As filed with the Securities and Exchange Registration No.: 333-46690
Commission on January 16, 2001
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1 to
Form SB-2
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
BECOR COMMUNICATIONS, INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
DELAWARE 7200
(STATE OR JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER)
17337 VENTURA BOULEVARD, SUITE 224 95-4766094
ENCINO, CALIFORNIA 91316 (IRS EMPLOYER IDENTIFICATION NO.)
(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:
L. STEPHEN ALBRIGHT, ESQ.
17337 VENTURA BOULEVARD, SUITE 326
ENCINO, CALIFORNIA 91316
(818) 784-0040 (EXT. 23)
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>
PROSPECTUS
Dated January 16, 2001 Subject to Completion
$640,000
BECOR COMMUNICATIONS, INC.
3,200,000 SHARES OF COMMON STOCK
We are offering up to 3,200,000 shares of our common stock for $0.20 per
share. We are offering 3,000,000 shares in this 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 the same price. We will not
receive any proceeds from the sale of those shares. Our sole stockholder will
not sell any shares until all 3,000,000 shares offered by us have been sold.
Please be aware that there is no public market for our common stock and that
this offering is intended to remain open for 2 years. However, if a public
market in the Company's stock is created, this offering will terminate. No
shares will be offered or sold under this offering if and when the Company's
shares become publicly traded.
We are making this offering on a best-efforts basis. Thus, we are not
required to sell a minimum number or dollar amount of shares before we are
entitled to keep an investor's payment for shares. Also, funds received from
investors will not be deposited in any escrow, trust or similar account. All
funds received from investors will be available for our immediate use. We do not
plan to use any underwriter or broker-dealer to assist in sale of the shares
offered for sale. We may continue offering these shares for sale for up to two
years from the effective date of this prospectus.
Our sole stockholder will not sell any shares until all 3,000,000 shares
offered by us have been sold. If our sole stockholder sells any shares, all
proceeds from those sales will be paid to the sole stockholder. Please be aware
that if a public market for the Company's stock is created, this offering will
terminate and no shares will be offered or sold under this offering if and when
the Company's shares become publicly traded.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE
MAY NOT SELL THESE SECURITIES UNTIL THE SECURITIES AND EXCHANGE COMMISSION HAS
DECLARED OUR REGISTRATION STATEMENT TO BE EFFECTIVE.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Price to Offering Proceeds
PURCHASERS EXPENSES TO COMPANY
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Per share...................... $0.20 $0.02 $0.18
Aggregate(1)................... $600,000 $60,000 $540,000
(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.
</TABLE>
This prospectus is dated __________, 2001.
AN INVESTMENT IN THESE SECURITIES WE ARE OFFERING FOR SALE IS RISKY. YOU
SHOULD PURCHASE THESE SECURITIES ONLY IF YOU CAN AFFORD TO LOSE YOUR ENTIRE
INVESTMENT. PLEASE REVIEW THE "RISK FACTORS" BEGINNING ON PAGE 4 FOR A
DISCUSSION OF FACTORS YOU SHOULD CONSIDER BEFORE YOU INVEST IN THESE SECURITIES.
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TABLE OF CONTENTS
PAGE
Risk Factors ......................................................... 3
Use of Proceeds ...................................................... 4
Dilution ............................................................. 5
Market for Common Equity and Related
Stockholder Information ........................................... 6
Determination of Offering Price ...................................... 8
Unaudited Pro Forma Consolidated
Statements of Operations .......................................... 9
Management's Discussion and Analysis
or Plan of Operation .............................................. 10
Business ............................................................. 12
Management ........................................................... 21
Certain Relationships and Related
Transactions ...................................................... 24
Principal Stockholders and Selling
Stockholder ....................................................... 25
Plan of Distribution ................................................. 26
Description of Securities ............................................ 27
Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities ........................................................ 27
Legal Matters ........................................................ 28
Experts .............................................................. 28
Where You Can Find More Information .................................. 28
Index to Consolidated Financial Statements ........................... F-1
Back Cover of Prospectus........................................(no page number)
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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 purchase
shares in Becor Communications.
WITH OUR LIMITED OPERATIONS AND SHORT OPERATING HISTORY, IT IS DIFFICULT TO
PREDICT WHETHER OR NOT WE WILL BE SUCCESSFUL. We have had limited operations and
a brief operating history. These two factors make it more difficult and riskier
for you to estimate our chances for success. We formed our company on June 7,
1999 and began operations on March 23, 2000, when we acquired the assets and
liabilities of a workforce training video business from Sporting Magic Inc.
Sporting Magic, Inc.'s previous name was Advanced Knowledge, Inc. Before we
acquired the assets and liabilities of Sporting Magic, it was controlled by our
sole stockholder and had the same officers and directors that we now have.
Sporting Magic began its workforce training video business operations in January
1998. As a result, Sporting Magic had only a brief operating history before we
acquired its assets and liabilities. We have included in this prospectus the
financial statements of Sporting Magic as of: (i) August 31, 1999; (ii) the
fiscal years ended August 31, 1999 and 1998; (iii) February 29, 2000; and, for
the three months and six months ended February 29, 2000 and 1999. You should
consider these risks as well as the uncertainties, delays and difficulties
normally associated with any developing and expanding new business. You should
also consider the fact that many of these factors are 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 $23,102. Assuming the acquisition of Sporting Magic's assets
and liabilities 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 $291,328. Sporting Magic had a history of significant losses before we
acquired our assets and liabilities from it. As we continue to develop business,
expenses are expected to continue to exceed revenues. This is expected to
continue for an indefinite period of time. Until we are profitable, if ever, our
ability to continue as a going concern will depend on our ability to
continuously obtain financing either from our sole stockholder, from the sale of
stock by this offering, or from other sources. As a result, 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. Assuming that we meet sales
expectations and are able to sell all of the shares offered by this prospectus,
we believe that will be able to fund operations for the next 12 months. If we
sell fewer shares than are offered, we expect that we will still be able to
satisfy current cash requirements through voluntary advances from our president.
Our president has provided us with a $300,000 credit facility. However, he is
not legally required to advance funds under the credit facility and does so
strictly on a voluntary basis. As a result, 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 seek
additional equity or debt financing. If this is the case, we may not be able to
obtain such financing on favorable terms, if at all. Any
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<PAGE>
equity financing would dilute our existing stockholders' equity. We are unable
to predict whether such dilution would be substantial. Any debt financing would
increase our need for cash to service the debt. If funding to meet our needs is
not available from any of these sources, we may be required to scale back our
planned operations.
IF WE WERE TO LOSE THE SERVICES OF OUR CURRENT MANAGEMENT, WE MIGHT NOT BE
ABLE TO FIND SUITABLE REPLACEMENTS. Our success depends in large part on the
continued service of Buddy Young, our president and chief executive officer, and
Howard Young, our vice president. The loss of the services of either 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 Buddy Young or Howard Young left us, we might not be able to find
qualified replacements and might be forced to make significant changes to our
business.
USE OF PROCEEDS
The following table describes how we plan to allocate the proceeds of this
offering, assuming we sell either half or all of the 3,000,000 shares of common
stock we are offering:
<TABLE>
<CAPTION>
Sale of Sale of
1,500,000 3,000,000
Shares (50% Shares (100%
of Offering) of Offering)
--------------------------------------------------------------------------------
<S> <C> <C>
Gross proceeds ................................... $300,000 $600,000
Estimated offering expenses (e.g.,
printing and mailing costs,
legal and accounting fees, SEC
registration fee, and blue sky fees) ............. $ 60,000 $ 60,000
--------
Estimated net proceeds ........................... $240,000 $540,000
Estimated uses of proceeds
Production of new videos .................... $100,000 $200,000
Marketing and sales expenses ................ $ 75,000 $160,000
General working capital ..................... $ 65,000 $190,000
-------- --------
$240,000 $540,000
======== ========
</TABLE>
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.
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The funds available for general working capital will mainly be used to pay
base salaries to salespersons that we are planning to hire over the next six
months. The remaining available working capital will be used to pay salaries to
administrative office personnel, rent, and other general office expenses. The
number of people hired for both sales and administrative positions will be
dependent on the funds available to us for these purposes.
If and when the Company's stock becomes publicly traded, whether on a
national exchange, NASDAQ, the OTC Bulletin Board or the Pink Sheets, then this
offering will automatically terminate and no further shares offered will be
sold. Thus, the amount of proceeds from the sale of shares in this offering may
be reduced if the Company's shares become publicly traded before all 3,000,000
shares are sold.
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
Percent Total of Total Price
Number of of Shares Considera- Considera- Paid Per
Shares Purchased tion Paid tion 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
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Percentage Average
Percent Total of Total Price
Number of of Shares Considera- Considera- Paid Per
Shares Purchased tion Paid tion Paid Share
--------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
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).
<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
Percentage Dilution Per Share 85% 60% 45%
</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 Securities and Exchange Commission that this registration
statement has become effective, we will seek to have our stock quoted for
trading on either the Over-The-Counter Bulletin Board system (also known as
OTCBB) 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.
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Both the Over-The-Counter Bulletin Board System (also known as OTCBB) or
the Pink Sheets Electronic Quotation Service have very minimal listing
requirements imposed on companies that desire to be listed in their systems.
The Over-The-Counter Bulletin Board System (also known as OTCBB) requires
that the company's stock be registered with the Securities and Exchange
Commission, that the company be current with its Securities and Exchange
Commission filings requirements, and have at least one (1) market maker. It does
not have any other listing requirements. There are no requirements as to stock
price, bid and asked quotes, number of shareholders, the number of shares held
by each shareholder, or the number of shares traded.
The Pink Sheets quotation system requires that the company's stock be
registered with the Securities and Exchange Commission, have at least one (1)
market maker and have a Form 15-211(c) on file with the National Association of
Securities Dealers (also known as the NASD). The Pink Sheets do not have any
minimum requirements as to stock price, bid and asked quotes, number of
shareholders, the number of shares held by each shareholder, or the number of
shares traded.
If and when the Company is successful in having its shares listed and
publicly traded, this offering will automatically terminate. No shares will be
offered for sale or sold under this offering once the Company's shares become
publicly traded.. The termination applies to all unsold shares as of the date
the Company's stock becomes publicly traded, regardless of whether the unsold
shares are to be sold by the Company or the selling shareholder.
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
November 30, 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 will 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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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 not offer any shares for sale until we have
sold all the shares we are offering for sale. Once we have sold all 3,000,000
shares being offered, the selling shareholder (who is also our sole shareholder)
will offer its 200,000 shares of common stock at the same price as the shares
offered by the Company.
If and when the Company is successful in having its shares listed and
publicly traded, thereby creating a market for the stock, this offering will
automatically terminate and no further shares will be offered for sale or sold
under this offering. The termination will apply to all unsold shares as of the
date the Company's stock becomes publicly traded, regardless of whether the
unsold shares are to be sold by the Company or the selling shareholder.
(Balance of Page Intentionally Left Blank)
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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 May 31, 2000
May 31, 2000 March 19, Pro Forma
Actual 2000 Combined
--------- --------- ---------
<S> <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 ................ (900) (10,516) (11,416)
--------- --------- ---------
Loss before income
tax provision ............... (22,302) (266,726) (289,028)
Income tax provision ........... 800 1,500 2,300
--------- --------- ---------
</TABLE>
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<TABLE>
<CAPTION>
Sporting
Becor Magic(1)
Communications, Period
Inc. June 1, Year Ended
Year Ended 1999 to May 31, 2000
May 31, 2000 March 19, Pro Forma
Actual 2000 Combined
--------- --------- ---------
<S> <C> <C> <C>
Net loss $ (23,102) $(268,226) $(291,328)
========= ========= =========
Basic loss per share ........... $ (0.23)
=========
Weighted average
common shares
outstanding - basic .......... 1,250,000
=========
-----------------
(1) Formerly known as Advanced Knowledge, Inc.
</TABLE>
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.
Because we have been in existence for only one fiscal year, we are not able
to provide any period-to-period comparison of operations or change in financial
condition. Therefore, none are presented. We have set forth below our plan of
operation.
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
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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.
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 November 30, 2000, we
owed our president a total of $253,912 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.
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.
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To date, four of the six training videos have been completed, and are
currently being distributed by us, as well as other distributors throughout the
world. The agreement requires us to finance 50% of the production cost of all
six videos and to pay a royalty to The Hathaway Group of 50% of revenues, minus
distribution expenses, derived from sales of each video in the series.
The total cost of production for the first four videos that have thus far
been completed under this agreement is approximately $200,000. Each of the four
videos cost approximately $50,000. We have paid a total of approximately
$100,000, as our share of the production costs.
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 in the series is entitled Own It (i.e., "own@ your job)
and focuses on the four main themes: Caring About What You Do, Going Above And
Beyond, Being A Team Player, and Being Proud Of What You Do And Where You Do It.
We anticipate beginning work with The Hathaway Group on fifth video in the
series during the first quarter of 2001. Its basic theme will be the importance
of diversity in the workplace. Our plans call for this video to be completed by
June 1, 2001, and to cost approximately $50,000.
Although preliminary discussions have taken place with The Hathaway Group,
there is no specific starting date, budget, or theme for the sixth video in the
series.
There is no default provision in the agreement. Either we, or the Hathaway
Group, can elect not to go forward with the funding for the production of the
remaining two videos. If that should happen, we do not feel it would have a
material effect on the company, as we will still have the distribution rights to
the videos that have been produced.
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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 twenty-eight (28)
domestic distribution agreements and twenty-seven (27) international
distribution agreements. Approximately eighty percent (80%) of our revenues are
derived from the sale of our videotapes through these agreements. We anticipate
that approximately the same percentage of revenue will be generated from these
agreements during fiscal 2001.
WORKFORCE TRAINING INDUSTRY OVERVIEW
General
According to the Annual Industry 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%.
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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.
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-
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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
The Annual Industry Report from the October, 1999 issue of Training
Magazine revealed that 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:
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.
It is our belief that all of the foregoing factors 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 we believe that 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.
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The October 1999 issue of Training Magazine indicates that 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 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 to us 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.
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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.
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.
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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.
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
We believe that 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.
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Internal Training Departments
We have learned that 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
Our experience has revealed that independent training providers range in
size and 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 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.
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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.
MANAGEMENT
The following table sets forth the current officers and directors of Becor
Communications:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Buddy Young 65 President, Chief Executive
Officer and Chairman
L. Stephen Albright 49 Secretary and Director
Dennis Spiegelman 54 Director
Howard Young 42 Vice President
</TABLE>
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 1996, 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
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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 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. Prior to becoming associated with Advantage Mergers and
Acquisitions in July 2000, Mr. Albright was employed as an associate attorney
with Wasserman, Comden & Casselman, L.L.P. a law firm located in Tarzana (Los
Angeles) California from June 1994 through June 2000. Mr. Albright started his
own law practice in June 2000. Mr. Albright received his undergraduate degree in
business administration and marketing from West Virginia University in 1975.
Following careers in industrial 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 vice
president, sales and marketing for Cast & Crew Entertainment Services, Inc., a
position he accepted in April 1998. From 1995 to April 1998, Mr. Spiegelman was
the senior vice president of sales and marketing for Axium Entertainment, Inc.
Both Cast & Crew and Axium specialize in providing payroll and payroll related
services to the motion picture and television entertainment industries. 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
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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.
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.
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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 approximately $101,000 and total liabilities
of approximately $305,000 at that date.
At the time of the acquisition, our sole stockholder, the Young Family
Trust owned 1,976,147 shares of Sporting Magic's common stock. These 1,976,147
shares represented 32.94% of the total ownership of Sporting Magic at that time.
Also, as co-trustees of the Young Family Trust, Buddy and Rebecca Young are
considered to be beneficial owners of these shares. As part of the March 20,
2000 acquisition, 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. Consequently, the Trust's 1,976,147 shares were reduced in
percentage ownership to only 12.35% of the company. 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 its credit arrangement with Mr. Young. Pursuant to that
arrangement, Mr. Young had agreed to advance, at his discretion, up to $300,000
to the company for operating expenses and the production of training videos. The
loan carried an 8% annual interest rate evidenced by a 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 November 30, 2000, we owed $224,712 in
principal and $29,200 in interest to Mr. Young under the note. As a result, the
Trust became our sole shareholder and our sole creditor. Thus, prior to the sale
of any shares through this offering, the Young Family Trust owns 100% of the
Company and Mr. Young and his wife are considered to be the beneficial owner of
100% of the Company.
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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 January 16, 2001, 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>
25
<PAGE>
PLAN OF DISTRIBUTION
We are offering up to 3,000,000 shares of our common stock for $0.20 per
in this initial public offering of our common stock. This is a best-efforts
offering. Thus, we are not required to sell a minimum number of shares or a
minimum dollar amount before we are entitled to keep an investor's payment for
shares. All funds received from investors will not be deposited in any escrow,
trust or similar account. All funds received from investors will be available
for our immediate use.
Our sole stockholder is also offering up to an additional 200,000 shares of
common stock in private transactions at the same price. We will not receive any
proceeds from the sale of those shares. Our sole stockholder will not sell any
shares until all 3,000,000 shares offered by us have been sold. All funds
received from investors for these shares will not be deposited in any escrow,
trust or similar account. All funds received from investors for these shares
will be available for the selling shareholder's immediate use.
Since we are making this offering on a best-efforts basis, we do not plan
to use any underwriters or broker-dealers to assist in the sale of the shares
offered for sale. We may continue offering these shares for sale for up to two
years from the date of this prospectus. Our sole stockholder will not sell any
shares until all 3,000,000 shares offered by us have been sold. If our sole
stockholder sells any shares, all proceeds from those sales will be paid to the
sole stockholder.
Our officers and directors 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 will not sell or
offer to sell any of the selling stockholder's shares unless and until we have
sold all the shares offered by the Company. Thus, in the event we have not sold
out the shares offered by the Company before the two year period ends, then no
shares of the selling shareholder will be offered for sale or sold. We are
making this offering only in the States of New York and California 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 it 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.
26
<PAGE>
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.
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 Seven 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.
27
<PAGE>
LEGAL MATTERS
Certain legal matters in connection with the issuance of the securities
offered hereby will be passed upon for Becor Communications by L. Stephen
Albright, attorney at law, Los Angeles, California. The opinion of Mr. Albright
is intended to and shall supercede the opinion of Miller & Holguin, attorneys at
law, which was submitted and filed with the original SB-2 Registration Statement
in September 2000.
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.
28
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGES
BECOR COMMUNICATIONS, INC.
Independent Auditors' Report ..................................... F-3
Consolidated Year-End Financial Statements:
Consolidated Balance Sheet as of May 31, 2000 ................. F-4
Consolidated Statement of Operations for the
period from June 7, 1999 (inception) to
May 31, 2000 ............................................... F-5
Consolidated Statement of Shareholders'
Deficit for the period from June 7, 1999
(inception) to May 31, 2000 ................................ F-6
Consolidated Statement of Cash Flows for the
period from June 7, 1999 (inception) to
May 31, 2000 ............................................... F-7
Notes to Consolidated Financial Statements .................... F-9
BECOR COMMUNICATIONS, INC.
Consolidated Financial Statements (Unaudited)
For Six Months ended November 30, 2000 ........................ F-13
Table of Contents ................................................ F-14
Consolidated Balance Sheet (unaudited) as of
November 30, 2000 ............................................. F-15
Consolidated Statement of Operations (unaudited)
for the period June 1, 2000 to November 30, 2000 .............. F-16
Consolidated Statement of Cash Flows (unaudited)
for the period June 1, 2000 to November 30, 2000 .............. F-17
Notes to Consolidated Financial Statements
(unaudited) for period ended November 30, 2000 ................ F-18
SPORTING MAGIC INC. (under its former name of
Advanced Knowledge, Inc.) ........................................ F-21
Independent Auditors' Report ..................................... F-22
Year-End Financial Statements:
Balance Sheets as of August 31, 1999 and 1998 ................. F-23
Statements of Operations for the years ended
August 31, 1999 and 1998 ................................... F-24
Statements of Shareholders' Deficit for the
years ended August 31, 1999 and 1998 ....................... F-25
Statements of Cash Flows for the years ended
August 31, 1999 and 1998 ................................... F-26
Notes to Financial Statements ................................. F-27
F-1
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Unaudited Interim Financial Statements:
Balance Sheets as of February 29, 2000 and
August 31, 1999 .............................................. F-31
Statements of Operations and Accumulated Deficit
for the three months and six months ended
February 29, 2000 and February 28, 1999 ...................... F-32
Statements of Cash Flows for the six months
ended February 29, 2000 and February 28, 1999 ................ F-33
Notes to Financial Statements ................................... F-34
F-2
<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.
Oxnard, California
July 28, 2000
F-3
<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
------------
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
------------
NOTE PAYABLE TO SHAREHOLDER ...................................... 139,712
------------
TOTAL LIABILITIES ................................................ 197,216
------------
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 ....................................... (105,443)
Accumulated deficit .............................................. (23,102)
------------
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-4
<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
Other expense, net ........................................ (900)
-----------
LOSS BEFORE INCOME TAXES .................................. (22,302)
INCOME TAXES .............................................. 800
-----------
NET LOSS .................................................. $(23,102)
===========
BASIC AND DILUTED LOSS PER COMMON SHARE ................... $(.02)
===========
WEIGHTED AVERAGE SHARES OUTSTANDING ....................... 1,250,000
===========
See independent auditors' report and accompanying notes to consolidated
financial statements.
</TABLE>
F-5
<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, -0- $ -0- $ -0- $ -0- $ -0-
JUNE 2, 1999
(Date of Inception)
CONTRIBUTION
OF CAPITAL
250 250
EXCESS OF LIABILITIES
ASSUMED OVER
ASSETS ACQUIRED
FROM SPORTING
MAGIC, INC.
(204,443) (204,443)
REDUCTION OF NOTE
PAYABLE TO
SHAREHOLDER 1,250,000 1,250 98,750 100,000
NET LOSS (23,102) (23,102)
--------- ------- --------- -------- ---------
BALANCE 1,250,000 $ 1,250 $(105,443) $(23,102) $(127,295)
MAY 31, 2000 ========= ======= ========= ======== =========
See independent auditors' report and accompanying notes to consolidated
financial statements.
</TABLE>
F-6
<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 ...................................................... $(23,102)
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 ..................................... 35,385
Video inventory and production costs .................... (1,072)
Accounts payable and accrued expenses ................... (59,858)
Security deposits ....................................... (2,350)
--------
Net cash used by operating activities ......................... (47,662)
--------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures .......................................... (4,824)
--------
Cash acquired from Sporting Magic, Inc. ....................... 4,091
--------
Net cash provided by financing activities ..................... (733)
--------
CASH FLOWS FROM FINANCING ACTIVITIES:
Contributed capital ........................................... 250
Borrowings from shareholder ................................... 51,750
--------
Net cash provided by financing activities ..................... 52,000
--------
NET INCREASE IN CASH .......................................... 3,605
CASH, BEGINNING OF PERIOD ..................................... -0-
--------
CASH, END OF PERIOD ........................................... $ 3,605
========
</TABLE>
(Continued)
F-7
<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-
</TABLE>
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.
During March, 2000, the Company acquired all of the assets and liabilities
of Sporting Magic, Inc., a related party through common ownership, for no
consideration. The assets acquired and liabilities assumed are as follows:
<TABLE>
<CAPTION>
<S> <C>
Cash .......................................................... $ 4,091
Accounts Receivable ........................................... 54,675
Video inventory ............................................... 41,065
Other Assets .................................................. 1,050
Due to shareholder ............................................ (187,962)
Other liabilities ............................................. (117,362)
---------
Excess of liabilities assumed over assets acquired ............ $(204,443)
</TABLE>
See independent auditors' report and accompanying notes to consolidated
financial statements.
--------------------------------------------------------------------------------
F-8
<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. The Company's fiscal year end is May 31.
During March, 2000, the Company acquired all of the assets and liabilities
of Sporting Magic, Inc., a related party through common ownership, for no
consideration. The acquisition has been accounted for in a manner similar
to a pooling of interests whereby the assets and liabilities have been
recorded at their historical basis at date of transfer. The excess of
liabilities assumed over assets acquired has been recorded as a charge to
paid-in capital.
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
F-9
<PAGE>
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 AND PRODUCTION COSTS - Video Inventory and Production Costs
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.
REVENUE RECOGNITION - Sales are recognized upon shipment of videos and
training manuals to the customer. Rental income is recognized over the
related period that the videos are rented.
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.
F-10
<PAGE>
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 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.
F-11
<PAGE>
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 additional financing sources consisting
of equity and debt to fund working capital and product development.
F-12
<PAGE>
BECOR COMMUNICATIONS, INC.
(FORMERLY BECOR INTERNET, INC.)
CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
FOR THE SIX MONTHS ENDED
NOVEMBER 30, 2000
F-13
<PAGE>
BECOR COMMUNICATIONS, INC.
(FORMERLY BECOR INTERNET, INC.)
TABLE OF CONTENTS
PAGE
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED):
Consolidated Balance Sheet,
November 30, 2000.......................................................F-15
Consolidated Statement of Operations
for the Period June 1, 2000
to November 30, 2000....................................................F-16
Consolidated Statement of Cash Flows
for the Period June 1, 2000
to November 30, 2000....................................................F-17
Notes to Consolidated Financial Statements..................................F-18
F-14
<PAGE>
<TABLE>
<CAPTION>
BECOR COMMUNICATIONS, INC.,
(FORMERLY BECOR INTERNET, INC.)
CONSOLIDATED BALANCE SHEET (UNAUDITED)
NOVEMBER 30, 2000
--------------------------------------------------------------------------------
<S> <C>
ASSETS
CASH ......................................................... $ 19,860
ACCOUNTS RECEIVABLE, Less allowance of $36,390 ............... 10,305
VIDEO INVENTORY AND PRODUCTION COSTS, Less
accumulated amortization of $10,374 ...................... 49,946
PREPAID EXPENSES ............................................. 1,050
PROPERTY AND EQUIPMENT, Less accumulated
depreciation of $643 ....................................... 4,182
OTHER ASSETS ................................................. 236
---------
TOTAL ASSETS ................................................. $ 85,579
=========
LIABILITIES AND SHAREHOLDER DEFICIT
ACCOUNTS PAYABLE AND ACCRUED EXPENSES ........................ $ 3,794
ACCRUED ROYALTIES ............................................ 40,585
ACCRUED INTEREST TO SHAREHOLDER .............................. 29,200
NOTE PAYABLE TO SHAREHOLDER .................................. 224,712
---------
TOTAL LIABILITIES ............................................ 298,291
---------
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 ................................... (105,443)
Accumulated deficit .......................................... (108,519)
---------
Total shareholder deficit .................................... (212,712)
---------
TOTAL LIABILITIES AND SHAREHOLDER DEFICIT .................... $ 85,579
=========
</TABLE>
F-15
<PAGE>
<TABLE>
<CAPTION>
BECOR COMMUNICATIONS, INC.
(FORMERLY BECOR INTERNET, INC.)
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE PERIOD JUNE 1, 2000 TO NOVEMBER 30, 2000
--------------------------------------------------------------------------------
<S> <C>
REVENUES:
Rental income ............................................. $ 9,172
Sales ..................................................... 92,250
Royalty income ............................................ 8,855
-----------
Total revenues ............................................ 110,277
-----------
OPERATING EXPENSES:
Cost of goods sold ........................................ 21,837
Selling and marketing ..................................... 63,451
General and administrative ................................ 97,331
Research and development .................................. 3,826
-----------
Total operating expenses .................................. 186,445
-----------
LOSS FROM OPERATIONS ...................................... (76,168)
OTHER EXPENSE - Interest .................................. (8,449)
-----------
LOSS BEFORE INCOME TAXES .................................. (84,617)
INCOME TAXES .............................................. 800
-----------
NET LOSS .................................................. $ (85,417)
===========
BASIC AND DILUTED LOSS PER COMMON SHARE ................... $ (.07)
===========
WEIGHTED AVERAGE SHARES OUTSTANDING ....................... 1,250,000
===========
</TABLE>
F-16
<PAGE>
<TABLE>
<CAPTION>
BECOR COMMUNICATIONS, INC.
(FORMERLY BECOR INTERNET, INC.)
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
FOR THE PERIOD JUNE 1, 2000 TO NOVEMBER 30, 2000
--------------------------------------------------------------------------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ....................................................... $(85,417)
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation ............................................... 482
Amortization ............................................... 7,200
Changes in operating assets and
liabilities:
Accounts receivable ........................................ 8,985
Video inventory and production costs ..................... (18,183)
Accounts payable and accrued expenses .................... 16,075
Other assets ............................................. 2,113
--------
Net cash used by operating activities .......................... (68,745)
--------
CASH FLOWS FROM FINANCING ACTIVITIES -
Borrowings from shareholder ................................ 85,000
--------
NET INCREASE IN CASH ........................................... 16,255
CASH, BEGINNING OF PERIOD ...................................... 3,605
--------
CASH, END OF PERIOD ............................................ $ 19,860
========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest ................................................... $ -0-
Income taxes ............................................... $ 800
</TABLE>
F-17
<PAGE>
BECOR COMMUNICATIONS, INC.
(FORMERLY BECOR INTERNET, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS DESCRIPTION - Becor Communications, Inc., (formerly Becor
Internet, Inc.) (the "Company"), through its wholly-owned subsidiary
(Advanced Knowledge, Inc.), 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. The
Company's fiscal year-end is May 31.
During March 2000, the Company acquired all of the asset and liabilities of
Sporting Magic, Inc., a related party through common ownership, for no
consideration. The acquisition has been accounted for in a manner similar
to a pooling of interests whereby the assets and liabilities have been
recorded at their historical basis at date of transfer. The excess of
liabilities assumed over assets acquired was recorded as a charge to
paid-in capital.
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 November 30, 2000, are not
necessarily indicative of the results that may be expected for the year
ended May 31, 2001. For further information, refer to the financial
statements and footnotes thereto included in the Company's report on Form
10-SB for the year ended May 31, 2000.
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include
the accounts of the Company and its wholly-owned subsidiary, Advanced
Knowledge, Inc. All significant inter- company accounts and transactions
have been eliminated.
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
F-18
<PAGE>
the Company were unable to continue its operations. 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 AND PRODUCTION COSTS - Video Inventory and Production Costs
consists primarily of film production costs. Film production costs consist
primarily of payments to production companies and consultants to develop
the films and training materials and are amortized in the ratio of the
current year's gross revenues to management's estimate of remaining gross
revenues.
REVENUE RECOGNITION - Sales are recognized upon shipment of videos and
training manuals to the customer. Rental income is recognized over the
related period that the videos are rented.
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 an development costs
related to both present and future products are expensed currently as a
separate line item in the accompanying statements of operations.
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 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.
F-19
<PAGE>
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 totalin approximately
$100,000 for Federal income tax purposes available to offset future taxable
income through 2021. 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 $2,305 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 fro operations will be
adequate to finance the next fiscal year's cash flow requirements.
Management also plans on obtaining additional financing sources consisting
of equity and debt to fund working capital and product development.
F-20
<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,
as of February 29, 2000 and for the three months and six months
ended February 29, 2000 and February 28, 1999
F-21
<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-22
<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-23
<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-24
<PAGE>
<TABLE>
ADVANCED KNOWLEDGE, INC.
STATEMENTS OF SHAREHOLDERS' DEFICIT
FOR THE YEARS ENDED AUGUST 31, 1999 AND 1998
--------------------------------------------------------------------------------
<CAPTION>
Common Stock Additional
---------------------- Paid-in Shareholders'
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-25
<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-26
<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 Decembe 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 EKS 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.
F-27
<PAGE>
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
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 financia 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
F-28
<PAGE>
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.
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 an 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.
F-29
<PAGE>
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-30
<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-31
<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-32
<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-33
<PAGE>
ADVANCED KNOWLEDGE, INC.
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying unaudited financial statements have bee 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.
F-34
<PAGE>
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.
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
F-35
<PAGE>
$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-36
<PAGE>
BACK COVER OF PROSPECTUS
Dealer Prospectus Delivery Obligation
Until __________________ (two year anniversary of effective date), 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.
II - 1
<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.
<TABLE>
<CAPTION>
<S> <C>
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
=======
</TABLE>
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
II - 2
<PAGE>
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) 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 L. Stephen Albright 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
10.6 Master copy of "Independent Sales Representative Agreement" used by
Advanced Knowledge, Inc. for all domestic sales representatives and
distributors
10.6.1 List of names and addresses of domestic sales representatives
and distributors
10.7 Master copy of "International Distribution Rights Agreement" used by
Advanced Knowledge, Inc. for all international sales representatives
and distributors
II - 3
<PAGE>
10.7.1 List of names and addresses of international sales
representatives and distributors
(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 L. Stephen Albright
(included in his opinion filed as Exhibit 5.1)
(27) Financial Data Schedule
27.1 Financial Data Schedule
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 tha a 20% change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee"
tabl in the effective registration statement;
(iii)To include any additional or changed material information on the
plan of distribution;
II - 4
<PAGE>
(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.
II - 5
<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 SB-2, as amended, and authorized this
registration statement to be signed on its behalf by the undersigned, in the
City of Encino, State of California, on January 16, 2001.
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 January 16, 2001
-------------------------
Buddy Young Officer, Chief Financial
Officer and Director (Principal
Executive, Financial and
Accounting Officer)
/S/ L. STEPHEN ALBRIGHT Director January 16, 2001
-------------------------
L. Stephen Albright
/S/ DENNIS SPIEGELMAN Director January 16, 2001
-------------------------
Dennis Spiegelman
II - 6
<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 L. Stephen Albright 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
II - 7
<PAGE>
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
10.6 Master copy of "Independent Sales Representative Agreement" used by
Advanced Knowledge, Inc. for all domestic sales representatives and
distributors
10.6.1 List of names and addresses of domestic sales representatives and
distributors
10.7 Master copy of "International Distribution Rights Agreement" used by
Advanced Knowledge, Inc. for all international sales representatives
and distributors
10.7.1 List of names and addresses of international sales representatives
and distributors
21.1 Subsidiaries of the Registrant
23.1 Consent of Farber & Hass LLP
23.2 Consent of L. Stephen Albright (included in his opinion filed as
Exhibit 5.1)
27.1 Financial Data Schedule
II - 8
