285
PREPAID EXPENSES ................................. 1,050 2,000
--------- ---------
TOTAL ASSETS ..................................... $ 89,921 $ 53,039
========= =========
LIABILITIES AND SHAREHOLDERS' DEFICIT
ACCRUED ROYALTIES ................................ $ 27,874
ACCRUED EXPENSES ................................. 22,061 $ 64,472
ACCRUED INTEREST TO SHAREHOLDER .................. 9,682
NOTE PAYABLE TO SHAREHOLDER ...................... 127,962 72,212
--------- ---------
TOTAL LIABILITIES ................................ 187,579 136,684
--------- ---------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' DEFICIT:
Common stock, par value - $.001,
25,000,000 shares authorized;
4,000,000 and 3,000,000 shares issued
and outstanding at August 31, 1999
and 1998, respectively ........................ 4,000 3,000
Additional paid-in capital ....................... 99,000
Accumulated deficit .............................. (200,658) (86,645)
--------- ---------
Total shareholders' deficit ...................... (97,658) (83,645)
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT ...... $ 89,921 $ 53,039
========= =========
See accompanying notes to financial statements.
--------------------------------------------------------------------------------
</TABLE>
F - 14
<PAGE>
<TABLE>
ADVANCED KNOWLEDGE, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED AUGUST 31, 1999 AND 1998
--------------------------------------------------------------------------------
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
REVENUES:
Rental income .................................. $ 3,311 $ 292
Sales .......................................... 116,581 6,151
Other revenues ................................. 54,377 393
----------- -----------
Total revenues ................................. $ 174,269 $ 6,836
----------- -----------
COST OF GOODS SOLD ............................. 53,731 904
----------- -----------
GROSS MARGIN ................................... 120,537 5,932
----------- -----------
OPERATING EXPENSES:
Selling and marketing .......................... 44,821 11,818
General and administrative ..................... 179,247 29,221
Research and development ....................... 25,000
Organization costs ............................. 25,738
----------- -----------
Total operating expenses ....................... 224,068 91,777
----------- -----------
LOSS FROM OPERATIONS ........................... (103,531) (85,845)
INTEREST EXPENSE ............................... 9,682
-----------
LOSS BEFORE INCOME TAXES ....................... (113,213) (85,845)
INCOME TAXES ................................... 800 800
----------- -----------
NET LOSS ....................................... $ (114,013) $ (86,645)
=========== ===========
BASIC LOSS PER SHARE ........................... $ (.03) $ (.03)
=========== ===========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING ..... 3,602,740 3,000,000
=========== ===========
See accompanying notes to financial statements.
--------------------------------------------------------------------------------
</TABLE>
F - 15
<PAGE>
<TABLE>
ADVANCED KNOWLEDGE, INC.
STATEMENTS OF SHAREHOLDERS' DEFICIT
FOR THE YEARS ENDED AUGUST 31, 1999 AND 1998
--------------------------------------------------------------------------------
<CAPTION>
COMMON STOCK ADDITIONAL
--------------------- PAID-IN SHAREHOLDER
SHARES AMOUNT CAPITAL (DEFICIT)
--------- ------ ------- ----------
<S> <C> <C> <C> <C>
BALANCE, SEPTEMBER 1, 1997 .. -0- $ -0- $ -0- $ -0-
CONTRIBUTION OF CAPITAL ..... 3,000,000 3,000
NET LOSS .................... (86,645)
--------- ------ ------- ---------
BALANCE, AUGUST 31, 1998 .... 3,000,000 3,000 (86,645)
SALE OF COMMON STOCK ........ 1,000,000 1,000 $99,000
NET LOSS .................... (114,013)
--------- ------ ------- ---------
BALANCE, AUGUST 31, 1999 .... 4,000,000 $4,000 $99,000 $(200,658)
========= ====== ======= =========
See accompanying notes to financial statements.
--------------------------------------------------------------------------------
</TABLE>
F - 16
<PAGE>
<TABLE>
ADVANCED KNOWLEDGE, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED AUGUST 31, 1999 AND 1998
--------------------------------------------------------------------------------
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ........................................... $(114,013) $ (86,645)
Adjustments to reconcile net loss to
net cash used by operating activities:
Amortization .................................... 7,867 417
Changes in operating assets and liabilities:
Accounts receivable ............................. (21,732) (6,836)
Inventories ..................................... (24,026) (33,702)
Prepaid expenses ................................ 950 (2,000)
Accrued expenses ................................ (4,855) 64,472
--------- ---------
Net cash used by operating activities .............. (155,809) (64,294)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of common stock ............................... 100,000
Contributed capital ................................ 3,000
Borrowings from shareholder ........................ 55,750 72,212
--------- ---------
Net cash provided by financing activities .......... 155,750 75,212
--------- ---------
NET INCREASE (DECREASE) IN CASH .................... (59) 10,918
CASH, BEGINNING OF YEAR ............................ 10,918 -0-
--------- ---------
CASH, END OF YEAR .................................. $ 10,859 $ 10,918
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION - Cash paid for income taxes ........ $ 800 $ 800
Effective June 30, 1998, DMA-Radtech, Inc. issued 2,700,000 shares of its common
stock in exchange for all outstanding shares of Advanced Knowledge, Inc.
See accompanying notes to financial statements.
--------------------------------------------------------------------------------
</TABLE>
F - 17
<PAGE>
ADVANCED KNOWLEDGE, INC.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL INFORMATION - At a special meeting held on June 30, 1998, the
shareholders of DMA-Radtech, Inc. ("DMA"), a wholly-owned subsidiary of
Electro-Kinetic Systems, Inc. ("EKSI"), approved a plan of merger and
reorganization, as set forth in an Agreement and Plan of Merger and
Reorganization dated as of June 30, 1998, with Advanced Knowledge, Inc.
("AKIP"). DMA issued 2,700,000 shares of its common stock in exchange for
all outstanding shares of Advanced Knowledge, Inc. Concurrent with the
agreement, DMA changed its name to Advanced Knowledge, Inc. ("AK"). DMA, a
Delaware corporation, was incorporated under the laws of the State of
Delaware in January 1987.
The merger was accounted for using the "reverse purchase" method of
accounting, pursuant to which AKIP was treated as the acquiring entity for
accounting purposes. The assets, liabilities and shareholders' deficit of
AKIP were recorded at their historical values. DMA had no assets or
liabilities.
DMA previously operated as a producer and distributor of radon testing
devices. In addition, DMA had maintained a testing facility for matters
related to radon. DMA ceased operations in 1995.
The Company has changed its fiscal year-end from December 31 to August 31.
The audited financial statements for the period January 1 through August
31, 1998 reflect primarily the operations of the predecessor company (AKIP)
since DMA was effectively dormant during the period January 1 through June
30, 1998.
In connection with the agreement, AK paid $25,000 to EKSI for certain
proprietary technology and work-products related to the Company's core
business and EKSI agreed to contribute to capital all liabilities of DMA as
of the date of the agreement. Such liabilities totaled approximately
$311,000. Based on the forecasted cash requirement to compete and market
the radon detection equipment, management has elected not to pursue the
technology acquired in the transaction and thus, the amount has been
expensed as research and development costs in 1998. In addition, AK paid
$25,000 to EKSI for professional fees and other expenses related to the
transaction. The amount paid by AK has been expensed as incurred and is
included in Organization Costs in the Statement of Operations for 1998.
The current core business of Advanced Knowledge, Inc. is the production and
marketing of business training videos.
GOING CONCERN - The Company has experienced significant operating losses
since inception. The financial statements have been prepared assuming the
Company will continue to operate as a going concern which contemplates the
realization of assets and the settlement of liabilities in the normal
F - 18
<PAGE>
course of business. No adjustment has been made to the recorded amount of
assets or the recorded amount or classification of liabilities which would
be required if the Company were unable to continue its operations. As
discussed in Note 4, management has developed an operating plan, which they
believe will generate sufficient cash to meet its obligations in the normal
course of business. In addition, the Company has an agreement with its
President and majority shareholder, which provides for borrowings up to
$300,000 (see Note 2).
UNCLASSIFIED BALANCE SHEET - In accordance with the provisions of SFAS No.
53, the Company has elected to present an unclassified balance sheet.
VIDEO INVENTORY - Video inventory consists of videotapes, demos, training
manuals and film production costs. Inventory is stated at the lower of cost
or estimated net realizable value and is amortized in the ratio of the
current year's gross revenues to management's estimate of remaining gross
revenues. Accumulated amortization at August 31, 1999 totaled $8,284.
PERVASIVENESS OF 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 the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
INCOME TAXES - The Company accounts for income taxes under Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes".
Income taxes are provided based on earnings reported for financial
statement purposes. Deferred taxes are provided on the temporary
differences between income for financial statement and tax purposes.
At August 31, 1999, the Company has available net operating loss carryovers
of approximately $200,000 that will expire in various periods through 2014.
The Company has established a valuation allowance for the full tax benefit
of the operating loss carryovers due to the uncertainty regarding
realization of the asset. The valuation allowance increased from
approximately $17,000 to $39,000, representing additional net operating
loss carryforwards generated in 1999.
FAIR VALUE OF FINANCIAL INSTRUMENTS - The carrying value of all financial
instruments potentially subject to valuation risk (principally consisting
of accounts receivable, accrued expenses and note payable) approximates
fair value due to the short term maturities of such instruments.
LOSS PER SHARE - The Company adopted the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share" that
established standards for the computation, presentation and disclosure of
earnings per share ("EPS"), replacing the presentation of Primary EPS with
a presentation of Basic EPS. It also requires dual presentation of Basic
EPS and Diluted EPS on the face of the income statement for entities with
complex capital structures. In accordance with Staff Accounting Bulletin
Topic 4, basic EPS is based on the number of common shares outstanding as
if such shares were outstanding at the beginning of the period, which
totaled 3,000,000 for 1998. The Company did not present Diluted EPS since
the result was anti-dilutive.
F - 19
<PAGE>
NEW ACCOUNTING PRONOUNCEMENTS - The Company adopted SFAS No. 130,
"Reporting Comprehensive Income", which establishes standards for reporting
and displaying comprehensive income and its components in financial
statements; however, the adoption of this statement had no impact on the
Company's net loss on shareholders' deficit.
RECLASSIFICATION - Certain 1998 amounts have been reclassified in order to
conform with 1999 classifications.
2. NOTE PAYABLE TO SHAREHOLDER
The Company entered into an agreement with its President and majority
shareholder to borrow up to $300,000 (at the discretion of the President)
with interest at 8.0%. Repayment shall be made when funds are available and
the balance of principal and accrued interest is due December 31, 2001.
3. COMMITMENTS AND CONTINGENCIES
The Company has agreements with companies to pay a royalty on sales of
certain videos. The royalty is based on a specified formula, which averages
to approximately 35% to 45% of gross sales.
The Company leases its operating facility for $1,605 per month in Encino,
California under a non-cancelable operating lease, which expires in
February 2000. The Company expects to renew the lease under similar terms.
In addition, the Company leases a sales office in Mill Valley, California
on a month-to-month lease for $795 per month. Lease expense totaled $21,210
in 1999 (none in 1998).
4. MANAGEMENT PLANS
During 1999 and 1998, the Company commenced marketing and sales of its new
training videos. Management expects that the forecasted higher sales and
cash flow from operations will be adequate to finance the 2000 cash flow
requirements. Management has developed plans that include but are not
limited to, merging with another company and obtaining additional financing
sources.
5. YEAR 2000 COMPLIANCE (UNAUDITED)
The Company has evaluated the impact of the Year 2000 date change on its
computer systems and has concluded that this change will not have a
material impact on its systems.
--------------------------------------------------------------------------------
F - 20
<PAGE>
<TABLE>
ADVANCED KNOWLEDGE, INC.
BALANCE SHEETS
--------------
<CAPTION>
February 29,
2000 August 31,
(UNAUDITED) 1999
--------- ---------
<S> <C> <C>
ASSETS
CASH ............................................. $ 13,931 $ 10,859
ACCOUNTS RECEIVABLE .............................. 55,423 28,568
VIDEO INVENTORY AND PRODUCTION COSTS ............. 47,444 49,444
PREPAID EXPENSES ................................. 1,050 1,050
--------- ---------
TOTAL ASSETS ..................................... $ 117,848 $ 89,921
========= =========
LIABILITIES AND SHAREHOLDERS' DEFICIT
LIABILITIES:
Accrued royalties ................................ $ 62,503 $ 27,874
Accrued expenses ................................. 33,484 22,061
Note payable to shareholder ...................... 187,962 127,962
Accrued interest due to shareholder .............. 17,034 9,682
--------- ---------
Total liabilities ................................ 300,983 187,579
--------- ---------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' DEFICIT:
Common stock, par value - $.001,
25,000,000 shares authorized, 6,000,000
and 4,000,000 shares issued and
outstanding at February 29, 2000 and
August 31, 1999, respectively .................. 6,000 4,000
Additional paid-in capital ....................... 222,000 99,000
Accumulated deficit .............................. (411,135) (200,658)
--------- ---------
Total shareholders' deficit ...................... (183,135) (97,658)
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT ...... $ 117,848 $ 89,921
========= =========
See accompanying notes to financial statements.
</TABLE>
F - 21
<PAGE>
<TABLE>
ADVANCED KNOWLEDGE, INC.
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
FOR THE THREE MONTHS AND SIX MONTHS ENDED
FEBRUARY 29, 2000 AND FEBRUARY 28, 1999
---------------------------------------
<CAPTION>
Three Months Six Months Three Months Six Months
Ended Ended Ended Ended
February 29, February 29, February 28, February 28,
2000 2000 1999 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUES ............ $ 70,433 $ 137,122 $ 48,897 $ 87,515
COST OF SALES ....... 27,976 53,773 16,463 35,034
----------- ----------- ----------- -----------
GROSS PROFIT ........ 42,457 83,349 32,434 52,481
----------- ----------- ----------- -----------
EXPENSES:
Selling and marketing 32,177 81,789 7,653 18,187
General and
administrative .... 18,218 35,207 12,926 28,168
Professional fees ... 127,339 167,879 18,751 44,141
Interest expense .... 3,693 7,352 2,205 3,659
----------- ----------- ----------- -----------
Total expenses ...... 181,426 292,226 41,535 94,155
----------- ----------- ----------- -----------
LOSS BEFORE
INCOME TAXES ...... (138,969) (208,877) (9,101) (41,674)
INCOME TAXES ........ 1,600 900
----------- ----------- ----------- -----------
NET LOSS ............ $ (138,969) (210,477) $ (9,101) (42,574)
=========== =========== =========== ===========
ACCUMULATED DEFICIT,
BEGINNING OF PERIOD (200,658) (86,645)
----------- ----------- ----------- -----------
ACCUMULATED DEFICIT,
END OF PERIOD ..... $ (411,135) $ (129,219)
=========== =========== =========== ===========
BASIC LOSS PER SHARE $ (.03) $ (.05) $ N/A $ (.01)
=========== =========== =========== ===========
COMMON SHARES
OUTSTANDING ....... 4,333,333 4,166,667 3,133,333 3,066,667
=========== =========== =========== ===========
See accompanying notes to financial statements.
</TABLE>
F - 22
<PAGE>
<TABLE>
ADVANCED KNOWLEDGE, INC.
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED FEBRUARY 29, 2000 AND FEBRUARY 28, 1999
----------------------------------------------------------------
<CAPTION>
February 29, February 28,
2000 1999
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ....................................... $(210,477) $ (42,574)
Adjustments to reconcile net loss to
net cash used by operating
activities:
Amortization ................................. 213 2,500
Issuance of stock for services ............... 125,000
Changes in operating assets and
liabilities:
Accounts receivable .......................... (26,855) (21,151)
Inventory .................................... 1,787 (19,284)
Prepaid expenses ............................. (1,110)
Accrued expenses ............................. 53,404 (20,661)
--------- ---------
Net cash used by operating activities .......... (56,928) (102,280)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Bank overdraft ................................. 612
Sale of common stock ........................... 20,000
Borrowings from shareholder .................... 60,000 70,750
--------- ---------
Net cash provided by financing
activities ................................... 60,000 91,362
--------- ---------
NET INCREASE (DECREASE) IN CASH ................ 3,072 (10,918)
CASH, BEGINNING OF PERIOD ...................... 10,859 10,918
--------- ---------
CASH, END OF PERIOD ............................ $ 13,931 $ -0-
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest ......................... $ -0- $ -0-
Cash paid for income taxes ..................... $ 1,600 $ 900
See notes to financial statements.
</TABLE>
F - 23
<PAGE>
ADVANCED KNOWLEDGE, INC.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Item
310(b) of Regulation S-B. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management
all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for
the six-month period ended February 29, 2000, are not necessarily
indicative of the results that may be expected for the year ended August
31, 2000. For further information, refer to the financial statements and
footnotes thereto included in the Company's report on Form 10K-SB for the
year ended August 31, 1999.
The balance sheet at August 31, 1999, has been derived from the audited
financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
GENERAL INFORMATION - The core business of the Company during the periods
covered by this report was the production and marketing of business
training videos.
GOING CONCERN - The Company experienced significant operating losses for
the year ended August 31, 1999 and through February 29, 2000. The financial
statements have been prepared assuming the Company would continue to
operate as a going concern, which contemplates the realization of assets
and the settlement of liabilities in the normal course of business. No
adjustment has been made to the recorded amount of assets or the recorded
amount or classification of liabilities which would be required if the
Company were unable to continue its operations. As discussed in Note 2, on
March 20, 2000, subsequent to the periods covered by these financial
statements, the Company completed the acquisition of all of the outstanding
common shares of Soccer Magic Inc. ("Soccer Magic") and subsequently sold
all of its other assets to Becor Internet Inc. in exchange for the
assumption of the Company's liabilities. Soccer Magic is considered the
accounting acquiror of the Company and, going forward, the financial
statements of the Company will be those of Soccer Magic.
UNCLASSIFIED BALANCE SHEET - In accordance with the provisions of SFAS No.
53, the Company has elected to present an unclassified balance sheet.
VIDEO INVENTORY - Video inventory consists of video tapes, demos, training
manuals and film production costs. Inventory is stated at the lower of cost
or estimated net realizable value and is amortized in the ratio of the
current year's gross revenues to management's estimate of remaining gross
revenues. Accumulated amortization at February 29, 2000 totaled $10,497.
F - 24
<PAGE>
LOSS PER SHARE - The Company adopted the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share," that
established standards for the computation, presentation and disclosure of
earnings per share ("EPS"), replacing the presentation of Primary EPS with
a presentation of Basic EPS. It also requires dual presentation of Basic
EPS and Diluted EPS on the face of the income statement for entities with
complex capital structures. The Company did not present Diluted EPS since
it has a simple capital structure.
The loss per share for the three months ended February 28, 1999 has been
indicated as "N/A" (not available) since the amount is less than $0.01 per
share.
2. ISSUANCE OF COMMON STOCK
During December 1999, the Company issued 2,000,000 shares of its common
stock in exchange for consulting services valued at $125,000.
3. SUBSEQUENT EVENTS (ACQUISITION OF SOCCER MAGIC INC.)
On March 20, 2000, pursuant to an Acquisition Agreement dated as of
December 14, 1999, the Company 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 Company 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 the Company. Under reverse takeover accounting principles,
Soccer Magic is deemed to be the accounting acquirer in the transaction.
Immediately following the Soccer Magic acquisition, the Company sold all of
the assets 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 the Company. 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 the Company as of March 20, 2000. In
exchange for the assets, Becor assumed, and both Becor and Mr. Young agreed
to indemnify the Company with respect to, all of the liabilities incurred
or accrued by the Company prior to March 20, 2000. According to the
unaudited balance sheet of the Company as of March 20, 2000, the Company
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.
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, the Company completes a private placement of
common stock raising gross proceeds for the Company of at least $2,700,000
and the Company 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 the Company will be
returned to the former Soccer Magic shareholders, and the Company shares
issued to the Soccer Magic shareholders will be returned to the Company for
cancellation.
F - 25
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The liability of our officers and directors is or may be affected by the
following provisions of applicable state law and of our certificate of
incorporation and bylaws:
Section 145 of the Delaware General Corporation Law permits our board of
directors to indemnify any person against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with any threatened, pending or completed action, suit or
proceeding in which such person is made a party by reason of his being or having
been a director, officer, employee or agent of each such corporation, in terms
sufficiently broad to permit such indemnification under certain circumstances
for liabilities (including reimbursement for expenses incurred) arising under
the Securities Act of 1933. The statute provides that indemnification pursuant
to its provisions is not exclusive of other rights of indemnification to which a
person may be entitled under any bylaw, agreement, vote of stockholders or
disinterested directors, or otherwise.
Section 102(b)(7) of the Delaware General Corporation Law permits us to
adopt a provision in our certificate of incorporation eliminating or limiting
the personal liability of our directors to the corporation and its stockholders
for monetary damages for breach of fiduciary duty as a director, except for
liability (i) for any breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware General Corporation Law (relating to the payment of
unlawful dividends and unlawful stock purchases and redemptions), or (iv) for
any transaction from which the director derived an improper personal benefit.
Under Section 2115 of the California General Corporation Law, certain
provisions of the California General Corporation Law may be deemed to apply to
Becor Communications as a Delaware corporation doing business in the state of
California. Those sections include Section 317, which makes provision for the
indemnification of officers and directors in terms sufficiently broad to include
indemnification under certain circumstances for liabilities, including
reimbursement for expenses incurred, arising under the Securities Act of 1933.
Our certificate of incorporation provides for mandatory indemnification of
our directors and officers to the full extent permitted by law. Our certificate
of incorporation further provides that the personal liability of our directors
is eliminated to the fullest extent permitted by Section 102(b)(7) of the
Delaware General Corporation Law, as the same may be amended and supplemented
from time to time.
II - 1
<PAGE>
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
We estimate the following expenses in connection with this registration and
offering of common stock by the Young Family Trust. Becor Communications will
pay all of these expenses.
SEC registration fee $ 198
Printing costs 500
Blue sky fees 3,000
Accounting fees and expenses 7,500
Legal fees and expenses 45,000
Miscellaneous 3,500
-------
Total $59,698
=======
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
On April 5, 2000, we sold 1,250,000 shares of common stock to Buddy Young,
registered in the name of the Young Family Trust, for $100,000, paid through a
$100,000 reduction of indebtedness owed by us to Mr. Young. This sale of shares
was exempt from registration under Section 4(2) of the Securities Act of 1933 as
a transaction not involving a public offering. We issued the shares subject to
resale restrictions. We are registering 200,000 of these shares to permit their
resale by the Young Family Trust.
ITEM 27. EXHIBITS.
The following exhibits are filed or incorporated by reference as part of
this Registration Statement.
(2) Plan of Purchase, Sale Reorganization, Arrangement, Liquidation or
Succession
2.1 Asset Sale Agreement dated March 16 , 2000, by and among Sporting
Magic Inc. (then known as Advanced Knowledge, Inc.), as seller, the
registrant, as purchaser, and Buddy Young, an individual, and ratified
and approved by Soccer Magic Inc.
(3) Articles of Incorporation and Bylaws
3.1 Certificate of Incorporation of the registrant dated June 2, 1999 and
filed with the Delaware Secretary of State on June 7, 1999
3.2 Certificate of Amendment of Certificate of Incorporation of the
registrant dated June 25, 1999 and filed with the Delaware Secretary
of State on June 29, 1999
3.3 Certificate of Amendment of Certificate of Incorporation of the
registrant dated May 8, 2000 and filed with the Delaware Secretary of
State on May 15, 2000
II - 2
<PAGE>
3.4 Certificate of Amendment of Certificate of Incorporation of the
registrant dated August 29, 2000 and filed with the Delaware Secretary
of State on August 30, 2000
3.5 Bylaws of Becor Communications, Inc.
(4) Instruments Defining the Rights of Security Holders, Including Indentures
4.1 Form of Certificate of Common Stock of Becor Communications, Inc.
(5) Opinion on Legality
5.1 Opinion of Miller & Holguin regarding the legality of the securities
being registered
(10) Material Contracts
10.1 Production Agreement, dated January 5, 1998, between the registrant
(assigned by Sporting Magic Inc.) and The Hathaway Group
10.2 Distribution Agreement, dated February 1, 1998, between the registrant
(assigned by Sporting Magic Inc.) and AIMS Multimedia, dated February
1, 1998
10.3 Secured Promissory Note of the registrant (assumed from Sporting Magic
Inc.), dated August 18, 1998, in favor of Buddy Young
10.4 Security Agreement, dated August 18, 1998, between the registrant
(assumed from Sporting Magic Inc.) and Buddy Young
10.5 Extension of the Note, dated March 24, 1999, between the registrant
(assumed from Sporting Magic Inc.) and Buddy Young
(21) Subsidiaries of the Registrant
21.1 Subsidiaries of the Registrant
(23) Consents of Experts and Counsel
23.1 Consent of Farber & Hass LLP .
23.2 Consent of Miller & Holguin (included in its opinion filed as Exhibit
5.1)
(27) Financial Data Schedule
27.1 Financial Data Schedule
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<PAGE>
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) Reflect in the prospectus any facts or events which, individually
or together represent a fundamental change in the information in
the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end
of the estimated maximum offering range may be reflected in the
form of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price
represent no more than a 20% change in the maximum aggregate
offering price set forth in the Calculation of Registration Fee"
table in the effective registration statement;
(iii)To include any additional or changed material information on the
plan of distribution;
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of th
securities offered, and the offering of the securities at that time to
be the initial bona fide offering; and
(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
(e) Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advise that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
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<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form S-B2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of Encino,
State of California, on September 20, 2000.
BECOR COMMUNICATIONS, INC.
By: /S/ BUDDY YOUNG
-------------------------------------
Buddy Young
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
NAME TITLE DATE
/S/ BUDDY YOUNG President, Chief Executive September 20, 2000
----------------------- Officer, Chief Financial
Buddy Young Officer and Director
(Principal Executive,
Financial and
Accounting Officer)
/S/ L. STEPHEN ALBRIGHT Director September 20, 2000
------------------------
L. Stephen Albright
/S DENNIS SPIEGELMAN Director September 20, 2000
------------------------
Dennis Spiegelman
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<PAGE>
EXHIBITS INDEX
EXHIBIT
NO. TITLE OF DOCUMENT
------- ----------------------------------------------------------------------
2.1 Asset Sale Agreement dated March 16 , 2000, by and among Sporting
Magic Inc. (then known as Advanced Knowledge, Inc.), as seller, the
registrant, as purchaser, and Buddy Young, an individual, and ratified
and approved by Soccer Magic Inc.
Pursuant to Regulation S-B, Item 601(b)(2), the following schedules to
the Asset Sale Agreement will be provided to the Commission upon
request:
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
3.1 Certificate of Incorporation of the registrant dated June 2, 1999 and
filed with the Delaware Secretary of State on June 7, 1999
3.2 Certificate of Amendment of Certificate of Incorporation of the
registrant dated June 25, 1999 and filed with the Delaware Secretary
of State on June 29, 1999
3.3 Certificate of Amendment of Certificate of Incorporation of the
registrant dated May 8, 2000 and filed with the Delaware Secretary of
State on May 15, 2000
3.4 Certificate of Amendment of Certificate of Incorporation of the
registrant dated August 29, 2000 and filed with the Delaware Secretary
of State on August 30, 2000
3.5 Bylaws of Becor Communications, Inc.
4.1 Form of Certificate of Common Stock of Becor Communications, Inc.
5.1 Opinion of Miller & Holguin regarding the legality of the securities
being registered
10.1 Production Agreement, dated January 5, 1998, between the registrant
(assigned by Sporting Magic Inc.) and The Hathaway Group
10.2 Distribution Agreement, dated February 1, 1998, between the registrant
(assigned by Sporting Magic Inc.) and AIMS Multimedia, dated February
1, 1998
10.3 Secured Promissory Note of the registrant (assumed from Sporting
Magic Inc.), dated August 18, 1998, in favor of Buddy Young
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<PAGE>
10.4 Security Agreement, dated August 18, 1998, between the registrant
(assumed from Sporting Magic Inc.) and Buddy Young
10.5 Extension of the Note, dated March 24, 1999, between the registrant
(assumed from Sporting Magic Inc.) and Buddy Young
21.1 Subsidiaries of the Registrant
23.1 Consent of Farber & Hass LLP
23.2 Consent of Miller & Holguin (included in its opinion filed as Exhibit
5.1)
27.1 Financial Data Schedule
II - 7
