U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF
SECURITIES OF SMALL BUSINESS ISSUERS
Under Section 12(b) Or 12(g) Of The Securities Act Of 1934
NewCom International Inc.,
(formerly Phileo Management Company, Inc.)
(Name of Small Business Issuer in Its Charter)
Nevada 88-0320439
(State or Other Jurisdictions (I.R.S. Employer Identification No.)
of Incorporation or Organization)
515 West Pender Street, Vancouver, British Columbia V6B 6H5
(Address of Principal Executive Offices) (Zip Code)
(604) 681-5678
(Issuer's Telephone Number, Including Area Code)
Securities to be registered under Section 12(b) of the Act: None
Securities to be registered under Section 12(g) of the Act:
Common Stock, par value $.001
(Title of Class)
<PAGE>
INFORMATION STATEMENT
NEWCOM INTERNATIONAL INC.
COMMON STOCK, PAR VALUE $.001
NewCom is voluntarily filing its registration statement on form 10-SB to make
information concerning itself more readily available to the public. Management
believes that being a reporting company under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), could provide a prospective merger or
acquisition candidate with additional information concerning NewCom. In
addition, management believes that this may make NewCom more attractive to an
operating business opportunity as a potential business combination candidate. As
a result of filing its registration statement, NewCom is obligated to file with
the Securities and Exchange Commission ("Commission") certain interim and
periodic reports including an annual report containing audited financial
statements. NewCom intends to continue to voluntarily file these periodic
reports under the Exchange Act even if its obligation to file such reports is
suspended under applicable provisions of the Exchange Act.
The date of this Information Statement is May 22, 2000
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
Business Development
NewCom International Inc. ("NewCom") was incorporated in Nevada on September 12,
1996 under the name AgriNet, Incorporated. On October 24, 1996, AgriNet,
Incorporated amended its Articles of Incorporation to change its name to Phileo
Management Company, Inc. On April 19, 2000 the Articles of Incorporation were
amended to change the name to NewCom International Inc. Since its incorporation,
NewCom has not conducted any significant operations.
Business of Issuer
NewCom's activities to date have focused primarily on incorporation and the
identification of potential operating opportunities or acquisition targets.
NewCom has not yet commenced principal operations or earned significant
revenues. NewCom is a blank-check company with virtually no assets or revenues.
On January 30, 1999, NewCom entered into an agreement to acquire certain assets,
consisting of 66% interest of a joint venture in a fibre-optic cable network in
China (the "Joint Venture"), for $60 million from the shareholders of Guangzhou
South China Fibre-Optic Network Engineering Co. Ltd. ("SCFC"). The consideration
consists of 42 million shares of NewCom's common stock and 18 million shares of
NewCom's preferred stock. As of the date of this filing, the acquisition has not
been completed and there are no assurances that such acquisition will be
completed. The Joint Venture still requires significant amounts of financing,
and in the event the financing is not completed, the acquisition by NewCom of
the Joint Venture interests will not be completed.
Therefore, future operations, NewCom will continue to attempt to become active
and seek potential operating businesses and business opportunities with the
intent to acquire or merge with such businesses. NewCom is considered a
blank-check company, and due to its status as a "shell" corporation, its
principal business purpose is to locate and consummate a merger or acquisition
with a private entity. No representation is made or intended that NewCom will be
able to carry out its activities profitably.
NewCom is voluntarily filing its registration statement on Form 10-SB to make
information concerning itself more readily available to the public. Management
believes that being a reporting company under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), could provide a prospective merger or
acquisition candidate with additional information concerning NewCom. In
addition, management believes that this may make NewCom more attractive to an
operating business opportunity as a potential business combination candidate. As
a result of filing its registration statement, NewCom is obligated to file with
the Commission certain interim and periodic reports including an annual report
containing audited financial statements. NewCom intends to continue to
voluntarily file these periodic reports under the Exchange Act even if its
obligation to file such reports is suspended under applicable provisions of the
Exchange Act.
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In the event NewCom cannot complete the acquisition of the Joint Venture
interests any other target acquisition or merger candidate of NewCom may become
subject to the same reporting requirements as NewCom upon consummation of any
such business combination. Thus, in the event that NewCom successfully completes
an acquisition or merger with another operating business, the resulting combined
business must provide audited financial statements for at least the two most
recent fiscal years, or in the event that the combined operating business has
been in business less than two years, audited financial statements will be
required from the period of inception of the target acquisition or merger
candidate. Since many private companies do not have audited financial
statements, obtaining them could be expensive and time consuming and thus not be
a merger candidate.
Source of Business Opportunities
If the Joint Venture acquisition is not completed, NewCom intends to use various
sources in its search for potential business opportunities including its
officers and directors, consultants, special advisors, securities
broker-dealers, venture capitalists, members of the financial community and
others who may present management with unsolicited proposals. NewCom may
investigate and ultimately acquire a venture that is in its preliminary or
development stage, is already in operation, or in various stages of its
corporate existence or development. Management cannot predict at this time the
status or nature of any venture in which NewCom may participate. The most likely
scenario for a possible business arrangement would involve the acquisition of or
merger with an operating business which does not need additional capital, but
which merely desires to establish a public trading market for its shares.
Evaluation Criteria
Once NewCom has identified a particular entity as a potential acquisition or
merger candidate, management will seek to determine whether acquisition or
merger is warranted or whether further investigation is necessary. Such
determination will generally be based on management's knowledge and experience,
or with the assistance of outside advisors and consultants evaluating the
preliminary information available to them. Management may elect to engage
outside independent consultants to perform preliminary analyses of potential
business opportunities. However, because of NewCom's lack of capital it may not
have the necessary funds for a complete and exhaustive investigation of any
particular opportunity. Further, no member of management is a professional
business analyst and management will rely on its own business judgment in
formulating the types of businesses that NewCom may acquire. It is quite
possible that management will not have any business experience or expertise in
the type of business engaged in by any potential acquisition or merger
candidate.
In evaluating such potential business opportunities, NewCom will consider, to
the extent relevant to the specific opportunity, several factors including
potential benefits to NewCom and its shareholders; working capital, financial
requirements and availability of additional financing; history of operation, if
any; nature of present and expected competition; quality and experience of
management; need for further research, development or exploration; potential for
growth and expansion; potential for profits; and other factors deemed relevant
to the specific opportunity. Because NewCom has not located or identified any
specific business opportunity to date, there are certain unidentified risks that
cannot be adequately expressed prior to the identification of a specific
business opportunity. There can be no assurance following consummation of any
acquisition or merger that the business venture will develop into a going
concern or, if the business is already operating, that it will continue to
operate successfully. Many of the potential business opportunities available to
NewCom may involve new and untested products, processes or market strategies,
which may not ultimately prove successful.
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Presently, NewCom cannot predict the manner in which it might participate in a
prospective business opportunity. Each separate potential opportunity will be
reviewed and, upon the basis of that review, a suitable legal structure or
method of participation will be chosen. The particular manner in which NewCom
participates in a specific business opportunity will depend upon the nature of
that opportunity, the respective needs and desires of NewCom and management of
the opportunity, and the relative negotiating strength of the parties involved.
Actual participation in a business venture may take the form of an asset
purchase, lease, joint venture, license, partnership, stock purchase,
reorganization, merger or consolidation. NewCom may act directly or indirectly
through an interest in a partnership, corporation, or other form of
organization, however, NewCom does not intend to participate in opportunities
through the purchase of minority stock positions.
If NewCom does complete the acquisition of the Joint Venture, the current
shareholders position would be diluted. In any acquisition where NewCom uses its
stock to pay for the acquisition, the current shareholders would be diluted.
Because NewCom has identified only one potential acquisition or merger
candidates, currently it is unable to evaluate the type and extent of its likely
competition. NewCom is aware that there are numerous other public companies with
only nominal assets that are also searching for operating businesses and other
business opportunities as potential acquisition or merger candidates. NewCom
will be in direct competition with these other public companies in its search
for business opportunities and, due to NewCom's lack of funds, it may be
difficult to successfully compete with these other companies. Also, there is no
way for NewCom to distinguish itself from other companies in a similar position.
As of this date, NewCom has one employee and until such time as NewCom's
business warrants the expense, or until NewCom successfully acquires the Joint
Venture interest or merges with an operating business, there is no need for
additional employees. No remuneration has been paid to date.
NewCom's office is located at 515 West Pender Street, Vancouver, British
Columbia V6B 6H5. NewCom leases space from an unaffiliated company, Westec
Venture Group, Inc. NewCom pays a monthly rental fee of $1,000.00.
NewCom will voluntarily send an annual report, including audited financial
statements, to its security holders.
NewCom will file annual, quarterly and special reports, proxy statements and
other information with the Securities and Exchange Commission (SEC). The public
may read and copy materials NewCom files with the SEC at the SEC's Public
Reference room at 450 Fifth Street, N.W., Washington, D.C. 20549. The public may
obtain information on the operation of the Public Reference room by calling the
SEC at 1-800-SEC- 0330. The SEC maintains an Internet site that contains
reports, proxy and information statements, and other information regarding
issuers that file electronically with the SEC. The address of the website is
http://www.sec.gov.
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Proposed Acquisition of Joint Venture Interest
SCFC was established for the purpose of developing, owning and leasing of long
haul fibre-optic telecommunication trunk lines in the Guangdong Province,
People's Republic of China ("PRC"). SCFC is currently owned 34% by Guangzhou
South China Telecommunication Investment Limited ("GSC Telecom"), 33% by New
Communication International Limited ("NCIL") and 33% by Magnum Enterprises Group
Limited ("Magnum"). The Joint Venture is managed by New Faith Technology Limited
("New Faith") an affiliated company of NCIL and Magnum.
The prime contractor and rights-of-way licensor is the People's Liberation
Army ("PLA"). Since the PLA also owns the easement rights, working with the PLA
further gives advantages SCFC holds in being able to secure on commercially
advantageous terms the unobstructed rights-of-way for its fibre-optic networks.
The rights-of-way represent a material intangible asset for the Joint Venture
and provide a significant barrier to entry given the limited availability of
such rights of way. It is thought unlikely that the terms under which the Joint
Venture secured these rights-of-way would be available to new market entrants.
The Joint Venture contract was signed on February 28, 1997 and is valid for 30
years from November 5, 1996, the date of registration of its business license.
The Joint Venture is due to expire on November 5, 2026 although an extension can
be approved by the Guangong Provincial authorities. NewCom is unaware of any
factors as of the date of this filing that would prevent the extension of the
contract. However, no assurances can be given on any extension.
GSC Telecom is a PRC incorporated investment company controlled by the Guangdong
Provincial Government. Its shareholders include Guangzhou CITIC, Guangzhou
Telecom Research Institute of the Ministry of Electronics and the Guangzhou Yue
Xiu Group. NCIL and Magnum are British Virgin Island incorporated holding
companies and are wholly-owned subsidiaries of the China Success Group
Corporation, a large state owned enterprise controlled by the PRC national
government.
The Joint Venture anticipates that its fibre-optic networks will be leased by
operating companies to provide cellular telephone services, cable television
operations (which will eventually include pay-per-view, video-on-demand), data
distribution (stock exchanges and multi-national corporations) and other
value-added services. Leased transmission lines connect the mobile switching
centers, base station controllers, base transceiver stations and the fixed line
public network systems. The Joint Venture currently has five networks in
different stages of development in Guangdong:
Network Location: Stage of Development:
GuangZhou - ShenZhen Built and fully operational from December 1997
GuangZhou - ZhuHai Built and fully operational from March 1998
GunagZhou - ShaoGuan Under construction
GuangZhou - ShanTou Under construction
GuangZhou - ZhanJiang Under construction
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The Guangzhou to Shenzhen line has been operational since December 1997 and has
performed according to management expectations. The principal customer for the
Joint Venture's services is the Guangdong branch of China United
Telecommunications Corporation ("Unicom"). Unicom's shareholders, as of the
valuation date, were the ministries of Railroads, Electronics Industry and
Electric Power and 12 prominent state enterprises. It was established pursuant
to an approval of the State Council in 1993 to build and operate cellular
networks nationwide and, in areas where public fixed line network coverage or
capacity is limited, fixed line local and domestic long distance networks. It is
envisaged that Unicom will continue to be the anchor tenant of SCFC's developing
network system and will provide a large share of its future revenues.
Other clients currently under contract or expected to be under contract are the
Ministry of Radio, Film and Television, the Guangdong Cable TV Network, the
Guangzhou Cable TV Network, People's Bank of China, Air China, China Multi-media
Co. and PRC securities houses.
Revenues from the provision of telecom related services have been based on a
monthly lease payment calculated on the per kilometer capacity leased (i.e., a
flat fee versus a usage sensitive fee). However, in the future, the Joint
Venture is assuming that it is likely to charge customers on a volume usage
basis.
In its initial years, the bulk of revenues for the Joint Venture are projected
to come from GSM cellular and cable television with a significantly smaller
portion coming from telecom-related value-added services and digital data
networks. However, as the Joint Venture matures, the later two sources account
for a progressively greater share of revenues.
The Joint Venture's prime contractor for the laying of its fibre-optic cable
network in Guangdong is the PLA through its telecommunications subsidiary, the
Office of Communication for the Support of National Economics and Construction.
As fibre-optic cable is a physical infrastructure that must be installed between
communicating points, the network provider must either acquire a right-of-way
for the cable or lease/buy the cable from an agent with the right-of-way. The
PLA provides this key right-of-way access in exchange for the title to a set
number of fibre-optic cores for its own dedicated military use. In the Joint
Venture's current operating lines, the PLA has received 12 out of 48 fibreoptic
cores in lieu of fees for the right to build its fibre-optic network on army
property. This unique relationship helps the Joint Venture secure difficult
rights-of-way at relatively low prices and gives it a significant competitive
advantage against potential market entrants.
In the long term, subject to deregulation in the telecom market, the Joint
Venture has indicated it will become a full service provider and be able to
market its network services directly to commercial and individual end- users.
However, the Joint Venture is currently focusing on the provision of network
operations to its customers.
The Joint Venture is managed by New Faith, although New Faith does not receive
any remuneration for such services. New Faith's expenses are borne solely by the
China Success Group Corporation. New Faith is a Hong Kong incorporated entity
and is wholly owned by the China Success Group Corporation. New Faith does not
hold an equity stake in the Joint Venture.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
Plan of Operation
NewCom was formed on September 12, 1996 under the name AgriNet, Incorporated on
October 26, 1996, AgriNet amended the Articles of Incorporation to change the
name to Phileo Management Company, Inc. On April 19, 2000, the Articles of
Incorporation were once again amended to change the name to NewCom International
Inc. Since its incorporation, NewCom has not conducted any significant
operations.
NewCom's activities to date have focused primarily on incorporation activities
and the identification of potential operating opportunities or acquisitions
targets. Since NewCom has not yet commenced any principal operations and has not
yet earned significant revenues, NewCom is considered to be a blank- check
company.
The plan of operation over the next twelve (12) months is to complete the
acquisition of the Joint Venture. Whether or not NewCom completes the
acquisition of the Joint Venture, NewCom expects to be able to meet all of its
cash requirements from existing cash and from payments it is receiving on its
receivables. Further, NewCom does not expect it will be necessary to raise funds
through equity or debt offerings to conduct its current operations for at least
the next twelve (12) months.
On January 30, 1999, NewCom entered into an agreement to acquire certain assets
consisting of the Joint Venture in a fibre-optic cable network in China for $60
million from the shareholders of SCFC. The consideration consists of 42 million
shares of NewCom's common stock and 18 million shares of NewCom's preferred
stock. NewCom's Joint Venture interest will, if successful, consist of a 66%
share in the profits and losses of the Joint Venture. NewCom will not control
the management of the venture; however, it will have significant influence. The
Joint Venture will be accounted for using the equity method, whereby NewCom will
record its interest in the profits and losses based on its pro-rata share.
NewCom's investment in the Joint Venture will be adjusted to reflect NewCom's
interest in its share of earnings and losses. There are no assurances that such
acquisition will be completed. In connection with the proposed acquisition,
NewCom paid a finder's fee to a third party totaling $461,000. In the event the
acquisition is unsuccessful, such costs will be charged to operations.
Results of Operations
To date, NewCom has had no revenues. NewCom has incurred expenses consisting
primarily of consulting services totaling $243,500 in 1999. A portion of the
consulting services expense in 1999 consisted of $233,000 relating to the fair
value of stock options granted to NuVen. The consulting fees were incurred to
NuVen for management, financial advisory, and strategic planning services.
General and administrative expenses consist of rent, travel, and professional
services. In 1998, management and consulting expenses amounting to $50,000
consisted of fees paid to its promoter.
ITEM 3. DESCRIPTION OF PROPERTY.
Although NewCom does not own or control any material property, NewCom will
maintain its business address at 515 West Pender Street; Vancouver, British
Columbia V6B 6H5. NewCom currently subleases these offices from an unaffiliated
company, Westec Venture Group, Inc. NewCom pays a monthly rental fee of
$1,000.00.
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ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
Currently, no Directors or Officers own any stock in NewCom and there are no
shareholders who own directly or indirectly five percent (5%) or more of the
outstanding common stock.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS.
Identification of Directors and Executive Officers
NewCom, pursuant to its Bylaws is authorized to maintain a three to five (3-5)
member Board of Directors, and executive officers as needed. The directors and
officers for fiscal 1999 are as follows:
<TABLE>
<CAPTION>
Position
Name Held with NewCom Age Dates of Service
--------------- -------------------- ------- ------------------------------
<S> <C> <C> <C>
David Lo President, Director 54 September 21, 1999 to Present
Mohan Datwani Secretary, Director 33 March 15, 2000 to Present
Xu Han Director 37 March 15, 2000 to Present
</TABLE>
All directors of NewCom hold office until the next annual meeting of
shareholders and until their successors have been elected and qualified.
Vacancies in the Board of Directors are filled by the remaining members of the
Board until the next annual meeting of shareholders. The officers of NewCom are
elected by the Board of Directors at its first meeting after each annual meeting
of NewCom's shareholders and serve at the discretion of the Board of Directors
or until their earlier resignation or death.
Business Experience
The following is a brief account of the business experience during the past five
years of each director, director nominee and executive officer of NewCom,
including principal occupations and employment during that period and the name
and principal business of any corporation or other organization in which such
occupation and employment were carried on.
David Lo.
Mr. David Lo has served as Director and President of NewCom since September 21,
1999. David Lo has twelve (12) years of experience as an accountant. Mr. Lo also
currently is a Director of Empire Supermarket Ltd. in Richmond, British Columbia
and has been the owner of David Lo Accounting & Management, Inc. since 1986.
Previous work experience includes Manager of Oceanic Sportswear, Ltd. and
Assistant Manager of Les Deax Fabricants Ltd.
Mohan Datwani
Mr. Mohan Datwani, age 33, recently was appointed Director of NewCom on March
15, 2000 and was elected as Director by a majority vote of the shareholders of
the outstanding stock on March 31, 2000. Mr. Datwani, an attorney, resides in
Hong Kong and is a British citizen. Mr. Datwani received his Bachelor of
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Laws (LL.B.) from the University of Hong Kong in 1988 and his Masters of Laws
from the University of Hong Kong in 1993. Mr. Datwani is licensed to practice as
a Solicitor of Hong Kong SAR since 1991 and admitted as a Solicitor of England
and Wales in 1994. Mr. Datwani has extensive experience as a banking finance
lawyer and has worked on many banking and commercial transactions involving the
People's Republic of China, including infrastructure financing.
Mr. Datwani is a founding partner of a large Hong Kong law firm, Koo and
Partners established in October 1993. Currently, there are 200 employees and
numerous clients, which include various banks and financial institutions in Hong
Kong and the People's Republic of China.
Xu Han
Mr. Xu Han, age 37, was appointed Director of NewCom March 15, 2000 and was
elected as Director by a majority vote of the shareholders of the outstanding
stock on March 31, 2000. Mr. Xu is in business and resides in the People's
Republic of China, but travels extensively. Mr. Xu graduated from the University
of Beijing with a major in Science; he has furthered his study in the US and was
formerly a senior officer in the China National Science Committee. Mr. Xu is
currently Executive Director and Vice President of the China Success Group
Corporation, a China-owned enterprise which was established in 1993. The China
Success Group Corporation has diverse investments in insurance, transport
network, information infrastructure, industrial and trading, property
development, tourism and leisure, and education.
Involvement in Certain Legal Proceedings.
During the past five years, no director or officer of NewCom has:
(1) Filed or has filed against him a petition under the federal bankruptcy
laws or any state insolvency law, nor has a receiver, fiscal agent or
similar officer been appointed by a court for the business or property of
such person, or any partnership in which he was a general partner, or any
corporation or business association of which he was an executive officer
at or within two years before such filings.
(2) Been convicted in a criminal proceeding;
(3) Been the subject of any order, judgment, or decree, not subsequently
reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining such person from, or otherwise
limiting his involvement in any type of business, securities or banking
activities;
(4) Been found by a court of competent jurisdiction in a civil action, the SEC
or the Commodity Futures Trading Commission ("FTC") to have violated any
federal or state securities or commodities law, which judgment has not
been reversed, suspended, or vacated.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires NewCom's directors and officers and persons who own more than 10
percent of NewCom's equity securities, to file reports of ownership and changes
in ownership with the SEC. Directors, officers and greater than ten-percent
shareholders are required by SEC regulation to furnish NewCom with copies of all
Section 16(a) reports filed.
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Based solely on its review of the copies of the reports it received from persons
required to file, NewCom believes that during fiscal 1999, all filing
requirements applicable to its officers, directors and greater than ten-percent
shareholders were complied with.
ITEM 6. EXECUTIVE COMPENSATION.
Officers and Directors currently do not receive compensation for their services
since the services rendered are inconsequential due to the nature of being a
blank-check company.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Effective October 1, 1999, NewCom entered into an Advisory and Management
Agreement (the "Agreement") with NuVen Advisors Limited Partnership ("NuVen").
Pursuant to the terms of the NuVen Agreement, NewCom is required to pay $3,500
per month, plus expenses, in exchange for NuVen's assistance in the formulation
of possible acquisition strategies, and the management of financial and general
and administrative matters. In addition, NewCom is required to pay a fee equal
to 10% of the asset value or investment made in NewCom resulting from NuVen's
efforts, and a transaction fee (as defined) equal to 5% of the proceeds received
by NewCom in connection with a sale of its assets. In addition, NewCom granted a
fully vested option to NuVen to purchase 500,000 shares of NewCom's common stock
at $0.50 per share. Using the Black-Sholes model to value these options, using a
volatility of 50%, an expected term of 5 years and a risk-free interest rate of
6.0%, NewCom valued these options at $233,000. Since these options are fully
vested, such value was charged to operations for the year ended December 31,
1999. The Agreement has an initial term of five years, but shall be
automatically extended on an annual basis, unless terminated by either party.
NewCom had $10,500 due to NuVen as of December 31, 1999. Such amounts do not
bear interest, are uncollateralized and have no stated repayment terms.
Effective October 6, 1999, NewCom entered into a note payable with an officer of
NewCom in exchange for advances made to NewCom. The note bears interest at 9.0%
per annum, expires two years from the date of the note and is due on demand. In
connection with this note, accrued interest of $2,156 has been recorded in the
accompanying balance sheet.
ITEM 8. DESCRIPTION OF SECURITIES.
NewCom is authorized to issue, as of the date hereof, One Hundred Million
(100,000,000) shares of $.001 par value common stock, of which approximately
15,500,000 shares of common stock are presently issued and outstanding and
Twenty Five Million (25,000,000) shares of $.001 par value preferred stock, of
which none have been issued.
Under the rules of the SEC, the price of NewCom common stock on the NASDAQ Pink
Sheets is below $5 per share, NewCom common stock will come within the
definition of a "penny stock". As a result, NewCom common stock will become
subject to the "penny stock" rules and regulations.
Broker-dealers who sell penny stock to certain types of investors are required
to comply with the SEC's regulations concerning the transfer of penny stock.
These regulations require broker-dealers to:
- make a suitability determination prior to selling penny stock to
the purchaser;
- receive the purchaser's written consent to the transaction; and
- provide certain written disclosures to the purchaser.
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These requirements may restrict the ability of broker-dealers to sell NewCom
common stock and may affect all shareholders ability to resell NewCom common
stock.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON
EQUITY AND OTHER SHAREHOLDER MATTERS.
NewCom's Common Stock began trading on the Bulletin Board Over-the-Counter
Market on October 15, 1998. On March 9, 2000, NewCom's common stock was trading
on the NASDAQ "Pink Sheets". The trading market is limited and sporadic and
should not be deemed to constitute an "established trading market".
The following table sets forth the range of high and low prices for the common
stock during the periods indicated, and represents inter-dealer prices, which do
not include retail mark-ups and mark-downs, or any commission to the
broker-dealer, and may not necessarily represent actual transactions.
<TABLE>
<CAPTION>
Date High Low
----------------------------------- ------------- ------------
<S> <C> <C>
Quarter ending March 31, 2000 $ 1.06 $ 1.06
Quarter ending December 31, 1999 $ 1.03 $ 1.03
Quarter ending September 30, 1999 $ 1.00 $ 1.00
Quarter ending June 30, 1999 $ 3.25 $ 3.25
Quarter ending March 31, 1999 $ 2.87 $ .87
Quarter ending December 31, 1998 $ 0.75 $ 0.75
Quarter ending September 30, 1998 $ 0.56 $ 0.56
Quarter ending June 30, 1998 $ N/A $ N/A
</TABLE>
1. Holders:
The approximate number of holders of record of the common shares, as of
March 31, 2000, was 26. None of the shareholders owns directly or
indirectly five (5) percent or more of the outstanding stock.
2. Dividends:
NewCom has not paid cash dividends on its common stock since its
inception. At the present time, NewCom's anticipated working capital
requirements are such that it intends to follow a policy of retaining any
earnings in order to finance the development of its business.
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3. Shareholder Meetings:
NewCom's shareholders held a meeting on March 31, 2000 and pursuant to
that meeting and by majority vote of the outstanding common stock, agreed
to the name change from Phileo Management Company, Inc. to NewCom
International Inc., elected the current Board of Directors, increased the
authorized stock to include Twenty Five Million (25,000,000) shares of
preferred stock, and ratified the January 30, 1999 agreement with SCFC.
ITEM 2. LEGAL PROCEEDINGS.
NewCom is not and has not been a party to any legal proceedings, nor is NewCom
aware of any disputes that may result in legal proceedings.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
NewCom has had no changes in and/or disagreements with its accountants.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
N/A
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under Nevada law, a corporation may indemnify its officers, directors, employees
and agents under certain circumstances, including indemnification of such person
against liability under the Securities Act of 1933. A true and correct copy of
Section 78.7502 of Nevada Revised Statutes that addresses indemnification of
officers, directors, employees and agents is attached hereto as Exhibit 99.1.
In addition, Section 78.037 of the Nevada Revised Statutes and NewCom's Articles
of Incorporation and Bylaws provide that a director of this corporation shall
not be personally liable to the corporation or its stockholders for monetary
damages due to breach of fiduciary duty as a director except for liability (a)
for acts or omissions which involve intentional misconduct, fraud or a knowing
violation of law; or (b) for the payments of distribution in violation of Nevada
Revised Statute 78.300.
The effect of these provisions may be to eliminate the rights of NewCom and its
stockholders (through stockholders' derivative suit on behalf of NewCom) to
recover monetary damages against a director for breach of fiduciary duty as a
director (including breaches resulting from negligent or grossly negligent
behavior) except in the situations described in clauses (a) and (b) of the
preceding paragraph.
12
<PAGE>
PART F/S
The following financial statements are attached to this report and filed as a
part thereof:
Independent Auditors' Report........................................F-2
Balance Sheets......................................................F-3
Statements of Operations and Comprehensive Income (Loss)............F-4
Statements of Stockholder's Equity..................................F-5
Statements of Cash Flows............................................F-6
Notes to Financial Statements.......................................F-7
13
<PAGE>
PART III
Item 1. Index to Exhibits
3.1 Articles of Incorporation of AgriNet, Inc.
3.1(a) Certificate of Amendment of Articles of Incorporation of AgriNet, Inc.
3.1(b) Certificate of Amendment to Articles of Incorporation For Nevada Profit
Corporations of Phileo Management Company, Inc.
3.1(c) Amended and Restated Articles of Incorporation of NewCom
International Inc.
3.2 By-laws
4.1 Form of Common Stock Certificate
10.1 Advisory and Management Agreement between NuVen Advisors, LP and
Phileo Management Company, Inc.
10.2 Share Exchange Agreement
10.3 Fee Agreement for Introduction Services
10.4 Exchange Agreement
10.5 Note Purchase Agreement
23.1 Consent of Independent Auditors
27 Financial Data Schedule
99.1 Additional Exhibits [Nevada Revised Statutes Section 78.7502]
14
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, NewCom has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized.
NewCom International Inc.
Date: May 30, 2000 By: /s/ David Lo
David Lo, President, Director
By: /s/ David Lo
David Lo
Principal Accounting Officer, Director
15
<PAGE>
NewCom INTERNATIONAL INC.
(A blank-check company)
Index to Financial Statements
Description Page
Independent Auditors' Report.................................................F-2
Balance Sheets as of March 31, 2000 (unaudited) and December 31, 1999........F-3
Statements of Operations for the Three Months Ended March 31, 2000 and 1999
(unaudited) and for the Years Ended December 31, 1999 and 1998,
and for the Period from Inception, September 12, 1996
Through December 31, 1999.................................................F-4
Statements of Stockholders' Equity for the Period from Inception,
September 12, 1996, Through December 31, 1997, and for the Years Ended
December 31, 1998 and 1999 and for the Three Months ended March 31, 2000
(unaudited)................................................................F-5
Statements of Cash Flows for the Three Months Ended March 31, 2000 and 1999
(unaudited) and for the Years Ended December 31, 1999 and 1998,
and for the Period from Inception, September 12, 1996
Through December 31, 1999.................................................F-6
Notes to Financial Statements................................................F-7
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
NewCom International Inc., formerly Phileo Management Company, Inc.
(A blank-check company)
We have audited the accompanying balance sheet of NewCom International Inc., a
blank-check company (the "Company"), as of December 31, 1999, and the related
statements of operations, stockholders' equity and cash flows for each of the
years in the two-year period ended December 31, 1999, and from the period from
inception, September 12, 1996 through December 31, 1999. These financial
statements are the responsibility of NewCom's management. Our responsibility is
to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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, the financial statements referred to above present fairly, in
all material respects, the financial position of NewCom as of December 31, 1999,
and the results of its operations and its cash flows for each of the years in
the two-year period ended December 31, 1999, and for the period from inception,
September 12, 1996, through December 31, 1999, in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming that NewCom
will continue as a going concern. As discussed in Note 1 to the financial
statements, NewCom has no operations and limited liquid resources. Such matters
raise substantial doubt about NewCom's ability to continue as a going concern.
Management's plans regarding those matters are also described in Note 1. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/ McKennon Wilson & Morgan LLP
McKENNON WILSON & MORGAN LLP
Irvine, California
March 10, 2000
F-2
<PAGE>
NewCom INTERNATIONAL INC.
(A blank-check company)
Balance Sheets
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 2000 1999
(unaudited)
Current assets:
<S> <C> <C>
Cash $ 4,199 $ 16,706
Restricted certificate of deposit 465,000 465,000
Current portion of notes receivable from affiliates 53,475 56,975
Prepaid expenses 27,500 27,500
Total current assets 550,174 566,181
Notes receivable from affiliates, net of current portion 367,315 367,315
Other receivables 47,710 47,710
Acquisition costs 461,000 461,000
$ 1,426,199 $ 1,442,206
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 91,834 $ 96,765
Due to Advisor 21,000 10,500
Note payable to bank 465,000 465,000
Note payable to related party 65,449 62,449
Total current liabilities 643,283 634,714
COMMITMENTS AND CONTINGENCIES (NOTE 6)
Stockholders' equity:
Common stock, $.001 par value;
100,000,000 shares authorized;
15,500,000 shares issued and outstanding 15,500 15,500
Additional paid-in capital 1,218,500 1,218,500
Deficit accumulated as a blank-check company (451,084) (426,508)
Total stockholders' equity 782,916 807,492
$ 1,426,199 $ 1,442,206
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
NewCom INTERNATIONAL INC.
(A blank-check company)
Statements of Operations
<TABLE>
<CAPTION>
For the Period
from
Inception,
September 12,
For the Three Months Ended For the Years Ended 1996, Through
March 31, December 31, December 31,
2000 1999 1999 1998 1999
(Unaudited)
<S> <C> <C> <C> <C> <C>
Operating expenses:
Management and consulting fees $ 10,500 $ - $ 243,500 $ 50,000 $ 61,500
General and administrative expenses 12,889 - 131,270 - 64,270
Total operating expenses 23,389 - 374,770 50,000 425,770
Operating loss (23,389) - (374,770) (50,000) (425,770)
Other expenses (income):
Interest expense 6,254 - 4,401 - 4,401
Interest (income) (5,066) - (3,663) - (3,663)
Total other expenses (income) 1,187 - 738 - 738
Net loss $ (24,576) $ - $ (375,508) $ (50,000) $ (426,508)
Basic and diluted weighted average
shares outstanding 15,500,000 6,000,000 13,125,000 6,000,000
Basic and diluted loss per common share $ - $ - $ (0.03) $ (0.01)
</TABLE>
See accompanying notes to financial statements
F-4
<PAGE>
NEWCOM INTERNATIONAL INC.
(A blank-check company)
Statements of Stockholders' Equity
For the Period from Inception, September 12, 1996, Through December 31, 1997,
For the Years Ended December 31, 1999 and 1998, and
For the Three Months Ended March 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Additional as a
Stock Paid-In Blank-Check
Shares Amount Capital Company Total
<S> <C> <C> <C> <C> <C>
Initial capitalization $ 6,000,000 $ 6,000 $ 45,000 $ - $ 51,000
Net loss from Inception,
September 12, 1996 through
December 31, 1997 - - - (1,000) (1,000)
Balances, at December 31, 1997 6,000,000 6,000 45,000 (1,000) 50,000
Net loss - - - (50,000) (50,000)
Balances, at December 31, 1998 6,000,000 6,000 45,000 (51,000) -
Issuance of common stock for cash 9,500,000 9,500 940,500 - 950,000
at $0.10 per share
Value of stock options granted
below FMV - - 233,000 - 233,000
Net loss - - - (375,508) (375,508)
Balances, at December 31, 1999 15,500,000 15,500 1,218,500 (426,508) 807,492
Net loss - - - (24,576) (24,576)
Balances, at March 31, 2000 (unaudited) $15,500,000 $ 15,500 $1,218,500 $ (451,084) $ 782,916
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
NewCom INTERNATIONAL INC.
(A blank-check company)
Statements of Cash Flows
<TABLE>
<CAPTION>
September 12,
For the Three Months For the Years Ended 1996 Through
Ended March 31, December 31, December
2000 1999 1999 1998 31, 1999
(Unaudited)
CASH FLOWS FROM OPERATING
ACTIVITIES:
<S> <C> <C> <C> <C> <C>
Net loss $ (24,576) $ - $ (375,508) $ (50,000) $ (426,508)
Adjustment to reconcile net loss to net
cash used in operating activities:
Value of stock options granted below fair
value - - 233,000 - 233,000
Changes in operating assets and
liabilities:
Prepaid expenses - - (27,500) - (27,500)
Accrued expenses (4,931) - 96,765 - 96,765
Net cash used in operating activities (29,507) - (73,243) (50,000) (124,243)
CASH FLOWS FROM INVESTING
ACTIVITIES:
Fees paid on fibre-optic cable network
investment - - (461,000) - (461,000)
Purchase of certificate of deposit - - (465,000) - (465,000)
Net cash used in investing activities - - (926,000) - (926,000)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Payments from (to) related parties 3,500 - (472,000) - (472,000)
Initial capitalization - - - - 51,000
Issuance of common stock - - 950,000 - 950,000
Proceeds from note payable - - 465,000 - 465,000
Increase in due to affiliates 13,500 - 72,949 - 72,949
Net cash provided by financing activities 17,000 - 1,015,949 - 1,066,949
Net increase (decrease) in cash (12,507) - 16,706 (50,000) 16,706
Cash, beginning of period 16,706 - - 50,000 -
$ 4,199 $ - $ 16,706 $ - $ 16,706
Cash, end of period
Cash paid during the period for:
Interest $ 4,108 $ - $ 2,247 $ - $ 2,247
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE>
NewCom INTERNATIONAL INC.
(A blank-check company)
Notes to Financial Statements
Note 1. Description of Business and Summary of Significant Accounting Policies
Description of Business
NewCom International Inc. (the "Company") was incorporated in Nevada in
September 1996 under the name of AgriNet, Inc. In October 1996, NewCom amended
its Articles of Incorporation to change its name to NewCom International Inc.
Since its incorporation, NewCom has not conducted any significant operations.
NewCom's activities to date have focused primarily on incorporation activities
and the identification of potential operating opportunities or acquisitions
targets. Since NewCom has not yet commenced any principal operations and has not
yet earned significant revenues, NewCom is considered to be a blank- check
company.
Unaudited Interim Financial Statements
The accompanying financial statements are unaudited and are prepared in
accordance with rules and regulations of the Securities and Exchange Commission
for interim quarterly reporting. Accordingly, these financial statements do not
include all disclosures required under generally accepted accounting principles.
In the opinion of management, the accompanying consolidated financial statements
contain all adjustments (which include only normal recurring adjustments)
necessary to present fairly the financial position of NewCom as of March 31,
2000, and the results of its operations and its cash flows for the three months
ended March 31, 2000 and 1999, respectively. Results for the three months ended
March 31, 2000, are not necessarily indicative of the operations which may occur
during the year ending December 31, 2000.
Management Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Loss Per Share
NewCom discloses "basic" and "diluted" earnings (loss) per share. Basic earnings
(loss) per share are computed by dividing net income (loss) by the weighted
average number of common shares outstanding during each period. Diluted earnings
(loss) per share are similar to basic earnings (loss) per share except that the
weighted average number of common shares outstanding is increased to reflect the
dilutive effect of potential common shares, such as those issuable upon the
exercise of stock options or warrants, and the conversion of preferred stock, as
if they had been issued.
For the years ended December 31, 1999 and 1998, there is no difference between
basic and diluted loss per common share since the effects of outstanding options
to purchase 500,000 shares of common stock and since their effects are
anti-dilutive.
F-7
<PAGE>
NewCom INTERNATIONAL INC.
(A blank-check company)
Notes to Financial Statements (Continued)
Note 1. Description of Business and Summary of Significant Accounting
Policies (continued)
Acquisition Costs
NewCom accounts for costs incurred for its acquisitions as a portion of the
purchase price with the costs being allocated to the fair value of the net
assets acquired. NewCom has incurred $461,000 for costs incurred in connection
with its proposed acquisition of certain assets consisting of a fibre-optic
cable network in China (Note 2). In the event the acquisition is unsuccessful,
NewCom will charge operations in 2000.
Income Taxes
NewCom accounts for income taxes using the "liability method". Accordingly,
deferred tax assets and liabilities, are determined based on the difference
between the financial statement and tax base of assets and liabilities using
enacted tax rates in effect for the year in which temporary differences are
expected to reverse. A valuation allowance is provided for certain deferred tax
assets if it is more likely than not that NewCom will not realize tax assets
through future operations.
Recent Accounting Standards
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income".
This Statement establishes standards for the reporting and display of
comprehensive income and its components (revenues, expenses, gains and losses)
in an entity's financial statements. This statement requires an entity to
classify items of other comprehensive income by their nature in a financial
statement and display the accumulated balance of other comprehensive income
separately from retained earnings and additional paid-in-capital in the equity
section of a statement of financial position. In accordance with the provisions
of this statement, NewCom has adopted SFAS No. 130 with no effect to the
accompanying financial statements.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." This statement requires public enterprises
to report financial and descriptive information about its reportable operating
segments, and establishes standards for related disclosures about products and
services, geographic areas, and major customers. As of June 30, 1999 and 1998,
NewCom has only no reportable operating segment.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"). SFAS 133 establishes a new
model for accounting for derivatives and hedging activities and supersedes and
amends existing accounting standards and is effective for fiscal years beginning
after June 15, 2000. SFAS 133 requires that all derivatives be recognized in the
balance sheet at their fair market value, and the corresponding derivative gains
or losses be either reported in the statement of operations or as a component of
other comprehensive income depending on the type of hedge relationship that
exists with respect to such derivative. NewCom does not expect the adoption of
SFAS 133 to have a material impact on its financial statements.
F-8
<PAGE>
NewCom INTERNATIONAL INC.
(A blank-check company)
Notes to Financial Statements (Continued)
Note 1. Description of Business and Summary of Significant Accounting
Policies (continued)
Going Concern and Management's Plans
NewCom has not commenced significant operations, and has limited liquid
resources. Such matters raise substantial doubt about NewCom's ability to
continue as a going concern. Management's plans with respect to these conditions
are to continue searching for additional sources of capital and new operating
opportunities. NewCom has entered into an acquisition agreement to acquire a
fibre-optics cable network, the ultimate consummation of which has not been
achieved, yet. In the interim, NewCom will continue operating with minimal
overhead, and key administrative and management functions which will be provided
by consultants. Accordingly, the accompanying financial statements have been
presented under the assumption NewCom will continue as a going concern, and
accordingly, no adjustments have been made to accompanying financial statements
as a result of this uncertainty.
Note 2. Proposed Acquisition
On January 30, 1999, NewCom entered into an agreement to acquire certain assets
consisting of a joint venture interest in a fibre-optic cable network in China
for $60 million from the shareholders of Guangzhou South China Fibre-Optic
Network Engineering Co. Ltd. The consideration consists of 42 million shares of
NewCom's common stock and 18 million shares of NewCom's preferred stock (see
Note 7 for discussion of terms of the preferred stock). There are no assurances
that such acquisition will be completed. In connection with the proposed
acquisition, NewCom paid a finder's fees to a third party totaling $461,000 (see
Note 6). The acquisition will be accounted for using the equity method, whereby
the historical income and losses of the Joint Venture will be recorded based on
NewCom's pro-rata share.
Note 3. Restricted Certificate of Deposit
In connection with NewCom's note payable to a bank (Note 5), it is required to
maintain a certificate of deposit in the amount of $465,000. Such certificate
earned interest at 4.02% per annum, and expires on March 22, 2000.
Note 4. Notes Receivable From Affiliates
On September 1, 1999, NewCom entered into an agreement with an unaffiliated
company, NuOasis International, Inc. ("NUOI"), which is a wholly-owned
subsidiary of NuOasis Resorts, Inc. ("NuOasis"). to acquire an 8%, note
receivable of an unrelated party with a face value of $500,000, originally due
March 1, 1999 for $472,000 cash. The note was secured by 500,000 shares of
common stock of Oasis Resorts International, Inc. The issuer of the note
subsequently filed for bankruptcy. As a result, NewCom entered into an agreement
with NewBridge Capital, Inc. ("NewBridge") dated November 1, 1999 wherein NewCom
exchanged the note for $470,000 in receivables due from nine (9) unrelated
corporations and individuals. Additionally, NewBridge and NewCom agreed to cross
guarantees whereby NewBridge has agreed to guarantee that NewCom will collect a
minimum of $470,000 on the substituted receivables or from liquidation of the
collateral.
F-9
<PAGE>
NewCom INTERNATIONAL INC.
(A blank-check company)
Notes to Financial Statements (Continued)
Note 5. Note Payable To Bank
On December 28, 1999, NewCom entered into a note agreement with a bank totaling
$465,000, interest at 5.87% per annum, due July 1, 2000, as amended. The note is
secured by the restricted certificate of deposit (see Note 1).
Note 6. Commitments and Contingencies
NewCom entered into an agreement with a consultant for the introduction to the
Joint Venture partners. The fee to the consultant is 10% of the purchase price
of the Joint Venture. Upon executing the services agreement, NewCom paid this
consultant $461,000 (in lieu of the stated payment of $475,000) to secure a
letter of intent to acquire the Joint Venture interest. Upon the close of the
acquisition of the Joint Venture interest, NewCom will be required to pay
approximately $5,539,000 in the form of cash.
Note 7. Stockholders' Equity
Common Stock
On or about April 3, 1999, NewCom issued 9.5 million shares of its common stock
for $0.10 per share in exchange for 10% promissory notes totaling $950,000. On
or about September 1, 1999, the notes were acquired by a third party for
$950,000 in cash. The notes acquired are secured by the 9.5 million shares of
NewCom's common stock.
Preferred Stock
Consideration in connection with the proposed acquisition (Note 2) will consist
of 18 million shares of NewCom's preferred stock pursuant to authorization of
such shares by the Board of Directors. The terms of the preferred stock will be
as follows:
1. The preferred stock shall carry no voting rights and no dividend or other
rights. It shall only carry rights of conversion to common stocks to rank
pari passu to other common stock;
2. The conversion of preferred stock may take place by written notice at the
option of the persons entitled to the preferred stock at any time during
the period commencing January 1, 2000 (or such later date as the audited
financial statements of NewCom for year 1999 shall have been prepared) to
March 31, 2003 (or 30 days after such later date as the audited financial
statements of NewCom for year 2002 shall have been prepared);
3. The conversion ratio of the preferred stock to common stock shall be based
on the gross income (i.e., performance) of NewCom as set out in the latest
audited financial statements prior to the exercise of the right of
conversion. The conversion ratio is as follows:
(A) for gross income of NewCom of over $10 million, but under $15
million: One (1) share of preferred stock may be converted to One
(1) share of common stock;
F-10
<PAGE>
NewCom INTERNATIONAL INC.
(A blank-check company)
Notes to Financial Statements (Continued)
(B) for gross income of NewCom of over $15 million, but under $20
million: One (1) share of preferred stock may be converted to two
(2) shares of common stock; and
(C) for gross income of NewCom of over $20 million: One (1) share of
preferred stock may be converted to three (3) shares of common
stock. In case of performance of $10 million is not met or the
conversion right is not exercised by March 31, 2003 (or 30 days
after such later date as the audited financial statements of NewCom
for year 2002 shall have been prepared), the preferred stock shall
expire and have no further effect.
Note 8. Related Party Transactions
Effective October 1, 1999, NewCom entered into an Advisory and Management
Agreement (the "Agreement") with NuVen Advisors Limited Partnership ("NuVen" or
the "Advisor"). Pursuant to the terms of the NuVen Agreement, NewCom is required
to pay $3,500 per month, plus expenses, in exchange for Advisor's assistance in
the formulation of possible acquisition strategies, and the management of
financial and general and administrative matters. In addition, NewCom is
required to pay a fee equal to 10% of the asset value or investment made in
NewCom resulting from Advisor's efforts, and a transaction fee (as defined)
equal to 5% of the proceeds received by NewCom in connection with a sale of its
assets. In addition, NewCom granted a fully vested option to NuVen to purchase
500,000 shares of NewCom's common stock at $0.50 per share. Using the
Black-Sholes model to value these options, using a volatility of 50%, an
expected term of 5 years and a risk-free interest rate of 6.0%, NewCom valued
these options at $233,000. Since these options are fully vested, such value was
charged to operations for the year ended December 31, 1999. The Agreement has an
initial term of five years, but shall be automatically extended on an annual
basis, unless terminated by either party. NewCom had $10,500 due to NuVen as of
December 31, 1999 and $21,000 (unaudited) at March 31, 2000. These deferred
amounts do not bear interest, are uncollateralized and have no stated repayment
terms.
Effective October 6, 1999, NewCom entered into a note payable with an officer of
NewCom in exchange for advances made to NewCom. The note bears interest at 9.0%
per annuum, expires two years from the date of the note and is due on demand. In
connection with this note, accrued interest of $2,156 has been recorded in the
accompanying balance sheet.
Note 9. Income Taxes
NewCom's net deferred tax assets at December 31, 1999, consist of net operating
loss carryforwards amounting to approximately $427,000 each for federal and
state tax purposes. At December 31, 1999, NewCom provided a 100% valuation
allowance for these net operating loss carryforwards totaling approximately
$145,000. During the years ended December 31, 1999 and 1998, NewCom's valuation
allowance increased $128,000 and $17,000, respectively.
The difference between the tax benefit assuming a Federal rate of 34% and the
nominal amount the recorded in the financial statements is the result of NewCom
recording a 100% valuation allowance for its deferred tax assets.
F-11
<PAGE>
NewCom INTERNATIONAL INC.
(A blank-check company)
Notes to Financial Statements (Continued)
Note 9. Income Taxes (Continued)
As a result of changes in ownership, NewCom's use of net operating loss
carryforwards may be limited by section 382 of the Internal Revenue Code until
such net operating loss carryforwards expire. Deferred tax assets have been
computed using the maximum expiration terms of 20 and 5 years for federal and
state tax purposes, respectively.
F-12
<PAGE>
EXHIBITS
EXHIBIT 3.1
ARTICLES OF INCORPORATION
AgriNet, Inc.
