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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB/A
Amendment No. 1
(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, 2003
[_] Transition Report under Section 13 or 15(d) of the Exchange Act for the
Transition Period from ________ to ___________
Commission File Number: 000-31653
ENHANCE BIOTECH, INC.
(Formerly 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 February 28, 2003.
Traditional Small Business Disclosure Format (check one) Yes [ ] No [X]
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1
INDEX TO QUARTERLY REPORT
ON FORM 10-QSB
PART I FINANCIAL INFORMATION
PAGE
----
Item 1. Financial Statements.......................................... 3
Consolidated Balance Sheet
February 28, 2003 ........................................ 4
Consolidated Statements of Operations
For the Three-and Nine-Month Periods
Ended February 28, 2003 and 2002.......................... 5
Consolidated Statements of Cash Flows
For the Nine Months Ended
February 28, 2003 and 2002................................ 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............................................. 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
ENHANCE BIOTECH, INC.
(FORMERLY BECOR COMMUNICATIONS, INC.)
CONSOLIDATED BALANCE SHEET (UNAUDITED)
FEBRUARY 28, 2003
- --------------------------------------------------------------------------------
ASSETS
ACCOUNTS RECEIVABLE, ........................................ $ 66,981
Less allowance of $36,372
PROPERTY AND EQUIPMENT,
Less accumulated depreciation of $4,121 ................... 5,639
OTHER ASSETS ................................................ 1,853
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TOTAL ASSETS ................................................ $ 74,473
=========
LIABILITIES AND SHAREHOLDERS' DEFICIT
BANK OVERDRAFT .............................................. $ 21,220
ACCOUNTS PAYABLE AND ACCRUED EXPENSES ....................... 84,994
ACCRUED ROYALTIES AND COMMISSIONS ........................... 14,517
ACCRUED INTEREST TO SHAREHOLDER ............................. 80,422
NOTE PAYABLE TO SHAREHOLDER ................................. 352,219
LOAN PAYABLE ................................................ 33,332
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TOTAL LIABILITIES ........................................... 586,704
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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 ........................... 1,613
Additional paid-in capital .................................. (33,226)
Accumulated deficit ......................................... (480,618)
---------
Total shareholders' deficit ................................. (512,231)
---------
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT ................. $ 74,473
=========
See accompanying notes to financial statements.
4
ENHANCE BIOTECH, INC.
(FORMERLY BECOR COMMUNICATIONS, INC.)
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE AND NINE MONTH-PERIODS ENDED
FEBRUARY 28, 2003 AND 2002
- --------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
----------------------- -----------------------
2003 2002 2003 2002
---------- ---------- ---------- ----------
REVENUES ................... $ 126,480 $ 81,811 $ 300,377 $ 282,206
COST OF REVENUES ........... 50,106 48,590 126,610 148,604
---------- ---------- ---------- ----------
GROSS PROFIT ............... 76,374 33,221 173,767 133,602
---------- ---------- ---------- ----------
OPERATING EXPENSES:
Selling and marketing ...... 59,034 25,551 117,989 80,662
General and administrative . 36,889 27,627 122,853 85,068
Lawsuit settlement ......... 25,000 25,000
Research and development ... 4,950 1,913 11,474 8,672
---------- ---------- ---------- ----------
Total operating expenses ... 100,873 80,091 252,316 199,402
---------- ---------- ---------- ----------
LOSS FROM OPERATIONS ....... (24,499) (46,870) (78,549) (65,800)
OTHER EXPENSE - Interest ... (7,023) (3,504) (20,292) (16,290)
---------- ---------- ---------- ----------
LOSS BEFORE INCOME TAXES ... (31,522) (50,374) (98,841) (82,090)
INCOME TAXES ............... 97 4,795 897 5,595
---------- ---------- ---------- ----------
NET LOSS ................... $ (31,619) $ (55,169) $ (99,738) $ (87,685)
========== ========== ========== ==========
BASIC AND DILUTED
LOSS PER COMMON SHARE .... $ (.02) $ (.04) $ (.06) $ (.07)
========== ========== ========== ==========
WEIGHTED AVERAGE
SHARES OUTSTANDING ....... 1,612,900 1,293,650 1,612,900 1,276,092
========== ========== ========== ==========
See accompanying notes to financial statements.
5
ENHANCE BIOTECH, INC.
(FORMERLY BECOR COMMUNICATIONS, INC.)
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE NINE MONTHS ENDED FEBRUARY 28, 2003 AND 2002
- --------------------------------------------------------------------------------
2003 2002
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ........................................... $(99,738) $(87,685)
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 .............................. (8,420) (31,826)
Accounts payable and accrued expenses ............ 2,806 52,696
Prepaid expenses and other assets ................ 133
Bank overdraft ................................... 21,220
-------- --------
Net cash used by operating
activities ....................................... (82,373) (66,541)
-------- --------
CASH FLOWS FROM INVESTING
ACTIVITIES - Capital
expenditures ..................................... (4,934)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings from shareholder ........................ 43,907 48,250
Borrowings on note payable ......................... 13,210 15,200
Sale of common stock ............................... 8,285
-------- --------
Net cash provided by financing activities .......... 57,117 71,735
-------- --------
NET INCREASE (DECREASE) IN CASH .................... (25,256) 260
CASH, BEGINNING OF PERIOD .......................... 25,256 3,483
-------- --------
CASH, END OF PERIOD ................................ $ -0- $ 3,743
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest ....................................... $ 129 $ -0-
Income taxes ................................... $ 897 $ -0-
See accompanying notes to financial statements.
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ENHANCE BIOTECH, INC.
(FORMERLY 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 accounting principles
generally accepted in the United States 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
nine-month period ended February 28, 2003 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 10K-SB for the year ended
May 31, 2002.
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 February 28, 2003 and has a net
shareholders' deficit of approximately $512,000. 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, the Company has entered
into an Acquisition Agreement which management believes will provide the
Company the resources to continue as a going concern. 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.
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
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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. ACQUISITION AGREEMENT
On February 6, 2003, the Company executed an Acquisition Agreement with
Enhance Lifesciences, Inc. ("Enhance") to acquire 100% of the outstanding
shares of Enhance in exchange for 14,516,000 shares of the Company's common
stock. The close of the transaction is expected to be completed in April
2003.
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ENHANCE BIOTECH, INC.
(FORMERLY 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
On February 6, 2003, we executed an Acquisition Agreement with Enhance
Lifesciences Inc., a privately held Delaware company ("Enhance") to acquire 100%
of all the outstanding shares of Enhance. It is anticipated that the transaction
will close during the month of April 2003. Enhance is an emerging
biopharmaceutical company that is focused on the acquisition, development and
commercialization of "Lifestyle Drugs" in the main therapeutic lifestyle
disorder categories. Enhance currently has six products in development targeted
against Sexual Dysfunction, IVF, Depression, Anti-Cellulite, Anti-Aging and
arthritis. Enhance's business strategy is to develop its existing products and
acquire other late stage product candidates in the "Lifestyle Drugs" sector will
position itself to be at the forefront in the development of drugs that will
improve and enhance the Lifestyles of many patients. By focusing on this
particular developing sector where there is the opportunity to acquire and
develop potential "Blockbuster" products the company has the opportunity for
exponential growth. Enhance's two lead products are planned to be the first to
market lifestyle drugs in unsaturated sectors that meet unmet needs and that
have the potential to make significant media impact and have potential
blockbuster status.
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Also, following the closing of the Acquisition of Enhanced, our wholly owned
subsidiary Advanced Knowledge, Inc. will be spun off to our shareholders of
record on the day prior to the closing. Advanced Knowledge produces and
distributes workforce training videos throughout the world. Additionally, to
better reflect our new core business, the name of the Company will be changed to
Enhanced Biotech, Inc.
We currently have 2 executive and 2 administrative employees. The executive
employees received no compensation through February 28, 2003.
During the quarter ended February 28, 2003, we had revenues of approximately
$126,000 versus $82,000 for the same quarter in the prior year. During the nine
months ended February 28, 2003, revenues increased slightly from approximately
$282,000 in 2002 to $300,000 in 2003. The increase is mainly due to the revenue
derived this quarter from the sale of a new video produced by the Company.
Cost of revenues increased from $49,000 (59% of revenues) in the quarter ended
February 28, 2002, to $50,000 (40% of revenues) in 2003. Cost of revenues
decreased from approximately $149,000 (53% of revenues) in the nine months ended
February 28, 2002, to approximately $127,000 (42% of revenues) in 2003.
Decreased distribution and production costs and improved pricing from vendors
accounted for the decreased costs in 2003.
Selling and marketing costs increased from $26,000 (32% of revenues) in the
quarter ended February 28, 2002, to $59,000 (47% of revenues) in 2003. Selling
and marketing costs increased from $81,000 (29% percent of revenues) for the
nine months ended February 28, 2002, to $118,000 (39% of revenues) in 2003. The
increased expenses reflect the costs incurred to market our new video entitled,
How Do You Put A Giraffe Into A Refrigerator?
General and administrative expenses increased from $28,000 (34% of revenues) in
the quarter ended February 28, 2002, to $37,000 (29% of revenues) in 2003. G&A
increased from $85,000 (30% of revenues) in the nine months ended February 28,
2002, to $123,000 (41% percent of revenues) in 2003. The main reason for the
increase was the employment of two 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 $352,000 through
February 28, 2003.
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's wholly owned
subsidiary 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
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royalty based on a specified formula, which has averaged to approximately 35% of
gross sales.
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
On February 21, 2003, shareholders representing 78.74% of Registrant's issued
and outstanding common stock executed a "written consent" and approved the
following action by Registrant:
1. The approval of the Acquisition Agreement by and between the
Registrant and Enhance Lifesciences, Inc., a Delaware corporation, ("ELSI")
pursuant to which the Registrant will purchase all the issued and outstanding
common stock of ELSI in exchange for shares of stock in the Registrant, based
upon an exchange ratio of one (1) share of ELSI for every one 0.7258 shares of
the Registrant's common stock for a total of 14,516,000 shares of the
Registrant's common stock to be issued to the ELSI shareholders;
2. The amendment the Registrant's Certificate of Incorporation to
change the authorized capital stock of the Registrant to Seventy Five Million
(75,000,000) shares, comprised of Fifty Million (50,000,000) shares of common
stock, par value $0.001 per share and Twenty Five Million (25,000,000) shares of
preferred stock, the rights, powers and preferences of which shall be set by
resolution of the Board of Directors of the Registrant, done in connection with
the Acquisition and in order to permit the issuance of shares of common stock of
the Registrant to the shareholders of ELSI;
3. The amendment of the Registrant's Certificate of Incorporation to
change the name of the Registrant to "Enhance Biotech, Inc."
4. In connection with the acquisition of ELSI, the approval of the
distribution to the stockholders of the Registrant of the stock of the
Registrant's wholly owned subsidiary, Advanced Knowledge, Inc., at the
discretion of Registrant's Board of Directors; and,
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5. The replacement of the Registrant's Board of Directors with three
(3) directors nominated by ELSI, namely Christopher Every, Lee Cole, and Roger
Holdom, each to hold office until any respective successor is elected and
qualified.
For further information regarding the pending acquisition of ELSI by
Registration, please refer to Registrant's Form 8-K filed with the Commission on
February 18, 2003.
ITEM 5. OTHER INFORMATION
On March 25, 2003 the Company filed an amendment to its Articles of
Incorporation changing its corporate name from Becor Communications, Inc. to
Enhance Biotech, Inc. The Board of Directors will effect the other actions
approved by the Company's shareholders, when it feels they are necessary and
appropriate.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS Exhibit 6(2) - A copy of the Acquisition Agreement by
and Between Becor Communications, Inc., a Delaware corporation and Enhance
Lifesciences Inc., a Delaware corporation dated as of February 6, 2003.
(b) FORM 8-K Registrant filed a Form 8-K on February 18, 2003
describing the pending transaction to acquire Enhance Lifesciences, Inc., a
Delaware corporation.
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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.
ENHANCE BIOTECH, INC.
(Registrant)
Dated: April 28, 2003 /S/ BUDDY YOUNG
--------------------------------
Buddy Young, President and Chief
Executive Officer
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CERTIFICATION OF CEO AND CFO PURSUANT TO
SECURITIES EXCHANGE ACT RULES 13A-14 AND 15D-14
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Buddy Young, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Enhance
Biotech, Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about
the effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: April 28, 2003
/s/ Buddy Young
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Buddy Young
Chief Executive Officer and
Chief Financial Officer
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