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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act
FEBRUARY 23, 2000
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Date of Report
(Date of Earliest Event Reported)
BEVERLY HILLS LTD., INC.
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(Exact Name of Registrant as Specified in its Charter)
16 N. FORT HARRISON
CLEARWATER, FLORIDA 33755
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(Address of principal executive offices)
727/298-8771
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Registrant's telephone number
KEYNOTE ACQUISITION CORPORATION
1504 R STREET N.W.
WASHINGTON, D.C. 20009
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Former name and former address
UTAH 000-28523 87-0281305
- ---------------------------- ----------- -------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
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ITEM 1. CHANGES IN CONTROL OF REGISTRANT
(a) On February 23, 2000, pursuant to an Agreement and Plan of
Reorganization (the "Acquisition Agreement") dated as of January 27, 2000,
Beverly Hills Ltd., Inc., ("Beverly Hills" or the "Company"), a Utah
corporation, acquired all the outstanding shares of common stock of Keynote
Acquisition Corporation ("Keynote"), a Delaware corporation, from shareholders
thereof in an exchange for an aggregate of 250,000 shares of common stock of
Beverly Hills (the "Acquisition"). As a result, Keynote became a wholly owned
subsidiary of Beverly Hills.
The Acquisition was adopted by the unanimous consent of the Board of
Directors of Beverly Hills on January 19, 2000. The Acquisition is intended to
qualify as a reorganization within the meaning of Section 368(a)(1)(B) of the
Internal Revenue Code of 1986, as amended.
Prior to the Acquisition, Beverly Hills had 15,325,957 shares of common
stock issued and outstanding, and 15,575,957 shares issued and outstanding
following the Acquisition.
Upon effectiveness of the Acquisition, pursuant to Rule 12g-3(a) of the
General Rules and Regulations of the Securities and Exchange Commission, Beverly
Hills became the successor issuer to Keynote for reporting purposes under the
Securities Exchange Act of 1934 (the "Act") and elects to report under the Act
effective February 23, 2000.
A copy of the Acquisition Agreement is filed as an exhibit to this Form 8-K
and is incorporated in its entirety herein. The foregoing description is
modified by such reference.
(b) The following table sets forth certain information with respect to the
beneficial ownership of Beverly Hills common stock as of February 23, 2000 with
respect (giving effect to the Acquisition) to: (a) each director of the Company;
(b) each of the Company's Executive Officers; (c) each shareholder known by the
Company to be the beneficial owner of more than 5% of the Company's common
stock; and (d) all executive officers and directors as a group. Unless otherwise
provided, the mailing address for the following persons is 16 N. Ft. Harrison,
Clearwater, Florida 33755:
[Table follows next page]
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COMMON STOCK
BENEFICIALLY OWNED
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NAME AND ADDRESS OF BENEFICIAL OWNER SHARES PERCENTAGE
- ------------------------------------ ------------ ---------
Triton Enterprises, Inc. (1)
5030 Champion Boulevard, Suite 6-212
Boca Raton, FL 33496 4,198,670 27.2%
Marc Barhonovich (2)
c/o Equity Advisors, Inc.
14502 N. Dale Mabry Highway
Tampa, FL 33618 3,613,000 21.7%
Makenzie Shea Inc. (3)
657 3rd Street
San Francisco, CA 94107 1,046,790 6.8%
Directors:
Marc Barhonovich (2)
c/o Equity Advisors, Inc.
14502 N. Dale Mabry Highway
Tampa, FL 33618 3,613,000 21.7%
Steven Velte (4)
c/o Beverly Hills Ltd., Inc.
16 N. Ft. Harrison
Clearwater, FL 33755 590,000 3.7%
Leon F. Willis, Jr. (5)
c/o Beverly Hills Ltd., Inc.
16 N. Ft. Harrison
Clearwater, FL 33755 200,000 1.3%
All directors and officers as a
group (3 persons) (6)
4,403,000 26.1%
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(1) Includes 100,000 shares which may be acquired upon the exercise of
outstanding warrants.
(2) Includes 1,000,000 shares which may be acquired upon the exercise of
outstanding warrants, 1,388,000 shares owned by Lehigh Enterprises, Ltd.,
1,000,000 shares owned by Peak Investment International ltd. Mr.
Barhonovich may be deemed to be the beneficial owner as a result of a trust
for the benefit of his minor children. Also includes a 50% interest in
390,000 shares owned by Barde, Inc.
(3) Consists of 241,790 shares owned of record by Makenzie Shea, 210,000 shares
owned by Avon Brill LLC, 110,000 shares held by Congo Capital, 275,000
shares owned by Dimension Capital and 210,000 owned by Haxlon Capital Corp.
All of such companies maintain an address co/o Makenzie Shea, Inc. and
Beverly Hills cannot determine whether all such shares are beneficially
owned by Makenzie Shea.
(4) Includes 450,000 shares which may be acquired upon the exercise of
outstanding options and warrants.
(5) Includes 100,000 shares which may be acquired upon the exercise of
outstanding warrants.
(6) Includes the shares which are deemed to be beneficially owned by each
officer and director, including 1,550,000 shares which may be acquired upon
the exercise of outstanding options and warrants.
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
(a) The consideration exchanged pursuant to the Acquisition Agreement was
negotiated between Keynote and Beverly Hills.
In evaluating Beverly Hills as a candidate for the proposed Acquisition,
Keynote used criteria such as the value of the assets of Beverly Hills, Beverly
Hills's ability to compete in the golf information, reservation and
merchandising market, the increased use of the Internet as a tool in such
markets, Beverly Hills's current and anticipated business operations, and
Beverly Hills's business reputation in the Internet community. In evaluating
Keynote, Beverly Hills placed a primary emphasis on Keynote's status as a
reporting company under the Section 12(g) of the Act and Keynote's facilitation
of Beverly Hills's becoming a reporting company under the Act.
(b) Beverly Hills intends to strengthen its position in the Internet portal
line of business by further developing its World Wide Web technologies and by
placing the primary emphasis on Internet niche properties and companies that
share the focus and quality specific to the Company's current portfolio of
acquisitions. The Company intends to achieve this goal by enhancing growth at
its existing facilities and selectively acquiring additional Internet properties
and companies to take advantage of synergies available as a result of the
Company's future acquisitions. The following is a description of Beverly Hills'
business.
BUSINESS
Company
Beverly Hills is a multifaceted company focusing on building market share
in the recreation, media and merchandising business through the development of
leisure apparel, golf merchandise, media, travel and Internet sales, including
tee time reservations, web advertising, sales sites and related e-commerce
businesses.
Beverly Hills, indirectly through its ownership of Focused Media Limited,
owns Ireland based Global Golf Limited (www.globalgolf.com), an international
tee time reservation system. Global Golf offers information pertaining to golf
courses, accommodations and dining, among other things. As a result of several
agreements relating to the financing and operation of Global Golf, Beverly Hills
ownership in Global Golf may be reduced. The Global Golf web site currently
receives approximately 1,000,000 hits per month and Beverly Hills estimates that
the number of hits is increasing at a rate of 20% per month. Global Golf
provides information and tee time services for golf courses in many states in
the USA including Florida, South Carolina, Nevada, Virginia and Illinois. In
Europe Global Golf covers courses in Ireland, England, Scotland, Wales, Spain
and Portugal. Global Golf has also expanded into the Far East with clients in
Malaysia, Thailand and Singapore. Utilizing the Global Golf web site, golfers
can view in detail the courses to play, book tee times on-line, check
accommodations in the area, access tour operators who provide a service to that
destination and decide upon restaurants or local places of interest to visit.
Global Golf has developed its own proprietary tee reservation software and plans
to provide the software to the golf courses that participate in its Internet
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reservation system. Beverly Hills expects revenue to be derived from Global
Golf's operations through commissions paid by the golf courses, primarily as
percentage of green fees, and advertising income.
In addition to providing online golf-related information and tee time
services, Beverly Hills has established Beverly Hills Charity Auction Online
(www.BHAuction.com), one of the industry's first Internet based companies to
offer celebrity/charity auctions over the Internet. Beverly Hills Charity
Auction Online acts as a medium through which charities can raise funds by
reaching the millions of consumers that have access to the Internet. We expect
this service offering to generate revenue for Beverly Hills through commissions
on sales of auctioned items. We believe that this operation will not only be of
value to Beverly Hills but to charities worldwide seeking unique fundraising
opportunities.
In January 1999, Beverly Hills acquired all of the stock of Golf Shoes
Plus, Inc. (www.golfshoesplus.com), a retailer of high-quality name brand golf
shoes sold over the Internet and in retail stores. Also in January 1999, Beverly
Hills acquired all of the stock of Pro's Edge Wholesale, Inc., a wholesaler of
quality name brand golf accessories. Pro's Edge also manufactures "The Big Smoke
Driver" a patent-pending Titanium alloy oversized driver that is being sold via
the Internet (www.thebigsmoke.com). In March 1999, Beverly Hills acquired all of
the stock of Briar and Wood, Inc., the publisher of The Golfer Magazine. Beverly
Hills intends to continue future acquisitions of the Internet companies that fit
Beverly Hills' general acquisition criteria. However, currently, Beverly Hills
does not have a fixed source of capital to finance such future acquisitions. In
this respect, the Company intends to accomplish its acquisition plans by
exchange of Beverly Hills stock alone. There is no assurance given as to the
trading price or liquidity of Beverly Hills' common stock. Low trading price or
poor liquidity of the Company's common stock may adversely affect the Company's
ability to engage in future acquisitions and to accomplish its growth
objectives.
Corporate History
Beverly Hills Ltd., Inc. was first incorporated in Utah on, April 29, 1939
as Ophir Queen Mines Company. On June 15, 1974 Ophir Queen Mines Company changed
its name to Hawk International. The Company had substantial operations until
March 15, 1996 when the Company discontinued operations and entered the
development stage. Hawk International changed its name to Beverly Hills Country
Club on February 28, 1998 when it acquired HMW Golf d/b/a the Hanlon Group.
Beverly Hills Country Club then changed its name to Beverly Hills Ltd., Inc. on
August 13, 1998.
Strategies
Key strategic factors in establishing brand recognition and fostering
growth for our Internet-based businesses include:
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o Maintaining an upscale quality to all facets of our web sites;
o Covering all facets of upscale golf apparel, quality
merchandising, tee times, travel and hospitality, publishing,
golf information, and charity links to maximize each web site's
drawing power;
o Partnering with businesses with broad market exposure;
o Partnering with industry leading technology providers;
o Building and maintaining additional relationships inside and
outside of the golf industry to further the objectives of Global
Golf and the overall Beverly Hills Ltd. business plan; and
o Acting with speed and decisiveness to stay ahead of our
competitors.
As part of the Beverly Hills' overall business strategy, we intend to
integrate our Global Golf Internet business with our other product and service
offerings such that consumers will have easy access to online golf course
information and tee time reservations, golf merchandise, charity auction events
and The Golfer magazine. We expect future revenue to be generated through a
combination of retail sales, transaction fees, and advertisements on the various
web sites. We expect to increase the rates we charge for advertising on our web
sites as the numbers of visits to these sites increases. Also, we anticipate
that in the future we will be able to build an enormous database of visitors to
our web sites that can be used for other marketing opportunities. Beverly Hills
plans to continue to look for possible acquisition or partnering candidates
whose businesses fit synergistically with our current operations.
Global Golf Business
The Global Golf Division of Beverly Hills has been organized to create an
integrated blend of businesses that provide Beverly Hills with multiple sources
of revenue and, when combined, become a unique and powerful drawing card to the
Global Golf e-commerce site, www.globalgolf.com. Services or areas of business
expertise needed by the company, that fall outside of the main focus of Global
Golf, are being pursued through strategic partnerships. Some areas where this
approach is being pursued include marketing, technology and fulfillment. Global
Golf's strategy includes involving strategic partners in key areas allows the
company to remain flexible and lessens drag on resources. Management believes
that the combination of the integrated businesses, brand identity, strategic
partners and technology will provide Global Golf with key competitive advantages
in the marketplace.
Although the terms "portal" or "destination site" are used frequently in
the Internet market, Global Golf recognizes that branding and the combination of
services and products offered are the keys to actually achieving true "portal"
status. Other Beverly Hills subsidiaries provide Global Golf with building
blocks that help differentiate the site and provide the foundation for Beverly
Hills' expected revenue growth. They are also stepping stones to a much broader
business vision surrounding the Global Golf brand.
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Beverly Hills indirectly owns Ireland based Global Golf and
www.globalgolf.com, a site that was originally designed as an international tee
time reservation system but it has since been significantly enhanced. The site
offers information on where to play, where to stay, where to eat, related
recreational activities and other information. The Global Golf website currently
receives over 1,000,000 hits per month and is increasing at 20% per month.
Seeking to establish the Global Golf brand, Beverly Hills sought a
partnership agreement with International Limited ("CNBC Sports") under which
CNBC Sports would provide certain marketing resources at a discount. As a result
of this agreement, and disputes concerning the Beverly Hills performance of its
obligations under the partnership agreement, CNBC Sports has filed a claim
against Beverly Hills and certain of its present and former officers (see
"Litigation"). The parties have reached an agreement to settle the litigation.
Global Golf now covers many states in the USA including Florida, South Carolina,
Nevada, Virginia and Illinois. In Europe Global Golf covers Ireland, England,
Scotland, Wales, Spain and Portugal. Global Golf has also expanded into the Far
East with clients in Malaysia, Thailand and Singapore. Golfers can view in
detail the courses to play, including booking tee times on-line check
accommodations in the area, access tour operators who provide a service to that
destination and decide upon restaurants or local places of interest to visit.
Global Golf has developed its own proprietary tee reservation software and will
give the software to the golf courses that join their Internet reservation
system.
The business goal, then, is to establish Global Golf as the premier website
for golf and the dominance of the Global Golf brand, which is expected to be
measured by the quantity and quality of viewers drawn to the site, the number
and dollar value of transactions conducted, overall prestige of the site as
(partially) reflected in related website advertising, and strategic referral
relationships.
Beverly Hills and CNBC Sports have entered into various agreements for the
financing, development and operation of Global Golf. In addition, the Company is
negotiating for additional financing which may involve the transfer or issuance
of interests in Global Golf. The Company does not anticipate reducing its
ownership in Global Golf below a majority. There can be no assurance that any or
all of these transactions will be consummated. If Beverly Hills does not obtain
sufficient financing for Global Golf, Beverly Hills' Global Golf business would
suffer significant adverse effects.
Key Strategies
The key strategic factors in establishing www.globalgolf.com as the premier
golf website and the powerful Global Golf brand include the following:
o Maintaining an upscale quality to all facets of the site.
o Having a strong name for branding, i.e. Global Golf.
o Covering all facets of upscale golf apparel, quality
merchandising, tee times, travel and hospitality, publishing,
golf information, and charity links to maximize the drawing power
as well as "stickiness" to the site.
o Partnering with marketing strength, including CNBC, to maximize
quality exposure
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o Partnering with technological strength to ensure state-of-the-art
technology platforms as well as expertise in e-commerce.
o Building and maintaining additional myriad relationships inside
and outside of the golf world to further the objectives of Global
Golf and the overall Beverly Hills Ltd. business plan.
o Acting with speed and decisiveness (within the business plan
structure) to stay ahead of the competition in the torrid net
climate.
o Focusing on opportunities that will increase revenues AND ensure
profitability.
Revenues
It is clear that sustainability of a business in the Internet marketplace
will depend on many factors. But actually, the final arbiter of which businesses
survive is profitability. Price competition on wholesale and retail goods will
be, and is already, fierce. Margins are razor thin, and in some cases, many
products are being sold at a loss. Beverly Hills' Global Golf business model
seeks to avoid the necessity of selling merchandise at a loss as a means to
attract web site viewers and users.
The Global Golf business model attempts to achieve relief from this
unprofitable scenario by participating in revenues at each leg of a transaction.
All business conducted at the site is subject to transaction fees, whether it is
the sale of a pair of brand name golf shoes or the booking of a destination golf
weekend in Scotland. But Beverly Hills also owns the businesses that help make
the web site a valuable place to visit. The sale of brand name golf shoes
translate into revenue for the company through our Golf Shoes Plus, Inc.
subsidiary. All are sources of revenue for the company. We will be establishing
price points, determining specials, creating frequent buyer programs and
combination offers which we expect will maintain the margins we deem necessary
to remain profitable and viable.
As the number of visitors to the site increases so does the value of
advertising on the Global Golf site. The site is designed to allow visitors to
survey the geographic area surrounding a destination golf course. After booking
your reservation through the tee-time reservation system a customer might be
interested in the accommodations or restaurants nearby. There are estimated to
be 36,000 golf courses around the world. As Global Golf adds more golf course
clients to its reservation system, the opportunity to derive revenue from
ancillary advertisers such as local restaurants, entertainment venues, hotels
and related leisure activities is expected to increase. This source of revenue,
though inexpensive for the individual advertiser, can become significant for the
site.
The combined revenue sources for the Global Golf business model are:
1) Transactional fees at the web site for product sales
2) Revenue from each subsidiary (listed below and linked to
www.globalgolf.com)
3) Regional and national banners
4) Tee-time reservation fees
5) Advertising associated with specific destinations (i.e.
restaurant & hotel)
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It is our plan that the breadth and scope of the site, when complete, will
increase loyalty to the site and reduce our susceptibility to "bargain hunter"
shopping which is widespread on the Internet. This coupled with unique product
offerings, such as original golf art and specially licensed products not
available elsewhere, is expected to provide an additional buffer from the zero
margin trend that is impacting many Internet businesses. Value added no-fee
services such as chat rooms with your favorite Golf Pros, helpful hint sections,
etc. are also under consideration to help increase customer loyalty and traffic.
Finally, special programs rewarding loyalty or repetitive business are planned
in an effort to encourage frequent visits and discourage "surfing" to other
sites. Programs such as these will be implemented where appropriate.
Golf Related Businesses
Beverly Hills owns Golf Shoes Plus (GSP) (www.golfshoesplus.com), a
retailer of high-quality name brand golf shoes sold over the internet and in
retail stores, and Pro's Edge Wholesale, Inc. (PEW) a wholesaler of quality name
brand golf accessories. PEW also manufactures "The Big Smoke Driver" a patent-
pending Titanium alloy oversized driver that is being sold via the Internet
(www.thebigsmoke.com) and through advertisements in the Wall Street Journal.
Both companies are already profitable selling their products in retail outlets
and over the Internet. GSP began Internet sales in January 1998 and sales
increased 300% through the first quarter of 1999.
Beverly Hills also acquired Briar and Wood, Inc., the publisher of THE
GOLFER magazine. The Golfer is written for the serious player and looks at
travel, equipment, club life, fashion and instruction like no other has before
as it delves into the personalities and passions that shape the game. The Golfer
has a current circulation exceeding 200,000 [and reaches an affluent audience
with the highest demographics of any golf publication.] The average income for
current subscribers is $200,000 per annum.
This publication is profitable as an independent operation and is expected
to become an additional medium through which Beverly Hills can promote its
products and Internet businesses. Beverly Hills will also generate additional
revenue through crossover of the magazine advertisers to our Internet
businesses. The advertising partnership between the magazine and Internet
operations will allow for an increase in advertising rates and can add
significant corporate profits.
All Global Golf internet businesses will be networked together so that
consumers will have easy access to the magazine, golf merchandise, charity
auction, retail sales locations and corporate information sites. This is
expected to generate income for Beverly Hills both through retail sales,
transaction fees, and advertisements on the various Web sites. As the numbers of
visits to these sites increases it is expected that the rates that can be
charged for advertising will also increase. Also, Beverly Hills expects to build
a database of visitors to the sites that can be used for other marketing
opportunities.
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Employees
As of December 31, 1999, Beverly Hills employed approximately 30 full-time
employees and 5 part-time employees. Management considers relations between the
Company and its employees to be good.
Facilities
Beverly Hills' executive office is located at 16 N. Fort Harrison,
Clearwater, Florida 33755. Pro's Edge Wholesale occupies 1850 Boyscout Drive,
Unit 209, Ft. Myers, Florida 33907. Golf Shoes Plus occupies 1850 Boyscout
Drive, Unit 111, Ft. Myers, Florida, 33907. Beverly Hills Charity Auction is
located at 2320 US Highway 19, Holiday, Florida 34691. Briar and Wood has
offices at 21 East 40th Street, New York, New York. Global Golf has offices at
Unit 27 Templemore Business Park, Northland Road, Derry, North Ireland BT4800LD
Marketing
Beverly Hills intends to focus its promotional efforts on mass media, the
Internet and public relations to create product and service awareness in order
to develop a broader user base. This advertising campaign is intended to raise
general awareness of the Beverly Hills Auction, Global Golf, Golf Shoes Plus and
Golfer Magazine brands. This advertising campaign is intended to raise consumer
awareness through the placement of television, print and radio advertising.
Through Global Golf's relationship with CNBC Sports will air approximately $1.5
million of 30 second television commercials during the broadcast of European and
Asian golf tournaments. Beverly Hills also acquired $2.4 million of prepaid
print media advertising in major airline magazines. Beverly Hills has entered
into an advertising agreement with Sports By Line, a leading sports talk radio
show carried in over 200 U.S. affiliates in 140 countries through the Armed
Forces Network to provide $1.5 million of 30-60 second spots during prime time
talk shows. The agreement also includes 3,000,000 banner ad impressions in the
Sports Byline USA Website and CBS Sports Byline Website. Beverly Hills intends
to continue and expand its promotional efforts in order to reach a larger
targeted audience.
Trademarks and Patents
Beverly Hills and its subsidiaries have no patents or trademarks. Beverly
Hills' Pro Edge Wholesale, Inc. has filed a patent application [get copy] for
the Big Smoke Driver. Through Online Tee Time, Beverly Hills has requested the
following existing Internet Domain names which are used in its business:
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alumniave.com eterrain.com
alumniavenue.com globalgolf.com
bevelryhillsauction.com globalgolfart.com
beverlyhillsartgallery.com globalgolfstore.com
beverlyhillsgallery.com globalgolfsuperstore.com
bhauction.com golfshirtsplus.com
bhccauction.com golfshoesplus.com
bhchats.com onlineteetime.com
bhltd.com onlinettime.com
bhltdart.com supportyourcollege.com
bigsmoke.com thegolferonline.com
Beverly Hills and its subsidiaries have registrations for "Global Golf",
Beverly Hills Charity Auction", Beverly Hills Limited" and "Auction.Com."
Suppliers
Beverly Hills employs services of a number of suppliers whose services
range from providing high speed Internet access to financial and other news
content providers. Among many service providers are the following companies:
Digital Nation is the ISP (internet service provider) for the Beverly Hills
Auction.
Mindspring/Exite is the ISP for Global Golf.
Opensite provides auction software and support to Beverly Hills Charity
Auction.
Credit Card International and Cybercard provide Internet credit card
processing and security services to Beverly Hills Auction sites.
Vario, Inc. provides software that creates a virtual shopping cart on each
of Beverly Hills retail sites.
Litigation
Beverly Hills, Marc Barhonovich, Steven Velte and Michael Hanlon, an
officer of Global Golf, are defendants in an action pending in the United States
District Court for the Northern District of Georgia brought by CBS Sports
International Limited. the parties have settled this matter and it will be
dismissed upon Beverly Hills fully performing its obligation under the terms of
the settlement agreement.
Beverly Hills and its subsidiaries, Golf Shoes Plus, Inc. and Pro's Edge
Wholesale, Inc. are defendants in two related actions pending in the Circuit
Court of the 20th Judicial Circuit and County Court for Lee County, Florida. The
Plaintiff in the action, Randall J. Personett alleges breaches of the Stock
Purchase Agreement under which Beverly Hills acquired the Golf Shoes Plus and
Pro's Edge Wholesale, employment agreements with Golf Shoes Plus and Pro's Edge
Whoesale and seeks possession of the space occupied by these subsidiaries.
Beverly Hills and its subsidiaries have commenced an action in the above Circuit
Court against Mr. Personett alleging that Mr. Personett breached his employmnet
agreement with the subsidiaries and has breached his fiduciary obligations to
the subsidiaries. Both cases were recently commenced and Beverly Hills intends
to vigorously pursue its action.
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DESCRIPTION OF SECURITIES
Beverly Hills' authorized capital stock consists of 50,000,000 shares of
common stock, par value $.001 per share and 25,000,000 shares of preferred
stock, $.001 par value per share. As of February 23, 2000 , Beverly Hills had
15,575,975 shares of common stock issued outstanding and no shares of Series A
or Series B Preferred Stock issued and outstanding.
Common Stock
Holders of common stock are entitled to one vote for each share held and,
subject to preferences that may be applicable to any preferred stock outstanding
at the time, are entitled to receive dividends out of the assets legally
available therefor at such times and in such amounts as the Board of Directors
may from time to time determine. While payments of dividends rests within the
discretion of the Board of Directors, the Company anticipates that it will
retain earnings, if any, in order to finance expansion of its operations. Such
dividends, as may be declared by the Board of Directors, will be distributed to
common shareholders only in the event any outstanding shares of preferred stock
have been converted into shares of common stock. Common shareholders, in the
event of liquidation, dissolution, or sale of the Company, are entitled to
receive, on a pro rata basis, all assets of the Company remaining after
satisfaction of all liabilities and preferences held by preferred shareholders.
Preferred Stock
The Board of Directors is authorized, subject to certain limitations
prescribed by law and without further shareholder approval, to issue from time
to time up to an aggregate of 25,000,000 shares of preferred stock in one or
more series and to fix or alter the designations, preferences, rights and any
qualifications, limitations or restrictions on the shares of each such series
thereof and the number of shares constituting any series or designations of such
series. The Board of Directors has designated 1,500,000 shares of preferred
stock as Series A Preferred Stock. The Series A Preferred Stock ranks senior to
the Company's common stock. The Board of Directors has also designated 1,000,000
shares of preferred stock as Series B Preferred Stock. The Series B Preferred
Stock ranks senior to the Company's common stock but junior to the Series A
Preferred stock. There are no shares of Series A Preferred Stock and no shares
of Series B Preferred Stock outstanding as of the date of this report.
Certain Articles of Incorporation and Bylaw Provisions
Shareholders' rights and related matters are governed by the Utah Revised
Business Corporation Act and the Company's Amended Articles of Incorporation and
Bylaws. The Company's Bylaws provide broad indemnification rights to directors
and officers for all expenses incurred by any person who is made a party to a
civil, criminal or administrative action, suit or proceeding by reason of the
fact that such person is or was at the time a director or officer of the Company
except where such person has been adjudged to be liable to the Company for
negligence or misconduct in the performance of his duties.
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Transfer Agent and Registrar
The transfer agent for the common stock of Beverly Hills is Fidelity
Transfer Agency, 1800 South West Temple, Salt Lake City, Utah 84115.
MARKET FOR THE COMPANY'S SECURITIES
Beverly Hills has been a non-reporting publicly traded company with certain
of its securities exempt from registration under the Securities Act of 1933
pursuant to Rule 504 of Regulation D of the General Rules and Regulations of the
Securities and Exchange Commission. The Company's common stock was traded on the
NASD OTC Bulletin Board under the symbol BLTD from March 24, 1998 to October 8,
1999. The Nasdaq Stock Market implemented a change in its rules requiring all
companies trading securities on the NASD OTC Bulletin Board to become reporting
companies under the Securities Exchange Act of 1934, since Beverly Hills was not
a reporting company on the date it was required to comply with these rules, it
was removed from the Bulletin Board.
Beverly Hills acquired all the outstanding shares of Keynote to become
successor issuer to it pursuant to Rule 12g-3 in order to comply with the
reporting company requirements implemented by the Nasdaq Stock Market.
The following table is bid price and volume information for Beverly Hills
common stock as reported by the OTC Bulletin Board for the periods indicated:
High Low Closing
Date Bid Bid Bid
---- ---- --- --------
Q3/1998 $ 6.875 $3 $5.25
Q4/1998 $ 6 $2 $4.5
Q1/1999 $ 8.375 $4.75 $8.25
Q2/1999 $11 $5 $7.5
Q3/1999 $10.5 $4 $4.625
The following table is trade information reported to the NASD by brokers
during the time that Beverly Hills has been quoted in the Pink Sheets:
Date High Price Low Price Closing Price
---- ---------- --------- -------------
Q3/1999 $5.5 $1.5 $1.5
(from October 8, 1999)
On February 29, 2000 the high, low and closing prices reported by brokers
to the NASD was $3 7/16, $2 7/8 and $3 1/16.
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Bid price information does not reflect actual sales prices and are prices
quoted between dealers.
MANAGEMENT
Executive Officers and Directors
The following table sets forth the executive officers and directors of
Beverly Hills, their ages and the positions they hold as of February 23, 2000.
NAME AGE POSITION(S)
- ---- --- -----------
Marc Barhonovich............ 37 President, Chief Executive Officer and
Director
Leon F. Willis, Jr.......... 65 Chief Financial Officer, Secretary,
Treasurer and Director
Steven Velte................ 38 Director
Marc Barhonovich, has served as a consultant to Beverly Hills since March
1998. Since 1997, Mr. Barhonovich has been the sole shareholder and President of
Equity Advisors, Inc., a corporation engaged in financial consulting to both
private and public companies. Mr. Barhonovich currently serves on the board of
directors for Florimed Health Group and in the past for American Dermatology
Network, Inc. Prior to 1997, Mr. Barhonovich served as Vice President of
Investments for Morgan Stanley Dean Witter.
Leon F. Willis, Jr. has served as Chief Financial Officer of Beverly Hills
since April 1999 and became a director December, 1999. Mr. Willis has over 20
years of experience in accounting and management including serving as the Senior
V.P. of Finance of Seaworld, Inc. Such previous experience includes serving as
chief financial officer and partner of Rosenbloom Marketing, Inc. Mr. Willis is
also President and Owner of Universal Truck Parts & Sales, Inc., a company which
sells truck parts and rebuilds drive train units. He is currently a director of
Asgard, a Development stage company traded on the Pink Sheets. Mr. Willis
graduated from San Diego State College with a B.S. in Accounting.
Steven Velte has served as a director of Beverly Hills since 1997. Mr.
Velte has served as a systems development engineer for Hewlett-Packard and
Agilent Technologies, Inc. for 15 years specializing in the placement of high
end telecommunications systems targeting network surveillance, fraud detection
and Internet traffic characterization. He is also president of RSV Productions,
an after-marketer of automotive specialty products. Mr. Velte is a graduate of
Virginia Technical Institute with a degree in Electrical Engineering.
14
Executive Compensation
The following table sets forth certain summary information regarding the
compensation paid to and accrued for each of the Company's Chief Executive
Officers that served in such capacity during Fiscal 1999 and each of its other
executive officers whose total salary and bonus for the fiscal year ended
December 31, 1999 exceeded $100,000:
Name and Year Other Restricted All Other
Principal Ended Annual Stock Options/ LTIP Compen-
Position Dec. 31, Salary Bonus Compensation Awards SARs Payouts sation
- ----------- --------- ------ ----- ------------ ---------- -------- ------- ----------
Marc Barhonovich 1999 $ 15,624 $ -0- $ -0- -0- 1,000,000/0 $ -0- $ -0-
President, 1998 -0- -0- -0- -0- 0/0 -0- -0-
Chief Executive 1997 -0- -0- -0- -0- 0/0 -0- -0-
Officer (1)
Cliff Wildes 1999 $ 55,250 $ -0- $ -0- -0- 185,000/0 $ -0- $ -0-
Chief Executive 1998 -0- -0- -0- -0- 0/0 -0- -0-
Officer(2) 1997 -0- -0- -0- -0- 0/0 -0- -0-
- -------------
(1) Became a director and chief executive officer in November 1999.
(2) Resigned July, 1999
Stock Option Plan
In January, 2000, the Board of Directors adopted the Beverly Hills Ltd.,
Inc. 2000 Employee Stock Incentive Plan (the "2000 Plan"). Pursuant to the 2000
Plan, subject to shareholder approval, eligible participants of the Company, its
subsidiaries and affiliates may receive, until January 10, 2010, stock options,
stock appreciation rights, restricted stock or deferred stock awards for up to
3,000,000 shares of the Company's Common Stock.
Pursuant to the 2000 Plan, an independent committee, in its discretion,
determines those directors of the Company to be granted Director Stock Options
and those officers and other key employees of the Company, its subsidiaries and
affiliates to be granted Employee Stock Options, Stock Appreciation Rights,
Restricted Stock Awards or Deferred Stock Awards or a combination, thereof; the
type of grants to be made; the number of shares subject to such grants; the
terms and conditions of the awards, including restrictions on Director Stock
Options, Employee Stock Options or other awards and/or the stock relating
thereto based on performance and/or such other factors as the Committee in its
sole discretion determines and vesting acceleration features based on
performance and/or such other factors as the Committee in its sole discretion
determines; and whether, to what extent and under what circumstances stock and
other amounts payable with respect to an award may be deferred either
automatically or at the participant's election. No grants of options to purchase
shares were made under the 2000 Plan during the year ended December 31, 1999.
15
The following table sets forth as to each executive officer of the Company
listed in the Summary Compensation table above concerning certain options and
warrants granted during the year ended December 31, 1999:
% of Total
Options and Warrants/
Options/ SARs Granted to
SARs Employees in Exercise or Base Expiration
Name Granted Fiscal Year Price Per Share Date
- ---- -------- ---------------------- ---------------- ----------
Marc Barhonovich 1,000,000/0 30%/N/A $ .05 11/20/2004
Cliff Wildes 185,000/0 6%/N/A $ .10 5/31/2001
The following table sets forth as to each executive officer listed in the
Summary Compensation table above certain information concerning the exercise of
options during the year ended December 31, 1999 and options outstanding as of
such date:
Value of
Number of Unexercised
Unexercised in-the-Money
Shares Options Options
Acquired Exercisable/ Exercisable/
Name on Exercise Value Realized Unexercisable Unexercisable
- ----- ----------- -------------- ------------- -------------
Marc Barhonovich 0 $ 0 1,000,000/0 $1,450,000/0
Cliff Wildes 0 $ 0 185,000/0 $ 259,000/0
Board Report on Executive Compensation
The Board of Directors did not, during the year ended December 31, 1999,
have a compensation or similar committee. Accordingly, the full Board of
Directors is responsible for determining and implementing the compensation
policies of the Company.
The Board's executive compensation policies are designed to offer
competitive compensation opportunities for all executives which are based on
personal performances, individual initiative and achievement, as well as
assisting the Company in attracting and retaining qualified executives. The
Board also endorses the position that stock ownership by management and
stock-based compensation arrangements are beneficial in aligning management's
and stockholders' interests in the enhancement of stockholder value.
Compensation paid to the Company's executive officers generally consists of
the following elements: base salary, annual bonus and long-term compensation in
the form of stock options. Compensation levels for executive officers of the
Company is determined by a
16
consideration of each officer's initiative and contribution to overall corporate
performance and the officer's managerial abilities and performance in any
special projects that the officer may have undertaken. Competitive base salaries
that reflect the individual's level of responsibility are important elements of
the Company's executive compensation philosophy. Subjective considerations of
individual performance are considered in establishing annual bonuses and other
incentive compensation. In addition, the Board considers the Company's financial
position and cash flow in making compensation decisions.
Mr. Barhonovich's Compensation and Employment Agreement
Mr. Barhonovich entered into a employment agreement with Beverly Hills on
November 15, 1999. Pursuant to the agreement, as amended, Mr. Barhonovich is to
serve as the Company's Chief Executive Officer for a term ending November 14,
2000, at which time the agreement is automatically extended for successive
additional terms of one year, unless either party has notified the other of its
intention to terminate the agreement thirty days prior to the expiration of the
term. The agreement provides for annual cash compensation of $125,000 during the
term and entitles Mr. Barhonovich to certain fringe benefits, including an
automobile and its maintenance, disability insurance, medical benefits and life
insurance coverage the cash value of which is payable to Mr. Barhonovich in the
event he retires after the age of 55. Mr. Barhonovich has agreed that during the
term of his agreement and for the twelve months thereafter (unless the agreement
is terminated by the Company without cause), he will be subject to
non-competition provisions. The agreement further provides for Mr. Barhonovich
to be granted 1,000,000 warrants which vested February 15, 2000 and are
exercisable for $.05 per share for a period of five years. Upon termination of
employment without cause, Mr. Barhonovich will be entitled to receive a lump sum
cash payment equal to the remaining base salary due through the expiration of
the term and the product of the number of full years employed times $75,000.
Director Compensation
Beverly Hills does not have a policy relating to compensating the members
of its Board of Directors. In January 1999, the Board of Directors voted to
award 100,000 shares of Beverly Hills' common stock to each of the members of
the Board, each member abstaining from voting with respect to his own stock
award. The value for such shares, as determined by Beverly Hills' Board of
Directors, was $1.00 per share.
RISK FACTORS
An investment in Beverly Hills involves a high degree of risk. You should
consider an investment in Beverly Hills only if you can afford to lose your
entire investment. In addition to the other information in this report, the
following risk factors should be considered carefully in evaluating an
investment in our common stock. When used in this report, the words "expect,"
"anticipates," "intends" and similar expressions are intended to identify
forward-looking statements. Such statements are subject to risks and
uncertainties that could cause actual results to differ materially from those
projected. These risks and uncertainties include, but are not limited to, those
risks discussed below and elsewhere in this report. Actual results could differ
materially from those projected in the forward-looking statements as a result of
the risk factors discussed below and elsewhere in the report.
17
We Have Recently Implemented a New Business Plan and We Anticipate Operating
Losses in the Near Term
Beverly Hills commenced its current business operations in February 1998.
Accordingly, we have little meaningful operating history upon which an
evaluation of our business and its prospects can be based. Although the
corporate entity has been in place for many years, because we have implemented a
new business plan, Beverly Hills business and it's prospects must be considered
in light of the risks, expenses and difficulties frequently encountered by
companies in their early stages of development. In the foreseeable future, we
will be required to among other things:
o attract, retain and motivate qualified personnel;
o implement and successfully execute our business strategy;
o respond to competitive developments;
o develop and market additional products and services; and
o develop and enhance its existing product and services.
There can be no assurance that we will be successful in addressing these
business requirements. In addition, our limited operating history makes the
prediction of future overall results difficult or impossible. We expect to
incur substantial expenses related to the development of our business, marketing
activities and personnel, among other things. We expect to incur net operating
losses in the foreseeable future. There can be no assurance that we will be able
to achieve and maintain profitability.
We are Uncertain Whether the Market Will Accept our Internet-based Product and
Service Offering and the Size of the Market for our Products and Services is
Unknown
In order to achieve anticipated growth rates, our products and services
must achieve broad market acceptance. There can be no assurance that the market
acceptance attained by our existing products will be sustained or will grow. In
addition, we cannot guaranty that future products and services will . Because
the market for golf-related products and services of the type offered by us is
constantly changing, we are unable to accurately estimate the commercial
viability and market demand for the range of products and services offered by
us. We believe that the current market for golf-related products and services
utilizing Internet technology is in an early stage of growth. However, we can
give no assurance that the market will in fact grow at the rates projected by
us, or at all. If that market does not grow rapidly, or if we are not able to
obtain sales from growth in that market, we will incur substantial operating
losses. Moreover, as the novelty of golf- and leisure-related products and
services delivered via Internet technology diminishes over time, we may not be
able to retain customers. We will be required to invest substantial resources in
developing awareness of and confidence in our on-line products and services and
there can be no assurance that we will have the resources necessary to be
successful.
Our Success Depends on Our Key Executives
Our business depends on the continued efforts of our key technical
employees and managers. We cannot guarantee that any individual will continue in
his or her present capacity
18
with us for any particular period of time. In addition, at this time we do not
maintain "key person" life insurance policies on the lives of any of our
personnel.
Our Business Could be Hurt By Competition
We will compete with other golf products and services providers and other
Internet vendors. In addition, the market for Internet services is highly
competitive and competition is expected to increase significantly due to
anticipated growth of the Internet as a means of communication and commerce.
There are no effective barriers that will prevent a potential competitor from
entering the market. Current providers of golf-related products and services may
decide to provide these products and services over the Internet and compete
directly with us. If so, many of our competitors would have greater financial,
development, technical, marketing and sales resources than we have and would
have greater expertise and established brand recognition. In addition, there can
be no assurance that our competitors will not develop products and services that
are superior to our products and services or that achieve greater market
acceptance than our products and services.
Risk of Inaccuracy of Projections and other Forward-Looking Statements
This report contains certain forward-looking statements, including, among
others:
o Our ability to execute our business strategies and generate
revenues from our Internet-based operations; and
o Our ability to finance future growth and possible acquisitions
through the issuance of shares of our common stock.
These forward-looking statements are based upon a number of assumptions and
estimates that, while considered reasonable by us when taken as a whole, are
inherently subject to significant business, economic, and competitive
uncertainties and contingencies, many of which are beyond our control, and are
based upon specific assumptions with respect to future business decisions, many
of which will change. It can be anticipated that some or all of the assumptions
underlying the projections and forward-looking statements included herein will
not materialize or will vary significantly from actual results. Accordingly, it
can be expected that actual results will vary from the projections and that such
variations, in all likelihood, will be material and are likely to increase over
time.
In addition to the other risks described elsewhere in this Risk Factors
discussion, important factors to consider and evaluate in such forward-looking
statements include:
o changes in the external competitive market factors or in our
internal budgeting process which might impact our results of
operations;
o unanticipated working capital or other cash requirements; and
o changes in our business strategy or an inability to execute our
strategy due to unanticipated changes in our targeted market.
19
In light of these risks and uncertainties, many of which are described in
greater detail elsewhere in this "Risk Factors" discussion, we cannot give
assurance that the forward-looking statements contained in this report will in
fact transpire.
Limited History of Operations; History of Losses
Beverly Hills and its subsidiaries have only a limited history of
operations with periods of net operating losses. During the period from March
15, 1996 (inception) to December 31, 1998, Beverly Hills experienced a loss from
its operations in the amount of $1,432,936 and during the nine months ended
September 30, 1999 the net loss was $1,915,965 (including a non-recurring gain
of $1,485,000 from the sale of an interest in Global Golf). Beverly Hills'
operations are subject to the risks and competition inherent in the
establishment of a relatively new business enterprise in a competitive field of
Internet start-up companies. There can be no assurance that future operations
will be profitable. Revenues and profits, if any, will depend upon various
factors, including market acceptance of its concepts, market awareness, its
ability to expand its network of participating Internet companies, reliability
and acceptance of the Internet commerce, dependability of its advertising and
recruiting network, and general economic conditions. There is no assurance that
Beverly Hills will achieve its expansion goals and the failure to achieve such
goals would have an adverse impact on it.
Adverse Economic Conditions or a Change in General Market Patterns
A weak economic environment could adversely affect Beverly Hills sales and
promotional efforts. General economic conditions impact Internet based and
related commerce and demand and interest for Beverly Hills' Internet services
may decline at any time, especially during recessionary periods. Many factors
beyond Beverly Hills' control may decrease overall demand for Internet portal
services including, among other things, decrease in the entry costs by other
similarly situated companies, increase in the overall unemployment rate,
additional government regulation. There can be no assurance that the general
market demand for Internet portal services and related fields will remain the
same or will not decrease in the future.
Reliance on Future Acquisitions Strategy
Beverly Hills expects to continue to rely on acquisitions as a primary
component of its growth strategy. Beverly Hills regularly engages in evaluations
of potential target candidates, including evaluations relating to acquisitions
that may be material in size and/or scope. There is no assurance that Beverly
Hills will continue to be able to identify potentially successful companies that
provide suitable acquisition opportunities or that Beverly Hills will be able to
acquire any such companies on favorable terms. Also, acquisitions involve a
number of special risks including the diversion of management's attention,
assimilation of the personnel and operations of the acquired companies, possible
loss of key employees. There is no assurance that the acquired companies will be
able to successfully integrate into Beverly Hills' existing infrastructure or to
operate profitably. There is also no assurance given as to Beverly Hills'
ability to obtain adequate funding to complete any contemplated acquisition or
that such acquisition will succeed in enhancing Beverly Hills' business and will
not ultimately have an adverse effect on Beverly Hills' business and operations.
20
Lack of Continued Development of E-Commerce Market
The use of the Internet and the World Wide Web for commercial purposes is
expanding dramatically. There is no assurance, however, that as increased
commerce takes place on the Internet that unforeseen overloads, lack of
sufficient hardware, telephone availability or other problems may develop. In
addition, consumer use of the Internet for purchases, banking, and other
commercial uses may decline for any number of reasons such as security problems,
overload difficulties, shopping trends, or slow Internet access. These
difficulties may undermine Company's expansion and promotional efforts. There is
no assurance that Beverly Hills will be able to successfully overcome these
difficulties and maintain its competitive pricing and services.
Loss of Beverly Hills Key Employees May Adversely Affect Growth Objectives
Beverly Hills success in achieving its growth objectives depends upon the
efforts of Marc Barhonovich as well as other key management personnel. Their
experience and industry-wide contacts significantly benefit Beverly Hills. The
loss of the services of these individuals could have a material adverse effect
on Beverly Hills business, financial condition and results of operations. There
is no assurance that Beverly Hills will be able to maintain and achieve its
growth objectives should it lose any of its key management members' services.
Competition From Larger and More Established Companies May Hamper Market Ability
The competition in the Internet and electronic commerce industry is
intense. Large and highly fragmented, this industry hosts a number of
well-established competitors, including national, regional and local companies
possessing greater financial, marketing, personnel and other resources than
Beverly Hills. There is no assurance that Beverly Hills will be able to market
or sell its products if faced with direct product and services competition from
these larger and more established Internet portal services providers.
Failure to Attract Qualified Personnel
A change in labor market conditions that either further reduces the
availability of employees or increases significantly the cost of labor could
have a material adverse effect on Beverly Hills' business, financial condition
and results of operations. Beverly Hills' business is dependent upon its ability
to attract and retain highly trained and qualified technical personnel and
corporate management. There is no assurance that Beverly Hills will be able to
employ a sufficient number of qualified training personnel in order to achieve
its growth objectives.
Issuance of Future Shares May Dilute Investor Share Value
The Certificate of Incorporation, as amended, of Beverly Hills authorizes
the issuance of 50,000,000 shares of common stock and 25,000,000 shares of
preferred stock. The future issuance of all or part of the remaining authorized
common stock and/or all or part of the preferred stock may result in substantial
dilution in the percentage of Beverly Hills' common stock held by its then
existing shareholders. Moreover, any common stock issued in the future may be
valued on an arbitrary basis by Beverly Hills. The issuance of Beverly Hills
21
shares for future services or acquisitions or other corporate actions may have
the effect of diluting the value of the shares held by investors, and might have
an adverse effect on any trading market, should a trading market develop for
Beverly Hills' common stock.
Penny Stock Regulation
Penny stocks generally are equity securities with a price of less than
$5.00 per share other than securities registered on certain national securities
exchanges or quoted on the Nasdaq Stock Market, provided that current price and
volume information with respect to transactions in such securities is provided
by the exchange or system. Beverly Hills' securities may be subject to "penny
stock rules" that impose additional sales practice requirements on
broker-dealers who sell such securities to persons other than established
customers and accredited investors (generally those with assets in excess of
$1,000,000 or annual income exceeding $200,000 or $300,000 together with their
spouse). For transactions covered by these rules, the broker-dealer must make a
special suitability determination for the purchase of such securities and have
received the purchaser's written consent to the transaction prior to the
purchase. Additionally, for any transaction involving a penny stock, unless
exempt, the "penny stock rules" require the delivery, prior to the transaction,
of a disclosure schedule prescribed by the Commission relating to the penny
stock market. The broker-dealer also must disclose the commissions payable to
both the broker-dealer and the registered representative and current quotations
for the securities. Finally, monthly statements must be sent disclosing recent
price information on the limited market in penny stocks. Consequently, the
"penny stock rules" may restrict the ability of broker-dealers to sell Beverly
Hills' securities. The foregoing required penny stock restrictions will not
apply to Beverly Hills' securities if such securities maintain a market price of
$5.00 or greater. There can be no assurance that the price of Beverly Hills'
securities will reach or maintain such a level.
ITEM 3. BANKRUPTCY OR RECEIVERSHIP
Not applicable.
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT
Not applicable.
ITEM 5. OTHER EVENTS
Successor Issuer Election.
Pursuant to Rule 12g-3(a) of the General Rules and Regulations of the
Securities and Exchange Commission, upon effectiveness of the Acquisition,
Beverly Hills became the successor issuer to Keynote for reporting purposes
under the Securities Exchange Act of 1934 and elects to report under the Act
effective February 23, 2000.
22
ITEM 6. RESIGNATIONS OF DIRECTORS AND EXECUTIVE OFFICERS
The sole officer and director of Keynote has resigned upon closing of the
Acquisition and the Directors as set forth in Item 2 above have replaced such
person.
ITEM 7. FINANCIAL STATEMENTS
AUDITED FISCAL YEAR END DECEMBER 31, 1998 AND 1997
1. Index to Financial Statements
2. Independent Auditor's Report F-1
3. Balance Sheets, December 31, 1998 and 1997 F-2
4. Consolidated Statements of Operations for each of the years ended
December 31, 1998 and 1997 and for the period from March 15, 1996
(inception) to December 31, 1998 F-3
5. Consolidated Statements of Stockholder's Equity (deficiency in
assets) since December 31, 1996 F-4
6. Consolidated Statements of Cash Flows for each of the years ended
December 31, 1998, and 1997 , and for the period from March 15,
1996 (inception) to December 31, 1998 F-5
7. Notes to Financial Statements F-6-10
8. Supplementary Information F-11
9. Independent Auditors Report on Supplementary
Information F-12
10. Schedule 1 Consolidating Balance Sheet F-13
11. Consolidating Statement of Operations F-14
23
UNAUDITED FINANCIAL STATEMENTS FOR NINE MONTHS ENDED DECEMBER 30, 1999 AND 1998
12. Balance Sheets, September 30, 1999 F-15
13. Consolidated Statements of Operations for the nine months ended
September 30, 1999 F-16
14. Consolidated Statements of Stockholder's Equity since December
31, 1998 F-17
15. Consolidated Statements of Cash Flows for the nine months
ended September 30, 1999 F-18
ITEM 8. CHANGE IN FISCAL YEAR
Not applicable. The Company has a fiscal year ending on December 31.
EXHIBITS
2.1 Agreement and Plan of Reorganization between Beverly Hills Ltd., Inc. and
Keynote Acquisition Corporation, dated as of January 27, 2000.
2.2 Amendment dated February 17, 2000 to Agreement and Plan of Reorganization,
dated as of January 19, 2000.
3.1 Amended and Restated Articles of Incorporation of Beverly Hills Ltd., Inc.
3.2 Amended and Restated By-Laws of Beverly Hills Ltd., Inc.
27.1 Financial Data Schedule.
24
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Current Report on Form 8-K to be signed on its
behalf by the undersigned hereunto duly authorized.
BEVERLY HILLS LTD., INC.
By: /s/ MARC BARHONOVICH
-------------------------------
Marc Barhonovich, President
Dated: March 10, 2000
25
CONSOLIDATED FINANCIAL STATEMENTS
BEVERLY HILLS LIMITED, INC.
(A Development Stage Company)
December 31, 1998
Consolidated Financial Statements
BEVERLY HILLS LIMITED, INC.
(A Development Stage Company)
December 31, 1998
CONTENTS:
Independent Auditors' Report .............................................. 1
Consolidated Financial Statements:
Consolidated Balance Sheets ............................................. 2
Consolidated Statements of Operations ................................... 3
Consolidated Statements of Stockholders' Equity (Deficiency in Assets) .. 4
Consolidated Statements of Cash Flows ................................... 5
Notes to Consolidated Financial Statements .............................. 6
Independent Auditors' Report on Supplementary Information ................. 12
Supplementary Information:
Consolidating Balance Sheet ............................................. 13
Consolidating Statement of Operations ................................... 14
INDEPENDENT AUDITORS' REPORT
To the Stockholders
Beverly Hills Limited, Inc.
(A Development Stage Company)
We have audited the accompanying consolidated balance sheets of Beverly Hills
Limited, Inc. (a development stage company) and subsidiary as of December 31,
1998 and 1997, and the related consolidated statements of operations,
stockholders' equity (deficiency in assets) and cash flows for the years then
ended. 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 audits.
We conducted our audits 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 audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Beverly Hills
Limited, Inc. as of December 31, 1998 and 1997, and the results of their
operations and their cash flows for the years then ended, in conformity with
generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note H, the
Company's recurring operating losses and lack of working capital raise
substantial doubt about its ability to continue as a going concern. Management's
plan in regard to those matters is also described in Note H. The financial
statements do not include adjustments that might result from the outcome of this
uncertainty.
/s/ SMITH & RADIGAN CPA'S, LLC
--------------------------------------
Smith & Radigan CPA's, LLC
Atlanta, Georgia
July 6, 1999
F-1
Consolidated Balance Sheets
BEVERLY HILLS LIMITED, INC.
(A Development Stage Company)
ASSETS
December 31,
--------------------------
1998 1997
----------- -----------
CURRENT ASSETS
Cash $ -0- $ 983
----------- -----------
TOTAL CURRENT ASSETS -0- 983
PROPERTY AND EQUIPMENT
Equipment 2,168 0
Less: allowance for depreciation 60 0
----------- -----------
2,108 0
----------- -----------
OTHER ASSETS
Organization costs, net 463 695
----------- -----------
463 695
----------- -----------
$ 2,571 $ 1,678
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY IN ASSETS)
December 31,
--------------------------
1998 1997
----------- -----------
CURRENT LIABILITIES
Cash overdraft $ 41,310 $ -0-
Accrued interest 61,677 29,677
Accounts payable 48,782 648
Loans payables to affiliates 218,636 117,123
----------- -----------
TOTAL CURRENT LIABILITIES 370,405 147,448
LONG-TERM DEBT
Notes payable to stockholder 416,000 129,000
STOCKHOLDERS' EQUITY (DEFICIENCY IN ASSETS)
Preferred stock, par value $0.001 per share:
Authorized X 25,000,000 shares
Issued and outstanding X -0- shares -0- -0-
Common stock, par value $0.001 per share:
Authorized for 1998 -- 50,000,000 shares
Issued and outstanding -- 11,568,134 11,568
Authorized for 1997 -- 20,000,000 shares
Issued and outstanding -- 11,001,509 11,002
Additional paid-in capital 685,944 100,542
Retained deficit (accumulated deficit during
development stage of $1,432,936) (1,481,346) (386,314)
----------- -----------
(783,834) (274,770)
----------- -----------
$ 2,571 $ 1,678
=========== ===========
The Notes to Consolidated Financial Statements are an integral part of these
Statements.
F-2
Consolidated Statements of Operations
BEVERLY HILLS LIMITED, INC.
(A Development Stage Company)
Total Since
Inception of
For the Years Ended Development
December 31, Stage
---------------------------- on 3/15/96
1998 1997 to 12/31/98
------------ ------------ ------------
OPERATING EXPENSES
Advertising $ 6,020 $ -0- $ 6,020
Amortization and depreciation 292 271 563
Dues and subscriptions 897 310 1,207
Insurance 31,830 691 32,521
Licenses and permits 670 260 930
Office expense 20,861 14,509 35,370
Professional fees 555,224 44,126 599,654
Rental expense 10,479 6,419 16,898
Service charges 34,652 16,488 65,017
Travel and entertainment 186,784 49,641 305,527
Utilities 22,928 10,821 33,749
Taxes 540 540 1,080
Miscellaneous 23,855 3,775 27,630
------------ ------------ ------------
Total operating expense 895,032 147,851 1,126,166
------------ ------------ ------------
OPERATING LOSS BEFORE NON
RECURRING ITEM (895,032) (147,851) (1,126,166)
NON RECURRING ITEM
Loss on abandoned development 200,000 106,770 306,770
------------ ------------ ------------
NET LOSS $ (1,095,032) $ (254,621) $ (1,432,936)
============ ============ ============
NET LOSS PER SHARE $ (.10) $ (.05) $ (.24)
============ ============ ============
WEIGHTED AVERAGE COMMON SHARES 11,143,402 5,084,250 6,122,677
============ ============ ============
The Notes to Consolidated Financial Statements are an integral part of these
Statements.
F3
Consolidated Statements of Stockholders' Equity (Deficiency in Assets)
BEVERLY HILLS LIMITED, INC.
(A Development Stage Company)
Paid-In
Common Stock Capital
------------------------------ (Discount Retained
No. of on Common Earnings
Shares Amount Stock) (Deficit) Total
----------- --------------- ----------- --------------- -----------
Balance at December 31, 1996 12,276,958 $ 122,770 $ (81,902) $ (131,693) $ (90,825)
February 1997, stock issued
For services at par value 2,718,042 27,180 -0- -0- 27,180
July 1997, 10 to 1 reverse
stock split (13,495,491) -0- -0- -0- -0-
August 1997, stock issued for
loan repayment 8,502,000 85,020 (48,524) -0- 36,496
October 1997, stock issued
for acquisition of subsidiary 1,000,000 10,000 (3,000) -0- 7,000
December 1997 par value amended
from $0.01 to $0.001 -0- (233,968) 233,968 -0- -0-
Net loss for the year ended
December 31, 1997 -0- -0- -0- (254,621) (254,621)
----------- --------------- ----------- --------------- -----------
Balance at December 31, 1997 11,001,509 $ 11,002 $ 100,542 $ (386,314) $ (274,770)
January 1998, stock issued for
services 178,225 178 178,047 -0- 178,225
January 1998, stock issued for cash 362,000 362 379,638 -0- 380,000
December 1998, stock issued for services 2,100 2 2,098 -0- 2,100
December 1998, stock issued for cash 24,300 24 25,619 -0- 25,643
Net loss for the year ended
December 31, 1998 -0- -0- -0- (1,095,032) (1,095,032)
----------- --------------- ----------- --------------- -----------
Balance at December 31, 1998 11,568,134 $ 11,568 $ 685,944 $ (1,481,346) $ (783,834)
=========== =============== =========== =============== ===========
Reconciliation of retained deficit
during development stage:
Retained deficit from operations
at March 15, 1996 $ (48,410)
Net loss from development stage
for the period March 16, 1996
to December 31, 1996 (83,283)
Net loss from development stage for
the year ended December 31, 1997 (254,621)
Net loss from development stage for
the year ended December 31, 1998 (1,095,032)
-----------
Accumulated retained deficit during
development stage at December 31, 1998 (1,432,936)
---------------
Retained deficit at December 31, 1998 $ (1,481,346)
===============
The Notes to Consolidated Financial Statements are an integral part of these
Statements.
F4
Statements of Cash Flows
BEVERLY HILLS LIMITED, INC.
(A Development Stage Company)
Total Since
Inception of
For the Years Ended Development
December 31, Stage
-------------------------- on 3/15/96
1998 1997 to 12/31/98
----------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,095,032) $ (254,621) $(1,432,936)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Common stock issued for services 180,325 34,181 214,506
Amortization and depreciation 292 232 758
Decrease (increase) in:
Organization costs -0- -0- (1,161)
Development costs -0- 106,770 -0-
Increase (decrease) in:
Accounts payable 26,594 21,539 48,582
Accrued interest 32,000 15,800 61,677
----------- ----------- -----------
Total adjustments 239,211 178,522 324,362
----------- ----------- -----------
Net cash used by operating activities (855,821) (76,099) (1,108,574)
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash payments for office equipment (2,168) -0- (2,168)
----------- ----------- -----------
Net cash used by investing
activities (2,168) -0- (2,168)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from loans 410,053 112,446 634,636
Proceeds from issuance of common stock 405,643 -0- 434,796
Principal payments from stockholder
loans -0- -0- (3,505)
----------- ----------- -----------
Net cash provided by
financing activities 815,696 112,446 1,065,927
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (42,293) 36,347 (44,815)
CASH AND CASH EQUIVALENTS (OVERDRAFT)
AT BEGINNING OF YEAR 983 (35,364) 3,505
----------- ----------- -----------
CASH AND CASH EQUIVALENTS (OVERDRAFT)
AT END OF YEAR $ (41,310) $ 983 $ (41,310)
=========== =========== ===========
NON-CASH TRANSACTIONS:
Par value amended from $.01 to $.001 $ -0- $ 233,968 $ 233,968
=========== =========== ===========
Common stock issued for loan
repayment $ -0- $ 36,495 $ 36,495
=========== =========== ===========
The Notes to Consolidated Financial Statements are an integral part of these
Statements.
F-5
Notes to Consolidated Financial Statements
BEVERLY HILLS LIMITED, INC.
(A Development Stage Company)
December 31, 1998
Note A -- Summary of Significant Accounting Policies
Organization
Beverly Hills Limited, Inc. (the Company, traded on NASDAQ Bulletin Board) was
first incorporated in Utah on April 29, 1939 as Ophir Queen Mines Company. On
June 15, 1974, Ophir Queen Mines Company changed its name to Hawk International.
The Company had substantial operations until March 15, 1996 when the Company
discontinued operations and entered the Development Stage. Subsequent to the
merger (see Note B), Hawk International changed its name to Beverly Hills
Country Club on February 28, 1998. Beverly Hills Country Club then changed its
name to Beverly Hills Limited, Inc. on August 13, 1998.
The Company is a developmental stage company as defined in Financial Accounting
Standards Board Statement No. 7. It is concentrating substantially all of its
efforts in raising capital and searching for a business operation with which to
merge, or assets to acquire, in order to generate significant operations.
Principles of Consolidation
The financial statements include the accounts of the Company and its
wholly-owned subsidiary, HMW Golf d/b/a The Hanlon Group (a Development Stage
Company). All intercompany transactions have been eliminated.
Accounting Method
The Company recognized income and expense on the accrual basis of accounting.
Earnings (Loss) Per Share
The computation of earnings per share of common stock is based on the weighted
average number of shares outstanding at the date of the financial statements.
Cash and Equivalents
The Company considers all highly liquid investments with maturities of three
months or less to be cash equivalents.
Property and Equipment
All property and equipment is recorded at cost and depreciated over their
estimated useful lives, which is three years for computers, using the
straight-line method. Depreciation expense for the year ended December 31, 1998
totaled $60.
Organization Costs
Organization costs are being amortized over a five year period on a
straight-line basis. Amortization expense totaled $232 for each of the years
ended December 31, 1998 and 1997.
F-6
Notes to Consolidated Financial Statements -- Continued
BEVERLY HILLS LIMITED, INC.
(A Development Stage Company)
December 31, 1998
Note A -- Summary of Significant Accounting Policies -- Continued
1998 1997
---- ----
Organization Costs $ 1,161 $ 1,161
Accumulated Amortization (698) (466)
------- -------
$ 463 $ 695
======= =======
Income Taxes
The Company accounts for income taxes under the liability method. Under this
method, deferred income taxes are recorded to reflect the net tax effects of
temporary differences between the carrying amounts of assets and liabilities for
financial reporting and the amounts used for income taxes.
Use 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.
Note B -- Acquisition of HMW Golf d/b/a The Hanlon Group
On October 27, 1997, the Company acquired one-hundred percent of the common
stock of HMW Golf d/b/a The Hanlon Group (the Subsidiary) a Georgia corporation,
in exchange for not less than ten percent of the outstanding common stock
(1,000,000 shares) of the Company. The acquisition was recorded as a pooling of
interest method of accounting. Prior to this acquisition, the Subsidiary's year
end was October 31st. The Subsidiary changed its year end to December 31st to
correspond with the Company's.
Revenues and net income for the Company and the pooled subsidiary prior to their
respective merger for the years ended December 31, were as follows:
1998 1997
---------- ----------
Revenues
Company $ -0- $ -0-
Pooled subsidiary -0- -0-
---------- ----------
Combined $ -0- $ -0-
---------- ----------
Net loss
Company $ 896,236 $ 27,180
Pooled subsidiary 198,797 227,441
---------- ----------
Combined $1,095,033 $ 254,621
========== ==========
F-7
Notes to Consolidated Financial Statements -- Continued
BEVERLY HILLS LIMITED, INC.
(A Development Stage Company)
December 31, 1998
Note C -- Loans Payable to Stockholders and Affiliates
Stockholders of the Company, officers and affiliates of the Company made
multiple loans to the Company to fund working capital. Loans in the amount of
$218,636 and $117,123 at December 31, 1998 and 1997, respectively, have no
stated interest rate and are due on demand.
A stockholder of the Company loaned the Company $416,000 through December 31,
1998, of which $129,000 was outstanding at December 31, 1997. These loans are
secured by the assets of the Company. The notes accrue interest at ten percent
per annum. Interest is due monthly. The balance of accrued interest at December
31, 1998 was $61,677. The note plus accrued interest is due on April 30, 2001 or
upon an event of default, as defined, or a private placement or public offering.
Note D -- Provision for Income Taxes
No provision for income taxes have been recorded due to net operating loss
carryforwards totaling approximately $1,446,000 that will be offset against
future taxable income. Substantially all NOL carryforwards begin to expire in
the year 2017. No tax benefit has been reported in the financial statements
because the Company's future income is unpredictable. No federal tax expense has
been recognized for 1998 and 1997 due to loss carryforwards.
1998 1997
---------- ----------
Tax assets
NOL carryforwards $ 457,600 $ 112,500
Valuation allowance (457,600) (112,500)
---------- ----------
Total $ -0- $ -0-
========== ==========
Note E -- Stock Restrictions
Certain shares of common stock have been issued to officers or employees of the
Company. These shares are considered restricted for two years as to saleability.
Restricted shares totaled 10,937,250 at December 31, 1998 and 8,569,307 at
December 31, 1997.
Note F -- Leases
The Subsidiary leases office space and office equipment. The noncancelable
leases are accounted for as operating leases for financial reporting purposes.
Charges to rent expense for the years ended December 31, 1998 and 1997 are
$10,479 and $6,419, respectively.
F-8
Notes to Consolidated Financial Statements -- Continued
BEVERLY HILLS LIMITED, INC.
(A Development Stage Company)
December 31, 1998
Note F -- Leases -- Continued
At December 31, 1998, the future minimum lease payments from the operating
leases consisted of the following:
1999 $ 4,175
2000 5,675
2001 434
---------
$ 10,284
=========
Note G -- Loss on Abandoned Development
The Company engaged in Golf Course Development projects which were later
abandoned due to lack of financing. The loss on abandoned developments totaled
$200,000 and $106,770 during the years ended December 31, 1998 and 1997,
respectively.
Note H -- Going Concern
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company has minimal assets, has
lacked working capital for the past several years, and is dependent upon
financing to continue operations. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty. Management
is currently seeking potential business acquisitions and/or business
opportunities.
Note I -- Subsequent Event
On January 26, 1999, the Company acquired one-hundred percent of common stock
(500 shares) of Pro's Edge Wholesale, Inc., a Florida corporation for $200,000.
In addition, the Company also acquired one-hundred percent of common stock (100
shares) of Golf Shoes Plus, Inc., a Florida corporation, for a total purchase
price of $907,400 in cash and stock. The cash requirement totaled $242,400 with
a down payment of $50,000 on the date of sale; and, the remaining $192,400 to be
paid over a six-month period beginning August 1, 1999. The stock requirement is
the number of restricted shares of common stock which shall be determined by
dividing the sum of $665,000 by the market value of each share on January 26,
1999. Pro's Edge Wholesale, Inc. and Golf Shoes Plus, Inc. sell golf supplies
and equipment.
In January 1999, the Company began an Internet auction website. Revenues will be
generated from bids and will be used to fund working capital.
F-9
Notes to Consolidated Financial Statements -- Continued
BEVERLY HILLS LIMITED, INC.
(A Development Stage Company)
December 31, 1998
Note I -- Subsequent Event -- Continued
On March 18, 1999, the Company purchased Briar & Wood, Inc., a magazine
publisher, for $250,000 plus $125,000 due on September 1, 1999 and $125,000 on
March 31, 2000. The Company is also required to pay a remaining amount based on
2001 earnings before interest, taxes, depreciation and amortization. The payment
range is based on earnings from zero to over $6,000,000 with multiples that
range from 3 to 6. The balance of the purchase shall be paid over a period
depending on the amount of the payout.
On March 31, 1999, the Company acquired Focused Media Limited (Focused) by
exchanging 300,000 shares of restricted common stock and $100,000 cash for
one-hundred percent of the shares of Focused.
F-10
SUPPLEMENTARY INFORMATION
F-11
INDEPENDENT AUDITORS' REPORT ON SUPPLEMENTARY INFORMATION
To the Stockholders of
Beverly Hills Limited, Inc.
(A Development Stage Company)
Our report on our audit of the consolidated financial statements of the Beverly
Hills Limited, Inc. (A Development Stage Company) for the years ended December
31, 1998 and 1997 appears on page 1. These audits were made for the purpose of
forming an opinion on the consolidated financial statements taken as a whole.
The consolidating information on Schedules 1 and 2 is presented for purposes of
additional analysis of the consolidated financial statements for 1998 and is not
a required part of the consolidated financial statements for 1998. Such
information has been subjected to the auditing procedures applied in the audits
of the consolidated financial statements and, in our opinion, is fairly stated
in all material respects in relation to the consolidated financial statements
taken as a whole.
/s/ SMITH & RADIGAN CPA'S, LLC
----------------------------------
Smith & Radigan CPA's, LLC
Atlanta, Georgia
July 6, 1999
F-12
Consolidating Balance Sheet Schedule 1
BEVERLY HILLS LIMITED, INC.
(A Development Stage Company)
December 31, 1998
ASSETS
HMW
Golf, Inc.
Beverly Hills d/b/a The Eliminating 1998
Limited, Inc. Hanlon Group Entries Total
------------- ------------ ----------- -----------
CURRENT ASSETS
Advance to affiliate $ 91,803 $ -0- $ (91,803) $ -0-
PROPERTY AND EQUIPMENT
Office equipment 2,168 -0- -0- 2,168
Less allowance for depreciation 60 -0- -0- 60
----------- ----------- ----------- -----------
Net property and equipment 2,108 -0- -0- 2,108
OTHER ASSETS
Organization costs, net -0- 463 -0- 463
Investment (deficit) in
subsidiary (471,765) -0- 471,765 -0-
----------- ----------- ----------- -----------
(471,765) -0- 471,765 463
----------- ----------- ----------- -----------
$ (377,854) $ 463 $ 379,962 $ 2,571
=========== =========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY IN ASSETS)
CURRENT LIABILITIES
Cash (balance) overdraft $ 41,357 $ (47) $ -0- $ 41,310
Accrued interest 15,491 46,186 -0- 61,677
Accounts payable 48,782 -0- -0- 48,782
Advance from affiliate -0- 91,803 (91,803) -0-
Loans payable to stockholders 52,350 166,286 -0- 218,636
----------- ----------- ----------- -----------
Total current liabilities 157,980 304,228 (91,803) 370,405
LONG-TERM DEBT 248,000 168,000 -0- 416,000
STOCKHOLDERS' EQUITY (DEFICIENCY ASSETS)
Preferred stock, par value $0.001
per share:
Authorized -- 25,000,000 shares
Issued and outstanding --
-0- shares -0- -0- -0- -0-
Common stock, par value $0.001
per share:
Authorized -- 50,000,000 shares
Issued and outstanding -- 11,568,134 11,568 100 (100) 11,568
Additional paid-in capital 685,944 37,353 (37,353) 685,944
Retained deficit (accumulated
deficit during development
stage of $1,171,259) (1,481,346) (509,218) 509,218 (1,481,346)
----------- ----------- ----------- -----------
(783,834) (471,765) 471,765 (783,834)
----------- ----------- ----------- -----------
$ (377,854) $ 463 $ 379,962 $ 2,571
=========== =========== =========== ===========
See Auditors' Report on Supplementary Information.
F-13
Page 2
Consolidating Statement of Operations Schedule 2
BEVERLY HILLS LIMITED, INC.
(A Development Stage Company)
December 31, 1998
HMW
Golf, Inc.
Beverly Hills d/b/a The Eliminating 1998
Limited, Inc. Hanlon Group Entries Total
------------- ------------ ----------- -----------
REVENUES $ -0- $ -0- $ -0- $ -0-
OPERATING EXPENSES
Advertising -0- 6,020 -0- 6,020
Amortization and depreciation 60 232 -0- 292
Dues and subscriptions 547 350 -0- 897
Insurance 25,746 6,084 -0- 31,830
Licenses and permits 671 -0- -0- 670
Office expense 7,504 13,357 -0- 20,861
Professional fees 538,791 16,433 -0- 555,224
Rental expense 165 10,314 -0- 10,479
Interest 16,199 18,453 -0- 34,652
Travel and entertainment 74,285 112,499 -0- 186,784
Utilities 7,545 15,383 -0- 22,928
Taxes -0- 540 -0- 540
Miscellaneous 24,722 (867) -0- 23,855
----------- ----------- ----------- -----------
Total operating expense 696,235 198,797 -0- 895,032
----------- ----------- ----------- -----------
OPERATING LOSS (696,235) (198,797) -0- (895,032)
LOSS ON ABANDONED DEVELOPMENT (200,000) -0- -0- 200,000
LOSS FROM SUBSIDIARY (198,797) -0- 198,797 -0-
----------- ----------- ----------- -----------
NET LOSS (1,095,032) (198,797) 198,797 (1,095,032)
RETAINED EARNINGS (DEFICIT) AT
BEGINNING OF YEAR (386,314) (310,421) (310,421) (386,314)
----------- ----------- ----------- -----------
RETAINED EARNINGS (DEFICIT) AT
END OF YEAR $(1,481,346) $ (509,218) $ (509,218) $(1,481,346)
=========== =========== =========== ===========
F-14
BEVERLY HILLS LTD., INC.
Consolidated Balance Sheets
Unaudited
ASSETS
September
1999
CURRENT ASSETS
Cash in bank $ 201,809
Accounts receivable - net of $100,797 reserve 763,677
Inventories 483,555
-----------
TOTAL CURRENT ASSETS 1,449,041
-----------
PROPERTY & EQUIPMENT
Equipment 732,795
Less: allowance for depreciation 421,027
-----------
311,768
-----------
OTHER ASSETS
Prepaid advertising & other 5,518,638
Goodwill 4,247,129
Marketable security 55,000
Deposits & organization costs 4,709
-----------
9,825,476
-----------
$11,586,285
===========
LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIENCY IN ASSETS)
CURRENT LIABILITIES
Accounts payable $ 2,232,066
Accrued expenses & unearned income 381,967
Current portion of notes payable 2,299,374
-----------
TOTAL CURRENT LIABILITIES 4,913,407
-----------
LONG TERM LIABILITIES
Notes payable 1,841,208
Deferred income taxes -28,161
-----------
1,813,047
-----------
Minority interest in subsidiary 515,000
-----------
STOCKHOLDER'S EQUITY (DEFICIENCY IN ASSETS)
Preferred stock, par value $0.001 per share
Authorized 25,000,000 shares 0
Common stock, par value $0.001 per
Authorized 50,000,000 shares
Issued and outstanding 12,503,000 & 11,568,000 12,503
Additional paid-in capital 7,547,743
Common stock subscriptions & options 180,272
Retained deficit -3,395,687
-----------
4,344,831
-----------
$11,586,285
===========
F-15
BEVERLY HILLS LTD., INC.
Consolidated Statements of Operations
Unaudited
September
1999
REVENUES
Sale of golf related merchandise $ 951,988
Magazine & advertising sales & fees 299,223
Reservation service fees 204,738
Miscellaneous income 7,278
------------
Total revenues 1,463,227
------------
COST OF SALES
Cost of merchandise, tickets & internet service 766,459
Cost of Freight 22,433
Cost of commissions, payroll & taxes 446,382
------------
Total cost of sales 1,235,274
------------
GROSS PROFIT 227,953
------------
SALES & MARKETING
Advertising 23,334
Other marketing costs 482,946
------------
Total cost of sales & marketing 506,280
------------
GENERAL & ADMINISTRATIVE
Gen & Admin Payroll & Taxes 1,289,432
Professional fees - legal, accounting & consulting 1,012,396
Travel & entertainment 181,295
Other Gen & Admin Costs 107,226
------------
2,590,349
------------
OTHER COSTS
Insurance 40,881
Telephone 54,587
Utilities 16,194
Rent 155,709
Depreciation & amortization 110,855
------------
378,226
------------
3,474,855
------------
OPERATING LOSS BEFORE INTEREST &
NON-RECURRING ITEMS -3,246,902
Gain on sale of interest in subsidiary 1,485,000
Loss on abandoned projects 0
Profit on subs prior to acquisition 42,278
Interest expense 111,785
------------
NET LOSS $ -1,915,965
============
F-16
BEVERLY HILLS LTD.
STATEMENTS OF STOCKHOLDERS' EQUITY
UNAUDITED
COMMON STOCK COMMON STOCK SUBSCRIPTIONS & OPTIONS
---------------------- -------------- ------------ ADDITIONAL PAID
NO. OF SHARES AMOUNT NO. OF SHARES AMOUNT IN CAPITAL
---------------------- -------------- ------------ ---------------
Balance at December 31,1998 11,568,134 11,568 685,944
1st Qtr, 1999:
Golf Shoes Plus Acquisition 80,606 79 664,921
Stock issued for cash 1,062,000 1062 1,275,938
Stock issued for services 347,112 347 346,765
Stock subscribed for services 75,000 75 74,925
Focused Media Acquisition 300,000 300 2,474,700
Employee stock options 1644 1644
2nd Qtr, 1999:
Stock subscribed for services 5000 5 4995
Employee stock options 82,894 82,894
3rd Qtr, 1999:
Stock issued for services 1,088,790 1089
Stock subscribed for services 260,000 260 2,020,990
Employee stock options 95,394 95,394
Net loss for period ended 9/30/99
Amounts arising from foreign
currency fluctuations & consolidation -1942 -1435
--------------------- -------------- ------------ ---------------
Balance at September 30, 1999 14,446,642 12,503 519,932 180,272 7,547,743
====================== =============== ============ ===============
RETAINED
EARNINGS (DEFICIT) TOTAL
--------------------------------
Balance at December 31,1998 -1,481,346 -783,834
1st Qtr, 1999:
Golf Shoes Plus Acquisition 665,000
Stock issued for cash 1,277,000
Stock issued for services 347,112
Stock subscribed for services 75,000
Focused Media Acquisition 2,475,000
Employee stock options 1,644
2nd Qtr, 1999:
Stock subscribed for services 5,000
Employee stock options 82,894
3rd Qtr, 1999:
Stock issued for services 1,089
Stock subscribed for services 2,021,250
Employee stock options 95,394
Net loss for period ended 9/30/99 -1,915,965 -1,915,965
Amounts arising from foreign
currency fluctuations & consolidation 1624 -1,753
--------------------------------
Balance at September 30, 1999 -3,395,687 4,344,831
=================================
F-17
BEVERLY HILLS LTD., INC.
Statements of Cash Flows
Unaudited
September
1999
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ -1,915,965
Adjustments to reconcile net loss
to net cash provided by operating activities:
Common stock issued for services 2,629,383
Amortization & depreciation 420,967
(Increase) decrease in:
Accounts receivable -763,677
Inventories -483,555
Increase (decrease) in:
Accounts payable and accruals 2,475,413
------------
Total adjustments 4,278,531
------------
------------
Net cash used by operating activities 2,362,566
------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash payments for equipment -730,627
Prepaid advertising costs -5,518,638
Goodwill -4,245,505
Marketable security -55,000
Cash deposit -4,246
------------
------------
Net cash used by investing activities -10,554,016
------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Minority interest in subsidiary 515,000
Proceeds from stockholder loans 3,505,946
Common stock issued for acquisitions 3,136,623
Proceeds from issuance of common stock 1,277,000
------------
Net cash provided by financing activities 8,434,569
------------
NET INCREASE(DECREASE) IN CASH AND
CASH EQUIVALENTS 243,119
CASH AND CASH EQUIVALENTS ( OVERDRAFT)
AT THE BEGINNING OF YEAR -41,310
------------
CASH AND CASH EQUIVALENTS (OVERDRAFT)
AT THE END OF THE YEAR $ 201,809
============
F-18