U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period ended February 28, 2002
[ ] Transition Report under Section 13 or 15(d) of the Exchange Act for the
Transition Period from ________ to ___________
Commission File Number: 333-46690
BECOR COMMUNICATIONS, Inc.
(Exact name of small business issuer as specified in its charter)
Delaware 95-4766094
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
17337 Ventura Boulevard, Suite 224
Encino, California 91316
Issuer's Telephone Number: (818) 784-0040
(Address and phone number of principal executive offices)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
The Registrant has 1,293,650 shares of Common stock, par value $.001 per
share issued and outstanding as of February 28, 2002.
Traditional Small Business Disclosure Format (check one) Yes [ ] No [X]
INDEX TO QUARTERLY REPORT
ON FORM 10-QSB
PART I FINANCIAL INFORMATION
Page
Item 1. Financial Statements................................................3
Consolidated Balance Sheets
February 28, 2002 and May 31, 2001..............................4
Consolidated Statements of Operations
For the Three-and Nine-Month Periods
Ended February 28, 2002 and 2001................................6
Consolidated Statements of Cash Flows
For the Nine Months Ended
February 28, 2002 and 2001......................................7
Notes to Consolidated Financial Statements..........................8
Item 2. Management's Discussion and Analysis or
Plan of Operation..............................................10
PART II OTHER INFORMATION
Item 1. Legal Proceedings..................................................12
Item 2. Changes in Securities and Use of Proceeds..........................12
Item 3. Defaults upon Senior Securities....................................12
Item 4. Submission of Matters to a Vote
of Security Holders............................................12
Item 5. Other Information..................................................12
Item 6. Exhibits and Reports on Form 8-K...................................12
Signatures..................................................................13
2
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
(Financial Statements Commence on Following Page)
3
BECOR COMMUNICATIONS, INC.,
CONSOLIDATED BALANCE SHEETS
FEBRUARY 28, 2002 AND MAY 31, 2001
- --------------------------------------------------------------------------------
February 28,
2002 May 31,
(Unaudited) 2001
------- -------
ASSETS
CASH ............................................... $ 3,743 $ 3,483
ACCOUNTS RECEIVABLE,
Less allowance of $26,096 ........................ 66,004 34,178
PREPAID EXPENSES ................................... 165 165
PROPERTY AND EQUIPMENT,
Less accumulated depreciation of $1,400
and $1,126, respectively ....................... 8,360 3,700
OTHER ASSETS ....................................... 2,353 2,353
------- -------
TOTAL ASSETS ....................................... $80,625 $43,879
======= =======
(Continued)
4
BECOR COMMUNICATIONS, INC.,
CONSOLIDATED BALANCE SHEETS - Continued
FEBRUARY 28, 2002 AND MAY 31, 2001
- --------------------------------------------------------------------------------
February 28,
2002 May 31,
(Unaudited) 2001
--------- ---------
LIABILITIES AND SHAREHOLDERS' DEFICIT
ACCRUED EXPENSES ................................. $ 81,000 $ 69,512
ACCRUED ROYALTIES ................................ 33,858 13,959
ACCRUED INTEREST TO SHAREHOLDER .................. 58,492 37,183
NOTE PAYABLE ..................................... 15,200
NOTE PAYABLE TO SHAREHOLDER ...................... 316,812 268,562
--------- ---------
TOTAL LIABILITIES ................................ 505,362 389,216
--------- ---------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' DEFICIT:
Common stock, par value - $.001;
25,000,000 shares authorized; 1,293,650
and 1,250,000 shares issued and
outstanding, respectively .................... 1,294 1,250
Additional paid-in capital ....................... (97,202) (105,443)
Accumulated deficit .............................. (328,829) (241,144)
--------- ---------
Total shareholders' deficit ...................... (424,737) (345,337)
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS'
DEFICIT ...................................... $ 80,625 $ 43,879
========= =========
5
BECOR COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE- AND NINE-MONTH PERIODS ENDED
FEBRUARY 28, 2002 AND 2001
- --------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
2002 2001 2002 2001
--------- --------- --------- ---------
REVENUES:
Rental income .............. $ 2,999 $ 5,370 $ 10,026 $ 14,542
Sales ...................... 75,852 73,708 264,817 165,958
Royalty income ............. 2,960 6,059 7,363 14,914
--------- --------- --------- ---------
Total revenues ............. 81,811 85,137 282,206 195,414
--------- --------- --------- ---------
OPERATING EXPENSES:
Cost of goods sold ......... 48,590 29,650 148,604 51,487
Selling and marketing ...... 25,551 53,192 80,662 116,643
General and administrative . 27,627 24,493 85,068 121,824
Lawsuit settlement ......... 25,000 25,000
Research and development ... 1,913 8,672 3,826
--------- --------- --------- ---------
Total operating expenses ... 128,681 107,335 348,006 293,780
--------- --------- --------- ---------
LOSS FROM OPERATIONS ....... (46,870) (22,198) (65,800) (98,366)
OTHER EXPENSE - Interest ... (3,504) (2,183) (16,290) (10,631)
--------- --------- --------- ---------
LOSS BEFORE INCOME
TAXES .................. (50,374) (24,381) (82,090) (108,997)
INCOME TAXES ............... 4,795 -0- 5,595 800
--------- --------- --------- ---------
NET LOSS ................... $ (55,169) $ (24,381) $ (87,685) $(109,797)
========= ========= ========= =========
BASIC AND DILUTED
LOSS PER COMMON
SHARE .................. $ (.04) $ (.02) $ (.07) $ (.09)
========= ========= ========= =========
WEIGHTED AVERAGE
SHARES OUTSTANDING ..... 1,293,650 1,250,000 1,276,092 1,250,000
========= ========= ========= =========
6
BECOR COMMUNICATIONS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
FOR THE NINE MONTHS ENDED FEBRUARY 28, 2002 AND 2001
- --------------------------------------------------------------------------------
2002 2001
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ......................................... $ (87,685) $(109,797)
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation and amortization ................ 274 15,664
Changes in operating assets and
liabilities:
Accounts receivable ........................ (31,826) (730)
Video inventory and production costs ....... (29,254)
Accounts payable and accrued expenses ...... 52,696 24,917
Other assets ............................... (5)
--------- ---------
Net cash used by operating activities ............ (66,541) (99,205)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES -
Capital expenditures ......................... (4,934)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings from shareholder ...................... 48,250 95,600
Borrowings on note payable ....................... 15,200
Sale of common stock ............................. 8,285
--------- ---------
Net cash provided by financing activities ........ 71,735 95,600
--------- ---------
NET INCREASE (DECREASE) IN CASH .................. 260 (3,605)
CASH, BEGINNING OF PERIOD ........................ 3,483 3,605
--------- ---------
CASH, END OF PERIOD .............................. $ 3,743 $ -0-
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash paid during the period for:
Interest ..................................... $ -0- $ -0-
Income taxes ................................. $ -0- $ -0-
7
BECOR COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation - The accompanying unaudited consolidated financial
statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-QSB and Item 310(b) of Regulation S-B. Accordingly,
they do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the nine-month period ended February 28,
2002, are not necessarily indicative of the results that may be expected
for the year ended May 31, 2002. For further information, refer to the
financial statements and footnotes thereto included in the Company's report
on Form 10-KSB for the year ended May 31, 2001.
The balance sheet at May 31, 2001, has been derived from the audited
financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
General Information - The Company produces and markets business training
videos.
Going Concern - The Company experienced significant operating losses for
the year ended May 31, 2001, and through February 28, 2002, and has a net
shareholders' deficit of approximately $425,000. The financial statements
have been prepared assuming the Company will continue to operate as a going
concern which contemplates the realization of assets and the settlement of
liabilities in the normal course of business. No adjustment has been made
to the recorded amount of assets or the recorded amount or classification
of liabilities which would be required if the Company were unable to
continue its operations. As discussed in Note 2, management has developed
an operating plan which they believe will generate sufficient cash to meet
its obligations in the normal course of business. In addition, the Company
has an agreement with its President and majority shareholder which provides
for borrowings up to $500,000.
Unclassified Balance Sheet - In accordance with the provisions of SFAS No.
53, the Company has elected to present an unclassified balance sheet.
8
Loss Per Share - The Company adopted the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share" that
established standards for the computation, presentation and disclosure of
earnings per share ("EPS"), replacing the presentation of Primary EPS with
a presentation of Basic EPS. It also requires dual presentation of Basic
EPS and Diluted EPS on the face of the income statement for entities with
complex capital structures. The Company did not present Diluted EPS since
it has a simple capital structure.
2. MANAGEMENT PLANS
Management believes that it will require additional investment in order to
achieve higher sales and cash flows from operations. Projected sales
combined with available borrowings on the line of credit with its sole
shareholder will be adequate to finance the next fiscal year's cash flow
requirements. Management also plans on obtaining additional financing
sources consisting of equity and debt to fund working capital and product
development.
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BECOR COMMUNICATIONS, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Plan of Operation
Through our subsidiary Advanced Knowledge, we will continue to devote our
limited resources to marketing our workforce training video library and related
training materials. At this time, these efforts are focused on four titles,
"Twelve Angry Men: Teams That Don't Quit," "The Cuban Missile Crisis: A Case
Study In Decision Making And Its Consequences," "What It Really Takes To Be A
World Class Company," and "It's A Wonderful Life: Leading Through Service." In
addition, we anticipate spending some of our resources on the production of
additional training videos, and the marketing of training videos produced by
other companies. The amount of funds available for these expenditures will be
determined by our ability to raise capital, either through an equity offering or
traditional borrowing sources. There can be no assurance that we will be
successful in these efforts.
Management expects that sales of its videos and training materials, along with
available funds under an agreement with its President and majority shareholder,
and the sale of equity should satisfy its cash requirements over the next year.
However, there can be no assurance that its President will continue to supply
funds pursuant to such an agreement, nor that the Company will be successful in
raising capital through the sale of equity. The Company's marketing expenses and
the production of new training videos will be adjusted accordingly.
We currently have 2 employees. These employees received no compensation through
February 28, 2002. If cash resources permit, the Company plans to increase its
employees to 6 during calendar year 2002 (2 administrative, 4 sales).
During the quarter ended February 28, 2002, we had revenues of approximately
$82,000 versus $85,000 for the same quarter in the prior year. During the nine
months ended February 28, 2002, revenues increased from approximately $195,000
in 2001 to $282,000 in 2002. The increase is due to other additional videos
added to our library over the past 2 years.
Cost of revenues increased from $30,000 (35% of revenues) in the quarter ended
February 28, 2001, to $49,000 (59% of revenues) in 2002. Cost of revenues
increased from approximately $51,000 (26% of revenues) in the nine months ended
February 28, 2001, to approximately $149,000 (53% of revenues) in 2002.
Increased distribution and production costs accounted for the increased costs in
2002.
10
Selling and marketing costs decreased from $53,000 (62% of revenues) in the
quarter ended February 28, 2001, to $26,000 (32% of revenues) in 2002. Selling
and marketing costs decreased from $117,000 (60% percent of revenues) for the
nine months ended February 28, 2001, to $81,000 (29% of revenues) in 2002. The
decreased expenses reflect the reduction in the employment of consultants by the
Company.
General and administrative expenses increased slightly from $24,000 (28% of
revenues) in the quarter ended February 28, 2001, to $28,000 (34% of revenues)
in 2002. G&A decreased from $122,000 (63% of revenues) in the nine months ended
February 28, 2001, to $85,000 (30% percent of revenues) in 2002. The larger
expenses in 2001 relate to legal and accounting fees associated with Becor's
SB-2 filing.
During the quarter ended February 28, 2002, the Company reached a settlement
with an organization for $25,000 (see Item 1, Legal Proceedings).
We have an agreement with our President and majority shareholder to provide, at
the President's discretion, up to $500,000 at 8% interest. Repayment is to be
made when funds are available, with the balance of principal and interest due
December 31, 2002. The Company has borrowed approximately $317,000 through
February 28, 2002.
The Company has no material commitments for capital expenditures nor does it
foresee the need for such expenditures over the next year. In connection with
the production of its video and training materials, the Company has an agreement
with the co-producer of the videos "Twelve Angry Men: Teams That Don't Quit,"
"The Cuban Missile Crisis: A Case Study In Decision Making And Its
Consequences," "It's A Wonderful Life: Leading Through Service," and "Own It" to
pay a royalty based on a specified formula, which has averaged to approximately
35% of gross sales.
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PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In November 2001, our wholly owned subsidiary Advanced Knowledge was
served with a complaint from a competitor. The complaint sought, among
other things, damages for alleged interference with contractual
relations. This was based upon the claim that one of Advanced
Knowledge's independent sales representatives, who was also a former
employee of that competitor, was, for a short period of time, employed
by that competitor while performing sales efforts on our behalf. We
disputed the allegations and denied any liability. However, in order
to avoid the costs and uncertainty associated with litigation, we
settled the matter for a one-time payment and the delivery of a number
of our training videos. The payment has been made and all videos have
been delivered. The matter is closed.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the quarter ended February 28, 2002, no matters were submitted
to the Company's security holders.
ITEM 5. OTHER INFORMATION None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K None.
12
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
BECOR COMMUNICATIONS, INC.
(Registrant)
Dated: April 9, 2002 /s/ Buddy Young
-------------------------
Buddy Young,
President and Chief
Executive Officer
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