Two schoolboys said a man accused of encouraging terrorism told them "you had to kill" anyone who insulted their religion, a court has heard.
One boy said Zameer Ghumra, 38, from Leicester, supported so-called Islamic State and showed him beheading videos.
Nottingham Crown Court heard the pharmacist believed in a "very, very, very extreme" form of Islam.
The jury heard Mr Ghumra, who denies the terrorist charge, said the two boys were making "a false allegation".
Mr Ghumra, of Haringworth Road, is accused of disseminating "terrorist propaganda" in the form of a graphic Twitter video on his mobile phone, between January 2013 and September 2014.
In a police interview played to the court, the younger child said: "He put us on Twitter. He told us to follow whoever he followed. He was following ISIS and really bad people."
The boy said the pharmacist gave them knives and toy guns.
"He was basically training us to survive in a situation with ISIS where the lights go out," he said.
He also said Mr Ghumra gave them business cards - which were shown to the jury - with the boy's names and email addresses alongside a picture of a rifle.
The older boy described being shown "horrible and disgusting" beheading videos, and asked the accused "how can you behead people?".
He said Mr Ghumra replied "if you truly believe in Allah, you can do it," the court heard.
"I realised how bad he was. You can't go round chopping heads off and killing people," the boy said.
The jury heard, the accused used a rented house to teach children about jihad and the boys were not allowed non-Muslim friends.
The boy said Mr Ghumra asked him to choose between going to Iraq or Syria, or staying in the UK and "manipulating" other people into supporting IS, the court heard.
The pharmacist was arrested in September 2015 and the phone containing the beheading video or the video itself was not found.
The trial continues.