UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 2000
Or
[ ] TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to _____________
Commission File Number:
The Cyber Group Network Corporation
(Exact name of registrant as specified in its charter)
Nevada 88-0407473
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) No.)
720 E. Carnegie Dr., Suite 200, 92408
San Bernardino, California (Zip Code)
(Address of principal executive
offices)
(909) 890-9769
(Registrant's telephone number, including area code)
897 Via Lata Drive, Colton, California 92324
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes [X] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING
THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Sections 12, 13 or
15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court.
Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
34,266,487
/1/
The Cyber Group Network Corporation
(A Development Stage Company)
Table of Contents
Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Independent Auditors' Report 4
Balance Sheet as of September 30, 2000 and 1999 5
Statement of Income and Retained Earnings for the Nine Months 6
Ended September 30, 2000 and 1999
Consolidated Statement of Cash Flows for the Nine Months 7
Ended September 30, 2000 and 1999
Statement of Stockholder's Equity From July 1, 2000 to 8
September 30, 2000
Notes to Financial Statements 9
Item 2. Management's Discussion and Plan of Operation 12
PART II - OTHER INFORMATION
Item 6. Exhibits 13
SIGNATURES 14
/2/
THE CYBER GROUP NETWORK CORPORATION
(A Development Stage Company)
Balance Sheets as of
SEPTEMBER 30, 2000 AND 1999
And
Statements of Income,
Stockholders' Equity, and
Cash Flows
For the quarters ended September 30, 2000 and 1999
WITH INDEPENDENT ACCOUNTANT'S REPORT
Prepared By:
Michael F. DeLuca
Certified Public Accountant
/3/
Michael F DeLuca
Certified Public Accountant
Accountant's Compilation Report
The Board of Directors
The Cyber Group Network Corporation
Colton, CA.
I have compiled the accompanying balance sheet of The Cyber Group
Network Corporation (a corporation) as of September 30, 2000 and
1999, and the related statements of income and retained earnings and
cash flows for the three months then ended, in accordance with
Statements on Standards for Accounting and Review Services issued by
the American Institute of Certified Public Accountants.
A compilation is limited to presenting in the form of financial
statements information that is the representation of management. I
have not audited or reviewed the accompanying financial statements
and, accordingly, do not express an opinion or any other form of
assurance on them.
The accompanying financial statements have been prepared assuming
the company will continue as a going concern. As discussed in Note D
to the financial statements, the company has had limited operations
and has not established a long-term source of revenue. This raises
substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in
Note D. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
/S/ Michael F DeLuca, CPA
October 26, 2000
Yorba Linda, California
(714) 692-8206 * 23001 E. La Palma Avenue Suite 220A Yorba Linda,
CA. 92887 * Fax (714) 692-3054
/4/
THE CYBER GROUP NETWORK CORPORATION
BALANCE SHEET
SEPTEMBER 30, 2000 and 1999
ASSETS
--------
2000 1999
Current Assets ------ ------
Cash in bank $82,275 $210
Other receivables 8,490 -0-
Prepaid expenses 66,035 -0-
------ ------
156,800 210
Property and Equipment, at cost
Equipment and furniture 250,782 27,000
Less accumulated depreciation (8,270) (3,600)
------ ------
242,512 23,400
Other Assets
Movie rights -0- 193,022
Goodwill 301,000 -0-
Less accumulated amortization (1,254) -0-
------ ------
Total Other Assets 299,746 193,022
------ ------
Total Assets $699,058 $216,632
====== ======
LIABILITIES AND CAPITAL
-------------------------
Liabilities
Current Liabilities
Accrued expenses $10,326 $2,500
Stockholders' Equity
Additional paid in capital 1,492,624 230,498
Common stock - shares authorized
50,000,000;
shares issued and outstanding 11,345 3,702
34,266,487
Deficit accumulated during (815,237) ( 20,068)
development stage ------- -------
Total Stockholders' Equity 688,732 214,132
------- -------
Total liabilities and stockholders' $699,058 $216,632
equity ======= =======
The accompanying notes are an
integral part of this statement
/5/
THE CYBER GROUP NETWORK CORPORATION
STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE QUARTERS ENDED
SEPTEMBER 30, 2000 and 1999
For the nine For the
months ended nine months
September 30, ended
2000 September
30, 1999
------------- ----------
Revenue $6,325 $-0-
Operating Expenses
Marketing 49,846 -0-
Interest expense 45,000 -0-
Legal and accounting 38,255 -0-
Depreciation 5,744 900
Other operating expenses 18,914 25
Research and development 204,128 -0-
-------- -------
Total Operating Expenses 361,887 925
-------- -------
Net Loss (355,562) (925)
Beginning Retained Deficit (459,675) (19,143)
-------- -------
Deficit accumulated during $(815,237) $(20,068)
Development stage ======== =======
Loss per share:
Basic $.0153 $.0002
Diluted $.0104 $.0002
Weighted Average number of
Shares outstanding
Basic 73,244,216 3,702,000
Diluted 34,266,487 3,702,000
The accompanying notes are an
integral part of this statement
/6/
THE CYBER GROUP NETWORK CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
For the nine For the nine
months Ended months Ended
September 30, September 30,
2000 1999
------------ -------------
Operating Activities:
Net loss $(355,562) $925
Depreciation 5,744 900
Change in accounts payable (13,993) -0-
Change in receivables (1,490) -0-
Change in prepaid expenses (66,035) -0-
--------- --------
Net cash used by Operating Activities (431,336) (25)
Cash Flows from Investing Activities:
Investment in property and equipment (80,899) -0-
---------
Cash Flows from Financing Activities:
Issuance of common stock conversion of 763,800 -0-
debt
Conversion of bonds (274,000) -0-
--------- --------
489,800 -0-
---------
Net Increase (Decrease) in Cash (22,435) (25)
Cash at beginning of period 104,710 235
Cash at End of period --------- --------
$82,275 $210
========= ========
Supplemental disclosures:
Interest paid $45,000 $-0-
========= ========
Income taxes paid $-0- $-0-
========= ========
The accompanying notes are an
integral part of this statement
/7/
THE CYBER GROUP NETWORK CORPORATION
STATEMENT OF STOCKHOLDERS' EQUITY
From July 1, 2000 to September 30, 2000
Deficit
Accumulated
During
Development
Paid in Common Stock Stage
Capital Shares Amount
-------- -------- --------- ----------
Balances at
July 1, 2000 $734,806 16,138,291 $5,363 $(459,675)
Stock issuance
for
Conversion of
bonds
757,818 18,128,196 5,982 -0-
Net loss -0- -0- -0- (355,562)
-------- --------- -------- ---------
Balances at
September 30,
2000
$1,492,624 34,266,487 $11,345 $(815,237)
========= ========== ======== ==========
The accompanying notes are an
integral part of this statement
/8/
THE CYBER GROUP NETWORK CORPORATION
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
Note A - Summary Of Significant Accounting Policies
The Cyber Group Network Corporation (the "Company"), incorporated
on September 24, 1998 as Hollywood Entertainment Network, Inc.,
is a development stage company with a principal business
objective to operate as a developer of computer security
technology, internet access devices and other internet and
communication investments. Because the Company is considered a
development stage company the accompanying financial statements
are presented in accordance with SFAS 7 for development stage
companies.
On September 25, 1998, two (2) founding shareholders purchased
three million five hundred thousand (3,500,000) shares of the
Company's authorized treasury stock in exchange for certain
assets contributed to the corporation as disclosed in Note B
Related Party Transactions.
In December of 1998, the Company completed an offering of two
hundred two thousand (202,000) shares of the Common Stock of the
Company to approximately fifty-three (53) unaffiliated
shareholders. This offering was made in reliance upon an
exemption from the registration provisions of Section 4(2) of the
Securities Act of 1933, as amended, pursuant to Regulation D,
Rule 504 of the Act.
On May 10, 2000 the Company issued a three for one stock split.
On May 23, 2000 The Cyber Group Network, Inc. purchased 89.1% of
the company's outstanding common stock for $295,000.
Subsequently, The Cyber Group Network, Inc. was merged into the
Company. The Company then changed its name to The Cyber Group
Network Corporation.
A summary of the Company's significant accounting policies
consistently applied in the preparation of the accompanying
consolidated financial statements follows:
Property and Equipment - Depreciation on property and equipment
is provided by charges to income using the straightline method
over the estimated life of the respective assets, ranging
generally from 5 to 7 years. Amortization of leasehold
improvements is provided over the life of the respective
leasehold.
Income Taxes - Timing differences in reporting transactions for
financial and tax purposes result in the recognition of deferred
income taxes.
Cash and Cash Equivalents - For the purpose of the statement of
cash flows, the Company considers all cash and certificates of
deposit with an original maturity of months or less to be cash
equivalents.
/9/
THE CYBER GROUP NETWORK CORPORATION
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
Note A Summary Of Significant Accounting Policies(continued)
Advertising The company accounts for its advertising costs as
nondirect response advertising. Accordingly, advertising costs
are expensed ad incurred.
Earnings Per Share - The company computes earnings per share
using the weighted average number of shares of common stock
outstanding.
Dividends - The company has not yet adopted any policy
regarding the payment of dividends.
Use of Estimates - Management of the company has made certain
estimates and assumptions relating to the reporting of assets
and liabilities and the disclosure of contingent assets and
liabilities to prepare these financial statements in accordance
with generally accepted accounting principles. Actual results
could differ from these estimates.
Start-Up Costs - The company has accounted for certain start-up
costs such as Website design, accounting, etc. as expenses per
Statement of Position 98-5.
Note B Property And Equipment
Property and equipment is stated at cost and consists of the
following:
2000 1999
-------- -------
Equipment and $250,782 $27,000
furniture
Accumulated (8,270) (3,600)
depreciation
$242,512 $23,400
======== =======
/10/
THE CYBER GROUP NETWORK CORPORATION
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
Note C Common Stock
The company is authorized to issue 50,000,000 of common stock
having a par value of $.001. The par value was adjusted to
$.00033 upon the three for one stock split on May 10, 2000.
On November 21, 1998 the company conducted a limited public
offering of common stock pursuant to Regulation D, Rule 504 of
the Securities Act of 1933 and sold 202,000 shares of its $.001
Par value common stock for cash of $20,200.00.
As part of the business combination 1,500,000 shares of common
stock were issued to the shareholders of The Cyber Group Network
Corporation in exchange for the company's assets.
Note D Going Concern
The company's financial statements are prepared using the
generally accepted accounting principles applicable to a going
concern, which contemplates the realization of assets and
liquidation of liabilities in the normal course of business.
However, the company has had limited sources of revenue. Without
realization of additional capital, it would be unlikely for the
company to continue as a going concern. It is management's plan
to seek to raise additional capital via a private placement of
funds.
Note E Financing
On May 23, 2000 the company authorized $1,000,000 face amount of
8% Senior Subordinated Convertible Redeemable Debentures for
$900,000. The debentures are due May 23, 2002. They are
convertible into common stock of the Company at 75% of the market
price of the stock at any time prior to maturity.
At September 30, 2000 all debentures had been issued and
converted into common stock. For the quarter ended September 30,
2000, $749,000 face of the debentures had been converted into
18,128,196 common shares at an average price of $.041 per share.
/11/
Item 2. Management's Discussion and Plan of Operation
Forward Looking Statements
Some of the statements contained in this Form 10-QSB that are not
historical facts are "forward-looking statements". They can be
identified by the use of terminology such as "estimates,"
"projects," "plans," "believes," "expects," "anticipates,"
"intends," or the negative or other variations, or by discussions of
strategy that involve risks and uncertainties. These forward-
looking statements reflect our current beliefs with respect to
future events and involve known and unknown risks, uncertainties and
other factors affecting our operations, market growth, services,
products and licenses. No assurances can be given regarding the
achievement of future results, as actual results may differ
materially as a result of the risks we face, and actual events may
differ from the assumptions underlying the statements that have been
made regarding anticipated events.
General
The Cyber Group Network Corporation ("CGPN" or the "Company"), a
Nevada corporation, was incorporated on September 24, 1998. We are
a Computer Security Company that is focused on developing Public
Patented Internet Devices that address the issue of Internet
Security. Additionally, we plan to use newly acquired technology to
enter the Financial Services industry. CGPN is in the infancy of an
exciting business platform. Our initial focus has been to invest
our limited resources into development of need-based products within
the high technology and financial services sectors.
Results of Operations
CGPN recorded earnings of $6,325 in the third quarter. During this
quarter the Company had only one product ready for distribution, The
Hi-Tech Hustler Research CD. We attempted to sell this product on a
consignment basis and over the Internet for one month, but were not
successful. We altered our marketing approach by shipping 19,000
CD's on a seven-day free trail basis. After the seventh day, the
consumer would have to register the CD and pay $69.95 to receive a
completed version along with free upgrades. Unfortunately, this
product never found its niche in the marketplace and failed to bring
in the type of sales we had estimated.
The company has made several investments in the third quarter to
help generate revenues in the upcoming quarters. We completed an
acquisition of a Community Banking program, which led to the
development of the Cyber Group ATM card. CGPN's premier ATM card
will be marketed to individuals who do not currently have
traditional banking relationships, but are desirous of obtaining an
FDIC approved ATM card. This card may be used at any ATM machine in
the United States or Mexico that carries a Star, EP, Plus or
Interlink symbol. Also, the final development stages of our C-4 chip
technology are complete. This "C-4 Chip" can be utilized to provide
for the global location within a few feet of missing and stolen
computers or devices. It is designed to work whether the device is
stationary or in transit. A 24-hour a day, seven day a week toll-
free number will be available in more than 20 countries to report
stolen or misplaced computers. These two products alone we expect
our fourth quarter to produce substantially greater revenues than
the previous quarter.
Future Business
We have a wide range of products and services that have been in the
development stages for the past quarter. A number of these products
have been completed and are now ready to be marketed next quarter.
Examples of which can be found on our Company web site
www.thecybergroup.net. We are transforming ourselves into a market-
driven organization. Our expectation is that we have researched and
developed products that customer's value and our willing to pay for.
We will be adding additional skill-sets to assist with the execution
and measurement of our strategy and results. We do expect some
personnel adjustments as part of our evolution; however, no
decisions regarding this issue have been made to date.
Our goal is to transition from a start-up organization that is
dependent on investor financing to a self-sufficient, revenue-
generating company capable of exceeding our customers' and
shareholders' expectations. Many of our product offerings have laws
and regulations that govern their use and protect consumers. It is
unclear what, if any, impact they will have on our current product
line. We are committed to staying compliant with all governmental
and regulatory agencies and plan to adhere to the highest legal,
moral and ethical standards.
Liquidity and Capital Resources
The $900,000 received from the issuance of debentures on May 23,
2000, as stated in "Note E - Financing" to the financial statements
of September 30, 2000, will allow us to operate as a going concern
for approximately six months. Therefore, we are aggressively moving
our fee-based products into the marketplace. Our expectation is
that these products will begin to generate increased revenues and
move us quickly towards profitability. However, even with this
revenue flow, the need may arise for additional funding for
expansion, the launching of new or expanded products and/or other
product development projects. Should this need occur, we would
consider borrowing funds, private placement, and/or reducing our
overhead to accommodate such a requirement.
/12/
.
PART II - OTHER INFORMATION
Item 6. Exhibits
Exhibit Name and/or Identification of Exhibit
Number
3 Articles of Incorporation & By-Laws
(a)Articles of Incorporation of the Company filed
September 24, 1998. Incorporated by reference to the
exhibits to the Company's General Form For Registration
Of Securities Of Small Business Issuers on Form 10-SB,
previously filed with the Commission.
(b)By-Laws of the Company adopted September 25, 1998.
Incorporated by reference to the exhibits to the
Company's General Form For Registration Of Securities
Of Small Business Issuers on Form 10-SB, previously
filed with the Commission.
13 Annual or Quarterly Reports
(a) Form 10-QSB for the Quarter ended June 30, 2000.
Incorporated by reference to the Company's Quarterly
Report for Small Business Issuers on Form 10-QSB,
previously filed with the Commission.
23 Consent of Experts and Counsel
Consent of Independent Public Accountant
27 Financial Data Schedule
Financial Data Schedule of The Cyber Group Network
Corporation ending September 30, 2000
/13/
SIGNATURES
Pursuant to the requirements of the Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
The Cyber Group Network Corporation
(Registrant)
Date: November 2, 2000
By:/s/ Leah M. Cunningham
Leah M. Cunningham, Director
/14/
