UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
Current Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 20, 2000
AMERICAN CHAMPION ENTERTAINMENT, INC.
(Exact name of registrant as specified in its charter)
22320 Foothill Boulevard, Suite 260
Hayward, California 94541
(Address of principal executive offices including zip code)
(510)-728-0200
(Registrant's telephone number, including area code)
1694 The Alameda, Suite 100, San Jose, California 95126
(Former name or former address, if changed since last report)
ITEM 2. Acquisition or Disposition of Assets
On December 20, 2000, American Champion Entertainment, Inc. ("ACEI" or the "Company") has received final approval from the State Commerce and Administration Bureau of China regarding the Company's ownership of Beijing Wisdom Network Technology Company Limited ("BA Network") and has consummated the Company's acquisition of 80% of the common stock of BA Network on that date. The acquisition is effective as of September 27, 2000 when shareholders of the Company approved the acquisition.
Pursuant to the acquisition agreement, the Company has paid BA Network $300,000 in cash on October 1, 2000 as initial payment. For the years 2000, 2001 and 2002, the Company has agreed to pay BA Network $1,184,097, $1,457,349 and $1,730,603, respectively. Such amounts assume BA Network meets projections previously provided to the Company and will be adjusted accordingly if such projections are incorrect. The amount for the year 2000 may be paid in either cash or shares of the Company's Common Stock, at the election of BA Network at the time such payments are due. The amounts for the years 2001 and 2002 are payable in shares of the Company.
BA Network is a limited company established in Beijing on June 10, 1997. The company has an operating history of ten years but focused on its core business since 1997, and financial results from operations began to show significance in the year 1999. The main business of BA Network is computer and communication network deployment, apartment and office building security automation and related consulting services. BA Network provides and installs optical fiber cable lines in buildings throughout the country, providing the newest large bandwidth optical fiber technology to equip users with high capacity voice and data lines, and faster access to the Internet.
ITEM 5. Other Events.
NONE
ITEM 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Business Acquired
(b) Pro Forma Financial Information
(c) Exhibits
| Number | Description |
| 10.1 | Agreement, dated as of March 27, 2000 and effective as of September 27, 2000, by and among American Champion Entertainment, Inc., Beijing Wisdom Network Technology Company, Ltd., and the Shareholders of Beijing Wisdom Network Company, Ltd. |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the Undersigned, thereunto duly authorized.
| AMERICAN CHAMPION ENTERTAINMENT, INC. |
| (Registrant) |
| By: | /s/ Anthony K. Chan |
| Anthony K. Chan | |
| President and Chief Executive Officer |
The following is the independent auditors' report on Beijing Wisdom Network Technology Company, Ltd. for the year ended December 31, 1999.
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of Beijing American Champion Entertainment Inc. :
(A limited company established in the People's Republic of China)
We have audited the accompanying balance sheet of Beijing Wisdom Net Technology Co., Ltd. (the "Company") as of December 31, 1999 and the related statements of operations, owners' equity and cash flows for the year 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 audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 1999 and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.
/s/ Deloitte Touche Tohmatsu Shanghai CPA
May 8, 2000
BEIJING WISDOM NET TECHNOLOGY CO., LTD.
BALANCE SHEET
ASSETS December 31, 1999
RMB
Current assets:
Cash and cash equivalents 451,281
Accounts receivable, trade 3,000,000
Other receivables 135,233
Amount due from shareholders (Note 8) 300,000
Inventories 1,193,540
-----------
Total current assets 5,080,054
Property and equipment, net (Note 4) 384,660
-----------
Total assets 5,464,714
===========
LIABILITIES AND INVESTORS' EQUITY
Current liabilities:
Accounts payable, trade 40,000
Advances from customers 441,251
Income tax payable 699,572
Other taxes payable (Note 5) 1,536,079
Other payables 84,164
Amount due to shareholders (Note 8) 548,113
-----------
Total current liabilities 3,349,179
Owners' equity
Paid-in capital 500,000
Retained earnings 1,615,535
-----------
2,115,535
Total liabilities and investors' equity 5,464,714
===========
See accompanying notes to financial statements
BEIJING WISDOM NET TECHNOLOGY CO., LTD.
STATEMENT OF OPERATIONS
Year ended
December 31, 1999
RMB
Revenues 10,093,410
Cost of sales 6,782,098
-----------
Gross profit 3,311,312
Operating expenses:
Selling expenses 115,924
Administrative expenses 1,077,735
-----------
Total operating expenses 1,193,659
-----------
Operating income 2,117,653
Interest income 2,260
-----------
Income before income tax 2,119,913
Income tax (Note 6) 699,572
-----------
Net income 1,420,341
===========
See accompanying notes to financial statements.
BEIJING WISDOM NET TECHNOLOGY CO., LTD.
STATEMENT OF OWNERS' EQUITY
Paid-in capital Retained earnings Total owners' equity
RMB RMB RMB
--------------- ----------------- --------------------
Balance at
January 1, 1999 500,000 195,194 695,194
Net Income - 1,420,341 1,420,341
--------------- ----------------- --------------------
Balance at
December 31, 1999 500,000 1,615,535 2,115,535
=============== ================= ====================
See accompanying notes to financial statements.
BEIJING WISDOM NET TECHNOLOGY CO., LTD.
STATEMENT OF CASH FLOWS
Year ended
December 31, 1999
RMB
Cash flows from operating activities:
Net income 1,420,341
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 63,112
Changes in assets and liabilities:
Accounts receivable, trade (3,000,000)
Advances to suppliers 5,000
Other receivables (596,041)
Inventories (344,506)
Accounts payable, trade 40,000
Advances from customers 75,285
Income tax payable 699,572
Other taxes payable 1,567,378
Other payables and accrued expenses 322,063
-----------
Net cash provided by operating activities 252,204
-----------
Cash used in investing activities:
Purchase of property and equipment (307,823)
-----------
Decrease in cash and cash equivalents (55,619)
Cash and cash equivalents, beginning of year 506,900
Cash and cash equivalents, end of year 451,281
See accompanying notes to financial statements.
BEIJING WISDOM NET TECHNOLOGY CO., LTD.
NOTES TO FINANCIAL STATEMENTS
1. COMPANY BACKGROUND
Beijing Wisdom Net Technology Co., Ltd. ("the Company") is a limited company established on June 10, 1997 by three shareholders: Mr. Cheng Dong (34%), Mr. Lin Tao (33%) and Ms. Zhou Xin (33%) with an operating period of 10 years. The total registered capital of the Company is RMB500,000. The main business of the Company is computer and communication network deployment, apartment and office building security automation deployment and related consulting sevices.
The Company's books of accounts are maintained in Renminbi ("RMB") in which currency the majority of the Company's transactions are denominated.
2. BASIS OF PREPARATION OF FINANCIAL STATEMENTS
The financial statements are prepared in accordance with accounting principles generally accepted in the United States of America ("US GAAP"). This basis of accounting differs from that used in the statutory financial statements of the Company, which are required to be prepared in accordance with the accounting principles and the relevant financial regulations as established by the Ministry of Finance of the People's Republic of China ("PRC GAAP").
The principal adjustments made to conform the statutory financial statements of the Joint Ventures to US GAAP included the following:
(i) Reclassification of leasehold improvements;
(ii) Reclassification of pre-operating expenses;
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies which have been adopted in preparing these financial statements and which conform with US GAAP are as follows:
Cash and cash equivalents
Cash and cash equivalents represent cash on hand and deposits in banks with an original maturity of three months or less.
Inventories
Inventories representing hardware and parts are stated at the lower of cost or market.
Property and equipment
Property and equipment is stated at cost. Depreciation is computed using the straight-line method with no salvage value, over the estimated useful lives as follows:
Electronic equipment 5 years Office equipment 5 years Motor vehicles 5 years Leasehold improvements Lease period
Impairment
The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may no longer be recoverable. An impairment loss, measured based on the fair value of the asset, is recognized if expected future undiscounted cash flows are less than the carrying amount of the assets.
Revenue recognition
Revenue is recognized when the earning process is completed. Revenues are presented net of sales taxes.
Comprehensive income
Statement of Financial Accounting Standards (SFAS) No. 130 (Reporting Comprehensive Income) requires that an enterprise report, by major components and as a single total, the change in its net assets during the period from non-owner sources. The Company does not have any item of other comprehensive income, therefore the net income reported in the statement of operations is equivalent to the total comprehensive income.
Income taxes
Deferred income taxes are provided under the asset and liability method. Under this method, deferred income taxes are recognized for all significant temporary differences and classified as current or non-current based on the classification of the related asset or liability in the financial statements. A valuation allowance is provided to reduce the amount of deferred tax assets if it is considered more likely than not, that some portion of, or all of, the deferred tax asset will not be realized.
Use of estimates
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
4. PROPERTY AND EQUIPMENT
December 31, 1999
RMB
Electronic equipment 167,939
Office equipment 47,426
Motor vehicles 147,624
Leasehold improvements 112,059
---------
475,048
Less: Accumulated depreciation (90,388)
---------
384,660
=========
5. OTHER TAXES PAYABLE
December 31, 1999
RMB
Value added tax ("VAT") 1,401,988
City tax 97,163
Individual income tax withheld 36,928
----------
Total 1,536,079
6. INCOME TAXES
The Company is subject to PRC income tax at a rate of 33%. There are no material temporary differences as the principal effect of adjustments made to conform PRC statutory accounts to US GAAP had no income statement impact.
7. EMPLOYEE RETIREMENT BENEFITS AND POST-RETIREMENT BENEFITS
The Company's employees are entitled to a retirement pension calculated with reference to their basic salaries on retirement in accordance with a government managed pension plan. The PRC government is responsible for the pension liability to these retired employees. The Company is required to make contributions at 14% of the monthly basic salaries of the current full-time employees. The Company is not obligated under any other retirement plans, and post-employment benefit obligations are not material. The Company's expense was RMB42,522 in 1999.
8. RELATED PARTY TRANSACTIONS
Balances with shareholders are as follows:
December 31, 1999
RMB
Amounts receivable from a shareholder:
Lin Tao 300,000
--------
Total 300,000
========
This is the advance for expenses to the shareholder for general business purpose. The Company will reconcile with Mr. Lin at a regular basis.
Amounts payable to shareholders:
Cheng Dong 278,250
Zhou Xin 269,863
--------
Total 548,113
========
The above amounts are all non-interest bearing, unsecured and repayable on demand.
9. CONTINGENCIES
In 1999, the Company did not file tax returns and pay VAT amounting to RMB1,388,036 and income tax of RMB699,572. Such amounts have been accrued in these financial statements. Under PRC tax regulations, taxpayers are required to file their VAT and income tax returns by the 10th of the following month and the 15th day of the month following each calendar quarter, respectively. Delays in filing tax return and tax payment may result in tax authorities imposing late payment interest at 0.2% on a daily basis. Late payment penalties may also be imposed at the discretion the of tax authorities. Such amounts, however, depend on negotiation with the tax authorities, and is not determinable by the management.
10. FINANCIAL INSTRUMENTS
The carrying values of financial instruments, including cash and cash equivalents, accounts and other receivables and other payables are equal to their approximate fair value because of the relatively short maturity of those instruments.
# End of Notes to Financial Statements from Independent Auditors' Report.#
The audited financial statements of BA Network for the year ended December 31, 1999 is provided in the Chinese local currency of Ren Min Bi (RMB). Figures in the following supplemental schedules are converted by management of American Champion Entertainment, Inc. into U.S. Dollars by dividing the value in RMB by 8.3 which was the exchange rate as quoted by Bank of China as of September 30, 2000.
Supplemental Schedule of Beijing Wisdom Net Technology Co. Ltd.
Financial Statements Converted to US Dollars at 8.3 RMB to 1 US$
BEIJING WISDOM NET TECHNOLOGY CO., LTD.
SUPPLEMENTAL BALANCE SHEET - IN US DOLLARS
ASSETS December 31, 1999
US$
Current assets:
Cash and cash equivalents 54,371
Accounts receivable, trade 361,446
Other receivables 16,293
Amount due from shareholders (Note 8) 36,145
Inventories 143,800
----------
Total current assets 612,055
Property and equipment, net (Note 4) 46,345
----------
Total assets 658,399
==========
LIABILITIES AND INVESTORS' EQUITY
Current liabilities:
Accounts payable, trade 4,819
Advances from customers 53,163
Income tax payable 84,286
Other taxes payable (Note 5) 185,070
Other payables 10,140
Amount due to shareholders (Note 8) 66,038
----------
Total current liabilities 403,516
Owners' equity
Paid-in capital 60,241
Retained earnings 194,643
----------
254,884
Total liabilities and investors' equity 658,399
==========
Supplemental Schedule of Beijing Wisdom Net Technology Co. Ltd.
Financial Statements Converted to US Dollars at 8.3 RMB to 1 US$
BEIJING WISDOM NET TECHNOLOGY CO., LTD.
SUPPLEMENTAL STATEMENT OF OPERATIONS - IN US DOLLARS
Year ended
December 31, 1999
US$
Revenues 1,216,073
Cost of sales 817,120
----------
Gross profit 398,953
Operating expenses:
Selling expenses 13,967
Administrative expenses 129,848
----------
Total operating expenses 143,814
Operating income 255,139
Interest income 272
----------
Income before income tax 255,411
Income tax (Note 6) 84,286
----------
Net income 171,125
==========
BEIJING WISDOM NET TECHNOLOGY CO., LTD.
STATEMENT OF OWNERS' EQUITY
Paid-in capital Retained earnings Total owners' equity
US$ US$ US$
--------------- ----------------- --------------------
Balance at
January 1, 1999 60,241 23,517 83,758
Net Income - 171,125 171,125
--------------- ----------------- --------------------
Balance at
December 31, 1999 60,241 194,643 254,884
=============== ================= ====================
Supplemental Schedule of Beijing Wisdom Net Technology Co. Ltd.
Financial Statements Converted to US Dollars at 8.3 RMB to 1 US$
BEIJING WISDOM NET TECHNOLOGY CO., LTD.
SUPPLEMENTAL STATEMENT OF CASH FLOWS - IN US DOLLARS
Year ended
December 31, 1999
US$
Cash flows from operating activities:
Net income 171,125
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 7,604
Changes in assets and liabilities:
Accounts receivable, trade (361,446)
Advances to suppliers 602
Other receivables (71,812)
Inventories (41,507)
Accounts payable, trade 4,819
Advances from customers 9,070
Income tax payable 84,286
Other taxes payable 188,841
Other payables and accrued expenses 38,803
----------
Net cash provided by operating activities 30,386
Cash used in investing activities:
Purchase of property and equipment (37,087)
----------
Decrease in cash and cash equivalents (6,701)
Cash and cash equivalents, beginning of year 61,072
Cash and cash equivalents, end of year 54,371
The following are interim financial statements of Beijing Wisdom Network Technology Company, Ltd. for the nine month period ended September 30, 2000. These statements are originally provided in the Chinese local currency of Ren Min Bi (RMB). Figures in the US Dollars column are converted by management of American Champion Entertainment, Inc. into U.S. Dollars by dividing the value in RMB by 8.3 which was the exchange rate as quoted by Bank of China as of September 30, 2000.
BEIJING WISDOM NET TECHNOLOGY CO., LTD.
INTERIM BALANCE SHEET
September 30, 2000 September 30, 2000
RMB US$
(unaudited) (unaudited)
ASSETS
Current assets:
Cash and cash equivalents 683,899 82,397
Accounts receivable, trade 20,118,685 2,423,938
Other receivables 121,632 14,654
Advances to suppliers 117,013 14,098
Amount due from shareholders 16,660 2,007
Inventories 78,597 9,470
----------- -----------
Total current assets 21,136,486 2,546,564
Property and equipment 283,694 34,180
----------- -----------
Total assets 21,420,180 2,580,744
=========== ===========
LIABILITIES AND INVESTORS' EQUITY
Current liabilities:
Accounts payable, trade 9,150,000 1,102,409
Advances from customers 1,131,863 136,369
Income tax payable 1,493,598 179,951
Other taxes payable (Note 5) 5,034,694 606,590
Other payables 203,762 24,550
Amount due to shareholders 678,613 81,761
----------- -----------
Total current liabilities 17,692,530 2,131,630
Stockholders' equity:
Paid-in capital 500,000 60,241
Retained earnings 3,227,650 388,873
----------- -----------
Total stockholders' equity 3,727,650 449,114
Total liabilites & stockholders' equity 21,420,180 2,580,744
=========== ===========
Interim financial statements of Beijing Wisdom Network Technology Company, Ltd. for the nine month period ended September 30, 2000. - continue
BEIJING WISDOM NET TECHNOLOGY CO., LTD.
INTERIM STATEMENT OF OPERATIONS
Nine-month period Nine-month period
ended ended
September 30, 2000 September 30, 2000
RMB US$
(unaudited) (unaudited)
Revenues 19,962,149 2,405,078
Cost of sales 16,677,243 2,009,306
----------- ----------
Gross profit 3,284,906 395,772
Operating expenses:
Selling expenses & Admin. expenses 880,603 106,097
----------- ----------
Total operating expenses 880,603 106,097
Operating income 2,404,303 289,676
Interest income 1,838 221
----------- ----------
Income before income tax 2,406,141 289,897
Income tax 793,758 95,633
----------- ----------
Net income 1,612,383 194,263
=========== ==========
Interim financial statements of Beijing Wisdom Network Technology Company, Ltd. for the nine month period ended September 30, 2000. - continue
BEIJING WISDOM NET TECHNOLOGY CO., LTD.
INTERIM STATEMENT OF OWNERS' EQUITY
Paid-in capital Retained earnings Total owners' equity
(unaudited) RMB (unaudited) RMB (unaudited) RMB
--------------- ----------------- --------------------
Balance at
January 1, 2000 500,000 1,615,535 2,115,535
Net Income - 1,612,383 1,612,383
--------------- ----------------- --------------------
Balance at
Sept 30, 2000 500,000 3,227,918 3,727,918
=============== ================= ====================
Paid-in capital Retained earnings Total owners' equity
(unaudited) US$ (unaudited) US$ (unaudited) US$
--------------- ----------------- --------------------
Balance at
January 1, 2000 60,241 194,643 254,884
Net Income - 194,263 194,263
--------------- ----------------- --------------------
Balance at
Sept 30, 2000 60,241 388,906 449,147
=============== ================= ====================
Interim financial statements of Beijing Wisdom Network Technology Company, Ltd. for the nine month period ended September 30, 2000. - continue
BEIJING WISDOM NET TECHNOLOGY CO., LTD.
INTERIM STATEMENT OF CASHFLOWS
Three-month period Three-month period
ended ended
September 30, 2000 September 30, 2000
RMB US$
(unaudited) (unaudited)
Cash flows from operating activities:
Net income 95,091 11,457
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 30,657 3,693
Changes in assets and liabilities:
Accounts receivable, trade 61,315 7,387
Advances to suppliers 249,593 30,071
Other receivables 101,199 12,193
Amount due from shareholders 356,300 42,928
Inventories 241 29
Accounts payable, trade (890,000) (107,229)
Advances from customers 354,364 42,694
Income tax payable 46,836 5,643
Other taxes payable 104,013 12,532
Other payables 8,773 1,057
Amount due to shareholdes (79,500) (9,578)
----------- -----------
Net cash provided by operating activities 438,882 52,877
Cash used in investing activities:
Purchase of property and equipment (9,682) (1,167)
Decrease in cash and cash equivalents 429,199 51,710
Cash and cash equivalents, beginning of year 254,700 30,687
----------- -----------
Cash and cash equivalents, end of year 683,899 82,397
The following proforma financial statements for the consolidation of American Champion Entertainment, Inc. and Beijing Wisdom Network Technology Company, Ltd. are provided for the purpose of reflecting purchase accounting.
The Proforma Balance Sheet provides for purchase accounting adjustments with the assumption that the acquisition had taken place on September 30, 2000. The Proforma Statements of Operations for the year ended December 31, 1999 and for the nine-month period ended September 30, 2000 demonstrate the effect of the consolidation of operation including amortization of Goodwill.
PROFORMA BALANCE SHEET AS OF SEPTEMBER 30, 2000
Purchase
Assets ACEI BA Network Adjustment Consolidated
US$ US$ US$ US$
Cash 558,809 82,397 (300,000) 341,206
Accounts receivable 880,090 2,423,938 - 3,304,028
Loans receivable, related parties 114,937 - 114,937
Prepaid expenses 18,163 - 18,163
Investment in subsidiary 300,000 - 300,000
Goodwill 330,736 330,736
Inventories 9,470 - 9,470
Property and equipment 250,200 34,180 - 284,380
Film costs, net 6,566,333 - 6,566,333
Notes/Other receivable 54,814 14,654 - 69,468
Advances to suppliers 14,098 - 14,098
Amount due from shareholders 2,007 - 2,007
Other assets 236,422 - 236,422
--------- --------- --------- ----------
Total Assets 8,979,768 2,580,745 30,736 11,591,249
========= ========= ========= ==========
Liabilities
Accounts payable & accrued expenses 396,924 1,102,410 - 1,499,334
Advances from customers 136,369 - 136,369
Income tax payable 179,952 - 179,952
Other tax payable 606,590 - 606,590
Amount due to shareholders 81,761 - 81,761
Other 24,550 - 24,550
Deferred revenues - -
Long term debt 1,563,743 - 1,563,743
--------- --------- --------- ----------
Total Liabilities 1,960,667 2,131,630 - 4,092,297
Stockholders' Equity
Common stock; paid in capital 24,835,346 60,241 329,787 25,225,374
Retained earnings/Accum. deficit (17,816,245) 388,873 (388,873) (17,816,245)
Minority Interest 89,823 89,823
--------- --------- --------- ----------
Total stockholders' equity 7,019,101 449,114 30,736 7,498,952
--------- --------- --------- ----------
Total liabilities & stockholders' equity 8,979,769 2,580,745 30,736 11,591,249
========= ========= ========= ==========
Proforma Financial Statements - continue
Note 1:
Purchase price of acquisition is determined by adding the initial payment amount of $300,000 and the contingency payment for the nine-month period ended September 30, 2000 which is the sum of Gross Revenue plus Earnings Before Taxes, Depreciation and Amortization (EBITDA) times 80% times 18%. This is the formula for calculation of contingency payments throughout the three-year contingency period as indicated in the Stock Exchange Agreement. The Company believes that it is necessary to include the known amount of the contingency payment for the first two quarters of year 2000 into the purchase price due to the Company's obligation pursuant to the Stock Exchange Contract between the Company and BA Network. The actual payments for the years 2000, 2001 and 2002 may be substantially higher than the amounts indicated in these proforma statements. BA Network projects the amounts may be as high as $1,184,097, $1,457,349 and $1,730,603, respectively. Additional Goodwill will be recorded based on actual payments and amortized over an eight-year period.
Purchase Price
Initial payment $300,000
Contingent payment for 9-month period ended 9/30/2000
BA Network Gross Revenue 2,405,300
BA Network EBITDA
Income before tax 289,897
Depreciation & amortization 13,331
EBITDA 303,228
Total times 80% X 18% $390,028
Total Purchase Price $690,028
Note 2:
Goodwill calculation
Total Purchase Price $690,028
Total assets acquired $2,580,745
Less liability assumed (2,131,630)
Less minority interest ( 89,823)
Net assets acquired 359,292
Less net assets acquired (359,292)
Goodwill 330,736
Note 3:
Goodwill is amortizaed over an eight-year period.
PROFORMA STATEMENT OF OPERATIONS FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2000
ACEI BA Network Pro Forma Consolidated
US$ US$ Adjustment US$
REVENUES
Revenues 2,405,078 2,405,078
Tuition and related fees 50,601 50,601
Accessories and video sales 248 248
License and sponsorship fees 487,436 487,436
Film income 18,591 18,591
Interest income 11,384 221 11,605
--------- --------- --------- ----------
Total Revenue 568,260 2,405,300 - 2,973,560
COSTS AND EXPENSES
Cost of sales 2,005 2,009,306 2,011,311
Amortization of film costs 1,031,057 1,031,057
Amortization of Goodwill - BA Network 20,671 20,671
Salaries and payroll taxes 803,657 803,657
Rent 108,062 108,062
Selling, general and administrative 5,620,783 106,097 5,726,880
Debenture conversion expense -
Interest 199,503 199,503
Beneficial conversion feature of
debentures 712,996 712,996
--------- --------- --------- ----------
Total costs and expenses 8,478,063 2,115,403 20,671 10,614,137
Net Income/(Loss) before income tax (7,909,803) 289,897 (20,671) (7,640,578)
Income Tax - 95,633 - 95,633
Minority interest - - 38,853 38,853
Net Income/(Loss) after income tax (7,909,803) 194,263 (7,775,064)
========= ========= ==========
Weighted average number of shares outstanding* 7,894,850 490,028 8,384,878
Basic loss per share (1.00) (0.93)
* adjusted for 1:4 reverse split on January 4, 2000
PROFORMA STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1999
ACEI BA Network Pro Forma Consolidated
US$ US$ Adjustment US$
REVENUES
Revenues 1,216,073 1,216,073
Tuition and related fees 73,180 73,180
Accessories and video sales 10,515 10,515
Film income 517,995 517,995
Interest income 63,942 272 64,214
--------- --------- --------- ----------
Total Revenue 665,632 1,216,346 - 1,881,978
COSTS AND EXPENSES
Cost of sales 8,174 817,120 825,294
Amortization of film costs 450,100 450,100
Amortization of Goodwill - BA Network 41,342 41,342
Salaries and payroll taxes 465,532 465,532
Rent 243,053 243,053
Selling, general and administrative 3,712,595 143,814 3,856,409
Debenture conversin expense 741,210 741,210
Interest 208,069 208,069
Beneficial conversion feature of debentures 1,233,684 1,233,684
--------- --------- --------- ----------
Total costs and expenses 7,062,417 960,935 41,342 8,064,694
Net Income/(Loss) Before Income Tax (6,396,785) 255,411 (41,432) (6,182,716)
Income Tax 1,543 84,286 - 85,829
Minority interest - - 34,225 34,225
Net Income/(Loss) after Income Tax (6,398,328) 171,125 (6,302,770)
========= ========= ==========
Weighted average number of shares outstanding* 2,385,622 490,028 2,875,650
Basic loss per share (2.68) (2.19)
* adjusted for 1:4 reverse split on January 4, 2000