U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[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
[ ] TRANSITIONAL REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 (No Fee Required)
Commission File No. 0-26405
CBCOM, INC.
--------------------------------------------------------
(Name of Small Business Issuer in its Charter)
Delaware 95-4635025
----------------------------------- ------------------------
(State or other jurisdiction of (I.R.S Employer
incorporation of organization) Identification No.)
16830 Ventura Blvd., Suite 211, Encino, California 91436
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Address of principal executive office
(818) 461-0800
----------------------------------
Issuer's telephone number
Check whether the issuer has (1) filed all reports required by Section 12 or
15(d) of the Exchange Act during the past 12 months, and (2) been subject to
such filing requirements for the past ninety (90) days. Yes ( X ) No ( )
As of September 30, 2000, 17,997,740 shares of Common Stock were
outstanding.
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<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CBCOM, INC.
(a development stage company)
BALANCE SHEETS
December 31, September 30,
1999 2000
------------ -------------
(Unaudited)
Assets
Current assets:
Cash $ 31,844 $ 8,594
Prepaid expenses 4,771 -
----------- -------------
Total current assets 36,615 8,594
----------- -------------
Property, plant and equipment, net 53,288 39,125
Other assets:
Deposit 19,897 29,722
Prepaid interest 165,000 110,001
Prepaid rent in Beijing representation office 197,917 151,041
----------- -------------
Total other assets 382,814 290,764
----------- -------------
Total assets $ 472,717 $ 338,483
=========== =============
Liabilities and Shareholders' Deficit
Current liabilities:
Accounts payable $ 331,412 $ 301,010
Salaries payable - Former CEO 363,649 -
Salaries payable - other 557,250 648,887
Accrued expenses 129,922 152,896
Income tax payable 2,400 2,400
Capital lease obligation - current 32,433 32,433
Loan payable - shareholders 11,988 126,018
----------- -------------
Total current liabilities 1,429,054 1,263,644
Loan from related party 157,184 1,172,446
----------- -------------
Total liabilities 1,586,238 2,436,090
Shareholders' Deficit
Common stock; par value $0.001 per share,
100,000,000 shares authorized, 17,212,240 and
17,997,740 shares issued and
outstanding, respectively 17,212 17,998
Additional paid-in capital 6,021,944 6,548,125
Subscription receivable (1,300) (1,250)
Accumulated deficit (7,151,377) (8,662,480)
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Total shareholders' deficit (1,113,521) (2,097,607)
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Total liabilities and shareholders' deficit $ 472,717 $ 338,483
=========== =============
See accompanying notes to financial statements.
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<PAGE>
CBCOM, INC.
(a development stage company)
STATEMENTS OF OPERATIONS
<TABLE>
<S> <C> <C> <C> <C> <C>
From
Inception
(April 23,
1997)
Three Months Ended Sept.30, Nine Months Ended Sept.30, to Sept. 30,
-------------------------- -------------------------- --------------
1999 2000 1999 2000 2000
----------- ----------- ----------- ------------ --------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Net sales $ - $ - $ - $ - $ -
Cost of sales - - - - -
----------- ----------- ----------- ------------ --------------
Gross profit - - - - -
Selling expense - - - - -
General and administrative expense 941,470 898,790 1,508,775 1,426,037 8,046,640
Merger transaction expense - - 149,950 - 399,950
----------- ----------- ----------- ------------ --------------
Loss from operations (941,470) (898,790) (1,658,725) (1,426,037) (8,446,590)
Other income (expense):
Interest expense, net (18,333) (38,936) (72,665) (85,066) (207935)
Other, net 6,500 - 10,905 - (5,555)
----------- ----------- ----------- ------------ --------------
Loss before income taxes (953,303) (937,726) (1,720,485) (1,511,103) (8,660,080)
Income tax provision - - 800 - 2,400
----------- ----------- ----------- ------------ --------------
Net loss $ (953,303) $ (937,726) $ (1,721,285) $ (1,511,103) $ (8,662,480)
=========== =========== =========== ============ ==============
Weighted average number of common 15,327,500 17,997,740 15,425,353 17,213,982
shares outstanding =========== =========== =========== ============
Basic and diluted loss per share $ (0.06) $ (.05) $ (0.11) $ (0.09)
=========== =========== =========== ============
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
CBCOM, INC.
(a development stage company)
STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
<TABLE>
<S> <C> <C> <C>
From Inception
(April 23,
1997)
Nine Months Ended Sept. 30, to Sept. 30,
---------------------------------
1999 2000 2000
-------------- -------------- ----------------
(Unaudited) (Unaudited) (Unaudited)
Cash flows from operating activities:
Net loss $ (1,721,275 ) $ (1,511,103 ) $ (8,662,480 )
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 14,164 61,038 104,090
Write-off assets in Beijing - - 187,500
Write-off of pager inventory 136,620 - 136,620
Issuance of stock for signing bonus - - 436,625
Forgiveness of interest on shareholder's loan 34,876 30,067 82,903
Amortization of prepaid interest 36,667 54,999 54,999
Compensation cost related to options granted 18,750 - 131,250
Issuance of stock for promotion and facilitation service - - 623,750
Issuance of stock for payroll expense - - 560,000
Issuance of stock for merger transaction expenses - - 250,000
Increase(decrease) in cash from changes in:
Receivables 8,655 - -
Pager inventory - - (136,620 )
Deposits 25 (9,825 ) (29,722 )
Prepaids 46,875 4,771 169,583
Accounts payable 216,129 (30,402 ) 301,010
Salaries payable - former CEO (25,934 ) (363,649 ) -
Salaries payable - other 418,501 318,137 875,387
Accrued liabilities and income tax payable 107,102 22,973 155,295
-------------- -------------- ----------------
Net cash used in operating activities (708,845 ) (1,422,994 ) (4,759,810 )
-------------- -------------- ----------------
Cash flows from investing activities:
Purchase of furniture and equipment - - (64,336 )
Refund of purchase price on a piece of furniture 500 - 500
-------------- -------------- ----------------
Net cash provided by investing activities - - (63,836 )
-------------- -------------- ----------------
</TABLE>
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<PAGE>
CBCOM, INC.
(a development stage company)
STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
<TABLE>
<S> <C> <C> <C>
From Inception
(April 23,
1997)
Nine Months Ended Sept. 30, to Sept. 30,
---------------------------------
1999 2000 2000
-------------- -------------- ----------------
(Unaudited) (Unaudited) (Unaudited)
Cash flows from financing activities:
Repayment of capital lease (71 ) - (71 )
Proceeds from related party 157,184 1,129,294 1,286,478
Repayments of related party loans (7,516 ) - (266,261 )
Proceeds from issuance of stock and warrants 304,200 50 855,125
Proceeds from stockholder loans 25,000 270,400 2,917,019
-------------- -------------- ----------------
Net cash provided by financing activities 478,797 1,399,744 4,832,240
-------------- -------------- ----------------
Net increase (decrease) in cash and cash equivalents (229,548 ) (23,250 ) 8,594
Cash and cash equivalents, beginning of period 240,000 31,844 -
-------------- -------------- ----------------
Cash and cash equivalents, end of period $ 10,452 $ 8,594 $ 8,594
============== ============== ================
Supplementary information Cash paid during the year:
Interest $ - $ - $ 5,563
============== ============== ================
Supplemental disclosure of non - cash activities
Issuance of stock to purchase selected assets in CBCom - - 187,500
Beijing
Capital lease - - 32,504
Issuance of stock for signing bonus - - 436,625
Issuance of stock for prepaid rents in Beijing - - 312,500
Conversion of shareholder's loan - 270,400 2,682,370
Issuance of stock for directors' compensation - - 560,000
Issuance of stock for promotion and facilitation service - - 623,750
Issuance of stock for merger transaction expenses - - 250,000
Deemed interest for Polmont - - 220,000
Forgiveness of interest accrued - 46,437
Conversion of accrued salary payable into common stock $ - $ 226,500 $ 226,500
============== ============== ================
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
CBCOM, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
(Information as of September 30, 2000 and for the nine months ended September
30, 1999 and 2000, respectively, is unaudited)
1. The Organization and Business
CBCom, Inc. ("the Company") was incorporated under the laws of the State of
Delaware on April 23, 1997 and is registered to do business as a foreign
corporation in the State of California. The strategic mission of the Company is
to participate in the development of telecommunication, Internet, and
information service businesses in the People's Republic of China. The Company
will seek to acquire existing Internet Service Providers (ISP) and web based
Internet content providers (ICP) and operates through a series of Sino-foreign
joint venture companies. The Company previously established a joint venture in
order to operate in the pager network business in China; however, this venture
was closed due to the inability at that time to raise sufficient capital.
The Company incurred consecutive losses in 1997, 1998, and 1999 and for the
first 3 quarters of 2000 and had negative working capital in 1998, 1999 and 2000
respectively, that raises substantial doubt about its ability to continue as a
going concern. Historically, one of the Company's directors and major
shareholders provided the Company with substantial financing sources. The
director has provided a letter of support indicating that he pledges to provide
continuous financial support to enable the Company to satisfy its working
capital requirements and to complete its commitments to the Company's joint
venture projects on a going concern basis. While there is no assurance that
funding will be available, the Company is continuing to actively seek funding to
complete the Shanghai joint venture project through equity and/or debt
financing. There is an uncertainty that management fund raising will be
successful. The accompanying financial statements do not include any provisions
or adjustments, which might result from the outcome of the uncertainty discussed
above.
2. Presentation of Interim Information
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-QSB and Item 310 of regulation S-B.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
The accompanying unaudited financial statements reflect all adjustments that, in
the opinion of the management, are considered necessary for a fair presentation
of the financial position, results of operations, and cash flows for the periods
presented. The results of operations for such periods are not necessarily
indicative of the results expected for the full fiscal year or for any future
period. The accompanying financial statements should be read in conjunction with
the audited consolidated financial statements of the Company included in the
Company's Form 10-KSB for the year ended December 31, 1999.
6
<PAGE>
CBCOM, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
3. Related Party Transactions
Loan from Polmont and Employment Agreement Dispute
The Company had a five-year employment agreement starting from May 17, 1997 with
the former CEO who left the Company in January 1999. He filed a lawsuit against
the Company for the unpaid compensation of $520,833 through May 17, 1999 plus
$30,000 for repurchasing the shares currently owned by him and the relevant
compensation remaining on his employment agreement. In accordance with the
employment agreement, the former CEO's annual base salary and bonus were
guaranteed up to May 15, 1999 by 800,000 shares of a publicly traded company's
common stock in an escrow account, which were owned by Polmont Investment
Limited.
On January 21, 1999, the Company entered into a settlement agreement with the
former CEO as follows: (1) the delayed compensation of $520,833 would be paid by
the proceeds from the sale of the asset held in the escrow account plus $30,000
for the repurchase of his CBCom Common Stock; and (2) both parties agreed to
submit any remaining compensation claims to binding arbitration. To the extent
that the former CEO wins an award in excess of $550,833, he will be authorized
to sell remaining shares in the escrow account to the extent of 3,500 shares per
day; and (3) the former CEO agreed to look solely to the escrowed shares for his
satisfaction of his claim in this lawsuit, waive any claim for damages in excess
of their value, and generally release all parties to this lawsuit, such release
being subject to the performance of the obligations of the related defendants.
As of June 30, 2000, the escrow has sold 250,000 shares and the former CEO had
received the entire compensation of $520,833 plus $16,407 towards the purchase
of his Common Stock.
As of September 30, 2000, all parties have signed a settlement agreement. The
former CEO would accept an additional 190,000 shares held in the escrow as full
and final settlement for all claims. As of September 1, 2000, the date of
delivery of the shares, the estimated value of these shares was $629,375. As
part of the agreement any title or interest the former CEO had in the Company's
stock or options would be transferred back to the Company. According to the
agreement between the Company and Polmont, the Company has recognized the
corresponding loan payable to Polmont as shares were sold and the proceeds were
used to settle its obligation to the former CEO. As of result of the above
settlement with the former CEO, the total loan from Polmont was increased to
$1,172,446. Polmont agreed to waive its accrued interest of $18,941 as of
September 3, 2000.
Shareholder loans
During the nine months ended September 30, 2000, the principal shareholder of
the Company provided $384,430 in cash to fund the Company's operations.
According to the agreement between the principal shareholder and the Company,
the principal shareholder will continue to provide funds to the Company on a
going forward basis and that any balance of loan payable to the principal
shareholder should be due on April 23, 2000 bearing an interest rate of 7% per
7
<PAGE>
CBCOM, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
annum. According to the agreement, the principal shareholder has the option to
convert his outstanding loan balance into the Company's common stock at a
conversion price of $0.50 per share at any time prior to April 23rd, the
maturity date of the loan. On April 24, 2000 the Company extended the note
between the Company and the principal shareholder for one additional year to
April 24, 2001. The principal shareholder retains the option to convert his
outstanding loan balance into the Company's Common Stock; however, the
conversion price for all loans advanced after April 24, 2000 will be $1.00 per
share.
The agreement also specified that the conversion price may be adjusted if the
Company shall at any time undergo a stock split, stock dividend or other
combination or subdivision that does not involve payment of consideration for
such shares. As of September 30, 2000, the principal shareholder waived his
accrued interest receivable of $11,125.
4. Subsequent Events
The Company filed Form 211 with the NASD to initiate a listing on the OTC
Bulletin Board and is awaiting notification.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Financial Condition at September 30, 2000
The Company had an accumulated deficit of $8,662,480 as of September 30, 2000.
Since its inception in 1997, the Company has suffered consecutive losses in the
fiscal years ended December 31, 1997, 1998, 1999 and 2000. The Company had
$8,594 cash on hand at September 30, 2000.
Results of Operations
The Third Quarter Ended September 30, 2000 Compared to The Third Quarter Ended
September 30, 1999
The general and administrative expense results of operations for the quarter
ending September 30, 2000 was $898,790 compared to $941,470 for the quarter
ending September 30, 1999. The components of the September 30, 2000 general and
administrative expenses included $138,300 of compensation expense, $26,919 of
rental expense for both the Beijing and California offices, $645,782 in one time
compensation expense relating to the settlement for the former CEO, and $31,195
in accounting and legal fees. The decrease of $42,680 represents the
increase in year 2000 of $257,112 in compensation expense offset by write-offs
in 1999 of $164,375 of advances to CBCom China and $143,492 of unrecoverable
pager development and inventory expense.
The Company undertook and completed a merger with ABBACY Corporation, a public
shell company in October, 1999. The Company recognized $100,000 of legal fees in
connection with the merger in September, 1999. On August 26, 1999, the Company
conducted a Regulation D, Rule 506 offering to issue 50,000 shares of common
stock at par value of $0.001 per share to 300 shareholders in order to satisfy
its goal to be listed on the NASDAQ OTC Bulletin Board and recognized a merger
transaction expense of $49,950. The $50 proceeds were received subsequent to
September 30, 1999.
The interest expense for the quarter ending September 30, 2000 was $38,936
compared to $18,333 for the quarter ending September 30, 1999. The increase in
interest expense was due firstly to recording the deemed interest expense for
the loan of Amtec shares by Polmont used to pay the compensation expense of the
former CEO. See the Note 3 about related party transactions for more
information. The remaining interest is accrued interest relating to the
shareholder loans.
The Nine Months Ended September 30, 2000 Compared to The Nine Months Ended
September 30, 1999
The general and administrative expense results of operations for the nine months
ending September 30, 2000 was $1,426,037 compared to $1,508,775 for the nine
months ending September 30, 1999. The components of the September 30, 2000
general and administrative expenses included $414,900 of compensation expense
(of which $337,500 was accrued), $90,460 of rental expense for both the Beijing
and California offices, $645, 782 in one time compensation expense relating to
the settlement for the former CEO, and $101,946 in legal and accounting fees.
The decrease of $82,738 represents the increase in year 2000 of $370,682 in
compensation expense offset by write offs in 1999 of $220,000 in advances to
CBCom China and $143, 492 of unrecoverable pager development and inventory
expense plus the decrease of $87, 543 in legal expenses.
9
<PAGE>
The Company undertook and completed a merger with ABBACY Corporation, a public
shell company in October, 1999. The Company recognized $100,000 of legal fees in
connection with the merger in September, 1999. On August 26, 1999, the Company
conducted a Regulation D, Rule 506 offering to issue 50,000 shares of common
stock at par value of $0.001 per share to 300 shareholders in order to satisfy
its goal to be listed on the NASDAQ OTC Bulletin Board and recognized a merger
transaction expense of $49,950. The $50 proceeds were received subsequent to
September 30, 1999.
The interest expense for the nine months ended September 30, 2000 was $85,066
compared to $72,665 for the nine months ending June 30, 1999. The increase in
interest expense was due mainly to the deemed interest expense for the loan by
Polmont of Amtec shares used to compensate the former CEO. See Note 3 to the
Financial Statements about related party transactions for more information. The
balance of the interest expense is accrued interest on the shareholder's loan.
Plan of Operation
CBCom was formed to develop telecommunications projects and Internet-related
information services in the People's Republic of China. CBCom establishes joint
venture partnerships with Chinese companies having data networking technologies
or customer bases to which CBCom will contribute United States technology and
management resources. In order to execute its Business Plan, CBCom plans to list
its common shares on the OTC Bulletin Board and undertake a Private Placement of
$5.0-10.0 million. The funds will be used to capitalize the joint venture
partnerships and acquire Internet companies in China. If CBCom is unable to
raise funds through a Private Placement, the company would be dependent upon its
major shareholders for funds and would have to alter its acquisition strategy
and timetable.
To limit the use of valuable cash reserves, CBCom will negotiate its first
acquisitions using only CBCom shares. The terms of any acquisition must give
operating control of the acquired business to CBCom. CBCom will provide the
necessary operating cash as well as management and technical staff to operate
the consolidated business. There is good cause to believe that owners of the
ISPs in China will welcome the opportunity to own stock in a United States
public company.
E-Commerce has not yet become a mainstream business in China, as credit cards
are essentially non-existent, and its parcel delivery services are inadequate.
ICP businesses offering free information and services financed solely by web
site "banner ads" are not yet profitable. The most secure Internet revenues are
those paid to the Internet Service Providers, as anyone wishing to access the
Internet must pay access fees. There is a large profit potential for ISPs both
now and in the foreseeable future.
Entering this business is attractive, as start-up costs are relatively low. This
has resulted in a large number of small, unsuccessful ISPs and ICPs that are
under capitalized. The typical smaller ISP is unable to support its overhead,
even less capable of proper marketing, and is thus unable to increase its
subscribers enough to turn a profit.
CBCom plans an aggressive series of mergers, acquisitions, and service
expansions. CBCom will offer convenient accessibility through local access
numbers nationwide, fast access speeds, high quality customer support, and
user-friendly services, all of which are currently lacking in China but are
10
<PAGE>
taken for granted in America. Internet Content will include unique and targeted
applications on its various web sites thereby drawing an ever-increasing
customer base to its ISP business, as well as generating revenue by charging
fees for specialized information and service web sites.
In order to quickly reach a profitable number of subscribers, CBCom plans to
acquire a number of smaller ISPs and by using current technology, combine the
existing customers into a single ISP. The infrastructure requirements of a very
small ISP are essentially the same as that of a very large ISP and the cost to
maintain operations are virtually fixed. Therefore the single most important
component of profitability is a high number of subscribers. By acquiring
existing businesses, CBCom will immediately benefit from achieving economies of
scale.
CBCom has entered into a memorandum of understanding with Shanghai Stock
Exchange Communication Co., Ltd. ("SSECC") and Shanghai Xingtong
Telecommunications Science & Technology Co., Ltd. to form a Sino-foreign joint
venture to develop a financial data network in China called "China Financial
Network" or "CFN". SSECC is a subsidiary of the Shanghai Stock Exchange formed
as a joint venture between Shanghai Stock Exchange and Shanghai Stock Central
Clearing Company. The memorandum contemplates that SSECC will provide access to
its existing satellite communication system as well as licenses, permissions and
rights to use the logo, name and promotional information of the Shanghai Stock
Exchange. Shanghai Xingtong Telecommunications will participate in network
design and management to ensure efficient utilization of the satellite network
and will provide technical assistance. CBCom will provide the resources to
collect and compile global financial information, United States technology,
management resources and capital.
The memorandum of understanding anticipates the project planned in two phases.
Phase I is to market and distribute financial information in Chinese provided by
the Shanghai Stock Exchange over a network to various terminals throughout
China, exclusively targeting Chinese stockbrokers, financial institutions and
corporate users. The financial information provided will include prices for
commodities and futures, precious metals, Asian and global equities and foreign
currencies, global market indexes and real time international news and
commentary. The information provided will differ from information provided by
competitors in that it will be entirely in Chinese at a lower rate. Phase II is
to market to individual consumers real-time financial data, news and on-line
investment trading bundled as a single service, developing into the equivalent
of a commercial Internet Service Provider.
The parties to the memorandum must enter into a joint venture and obtain the
required approvals from the Chinese government authorities by December 31, 2000
(the original deadline was June 30, 2000) or may lose the exclusive right to the
use of the SSECC satellite communication system. CBCom has advanced $250,000 in
start-up expenses which was expensed during 1998 and which could be credited
toward its capital contribution to the joint venture company when the joint
venture is completed. If the joint venture has not been set up and exclusive
licenses to use the satellite communication network owned by Shanghai Stock
Exchange and use the logo and name of Shanghai Stock Exchange have not been
obtained, the issuance of promotional stock to Sinoway, Ltd. could be cancelled.
CBCom intends to continue its sale of the Microtron 2000 in addition to the
development of the joint venture project for the creation of the China Financial
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Network. CBCom believes that the Shanghai Stock Exchange and its members provide
a ready market for the sale of the Microtron 2000 and its capability to receive
stock quotes.
Liquidity and Capital Resources
The Company has suffered losses in 1997, 1998, 1999 and the first six months of
2000 and had negative working capital in all of these periods. The operating
activities of the Company have been funded by the principal shareholders in the
form of equity and shareholder loans. Funds loaned by the principal shareholder
to the Company amounted to $679,000 in 1998, $137,000 in 1999 and $384,430 in
the first nine months of 2000. During 1999, the Company raised money through a
series of private placements obtaining net proceeds of $304,000 after selling
commissions.
One the Company's directors and major shareholders continue to provide the
Company with substantial financing sources. The director has provided a letter
of support indicating that he pledges to provide continuous financial support to
enable the Company to satisfy its working capital requirements and to complete
its commitments to its joint venture projects. The consecutive losses and the
negative working capital situation raise substantial doubt about the company's
ability to continue as a going concern. While there is no assurance that funding
will be available, the Company is continuing to actively seek funding to
complete its joint venture projects and execute its Business Plan through equity
and/or debt financing. Without outside funding, the Company is totally dependent
upon its major shareholders and would need to reconsider its Business Plan.
PART II - OTHER INFORMATION
CBCOM, INC.
SEPTEMBER 30, 2000
Item 1. Legal Proceedings
CBCom entered into a settlement agreement with Bernard J. Luskin, the former
Chief Executive Officer of CBCom, in January,1999, settling an outstanding
dispute for unpaid salary and other compensation. Mr. Luskin had an employment
contract with CBCom which guaranteed payment of his salary through an escrow
account containing 800,000 shares of common stock of Amtec, Inc., which shares
were pledged by Polmont Investments, Ltd., a British Virgin Islands corporation
controlled by one of the principal stockholders of CBCom.
Through the settlement, the parties agreed that Mr. Luskin will receive unpaid
salary and bonus through May 15, 1999 totaling $520,833, plus $30,000 for the
repurchase of his Company Common Stock, plus additional compensation as may be
determined by binding arbitration; but in no event shall CBCom's liability
exceed the value of the shares held in escrow. . As of June, 2000, the escrow
has sold 250,000 shares for proceeds of $537,240; accordingly the unpaid salary
amount of $520,833 has been fully paid and $16,407 toward the repurchase of his
company stock has been paid.
12
<PAGE>
As of September 30, 2000, all parties had signed a settlement agreement. The
former CEO would accept an additional 190,000 shares held in the escrow as full
and final settlement for all claims. As of September 1, 2000 the estimated value
of these shares was $629,375. As part of the agreement any title or interest the
former CEO had in the Company's stock or options would be transferred back to
the Company. According to the agreement between the Company and Polmont, the
Company has recognized the corresponding loan payable to Polmont as shares were
sold and the proceeds were used to settle its obligation to the former CEO.
Mr. Luskin waived any rights to satisfy any claims against CBCom from any assets
other than those shares held in the escrow account. CBCom is obligated to repay
Polmont the amount it has paid to Mr. Luskin from the sale of its Amtec, Inc.
shares. Polmont has agreed to accept payment in the form of shares of CBCom,
Inc. valued at $0.50 per share. Due to the nature of this off-balance sheet
financing, the Company has recognized prepaid interest of $220,000 and the
corresponding amount in additional paid-in capital and has amortized the prepaid
interest over a period of three years.
On August 30, 1999, a lawsuit was filed in the Superior Court of the State of
California against CBCom, Inc., Max Sun, and Charles Lesser (Case No. LCO49888)
by Com VU Corporation, a Delaware corporation, based on an alleged breach of a
prior agreement between CBCom and Com VU. The parties entered into a merger
agreement on March 26, 1999, which merger was never effected. Com VU is alleging
CBCom (i) failed to consummate the merger by failure to use its best efforts to
effect it (ii) failed to pay $50,000 in outstanding debts to two shareholders on
behalf of Com Vu (iii) terminated the agreement improperly and (iv) breached a
covenant of good faith. Com Vu is requesting payment of the $50,000 plus losses
of approximately $15,000 in expenses and costs. CBCom disputed the allegations
of the claims and defended the action vigorously.
As of September 30, 2000 the litigation between Com VU and CBCom was settled.
Both parties agreed to a dismissal agreement and a mutual general release of
this lawsuit. Both parties agreed to unconditionally release, acquit and forever
discharge each other for any and all actions based directly or indirectly on the
subject matter of the above lawsuit.
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
13
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(a) Exhibits.
10.9 Dismissal Agreement and Mutual General Release by and between
ComVu Corporation and CBCom, Inc. Max Sun and Charles Lesser
10.10 Luskin v. CBCom, Inc et al., release and receipt; Declaration of
Bernard Luskin
(b) Reports on Form 8-K. On September 7, 2000, the Company filed Form 8-K
to indicate a change in the Registrant's Certifying Accountant. On
September 27, 2000 the Company filed Form 8-K/A to amend the above
mentioned filing.
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized, in the city of Encino,
California, on the 14th day of November, 2000.
CBCOM, INC.
By /s/ Chian Yi Sun
----------------------------
Chian Yi Sun
Chairman of the Board
By /s/ Charles A. Lesser
----------------------------
Charles A. Lesser
Chief Financial Officer
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