AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 13, 2007.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION STATEMENT
PURSUANT TO SECTION 12(B) OR (G) OF THE SECURITIES EXCHANGE ACT OF 1934
PROGRESSIVE TRAINING, INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
DELAWARE 7200 32-0186005
(STATE OR JURISDICTION (PRIMARY STANDARD (IRS EMPLOYER
OF INCORPORATION INDUSTRIAL CLASSIFICATION IDENTIFICATION NO.)
ORGANIZATION) CODE NUMBER)
17337 VENTURA BOULEVARD, SUITE 208
ENCINO, CALIFORNIA 91316
(818) 784-0040
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(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES
AND PRINCIPAL PLACE OF BUSINESS)
L. STEPHEN ALBRIGHT, ESQ.
ALBRIGHT & BLUM, P.C.
17337 VENTURA BOULEVARD, SUITE 208
ENCINO, CALIFORNIA 91316
(818) 789-0779
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT.
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH
EACH CLASS IS TO BE REGISTERED
NONE NONE
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SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT.
COMMON STOCK, PAR VALUE $0.0001
(TITLE OF EACH CLASS)
PROGRESSIVE TRAINING, INC.
FORM 10-SB
TABLE OF CONTENTS
PAGE
PART I
Item 1. Description of Business ............................................. 3
Item 2. Management's Discussion and Analysis or Plan of Operation ........... 13
Item 3. Description of Property ............................................. 18
Item 4. Securities Ownership of Certain Beneficial Owners and Management .... 19
Item 5. Directors and Executive Officers, Promoters and Control Persons ..... 19
Item 6. Executive Compensation .............................................. 23
Item 7. Certain Relationships and Related Transactions ...................... 24
Item 8. Description of Securities ........................................... 25
PART II
Item 1. Market for Common Equity and Related Stockholder Matters ............ 26
Item 2. Legal Proceedings ................................................... 28
Item 3. Changes in and Disagreements with Accountants ....................... 28
Item 4. Recent Sales of Unregistered Securities ............................. 28
Item 5. Indemnification of Directors and Officers ........................... 30
PART F/S
Financial Statements ................................................ 31
PART III
Item 1. Index to Exhibits ................................................... 50
Item 2. Description of Exhibits ............................................. 51
Signatures ......................................................................... 51
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
(a) BUSINESS DEVELOPMENT
Progressive Training, Inc. (hereinafter "the Company") was incorporated in Delaware on October 31, 2006. From the date we were incorporated until March 1, 2007, we were a wholly owned subsidiary of Dematco, Inc., formerly Advanced Media Training Inc., a Delaware corporation (hereinafter "Dematco"). On December 10, 2006, our then parent Dematco, acquired all the remaining outstanding shares of Dematco Ltd., a U.K. corporation "Dematco Ltd."), and elected a new slate of directors and appointed new corporate officers. Concurrent with the acquisition, the new management of Dematco decided to change its core business to that of its just acquired company Dematco, Ltd., and to as soon as feasible cease all business activity related to its unrelated business of producing and distributing workforce training videos. The business of Dematco, Ltd. is the dematerializing or converting of financial instruments from paper form to electronic form so as to enable such instruments to be traded in a secure manner electronically on exchanges or exchange platforms on a peer to peer basis.
On March 1, 2007, to facilitate its exit from the training business, Dematco entered into an Asset and Liability Assumption Agreement, whereby the Company acquired all of Dematco's assets and liabilities related to the production and distribution of workforce training videos. The assets included distribution rights to twelve workforce training videos, its distribution contracts with other producers of related videos, accounts receivable totaling approximately $9,000, the name Advanced Knowledge for use by a division of the Company, and the Advanced Knowledge website. The liabilities we assumed included approximately $28,500, in accounts payable, an outstanding line of credit balance of $12,000, and an outstanding credit card balance of approximately $23,500.
Additionally, on March 1, 2007 Dematco's Board of Directors approved and agreed to a debt conversion agreement between three parties, namely, (i) Dematco as the parent company, (ii) us, as the then wholly owned subsidiary of Dematco, and (iii) our president, Buddy Young. Under the terms of the agreement, Mr. Young agreed to convert $80,000 of the $138,173 owed to him under a promissory note, to equity in exchange for Dematco's transfer of 1,000,000 shares of the Company's common stock to Mr. Young. As a result, Mr. Young became our principal shareholder, while Dematco retained 750,000 shares. As a result of that transfer we were no longer a subsidiary of Dematco. For a discussion of the Company's history, see "Company History."
We are filing this Form 10-SB registration statement on a voluntary basis. We believe that registration with the Commission may provide us with additional alternatives when seeking financing to expand our business operations. These possible alternatives include the sale of restricted shares to raise capital, as well as the issuance of restricted stock as consideration to purchase other companies in the work force training video business and related businesses. In both instances, management believes that investors and potential businesses to be acquired are more likely to enter into arrangements with a company that has its shares registered with the Commission.
There can be no assurance that we will be successful in our efforts to either raise additional capital, or acquire other businesses.
(b) DESCRIPTION OF BUSINESS
Progressive Training's core business is the development, production and distribution of management and general workforce training videos for use by businesses throughout the world. In addition to distributing videos produced by us, we market and distribute training videos financed and produced by other producers. The sale of third party videos currently accounts for approximately 57% of our revenues. We anticipate that this percentage will remain the same for the foreseeable future.
WORKFORCE TRAINING VIDEO PRODUCTION
Among the videos in the library we acquired from Dematco are:
THE CUBAN MISSILE CRISIS: A CASE STUDY IN DECISION MAKING AND ITS CONSEQUENCES. This video is based on the decision making process of President Kennedy and his Cabinet during the Cuban missile crisis,
OWN IT (i.e., "own" your job) and focuses on four main themes: Caring About What You Do, Going Above And Beyond, Being A Team Player, and Being Proud Of What You Do And Where You Do It.
HOW DO YOU PUT A GIRAFFE INTO A REFRIGERATOR? This is an animated short that is used as a meeting opener to stimulate the thinking of the participants,
TEAMSPEAK: HOW TO ASK POSITIVE QUESTIONS. The video's basic theme is the importance of asking positive questions at team meetings. In addition to the videos listed above, in 1998 we acquired the United States distribution rights to a video entitled,
WHAT IT REALLY TAKES TO BE A WORLD CLASS COMPANY. The video identifies seven attributes which are key to making organizations world class caliber. Although contractually we still retain the distribution rights, the video has not generated any significant revenue during the past two fiscal years.
CHARACTER IN ACTION: THE UNITED STATES COAST GUARD ON LEADERSHIP. In this video author Donald T. Phillips ("Lincoln on Leadership") demonstrates the highest qualities of leadership, and how to apply them, using the example of the United States Coast Guard.
PIT CREW CHALLENGE: DRIVEN TO PERFORM. The video uses the example of an executive team, whose members have little or no experience with cars beyond driving them, taking the challenge of learning how to function as a NASCAR pit crew.
WORKTEAMS AND THE WIZARD OF OZ. Utilizing scenes from the classic movie, host Ken Blanchard demonstrates how workteams can reach their goals, no matter how diverse their members or how difficult the undertaking.
GENERATION WHY. Former teacher and coach on camera host Eric Chester shows organizations how to recruit, train, manage, motivate, and retain the very best of this new generation.
In most cases the cost of production for the workforce training videos range from a low of $40,000 to a high of $125,000. Among the factors that determine the cost are: (a) Script costs, (b) number of cast members, (c) location or studio photography, (d) on-camera host, (e) music & special effects, and (f) size of production crew.
If cash flow permits, management will attempt to develop, produce and distribute additional videos financed solely by us. However, if cash flow is insufficient, and we are not able to raise substantial additional capital, we will be unable to pursue the production and distribution of these additional videos.
DISTRIBUTION OF VIDEOS
As a consequence of our current and very limited financial resources we are prevented from developing and producing new training products on a regular basis. As a result, we mainly market and sell products produced by third parties During the past fiscal year, and we anticipate for the foreseeable future, approximately 57% of our revenues will be generated from the sale of videos and other workforce training products produced by others. These producers range in size from large corporations with substantial financial resources such as Star Thrower, Inc., Coastal Training Technologies, Corp., and SunShower Learnings, Corp., to small independent companies with limited resources such as Corevision. In general, we market and sell videos they have financed and produced and we receive a discount ranging from 35% to 50% of the gross sale price. It is standard practice within the training industry for distributors to market and sell videos financed and produced by third parties. We are not dependent on any one producer as a source of product for us to sell. To date, no one source of product has accounted for 10% or more of revenues.
In regard to videos produced by us, we have non-exclusive distribution agreements with a number of distributors to market and sell videos financed and produced by us. Among these distributors are CRM Learning, and Media Partners, Corp. Under the terms of these distribution agreements, we have agreed to pay a marketing/distribution fee, ranging from 35% to 50% of gross sales to distributors that sell our video training products. In many instances, we have mutual non-exclusive distribution agreements to market/distribute their products for a similar fee. We are not dependent on any one distributor to market or sell our product. To date, no one distributor has accounted for ten percent or more of revenues derived from the sale of videos produced by us. Currently, we have twenty-eight domestic distribution agreements and twenty-seven international distribution agreements. Except for the percentage of distribution fees paid or received, the terms and conditions are virtually the same in all of our distribution contracts.
The material terms of our various agreements with suppliers (which consist of distributors and producers) are very similar. All of these agreements provide us with the right to sell the supplier's video training products on a non-exclusive basis. Other material terms include: (i) length of contractual period, automatic renewal for an additional one (1) year terms, subject to termination on 30 or 60 days prior written notice by either party; (ii) sales territory; (iii) confirmation of our independent contractor relationship: (iv) sales commission: and, (v) in two (2) instances (StarThrower and Media Partners) we are required to meet monthly sales minimums, which if not met, permits the supplier, at his option, to terminate of the agreement. As noted above, we market and sell the training videos for a commission from 35% to 50% of the gross sale price. We are in compliance with all the terms and conditions of our agreements with suppliers.
WORKFORCE TRAINING INDUSTRY OVERVIEW
GENERAL
According to the Annual Industry Report published by Lakewood Publications in the December 2006 issue of its respected industry publication, TRAINING MAGAZINE:
o $55.8 billion was spent for formal training in 2006 by U.S. organizations with 100 or more employees. This compares to $51.1 billion total industry spending in 2005.
o $15.8 billion of that $55.8 billion was spent on outside providers of products and services in 2006. This compares to $13.5 billion in 2005. These products and services include "off-the-shelf" materials (which category includes our videos and work books).
o Training budgets increased by 7% from 2005
During the past several years, large and small corporations throughout the world have sought to remain competitive and to prosper in today's information age and knowledge-orientated economy by allocating an increasing amount of resources to the training of their employees. No longer is workforce training restricted to senior managers. Among other categories of employees who now receive training paid for by their employers are middle managers, salespeople, first line supervisors, production workers, administrative employees, customer service representatives, and information technology personnel.
"Soft-Skill" training and Information Technology training represent the industry's two major distinct sources of revenue. Soft-Skill training includes management skills/development, supervisory skills, communication skills, new methods and procedures, customer relations/services, clerical/secretarial skills, personal growth, employee/labor relations, and sales. Information Technology training includes client/server systems, internet/intranet technologies, computer networks, operating systems, databases, programming languages, graphical user interfaces, object-oriented technology and information technology management.
TRAINING VIDEO PRODUCTION
As stated earlier, approximately 57% of our revenue is derived from the sale of training videos produced by other companies. Many of these videos are produced by major distributors such as CRM Films, Media Partners and Charthouse, who have the financial resources to produce several videos each year. These distributors then enter into sub-distribution agreements with other industry distributors to market and sell these videos. Additionally, there are many independent producers who produce one or two videos a year. These independent producers then enter into a distribution agreement for the marketing and sale of the video. Such agreements are usually on a royalty basis, and may include an advance against royalties.
THE SOFT SKILL TRAINING MARKET
Although no breakdown for soft skill training was provided in Training Magazine's 2004 report management believes that soft skill training still represents over 50% of the monies spent by U.S. companies in the training of their employees. Additionally, we believe that the Soft-Skill training market is rapidly expanding mainly as a result of realization by organizations throughout the world that in order to remain competitive and manage for success, they must continuously invest in the training of their employees. Demand for quality training products and services is not only stemming from organizations, but from millions of workers who are seeking advanced training to keep up with the job skills required by today's more competitive global economy.
As further reported by TRAINING MAGAZINE, there were over thirty
different specific Soft-Skill training subjects utilized by organizations to
increase employee productivity and awareness. Among the top ten subjects were:
new-employee orientation, leadership, sexual harassment, new-equipment
orientation, performance appraisals, team-building, safety,
problem-solving/decision-making, train-the-trainer, and product knowledge.
We have produced and are marketing training tapes that address a number of the categories listed in TRAINING MAGAZINE. These tapes address such categories as leadership, team-building, and problem solving/decision-making. These three categories match the focus of the tapes in our current library.
Although many organizations continue to maintain in-house training departments, outside suppliers represent a significant portion of the training budget. TRAINING MAGAZINE reported in its December 2006 issue that training delivered by outside sources represented approximately 30% of the total dollars spent on traditional training, and approximately 38% of technology based training. Management believes that the trend for organizations to increasingly outsource the training function will continue as a result of the broad range of subjects that must be part of an effective employee training program and the cost of developing and maintaining internal training courses in the rapidly changing workplace.
THE INFORMATION TECHNOLOGY MARKET
To date, we have not produced any training products for the information technology market. Nor do we anticipate doing so in the foreseeable future. However, since we do market such products produced by others, we felt it appropriate to include a discussion of this sector.
The Annual Industry Report from the December 2006 issue of TRAINING MAGAZINE revealed that of all formal training in U.S. organizations with ten or more employees, approximately 40% is devoted to teaching computer skills. Management believes that the market for Information Technology will continues to be driven by technological change. As the rate of this change accelerates, organizations find themselves increasingly hampered in their ability to take advantage of the latest information technologies because their information technology professionals lack up-to-date knowledge and skills. We believe that the increasing demand for training information technology professionals is a result of several key factors, including:
o the proliferation of computers and networks throughout all levels of organizations;
o the shift from mainframe systems to new client/server technologies;
o the continuous introduction and evolution of new client/server hardware and software technologies;
o the proliferation of internet and intranet applications; and
o corporate downsizing.
It is our belief that all of the foregoing factors have resulted in increased training requirements for employees who must perform new job functions or multiple job tasks that require knowledge of varied software applications, technologies, business specific information and other training topics. Furthermore, since we believe that many businesses use hardware and software products provided by a variety of vendors, their information technology professionals require training on an increasing number of products and technologies which apply across vendors, platforms and operating systems.
PRODUCTS AND SERVICES
Currently, and for at least the next twelve months, we anticipate devoting our limited resources to the development, production and distribution of workforce training videos. If cash flow permits, or we are successful in raising substantial additional capital through equity or debt, management will seek to develop, produce and distribute other training products and services, such as publications, audiocassettes and training packages. However, if cash flow is insufficient and we are not successful in raising substantial additional capital through equity or debt, we will be unable to pursue the development, production and distribution of these other products and services.
Accompanying each of the videos produced by us is a workbook that is designed to be given to all employees participating in the training program. These workbooks are written for us by training professionals and serve to reinforce and enhance the lasting effectiveness of the video. In addition to the workbook, we plan to offer an audiocassette that gives the trainee a general orientation to the training material and serves to reinforce the video's salient points. We believe that the trainees will significantly benefit by being able to use the audio cassette to strengthen and review their comprehension of the information covered in the video during periods when it would be impossible to view a video, such as during drive-time.
Training videos typically have a running time of 20 to 35 minutes. The price range for training videos is from a low of $295 to over $895 per video. Except for our video entitled HOW DO YOU PUT A GIRAFFE INTO A REFRIGERATOR?, which is used as a short 3 minute meeting opener, the videos we acquired fall within the 25 to 35 minute running time range and are sold within the price range mentioned above. The wide variance in the pricing structure is due to such factors as quality of production, on-camera personalities, source of material, sophistication of graphics, and accompanying reference materials. The market continues to demonstrate to us its willingness to purchase high-end videos. Therefore, our strategy is to concentrate on producing high caliber videos utilizing elements and production values that will generate sales at the higher end of the price range, where profit margins are greater.
The price differential between a corporate training video and a standard consumer video is justified by the fact that an organization will purchase a video and utilize it to train hundreds of employees over many years.
SALES AND MARKETING
In most cases, the sale of management training products involves direct mail solicitation, preview request fulfillment, and telemarketing. We begin our sales effort by identifying prospective buyers and soliciting them through direct mail appeals that offer the recipient a free preview. In addition, we market and distribute our work force training videos via our web site at "advancedknowledge.com."
Preview request fulfillment represents a major part of our sales plan. Most professional trainers will not purchase a training video until they have previewed it in its entirety, affording them an opportunity to evaluate the video's applicability to their specific objective and to judge its effectiveness as a training tool. When requests are received, a preview copy is immediately sent to the prospective buyer. To enhance sales potential, we send preview copies in the form of video catalogues. Each video catalogue will include several titles in the same general subject area, as the prospect may be interested in acquiring other videos that deal with similar issues. Within a short period of time following the shipment of the preview copy, a telemarketing representative will call the prospective buyer to get their comments and to ascertain their level of interest. As a result of having to send preview copies to potential customers, the sales cycle may take as little as a week or as long as several months.
Understanding that the principal competitive factors in the training industry are quality, effectiveness, client service, and price, we have developed a marketing campaign that emphasizes our commitment to these key points and, in addition, serves to establish a positive image and brand value for our products. We utilize the following marketing methods to reach and motivate buyers of training products and services.
BRANDING
The reason management has made brand development a key strategic point of our business plan is that a brand is the intentional declaration of "who we are," "what we believe" and "why you should put your faith in our products and services." Above all, corporate branding is a promise a company can keep to its customers, the trade and its own employees.
To be effective, a corporate brand should be understood by key audiences: customers, vendors, analysts, the media, employees and all other groups that determine the viability of a business. Familiarity leads to favorability. People who know our company are likely to feel more positive toward it than a lesser-known company. In order to build brand name recognition, we will strive to ensure that all corporate, brand, and trade advertising carrying the corporate name and other company-wide communications have a demonstrably positive impact on familiarity and favorability.
DIRECT MAIL
We believe the most cost efficient way of generating sales is through the direct mailing of product catalogues to the purchaser of training products and materials at organizations having 100 or more employees. This is our prime target. According to Dun & Bradstreet, there are over 135,000 organizations in the United States with at least 100 people.
To reach the target buyer, we utilize mailing lists purchased from, among others, the industry's most prestigious trade association, the American Society of Training and Development. Other sources of mailing lists include various trade associations and companies that sell mailing lists, such as Hugo Dunhill Mailing Lists, Inc. Additionally, a catalogue is included with any sale or preview video sent to our customers.
In addition to being cost effective, direct mail represents the most accurate way of measuring sales and marketing efforts. Each response received by us is tracked through a database for the purpose of determining the highest "pulling" list and to measure the effectiveness of a specific marketing campaign. In addition, by evaluating response rates, management is also in a position to determine what level of direct mail is needed to reach sales goals, and to alter its product line in accordance with marketplace feedback. As cash flow permits, our intention is to incorporate state-of-the-art design in the production of our catalogues that will not only serve to generate sales for specific products, but will also help in building our brand value. This will be accomplished by highlighting the quality and effectiveness of our product line through the showcasing of customer endorsements. We believe that brand values have a strong tangible effect on the results of any direct mail effort; and, therefore, we will utilize all of our marketing materials to enhance our image as a reliable and competitive provider of quality training products and services.
COMPETITION
The workforce training industry is highly fragmented, with low barriers to entry and no single competitor accounting for a dominant market share. Among our competitors are companies such as Media Partners Corp, the LearnCom Corporation, Coastal Training Technologies, and CRM Learning. Many of our competitors have a competitive edge in that they have significantly more financial resources then we do. As a result, they are able to produce more videos then we are and to spend more money on the marketing of their product. Additionally, we compete with the internal training departments of companies and other independent education and training companies.
The principal factors influencing our business are its professional staff, knowledge of training products, customer relationships, and customer service.
INTERNAL TRAINING DEPARTMENTS
We have learned that internal training departments generally provide companies with the most control over the method and content of training, enabling them to tailor the training to their specific needs. However, we believe that industry trends toward downsizing and outsourcing continue to reduce the size of internal training departments and increase the percentage of training delivered by external providers. Because internal trainers find it increasingly difficult to keep pace with new training concepts and technologies and lack the capacity to meet demand, organizations increasingly supplement their internal training resources with externally supplied training in order to meet their requirements.
INDEPENDENT TRAINING PROVIDERS
Our experience has revealed that independent training providers range in size and include publishers of texts, training manuals and newsletters, as well as providers of videos, software packages, training programs and seminars.
Independent training providers are the main beneficiaries of the organizational outsourcing trend. As a result of the increased demand for external training products and services, many large corporations have entered the field by establishing corporate training divisions. Among the larger competitors are: Times Mirror Corporation; Sylvan Learning Systems, Inc.; Berkshire Hathaway; and Harcourt General. Additional competitors currently producing training products include Blanchard Training & Development, Career Track, American Media, Pfeiffer & Company, CRM Films, AIMS Multimedia, Charthouse International and Learning Works. In all cases, the companies listed above have established credibility within the training industry and, compared to us, have substantially greater name recognition and greater financial, technical, sales, marketing and managerial resources.
The workforce training market is characterized by significant price competition, and we expect to face increasing price pressures from competitors as company training managers demand more value for their training budgets. There can be no assurance that we will be able to provide products that compare favorably with workforce instructor-led training techniques, interactive
training software or other video programs, or that competitive pressures will not require us to reduce our prices significantly.
COMPANY HISTORY
We were incorporated in Delaware on October 31, 2006. From the date we were incorporated until March 1, 2007, we were a wholly owned subsidiary of Dematco, Inc., formerly Advanced Media Training Inc., a Delaware corporation (hereinafter "Dematco"). On December 10, 2006, our then parent Dematco, acquired all the remaining outstanding shares of Dematco Ltd., and elected a new slate of directors and appointed new corporate officers. Concurrent with the acquisition, the new management of Dematco decided to change its core business to that of its just acquired company Dematco, Ltd., and to as soon as feasible cease all business activity related to its unrelated business of producing and distributing workforce training videos. The business of Dematco, Ltd. is the dematerializing or converting of financial instruments from paper form to electronic form so as to enable such instruments to be traded in a secure manner electronically on exchanges or exchange platforms on a peer to peer basis.
On March 1, 2007, to facilitate its exit from the training business, Dematco entered into an Asset and Liability Assumption Agreement, whereby the Company acquired all of Dematco's assets and liabilities related to the production and distribution of workforce training videos. The assets included distribution rights to twelve workforce training videos, its distribution contracts with other producers of related videos, accounts receivable totaling approximately $9,000, the name Advanced Knowledge for use by a division of the Company, and the Advanced Knowledge website. The liabilities we assumed included approximately $28,500, in accounts payable, an outstanding line of credit balance of $12,000, and an outstanding credit card balance of approximately $23,500.
Additionally, on March 1, 2007 Dematco's Board of Directors approved and agreed to a debt conversion agreement between three parties, namely, (i) Dematco as the parent company, (ii) us, as the then wholly owned subsidiary of Dematco, and (iii) our president, Buddy Young. Under the terms of the agreement, Mr. Young agreed to convert $80,000 of the $138,173 owed to him under a promissory note, to equity in exchange for Dematco's transfer of 1,000,000 shares of the Company's common stock to Mr. Young. As a result, Mr. Young became our principal shareholder, while Dematco retained 750,000 shares. As a result of that transfer we were no longer a subsidiary of Dematco.
Since our inception, we have been engaged in the development, production and distribution of creatively unique management and general workforce training videos for use by businesses throughout the world.
We currently have one full time employee who manages our marketing and sales efforts. Additionally we have two part time employees who assist with the administration functions. We mainly utilize outside services to handle our accounting and other administrative requirements, and commissioned sales personnel to handle the selling and marketing of our videos. During the next 12 months we anticipate hiring one or two additional full-time employees to assist in our sales and marketing requirements. In addition, Mr. Buddy Young, our Chief
Executive Officer, Chief Financial Officer and Chairman of the Board of Directors, and L. Stephen Albright, our Vice President, Secretary and a Director, each work on a part-time basis. During fiscal 2007, Mr. Young received non-cash compensation (representing the estimated value of services contributed to the Company of $41,600).
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
CRITICAL ACCOUNTING POLICIES
We were incorporated in Delaware on October 31, 2006. From August 10, 2004 through October 31, 2006 the business of the development, production and distribution of management and general workforce training videos was previously conducted under the name Advanced Media Training, Inc. We are including the results from operations prior to October 31, 2006 of Advanced Media Training, Inc. for comparative discussion and analysis.
Our discussion and analysis of our financial condition and results of operations are based upon our 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. Based on the nature of our product, we do not accept returns. Damaged or defective product is replaced upon receipt. Such returns have been negligible since the Company's inception.
The second critical accounting policy relates to production costs. The Company periodically incurs costs to produce new management training videos and to enhance current videos. Historically, the Company has been unable to accurately forecast revenues to be earned on these videos and has, accordingly, expensed such costs as incurred.
RESULTS OF OPERATIONS
GENERAL
Our core business is the development, production and distribution of management and general workforce training videos for use by businesses throughout the world. In addition to distributing videos produced by us, we market and distribute training videos financed and produced by other producers, which currently account for approximately 57% of our revenues.
Workforce training industry trends have demonstrated that the amount of money allocated by companies for the training of their employees varies according to general economic conditions. In many cases in a good economy training department budgets are increased, and as a result more funds are
available to purchase training videos and other employee training products. Conversely, when economic conditions are not good companies tend to cut back on the amount of funds spent on the purchase of workforce training products. We anticipate that general economic conditions will continue to have a direct effect on our revenues.
SELECT FINANCIAL INFORMATION
For the Three Months Ended
---------------------------
02/28/07 02/28/06
(Unaudited) (Unaudited)
----------- -----------
Statement of Operations Data
Revenue ........................................ $ 85,602 $ 94,287
Cost of revenues ............................... $ 21,659 $ 25,594
Gross profit ................................... $ 63,943 $ 68,693
Total expenses ................................. $ 88,181 $ 122,204
Net loss after taxes ........................... $ (24,238) $ (53,511)
Net loss per share ............................. $ (0.00) $ (0.00)
Balance Sheet Data
Total assets ................................... $ 11,919 $ 551,650
Total liabilities .............................. $ 65,513 $ 833,104
Stockholder's deficit .......................... $ (53,594) $ (281,454)
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THREE-MONTH PERIOD ENDED FEBRUARY 28, 2007 COMPARED TO THREE-MONTH PERIOD ENDED
FEBRUARY 28, 2006
REVENUES
Revenues for the three month period ended February 28, 2007 were $85,602. Revenues for the prior three month period ended February 28, 2006, were $94,297. This represents a decrease of $8,695. This decrease during this period was mainly due to the lack of any new videos produced by us being launched into the marketplace, and the aging of our video library.
Product sales made up nearly 100% of the total revenue in both three month periods. Rental of videos were less than 1% of our sales in both periods. Sales of videos produced by other companies accounted for approximately 57% of sales in both fiscal 2007 and 2006.
COST OF REVENUES
The cost of revenues during the three month period ended February 28, 2007, was $21,659. This represents a decrease of $3,935 from the $25,594 experienced during the same period of 2006. The cost of revenues as a percent of sales decreased by approximately 2% (25% in 2007 vs. 27% in 2006). This decrease is primarily due to the product sales mix.
During most periods approximately between 55% and 65% of our revenue is generated from the sale of training videos produced by companies with which we have distribution contracts. The terms of these distribution contracts vary with regard to percentage of discount we receive. These discounts range from a low of 35% to a high of 50% of gross receipts. As we cannot predict which companies will produce better selling videos in any one period, we cannot predict future product mix.
EXPENSES
Selling and marketing expenses decreased to $27,773 in 2007 from $42,567 in 2006. This represents a decrease of $14,794. This decrease during this period of approximately 35% in selling and marketing expense resulted from the decrease of $14,864 in product and business promotion expenses to $760 in 2007 from $15,624 in 2006.
Additionally, our selling and marketing costs are influenced by the introduction of new videos produced by us. These costs are mainly comprised of the creation of advertising and publicity materials, the making of preview copies of the video to be sent to other distributors, and for advertising space in trade publications.
General and administrative expenses decreased to $59,955 in 2007 from $67,488 in 2006. This represents a decrease of $7,533. The main components in these general and administrative expenses are salaries for our employees, consulting fees, and professional fees for accounting and legal services, and rent.
Research and development expenses for this fiscal quarter were $200 as compare to $0 in 2006. Our research and development costs are comprised mainly of fees paid to writers for the initial preparation of an outline for a new training video. Based on our analysis of the outline's sales potential, we will make a decision as to whether or not to move forward with the production.
Interest expense decreased to $253 in 2007 from $12,149 in 2006. This represents a decrease of $11,896. This decrease is primarily due to the fact that a substantial portion of the principal owed our President and principal shareholder were paid during fiscal 2006.
NET LOSS
As a result of the foregoing, our net loss decreased to $24,238 in 2007 from $53,511 in 2006. This is a decrease of $29,273.
SELECT FINANCIAL INFORMATION
For the Nine Months Ended
---------------------------
2/28/07 2/28/06
(Unaudited) (Unaudited)
----------- -----------
Statement of Operations Data
Revenue ........................................ $ 291,033 $ 293,801
Cost of revenues ............................... $ 62,761 $ 90,744
Gross profit ................................... $ 228,272 $ 203,057
Total Expenses ................................. $ 281,066 $ 379,085
Net loss after taxes ........................... $ (53,594) $ (176,828)
Net loss per share ............................. $ (0.00) $ (0.01)
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NINE MONTH PERIOD ENDED FEBRUARY 28, 2007 COMPARED TO NINE MONTH PERIOD ENDED
FEBRUARY 28, 2006
REVENUES
Revenues for the nine month period ended February 28, 2007 were $291,033. Revenues for the prior nine month period ended February 28, 2006, were $293,801. This represents a decrease of $2,768, primarily due to general market conditions.
Net product sales made up nearly 100% of the total revenue in both nine month periods. Rental of videos were less than 1% of our sales in both periods. Sales of videos produced by other companies accounted for approximately 55% to 65% of sales in both fiscal 2007 and 2006.
COST OF REVENUES
The cost of revenues during the nine month period ended February 28, 2007, decreased to $62,761 from the $90,744 experienced in 2006. This represents a decrease of $27,983. The cost of revenues as a percent of sales decreased by approximately 9 percentage points (22% in 2007 to 31% in 2006). This decrease is primarily due to a decrease in production costs incurred in the first nine months of 2006. However, although there may be occasional variances, we anticipate that the cost of goods sold (excluding production costs expensed) as a percentage of revenues will generally be approximately within the 30 to 40 percent range.
EXPENSES
Selling and marketing expenses decreased to $112,074 in 2007 from $138,788 in 2006. This represents a decrease of $26,714. The decrease is primarily due to stock issued to employees and consultants associated with our selling and marketing activities (valued at $41,000) in 2006 for services rendered. As stated earlier, our selling and marketing costs are directly affected by the number of new training products we introduce into the marketplace. The decrease in selling and
marketing was the result of our introducing less new videos produced by us into the marketplace during this period, as compared to the same period in 2006.
General and administrative expenses decreased to $168,539 in 2007 from $208,263 in 2006. This represents a decrease of $39,724. The decrease is primarily due to a reduction in payroll and employee related expenses as we transition from Dematco. The main components in these general and administrative expenses are salaries for our employees, consulting fees, and professional fees for accounting and legal services, and rent.
Research and development expenses increased to $200 in 2007 from $50 in 2006. Our research and development costs are comprised mainly of fees paid to writers for the initial preparation of an outline for a new training video. Based on our analysis of the outline's sales potential, we will make a decision as to whether or not to move forward with the production.
Interest expense decreased to $253 in 2007 from $31,984 in 2006. This represents a decrease of $31,731. This decrease is primarily due to the fact that a substantial portion of the principal owed our President and principal shareholder were paid during fiscal 2006.
NET LOSS
The net loss decreased to $53,594 in 2007 from $176,828 in 2006. This represents a decrease of $123,234. The cause of this decrease was mainly the result of a decrease in selling and marketing expenses resulting from our introducing less new videos produced by us into the marketplace during this period, as compared to the same period in 2005 and a decrease in general and administrative expenses as a result of decreased payroll, less expense incurred for the development of our internet website, and less consulting fees paid to professional and administrative personnel.
PLAN OF OPERATION
Until March 1, 2007 the Company's was a wholly owned subsidiary of Dematco, Inc. As explained above, on that date Dematco transferred to us all of its assets and liabilities related to the production and distribution of workforce training videos, see "Company History"
We will continue to devote our limited resources to marketing and distributing workforce training videos and related training materials. At this time these efforts are focused on the sale of videos produced by third parties. Approximately 57% of our revenue is derived from these sales. Additionally, we will continue to market videos produced by us, Among these are "The Cuban Missile Crisis: A Case Study In Decision Making And Its Consequences," "What It Really Takes To Be A World Class Company," "How Do You Put A Giraffe In The Refrigerator?." In addition, we anticipate spending some of our resources on the production and marketing of additional training videos produced by us. The amount of funds available for these expenditures will be determined by cash flow from operations, as well as, our ability to raise capital through an equity offering or further borrowing from our President, and other traditional borrowing sources. There can be no assurance that we will be successful in these efforts.
Management expects that sales of videos and training materials, along with available funds under an agreement with its President and majority shareholder should satisfy our cash requirements through December 31, 2007. The Company's marketing expenses and the production of new training videos will be adjusted accordingly.
We currently have one full time employee who manages our marketing and sales efforts. Additionally we have two part time employees who assist with the administration functions. We mainly utilize outside services to handle our accounting and other administrative requirements, and commissioned sales personnel to handle the selling and marketing of our videos. During the next 12 months we anticipate hiring one or two additional full-time employees to assist in our sales and marketing requirements. In addition, Mr. Buddy Young, our Chief Executive Officer, Chief Financial Officer and Chairman of the Board of Directors, and L. Stephen Albright, our Vice President, Secretary and a Director, each work on a part-time basis. During fiscal 2007, Mr. Young received non-cash compensation (representing the estimated value of services contributed to the Company of $41,600).
LIQUIDITY AND CAPITAL RESOURCES
Working capital deficit decreased to $56,378 in 2007 from $58,060 in 2006.
Cash flows used by operations decreased to $1,820 in 2007 from $75,306 in 2006. This decrease is primarily the result of the decrease in net loss from $176,828 in 2006 to $53,594 in 2007.
During 2007 and 2006 we did not use any cash for investing activities.
Our cash flows provided by financing activities decreased to $13,529 in 2007 from $64,303 in 2006. This is the result of the borrowings from our President and on our line of credit.
We currently have no material commitments at this time to acquire any significant capital equipment.
We are a company with a limited operating history and a history of net losses.
We had a cash balance of $0 on February 28, 2007.
ITEM 3. DESCRIPTION OF PROPERTY.
We lease office space from Encino Gardens LLC, an unaffiliated third party for $2,364 per month, located at 17337 Ventura Boulevard, Suite 208, Encino, California 91316. The lease terminates August 31, 2007. We anticipate that we will be able to extend the lease and that this space, consisting of a total of approximately 1,150 square feet, will be adequate for our operations through the end of our current fiscal year.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of May 31, 2007, regarding beneficial ownership of the Common Stock of the Company by (i) each person known by the Company to be the beneficial owner of more than 5% of the outstanding shares of the Company's Common Stock, (ii) each director of the Company, (iii) the Chief Executive Officer and other executive officers of the Company and (iv) the Company's executive officers and directors as a group. Unless otherwise indicated, the address of each stockholder listed in the table is 17337 Ventura Boulevard, Suite 208, Encino, California 91316.
Number of Percentage
Name and Address Shares Owned of Class Owned
---------------------- ------------ --------------
Young Family Trust (1) 1,000,000 45.87%
Stephen Albright (2) 200,000 9.17%
David Leedy (3) 10,000 0.46%
Mel Powell (3) 10,000 0.46%
Dennis Spiegelman (3) 10,000 0.46%
Howard Young (4) 200,000 9.17%
Dematco, Inc.(5) (6) 750,000 34.40%
All officers and directors as a
group (6 persons) 1,430,000 65.60%
----------
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(1) All of the shares beneficially owned by the Young Family Trust are also beneficially owned by Buddy Young and Rebecca Young, who, as co-trustees of the Trust, share voting and investment power over the shares. Buddy Young is a director and executive officer of Progressive Training and the Chief Executive Officer of the Company.
(2) Director, Vice President and Secretary (3) Director
(4) Howard Young is a Vice President and the son of Mr. Buddy Young.
(5) Until March 1, 2007, we were a wholly owned subsidiary of Dematco, Inc.
(6) Dematco, Inc., Rob Stevens, President. 1 Mark Road, Hemel Hemstead, Hertfordshire, UK HP2 7BN
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The following table sets forth the current officers and directors of Progressive Training:
NAME AGE POSITION
------------------- --- --------------------------------------
Buddy Young 71 President, Chief Executive Officer,
Chief Financial Officer and Chairman
L. Stephen Albright 55 Vice President, Secretary and Director
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David Leedy 67 Director Dennis Spiegelman 60 Director Mel Powell 42 Director Howard Young 49 Vice President |
Buddy Young has served as president, chief executive officer, chief financial officer and chairman of the board of directors of Progressive Training, Inc. since its inception in October 2006. From 1999 through December 10, 2006, Mr. Young served as an officer and director of Dematco, Inc., formerly known as Advanced Media Training, Inc. From the date of our incorporation through March 1, 2007, we were a wholly owned subsidiary of Dematco. From March 1998 until July 1999, Mr. Young served as president, executive officer and a director of MGPX Ventures, Inc., now known as Contango Oil & Gas. Prior to Mr. Young joining MGPX Ventures, it sold its business of installing efficient electrical power systems in buildings to its management and had no other business operations. Mr. Young assisted MGPX Ventures in developing a new business plan and recruiting new management to implement its operations in the oil and gas exploration industry. From 1992 until July 1996, Mr. Young served as president and chief executive officer of Bexy Communications, Inc., a publicly held company, now known as Cheniere, and traded on the American Stock Exchange. Until Bexy acquired Cheniere and focused its resources on oil and gas exploration the company's core business was the production, financing and distribution of television programming. During Mr. Young's tenure at Bexy, Bexy produced and distributed a number of television programs, including a two-hour special, HEARTSTOPPERS . . . HORROR AT THE MOVIES, hosted by George Hamilton, and a 26 episode half-hour television series entitled FEELIN' GREAT, hosted by Dynasty's John James. From June 1983 until December 1991, Mr. Young was president, chief executive officer and a director of Color Systems Technology, Inc., a publicly held company. Color Systems' major line of business was the use of its patented computer process for the conversion of black and white motion pictures to color. Prior to joining Color Systems, Mr. Young served from 1965 to 1975 as Director of West Coast Advertising and Publicity for United Artists Corporation, from 1975 to 1976 as Director of Worldwide Advertising and Publicity for Columbia Pictures Corp., from 1976 to 1979 as Vice President of Worldwide Advertising and Publicity for MCA/Universal Pictures, Inc., and from 1981 to 1982 as a principal in the motion picture consulting firm of Powell & Young, which represented some of the industry's leading film makers. For over thirty-five years, Mr. Young has been an active member of The Academy of Motion Picture Arts and Sciences and has served on a number of industry-wide committees.
L. Stephen Albright has served as a vice president, director and secretary of Progressive Training, Inc. since its inception in October 2006. Mr. Albright was employed as an associate attorney with a law firm in Los Angeles, California, from June 1994 through June 2000. Mr. Albright started his own law practice in June 2000. Mr. Albright received his undergraduate degree in business administration and marketing from West Virginia University in 1975. Following a career in industrial sales, Mr. Albright entered Whittier College School of Law in 1980. Mr. Albright was admitted to practice law in the State of California in 1983. Mr. Albright's legal career has consisted primarily of transactional work, business litigation, corporate matters, employee matters and providing general legal business advice to clients. Mr. Albright also spent seven years as in-house counsel, vice president, general counsel and secretary to Color Systems Technology, Inc., a publicly-held company whose stock traded on the American Stock Exchange. While with
Color Systems, Mr. Albright was responsible for all aspects of the company's legal needs including annual shareholders' meetings; preparation and filing of the company's proxy materials, annual reports on Form 10-K, and registration statements on Form 10-Q; and drafting and negotiating lease agreements, distribution and licensing agreements and debt and equity funding arrangements. Mr. Albright was an officer and director of Enhance Biotech, Inc. (formerly known as Becor Communications, Inc.) from the inception of Enhance Biotech, Inc. on March 20, 2000, until he resigned those positions on April 29, 2003, as part of Enhance Biotech, Inc.'s acquisition of Enhance Lifesciences, Inc.
David. Leedy has served as a director of Progressive Training, Inc. since its inception in October 2006. He is a certified public accountant with many years of experience in establishing and managing corporate financial controls. In 1963 he began his career at Haskins & Sells (now Deloitte & Touche). He is now retired and resides in Texas. From 1994 through the end of 1995 he was Chief Operations/Financial Officer of Reel EFX, Inc., a special effects company whose operations included manufacturing and sales, equipment rentals, and special effects for movies, TV, commercials and live performances. Mr. Leedy retired when he resigned his position at Reel EFX in 1995. In 1993 he served as a Production Accountant at Games Animations/Nickelodeon-MTV. From 1989 through 1992, he served as a consultant to a number of film producers, distributors and foreign sales agents. From 1984 through 1989, he served as Sr. Vice President and Chief Financial Officer of Color Systems Technology, Inc. While there he was responsible for all administrative and financial matters and, assisting the Chief Executive Officer, responsible for operations. He has also served as an expert witness on an important legal case (BUCHWALD V. PARAMOUNT 1990). From 1975 through 1979, he served as Controller of MCA/Universal Pictures and was responsible for the accounting of approximately $350 million in worldwide revenues, advertising and promotion, and royalties. Additionally, he authored and published the definitive book on accounting for royalties in the motion picture industry in 1980, and co-authored another in 1988.
Dennis Spiegelman has served as a director of Progressive Training, Inc. since March 1, 2007. He previously had served as a director of Advanced Media Training. Mr. Spiegelman is an experienced sales and marketing executive with a successful track record in many aspects of the entertainment industry. For 6 years he served as vice president, sales and marketing for Cast & Crew Entertainment Services, Inc., a position he accepted in April 1998. From 1995 to April 1998, Mr. Spiegelman was the senior vice president of sales and marketing for Axium Entertainment, Inc. In 2004, he returned to Axium as Sr. VP worldwide sales, and in 2006 he formed Spiegelman Entertainment Services, Inc. Both Cast & Crew and Axium specialize in providing payroll and production accounting technology to the motion picture and television entertainment industries. During his career of more than 25 years, Mr. Spiegelman has held various other senior positions, including director of operations at Heritage Entertainment, and president and director of All American Group, Inc. While at these companies, Mr. Spiegelman was mainly responsible for the sale of feature films to foreign theatrical, video, and television markets. In addition, Mr. Spiegelman has served as executive producer of the theatrical motion picture entitled NOBODY'S PERFECT and is a past president of Financial, Administrative, and Management Executives in Entertainment, a 50-year-old networking organization for entertainment industry executives.
Mel Powell has served as a director of Progressive Training, Inc. since March 1, 2007. He
previously served as a director of Advanced Media Training. Mr. Powell brings a background in law, writing, and marketing to the Company. He attended Yale College as an undergraduate (B.A. 1985), and graduated from UCLA Law School in 1988. Mr. Powell is a member of the California Bar Association, and practiced family law from 1988 through 1992 at the Los Angeles based law firm of Trope & Trope. Since 1992 Mr. Powell has been self employed through his privately held company, Breakaway Entertainment. During his time at Breakaway, he has written feature screenplays, teleplays, radio scripts for Premiere Radio Networks, and scripts for corporate training videos.
Howard Young has served as a Vice President since March 1, 2007. He
previously joined Advanced Media Training as Director of Marketing in March
2000, and remained in that position until he was appointed a Vice President in
May 2003. From June 1998 until March 2000, Mr. Young served as an independent
marketing consultant to the Company. He started his business career at Columbia
Pictures in 1983 as a motion picture sales trainee. Shortly thereafter he was
promoted to salesman, and was responsible for sales and exhibitor relations in
the Seattle- Portland territory. From 1985 through June 1998 Mr. Young worked
for one of Hollywood's leading advertising agencies, JP Advertising. While there
he served in a number of positions relating to the marketing of motion pictures.
In 1992 he was named a Senior Vice President of the agency, and was responsible
for supervising client accounts. Among others, the agency's accounts included:
The Walt Disney Company, 20th Century Fox, Columbia Pictures and Paramount
Pictures. Along with his client responsibilities, Mr. Young supervised the
administrative operations of the agency. During his tenure at JP Advertising,
Mr. Young worked on the marketing campaigns of such films as TITANIC, SPEED, 101
DALMATIANS, MEN IN BLACK, and TRUE LIES. A graduate of Redlands University, Mr.
Young is active as a graduate assistant in the Dale Carnegie Course Program. Mr.
Young is the son of the Company's president and principal stockholder.
Directors are elected in accordance with our bylaws to serve until the next annual stockholders meeting and until their successors are elected and qualified or until their earlier resignation or removal. Officers are elected by the board of directors and hold office until the meeting of the board of directors following the next annual meeting of stockholders and until their successors shall have been chosen and qualified. Any officer may be removed, with or without cause, by the board of directors. Any vacancy in any office may be filled by the board of directors.
Buddy Young, our President, Chief Executive Officer, Chief Financial Officer and Chairman, and L. Stephen Albright our Vice President and Secretary, have various outside business interests that preclude them from devoting full time to the operations of the Company. We anticipate that Mr. Young will be able to devote approximately 75 percent and Mr. Albright approximately 25 percent of their respective time to our operations. Mr. Howard Young, our Vice President devotes full time to the operations of the Company.
Except that one of the Company's key employees, Howard Young, is the son of Buddy Young, there are no family relationships between any directors or executive officers and any other director or executive officer of Progressive Training, Inc.
ITEM 6. EXECUTIVE COMPENSATION
ANNUAL COMPENSATION LONG-TERM COMPENSATION
--------------------------------------- --------------------------------------
Other Securities
Name and Annual Restricted Underlying LTIP All other
Principal Position Year Salary Bonus Compensation Stock Awards Option Payouts Comp.
----------------------- ---- ----------- ---------- ---------- ---------- ---------- ---------- ----------
Buddy Young,
CEO, CFO & Director 2004 -0- -0- -0- -0- -0- -0- -0-
2005 -0- -0- -0- -0- -0- -0- -0-
2006 -0- -0- -0- -0- -0- -0- -0-
2007* -0- -0- -0- -0- -0- -0- -0-
L. Stephen Albright,
Secretary & Director (1) 2004 -0- -0- -0- -0- -0- -0- -0-
2005 -0- -0- -0- -0- -0- -0- -0-
2006 -0- -0- -0- -0- -0- -0- -0-
2007* -0- -0- -0- -0- -0- -0- -0-
Dennis Spiegelman,
Director (2) 2004 -0- -0- -0- -0- -0- -0- -0-
2005 -0- -0- -0- -0- -0- -0- -0-
2006 -0- -0- -0- -0- -0- -0- -0-
2007* -0- -0- -0- -0- -0- -0- -0-
David J. Leedy,
Director (2) 2004 -0- -0- -0- -0- -0- -0- -0-
2005 -0- -0- -0- -0- -0- -0- -0-
2006 -0- -0- -0- -0- -0- -0- -0-
2007 -0- -0- -0- -0- -0- -0- -0-
Mel Powell
Director (2) 2004 $ 7,700 -0- -0- -0- -0- -0- -0-
2005 $ 9,600 -0- -0- -0- -0- -0- -0-
2006 -0- -0- -0- -0- -0- -0- -0-
2007* -0- -0- -0- -0- -0- -0- -0-
Howard Young,
Vice President (3) 2004 $ 30,300 -0- -0- -0- -0- -0- -0-
2005 $ 72,000 -0- -0- -0- -0- -0- -0-
2006 $ 72,000 -0- -0- -0- -0- -0- -0-
2007* $ 62,650 -0- -0- -0- -0- -0- -0-
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* For the nine month period ended February 28, 2007
During the nine months ended February 28, 2007, 2006 and 2005, Mr. Young devoted time to the development process of our Company. Compensation expense totaling $41,600 and $0 has been recorded for the years ended February 28, 2007, 2006, and 2005, respectively. For the years ended February 28, 2007 2006, and 2005, Mr. Young has waived reimbursement and has considered the total expense as additional paid-in capital.
(1) As compensation for services rendered and for serving as an officer and a director of the Company, on April 2, 2007, the Company issued 200,000 shares of common stock to Mr. Albright. At the time of the issuance, the stock had no positive book value, and no market value.
(2) As compensation for joining and serving as a director of the Company, on April 2, 2007, the Company issued 10,000 shares of common stock to each of Mr. Spiegelman, Mr. Leedy, and Mr. Powell. At the time of the issuance, the stock had no positive book value, and no market value.
(3) As compensation for serving as an officer of the Company and conducting most of the day to day operations of the Company, on April 2, 2007 we issued 200,000 shares of common stock to Mr. Young. At the time of the issuance, the stock had no positive book value, and no market value.
EMPLOYMENT AND CONSULTING AGREEMENTS
We do not have any employment or consulting agreements with any of our executive officers. Other than the compensation paid to Mr. Howard Young no other compensation has been paid or accrued to any officer or director since the incorporation of Progressive Training, Inc. in October 2006. During fiscal 2007, Mr. Buddy Young received non-cash compensation (representing the estimated value of services contributed to the Company of $41,600)
OPTION/SAR GRANTS
We have not granted any options or stock appreciation rights to any of our executive officers or employees.
AGGREGATED OPTION/SAR EXERCISES
Since we have never granted any options or stock appreciation rights to any of our executive officers or employees, none exist to be exercised.
COMPENSATION OF DIRECTORS
Other than the initial issuance of common stock as described above, directors of the Company have not and do not receive any compensation for serving on the board or for attending any meetings. Directors who are also officers of the Company receive no additional consideration for their service as a director.
During fiscal 2006, Howard Young received a total of $72,000 in compensation (see "Certain Relationships and Related Transactions"). Other than the compensation paid to Mr. Young, no other compensation has been paid or accrued to any officer or director since the incorporation of Progressive Training, Inc. in October 2006. No stock options, warrants or other rights have been issued to any of the Company's officers, directors or employees. The Company has not approved or adopted any such plan.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Prior to December 11, 2006, Buddy Young, our chief executive officer, director and principal shareholder, and L. Stephen Albright, our secretary and director, served in similar capacities with our then parent company, Dematco, Inc. Mr. Young occasionally serves as a consultant to Dematco, and Mr. Albright occasionally provides legal services for Dematco on an as requested basis.
We have an agreement with our President and majority shareholder to fund any shortfall in cash flow up to $250,000 at 8% interest through June 30, 2008. Repayment is to be made when funds are available with the balance of principal and interest due December 31, 2008. As of May 31, 2007, the Company has not borrowed any funds from Mr. Young.
Prior to March 1, 2007, our former parent company, Dematco, Inc. owed Mr. Young approximately $138,000 in principal and interest. However, on that date, $80,000 of that debt due Mr. Young was converted into equity when Dematco transferred 1,000,000 of its 1,750,000 shares of Progressive Training to Mr. Young, resulting in Mr. Young becoming our principal shareholder, and the Company no longer being a wholly owned subsidiary of Dematco.
The note is secured by all our right, title and interest in and to our video productions and projects, regardless of their state of production, including all related contracts, licenses, and accounts receivable. Any unpaid principal and interest under the Note will be due and payable on December 31, 2008.
Mr. Howard Young, an officer of the Company and the son of the Company's president, received fees totaling $72,000 in both fiscal 2005, and 2006, and $62,650 during the first 9 months of fiscal 2007. Mr. Young's duties include the management of our administrative, sales and marketing functions.
Since the inception of the Company, we have not had a relationship with any outside promoters. However, our officers and directors are considered promoters, as that term is defined by Rule 405 of Regulation C. As indicated in the Executive Compensation Table above, including the footnotes, we have issued stock to our officers and directors as consideration for services. Thus, these stock issuances are considered to be transactions with promoters and the information regarding these transactions is provided in the Executive Compensation Table above.
ITEM 8. DESCRIPTION OF SECURITIES
We have one class of common stock authorized for issuance, 100,000,000, shares of common stock, par value $0.0001 per share. Of the 100,000,000 shares of common stock authorized, 2,280,000 shares are issued and outstanding at May 31, 2007. We do not have any preferred stock authorized for issuance.
Holders of common stock are entitled to receive such dividends as the board of directors may from time to time declare out of funds legally available for the payment of dividends. To date we have not paid any dividends on our common stock, and we do not anticipate paying any dividends in the foreseeable future.
Each share of our common stock is entitled to one vote. Our stockholders have no preemptive or cumulative voting rights.
If and when this Registration Statement is declared effective, we will retain U.S. Stock Transfer Company, located at 1745 Gardena Ave, Glendale, CA 91204, to serve as the Company's stock transfer agent. Their telephone and fax numbers are respectively (818) 502-1404 and (818) 502-0674.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
There is no established public trading market for our securities and a regular trading market may not develop, or if developed, may not be sustained. Therefore, a shareholder, in all likelihood, will not be able to resell his, her or its securities should he, she or it desire to do so, if and when such shares become eligible for public resale. Further, it is unlikely that any lending institutions would accept our securities as collateral for loans unless a regular trading market in our stock develops.
Currently, we have no plans, proposals, arrangements, or understandings with any person with regard to the development of a trading market in any of our securities. Without a market for our securities, no transactions for or with the account of customers, no bid and asked quotations, and no compensation to brokers, dealers or associated persons exist for us to disclose.
NO PUBLIC MARKET
There is currently no public market for our common stock. If and when we can meet the requirements, we will seek to have our stock quoted for trading on either the NASD's Over-The-Counter Bulletin Board system (also known as "OTCBB") or the Pink Sheets Electronic Quotation Service. There can be no assurance that we will ever be able to qualify to have our stock quoted on the OTC Bulletin Board system, the Pink Sheets Electronic Quotation System, or any stock exchange or stock market.
Both the OTCBB and the Pink Sheets Electronic Quotation Service have very minimal listing requirements imposed on companies that desire to be listed in their systems.
The OTCBB only requires that the company's stock be registered with the Commission and that the company be current with its Commission filing requirements. It does not have any other listing requirements. However, in order to be traded, it must also have a Form 15-211(c) on file with the National Association of Securities Dealers (also known as the "NASD") and have at least one (1) market maker in the stock, but these are not listing requirements. There are no requirements as to stock price, bid and asked quotes, number of shareholders, the number of shares held by each shareholder, or the number of shares traded.
The Pink Sheets quotation system requires that the company's stock be registered with the Securities and Exchange Commission, have at least one (1) market maker and have a Form 15-211(c) on file with the NASD. The Pink Sheets do not have any minimum requirements as to stock price, bid and asked quotes, number of shareholders, the number of shares held by each shareholder, or the number of shares traded.
RESALES UNDER RULE 144 AND OTHERWISE
There are 2,280,000 shares of our common stock issued and outstanding, of which all but 100,000 shares are held by affiliates, as that term is defined by the Securities Act of 1933, as amended, (the "Act"). These shares are defined by Rule 144 of the Act as restricted securities. No shares have been sold
pursuant to Rule 144 of the Act. None of these shares may be sold except in compliance with the resale provisions of Rule 144.
In general, under Rule 144, as currently in effect, affiliates and any person or persons whose sales are aggregated who has beneficially owned his or her restricted shares for at least one year may be entitled to sell in the open market within any three-month period a number of shares of common stock that does not exceed 1% of the then outstanding shares of our common stock or the average weekly reported trading volume in the stock during the four calendar weeks preceding such sale. Sales under Rule 144 are also affected by limitations on manner of sale, notice requirements, and availability of current public information about us. Non-affiliates who have held their restricted shares for two years may be entitled to sell their shares under Rule 144 without regard to any of the above limitations, provided they have not been affiliates for the three months preceding such sale.
As a result of the provisions of Rule 144, all of the restricted securities could be available for sale in a public market, if developed, 90 days after this registration statement becomes effective. The availability for sale of substantial amounts of common stock under Rule 144 could reduce prevailing market prices for our securities.
THERE IS NO PUBLIC MARKET FOR OUR STOCK. AS A RESULT, INVESTORS MAY NOT BE ABLE TO SELL THEIR SECURITIES. Currently, there is no trading market for any of our stock. Although we contemplate developing a market for our stock in the future, there can be no assurance that a market for our stock will be created or, if such a market is created, that it will be sustained. Accordingly, purchasers of the stock may have to hold the stock indefinitely. Further, the Securities and Exchange Commission has adopted regulations which define a "penny stock" to be any equity security that has a market price (as therein defined) of less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. For any transactions involving a penny stock, unless exempt, the rules require the delivery, prior to any transaction involving a penny stock by a retail customer, of a disclosure schedule prepared by the Commission relating to the penny stock market. Disclosure is also required to be made about commissions payable to both the broker-dealer and the registered representative and current quotations for the securities. Finally, monthly statements are required to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. You should consider these risks as well as the uncertainties, delays, and difficulties normally associated with any developing and expanding new business, many of which may be beyond our control.
OUR COMMON STOCK IS SUBJECT TO "PENNY STOCK" REGULATIONS, WHICH COULD MAKE IT MORE DIFFICULT FOR AN ACTIVE, LIQUID MARKET TO DEVELOP IN THE STOCK AND COULD PREVENT YOU FROM SELLING ANY SHARES YOU BUY IN THIS OFFERING. Penny stocks are equity securities that have a price of less than $5.00 and are not registered on certain national securities exchanges or quoted on the Nasdaq system. Our common stock is currently a penny stock and will probably remain a penny stock for the foreseeable future because the offering price of the common stock in this offering is substantially less than $5.00 per share and we do not qualify for an exemption from the SEC's penny stock rules. The penny stock rules regulate broker-dealer practices in connection with transactions in penny stock. These regulations could make it more difficult for an active, liquid market in our common stock to develop and could prevent you from selling shares you purchase in this offering. These rules require any broker-dealer engaging in transactions in penny stocks to first provide to its customer a series of disclosures and documents, including:
o a standardized risk disclosure document identifying the risks inherent in investment in penny stocks;
o all compensation received by the broker-dealer in connection with the transaction;
o current quotation prices and other relevant market data; and
o monthly account statements reflecting the fair market value of the securities.
In addition, these rules require that a broker-dealer obtain financial and other information from its customer, determine that transactions in penny stocks are suitable for the customer, and deliver a written statement to the customer setting forth the basis for that determination. These extensive requirements could cause some broker-dealers and their customers to limit their involvement in penny stock transactions or to avoid them altogether.
HOLDERS
As of March 31, 2007, we have 2,280,000 shares of common stock issued and outstanding held by eight shareholders of record. We currently have no outstanding options or warrants for the purchase of our common stock and have no securities outstanding which are convertible into common stock. We have not adopted or developed any plans to adopt any stock option, stock purchase or similar plan for our employees.
DIVIDEND POLICY
We have not declared any cash dividends on our common stock since our inception and do not anticipate paying such dividends in the foreseeable future. We plan to retain any future earnings for use in our business. Any decisions as to future payments of dividends will depend on our earnings and financial position and such other facts as the board of directors deems relevant. We are not limited in our ability to pay dividends on our securities.
ITEM 2. LEGAL PROCEEDINGS.
As of the date hereof, we are not a party to any material legal proceedings, and we are not aware of any such claims being contemplated against us.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
None.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
On March 1, 2007, our then parent Dematco converted $80,000 of its debt to equity by transferring 1,000,000 shares of our common stock to Mr. Buddy Young in exchange for the satisfaction of a portion of the debt owed to him.
All securities sold or issued by us have been of common stock, par value $0.0001 per share, and are restricted as to transfer. We have issued
shares to eight shareholders, seven of whom are affiliates of ours. None of the sales or transfers was effected by an underwriter, broker or dealer or as part of an underwriting, registration or private placement. There were no proceeds from any of the following listed transfers or sales. The sale/transfers were affected as follows:
OTHER ISSUANCE/SALE OF SHARES
STEVEN KATTEN
On March 23, 2007, we issued 100,000 shares of our common stock to Mr. Katten for services rendered and to be rendered. His service consists of assisting us in the production and marketing of our videos.
L. STEPHEN ALBRIGHT
On April 2, 2007, we issued 200,000 shares of our common stock to Mr. Albright for services rendered and to be rendered. Mr. Albright's services consisted of the negotiation and preparation of all documents regarding Mr. Young's transaction with Dematco and other contract matters, assistance in the preparation of this Form 10-SB and other business related legal matters.
DENNIS SPIEGELMAN, DAVID LEEDY, AND MEL POWELL
On April 2, 2007, we issued 10,000 shares of our common stock to Mr. Spiegelman, Mr. Leedy, and Mr. Powell for their services rendered and to be rendered. Their services consisted of joining our board of directors and participating in the governance of our corporation.
HOWARD YOUNG
On April 2, 2007, we issued 200,000 shares of our common stock to Mr. Young for services rendered and to be rendered. Mr. Young's services consisted of becoming an officer of the Company and managing the sales operations, as well as other daily operations, of the Company.
STEVEN KATTEN
On March 23, 2007, we issued 100,000 shares of our common stock to Mr. Katten for services rendered and to be rendered. His service consists of assisting us in the production and marketing of our videos.
All of these transactions were exempt from the registration requirements of the Securities Act of 1933, as amended, by virtue of the exemptions provided under section 4(2) was available because:
o The transfer or issuance did not involve underwriters, underwriting discounts or commissions;
o A restriction on transfer legend was placed on all certificates issued;
o The distributions did not involve general solicitation or advertising; and,
o The distributions were made only to insiders, accredited investors or investors who were sophisticated enough to evaluate the risks of the investment. Each shareholder was given access to all information about our business and the opportunity to ask questions and receive answers about our business from our management prior to making any investment decision.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law authorizes us to indemnify any director or officer under prescribed circumstances and subject to certain limitations against certain costs and expenses, including attorneys' fees actually and reasonably incurred in connection with any action, suit or proceedings, whether civil, criminal, administrative or investigative, to which such person is a party by reason of being one of our directors or officers if it is determined that the person acted in accordance with the applicable standard of conduct set forth in such statutory provisions.
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of Progressive Training pursuant to the foregoing provisions, or otherwise, we have been advised that, in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in such Act and is, therefore, unenforceable.
PART F/S
PROGRESSIVE TRAINING, INC.
TABLE OF CONTENTS FOR FINANCIAL INFORMATION
PAGE
INDEPENDENT AUDITORS' REPORT.............................................. 32
AUDITED FINANCIAL STATEMENTS OF ADVANCED MEDIA TRAINING, INC.:
Balance Sheets, May 31, 2006.............................................. 39
Statements of Operations
for the Years Ended May 31, 2006 and 2005............................. 34
Statements of Shareholders Deficit
for the Years Ended May 31, 2006 and 2005............................. 35
Statements of Cash Flows
for the Years Ended May 31, 2006 and 2005............................. 36
Notes to Financial Statements
for the Years Ended May 31, 2006 and 2005............................. 37
UNAUDITED INTERIM FINANCIAL STATEMENTS OF PROGRESSIVE
TRAINING, INC.:
Condensed Balance Sheets, February 28, 2007............................... 43
Condensed Statements of Operations and Accumulated Deficit
for the Three- and Nine-Month Periods Ended February 28, 2007
and February 28, 2006................................................. 44
Condensed Statements of Shareholders' Deficit
for the Nine-Month Period Ended February 28, 2007..................... 45
Condensed Statements of Cash Flows
for the Nine-Month Period Ended February 28, 2007
and February 28, 2006................................................. 46
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Notes to Condensed Financial Statements
for the Three- and Nine-Month Periods Ended February 28, 2007
and February 28, 2006................................................. 47
INDEPENDENT AUDITORS' REPORT
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF ADVANCED MEDIA TRAINING, INC.:
We have audited the accompanying balance sheet of Advanced Media Training, Inc. (the "Company") as of May 31, 2006, and the related statements of operations, shareholders' deficit, and cash flows for the years ended May31, 2006 and 2005. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, based on our audits, such financial statements present fairly, in all material respects, the financial position of the Company as of May 31, 2006, and the results of its operations and its cash flows for the years ended May 31, 2006 and 2005, in conformity with accounting principles generally accepted in the United States of America.
/S/ FARBER HASS HURLEY & MCEWEN LLP ----------------------------------- CAMARILLO, CALIFORNIA AUGUST 17, 2006 |
May 31,
May 31 2005
2006 (as restated)
------------- -------------
ASSETS
Cash .......................................... $ 50,701 $ 11,774
Accounts receivable, Net of allowance
for doubtful accounts of $16,590 and $10,261
in 2006 and 2005, respectively .............. 17,986 45,131
Property and equipment, Net of accumulated
depreciation of $11,709 and $9,576 in 2006
and 2005, respectively ...................... -- 2,133
Prepaid expenses and other assets ............. 2,115 2,278
Investment in Dematco, Inc. ................... 66,464 --
------------- -------------
TOTAL ASSETS .................................. $ 137,266 $ 61,316
============= =============
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LIABILITIES AND SHAREHOLDERS' DEFICIT
LIABILITIES:
Bank overdraft ................................ $ 1,289 $ --
Line of credit ................................ 18,686 37,096
Accounts payable and accrued expenses ......... 56,042 59,218
Deferred revenue .............................. 5,570 10,095
Note payable to shareholder ................... 52,629 446,375
Accrued interest due to shareholder ........... 64,974 35,650
Convertible note payable, net of debt discount 100,670 --
------------- -------------
Total liabilities ............................. 299,860 588,434
------------- -------------
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COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' DEFICIT:
Common stock, par value - $.001;
200,000,000 shares authorized; 23,774,000
shares issued and outstanding ............. 23,774 2,685
Common stock subscribed ....................... 50,000 --
Additional paid-in capital .................... 907,095 407,514
Accumulated deficit ........................... (1,143,463) (937,317)
------------- -------------
Total shareholders' deficit ................... (162,594) (527,118)
------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT ... $ 137,266 $ 61,316
============= =============
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See independent auditors' report and accompanying notes to financial statements.
ADVANCED MEDIA TRAINING, INC.
2006 2005
------------ ------------
(As Restated)
REVENUES ................................... $ 365,163 $ 443,762
COST OF REVENUES ........................... 91,087 173,629
------------ ------------
GROSS PROFIT ............................... 274,076 270,133
------------ ------------
EXPENSES:
Selling and marketing ...................... 170,598 249,100
General and administrative ................. 261,576 314,904
Research and development ................... 50 15,418
License agreement expense .................. -- 30,000
Interest expense ........................... 47,198 30,192
------------ ------------
Total expenses ............................. 479,422 639,614
------------ ------------
LOSS BEFORE INCOME TAXES ................... (205,346) (369,481)
INCOME TAXES ............................... 800 800
------------ ------------
NET LOSS ................................... $ (206,146) $ (370,281)
============ ============
BASIC AND DILUTED LOSS PER SHARE ........... $ (0.01) $ (0.03)
============ ============
WEIGHTED AVERAGE SHARES OUTSTANDING ........ 17,822,351 14,435,589
============ ============
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See independent auditors' report and accompanying notes to financial statements.
ADVANCED MEDIA TRAINING, INC.
STATEMENTS OF SHAREHOLDERS' DEFICIT
FOR THE YEARS ENDED MAY 31, 2006 AND 2005
-----------------------------------------------------------------------------------------------------------------
COMMON STOCK COMMON ADDITIONAL
------------------------- STOCK PAID-IN SHAREHOLDER
SHARES AMOUNT SUBSCRIBED CAPITAL (DEFICIT) TOTAL
----------- ----------- ----------- ----------- ----------- -----------
BALANCE, MAY 31, 2004 ..... 1,920,000 $ 1,920 $ -- $ 213,679 $ (567,036) $ (351,437)
COMMON STOCK ISSUED TO
EMPLOYEES AND CONSULTANTS
AS COMPENSATION ......... 410,000 410 -- 81,590 -- 82,000
COMMON STOCK ISSUED FOR
CASH ..................... 195,000 195 -- 38,805 -- 39,000
COMMON STOCK ISSUED FOR
ACCRUED ROYALTY .......... 160,000 160 -- 31,840 -- 32,000
CONTRIBUTION OF CAPITAL ... -- -- -- 41,600 -- 41,600
NET LOSS .................. -- -- -- -- (370,281) (370,281)
----------- ----------- ----------- ----------- ----------- -----------
BALANCE, MAY 31, 2005
(As Restated) ........... 2,685,000 $ 2,685 $ -- $ 407,514 $ (937,317) $ (527,118)
6:1 FORWARD STOCK SPLIT ... 13,425,000 13,425 -- (13,425) -- --
COMMON STOCK ISSUED FOR
ACQUISITION OF DEMATCO ... 7,664,000 7,664 -- 58,800 -- 66,464
COMMON STOCK SUBSCRIPTION . -- -- 50,000 -- -- 50,000
CONTRIBUTED CAPITAL ....... -- -- -- 41,600 -- 41,600
DEBT DISCOUNT ............. -- -- -- 412,606 -- 412,606
NET LOSS .................. -- -- -- -- (206,146) (206,146)
----------- ----------- ----------- ----------- ----------- -----------
BALANCE, MAY 31, 2006 ..... 23,774,000 $ 23,774 $ 50,000 $ 907,095 $(1,143,463) $ (162,594)
=========== =========== =========== =========== =========== ===========
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See accompanying notes to financial statements.
ADVANCED MEDIA TRAINING, INC.
2006 2005
--------- ---------
(As
Restated)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ............................................. $(206,146) $(370,281)
Adjustments to reconcile net loss
to net cash used by operating activities:
Common stock issued for services ................ -- 82,000
Contribution of capital for services ........... 41,600 41,600
Provision for bad debts ......................... 13,592 2,601
Amortization of debt discount ................... 13,276 --
Depreciation .................................... 2,133 2,581
Changes in operating assets and liabilities:
Accounts receivable ......................... 13,553 (12,557)
Other assets ................................ 163 16
Accounts payable and accrued expenses ....... 26,148 (18,660)
Deferred revenue ............................ (4,525) 10,095
--------- ---------
Net cash used by operating activities ................ (100,206) (262,605)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Bank overdraft ....................................... 1,289 --
Net borrowings (repayments) from (to) shareholder .... (393,746) 231,000
Net borrowings (repayments) on line of credit ........ (18,410) 264
Proceeds from issuance of convertible note ........... 500,000 --
Proceeds from common stock subscribed ................ 50,000 --
Common stock issued for cash ......................... -- 39,000
--------- ---------
Net cash provided by financing activities ............ 139,133 270,264
--------- ---------
NET INCREASE IN CASH ................................. 38,927 7,659
CASH, BEGINNING OF YEAR .............................. 11,774 4,115
--------- ---------
CASH, END OF YEAR .................................... $ 50,701 $ 11,774
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest ............................... $ 15,627 $ 2,460
Cash paid for income taxes ........................... $ 800 $ --
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In September 2004, the Company issued 410,000 shares of its common stock for services valued at $82,000. In addition, the Company issued 160,000 shares of its common stock for accrued royalties totaling $32,000.
In January and March 2006, the Company issued 7,664,000 shares of its common stock for the acquisition of Dematco, Inc. (See Note 2).
See independent auditors' report and accompanying notes to financial statements.
ADVANCED MEDIA TRAINING, INC.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Advanced Media Training, Inc. (formerly Advanced Knowledge, Inc.; the "Company") is engaged in the development, production and distribution of training and educational video products and services.
From the Company's inception to April 18, 2003, it was a wholly-owned subsidiary of Enhance Biotech, Inc. ("Enhance"), formerly Becor Communications, Inc. On April 18, 2003, Enhance agreed to transfer 1 million shares of the Company's common stock held by them in exchange for forgiveness of debt of approximately $434,000 due to Buddy Young, the Company's President and majority shareholder. Accordingly, the Company is no longer a wholly-owned subsidiary of Enhance Biotech after April 18, 2003. However, it still owned 750,000 shares. On September 7, 2004 Enhance distributed the 750,000 shares of common stock held by it to its shareholders of record as of July 15, 2004. The shareholders received one share of the Company's common stock for every five hundred shares of Enhance's common stock, held by the shareholder as of July 15, 2004. Under the agreement no shareholder received less than 100 shares of the Company's common stock. As a result of this transaction, since September 7, 2004, Enhance has not been a shareholder of the Company, nor do they have any other relationship with it.
RESTATEMENT OF FINANCIAL STATEMENTS
The financial statements for the year ended May 31, 2005 have been restated to correct certain errors in the financial statements and notes thereto. The errors relate to the recording of compensation expense for the Company's president as contributed capital ($41,600 per year), the reclassification of a non-refundable upfront fee from additional paid in capital to deferred revenue ($15,000), the expense of its license agreement ($30,000) and the overstatement of expenses ($21,314).
The following financial statement line items for fiscal years 2005 were affected by the corrections.
STATEMENT OF OPERATIONS EFFECT OF
AS REPORTED AS ADJUSTED CHANGE
----------- ----------- -----------
Revenue ............................ $ 438,857 $ 443,762 $ 4,905
Cost of revenues ................... 192,510 173,629 (18,881)
Gross profit ....................... 246,347 270,133 23,786
Expenses ........................... 573,447 639,614 66,167
Net loss ........................... $ (327,900) $ (370,281) (42,381)
Basic and diluted loss per share ... $ (0.14) $ (0.16) $ (0.02)
BALANCE SHEET EFFECT OF
AS REPORTED AS ADJUSTED CHANGE
----------- ----------- -----------
Total assets ....................... $ 88,316 $ 61,316 $ (27,000)
Deferred revenue ................... -- 10,095 10,095
Total liabilities .................. 599,653 588,434 (11,219)
Common stock ....................... 2,685 2,685 0
Additional paid-in capital ......... 339,314 407,514 68,200
Accumulated deficit ................ (853,336) (937,317) (83,981)
Total shareholders' deficit ........ $ (511,337) $ (527,118) $ (15,781)
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STATEMENT OF CASH FLOWS EFFECT OF
AS REPORTED AS ADJUSTED CHANGE
----------- ----------- -----------
TNet loss ......................... $ (327,900) $ (370,281) $ (42,381)
Capital contribution .............. 0 41,600 41,600
Deferred revenue .................. 0 10,095 10,095
Net cash used by operating
activities ...................... (247,605) (262,605) 15,000
Contribution of capital ........... 15,000 0 (15,000)
Net cash provided by financing
activities ...................... 285,264 270,264 (15,000)
Net increase in cash .............. 7,659 7,659 $ 0
Cash, beginning of year ........... 4,115 4,115 $ 0
Cash, end of year ................. $ 11,774 $ 11,774 $ 0
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UNCLASSIFIED BALANCE SHEET
In accordance with the provisions of AICPA Statement of Position 00-2, "ACCOUNTING BY PRODUCERS OR DISTRIBUTORS OF FILMS," the Company has elected to present an unclassified balance sheet.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make certain estimates and assumptions that affect the reported amounts and timing of revenue and expenses, the reported amounts and classification of assets and liabilities, and the disclosure of contingent assets and liabilities. These estimates and assumptions are based on the Company's historical results as well as management's future expectations. The Company's actual results could vary materially from management's estimates and assumptions.
CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of accounts receivable. Accounts receivable are unsecured and the Company is at risk to the extent such amount becomes uncollectible. The Company normally does not require collateral to support its accounts receivable. As of May 31, 2006, three customers each accounted for approximately 12% of gross accounts receivable.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of all financial instruments potentially subject to valuation risk (principally consisting of our lines of credit and convertible debenture) approximates fair value due to the short term maturities of such instruments. See Note 5 regarding our valuation of the convertible debenture.
ACCOUNTS RECEIVABLE
Accounts receivable are reported at the customers' outstanding balances less any allowance for doubtful accounts. Interest is not accrued on overdue accounts receivable. The Company normally does not require advance payments on orders of products.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
The allowance for doubtful accounts on accounts receivable is charged to income in amounts sufficient to maintain the allowance for uncollectible accounts at a level management believes is adequate to cover any probable losses. Management determines the adequacy of the allowance based on historical write-off percentages and information collected from individual customers. Accounts receivable are charged off against the allowance when collectibility is determined to be permanently impaired (bankruptcy, lack of contact, age of account balance, etc).
PRODUCTION COSTS
The Company periodically incurs costs to produce new management training videos and enhance current videos. Historically, the Company has been unable to accurately forecast revenues to be earned on these videos and has, accordingly, expensed such costs as incurred. The Company expensed approximately $-0- and $96,000 in the years ended May 31, 2006 and 2005, respectively.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is computed using the straight-line method over an estimated useful life of five years. Property and equipment consists of a telephone system and office equipment costing $11,709 which is fully depreciated at May 31, 2006.
LONG-LIVED ASSETS
Statement of Financial Accounting Standards No. 121, "Accounting For The Impairment of Long-Lived Assets and For Long-Lived Assets to Be Disposed of", requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the historical cost-carrying value of an asset may no longer be appropriate. The Company assesses recoverability of the carrying value of an asset by estimating the future net cash flows expected to result from the asset, including eventual disposition. If the future net cash flows are less than the carrying value of the asset, an impairment loss is recorded equal to the difference between the asset's carrying value and fair value. The Company did not record any impairment loss in 2006 or 2005.
REVENUE RECOGNITION
Sales are recognized upon shipment of videos and training manuals to the customer. Royalty income is earned from third-party sellers of our videos. Royalty income averages 30% of the sales price and is recorded upon receipt. Total royalty income amounted to $42,902 and $19,422 in 2006 and 2005, respectively. Rental income is recognized over the related period that the videos are rented. Total rental income amounted to $2,250 and $7,139 in 2006 and 2005, respectively. The Company's products may not be returned by the customer. Accordingly, the Company has made no provision for returns.
SEGMENT DISCLOSURE
During the years ended May 31, 2006 and 2005, the Company did not have one customer that accounted for 10% or more of the Company's net sales. Foreign sales (primarily royalty income from Canada) amounted to $12,523 and $16,804 in 2006 and 2005, respectively.
SHIPPING AND HANDLING COSTS
The Company's policy is to classify shipping and handling costs as part of selling and marketing expense in the statement of operations. Total shipping and handling costs amounted to $11,253 and $17,524 in 2006 and 2005, respectively.
ADVERTISING EXPENSE
The Company expensed advertising costs amounting to $216 and $-0- in the years ended May 31, 2006 and 2005, respectively. The Company does not conduct direct response advertising.
CONTRIBUTION OF SERVICES
The Company's President and majority shareholder does not receive compensation for his services. An annual amount of $41,600 was determined by management to be a fair value of his services to the Company and has been recorded as a contribution of capital in 2006 and 2005.
RESEARCH AND DEVELOPMENT
Company-sponsored research and development costs related to both present and future products are expensed currently as a separate line item in the accompanying statements of operations.
INCOME TAXES
The Company accounts for its income taxes under the provisions of Statement of Financial Accounting Standards 109 ("SFAS 109"). The method of accounting for income taxes under SFAS 109 is an asset and liability method. The asset and liability method requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of temporary differences between tax bases and financial reporting bases of other assets and liabilities. The provision for income taxes in 2006 and 2005 represents the California corporate minimum franchise tax.
NET LOSS PER SHARE
Basic and diluted net loss per share has been computed by dividing net loss by the weighted average number of common shares outstanding during the applicable fiscal periods. At May 31, 2006, the Company had outstanding debt that is convertible into 833,000 shares of the Company's common stock. In 2005, the Company had no common stock equivalents outstanding. Potentially dilutive shares are excluded from the computation in loss periods, as their effect would be anti-dilutive.
RECENTLY ISSUED ACCOUNTING STANDARDS NOT YET ADOPTED
There are no accounting standards with pending adoptions that have any applicability to the Company.
RECLASSIFICATIONS
Certain amounts in the financial statements for the comparative prior fiscal periods have been reclassified to be consistent with the current fiscal period's presentation.
2. INVESTMENT IN DEMATCO, INC.
On February 6, 2006, the Company entered into a Letter of Intent with Dematco, Inc., ("Dematco"). Under the Letter of Intent, the Company had the 30 day right to, but not the duty, to purchase 8,080,000 shares of Dematco's common stock, which equals eight percent (8%) of the total issued and outstanding equity of Dematco.
On March 20, 2006, the Company closed the transaction with Dematco. Per the agreement, the Company issued 6,464,000 shares of its common stock, restricted as to transfer, for the 8,080,000 shares of Dematco.. In addition, the Company received an option to purchase all of the remaining issued and outstanding equity of Dematco from Dematco's shareholders. The option is exercisable up to and including February 28, 2007 (see Note 9).. The audited financial statements of Dematco indicate total assets of approximately $21,000 and a stockholders' deficit of approximately $2,000. Based on the restricted nature and volume of shares issued and Dematco's limited operating history as a development stage company, we valued the investment in Dematco at the par value of the shares issue, $6,464.
During January 2006, the Board of Directors issued 1,200,000 shares (unrestricted) of the Company's common stock to two consultants for services relating to the Letter of Intent (see Note 8). The shares had an aggregate fair market value of $60,000 on the date of issuance and have been recorded as a cost of acquisition.
3. NOTE PAYABLE TO SHAREHOLDER
The Company has an agreement with its President and majority shareholder to borrow up to $600,000 with interest at 8.0%. Repayment shall be made when funds are available and the balance of principal and accrued interest is due June 30, 2007.
4. LINE OF CREDIT
The Company has a revolving line of credit with a bank which permits borrowings up to $40,000. The line is guaranteed by the Company's President. Interest is payable monthly at 2.22% above the bank's prime rate of interest (8.00% at May 31, 2006).
5. CONVERTIBLE NOTE PAYABLE
The Company issued a zero percent convertible debenture to Societe Bancaire Privee, S.A., ("Societe"), and received $500,000 on February 28, 2006. Societe is related to Dematco through a business venture. The convertible debenture calls for the principal sum to be paid on or before March 31, 2009 without interest. At any time prior to the maturity date and after March 31, 2006, Societe shall have the right and option to convert the principal balance of $500,000 into 833,000 shares of the Company's common stock, in whole or part.
The Company has valued the convertible note payable (imputing an interest rate of 20%) and the related beneficial conversion option to convert the principal balance into shares using the "Relative Fair Value" approach. Accordingly, the Company recognized a $412,606 debt discount on the $500,000 principal value of the convertible note payable and is amortizing the debt discount over the life of the note, 38 months.
6. STOCKHOLDERS' DEFICIT
STOCK SPLIT
During January 2006, the Board of Directors adopted a resolution to effect a six
(6) for one (1) forward split of the Company's issued and outstanding common
stock to shareholders of record on February 3, 2006. The accompanying financial
statements retroactively include this forward stock split.
COMMON STOCK ISSUED FOR ACQUISITION OF DEMATCO
During January 2006, the Board of Directors issued 1,200,000 shares (unrestricted) of the Company's common stock to two consultants for services relating to the Letter of Intent (See Note 2). The shares had an aggregate fair market value of $60,000 on the date of issuance and have been recorded as a cost of acquisition.
During March 2006, the Company issued 6,464,000 shares of its common stock, restricted as to transfer, for 8,080,000 shares of Dematco (See Note 2). The Company valued the 6,464,000 shares at par value, $6,464.
COMMON STOCK SUBSCRIBED
During May 2006, the Company received $50,000 for the purchase of 59,524 shares of the Company's common stock restricted as to transfer. The shares were subsequently issued to the purchasers during July 2006.
7. INCOME TAXES
The Company has net operating loss carryforwards totaling approximately $953,000 at May 31, 2006 for Federal income tax purposes available to offset future taxable income through 2026. Deferred tax assets consist substantially of the net operating loss carryforward. The Company has made a 100% valuation allowance against the deferred tax asset. The valuation allowance increased approximately $56,000 due to the net loss incurred in 2006. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considered the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment.
8. STOCK COMPENSATION PLAN
On January 9, 2006, the Company created the 2006 Employees-Consultants Stock Compensation Plan of Advanced Media Training, Inc., ("the Plan"), to offer directors, officers and selected key employees, advisors and consultants an opportunity to acquire a proprietary interest in the success of the Company to receive compensation, or to increase such interest, by purchasing shares of the Company's common stock. The Plan provides for either the direct award or sale of shares and for the grant of options to purchase shares. Options granted under the Plan may include non-statutory options, as well as ISO's intended to qualify under section 422 of the IRS code. On January 18, 2006, the Company awarded 1,200,000 shares of common stock to two consultants under the Plan (see note 6). As of February 28, 2006, no options have been granted under the Plan.
9. COMMITMENTS AND CONTINGENCIES
The Company has agreements with companies to pay a royalty on sales of certain videos (co produced with these companies). The royalty is based on a specified formula, which averages approximately 35% of net amounts collected.
The Company leases its operating facility for $2,295 per month (increasing to $2,364 effective September 2006) in Encino, California under an operating lease which expires August 31, 2007. Rent expense was $25,025 and $28,065 for the years ended May 31, 2006 and 2005, respectively. Future minimum lease expenses for 2007 and 2008 amount to $28,161 and $7,092, respectively.
The Company has an option to exchange 92,920,000 shares of its common stock for all the remaining issued and outstanding equity of Dematco. The option is exercisable up to and including February 28, 2007, the one year anniversary of the effective date of the transaction.
10. LEGAL
The Company is, from time to time, subject to legal and other matters in the normal course of its business. While the results of such matters cannot be predicted with certainty, management does not believe that the final outcome of any pending matters will have a material effect on the financial position and results of operations of the Company.
11. RELATED PARTY TRANSACTIONS
In fiscal 2004, the Company entered into an agreement with a Director of the Company to pay $700 per month to preview scripts and ideas for potential training videos. The agreement was on a month-to-month basis. The expense, totaling $8,750, is included in Research and Development Expense in the Statement of Operations for the year ended May 31, 2005. The agreement was discontinued in June 2005.
The Company has a consulting agreement with Howard Young, the son of Buddy Young (the Company's Chief Executive Officer) which provides a monthly fee of $6,000 for administrative and sales consultation. The fee is allocated equally between General and Administrative and Selling and Marketing expense in the Statement of Operations for the years ended May 31, 2006 and 2005. Total expense was $72,000 in 2006 and 2005.
During the year ended May 31, 2005, the Company issued 100,000 shares of common stock (valued at $0.20 per share) each to Howard Young and Elise Eisenstadt (daughter of Buddy Young) for services rendered to the Company.
12. FOURTH QUARTER ADJUSTMENT
The Company recorded an adjustment in the fourth quarter that related to a correction of an error for overstatement of expenses in earlier fiscal quarters in 2006 and 2005. The following summarizes the adjustments and the revised results of operations in the applicable quarters:
August 31, November 30, February 28, May 31, November 30,
2004 2004 2005 2005 2005
----------- ----------- ----------- ----------- -----------
Net Loss, as previously reported .. $ (116,138) $ (207,041) $ (50,380) $ (18,036) $ (63,263)
Fourth quarter adjustments:
Overstatement of expenses .. 3,442 8,150 6,372 3,350 3,000
Net Loss, as restated ............. $ (112,696) $ (198,891) $ (44,008) $ (14,686) $ (60,263)
Net Loss per share, as previously $ (0.01) $ (0.01) $ (0.00) $ (0.00) $ (0.00)
reported
Effect of adjustments ............. $ (0.00) $ (0.00) $ (0.00) $ (0.00) $ (0.00)
Net Loss per share, as restated ... $ (0.01) $ (0.01) $ (0.00) $ (0.00) $ (0.00)
|
13. SUBSEQUENT EVENTS
During July 2006, the Company issued 59,524 shares of the Company's common stock, restricted as to transfer, to Societe in exchange for $50,000 received during May 2006.
PROGRESSIVE TRAINING, INC.
ASSETS
Accounts receivable, Net of allowance
for doubtful accounts of $25,590 ............................. $ 9,135
Prepaid expenses and other assets .............................. 2,784
------------
TOTAL ASSETS ................................................... $ 11,919
============
|
LIABILITIES AND SHAREHOLDERS' DEFICIT
LIABILITIES:
Bank overdraft ................................................. $ 1,529
Line of credit ................................................. 12,000
Accounts payable and accrued expenses .......................... 51,984
------------
Total liabilities .............................................. 65,513
------------
|
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' DEFICIT:
Common stock, par value - $.001; 200,000,000 shares
authorized; -0- and 1,750,000 shares
issued and outstanding ..................................... 1,750
Accumulated deficit ............................................ (53,594)
Less: note receivable .......................................... (1,750)
------------
Total shareholders' deficit .................................... (53,594)
------------
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT .................... $ 11,919
============
|
See accompanying notes to financial statements.
PROGRESSIVE TRAINING, INC.
CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED
FEBRUARY 28, 2007 AND 2006 (UNAUDITED)
-------------------------------------------------------------------------------------------
THREE MONTHS NINE MONTHS
---------------------------- ----------------------------
2007 2006 2007 2006
------------ ------------ ------------ ------------
REVENUES ................... $ 85,602 $ 94,287 $ 291,033 $ 293,801
COST OF REVENUES ........... 21,659 25,594 62,761 90,744
------------ ------------ ------------ ------------
GROSS PROFIT ............... 63,943 68,693 228,272 203,057
------------ ------------ ------------ ------------
EXPENSES:
Selling and marketing ...... 27,773 42,567 112,074 138,788
General and administrative . 59,955 67,488 168,539 208,263
Research and development ... 200 -- 200 50
Interest expense ........... 253 12,149 253 31,984
------------ ------------ ------------ ------------
Total expenses ............. 88,181 122,204 281,066 379,085
------------ ------------ ------------ ------------
LOSS BEFORE INCOME TAXES ... (24,238) (53,511) (52,794) (176,028)
INCOME TAXES ............... -- -- 800 800
------------ ------------ ------------ ------------
NET LOSS ................... $ (24,238) $ (53,511) $ (53,594) $ (176,828)
============ ============ ============ ============
BASIC AND DILUTED LOSS
PER SHARE ............... $ (0.00) $ (0.00) $ (0.00) $ (0.01)
============ ============ ============ ============
WEIGHTED AVERAGE SHARES
OUTSTANDING ............. -- 16,656,667 -- 16,290,220
============ ============ ============ ============
|
See accompanying notes to financial statements.
PROGRESSIVE TRAINING, INC.
CONDENSED STATEMENTS OF SHAREHOLDERS' DEFICIT
FOR THE NINE MONTHS ENDED FEBRUARY 28, 2007 (UNAUDITED)
--------------------------------------------------------------------------------------------------
COMMON STOCK
------------------------- ACCUMULATED NOTE
SHARES AMOUNT (DEFICIT) RECEIVABLE TOTAL
----------- ----------- ----------- ----------- -----------
BALANCE, MAY 31, 2006 .... -- $ -- $ -- $ -- $ --
COMMON STOCK ISSUED ...... 1,750,000 1,750 -- (1,750) --
NET LOSS ................. -- -- (53,594) -- (53,594)
----------- ----------- ----------- ----------- -----------
BALANCE, FEBRUARY 28, 2007 1,750,000 $ 1,750 $ (53,594) $ (1,750) $ (53,594)
=========== =========== =========== =========== ===========
|
See accompanying notes to financial statements.
PROGRESSIVE TRAINING, INC.
2007 2006
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ........................................... $ (53,594) $(176,828)
Adjustments to reconcile net loss
to net cash used by operating activities:
Contribution to capital for services.......... - 31,200
Provision for bad debt......................... 9,000 5,000
Depreciation .................................. - 1,981
Changes in operating assets and liabilities:
Accounts receivable ....................... (18,135) (8,313)
Other assets .............................. (2,784) (5)
Accounts payable and accrued expenses ..... 51,984 75,389
Deferred revenue .......................... - (3,730)
--------- ---------
Net cash used by operating activities .............. (13,529) (75,306)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Bank overdraft ..................................... 1,529 2,597
Net borrowings (repayments) from (to) shareholders . - 60,438
Net borrowings (repayments) on line of credit ...... 12,000 1,268
Proceeds from issuance of convertible note ......... - 500,000
--------- ---------
Net cash provided by financing activities .......... 13,529 564,303
--------- ---------
NET INCREASE (DECREASE) IN CASH .................... - 488,997
CASH, BEGINNING OF PERIOD .......................... - 11,774
--------- ---------
CASH, END OF PERIOD................................. $ - $500,771
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest ............................. $ 253 $ 3,491
Cash paid for income taxes ......................... $ - $ 800
|
See accompanying notes to financial statements.
PROGRESSIVE TRAINING, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. BACKGROUND
Progressive Training, Inc. (the "Company") was incorporated in Delaware on October 31, 2006. From August 10, 2004 through October 31, 2006 the business of the development, production and distribution of management and general workforce training videos was conducted under the name Advanced Media Training, Inc. The results from operations prior to October 31, 2006 of Advanced Media Training, Inc. are included for comparative discussion and analysis.
2. INTERIM CONDENSED FINANCIAL STATEMENTS
FISCAL PERIODS
The Company's fiscal year-end is May 31. References to a fiscal year refer to the calendar year in which such fiscal year ends.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make certain estimates and assumptions that affect the reported amounts and timing of revenue and expenses, the reported amounts and classification of assets and liabilities, and the disclosure of contingent assets and liabilities. These estimates and assumptions are based on the Company's historical results as well as management's future expectations. The Company's actual results could vary materially from management's estimates and assumptions.
RECLASSIFICATIONS
Certain amounts in the financial statements for the comparative prior fiscal periods have been reclassified to be consistent with the current fiscal period's presentation.
PREPARATION OF INTERIM CONDENSED FINANCIAL STATEMENTS
These interim condensed financial statements for the periods ended February 28,
2007 and 2006 have been prepared by the Company's management, without audit, in
accordance with accounting principles generally accepted in the United States of
America and pursuant to the rules and regulations of the United States
Securities and Exchange Commission ("SEC"). In the opinion of management, these
interim condensed consolidated financial statements contain all adjustments
(consisting of only normal recurring adjustments, unless otherwise noted)
necessary to present fairly the Company's financial position, results of
operations and cash flows for the fiscal periods presented. Certain information
and note disclosures normally included in annual financial statements prepared
in accordance with accounting principles generally accepted in the United States
of America have been condensed or omitted in these interim financial statements
pursuant to the SEC's rules and regulations, although the Company's management
believes that the disclosures are adequate to make the information presented not
misleading. The financial position, results of operations and cash flows for the
interim periods disclosed herein are not necessarily indicative of future
financial results. These interim condensed consolidated financial statements
should be read in conjunction with the annual financial statements and the notes
thereto included in the Company's most recent Annual Report on Form 10-KSB (as
amended) for the fiscal year ended May 31, 2006.
SIGNIFICANT CUSTOMERS
The Company has one customer that exceeded 10% of gross accounts receivable, (11%) at February 28, 2007. One customer accounted for 10% of sales during the nine months ended February 28, 2007. No customers exceeded 10% of sales during the nine months ended February 28, 2006.
PRODUCTION COSTS
The Company periodically incurs costs to produce new management training videos and enhance current videos. Historically, the Company has been unable to accurately forecast revenues to be earned on these videos and has, accordingly, expensed such costs as incurred. The Company had no production costs in either period.
NET LOSS PER SHARE
Basic and diluted net loss per share has been computed by dividing net loss by the weighted average number of common shares outstanding during the applicable fiscal periods. Potentially dilutive shares are excluded from the computation in loss periods, as their effect would be anti-dilutive.
UNCLASSIFIED BALANCE SHEET
In accordance with the provisions of AICPA Statement of Position 00-2, "ACCOUNTING BY PRODUCERS OR DISTRIBUTORS OF FILMS," the Company has elected to present an unclassified balance sheet based on the operations of the Company during this quarter and year-to-date consisting primarily of the development, production and distribution of training and educational video products and services.
3. LINE OF CREDIT
The Company has a revolving line of credit with a bank which permits borrowings up to $40,000. The line is guaranteed by the Company's former President. Interest is payable monthly at 2.22% above the bank's prime rate of interest (10.48% at February 28, 2007).
4. INCOME TAXES
The Company has net operating loss carryforwards totaling approximately $953,000 at May 31, 2006 for Federal income tax purposes available to offset future taxable income through 2026. Deferred tax assets consist substantially of the net operating loss carryforward. The Company has made a 100% valuation allowance against the deferred tax asset
5. COMMITMENTS AND CONTINGENCIES
The Company has agreements with companies to pay a royalty on sales of certain videos (co produced with these companies). The royalty is based on a specified formula, which averages approximately 35% of net amounts collected.
The Company leases its operating facility for $2,364 per month in Encino, California under an operating lease which expires August 31, 2007. Rent expense was $21,069 and $18,140 for the nine months ended February 28, 2007 and 2006, respectively.
6. LEGAL
The Company is, from time to time, subject to legal and other matters in the normal course of its business. While the results of such matters cannot be predicted with certainty, management does not believe that the final outcome of any pending matters will have a material effect on the financial position and results of operations of the Company.
7. SUBSEQUENT EVENT
On April 4, 2007, in order to facilitate Dematco, Inc.'s ("Dematco") exit from the corporate training video business and to allow it to devote its resources to the business of its recently acquired subsidiary, Dematco, Ltd., Dematco entered into an Asset and Liability Assumption Agreement, effective as of March 1, 2007, whereby it's wholly owned subsidiary, Progressive Training, Inc. ("Progressive") acquired all of it's assets and liabilities related to the production and distribution of workforce training videos. The assets included distribution rights to twelve workforce training videos, it's distribution contracts with other producers of related videos, accounts receivable totaling approximately $9,000, the name Advanced Knowledge for use by Progressive, as well as the "Advanced Knowledge" URL and website. The liabilities assumed by Progressive included approximately $28,500 in accounts payable, an outstanding line of credit balance of approximately $12,000 and an outstanding credit card balance of approximately $23,500.
Additionally, on April 4, 2007 Dematco's Board of Directors approved and agreed to a debt conversion agreement between three parties, namely, (i) Dematco as the parent corporation, (ii) Progressive, as the then wholly owned subsidiary of, Dematco and (iii) Progressive's president, Buddy Young. Under the terms of the agreement, Mr. Young agreed to convert $80,000 of the $138,174 debt owed to him by Dematco pursuant to a promissory note, in exchange for Dematco's transfer to Mr. Young of 1,000,000 shares of Progressive common stock from the 1,750,000 shares owned by Dematco. Consequently, Mr. Young became Progressive's principal shareholder while Dematco retained 750,000 shares of Progressive. As a result, Progressive is no longer a subsidiary, wholly owned or otherwise, of Dematco. In addition, Dematco is no longer a controlling shareholder of Progressive.
PART III
ITEM 1. INDEX TO EXHIBITS.
The following exhibits are filed or incorporated by reference as part of this Registration Statement.
(3) ARTICLES OF INCORPORATION AND BYLAWS
3.1 Certificate of Incorporation of the registrant dated October 31, 2006, and filed with the Delaware Secretary of State, Division of Corporations on October 31, 2006;
3.2 Bylaws of the registrant, adopted October 31, 2006;
(4) INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING INDENTURES
4.1 Form of Certificate of Common Stock of Progressive Training, Inc.;
(5) OPINION ON LEGALITY
5.1 Opinion of L. Stephen Albright regarding the legality of the securities being registered;
(10) MATERIAL CONTRACTS
10.1 Secured Promissory Note of the Registrant, dated April 2, 2007, in favor of Buddy Young;
10.2 Security Agreement, dated April 2, 2007, between Registrant and Buddy Young, as secured party;
10.3 Lease between Registrant, as lessee, and Encino Gardens, LLC, as lessor, for office space at 17337 Ventura Boulevard, Suite 208, Encino, California, the location of Registrant's principal executive offices;
(21) SUBSIDIARIES OF THE REGISTRANT
NONE
(23) CONSENTS OF EXPERTS AND COUNSEL
23.1 Consent of Farber Hass Hurley & McEwen LLP .
23.2 Consent of L. Stephen Albright (included in Exhibit 5.1)
(99) ADDITIONAL EXHIBITS
NONE
ITEM 2. DESCRIPTION OF EXHIBITS. N/A
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized.
PROGRESSIVE TRAINING, INC.
Dated: June 13, 2007 By: /S/ BUDDY YOUNG
---------------------------------
BUDDY YOUNG
BUDDY YOUNG, CEO & CFO
|
EXHIBITS INDEX
The following exhibits are filed or incorporated by reference as part of this Registration Statement.
3.1 Certificate of Incorporation of the registrant dated October 31, 2006, and filed with the Delaware Secretary of State, Division of Corporations on October 31, 2006;
3.2 Bylaws of the registrant, adopted October 31, 2006;
(4) INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING INDENTURES
4.1 Form of Certificate of Common Stock of Progressive Training, Inc.
(5) OPINION ON LEGALITY
5.1 Opinion of L. Stephen Albright regarding the legality of the securities being registered;
(10) MATERIAL CONTRACTS
10.1 Secured Promissory Note of the Registrant, dated April 2, 2007, in favor of Buddy Young;
10.2 Security Agreement, dated April 2, 2007, between Registrant and Buddy Young;
10.3 Lease between Registrant, as lessee, and Encino Gardens, LLC, as lessor, for office space at 17337 Ventura Boulevard, Suite 208, Encino, California, the location of Registrant's principal executive offices;
(21) SUBSIDIARIES OF THE REGISTRANT
NONE
(23) CONSENTS OF EXPERTS AND COUNSEL
23.1 Consent of Farber Hass Hurley & McEwen LLP
23.2 Consent of L. Stephen Albright, see Exhibit 5.1
(99) ADDITIONAL EXHIBITS
NONE
EXHIBIT 3.1
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
DELIVERED 05:49 PM 10/31/2006
FILED 05:49 PM 10/31/2006
SRV 061000967 - 4243205 FILE
CERTIFICATE OF INCORPORATION
FIRST: The name of this corporation (the "Corporation") is:
PROGRESSIVE TRAINING, INC.
SECOND: The Registered Office of this Corporation in Delaware is to be located at 15 East North Street, Dover, Delaware 19901, County of Kent. The Registered Agent in charge thereof is Paracorp Incorporated 15 East North Street, Dover, Delaware 19901.
THIRD: The purpose of the Corporation is to engage in any lawful act or activity for which corporation may be organized under the General Corporation Law of Delaware other than the banking business, the trust company business, or the practice of a profession.
FOURTH: The Corporation is authorized to issue one class of stock, namely common stock, and the total number of shares of common stock which this corporation is authorized to issue is One Hundred Million (100,000,000), par value $0.0001 per share.
FIFTH: The name and address of the incorporator of this Corporation are as follows:
L. Stephen Albright, Esq.
17337 Ventura Blvd., Ste. 208
Encino, California 91316
SIXTH: The Board of Directors shall have the power to adopt, amend or repeal the by-laws of this Corporation.
SEVENTH: No director shall be personally liable to this Corporation or its stockholders for monetary damages for any breach of fiduciary duty by such director as director. Notwithstanding the foregoing sentence, a director shall be liable to the extent provided by applicable law, (i) for breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) pursuant to Section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the director derived an improper personal benefit. No amendment or repeal of this Article Seventh shall apply to or have any effect on the liability of alleged liability of any director of the Corporation for or with respect to any acts or omissions of such director prior to such amendment.
I, THE UNDERSIGNED, for the purpose of forming a corporation under the laws of the State of Delaware, do make, file and record this Certificate, and do certify that the facts herein stated are true, and I have accordingly hereunto set my hand this 31st day of October, 2006.
/s/ L. Stephen Albright ---------------------------------- L. STEPHEN ALBRIGHT, Incorporator |
EXHIBIT 3.3
PROGRESSIVE TRAINING, INC.,
A DELAWARE CORPORATION
BYLAWS
ARTICLE I
Offices
SECTION 1.01 REGISTERED OFFICE. The registered office of Progressive Training, Inc. (hereinafter called the "Corporation") in the State of Delaware shall be at 15 East North Street, Dover, Delaware, County of Kent, and the name of the registered agent in charge thereof shall be Paracorp Incorporated, 15 East North Street, Dover, Delaware 19901.
SECTION 1.02 OTHER OFFICES. The Corporation may also have an office or offices at such other place or places, either within or without the State of Delaware, as the Board of Directors (hereinafter called the "Board") may from time to time determine or as the business of the Corporation may require. As at the date of the adoption of these by-law, the Corporation's principal executive offices are located at 17337 Ventura Boulevard, Suite 208 Encino, California 91302.
ARTICLE II
Meetings of Stockholders
SECTION 2.01 ANNUAL MEETINGS. Annual meetings of the stockholders of the Corporation for the purpose of electing directors and for the transaction of such other proper business as may come before such meetings may be held at such time, date and place as the Board shall determine by resolution.
SECTION 2.02 SPECIAL MEETINGS. A special meeting of the stockholders for the transaction of any proper business may be called at any time by the Board or by the President.
SECTION 2.03 PLACE OF MEETINGS. All meetings of the stockholders shall be held at such places, within or without the State of Delaware, as may from time to time be designated by the person or persons calling the respective meeting and specified in the respective notices or waivers of notice thereof.
SECTION 2.04 NOTICE OF MEETINGS. Except as otherwise required by law, notice of each meeting of the stockholders, whether annual or special, shall be given not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder of record entitled to vote at such meeting by delivering a written notice thereof to him personally, or by depositing such notice in the United States mail, in a postage prepaid envelope, directed to him
at his post office address furnished by him to the Secretary of the Corporation for such purpose or, if he shall not have furnished to the Secretary his address for such purpose, then at his post office address last known to the Secretary, or by delivering such notice by any other lawful means. Except as otherwise expressly required by law, no publication of any notice of a meeting of the stockholders shall be required. Every notice of a meeting of the stockholders shall state the place, date and hour of the meeting, and, in the case of a special meeting, shall also state the purpose or purposes for which the meeting is called. Notice of any meeting of stockholders shall not be required to be given to any stockholder who shall have waived such notice and such notice shall be deemed waived by any stockholder who shall attend such meeting in person or by proxy, except as a stockholder who shall attend such meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Except as otherwise expressly required by law, notice of any adjourned meeting of the stockholders need not be given if the time and place thereof are announced at the meeting at which the adjournment is taken.
SECTION 2.05 QUORUM. Except in the case of any meeting for the election of directors summarily ordered as provided by law, the holders of record of a majority in voting power of the outstanding shares of stock of the Corporation entitled to be voted thereat, present in person or by proxy, shall constitute a quorum for the transaction of business at any meeting of the stockholders of the Corporation or any adjournment thereof. In the absence of a quorum at any meeting or any adjournment thereof, the holders of record of a majority in voting power of the shares present in person or by proxy and entitled to vote thereat or, in the absence therefrom of all the stockholders, any officer entitled to preside at, or to act as secretary of, such meeting may adjourn such meeting from time to time. At any such adjourned meeting at which a quorum is present any business may be transacted which might have been transacted at the meeting as originally called.
SECTION 2.06 VOTING.
(a) Each stockholder shall, at each meeting of the stockholders, be entitled to vote in person or by proxy each share or fractional share of the stock of the Corporation having voting rights on the matter in question and which shall have been held by him and registered in his name on the books of the Corporation:
(i) on the date fixed pursuant to Section 6.05 of these Bylaws as the record date for the determination of stockholders entitled to notice of and to vote at such meeting, or
(ii) if no such record date shall have been so fixed, then (a) at the close of business on the day next preceding the day on which notice of the meeting shall be given or (b) if notice of the meeting shall be waived, at the close of business on the day next preceding the day on which the meeting shall be held.
(b) Shares of its own capital stock belonging to the Corporation or to another corporation, if a majority of the shares entitled to vote in the election of directors in such other corporation is held, directly or indirectly, by the Corporation, shall neither be entitled to vote nor be counted for quorum purposes. Nothing in the previous sentence shall be construed as limiting the right of any corporation to vote stock, including but not limited to its own stock, held by it in a fiduciary capacity. Persons whose stock is pledged shall be entitled to vote, unless in the transfer by the pledgor on the books of the Corporation he shall have expressly empowered the pledgee to vote thereon, in which case only the pledgee, or his proxy, may represent such stock and vote thereon. Stock having voting power standing of record in the names of two or more persons, whether fiduciaries, members of a partnership, joint tenants, tenants in common, tenants by entirety or otherwise, or with respect to which two or more persons have the same fiduciary relationship, shall be voted in accordance with the provisions of the General Corporation Law of the State of Delaware.
(c) Any such voting rights may be exercised by the stockholder entitled thereto in person or by proxy granted by such stockholder or by his attorney thereunto authorized and delivered to the secretary of the meeting; provided, however, that no proxy shall be voted or acted upon after three years from its date unless said proxy shall provide for a longer period. The attendance at any meeting of a stockholder who may theretofore have given a proxy shall not have the effect of revoking the same unless he shall in writing so notify the secretary of the meeting prior to the voting of the proxy or unless he votes in person at such meeting. At any meeting of the stockholders all matters, except as otherwise provided in the Certificate of Incorporation, in these Bylaws or by law, or by the rules or regulations of any stock exchange applicable to the Corporation, shall be decided by the vote of a majority in voting power of the stockholders present in person or by proxy and entitled to vote thereat and thereon, a quorum being present. The vote at any meeting of the stockholders on any question need not be by ballot, unless so directed by the chairman of the meeting. On a vote by ballot each ballot shall be signed by the stockholder voting, or by his proxy, if there be such proxy, and it shall state the number of shares voted.
SECTION 2.07 LIST OF STOCKHOLDERS. The Secretary of the Corporation shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present.
SECTION 2.08 INSPECTORS. If at any meeting of the stockholders a vote by written ballot shall be taken on any question, the chairman of such meeting may appoint an inspector or inspectors to act with respect to such vote. Each inspector so appointed shall first subscribe an oath faithfully to execute the duties of an inspector at such meeting with strict impartiality and according to the best of his ability. Such inspectors shall decide upon the qualification of the voters and shall report the number of shares represented at the meeting and entitled to vote on such question, shall conduct and accept the votes, and, when the voting is completed, shall ascertain and report the number of shares voted respectively for and against the question. Reports of inspectors shall be in writing and subscribed and delivered by them to the Secretary of the Corporation. The inspectors need not be stockholders of the Corporation, and any officer of the Corporation may be an inspector on any question other than a vote for or against a proposal in which he shall have a material interest.
SECTION 2.09 ACTION WITHOUT MEETING. Any action required to be taken at any annual or special meeting of stockholders of the Corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing and who, if the action had been taken at a meeting, would have been entitled to notice of the meeting if the record date for such meeting had been the date that written consents signed by a sufficient number of holders or members to take the action were delivered to the Corporation in accordance with applicable law.
ARTICLE III
Board of Directors
SECTION 3.01 GENERAL POWERS. The property, business and affairs of the Corporation shall be managed by or under the direction of the Board.
SECTION 3.02 NUMBER AND TERM OF OFFICE. The number of directors of the corporation shall be no less than three (3) and no greater than seven (7). Directors need not be stockholders. Each of the directors of the Corporation shall hold office until his successor shall have been duly elected and shall qualify or until he shall resign or shall have been removed in the manner hereinafter provided.
SECTION 3.03 ELECTION OF DIRECTORS. The directors shall be elected annually by the stockholders of the Corporation and the persons receiving the greatest number of votes, up to the number of directors to be elected, shall be the directors. There shall be no cumulative voting of shares for directors.
SECTION 3.04 RESIGNATIONS. Any director of the Corporation may resign at any time by giving written notice to the Board or to the Secretary of the Corporation. Any such resignation shall take effect at the time specified therein, or, if the time be not specified, it shall take effect immediately upon its receipt; unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.
SECTION 3.05 VACANCIES. Except as otherwise provided in the Certificate of Incorporation, any vacancy in the Board, whether because of death, resignation, disqualification, an increase in the number of directors, or any other cause, may be filled by vote of the majority of the remaining directors, although less than a quorum. Each director so chosen to fill a vacancy shall hold office until his successor shall have been elected and shall qualify or until he shall resign or shall have been removed in the manner hereinafter provided.
SECTION 3.06 PLACE OF MEETING, ETC. The Board may hold any of its meetings at such place or places within or without the State of Delaware as the Board may from time to time by resolution designate or as shall be designated by the person or persons calling the meeting or in the notice or a waiver of notice of any such meeting. Directors may participate in any regular or special meeting of the Board by means of conference telephone or similar communications equipment pursuant to which all persons participating in the meeting of the Board can hear each other, and such participation shall constitute presence in person at such meeting.
SECTION 3.07 FIRST MEETING. The Board shall meet as soon as practicable after each annual election of directors and notice of such first meeting shall not be required.
SECTION 3.08 REGULAR MEETINGS. Regular meetings of the Board may be held at such times as the Board shall from time to time by resolution determine. If any day fixed for a regular meeting shall be a legal holiday at the place where the meeting is to be held, then the meeting shall be held at the same hour and place on the next succeeding business day not a legal holiday. Except as provided by law, notice of regular meetings need not be given.
SECTION 3.09 SPECIAL MEETINGS. Special meetings of the Board of Directors may be called at any time, and for any purpose permitted by law, by the President, or by the Secretary on the written request of a majority of the members of the Board of Directors, which meetings shall be held at the time and place either within or without the State of Delaware designated by the person or persons calling the meeting.
SECTION 3.10 NOTICE. Notice of the time and place of any special meeting shall be given to the directors by the Secretary, or in case of his absence, refusal or inability to act, by any other officer. Any such notice may be given by mail, by telegraph, by telephone, by facsimile, by cable, by personal service or by other lawful means (including by electronic mail), to each of the directors. If the notice is by mail, it shall be deposited in a United States Post Office at least forty-eight hours before the time of the meeting; if by facsimile, transmitted at
least twelve hours before the time of the meeting; and if by telegraph, by deposit of the message with the telegraph company at least twelve hours before the time of the meeting, if by telephone, or by other lawful means, or by personal service, given at least twelve hours before the time of the meeting.
Except where otherwise required by law or by these Bylaws, notice of the purpose of a special meeting need not be given. Notice of any meeting of the Board shall not be required to be given to any director who is present at such meeting, except a director who shall attend such meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.
SECTION 3.11 QUORUM AND MANNER OF ACTING. Except as otherwise provided in these Bylaws or by law, the presence of a majority of the authorized number of directors shall be required to constitute a quorum for the transaction of business at any meeting of the Board, and all matters shall be decided at any such meeting, a quorum being present, by the affirmative votes of a majority of the directors present. In the absence of a quorum, a majority of directors present at any meeting may adjourn the same from time to time until a quorum shall be present. Notice of any adjourned meeting need not be given. The directors shall act only as a Board, and the individual directors shall have no power as such.
SECTION 3.12 ACTION BY CONSENT. Any action required or permitted to be taken at any meeting of the Board or of any committee thereof may be taken without a meeting if a written consent thereto is signed by all members of the Board or of such committee, as the case may be, and such written consent is filed with the minutes of proceedings of the Board or committee.
SECTION 3.13 REMOVAL OF DIRECTORS. Subject to the provisions of the Certificate of Incorporation, any director may be removed at any time, either with or without cause, by the affirmative vote of the stockholders having a majority of voting power of the Corporation.
SECTION 3.14 COMPENSATION. The directors shall receive only such compensation for their services as directors as may be allowed by resolution of the Board. The Board may also provide that the Corporation shall reimburse each such director for any expense incurred by him on account of his attendance at any meetings of the Board or committees of the Board. Neither the payment of such compensation nor the reimbursement of such expenses shall be construed to preclude any director from serving the Corporation or its subsidiaries in any other capacity and receiving compensation therefor.
SECTION 3.15 COMMITTEES. The Board may, by resolution passed by a majority of the whole Board, designate one or more committees, each committee to consist of one or more of the directors of the Corporation. Any such committee, to the extent provided in the resolution of the Board and except as otherwise limited by law, shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the Corporation, and
may authorize the seal of the Corporation to be affixed to all papers which may require it. Any such committee shall keep written minutes of its meetings and report the same to the Board at the next regular meeting of the Board. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in the place of any such absent or disqualified member.
ARTICLE IV
Officers
SECTION 4.01 NUMBER. The officers of the Corporation shall be a President, one or more Vice Presidents (the number thereof and their respective titles to be determined by the Board), a Chief Executive Officer, a Treasurer and a Secretary. There may also be other officers, including a Chairman of the Board of Directors as specified in these Bylaws or designated by the Board.
SECTION 4.02 ELECTION, TERM OF OFFICE AND QUALIFICATIONS. The officers
of the Corporation, except such officers as may be appointed in accordance with
Section 4.03, shall be elected annually by the Board at the first meeting
thereof held after the election thereof. Each officer shall hold office until
his successor shall have been duly chosen and shall qualify or until his
resignation or removal in the manner hereinafter provided.
SECTION 4.03 ASSISTANTS, AGENTS AND EMPLOYEES, ETC. In addition to the officers specified in Section 4.01, the Board may appoint other assistants, agents and employees as it may deem necessary or advisable, including one or more Assistant Secretaries, each of whom shall hold office for such period, have such authority, and perform such duties as the Board may from time to time determine. The Board may delegate to any officer of the Corporation or any committee of the Board the power to appoint, remove and prescribe the duties of any such assistants, agents or employees.
SECTION 4.04 REMOVAL. Any officer, assistant, agent or employee of the Corporation may be removed, with or without cause, at any time: (i) in the case of an officer, assistant, agent or employee appointed by the Board, only by resolution of the Board; and (ii) in the case of an officer, assistant, agent or employee, by any officer of the Corporation or committee of the Board upon whom or which such power of removal may be conferred by the Board.
SECTION 4.05 RESIGNATIONS. Any officer or assistant may resign at any time by giving written notice of his resignation to the Board or the Secretary of the Corporation. Any such resignation shall take effect at the time specified therein, or, if the time be not specified, upon receipt thereof by the Board or the Secretary, as the case may be; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.
SECTION 4.06 VACANCIES. A vacancy in any office because of death, resignation, removal, disqualification, or other cause, may be filled for the unexpired portion of the term thereof in the manner prescribed in these Bylaws for regular appointments or elections to such office.
SECTION 4.07 THE PRESIDENT. The President of the Corporation shall have, subject to the control of the Board and the Chief Executive Officer, general and active supervision and management over the business of the Corporation and over its several officers, assistants, agents and employees.
SECTION 4.08 CHIEF EXECUTIVE OFFICER. Unless the Board of Directors shall otherwise determine, the President shall also serve as the Chief Executive Officer. The Chief Executive Officer shall, subject to the control of the Board, have general supervision, direction and control of the business and affairs of the Corporation. He shall preside at all meetings of stockholders. He shall have the general powers and duties of management usually vested in the chief executive officer of a corporation, and shall have such other powers and duties with respect to the administration of the business and affairs of the Corporation as may from time to time be assigned to him by the Board or as is prescribed by the Bylaws.
SECTION 4.09 THE VICE PRESIDENTS. Each Vice President, if any, shall have such powers and perform such duties as the Board may from time to time prescribe. At the request of the President, or in case of the President's absence or inability to act upon the request of the Board, a Vice President shall perform the duties of the President and when so acting, shall have all the powers of, and be subject to all the restrictions upon, the President.
SECTION 4.10 THE SECRETARY. The Secretary shall, if present, record the proceedings of all meetings of the Board, of the stockholders, and of all committees of which a secretary shall not have been appointed in one or more books provided for that purpose; he shall see that all notices are duly given in accordance with these Bylaws and as required by law; he shall be custodian of the seal of the Corporation and shall affix and attest the seal to all documents to be executed on behalf of the Corporation under its seal; and, in general, he shall perform all the duties incident to the office of Secretary and such other duties as may from time to time be assigned to him by the Board.
SECTION 4.11 THE TREASURER. The Treasurer shall be the Chief Financial Officer of the Corporation and shall have the general care and custody of the funds and securities of the Corporation, and shall deposit all such funds in the name of the Corporation in such banks, trust companies or other depositories as shall be selected by the Board. He shall receive, and give receipts for, moneys due and payable to the Corporation from any source whatsoever. He shall exercise general supervision over expenditures and disbursements made by officers, agents and employees of the Corporation and the preparation of such records and reports in connection therewith as may be necessary or desirable. He shall, in general, perform all other duties
incident to the office of Treasurer and such other duties as from time to time may be assigned to him by the Board.
SECTION 4.12 COMPENSATION. The compensation of the officers of the Corporation shall be fixed from time to time by the Board. None of such officers shall be prevented from receiving such compensation by reason of the fact that he is also a director of the Corporation. Nothing contained herein shall preclude any officer from serving the Corporation, or any subsidiary, in any other capacity and receiving such compensation by reason of the fact that he is also a director of the Corporation.
ARTICLE V
Contracts, Checks, Drafts, Bank Accounts, Etc.
SECTION 5.01 EXECUTION OF CONTRACTS. The Board, except as in these Bylaws otherwise provided, may authorize any officer or officers, agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the Corporation, and such authority may be general or confined to specific instances; and unless so authorized by the Board or by these Bylaws, no officer, agent or employee shall have any power or authority to bind the Corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or in any amount.
SECTION 5.02 CHECKS, DRAFTS, ETC. All checks, drafts or other orders for payment of money, notes or other evidence of indebtedness, issued in the name of or payable to the Corporation, shall be signed or endorsed by such person or persons and in such manner as, from time to time, shall be determined by resolution of the Board. Each such officer, assistant, agent or attorney shall give such bond, if any, as the Board may require.
SECTION 5.03 DEPOSITS. All funds of the Corporation not otherwise employed shall be deposited from time to time to the credit of the Corporation in such banks, trust companies or other depositories as the Board may select, or as may be selected by any officer or officers, assistant or assistants, agent or agents, or attorney or attorneys of the Corporation to whom such power shall have been delegated by the Board. For the purpose of deposit and for the purpose of collection for the account of the Corporation, the President, any Vice President or the Treasurer (or any other officer or officers, assistant or assistants, agent or agents, or attorney or attorneys of the Corporation who shall from time to time be determined by the Board) may endorse, assign and deliver checks, drafts and other orders for the payment of money which are payable to the order of the Corporation.
SECTION 5.04 GENERAL AND SPECIAL BANK ACCOUNTS. The Board may from time to time authorize the opening and keeping of general and special bank accounts with such banks, trust companies or other depositories as the Board may select or as may be selected by any officer or officers, assistant or assistants, agent or agents, or attorney or attorneys of the Corporation to whom such power shall have been delegated by the Board. The Board may make
such special rules and regulations with respect to such bank accounts, not inconsistent with the provisions of these Bylaws, as it may deem expedient.
ARTICLE VI
Shares and Their Transfer
SECTION 6.01 CERTIFICATES FOR STOCK. Every owner of stock of the Corporation shall be entitled to have a certificate or certificates, to be in such form as the Board shall prescribe, certifying the number and class of shares of the stock of the Corporation owned by him. The certificates representing shares of such stock shall be numbered in the order in which they shall be issued and shall be signed in the name of the Corporation by the Chairman or Vice-Chairman of the Board of Directors, or the President or a Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary. Any of or all of the signatures on the certificates may be a facsimile. In case any officer, transfer agent or registrar who has signed, or whose facsimile signature has been placed upon, any such certificate, shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, such certificate may nevertheless be issued by the Corporation with the same effect as though the person who signed such certificate, or whose facsimile signature shall have been placed thereupon, were such officer, transfer agent or registrar at the date of issue. A record shall be kept of the respective names of the persons, firms or corporations owning the stock represented by such certificates, the number and class of shares represented by such certificates, respectively, and the respective dates thereof, and in case of cancellation, the respective dates of cancellation. Every certificate surrendered to the Corporation for exchange or transfer shall be canceled, and no new certificate or certificates shall be issued in exchange for any existing certificate until such existing certificate shall have been so canceled, except in cases provided for in Section 6.04.
SECTION 6.02 TRANSFERS OF STOCK. Transfers of shares of stock of the Corporation shall be made only on the books of the Corporation by the registered holder thereof, or by his attorney thereunto authorized by power of attorney duly executed and filed with the Secretary, or with a transfer clerk or a transfer agent appointed as provided in Section 6.03, and upon surrender of the certificate or certificates for such shares properly endorsed and the payment of all taxes thereon. The person in whose name shares of stock stand on the books of the Corporation shall be deemed the owner thereof for all purposes as regards the Corporation. Whenever any transfer of shares shall be made for collateral security, and not absolutely, such fact shall be so expressed in the entry of transfer if, when the certificate or certificates shall be presented to the Corporation for transfer, both the transferor and the transferee request the Corporation to do so.
SECTION 6.03 REGULATIONS. The Board may make such rules and regulations as it may deem expedient, not inconsistent with these Bylaws, concerning the issue, transfer and registration of certificates for shares of the stock of the Corporation. It may appoint, or authorize any officer or officers to appoint, one or more transfer clerks or one or more transfer agents and one or more registrars, and may require all certificates for stock to bear the signature or signatures of any of them.
SECTION 6.04 LOST, STOLEN, DESTROYED, AND MUTILATED CERTIFICATES. In any case of loss, theft, destruction, or mutilation of any certificate of stock, another may be issued in its place upon proof of such loss, theft, destruction, or mutilation and upon the giving of a bond of indemnity to the Corporation in such form and in such sum as the Board may direct; provided, however, that a new certificate may be issued without requiring any bond when, in the judgment of the Board, it is proper so to do.
SECTION 6.05 FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF RECORD. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board, and which record date: (1) in the case of determination of stockholders entitled to vote at any meeting of stockholders or adjournment thereof shall, unless otherwise required by law, not be more than sixty (60) nor less than ten (10) days before the date of such meeting; (2) in the case of determination of stockholders entitled to express consent to corporate action in writing without a meeting, shall not be more than ten (10) days from the date upon which the resolution fixing the record date is adopted by the Board; and (3) in the case of any other action, shall not be more than sixty (60) days prior to such other action. If no record date is fixed: (1) the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held; (2) the record date for determining stockholders entitled to express consent to corporate action in writing without a meeting, when no prior action of the Board is required by law, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation in accordance with applicable law, or, if prior action by the Board is required by law, shall be at the close of business on the day on which the Board adopts the resolution taking such prior action, and (3) the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board adopts the resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board may fix a new record date for the adjourned meeting.
ARTICLE VII
Indemnification
SECTION 7.01 INDEMNITY. This Corporation shall indemnify its directors,
offices and employees to the fullest extent allowed by law, provided, however,
that it shall be within the discretion of the Board of Directors whether to
advance any funds in advance of disposition of any action suit or proceeding,
and provided further that nothing in this Article 7 shall be deemed to obviate
the necessity of the Board of Directors to make any determination that has met
the applicable standard of conduct set forth in subsections (a) and (b) of
Section 145 of the Delaware General Corporation Law.
SECTION 7.02 INSURANCE. Upon resolution passed by the Board, the Corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability under the provisions of this Article.
ARTICLE VIII
Miscellaneous
SECTION 8.01 SEAL. The Board shall provide a corporate seal, which shall be in the form of a circle and shall bear the name of the Corporation and words and figures showing that the Corporation was incorporated in the State of Delaware and the year of incorporation.
SECTION 8.02 WAIVER OF NOTICES. Whenever notice is required to be given by these Bylaws or the Certificate of Incorporation or by law, the person entitled to said notice may waive such notice in writing, either before or after the time stated therein, and such waiver shall be deemed equivalent to notice.
SECTION 8.03 AMENDMENTS. These Bylaws, or any of them, may be altered, amended or repealed, and new Bylaws may be made, (i) by the Board, by vote of a majority of the number of directors then in office as directors, acting at any meeting of the Board, or (ii) by the stockholders, at any annual meeting of stockholders, without previous notice, or at any special meeting of stockholders, provided that notice of such proposed amendment, modification, repeal or adoption is given in the notice of special meeting.
CERTIFICATE OF SECRETARY
The undersigned, being the duly elected Secretary of Progressive Training, Inc., a Delaware corporation, hereby certifies that the Bylaws to which this Certificate is attached were duly adopted by the Board of Directors of said Corporation as of the ___th day of October, 2006.
/s/ L. Stephen Albright
-------------------------------
By: L. STEPHEN ALBRIGHT, Secretary
|
Exhibit 4.1
The stock certificates state:
Number Shares
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
PROGRESSIVE TRAINING, INC.
TOTAL AUTHORIZED ISSUE
100,000,000 SHARES PAR VALUE $.0001 EACH
COMMON STOCK
THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED, SOLD,
PLEDGED, HYPOTHECATED, OR OTHERWISE DISPOSED OF EXCEPT IN ACCORDANCE WITH A
SHAREHOLDERS' AGREEMENT AMONG THE FOUNDING SHAREHOLDERS, A COPY OF WHICH MAY BE
OBTAINED FROM THE CORPORATION. PLEASE ALSO SEE RESTRICTION ON TRANSFER ON
REVERSE SIDE OF CERTIFICATE.
This is to certify that _____________________ is the owner of _______________ fully paid and non-assessable shares of the above Corporation transferable only on the books of the Corporation by the holder hereof in person or by duly authorized Attorney upon surrender of this Certificate properly endorsed.
Witness, the seal of the Corporation and the signatures of its duly authorized officers.
Dated
____________________________ [place for seal]
------------------------
Secretary
President
|
[Reverse Side of Certificate]
The following abbreviations, when used in the inscription on the fact of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and not as tenants in common
UNIF TRANSFERS MIN ACT - _______Custodian_____
(Cust) (Minor)
under Uniform Transfer to Minors Act ________________
Additional Abbreviations may also be used though not in the above list
For Value received, _______________________________ hereby sell, assign
and transfer unto PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
Dated___________________
In presence of _______________________
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED, QUALIFIED, APPROVED OR DISAPPROVED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE OFFERED, SOLD OR OTHERWISE DISPOSED OF OR TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR AN APPLICABLE EXEMPTION TO THE REGISTRATION REQUIREMENTS OF SUCH ACT OR SUCH LAWS AND NEITHER THE UNITED STATES SECURITIES AND EXCEPT COMMISSION NOR ANY OTHER FEDERAL OR STATE REGULATORY AUTHORITY HAS PASSED ON OR ENDORSED THE MERITS OF THESE SECURITIES.
[The following text is placed vertically on the reverse side of the certificates]
NOTICE: SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATEVER
EXHIBIT 5.1
ALBRIGHT & BLUM, P.C. LETTER HEAD
June 13, 2007
PROGRESSIVE TRAINING, INC.
17337 Ventura Boulevard, Suite 208
Encino, California 91316
Re: PROGRESSIVE TRAINING, INC. (THE "COMPANY")
REGISTRATION ON FORM 10SB
Gentlemen:
We have acted as counsel to Progressive Training, Inc., a Delaware corporation
(the "Company"), in connection with the filing of the Registration Statement on
Form 10-SB (the "Registration Statement") under the Securities Exchange Act of
1934, as amended (the "Act"), relating to the registration of the Company as a
Section 12(g) company under that Act. For the purpose of this opinion, the term
"Shares" shall include shares of common stock, par value $.0001 per share of the
Company which are outstanding. This opinion is being provided at your request
for use in the Registration Statement.
In connection with this opinion, we have examined originals, or copies certified or otherwise identified to my satisfaction, of such instruments, certificates, records and documents, and have reviewed such questions of law, as we have deemed necessary or appropriate for purposes of this opinion. In such examination, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals, the conformity to the original documents of all documents submitted as copies and the authenticity of the originals of all documents submitted as copies. As to any facts material to my opinion, we have relied upon the aforesaid instruments, certificates, records and documents and inquiries of your representatives.
Based upon the foregoing examination, we are of the opinion that issuance of the Shares presently issued have been duly authorized by the Company and are validly issued, fully paid and non-assessable. In rendering this opinion, we advise you that I am a member of the Bar of the State of California and we do not express any opinion herein concerning any law other than the law of the State of California and the corporate laws of the State of Delaware. We are not opining on Federal securities or other laws or on "blue sky" or other state securities laws.
We hereby consent to the filing of this opinion as an exhibit to the Registration Statement. We also hereby consent to any reference to me in the Registration Statement or documents incorporated by reference in the Registration Statement.
Sincerely,
/s/ Albright & Blum, P.C. ------------------------ ALBRIGHT & BLUM, P.C. |
EXHIBIT 10.1
SECURED PROMISSORY NOTE
(SECURED BY A SECURITY AGREEMENT)
(HEREINAFTER "NOTE")
Up To Two Hundred Fifty Thousand Dollars Encino, California (up to $250,000) April 2, 2007
For value received, the undersigned maker/borrower, namely PROGRESSIVE TRAINING, INC., a Delaware corporation (hereinafter "BORROWER"), hereby promises to pay to BUDDY YOUNG, an individual (hereinafter "HOLDER"), at 17337 Ventura Blvd., Suite 208 Encino, California 91316, or at such other place as may be designated in writing by the HOLDER of this NOTE, the principal sum not to exceed Two Hundred Fifty Thousand Dollars ($250,000), with interest thereon from April 2, 2007, on the outstanding principal balance, as such may change from time to time.
The principal amount hereof, as adjusted from time to time, shall bear interest at the rate of eight percent (8%) per annum. Interest hereunder shall be calculated on the basis of a three hundred sixty (360) day year for each day on any of the principal balance hereof which remains outstanding. Interest shall be paid in arrears. Prepayment of interest or principal, in whole or in part, may be made without penalty or forfeiture.
This NOTE shall be due and payable in full on December 31, 2008.
Principal and interest are payable in lawful money of the United States of America.
Any interest rate provided hereunder which exceeds the maximum rate provided by applicable law shall instead be deemed to be such maximum rate and any interest in excess of such maximum rate paid to HOLDER shall be applied to reduce the principal balance of this NOTE so that in no event shall HOLDER receive or be entitled to receive interest in excess of the maximum amount permitted by applicable law.
BORROWER hereby waives diligence, demand, presentment for payment, and notice of whatever kind of nature. Without discharging or in any way affecting the liability of the undersigned, the undersigned hereby consents to any and all extensions of this NOTE. BORROWER further waives exhaustion of legal remedies and the right to plead any and all statutes of limitation as a defense to any demand on this NOTE, or to any agreement to pay the same.
If any provision of this NOTE is held to be invalid or unenforceable by a court of competent jurisdiction, the other provisions of this NOTE shall remain in full force.
Should BORROWER default on any payment due pursuant this NOTE or defaults or breaches any of the agreements, promises, covenants, conditions, duties or obligations under this NOTE or contained in the Security Agreement executed in conjunction herewith, then the entire sum of unpaid principal and interest shall become immediately due and payable to HOLDER, without any notice to BORROWER by HOLDER. Any failure of HOLDER to exercise its right to accelerate repayment of this NOTE shall not constitute a waiver of the right to exercise it in the future or in the event of any subsequent default or breach.
Whether or not legal proceedings are instituted to enforce any of the HOLDER's rights under this NOTE, BORROWER shall be responsible for and pay all reasonable costs, including attorney's fees, incurred by HOLDER with regard to enforcement of its rights under this NOTE or collection of the sums due HOLDER under the NOTE.
This NOTE shall be governed by, and construed in accordance with, the laws of the State of California.
This NOTE is secured by a Security Agreement, dated April 2, 2007, executed by BORROWER in favor of HOLDER and is given as security for the repayment of the loan represented by this NOTE.
Executed this 2nd day of April, 2007, in the city of Los Angeles (Encino), County of Los Angeles, State of California.
"BORROWER":
PROGRESSIVE TRAINING, INC.
A Delaware corporation
/S/ L. STEPHEN ALBRIGHT -------------------------------------------- L. STEPHEN ALBRIGHT, Secretary and Director |
Notwithstanding any terms, conditions, covenants, representations or warranties contained in the NOTE, HOLDER acknowledges and confirms that HOLDER is obligated hereunder to provide up to Two Hundred Fifty ($250,000) to cover any of BORROWER's financial shortfalls through December 31, 2008.
Acknowledged, confirmed and agreed by HOLDER,
/S/ BUDDY YOUNG -------------------------------- BUDDY YOUNG |
EXHIBIT 10.2
SECURITY AGREEMENT
This SECURITY AGREEMENT ("SECURITY AGREEMENT") is made this 2nd day of April, 2007, by, between and among, PROGRESSIVE TRAINING, INC, a Delaware corporation ("DEBTOR"), on the one hand, and BUDDY YOUNG, an individual, ("SECURED PARTY"), on the other hand, with respect to the following:
RECITALS
A. DEBTOR has borrowed the sum of up to Two Hundred Fifty Thousand ($250,000) from Secured Party (the "DEBT");
B. DEBTOR and SECURED PARTY now mutually desire for DEBTOR to secure the Loan in the principal sum of up to Two Hundred Fifty Thousand ($250,000) as evidenced by a SECURED PROMISSORY NOTE, dated of even date herewith, and signed by DEBTOR in favor of SECURED PARTY (the "NOTE") in said amount (the "DEBT") and for DEBTOR to pledge the personal property listed on attached Exhibit "A" security\collateral or the repayment of the DEBT (the "COLLATERAL") on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of and reliance on the mutual covenants, conditions, promises, and representations contained herein, the parties hereto agree as follows:
A) RECITALS. The recitals stated above are incorporated herein by this reference as if set forth in full at this point.
B) DEFINITIONS. As used in this SECURITY AGREEMENT, the following terms shall have the following meanings:
a. "COLLATERAL" and "SECURITY" mean the personal property set forth and fully described in attached Exhibit "A".
b. "DEBTOR" means PROGRESSIVE TRAINING, INC., a Delaware corporation.
c. "DEBT", "INDEBTEDNESS" and "LOAN" mean DEBTOR'S obligations represented by the NOTE executed by DEBTOR and payable to the SECURED PARTY as Holder.
d. "LIEN" means any security interest, mortgage, pledge, lien, attachment, claim, charge, encumbrance, agreement retaining title, or other interests in, to or covering the COLLATERAL.
e. "OBLIGATIONS" mean any and all existing and future duties, obligations, indebtedness and liabilities of DEBTOR to SECURED PARTY, including attorneys' fees incurred in enforcing this SECURITY AGREEMENT or collecting payment due under the NOTE.
f. "BREACH" and "DEFAULT" mean an event or omission that is or would be a breach or default under this SECURITY AGREEMENT or any other document evidencing, creating or relating to the security for and performance of the OBLIGATIONS.
g. "NOTE" means the SECURED PROMISSORY NOTE, of even date herewith executed by DEBTOR for the benefit of SECURED PARTY, a true and correct copy of which is attached hereto and marked as Exhibit "B".
h. Terms defined in the California Uniform Commercial Code not otherwise defined in this Security Agreement are used in this Security Agreement as defined in that Code on the date of this agreement.
i. "SECURED PARTY" and "HOLDER" mean BUDDY YOUNG, or his nominee or order.
C) GRANT OF SECURITY INTEREST. For the purpose of providing SECURED PARTY with security for the DEBTOR's payment of the NOTE, DEBTOR hereby grants SECURED PARTY a security interest in and to the COLLATERAL, which is more specifically described and set forth in attached Exhibit "A" and which is incorporated herein by this reference. Further, DEBTOR shall execute any and all other documents necessary to grant, perfect and otherwise effect notice that SECURED PARTY has a first priority secured interest in the COLLATERAL. In this regard, DEBTOR grants SECURED PARTY the limited power of attorney to sign such documents on behalf of DEBTOR in the event DEBTOR is unable to or refuses to sign such documents. Said documents include, without limitation, a UCC-1 Financing Statement to be filed with the California Secretary of State.
D) DEBTOR'S COVENANTS. DEBTOR shall:
a. make all payments to the SECURED PARTY as set forth in the NOTE;
b. pay all expenses, including attorneys' fees, incurred by SECURED PARTY in the perfection, preservation, realization, enforcement, and exercise of its rights under this SECURITY AGREEMENT;
c. indemnify SECURED PARTY against loss of any kind, including reasonable attorneys' fees, caused to SECURED PARTY by reason of its interest in the COLLATERAL;
d. not sell, lease, transfer, or otherwise dispose of or hypothecate the COLLATERAL, without the express prior written consent of the SECURED PARTY;
e. not permit liens on the COLLATERAL, except the lien created by this SECURITY AGREEMENT;
f. not use the COLLATERAL for any unlawful purpose or in any way that would void any effective insurance;
g. perform all acts necessary to maintain, preserve, and protect the COLLATERAL;
h. notify SECURED PARTY promptly in writing of any default, potential default, or any development that might have a material adverse effect on the COLLATERAL;
E) DEBTOR'S REPRESENTATIONS AND WARRANTIES. DEBTOR covenants, warrants, and represents as follows:
a. DEBTOR, has the full corporate capacity to understand and enter into this SECURITY AGREEMENT and possesses all the necessary corporate authority to conduct its businesses in the fashion now conducted and as contemplated herein, wherever conducted;
b. The SECURITY AGREEMENT is a valid and binding obligation of DEBTOR. This SECURITY AGREEMENT creates a perfected, first priority security interest enforceable against the COLLATERAL in which DEBTOR'S rights will be effected as this SECURITY AGREEMENT creates a perfected, first priority security interest for the benefit of SECURED PARTY, which is enforceable against the COLLATERAL;
c. Neither the execution and delivery of this SECURITY AGREEMENT, nor the taking of any action in compliance with it, will (1) violate or breach any law, regulation, rule, order, or judicial action binding on DEBTOR, any agreement to which DEBTOR is a party, if such exist; or (2) result in the creation of a lien against the COLLATERAL except that created by this SECURITY AGREEMENT;
d. No default or potential default exists; and,
e. DEBTOR owns the COLLATERAL, subject only to those liens and adverse claims created by this SECURITY AGREEMENT.
F) TERMINATION. This SECURITY AGREEMENT shall continue in effect even though from time to time there may be no outstanding obligations or commitments under this SECURITY AGREEMENT and/or the NOTE. This SECURITY AGREEMENT shall terminate when (a) DEBTOR'S complete performance of all obligations to SECURED PARTY, including without limitation the payment of all INDEBTEDNESS by DEBTOR to SECURED PARTY; (b)
SECURED PARTY has no commitment that could give rise to an obligation; and (c) DEBTOR has notified SECURED PARTY in writing of the termination.
G) DEFAULT. DEBTOR shall be in default under this SECURITY AGREEMENT if:
a. DEBTOR fails to make the payment, or any payment when due, or the entire indebtedness to SECURED PARTY when due;
b. DEBTOR fails to make any remittances required by this SECURITY AGREEMENT;
c. DEBTOR commits any breach of this SECURITY AGREEMENT, or any present or future rider or supplement to this SECURITY AGREEMENT, or any other agreement between DEBTOR and SECURED PARTY evidencing the obligation or securing it;
d. Any warranty, representation, or statement, made by or on behalf of DEBTOR in or with respect to the SECURITY AGREEMENT, is false;
e. The COLLATERAL is lost, stolen, or damaged; or,
f. There is a seizure or attachment of, or a levy on, the COLLATERAL.
H) REMEDIES.
8.1 Upon an event of default, SECURED PARTY may, at its option, to:
a. Declare the obligations immediately due and payable without demand, presentment, protest, or notice to DEBTOR, all of which DEBTOR expressly waives;
b. Terminate any obligations or to make future advances, if any;
c. Exercise all rights and remedies available to a secured creditor after default, including but not limited to the rights and remedies of secured creditors under the California Uniform Commercial Code;
d. Perform any of DEBTOR's obligations under this SECURITY AGREEMENT for DEBTOR's account; and,
e. SECURED PARTY's notice of the time and place of public sale of the COLLATERAL, or the time on or after which a private sale or other disposition of the COLLATERAL will be made, is reasonable if sent to DEBTOR in the manner for giving notice at least five days before the public or private sale.
f. Any money expended or obligations incurred in doing so, including reasonable attorneys' fees and interest at the highest rate permitted by law, will be charged to DEBTOR and added to the obligation secured by this SECURITY AGREEMENT.
8.2 Upon an event of a notice of default by the SECURED PARTY, DEBTOR shall:
a. Assemble the COLLATERAL and make it and all records relating to it available to SECURED PARTY as SECURED PARTY directs; and,
b. Allow SECURED PARTY, its representatives, and its agents to enter the premises where all or any part of the COLLATERAL, the records, or both may be, and remove any or all of it.
I) ATTORNEY'S FEES. In the event that SECURED PARTY is forced to engage attorneys to enforce its rights under the SECURITY AGREEMENT and the NOTE, including to collect payments due under the NOTE, DEBTOR shall be responsible for the payment of his, her or its costs and expenses of collection, including reasonable attorneys' fees.
J) SURVIVAL OF DEBTOR'S REPRESENTATIONS AND WARRANTIES. DEBTOR's representations and warranties made in this SECURITY AGREEMENT shall survive its execution, delivery, and termination.
K) ASSIGNMENT. This SECURITY AGREEMENT shall bind and enure to the benefit of the parties successors, heirs and assigns. However, DEBTOR may not assign its rights, duties and obligations under this SECURITY AGREEMENT or the NOTE without SECURED PARTY's prior written consent.
L) NOTICES. Any communication to be given to any party to this SECURITY AGREEMENT shall be in writing and deemed delivered when delivered in person, sent by fax, or five (5) days after such is deposited in the United States Mail, postage prepaid, certified, return receipt requested and addressed to the party at its address set forth below:
If to DEBTOR:
Progressive Training, Inc.
17337 Ventura Blvd. Suite 208
Encino, CA 91316
If to SECURED PARTY:
Buddy Young
17614 McCormick Street
Encino, CA 91316
M) BINDING EFFECT. The parties hereto hereby represent and warrant, each for themselves, that they have the capacity to and are authorized to enter into this SECURITY AGREEMENT on behalf of their respective party and that this SECURITY AGREEMENT, when duly executed, will constitute a legal, valid, and binding agreement, enforceable against each of the parties in accordance with the terms hereof.
N) SEVERABILITY. In the event that any covenant, condition or other provision herein contained is held to be invalid, void, or illegal by any court of competent jurisdiction, the same shall be deemed severable from the remainder of this SECURITY AGREEMENT and shall in no way affect, impair or invalidate any other covenant, condition or other provision herein contained. If such condition, covenant or other provision shall be deemed invalid due to its scope or breadth, such covenant, condition, or other provision shall be deemed valid to the extent of the scope or breadth permitted by law.
O) WAIVER, AMENDMENT AND MODIFICATION.No breach of any provision hereof can be waived unless in writing. Waiver of any one breach of any provision hereof shall not be deemed to be a waiver of any other breach of the same or any other provision hereof. This SECURITY AGREEMENT may only be amended or modified by an instrument in writing executed by each of the parties hereto.
P) CONSTRUCTION. This SECURITY AGREEMENT shall not be construed against the party preparing it, and shall be construed without regard to the identity of the person who drafted it or the party who caused it to be drafted and shall be construed as if all parties had jointly prepared this SECURITY AGREEMENT and it shall be deemed their joint work product, and each and every provision of this SECURITY AGREEMENT shall be construed as though all of the parties hereto participated equally in the drafting hereof; and any uncertainty or ambiguity shall not be interpreted against any one party. As a result of the foregoing, any rule of construction that a document is to be construed against the drafting party shall not be applicable.
Q) GOVERNING LAW. This SECURITY AGREEMENT shall be governed in all respects, including validity, interpretation, effect and enforcement, by the laws of the State of California.
R) COUNTERPARTS. This SECURITY AGREEMENT may be executed in counterparts, each of which, when so executed and delivered, shall be an original; however, such counterparts together shall constitute but one and the same SECURITY AGREEMENT.
S) HEADINGS. The headings used herein are for convenience of reference only and do not constitute a part of this SECURITY AGREEMENT and shall not be deemed to limit or effect any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have executed this SECURITY AGREEMENT effective as of the day and year above first written.
"DEBTOR":
PROGRESSIVE TRAINING MEDIA, INC., a Delaware corporation
By: /S/ L. STEPHEN ALBRIGHT
-------------------------------------------
L. STEPHEN ALBRIGHT, Secretary and Director
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"SECURED PARTY":
By: /S/ BUDDY YOUNG
-------------------------------------------
BUDDY YOUNG
|
REQUESTED BY EXHIBIT 10.3
WHEN RECORDED MAIL TO
NAME
STREET
ADDRESS
CITY
STATE
ZIP
ASSIGNMENT OF LEASE AGREEMENT
This Assignment of Lease Agreement is made and entered into this 1st day of March 2007, by and between ADVANCED KNOWLEDGE, INC. (hereinafter referred to as "Assignor") whose address is: _____________________________________________ and PROGRESSIVE TRAINING, INC. (hereinafter referred to as "Assignor") whose address is: 17337 Ventura Boulevard, Suite 208 Encino, CA 91316
WHEREAS. Assignor now desires to assign all of its rights, title and interest as the Tenant under said Lease to Assignee and Assignee desires to receive and accept such assignment.
NOW. THEREFORE, it i agreed between the parties hereto as follows:
1. In consideration of the sum of ($--------------) dollars and other valuable consideration. receipt of which is hereby acknowledged by Assignor. Assignor hereby assigns and transfers to Assignee all of its rights, title and interest in the lease and the leased premises and Assignee hereby accepts said assignment and hereby assumes and agrees to perform from and after the date this Agreement becomes effective, as a direct obligation to the Landlord, all of the terms and provisions of the Lease.
2. The assignment of the Lease as provided for in this agreement shall take place on March 1, 2007 and Assignor shall give possession of the leased premises to Assignee on that date.
3. A portion of the consideration for this Assignments is that Assignee hereby agrees to assume all of the obligations and perform all of the conditions and covenants of said Lease and Assignee hereby agrees to make all the payments provided for in said Lease now or hereafter
to become due thereunder, including the payment of all rentals specified in said Lease. If Assignee defaults under the Lease. Assignee shall indemnify and hold Assignor harmless from against damages resulting from any such default. If Assignee defaults in its obligations under the Lease and Assignor must pay rent or any other charges to the Landlord under the Lease due to such failure or fulfills any of Assignee's other obligations under the lease in order to cure or prevent assignee from being in default. Assignee shall immediately reimburse Assignor for the amount of rent or other amounts paid or costs incurred by Assignor to fulfill Assignee's obligations under the Lease or this Assignment of Lease Agreement, together with interest hereon at the rate of ten (10%) percent per annum.
4. Assignor hereby represents to Assignee that the Lease is in full force and effect and that Assignor, as Tenant under said Lease, is not in default under any of the terms, conditions, and provisions contained in the Lease on the part of the Tenant to be kept and performed therein.
5. The parties hereto acknowledge that Landlord now holds the sum of Two Thousand Three Hundred Sixty Four ($2,364.00 ) dollars as a security deposit and/or prepaid rent pursuant to Article ____ of the Lease, to be applied subject to the provisions of tho Lease. Assignor hereby releases all claims to said sum, and said sum shall be held by the Landlord for the benefit of Assignee subject to the provisions of the lease.
6. This Assignment shall be binding upon and inure to the benefit of the parties hereto, their heirs, personal representatives, successors and assigns. IN WITNESS WHEREOF, the parties hereto have executed this Assignment or Lease Agreement on the day and year first above written.
Assignor: ADVANCED KNOWLEDGE, INC. Assignee: PROGRESSIVE TRAINING, INC. By /S/ BUDDY YOUNG By /S/ BUDDY YOUNG -------------------------------- ------------------------------------ |
I, ____________________ Landlord in the Lease described above, hereby consent to the above Assignment of Lease, provided that this consent shall not in any way he deemed to be a consent to any other assignment, and further provided that Assignor shall at all times remain liable for the performance of the terms and provisions of the Leese.
DATED: March 1, 2007
LANDLORD: Encino Gardens, LLC
By /S/ SINA COHEN ----------------------------- Property Manager |
EXHIBIT "A" TO ASSIGNMENT
ENCINO GARDENS OFFICE BUILDING LEASE AGREEMENT
BY AND BETWEEN
ENCINO GARDENS, LLC
a California Limited Liability Company
AND
ADVANCED KNOWLEDGE, INC.,
d.b.a. Advanced Knowledge Training, Inc.
Dated: July 24, 2003
THE ENCINO GARDENS OFFICE BUILDING
OFFICE LEASE AGREEMENT
In consideration of the rents and covenant hereinafter set forth, Lessor hereby leases to Lessee, and Lessee hereby leases from Lessor, the following described Premises upon the terms and conditions set forth below:
FUNDAMENTAL LEASE PROVISIONS
A. Date: July 24, 2003
B. Lessor: ENCINO GARDENS, LLC, a California Limited Liability Company
C. Lessee: ADVANCED KNOWLEDGE, INC.
D. Lessee's Trade Name: Advanced Knowledge Training, Inc.
E. Use of Premises: General Office Use
F. Lease Term: Twenty-four (24) Months, Commencing on September 1, 2003 ("Commencement Date") and Expiring on August 31, 2005 (Expiration Date")
G. Minimum Rent: 09/01/03 to 08/31/04 $2,100.00 Per month 09/01/04 to 08/31/05 $2,185.00 Per month
H. Base Year: 2003
I. Escalation And Utility
Percentage: 1.7%
J. Premises: Suite Number #208 (the "Premises") on the 2nd floor located at "17337 Ventura Boulevard, Encino, California, as shown on the fl our plan attached hereto as Exhibit "A" and approximately 1144 Rentable Square Feet. The Encino Gardens Office Building is defined as "17327-17337 Ventura Blvd. Encino. California 91316 (the "Building"). Notwithstanding the stipulated "rentable feet", Lessee acknowledges that the Minimum Annual Rent has been agreed upon without regard to the actual rentable feet of the Premises or the Office Building, and accordingly shall not be adjusted even if the actual rentable feet of the Premises or Office Building is different.
K. Notices Addresses: To Lessor: ENCINO GARDENS, LLC 17337 Ventura Blvd., Office of the Building, Suite 103 Encino, CA 91364 (Tel) 818-592-0507
To Lessee: ADVANCED KNOWLEDGE, INC.
ATTN: Buddy Young
17337 Ventura Blvd., Suite # 208
Encino, CA 91316
(Tel) 818-
L. Security Deposit: $2,185.00
M. Parking: Lessee shall have the right to use four (4) parking spaces in the Building Parking Lot at Building prevailing rate.
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LEASE
1. Parties. This Lease, dated the 24th day of July, 2003 is made by and between ENCINO GARDENS, LLC a California Limited Liability Company ("Lessor"), and ADVANCED KNOWLEDGE, INC., d.b.a. Advanced Knowledge Training, Inc. ("Lessee").
2. Premises Lessor hereby leases to Lessee and Lessee hereby leases from Lessor for the term, at the rental, and upon all of the conditions set forth herein, that certain real property situated in the County of Los Angeles, State of California, commonly known as 17337 Ventura Boulevard, Suite # 208, Encino, California 91316. Said real property including the land and all improvements
therein, are herein called "the Premises."
3. Term.
3.1 Term. The term of this Lease shall be for twenty-four (24)
months, commencing on September 1, 2003 and expiring on August 31, 20005 unless
sooner terminated pursuant to any provision hereof.
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3.2 Delay in Possession. Notwithstanding said commencement date, if for any reason Lessor cannot deliver possession of the Premises to Lessee on said date, Lessor shall not be subject to any liability therefor, nor shall such failure affect the validity of this Lease or the obligations of Lessee hereunder or extend the term hereof, but in such case, Lessee shall not be obligated to pay rent until possession of the Premises is tendered to Lessee; provided, however,
that if Lessor shall not have delivered possession of the Premises within 150 days from said commencement date, Lessee may, at Lessee's option, by notice in writing to Lessor within ten (10) days thereafter, cancel this Lease, in which event the parties shall be discharged from all obligations hereunder. 3.2 Early Possession. If Lessee occupies the Premises prior to said commencement date, such occupancy shall be subject to all provisions hereof, such occupancy shall not advance the termination date, and Lessee shall pay rent for such period at the initial monthly rates set forth below.
4. Rent.
4.1 Minimum Annual Rent. Lessee shall pay Minimum Annual Rent as stated in Fundamental Lease Provision "G" in twelve (12) equal monthly installments during each year, in advance, on the first day of each calendar month, commencing on the first day of the term of this Lease. If the lease term commences on a day other than the first day of a month, then the rent for the first fractional month shall be computed on a daily basis from the date of commencement to the end of such month. All rent shall be paid in lawful money of the United States of America and shall be paid without deduction off-set, prior notice or demand, at the office of the Buildings or such other place as Lessor may designate.
4.2 Adjustment of Minimum Annual Rent. The minimum rent payable pursuant to Section 4.1 hereof shall be increased effective September 1, 2004 ("Adjustment Date").
4.3 Additional Rent. Lessee shall pay as additional rent all other sums of money or charges required to be paid pursuant to the terms of this Lease, whether or not the same be designated "Additional Rent."
5. Security Deposit. Lessee shall deposit with Lessor upon execution hereof $2,85.00 as security for Lessee's faithful performance of Lessee's obligations hereunder, If Lessee fails to pay rent or other charges due hereunder, or otherwise defaults with respect to any provision of this Lease, Lessor may use, apply or retain all or any portion of said deposit for the payment of any rent or other charge in default or for the payment of any other sum to which Lessor may become obligated by reason of Lessee's default, or to compensate Lessor for any loss or damage which Lessor may suffer thereby. If Lessor so uses or applies all or any portion of said deposit, Lessee shall within ten (10) days after written demand therefor deposit cash with Lessor in an amount sufficient to restore said deposit to the full amount herein stated and Lessee's failure to do so shall be a material breach of this Lease. Lessor shall not be required to keep said deposit separate from its
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general accounts. If Lessee performs all of Lessee's obligations hereunder, said deposit, or so much thereof as has not theretofore been applied by Lessor, shall be returned, without payment of interest or other increment for its use, to Lessee (or, at Lessee's option, to the last assignee, if any, of Lessees interest hereunder) at the expiration of the term hereof, and after Lessee has
vacated the Premises. No trust relationship is created herein between Lessor and Lessee with respect to said Security Deposit. Said security deposit shall always be adjusted upward by twice the amount of any unpaid rental adjustments.
In the event of any bankruptcy or other insolvency against Lessee, it is agreed that all such Security Deposit held hereunder shall be deemed to be applied by Lessor to rent, sales tax and other charges, due to Lessor for the last month of the Lease Term and each proceeding month until such Security Deposit is fully applied.
LESSOR HEREBY ACKNOWLEDGES A SECURITY DEPOSIT IN THE AMOUNT OF $1,767.20 FROM A PREVIOUS LEASE. CONCURRENT WITH EXECUTION OF THIS LEASE, LESSEE SHALL PAY TO LESSOR $ 417.80 AS ADDITIONAL SECURITY DEPOSIT.
6 Use.
6.1 Use. The Premises shall be used and occupied only for GENERAL
OFFICE USE and for no other purpose.
Lessee shall not use or permit the Premises to be used for any
|
other purpose without first obtaining Lessor's written consent. Nothing contained in this Lease by express statement or by implication, shall be deemed to grant to Lessee the exclusive rights to conduct or carry on in the Office Building the type of business referred to herein.
Lessee covenants and agrees that: it will not use or suffer or permit any person or person(s) to use the Premises or any part thereof in any unlawful manner or for any unlawful purposes. Lessor shall have the right to establish and make, and from time to time to change, alter and amend, and to enforce against Lessee and all persons upon the Premises such reasonable rules and regulations concerning the use of the Premises as Lessor may deem necessary or advisable. Lessee agrees to conform to and abide by such rules and regulations.
The initial rules for the operation of the Premises (to which Lessee hereby agrees) are set forth in Exhibit "B" attached hereto and by this reference made a part hereof.
Lessor specifically reserves the right to change the size, configuration, design, layout and all o1her aspects of the parking facility at any time, and Lessee acknowledges and agrees that Lessor may, without incurring any liability to Lessee and without abatement of rent under this Lease, from time to time, close-off or restrict access to the parking facility for the purposes of permitting or facilitating any such construction, alteration or improvements.
6.2 Compliance With Law.
6.2.1 Lessor warrants to Lessee that the Premises, in its existing state, on the date that the Lease term commences, but without regard to the use for which Lessee will use the Premises, does not violate any covenants or restrictions of record, or any applicable building code,
regulation or ordinance in effect on such Lease term commencement date. In the
event it is determined that this warranty has been violated, then it shall be
the obligation of the Lessor, after written notice from Lessee, to promptly, at
Lessor's sole cost and expense, rectify any such violation. In the event that
Lessee does not give to Lessor written notice of the violation of this warranty
within one (1) year from the commencement of the term of this Lease, it shall be
conclusively deemed that such violation did not exist, and the correction of the
same shall be the obligation of Lessee. The warranty contained in this paragraph
10.4 (b) shall be of no force or effect, if prior to the date of this Lease,
Lessee was the occupant of the Premises.
6.2.2 Except as provided in paragraph 10.4 (b), Lessee shall, at Lessee's expense, comply promptly with all applicable statutes, ordinances, rules, regulation, orders, covenants and restrictions of record, and requirements in effect during the tenn or any part of the term hereof, regulating the use by Lessee of the Premises. Lessee shall not use nor permit the use of the Premises in any manner that will tend to create waste or a nuisance or, if there shall be more than one tenant in the building containing the Premises, shall tend to disturb such other tenants.
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6.3 Condition of Premises. Except as otherwise provided in this Lease, Lessee hereby accepts the Premises in their condition existing as of the Lease commencement date or the date that Lessee takes possession of the Premises, whichever is earlier, subject to all applicable zoning, municipal, county and state laws, ordinances and regulations governing and regulating the use of the Premises, and any covenants or restrictions of record, and accepts this Lease subject thereto and to all matters disclosed thereby and by any exhibits attached hereto. Lessee acknowledges that neither Lessor nor Lessor's agent has made any representation or warranty as to the present or future suitability of the Premises for the conduct of Lessee's business, except as stated herein.
7 Maintenance, Repairs and Alterations.
7.1 Lessor's Obligations. Subject to the provisions of Paragraphs 6, 7.2 and 9, and except for damage caused by the negligent or intentional act or omission of Lessee, Lessee's agents, employee's or invitees in which event Lessee shall repair the damage, Lessor at Lessor's expense shall keep in good order, condition, and repair the foundations, exterior walls and the exterior roof of the Premises. Lessor shall not, however, be obligated to paint such exterior, nor shall Lessor be required to maintain the interior surface of exterior walls, windows, doors or plate glass. Lessor shall have no obligation to make repairs under this Paragraph 7.1 until a reasonable time after receipt of the notice of the need for such repairs. Lessee expressly waives the benefits of any statute now or hereafter in effect which would otherwise afford Lessee the right to make repairs at Lessor's expense or to terminate this Lease because of Lessor's failure to keep the Premises in good order, condition and repair.
7.2 Lessee's Obligations. Subject to the provisions of Paragraphs 6,7.1 and 9, Lessee at Lessee's expense, shall keep in good order, condition and repair the Premises and every part thereof including, all electrical, and equipment within the Premises, fixtures, interior walls,
and interior surface of exterior walls, ceilings, windows, doors, door locks, plate glass, located within the Premises, and signs located on the Premises or around the Premises.
7.3 Surrender. On the last day of the term hereof, or on any sooner termination, Lessee shall surrender the Premises to Lessor in the same condition as when received, ordinary wear and tear excepted, clean and free of debris. Lessee shall repair any damage to the Premises occasioned by the installation or removal of Lessee's trade fixtures, furnishings and equipment pursuant to Paragraph 12.10 (h) which repair shall include the patching and filling of holes and repair of structural damage.
7.4 Lessor's Rights. If Lessee fails to perform Lessee's obligations under this Paragraph 7, or under any other paragraph of this Lease, Lessor may at its option (but shall not be required to) enter upon the Premises after five (5) days prior written notice to Lessee (except in the case of any emergency, in which case no notice shall be required), perform such obligations on Lessee's behalf and put the same in good order, condition and repair, and the reasonable and necessary cost thereof together with interest thereon at the maximum rate then allowable by law shall become due and payable upon written notice and proof thereof as additional rental to Lessor together with Lessee's next rental installment.
7.5 Alterations and Additions.
7.5.1 Lessee shall not, without Lessor's prior written consent make any alterations, improvements, additions, or Utility Installations in, on or about the Premises, except for non-structural alterations not exceeding $1,000 in costs. As used in this Paragraph 7.5 the term "Utility Installation" shall mean carpeting, window coverings, air lines, power panels, electrical distribution systems, lighting fixtures, space heaters, air-conditioning, plumbing, and fencing. Lessor may require that the Lessee remove any or all of said alterations, improvements, additions or Utility Installations at the expiration of the term, and restore the Premises to their prior condition. Lessor may require Lessee to provide Lessor, at no cost and expense to Lessor, a lien and completion bond in an amount equal to one and one-half times the estimated cost of such improvements, to insure Lessor against any liability for mechanic's and material men's liens and to insure completion of the work. Should Lessee make any alterations, improvements, additions or Utility Installations without the prior approval of Lessor, Lessor may require that Lessee remove any or all of the same.
7.5.2 Any alterations, improvements, additions or Utility Installations in, or about the Premises that Lessee shall desire to make and which requires the consent of the Lessor shall be presented to Lessor in written form, with proposed detailed plans. If Lessor shall give its consent, the consent shall be deemed conditioned upon Lessee acquiring a
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permit to do so from appropriate governmental agencies, the furnishing of a copy thereof to Lessor prior to the commencement of the work and the compliance by Lessee of all conditions of said permit in a prompt and expeditious manner.
7.5.3 Lessee shall pay, when due, all claims for labor or materials furnished or alleged to have been furnished, for Lessee at or for use in the Premises, which claims are or may
be secured by any mechanics' or material man's lien against the Premises or any interest therein. Lessee shall give Lessor not less than ten (10) days notice prior to the commencement of any work in the Premises, and Lessor shall have the right to post notices of non-responsibility in or on the Premises as provided by law. If Lessee shall, in good faith, contest the validity of any such lien, claim or demand, then Lessee shall, at its sole expense defend itself and Lessor against the same and shall pay and satisfy any such adverse judgment that may be rendered thereon or secure Lessor for payment of same before the enforcement thereof against the Lessor or the Premises, upon the condition that if Lessor shall require, Lessee shall furnish to Lessor a surety bond satisfactory to Lessor in an amount equal to such contested lien claim or demand indemnifying Lessor against liability for the same and holding the Premises free from the effect of such lien or claim. Lessor may require Lessee to pay Lessor's attorneys' fees and costs in participating in such action if Lessor shall decide it is in its best interest to do so.
7.5.4 Unless Lessor requires their removal, as set forth in Paragraph 7, all alterations, improvements, additions and Utility Installations (whether or not such Utility Installations constitute trade fixtures of Lessee), which may be made on the Premises, shall become the property of Lessor and remain upon and be surrendered with the Premises at the expiration of the term.
7.5.6 Except for any initial improvements which Lessor has expressly agreed to provide pursuant to Exhibit "C" attached hereto, Lessee is leasing the Premises "AS-IS" on the date hereof. The taking of possession by Lessee of the Premises shall be conclusive evidence as against Lessee that the Premises and the Building were in good and satisfactory condition at the time such possession was taken, subject to latent defects and deficiencies listed in writing by Lessee to Lessor within thirty (30) days after the date Lessee takes possession.
7.6 Common Areas--Operating Cost.
7.6.1 Lessee shall pay to Lessor at the times set forth in this Paragraph Lessee's share of the increases in Lessor's operating costs for the building in which the Premises are located over the operating costs for calendar year 2003 ("Base").
7.6.2 Lessee's proportionate share of the increase in operating costs shall be the ratio of the total increase in Lessor's operating costs that the total number of square feet in the Premises bears to the total number of rentable square feet in the building in which the Premises are located.
7.6.3 Lessor's operating costs include, without limitation, all costs of any kind paid or incurred by Lessor in operating, maintaining, cleaning, equipping, protecting, lighting, repairing, replacing, heating, air conditioning, and maintaining the Premises. The costs shall include, without limitation, and if applicable, utilities, supplies, janitorial services, employees' wages, social security and unemployment insurance contributions, union benefits, rubbish removal, maintenance and replacement of landscaping and premiums for public liability and property damage and fire and extended coverage insurance.
7.6.4 After the end of each calendar year, Lessor shall furnish to Lessee a
statement showing the total operating costs for the calendar year just ended, and Lessee's share of any increases. Lessee shall pay to Lessor the amount of Lessee's share of the increases within ten (10) days after Lessor furnishes the statement.
7.6.5 If the term expires on a date other than December 31, Lessee's obligation under this Paragraph in the year in which the term expires shall be payable monthly in advance at the time minimum monthly rent is payable, and in lieu of the sums set forth in this Paragraph, Lessee shall pay to Lessor 1/12th of the sums due from Lessee to Lessor for the calendar year immediately preceding the year in which the term of this Lease expires.
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7.6.6 Lessor may request from Lessee monthly reimbursement, which shall be paid with the next monthly rental payment, for Lessee's share of total operating expenses as outlined herein.
7.6.7 After the end of the calendar year in which this Lease expires or terminates, Lessor shall furnish to Lessee a statement of the total operating costs for the calendar year, and of Lessee's share of any increases. If Lessee's share of operating cost increases for that calendar year exceeds the monthly payments made by Lessee, Lessee shall pay Lessor the deficiency within ten (10) days after receipt of the statement. If Lessees payments made during the calendar year exceed Lessee's share of operating cost increases, Lessor shall pay Lessee the excess at the time Lessor furnishes the statement to Lessee.
8. Insurance Indemnity.
8.1 Liability Insurance -Lessee. Lessee shall, at Lessees expense obtain and keep in force during the term of this Lease a policy of Combined Single Limit, Bodily Injury and Property Damage insurance insuring Lessor and Lessee against any liability arising out of the ownership, use, occupancy or maintenance of the Premises and all areas appurtenant thereto. Such insurance shall be a combined single limit policy in an amount not less than $500,000 per occurrence. The policy shall contain cross liability endorsements and shall insure performance by Lessee of the indemnity provisions of this Paragraph 8. The limits of said insurance shall not, however, limit the liability of Lessee hereunder.
8.2 Liability Insurance - Lessor. Lessor shall obtain and keep in force during the term of this Lease a policy of Combined Single Limit Bodily Injury, Property Damage insurance, insuring Lessor, but not Lessee, against any liability arising out of the ownership, use, occupancy, or maintenance of the Premises, and all areas appurtenant thereto in an amount not less than Five Hundred Thousand Dollars ($500,000.00) per occurrence.
8.3 Property Insurance. Lessor shall obtain and keep in force during the term of this Lease a policy or policies of insurance covering loss or damage to the Premises, but not Lessee's
fixtures, equipment or tenant improvements in an amount not to exceed the full replacement value thereof, as the same may exist from time to time, providing protection against all perils included within the classifications of fire, extended coverage, vandalism, malicious mischief, flood (in the event same is required by a lender having a lien on the Premises) special extended perils ("all risk" as such term is used in the insurance industry but not plate glass insurance).
8.4 Payment of Premium Increases.
8.4.1 Lessee shall pay to Lessor, during the term hereof, in addition to the rent, the amount of any increase in premiums for the insurance required under Paragraphs 8.2 and 8.3 over and above such premiums paid during the Base Period, whether such premium increase shall be the result of the nature of Lessee's occupancy, any act or omission of Lessee, requirements of holder of a mortgage or deed of trust covering the Premises, increased valuation of the Premises or general rate increases.
8.4.2 Lessee shall pay any such premium increases to Lessor within Thirty (30) days after receipt by Lessee of a statement of the amount due. If the insurance policies maintained hereunder cover other improvements in addition to the Premises, Lessor's statement shall show the amount of such increase attributable to the Premises and showing in reasonable detail, the manner in which such amount was computed. If the term of this, Lease shall not expire concurrently with the expiration of the period covered by such insurance, Lessee's liability for premium increases shall be prorated on an annual basis.
8.5 Insurance Policies. Insurance required hereunder shall be in companies holding a "General Policyholders Rating" of at least B plus, or such other rating as may be required by a lender having a lien on the Premises, as set forth in the most current issue of "Best's Insurance Guide." The insuring party shall deliver to the other party copies of policies of such insurance or certificates evidencing the existence and amounts of such insurance with loss payable clauses satisfactory to Lessor. No such policy shall be canceled or subject to reduction of coverage or other modification except after thirty (30) days prior written notice to Lessor or Lessee as the case may be. The insuring party shall, at least thirty (30) days prior to the expiration of such policies, furnish the other party with renewals or "binder" thereof, or the other party may
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order such insurance and charge the cost thereof to the insuring party, which amount shall be payable upon demand. Lessee shall not do or permit to be done anything which shall invalidate the insurance policies referred to in Paragraph 8.3.
8.6 Waiver of Subrogation. Lessee and Lessor each hereby release and relieve the other, and their entire right of recovery against the other for loss or damage arising out of or incident to the perils insured against under Paragraph 8.3, which perils occur in, on or about the Premises, whether due to the negligence of Lessor or Lessee or their agents, employees,
contractors and/or invitees. Lessee and Lessor shall, upon obtaining the policies of insurance required hereunder, give notice to the insurance carrier or carriers that the foregoing mutual waiver of subrogation is contained in this Lease.
8.7 Indemnity. Lessee shall indemnify and hold harmless Lessor from and against any and all claims arising from Lessees use of the Premises, or from the conduct of Lessees business or from any activity, work or things done, permitted or suffered by Lessee in or about the Premises or elsewhere and shall further indemnify and hold harmless Lessor from and against any and all claims arising from any breach or default in the performance of any obligation of Lessees part to be performed under the terms of this Lease, or arising from any negligence of the Lessee, or any of Lessee's agents, contractors, or employees, and from and against all cost, attorney's fees, expenses and liabilities incurred in the defense of any such claim or any action or proceeding brought thereon; and in case any such action or proceeding be brought against Lessor by reason of any such claim, Lessee upon notice from Lessor shall defend the same at Lessee's expense by counsel satisfactory to Lessor. Lessee, as a material part of the consideration to Lessor, hereby assumes all risk of damage to property or injury to persons, in, upon or about the Premises arising from any cause except for the negligent acts of Lessor, and Lessee hereby waives all claims in respect thereof against Lessor.
8.8 Exemption of Lessor from Liability. Lessee hereby agrees that Lessor shall not be liable for injury to Lessee's business or any loss of income therefrom or for damage to the goods, wares, merchandise or other property of Lessee, Lessee's employees, invitees, customers, or any other person in or about the Premises, nor shall Lessor be liable for injury to the person of Lessee, Lessee's employees, agents or contractors, whether such damage or injury is caused by or results from fire, steam, electricity, gas, water or rain, or from the breakage, leakage, obstruction or other defects of pipes, sprinklers, wires, appliances, plumbing, air conditioning or lighting fixtures, or from any other cause, whether the said damage or injury results from a condition arising upon the Premises or upon other portions of the building of which the Premises are a part, or from other sources or places and regardless of whether the cause of such damage or injury or the mews of repairing the same is inaccessible to Lessee. Lessee shall not be liable for any injury or damage caused by the negligent acts of Lessor.
9 Damage, Destruction, Obligation to Rebuild, Rent Abatement.
9.1 Definitions.
9.1.1 "Premises Partial Damage" shall herein mean damage or destruction to the Premises to the Went that the cost of repair is less than fifty percent (50%) of the fair market value of the Premises immediately prior to such damage or destruction. "Premises Building Partial Damage" shall herein mean damage or destruction to the building of which the Premises are a part to the extent that the cost of repair, is less than fifty percent (50%) of the fair market value of such building as a whole immediately prior to such damage or destruction.
9.1.2 "Premises Total Destruction" shall herein mean damage or destruction to the Premises to the extent that the cost of repair is fifty percent (50%) or more of the fair market value of such building as a whole immediately prior to such damage or destruction.
9.1.3 "Insured Loss" shall herein mean damage or destruction which was caused by an event required to be covered by the insurance described in Paragraph 8.
9.2 Partial Damage -Insured Loss. Subject to the provisions of Paragraphs 9.4,9.5 and 9.6, if at anytime during the term of this Lease there is damage which is an Insured Loss and which falls into the classification of Premises Partial Damage or Premises Building Partial Damage, then Lessor shall, at Lessor's sole cost, repair such damage, but not
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Lessee's fixtures, equipment or tenant improvements, as soon as reasonably possible and this Lease shall continue in full force and effect.
9.3 Partial Damage -Uninsured Loss. Subject to the provisions of Paragraphs 9.4,9.5 and 9.6, if at any time during the term of this Lease there is damage which is not an insured Loss and which falls within the classification of Premises Partial Damage or Premises Building Partial Damage unless caused by a negligent or willful act of Lessee (in which event Lessee shall make the repairs at Lessee's expense), Lessor may at Lessor's option either repair such damage as soon as reasonably possible at Lessor's expense, in which event this Lease shall continue in full force and effect, or give written notice to Lessee within Thirty (30) days after the date of the occurrence of such damage of Lessor's intention to cancel and terminate this Lease, as of the date of the occurrence of such damage. In the event Lessor elects to give such notice of Lessor's intention to cancel and terminate this Lease, Lessee shall have the right within ten (10) days after the receipt of such notice to give written notice to Lessor of Lessee's intention to repair such damage at Lessee's expense, without reimbursement from Lessor, in which event this Lease shall continue in full force and effect, and Lessee shall proceed to make such repairs as soon as reasonably possible. If Lessee does not give such notice within such ten (10)-day period this Lease shall be canceled and terminated as of the date of the occurrence of such damage.
9.4 Total Destruction. If at anytime during the term of this Lease there is damage, whether or not an Insured Loss (including destruction required by any authorized public authority), which falls into the classification of Premises Total Destruction or Premises Building Total Destruction, this Lease shall automatically terminate as of the date of such total destruction.
9.5 Damage Near End of Term. If at anytime during the last six (6) months of the term of this Lease there is damage, whether or not an Insured Loss, which falls within the classification of Premises Partial Damage, Lessor may at Lessor's option cancel and terminate this Lease as of the date of occurrence of such damage by giving written notice to Lessee of Lessor's election to do so within thirty (30) days after the date of occurrence of such damage.
9.6 Abatement of Rent; Lessee Is Remedies.
9.6.1 In the event of damage described in Paragraphs 9.2 or 9.3 and Lessor or Lessee repairs or restores the Premises pursuant to the provisions of this Paragraph 9, the rent payable hereunder for the period during which such damage, repair or restoration continues shall be abated in proportion to the degree to which Lessee's use of the Premises is impaired. Except for abatement of rent, if any, Lessee shall have no claim against Lessor for any damage suffered by reason of any such damage, destruction, repair or restoration.
9.6.2 If Lessor shall be obligated to repair or restore the Premises under the provisions of this Paragraph 9 and shall not commence such repair or restoration within ninety (90) days after such obligations shall accrue, Lessee may at Lessee's option cancel and terminate this Lease by giving Lessor written notice of Lessee's election to do so at any time prior to the commencement of such repair or restoration. In such event this Lease shall terminate as of the date of such notice.
9.7 Termination - Advance Payments. Upon termination of this Lease pursuant to this Paragraph 9, an equitable adjustment shall be made concerning advance rent and any advance payments made by Lessee to Lessor. Lessor shall, in addition, return to Lessee so much of Lessee's security deposit as has not theretofore been applied by Lessor.
9.8 Waiver. Lessee hereby waives the provision of California Civil Code Sections 1932(2) and 1933(4) which relate to termination of leases when the item leased is destroyed and agrees to be governed by the terms of this Lease.
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10 Real Property Taxes.
10.1 Payment of Tax Increase. Lessor shall pay the real property tax, as defined in Paragraph 10.3 applicable to the Premises; provided, however, that Lessee shall pay, in addition to rent, the amount, if any, by which real property taxes applicable to the Premises increased over the fiscal real estate year 2002/2003 . Such payment shall be made by Lessee within Thirty (30) days after receipt of Lessor's written statement setting forth the amount of such increase and the computation thereof. If the term of this Lease shall not expire concurrently with the expiration of the tax fiscal year, Lessee's liability for increased taxes for the last partial lease year shall be prorated on an annual basis.
10.2 Additional Improvements. Notwithstanding Paragraph 10. 1 hereof, Lessee shall pay to Lessor upon demand therefor, the entirety of any increase in real property tax if assessed solely by reason of additional improvements placed on the Premises by Lessee or at Lessee's request.
10.3 Definition of "Real Property Tax." As used herein, the term "real property tax" shall include any form of real estate tax or assessment, general, special, ordinary or extraordinary, and any license fee, commercial rental tax, improvement bond or bonds, levy or tax (other than inheritance, personal income or estate taxes) imposed on the Premises by any authority having the direct or indirect power to tax, including any city, state or federal government, or any school, agricultural, sanitary, fire, street, drainage or other improvement district thereof, as against any legal or equitable interest of Lessor in the Premises or in the real property of which the Premises are a part, as against Lessor's right to rent or other income therefrom, and as against Lessor's business of leasing the Premises. The term "real property tax" shall also include any tax, fee, levy, assessment or charge in substitution of, partially or totally, any tax, fee, levy, assessment or charge herein included within the definition of "real property tax," or which is imposed as a result of a transfer, either partial or total, of Lessor's interest in the Premises or which is added to tax or charge herein before included within the definition of real property tax by reason of such transfer, or which is imposed by reason of this transaction, any modifications or changes hereto, or any transfers hereof.
10.4 Joint Assessment. If the Premises are not separately assessed, Lessees liability shall bean equitable proportion of the real property taxes for all of the land and improvements included within the tax parcel assessed, such proportion to be determined from the respective valuations assigned in the assessor's work sheets or such other information as may be reasonably available. Lessor's reasonable determination thereof, in good faith, shall be conclusive.
10.5 Personal Property Taxes.
10.5.1 Lessee shall pay prior to delinquency all taxes assessed against and levied upon trade fixtures, furnishings, equipment and all other personal property to be assessed and billed separately from the real property of Lessor.
10.5.2 If any of Lessee's said personal property shall be assessed with Lessor's real property, Lessee shall pay Lessor the taxes attributable to Lessee within ten (10) days after receipt of a written statement setting forth the taxes applicable to Lessee's property.
11. Utilities. Lessor shall pay for all water, gas, heat, light, power, services supplied to the Premises, together with any taxes thereon subject to reimbursement under paragraph "7.6". Notwithstanding anything contained herein to the contrary, Lessor shall supply the Premises during reasonable and usual business hours: (Monday through Friday, from 7:00 am and 7:00 pm) and (Saturday, from 8:00 am to 2:00 pm), except Holidays, as determined by the Lessor and subject to the Rules and Regulations of the Building, with normal heating, ventilation and cooling as reasonably required in the judgment of Lessor for the comfortable occupation of the Premises. If Lessor shall
require HVAC service at any time other than during the business hours, Lessor shall furnish such after-hours service upon reasonable advance notice from Lessee to Lessor. Such after-hours HVAC service is presently at $ 20.00 per hour subject to increase from time to time at Lessor's sole discretion. All charges for extra after-hours HVAC services shall be due within ten (10) days after such billing.
12. Assignment and Subletting.
12.1 Lessor's Consent Required.Lessee shall not voluntarily or by operation of law assign, transfer, mortgage, sublet, or otherwise transfer or encumber all or any part of Lessee's interest in this Lease or in the Premises,
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without Lessors prior written consent, which Lessor shall not unreasonably withhold. The basis of a refusal of a proposed assignment may include but shall not be limited to an increase in use of hazardous substances on the Premises. Any attempted assignment, transfer, mortgage, encumbrance or subletting without such consent shall be void, and shall constitute a breach of this Lease. A transfer fee for such assignment or other transfer in an amount equal to Three Hundred Fifty Dollars ($350.00) shall be charged for each such transfer payable to Lessor. IN NO EVENT LESSEE MAY ASSIGN OR SUBLEASE ANY PORTION OF THE LEASED PREMISES TO ANY INDIVIDUAL OR ENTITY WHO HAS BEEN EVICTED BY AN UNLAWFUL DETAINER FROM THE PROPERTY AT 17327-17337 VENTURA BOULEVARD, ENCINO, CALIFORNIA. IN THE EVENT THIS CONDITION IS VIOLATED, AT THE SOLE DISCRETION OF LESSOR, THE LEASE SHALL BE TERMINATED AND LESSOR MAY PURSUE ALL LEGAL REMEDIES IN ACCORDANCE TO THE TERMS OF THE LEASE, AS ALLOWED BY LAW.
12.2 Lessee Affiliate. Notwithstanding the provisions of paragraph 12.1 hereof, Lessee may assign or sublet the Premises, or any portion thereof, without Lessor's consent, to any corporation which controls, is controlled by or is under common control with Lessee, or to any corporation resulting from the merger or consolidation with Lessee, provided that said assignee assumes, in full, the obligations of Lessee under this Lease. Any such assignment shall not, in any way, affect or limit the liability of Lessee under the terms of this Lease even if after such assignment or subletting the terms of this Lease are materially changed or altered without the consent of Lessee, the consent of whom shall not be necessary.
12.3 No Release of Lessee. Regardless of Lessor's consent, no subletting or assignment shall release Lessee of Lessee's obligation or alter the primary liability of Lessee to pay the rent and to perform all other obligations to be performed by Lessee hereunder. The acceptance of rent by Lessor from any other person shall not be deemed to be a waiver by Lessor of any provision hereof. Consent to one assignment or subletting shall not be deemed consent to any subsequent assignment or subletting. In the event of default by any assignee of Lessee or any successor of Lessee, in the performance of any of the terms hereof, Lessor may proceed directly against Lessee without the necessity of exhausting remedies against said assignee. Lessor may consent to
subsequent assignments or subletting of this Lease or amendments or modifications to this Lease with assignees of Lessee, without notifying Lessee, or any successor of Lessee, and without obtaining its or their consent thereto and such action shall not relieve Lessee of liability under this Lease.
12.4 Attorneys' Fees. In the event Lessee shall assignor sublet the Premises or request the consent of Lessor to any assignment or subletting or if Lessee shall request the consent of Lessor for any act Lessee proposes to do, then Lessee shall pay Lessor's reasonable and necessary attorneys fees incurred in connection therewith, such attorney's fees not to exceed $500 for each such request.
13. Defaults; Remedies.
13.1 Defaults. The occurrence of any one or more of the following events shall constitute a material default and breach of this Lease by Lessee:
13.1.1 The vacating or abandonment of the Premises by Lessee.
13.1.2 The failure by Lessee to make any payment of rent or
any other payment required to be made by Lessee hereunder, as and when due,
where such failure shall continue for a period of three (3) days after written
notice thereof from Lessor to Lessee. In the event that Lessor shall serve
Lessee with a Notice to Pay or Quit pursuant to applicable Unlawful Detainer
statutes, such Notice to Pay Rent or Quit shall also constitute the notice
required by this subparagraph so long as service is in accordance with the time
periods herein provided. On the third such occasion of Lessee's failure to make
timely rental payments where such failure shall continue for a period of three
(3) days as outlined above, this shall be deemed a material breach of this
Lease, and Lessor may elect upon not less than ten (10) days written notice to
Lessee to terminate this Lease as of the date specified in such notice.
13.1.3 The failure by Lessee to observe or perform any of the material covenants, conditions or provisions of this Lease to be observed or performed by Lessee, other than described in paragraph (b) above, where such failure shall continue for a period of twenty (20) calendar days after written notice hereof from Lessor to Lessee; provided, however, that if the nature of Lessee's default is such that more than twenty (20) calendar days are reasonably required for its cure, then Lessee shall not be deemed to be in default if Lessee commenced such cure within said twenty (20)-day period and thereafter diligently prosecutes such cure to completion.
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13.1.4 The making by Lessee of any general arrangement or assignment for the benefit of creditors; Lessee becomes a "debtor" as defined in
I I U.S.C. * 10 1 or any successor statute thereto (unless, in the case of a petition filed against Lessee, the same is dismissed within 60 days); the appointment of a trustee or receiver to take possession of substantially all of Lessee's assets located at the Premises or of Lessees interest in this Lease, where possession is not restored to Lessee within 30 days; or the attachment, execution or other judicial seizure of substantially all of Lesse's assets located at the Premises or of Lessee's interest in this Lease, where such seizure is not discharged within 30 days. Provided, however, in the event that any provision of this paragraph 13.1.4 is contrary to any applicable law, such provision shall be of no force or effect.
13.1.5 The discovery by Lessor that any financial statement given to Lessor by Lessee, any assignee of Lessee, any subtenant of Lessee, any successor in interest of Lessee or any guarantor of Lessee's obligations hereunder, and any of them, was materially false.
13.1.6 The release or disposal of a hazardous substance on or around the Premises.
13.2 Remedies. In the event of any such material default or breach by Lessee, Lessor may at any time thereafter, with notice and without limiting Lessor in the exercise of any right or remedy which Lessor may have by reason of such default or breach:
13.2.1 Terminate Lessee's right to possession of the Premises by any lawful means, in which case this Lease shall terminate and Lessee shall immediately surrender possession of the Premises to Lessor. In such event Lessor shall be entitled to recover from Lessee all damages incurred by Lessor by reason of Lessee's default including, but not limited to, the cost of recovering possession of the Premises; cost of the clean up of any hazardous substance released; expenses of reletting, including necessary renovation and alteration of the Premises, reasonable attorneys fees, and any real estate commission actually paid; the worth at the time of award by the court having jurisdiction thereof of the amount by which the unpaid rent for the balance of the term after the time of such award exceeds the amount of such rental loss for the same period that Lessee proves could be reasonably avoided; that portion of the leasing commission paid by Lessor pursuant to Paragraph 15 applicable to the unexpired term of this Lease.
13.2.2 Maintain Lessee's right to possession in which case this Lease shall continue in effect whether or not Lessee shall have abandoned the Premises. In such event Lessor shall be entitled to enforce all of Lessor's rights and remedies under this Lease, including the right to recover the rent as it becomes due hereunder.
13.2.3 Pursue any other remedy now or hereafter available to Lessor under the laws or judicial decisions of the state wherein the Premises are located. Unpaid installments of rent and other unpaid monetary obligations of Lessee under the terms of this Lease shall bear interest from the date due at the maximum rate then allowable by law.
13.3 Default by Lessor. Lessor shall not be in default unless Lessor fails to perform obligations required of Lessor within thirty (30) days after written notice by Lessee to Lessor and to the holder of any first mortgage or deed of trust covering the Premises whose name and address shall have theretofore been furnished to Lessee in writing, specifying wherein Lessor has failed to perform such obligation; provided, however, that if the nature of Lessor's obligation is such that more than thirty (30) days are required for performance then Lessor shall not be in default if Lessor commences performance within such thirty (30)-day period and thereafter diligently prosecutes the same to completion. Provided, further, that no delay, default or other failure by Lessor to perform Lessor's obligations under the Lease shall waive, release or otherwise excuse Lessee from its monetary or other obligations under this Lease in any way whatsoever.
13.4 Late Charge. Lessee hereby acknowledges that late payment by Lessee to Lessor of rent or other sums due hereunder will cause Lessor to incur costs not contemplated by this Lease, the exact amount of which will be extremely difficult to ascertain. Such costs include but are not limited to, processing and accounting charges, and late charges which may be imposed on Lessor by the terms of any mortgage or any trust deed covering the Premises. Accordingly, if any installment of rent or any other sum due from Lessee shall not be received by Lessor or Lessor's designee within nine (9) days after such amount shall be due, then, without any requirement for notice to Lessee, Lessee shall pay to Lessor a late charge equal to ten percent (10%) of such overdue amount. The parties hereby agree that such late charge represents a fair
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and reasonable estimate of the costs Lessor will incur by reason of late payment by Lessee. Acceptance of such late charge by Lessor shall in no event constitute a waiver of Lessee's default with respect to such overdue amount nor prevent Lessor from exercising any of the other rights and remedies granted hereunder. In the event that a late charge is payable hereunder, whether or not collected, for three (3) consecutive installments of rent, then rent shall automatically become due and payable quarterly in advance, rather than monthly, notwithstanding Paragraph 5 or any other provision of this Lease to the contrary.
13.5 Impounds. In the event that a late charge is payable hereunder, whether or not collected, for three (3) installments of rent or any other monetary obligation of Lessee under the terms of this Lease, Lessee shall pay to Lessor, if Lessor shall so request, in addition to any other payments required under this Lease, a monthly advance installment, payable at the same time as the monthly rent, for real property tax and insurance, based on last year's real property tax and insurance payments on the Premises, which are payable by Lessee under the terms of this Lease. Such fund shall be established to insure payment when due, before delinquency, of any or all such real property taxes and insurance premiums. If the amounts paid to Lessor by Lessee under the provisions of this Paragraph are insufficient to discharge the obligations of Lessee to pay such real property taxes and insurance premiums as the same become
due, Lessee shall pay to Lessor, upon Lessor's demand, such additional sums necessary to satisfy any such obligations. All moneys paid to Lessor under this Paragraph may be intermingled with other moneys of Lessor and shall not bear interest. In the event of a default in the obligations of Lessee to perform under this Lease, then any balance remaining from funds paid to Lessor under the provisions of this Paragraph may, at the option of Lessor, be applied to the payment of any monetary default of Lessee in lieu of being applied to the payment of real property tax and insurance premiums.
14. Condemnation. If the Premises or any portion thereof are taken under the power of eminent domain, or sold under the threat of the exercise of said power (all of which are herein called "condemnation"), this Lease shall terminate as to the part so taken as of the date the condemning authority takes title or possession, whichever first occurs. If more than 10% of the floor area of the building on the Premises, or more than 25% of the land area of the Premises which is not occupied by any building, is taken by condemnation, Lessee may, at Lessee's option, to be exercised in writing only within ten (10) days after Lessor shall have given Lessee written notice of such taking (or in the absence of such notice, within ten (10) days after the condemning authority shall have taken possession) terminate this Lease as of the date the condemning authority takes such possession. If Lessee does not terminate this Lease in accordance with the foregoing, this Lease shall remain in full force and effect as to the portion of the Premises remaining, except that the rent shall be reduced in the proportion that the floor area of the building taken bears to the total floor area of the building situated on the Premises. No reduction of rent shall occur if the only area taken is that which does not have a building located thereon. Any award for the taking of all or any part of the Premises under the power of eminent domain or any payment made under the threat of the exercise of such power shall be the property of Lessor, whether such award shall be made as compensation for diminution in value of the leasehold or for the taking of the fee, or as severance damages; provided, however, that Lessee shall be entitled to any award for loss of or damage to Lessee's trade fixtures and removable personal property. In the event that this Lease is not terminated by reason of such condemnation, Lessor shall to the extent of severance damages received by Lessor in connection with such condemnation, repair any damage to the Premises caused by such condemnation except to the extent that Lessee has been reimbursed therefore by the condemning authority. Lessee shall pay any amount in excess of such severance damages required to complete such repair.
15. Broker's Fee. Lessor and Lessee hereby warrant to each other that they have had no dealings with any real estate broker or agent in connection with the negotiation of this Lease. Each party agrees to indemnify and defend the other party against and hold the other party harmless from any and all claims, demands, losses, liabilities, lawsuits judgments and cost and expenses (including without limitation reasonable attorney fees) with respect to any leasing commission or equivalent compensation alleged to be owing on account of the indemnifying party's dealings with any real estate broker or agent other than that specified herein.
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16. General Provisions.
16.1 Estoppel Certificate.
16.1.1 Lessee shall at anytime but not more often than once each calendar month, upon not less than ten (10) days prior written notice from Lessor, execute, acknowledge and deliver to Lessor a statement in writing certifying that this Lease is unmodified and in full force and effect (or, if modified, stating the nature of such modification and certifying that this Lease, as so modified, is in full force and effect) and the date to which the rent and other charges are paid in advance, if any, and acknowledging that there are not, to Lessees knowledge, any uncured defaults on the part of Lessor hereunder, or specifying such defaults if any are claimed, and acknowledge such other matters as shall be requested by a financing Lender or a Buyer that is customarily requested in accordance with then prevailing Lending or purchasing practices. Any such statement may be conclusively relied upon by any prospective purchaser or encumbrance of the Premises.
16.1.2 At Lessor's option, Lessee's failure to deliver such statement within such time shall be a material breach of this Lease or shall be conclusive upon Lessee that this Lease is in full force and effect, without modification except as maybe represented by Lessor, that there are no uncured defaults in Lessor's performance, and that not more than one (1) month's rent has been paid in advance or such failure may be considered by Lessor as a default by Lessee under this Lease.
16.1.3 If Lessor desires to finance, refinance, or sell the Premises, or any part thereof, Lessee hereby agrees to deliver to any lender or purchaser designated by Lessor such financial statements of Lessee as may be reasonably required by such lender or purchaser. Such statements shall include the past three (3) years' financial statements of Lessee. All such financial statements shall be received by Lessor and such lender or purchaser in confidence and shall be used only for the purposes herein set forth.
16.2 Lessor's Liability. The term "Lessor" as used herein shall mean only the owner or owners, at the time in question, of the fee title or a lessee's interest in a ground lease of the Premises. In the event of any transfer of such title or interest, Lessor herein named (and in case of any subsequent transfers then the grantor) shall be relieved from and after the date of such transfer of all liability in respect to Lessor's obligations thereafter to be performed, provided that any funds in the hands of Lessor or the then grantor at the time of such transfer, in which Lessee has an interest, shall be delivered to the grantee. The obligations contained in this Lease to be performed by Lessor shall, subject as aforesaid, be binding on Lessor's successors and assigns, only during their respective periods of ownership.
16.3 Relocation of Premises. If the Premises leased hereunder are less than 3,000 square feet, Lessor may, at its option, elect by notice to Lessee to substitute for the Premises other office space in the Building (herein called "Substitute Premises") designated by Lessor; provided that the Substitute
Premises contain at least the same useable square foot area as the Premises. Lessee shall vacate and surrender the Premises and shall occupy the Substitute Premises promptly (and, in any event, not later than fifteen (15) days after Lessor has substantially completed the work to be performed by Lessor in the Substitute Premises pursuant to this Section 30.6- Base Rent for the Substitute Premises shall remain the same as the Premises. Lessee shall not be entitled to an abatement of Rent due to its relocation to the Substitute Premises, but Lessor shall, at Lessor's expenses: furnish and install in the Substitute Premises fixtures, equipment, improvements and appurtenances at least equal in kind and quality to those contained in the Premises; provide to Lessee personnel to perform, under Lessee's direction, the moving of Lessee's property; promptly reimburse Lessee for lessee's actual and reasonable out-of-pocket costs incurred by Lessee in connection with the relocation provided such costs are approved by Lessor in advance, which approval will not be unreasonably withheld. Lessee agrees to cooperate with Lessor to facilitate the prompt completion by Lessor of its obligations under this Section and the prompt surrender by Lessee of the Premises.
17. Severability. The invalidity of any provision of this Lease as determined by a court of competent jurisdiction, shall in no way affect the validity of any other provision hereof.
18. Interest on Past-Due Obligations. Except as expressly herein provided, any amount due not paid when due shall bear interest at the maximum rate then allowable by law from the date due. Payment of such interest shall not excuse or cure any default under this Lease, provided, however, that interest shall not be payable on late charges incurred by Lessee nor on any amounts upon which late charges are paid by Lessee.
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19. Time of Essence. Time is of the essence.
20. Additional Rent. Any monetary obligations of Lessee to Lessor under the terms of this Lease shall be deemed to be rent.
21. Incorporation of Prior Agreements, Amendments. This Lease contains all agreements of the parties with respect to any matter mentioned herein. No prior agreement or understanding pertaining to any such matter shall be effective. This Lease may be modified in writing only, signed by the parties in interest at the time of the modification. Except as otherwise stated in this Lease. Lessee hereby acknowledges that neither the real estate broker, listed in Paragraph 15 hereof, nor any cooperating broker on this transaction nor the Lessor or any employees or agents of any of said persons has made any oral or written warranties or representations to Lessee relative to the condition or use by Lessee of said Premises except as provided herein. Lessee acknowledges that Lessee assumes all responsibility regarding the Occupational Safety Health Act, the legal use and adaptability of the Premises and the compliance thereof with all applicable laws and regulations in effect during the term of this Lease except as otherwise specifically stated in this Lease.
22. Notices. Any notice required or permitted to be given hereunder shall be in writing and may be given by personal delivery, Courier Service or certified mail and if given personally or by mail, shall be deemed sufficiently given if addressed to Lessee or to Lessor at the address first set forth above. Either party may by notice to the other specify a different address for notice purposes except that upon Lessee's taking possession of the Premises, the Premises shall constitute Lessee's address for notice purposes.
23. Waivers. No waiver by a party or any provision hereof shall be deemed a waiver of any other provision hereof or of any subsequent breach by the other of the same or any other provision. Lessor's consent to, or approval of, any act shall not be deemed to tender unnecessary the obtaining of Lessor's consent to or approval of any subsequent act by Lessee. The acceptance of rent hereunder by Lessor shall not be a waiver of any preceding breach by Lessee of any provision hereof, other than the failure of Lessee to pay the particular rent so accepted, regardless of Lessor's knowledge of such preceding breach at the time of acceptance of such rent.
24. Recording. Lessee shall, upon request of Lessee, execute, acknowledge and deliver to Lessee a "short form" memorandum of this Lease for recording purposes, and when appropriate, a memorandum of termination of this Lease.
25. Holding Over. If Lessee fails to vacate the Premises at the end of the Tern, then Lessee shall be a tenant at will and, in addition to all other damages and remedies to which Lessor may be entitled for such hold over, Lessee shall pay, in addition to the other rent, a daily Basic Rent equal to the greater of (a) one hundred fifty percent (150%) of the daily Basic Rent payable during the last month of the Tern, or (b) one hundred twenty-five percent (125%) of the prevailing rental rate in the Building for similar space. If Lessee fails to surrender the Premises upon Termination or Expiration of the Lease, in addition to any other liabilities to Lessor accruing therefrom, Lessee shall protect, defend, indemnify and hold Lessor harmless from all loss, costs, (including reasonable attorney's fees) and liability resulting from such failure, including without limiting the generality of the foregoing, any claims made by any succeeding tenant founded upon such failure to surrender, and any lost profits to Lessor resulting therefrom. The above conditions shall not be deemed to limit or constitute a waiver of any other rights or remedies provided to Lessor herein or at law. If Lessee, with Lessor's consent, remains in possession of the Premises or any part thereof after the expiration of the term hereof, such occupancy shall be a tenancy from month to month upon all the provisions of this Lease pertaining to the obligations of Lessee, but all options and rights of first refusal, if any, granted under the terms of this Lease shall be deemed terminated and be of no further effect during said month to month tenancy.
26. Cumulative Remedies. No remedy or election hereunder shall be deemed exclusive but shall, wherever possible, be cumulative with all other remedies at law or in equity.
27. Covenants and Conditions. Each provision of this Lease performed by Lessee shall be deemed both a covenant and a condition.
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28. Binding Effect; Choice of Law. Subject to any provisions hereof restricting assignment or subletting by Lessee and this Lease shall bind the parties, their personal representatives, successors and assigns. This Lease shall be governed by the laws of the State wherein the Premises are located.
29. Subordination.
29.0.1 This Lease, at Lessor's option, shall be subordinate to any ground lease, mortgage, deed of trust, or any other hypothecation or security now or hereafter placed upon the real property of which the Premises are apart and to any and all advances made on the security thereof and to all renewals, modifications, consolidations, replacements and extensions thereof Notwithstanding such subordination, Lessee's right to quiet possession of the Premises shall not be disturbed if Lessee is not in default and so long as Lessee shall pay the rent and observe and perform all of the provisions of this Lease, unless this Lease is otherwise terminated pursuant to its terms. If any mortgagee, trustee or ground lessor shall elect to have this Lease prior to the lien of its mortgage, deed of trust or ground lease, and shall give written notice thereof to Lessee, this Lease shall be deemed prior to such mortgage, deed of trust, or ground lease, whether this Lease is dated prior or subsequent to the date of said mortgage, deed of trust or ground lease or the date of recording thereof.
29.0.2 Lessee agrees to execute any documents required to effectuate an attornment, a subordination or to make this Lease prior to the lien of any mortgage, deed of trust or ground lease, as the case may be. Lessee's failure to execute such documents within ten (10) days after written demand shall constitute a material default by Lessee hereunder.
30. Attorneys' Fees. If either party consults an attorney regarding the enforcement of the provisions of the Lease, or if either party commences an action or proceeding against the other party arising out of or in connection with this Lease, or institutes any proceeding in a bankruptcy or similar court which has jurisdiction over the other party or any or all of its property or assets, the correct or prevailing party in such enforcement, action or proceeding and in any appeal in connection therewith shall be entitled to have and recover from the incorrect or unsuccessful party reasonable attorneys' and expert's fees, court costs, expenses and other costs of investigation and
preparation. If such correct or prevailing party recovers a judgement in any such action, proceeding or appeal, such attorneys' and experts fees, costs and expenses shall be included in and as a part of such judgment
31. Lessor's Access. Lessor and Lessor's agents shall have the right to enter the Premises at reasonable times, upon notice to Lessee, for the purpose of inspecting the same, showing the same to lenders, and making such alternations, repairs, improvements or additions to the Premises or to the building of which they are a part as are necessary. Lessor may at any time place on or about the Premises any ordinary "For Sale" signs and Lessor may at any time during the last 120 days of the term hereof place on or about the Premises any ordinary "For Lease" signs, a without rebate of rent or liability to Lessee.
32. Auctions. Lessee shall not conduct, nor permit to be conducted, either voluntarily or involuntarily, any auction upon the Premises without first having obtained Lessor's prior written consent. Notwithstanding anything to the contrary in this Lease, Lessor shall not be obligated to exercise any standard of reasonableness in determining whether to grant such consent.
33. Signs. Lessee shall not place any sign upon the Premises or within view of the common areas of the Building without Lessor's prior written consent.
34. Merger. The voluntary or other surrender of this Lease by Lessee, or a mutual cancellation thereof, or a termination by Lessor, shall not work a merger, and shall, at the option of Lessor, terminate all or any existing subtenants or may, at the option of Lessor, operate as an assignment to Lessor of any or all of such subtenants.
35. Consents. Wherever in this Lease the consent of one party is required to an act of the other party such consent shall not be unreasonably withheld, delayed or conditioned.
36. Guarantor. In the event that there is a guarantor of this Lease, said guarantor shall have the same monetary obligations as Lessee under this Lease.
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37. Quiet Possession. Upon Lessee paying the rent for the Premises and observing and performing all of the covenants, conditions and provisions of Lessee's part to be observed and performed hereunder, Lessee shall have quiet possession of the Premises for the entire term hereof subject to all of the provisions of this Lease. The individuals executing this Lease on behalf of Lessor represent and warrant to Lessee that they are duly authorized and legally capable of executing this Lease on behalf of Lessor and that such execution is binding upon all parties holding an ownership interest in the Premises.
38. Security Measures. Lessee hereby acknowledges that the rental payable to Lessor hereunder does not include the cost of guard service or other security measures.
39. Easements. Lessor reserves to itself the right, from time to time, to grant such reasonable easements, rights, dedications that Lessor deems necessary and to cause the recording of Parcel maps and restrictions, so long as such easements, rights, dedications, maps and restrictions do not unreasonably interfere with the use of the Premises by Lessee. Lessee shall sign any of the aforementioned documents upon request of Lessor and failure to do so shall constitute a material breach of this Lease.
40. Performance Under Protest. If at any time a dispute shall arise as to any amount or sum of money to be paid by one party to the other under the provisions hereof, the party against whom the obligation to pay the money is asserted shall have the right to make payment "under protest" and such payment shall not be regarded as a voluntary payment, and there shall survive the right on the part of said party to institute suit for recovery of such sum. If it shall be adjudged that there was no legal obligation on the part of said party to pay such sum or any part thereof, said parry shall be entitled to recover such sum or so much thereof as it was not legally required to pay under the provisions of this Lease, along with interest thereon at the highest lawful rate and reasonable and necessary attorney's fees and any damages caused thereby.
41. Authority. If Lessee is a corporation, trust, or general or limited partnership, each individual executing this Lease on behalf of such entity represents and warrants that he or she is duly authorized to execute and deliver this Lease on behalf of said entity. If Lessee is a corporation, trust or partnership, Lessee shall, within thirty (30) days after execution of this Lease, deliver to Lessor evidence of such authority satisfactory to Lessor.
42. Confidentiality. Lessee acknowledges that the terms and conditions of this Lease are to remain confidential for Lessor's benefit, and may not be disclosed by Lessee to anyone, by any manner or means, directly or indirectly, without Lessor's prior written consent. The consent by Lessor to any disclosure shall not be deemed to be a waiver on the part of Lessor of any prohibition against any future disclosure
43. Conflict. Any conflict between the printed provision of this Lease and the typewritten or handwritten provisions shall be controlled by the typewritten or handwritten provision.
IN WITNESS WHEREOF, the parties have executed this Lease as of the date first set forth above.
/s/ /s/
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Lessor: ENCINO GARDENS, LLC Lessee: ADVANCED KNOWLEDGE, INC.
a California limited d.b.a. Advanced Knowledge
liability company Training, Inc.
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EXHIBIT "A
[map of premises]
EXHIBIT B
TO
THE ENCINO GARDENS OFFICE BUILDING
OFFICE LEASE AGREEMENT
RULES AND REGULATIONS
Attached to and forming a part of a lease between ENCINO GARDENS, LLC,
as Lessor ("Landlord"), and, ADVANCED KNOWLEDGE, INC., D.B.A. ADVANCED KNOWLEDGE
TRAINING, INC., as Lessee ("Tenant").
1. The entrances, halls, corridors, stairways, retail arcade walkways, exits, and elevators shall not be obstructed by any of the tenants or used for any purpose other than for ingress and egress from their respective premises. The entrances, halls, corridors, stairways, retail arcade walkways, exits, and elevators are not intended for use by the general public but for the tenant and its employees, licensees and invitees. Lessor reserves the right to control and operate the public portions of the Building and the public facilities as well as facilities furnished for the common use of the tenants, in such manner as it in its reasonable judgment deems best for the benefit of the tenants generally. No tenant shall invite to the tenants premises, or permit the visit of, persons in such numbers or under such conditions as to interfere with the use and enjoyment of any of the plazas, entrances, corridors, elevators and other facilities of the Building by any other tenants. Fire exits and stairways are for emergency use only, and they shall not be used for any other purpose.
2. Lessor may refuse admission to the Building outside of Business Hours on Business Days (as such terms are defined in the Lease) to any person not producing identification satisfactory to Lessor. If Lessor issues identification passes, Lessee shall be responsible for all persons for whom it issues any such pass and shall be liable to Lessor for all acts or omissions of such persons.
3. No tenant shall obtain or accept for use in its premises ice, food, beverages, cleaning or other similar services from any persons reasonably prohibited in writing from furnishing such services. Such services shall be furnished only at such hours, and under such reasonable regulations, as may be fixed by Lessor from time to time.
4. The cost of repairing any damage to the public portions of the Building or the public facilities or to any facilities used in common with other tenants, caused by a tenant or its employees, agents, contractors, licensees or invitees, shall be paid by such tenant.
5. No awnings or other projections shall be attached to the outside walls of the Building. No curtains, blinds, shades or screens, if any, which are different from the standards adopted by Lessor for the Building shall be
attached to or hung in any exterior window or door of the premises of any tenant without the prior written consent of Lessor.
6. No sign, placard, picture, name lettering, advertisement, notice or object visible from the exterior of any lessee's premises shall be displayed in or on the exterior windows or doors, or on the outside of any lessee's premises, or at any point inside any tenants premises where the same might be visible outside of such premises, without the prior written consent of Lessor. Lessor shall adopt and furnish to tenants general guidelines relating to signs inside the Building. Lessee shall conform to such guidelines. All approved signs or lettering shall be prepared, printed, affixed, or inscribed at the expense of the tenant and shall be of a size, color and style acceptable to Lessor.
7. The windows that reflect or admit light and air into the halls, passageways or other public places in the Building shall not be covered or obstructed by any tenant, nor shall any bottles, parcels or other articles be placed on the window sills.
8. No showcases or other articles shall be put in front of or affixed to any part of the exterior of the Building, no placed in the halls, corridors or vestibules.
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9. No bicycles, vehicles, animals, fish or birds of any kind shall he brought into or kept in or about the premises of any tenant or the Building.
10. No noise, including, but not limited to, music or the playing of musical instruments, recordings, radio or television, which, in the judgment of Lessor, might disturb other tenants in the Building, shall be made or permitted by any tenant.
11. No tenant, nor any tenant's contractors, employees, agents, visitors, invitees or licensees, shall at any time bring into or keep upon the premises or the Building any flammable, combustible, explosive, environmentally hazardous or otherwise dangerous fluid, chemical or substance.
12. Additional locks or bolts of any kind which shall not be operable by the Grand Master Key for the Building shall not be placed upon any of the doors or windows by any tenant, nor shall any changes be made in locks or mechanism thereof which shall make such locks inoperable by said Grand Master Key. Additional keys for a tenant's premises and toilet rooms shall be procured only from the Lessor who may make a reasonable charge therefor.
13. All movement of freight, furniture, packages, boxes, crates or any other object or matter of any description must take place during such hours and in such elevators, and in such manner as Lessor or its agent may determine from
time to time. Any labor and engineering costs incurred by Lessor in connection with any moving herein specified, shall be paid by Lessee to Lessor, on demand.
14. No tenant shall occupy or permit any portion of its premises to be occupied as an office for a public stenographer, public typist, printer or photocopier without the prior written consent of Lessee. No tenant shall use its premises, or permit any part thereof to be used, for manufacturing or the sale at retail or auction of merchandise, goods or property of any kind or for the possession, storage, manufacture, or sale of liquor, narcotics, dope, tobacco, in any form, or as a barber, beauty or manicure shop, or as school.
15. Lessor shall have the right to prescribe the weight and position of safes and other objects of excessive weight, and no safe or other object whose weight exceeds the lawful load for the area upon which it would stand shall be brought into or kept upon any tenant' s, premises. If, in the judgment of Lessor, it is necessary to distribute the concentrated weight of any heavy object, the work involved in such distribution shall be done at the expense of the tenant and in such manner as Lessor shall determine.
16. No machinery or mechanical equipment other than ordinary portable business machines may be installed or operated in any tenants premises without Lessor's prior written consent which consent shall not be unreasonably withheld or delayed, and in no case shall any machines or mechanical equipment be so placed or operated as to disturb other tenants. Machines and mechanical equipment which may be permitted to be installed and used in tenant' s premises shall be equipped, installed and maintained so as to prevent any disturbing noise, vibration or electrical or other interference from being transmitted from such premises to any other area of the Building.
17. Lessor, it contractors, and their respective employees, shall have the right to use, without charge therefor, all light, power and water in the premises of any tenant while cleaning or making repairs or alterations in the premises of such tenant.
18. No premises of any tenant shall be used for lodging or sleeping or for any immoral or illegal purpose.
19. The requirements of tenants for any services by Lessor will be attended to only upon prior application to the Lessor. Employees of Lessor shall not perform any work or do anything outside of their regular duties, unless under special instructions from Lessor.
20. Canvassing, soliciting and peddling in the Building are prohibited and each tenant shall cooperate to prevent the same.
21. Without the prior written consent of Lessor, no tenant shall sell newspapers, magazines, periodicals, theater, or travel tickets or other goods or merchandise to the general public in or on tenanfs premises nor shall any tenant
use or permit the use of any sidewalk or any area of the retail arcade for any similar purpose.
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22. Each tenant shall store its trash and garbage within its premises. No material shall be placed in the trash boxes or receptacles if such material is of such nature that it may not be disposed of in the ordinary and customary manner of removing and disposing of office building trash and garbage in the City of Los Angeles without being in violation of any law or ordinance governing such disposal. All garbage and refuse disposal shall be made only through entryways and elevators provided for such purposes and at such times as Lessor shall designate. No tenant shall cause or permit any unusual or objectionable odors to emanate from its premises which would annoy other tenants or create a public or private nuisance. No cooking shall be done in the premises of any tenant except as is expressly permitted in such tenant's lease.
23. No bankruptcy, going out of business, liquidation or other form of distress sale shall be held on any of tenant' s premises. No sales shall be held outside of any tenant's premises. No advertisement shall be done by loudspeaker, barkers, flashing lights or displays or other methods not consistent with the character of a high-quality office building.
24. Nothing shall be done or permitted in any tenants premises, and nothing shall be brought into or kept in any tenants premises, which would impair or interfere with the economic heating, cleaning or other servicing of the Building or the premises, or the use or enjoyment by any other tenant of any other premises, nor shall there be installed by any tenant any ventilating, air conditioning, electrical or other equipment of any kind which, in the reasonable judgment of Lessor, might cause any such impairment or interference.
25. No acids, vapors or other similar caustic materials shall be discharged or permitted to be discharged into the waste lines, vents or flues of the Building. The water and wash closets and other plumbing fixtures in or servicing any tenant! s premises shall not be used for any purpose other than the purposes for which they were designed or constructed, and no sweepings, rubbish, rags, acids or other foreign substances shall be deposited therein. All damages resulting from any misuse of the fixtures shall be borne by the tenant who, or whose servants, employees, agents, invitees, visitors or licensees shall have caused the same.
26. All entrance doors in each tenant's premises shall be left locked and all windows shall be left closed by the tenant when the tenant's premises are not in use. Entrance doors to the tenant's premises shall not be Jeff open at any time. Each tenant, before closing and leaving its premises at any time, shall turn out all lights.
27. Window coverings for all windows in each tenant's premises above the ground floor shall be lowered as reasonably required because of the position of the sun, during the operation of the Building air-conditioning system to cool or ventilate the tenant's premises.
28. Lessor reserves the right to rescind, modify, alter or waive any rule or regulation at any time prescribed for the Building when, in its
reasonable judgment, it deems it necessary, desirable or proper for its best interest and for the best interests of the tenants generally, and no alteration or waiver of any rule or regulation in favor of one tenant shall operate as an alteration or waiver in favor of any other tenant. Lessor shall not be responsible to any tenant for the non-observance or violation by any other tenant of any of the rules and regulations at any time prescribed for the Building.
29. Lessor reserves the right to add to, modify or otherwise change these Rules and Regulations. Such changes shall become effective when written notice thereof is provided to tenants of the Building.
EXHIBIT C
TO
ENCINO GARDENS OFFICE LEASE AGREEMENT
TENANT FINISH-WORK: AS-IS
Lessee hereby accepts the Premises in their "AS-IS" condition, and Lessor shall have no obligation to perform any work therein (including, without limitation, demolition of any improvements existing therein or construction of tenant finish-work or other improvements therein), and shall not be obligated to reimburse Lessee or provide an allowance for any costs related to the demolition or construction of improvements therein, except for the following improvements to the Premises, which Lessor shall make at its cost and expense:
1) Install laminated wood floor covering in office 41.
2) Replace the damaged mini blinds in office #1.
3) Install an additional electrical plug in office #1, as indicated in Exhibit A.
4) Make the necessary adjustment to the HVAC for proper and independent operation of the system within the Premises.
5) Patch and paint the walls (color: D.E. EGGSHELL ) PURE GRAY DE1077
LESSEE SHALL IN A TIMELY MANNER AND AT LESSEE'S SOLE COST AND EXPENSE INSTALL. THE TELECOMMUNICATION SYSTEM, AND CARPETING.
EXHIBIT 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the use of our report dated August 17, 2006 on the May 31, 2006 financial statements of Advanced Media Training, Inc. in the Registration Statement on Form 10-SB.
/s/ Farber Hass Hurley & McEwen LLP ----------------------------------- Camarillo, California May 29, 2007 |