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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 November 30, 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 1,612,900 shares of Common stock, par value $.001 per
share issued and outstanding as of December 31, 2002. Based on the average of
the closing bid and asked prices of the issuer's common stock on December 31,
2002, the aggregate market value of the voting stock held by non-affiliates of
the registrant on that date was $64,850.
Traditional Small Business Disclosure Format (check one)
Yes [ ] No [X]
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INDEX TO QUARTERLY REPORT
ON FORM 10-QSB
PART I FINANCIAL INFORMATION
PAGE
----
Item 1. Financial Statements ............................................. 3
Consolidated Balance Sheets
November 30, 2002 and May 31, 2002 ........................... 4
Consolidated Statements of Operations
For the Three- and Six-Month Periods
Ended November 30, 2002 and 2001 ............................. 5
Consolidated Statements of Cash Flows
For the Six Months Ended
November 30, 2002 and 2001 ................................... 6
Notes to Consolidated Financial Statements ....................... 7
Item 2. Management's Discussion and Analysis or Plan
of Operation ..................................................... 9
PART II OTHER INFORMATION
Item 1. Legal Proceedings ................................................ 11
Item 2. Changes in Securities and Use of Proceeds ........................ 11
Item 3. Defaults upon Senior Securities .................................. 11
Item 4. Submission of Matters to a Vote of Security Holders .............. 11
Item 5. Other Information ................................................ 11
Item 6. Exhibits and Reports on Form 8-K ................................. 11
Signatures ................................................................ 12
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PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
(Financial Statements Commence on Following Page)
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BECOR COMMUNICATIONS, INC.
BALANCE SHEETS
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November 30,
2002 May 31,
(Unaudited) 2002
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ASSETS
CASH ............................................. $ 25,256
ACCOUNTS RECEIVABLE, Net ......................... $ 54,068 58,561
PROPERTY AND EQUIPMENT, Net ...................... 5,639 7,265
PREPAID EXPENSES AND OTHER ASSETS ................ 5,465 1,986
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TOTAL ASSETS ..................................... $ 65,172 $ 93,068
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LIABILITIES AND SHAREHOLDERS' DEFICIT
LIABILITIES:
Bank overdraft ................................... $ 14,171
Line of credit ................................... 33,332 $ 20,122
Accrued royalties ................................ 6,868 26,628
Accrued expenses ................................. 74,952 90,240
Note payable to shareholder ...................... 343,062 308,312
Accrued interest due to shareholder .............. 73,399 60,259
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Total liabilities ................................ 545,784 505,561
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COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' DEFICIT:
Common stock, par value - $.001,
25,000,000 shares authorized,
1,612,900 shares issued and
outstanding at November 30, 2002
and May 31, 2002, respectively ................. 1,613 1,613
Additional paid-in capital ....................... (33,226) (33,226)
Accumulated deficit .............................. (448,999) (380,880)
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Total shareholders' deficit ...................... (480,612) (412,493)
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TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT ...... $ 65,172 $ 93,068
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See accompanying notes to financial statements.
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BECOR COMMUNICATIONS, INC.
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
FOR THE THREE AND SIX MONTHS ENDED NOVEMBER 30, 2002 AND 2001
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Six Months Ended Three Months Ended
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2002 2001 2002 2001
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REVENUES ................. $ 173,897 $ 200,395 $ 87,843 $ 102,015
COST OF REVENUES ......... 76,504 100,014 37,058 53,794
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GROSS PROFIT ............. 97,393 100,381 50,785 48,221
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EXPENSES:
Selling and marketing .... 58,955 55,111 29,590 24,293
General and administrative 85,964 57,441 29,122 19,337
Research and development . 6,524 6,759 1,750 2,163
Interest expense ......... 13,269 12,786 6,779 7,379
---------- ---------- ---------- ----------
Total expenses ........... 164,712 132,097 67,241 53,172
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LOSS BEFORE INCOME TAXES . (67,319) (31,716) (16,456) (4,951
INCOME TAXES ............. 800 800 800 -0-
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NET LOSS ................. (68,119) $ (32,516) $ (17,256) $ (4,951
========== ========== ==========
ACCUMULATED DEFICIT AT
MAY 31, 2002 ........... (380,880)
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ACCUMULATED DEFICIT AT
NOVEMBER 30, 2002 ...... $ (448,999)
==========
BASIC LOSS PER SHARE ..... $ (0.04) $ (0.03) $ (0.01) $ -0-
========== ========== ========== ==========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING ..... 1,612,900 1,261,114 1,612,900 1,273,650
========== ========== ========== ==========
See accompanying notes to financial statements.
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BECOR COMMUNICATIONS, INC.
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED NOVEMBER 30, 2002 AND 2001
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2002 2001
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ........................................... $(68,119) $(32,516)
Adjustments to reconcile net loss
to net cash used by operating activities:
Depreciation and amortization .................. 1,626 274
Changes in operating assets and
liabilities:
Accounts receivable ............................ 4,493 (18,373)
Other assets ................................... (3,479)
Accrued expenses and overdraft ................. (7,737) 20,540
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Net cash used by operating activities .............. (73,216) (30,075)
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CASH FLOWS FROM INVESTING ACTIVITIES -
Purchase of equipment ............................ (642)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings from shareholders ....................... 4,535
Net borrowings from shareholder .................... 34,750 23,000
Net borrowings from bank ........................... 13,210
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Net cash provided by financing
activities ....................................... 47,960 27,535
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NET INCREASE (DECREASE) IN CASH .................... (25,256) (3,182)
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CASH, BEGINNING OF PERIOD .......................... 25,256 3,483
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CASH, END OF PERIOD ................................ $ -0- $ 301
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest ............................. $ -0- $ -0-
Cash paid for income taxes ......................... $ 800 $ 800
See accompanying notes to financial statements.
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BECOR COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
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1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION - The accompanying unaudited financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to
Form 10-QSB and Item 310(b) of Regulation S-B. Accordingly, they do not
include all of the information and footnotes required by accounting
principles generally accepted in the United States 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 three-month period ended
November 30, 2002, are not necessarily indicative of the results that may
be expected for the year ended May 31, 2003. 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, 2002.
The balance sheet at May 31, 2002, has been derived from the audited
financial statements at that date but does not include all of the
information and footnotes required by accounting principles generally
accepted in the United States 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, 2002 and through November 30, 2002. 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 that 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 that
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.
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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
CRITICAL ACCOUNTING POLICIES
Our discussion and analysis of our financial condition and results of operations
are based upon our consolidated statements, which have been prepared in
accordance with accounting principles generally accepted in the United States.
The preparation of these financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues and
expenses. In consultation with our Board of Directors, we have identified two
accounting policies that we believe are key to an understanding of our financial
statements. These are important accounting policies that require management's
most difficult, subjective judgments.
The first critical accounting policy relates to revenue recognition. We
recognize revenue from product sales upon shipment to the customer. Rental
income is recognized over the related period that the videos are rented.
The second critical accounting policy relates to research and development
expenses. We expense all research and development expenses as incurred. Costs
incurred to establish the feasibility and marketability of a product is expensed
as incurred and included in Research and Development expenses.
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 five 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," "It's A Wonderful Life: Leading Through Service," and "How
Do You Put A Giraffe Into A Refrigerator." 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.
Operating expenses and production costs during the quarter ending November 30,
2002 were approximately $98,000. 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 agreement, nor that
the Company will be successful in raising capital through the sale of equity.
The Company's marketing expenses and the
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production of new training videos will be adjusted accordingly.
We currently have 4 employees. Two of these employees received no compensation
through November 30, 2002. If cash resources permit, the Company plans to
increase its employees to 7 during calendar 2003 (1 administrative, 2 sales).
During the quarter ended November 30, 2002, we had revenues of approximately
$88,000 versus $102,000 for the same quarter in the prior year. Cost of revenues
decreased from $54,000 (53% of revenues) in the quarter ended November 30, 2001,
to $37,000 (34% of revenues) in 2002. Decreased production costs accounted for
the decreased costs in 2002.
Selling and marketing costs increased from $24,000 (24% of revenues) in 2001 to
$30,000 (34% of revenues in 2002). The increased expenses reflect the additional
distribution costs incurred in the initial launching of our new video
production, "How Do You Put A Giraffe Into A Refrigerator."
General and administrative expenses increased from $19,000 (19% of revenues) in
2001 to $29,000 (33% of revenues) in 2002. The increase in cost primarily
relates to the hiring of two employees.
Total revenues from the six-month period ended November 30, 2002, decreased
$26,000 (13%) to $174,000 from $200,000 in 2001. The decrease came primarily
from sales of videos. The Company decreased its use of commissioned sales reps
in 2002 due to cash shortfalls.
Cost of revenues decreased $24,000 to $76,000 in 2002 from $100,000 in 2001.
Reduced production costs and lower sales volume accounted for the decrease.
General and administration expenses increased $29,000 to $86,000 in 2002 from
$57,000 in 2001. The increased expenses are primarily professional fees and the
hiring of administrative personnel.
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, 2003. The Company has borrowed approximately $344,000 through
November 30, 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 38% of gross sales.
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PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS None.
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 November 30, 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.
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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: January 9, 2003 /s/ Buddy Young
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Buddy Young, President and Chief
Executive Officer
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Becor Communications, Inc., (the
"Company") on Form 10-QSB for the quarter ending November 30, 2002, as filed
with the Securities and Exchange Commission on the date hereof (the "Report"),
we certify, pursuant to 18 U.S.C. (S) 1350, as adopted pursuant to (S) 906 of
the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.
/s/ Buddy Young
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Buddy Young, Chief Executive Officer and Chief Financial Officer
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