<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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 August 31, 2000
[ ] Transition Report pursuant to 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from __________ to __________
Commission File Number 000-30029
ENCOUNTER.COM INC.
------------------
(Exact name of Small Business Issuer as specified in its charter)
Colorado 84-1027606
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(State or other jurisdiction of (IRS Employer
incorporation) Identification No.)
6900 Westcliff Drive, Suite 608
Las Vegas, Nevada 89145
----------------- -----
(Address of principal executive offices) Zip Code
(702) 360-0066
--------------
(Issuer's telephone number)
_________________________________________________________________
(Former name, former address and former fiscal year if changed
since last report)
State the number of shares outstanding of each of the
issuer's classes of common equity, as of the latest
practicable date: 34,068,264 shares of Common Stock as of
August 31, 2000.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [X]
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
GENERAL
The Company's unaudited consolidated financial statements for the
three consolidated months ended August 31, 2000 are included with
this Form 10-QSB. The unaudited financial statements for the
three months ended August 31, 2000 include:
(a) Consolidated Balance Sheets as of August 31, 2000 and
May 31, 2000;
(b) Statements of Operations - Three months ended August
31, 2000 and 1999 and inception to Development Stage on
February 5, 2000 to August 31, 2000;
(c) Statements of Stockholders' Deficiency - Inception to
August 31, 2000;
(d) Statements of Cash flows - Three months ended August
31, 2000 and 1999 and inception of Development Stage on
February 5, 2000 to August 31, 2000;
(e) Notes to Consolidated Financial Statements.
The unaudited financial statements have been prepared in
accordance with the instructions to Form 10-QSB and, therefore,
do not include all information and footnotes necessary for a
complete presentation of financial position, results of
operations, cash flows, and stockholders' equity in conformity
with generally accepted accounting principles. In the opinion of
management, all adjustments considered necessary for a fair
presentation of the results of operations and financial position
have been included and all such adjustments are of a normal
recurring nature. Operating results for the three months ended
August 31, 2000 are not necessarily indicative of the results
that can be expected for the fiscal year ending May 31, 2001.
<PAGE>
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors
Encounter.com, Inc.
We have reviewed the accompanying consolidated balance sheet
at August 31, 2000, the consolidated statements of
operations for the three month periods ended August 31, 2000
and 1999, the consolidated statement of stockholders' equity
for the three month period ended August 31, 2000 and the
consolidated statements of cash flows for the three month
periods ended August 31, 2000 and 1999. These consolidated
financial statements are the responsibility of the company's
management.
We conducted our review in accordance with standards
established by the American Institute of Certified Public
Accountants. A review of financial statements consists
principally of applying analytical procedures to financial
data and making inquiries of persons responsible for
financial and accounting matters. It is substantially less
in scope than an audit conducted in accordance with
generally accepted auditing standards, the object of which
is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express
such an opinion.
Based on our review, we are not aware of any material
modifications that should be made to the accompanying
consolidated financial statements for them to be in
conformity with generally accepted accounting principles.
As described in Note 1, the accompanying consolidated
financial statements have been prepared in accordance with
the instructions to SEC Form 10-QSB, accordingly the
comparative balance sheet presented is for the preceding
fiscal period ended May 31, 2000. The financial statements
for the period ended May 31, 2000 were audited by us and we
expressed an unqualified opinion on them in our report dated
August 31, 2000, but we have not performed any auditing
procedures since that date. As discussed in Note 2, certain
conditions indicate that the Company may be unable to
continue as a going concern. The accompanying financial
statements do not include any adjustments to the financial
statements that might be necessary should the Company be
unable to continue as a going concern.
Bellingham, Washington
November 30, 2000
CERTIFIED PUBLIC ACCOUNTANTS
<PAGE>
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ENCOUNTER.COM, INC
(A Development Stage Enterprise)
CONSOLIDATED BALANCE SHEET
(Unaudited)
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August 31, May 31,
2000 2000
--------------------------
$ $
ASSETS
CURRENT ASSETS
Cash - 52,010
Prepaid expense 3,000 1,539
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3,000 53,549
EQUIPMENT AND FURNITURE 20,171 19,228
SECURITY DEPOSIT 3,078 3,078
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26,249 75,855
=======================================================================
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Bank indebtedness 9,013 -
Accounts payable and accrued liabilities 53,756 43,025
Current portion of note payable 94,573 74,573
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157,342 117,598
NOTE PAYABLE - 20,000
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Total Liabilities 157,342 137,598
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CONTINGENCY (NOTE 5)
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MINORITY INTEREST (NOTE 3) 1 -
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STOCKHOLDERS' DEFICIENCY
Preferred Stock:
Authorized: 5,000,000 shares, $1.00 par value
Issued and outstanding: Nil
Common Stock:
Authorized: 50,000,000 shares, $0.001 par value
Issued and outstanding
August 31, 2000 - 34,068,264 shares 34,068 33,968
May 31, 2000-33,968,264 shares
ADDITIONAL PAID IN CAPITAL 264,868 106,032
DEFICIT ACCUMULATED DURING THE DEVELOPMENT STAGE (430,030) (201,743)
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(131,094) (61,743)
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26,249 75,855
=======================================================================
See accompanying Notes to the Consolidated Financial Statements
<PAGE>
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ENCOUNTER.COM, INC
(A Development Stage Enterprise)
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
-----------------------------------------------------------------------
Cumulative
from
Inception of
Development
Stage on
February 5,
For the Three 2000 to
Months Ended August 31,
August 31, 2000
-----------------------------------------------------------------------
2000 1999
$ $ $
Revenues - - -
-----------------------------------------------------------------------
General and Administrative Expenses
Management, administrative and
shareholder relations 88,545 70,000 129,361
Travel and promotion 60,210 9,944 119,529
Legal fees 23,364 3,927 57,544
Rent 11,203 - 17,308
Communications 3,992 2,004 10,175
Audit and accounting 2,500 (1,889) 10,000
Office and sundry 4,096 1,090 8,409
Amortization 1,491 - 2,545
Interest 2,837 - 6,620
Software development (3,888) - 34,602
Specialized development
components 35,000 35,000
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229,350 85,076 431,093
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Net loss, before minority interest(229,350) (85,076) (431,093)
Minority interest 1,063 - 1,063
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Net Loss (228,287) (85,076) (430,030)
=======================================================================
Basic and Fully Diluted
Loss Per Share $0.01 $0.01
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Weighted Average
Number of Shares 34,068,264 8,242,066
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See accompanying Notes to the Consolidated Financial Statements
<PAGE>
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ENCOUNTER.COM, INC.
(A Development Stage Enterprise)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIENCY
(Unaudited)
-------------------------------------------------------------------------------
Deficit
Accu- Total
mulated Stock-
During holders'
Addition- Develop Equity
al Paid-in -ment (Defi-
Common Stock Capital Deficit Stage ciency)
-------------------------------------------------------------------------------
Number Amount
Balance, May 31,
1998 (Note 4) 162,066 $ 162 $ 622,249 $(616,124)$ -$ 6,287
Issued for cash:
$0.01 per share 8,000,000 8,000 72,000 - - 80,000
Issued for cash:
$2.50 per share 80,000 80 199,920 - - 200,000
Share issue costs
- legal fees - - (5,000) - - (5,000)
Net loss-year ended
May 31, 1999 - - - - (375,333)(375,333)
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Balance,
May 31, 1999 8,242,066 8,242 889,169 (616,124) (375,333) (94,046)
Net loss-June 1,
1999 to February
4, 2000 - - - - (5,954) (5,954)
Reorganization
Adjustments - - (997,411) 616,124 381,287 -
------------------------------------------------------------------------------
Balance, February
4, 2000 8,242,066 8,242 (108,242) - - (100,000)
Issued for
technology
license
and business
plan 24,726,198 24,726 (24,726) - - -
Issued for cash:
$0.25 per share 1,000,000 1,000 249,000 - - 250,000
Share issue costs-
finder's fee (10,000) - - (10,000)
Net loss-February
5, 2000 to
May 31, 2000 (201,743)(201,743)
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Balance,
May 31, 2000 33,968,264 33,968 106,032 - (201,743) (61,743)
Issued for cash:
$0.25 per share 100,000 100 24,900 - - 25,000
Excess of proceeds
on sale of
subsidiary company
stock over book
value (Note 3) - - 133,936 - - 133,936
Net loss - three
months ended
August 31, 2000 (228,287)(228,287)
------------------------------------------------------------------------------
Balance,
August 31, 2000 34,068,264 $ 34,068 $264,868 $ -$(430,030)$(131,094)
==============================================================================
<PAGE>
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ENCOUNTER.COM, INC
(A Development Stage Enterprise)
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
-----------------------------------------------------------------------
Cumulative
from
Inception of
Development
Stage on
February 5,
For the Three 2000 to
Months Ended August 31,
August 31, 2000
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2000 1999
CASH PROVIDED BY (USED IN): $ $ $
OPERATING ACTIVITIES
Net loss for the period (228,287) (85,076) (430,030)
Items not requiring outlay
of cash
Amortization 1,491 - 2,545
Changes in operating assets
and liabilities
Prepaid expenses (1,461) - (3,000)
Accounts payable and
accrued liabilities 10,731 (3,837) 53,756
Due to related parties 89,469
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Net cash - operating activities (217,526) 556 (376,729)
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INVESTING ACTIVITIES
Additions to equipment and
Furniture (2,434) - (22,716)
Security deposits - (3,078)
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(2,434) - (25,794)
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FINANCING ACTIVITIES
Common stock subscribed 25,000 - 275,000
Reduction in note payable - (5,427)
Stock offering costs (10,000)
Minority interest in subsidiary 133,937 - 133,937
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158,937 - 393,510
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(DECREASE) INCREASE IN CASH (61,023) 556 (9,013)
CASH (BANK INDEBTEDNESS),
BEGINNING OF PERIOD 52,010 (12) -
-----------------------------------------------------------------------
(BANK INDEBTEDNESS) CASH,
END OF PERIOD (9,013) 544 (9,013)
=======================================================================
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION
Cash paid for interest 2,837 - 6,620
Cash paid for income taxes - - -
SUPPLEMENTAL NON-CASH
INVESTING AND FINANCING
ACTIVITIES
Note payable issued in
settlement of related party
accounts payable 100,000
See accompanying Notes to the Consolidated Financial Statements
<PAGE>
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ENCOUNTER.COM, INC.
(A Development Stage Enterprise)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
August 31, 2000
(Unaudited)
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Note 1 - Basis of Presentation
These unaudited financial statements have been prepared in
accordance with the instructions to SEC Form 10-QSB.
Accordingly, certain information and footnote disclosures
normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed
or omitted pursuant to such instructions. These unaudited
financial statements should be read in conjunction with the
audited financial statements and notes thereto included in the
Company's annual report on Form 10-KSB for the year ended May 31,
2000.
In the opinion of the Company's management, all adjustments
considered necessary for a fair presentation of these unaudited
consolidated financial statements have been included and all such
adjustments are of a normal recurring nature. Operating results
for the three-month period ended August 31, 2000 are not
necessarily indicative of the results that can be expected for
the year ended May 31, 2001.
Note 2 - Going Concern
These financial statements have been prepared on the basis that
the Company will continue as a going concern. The Company has
incurred operating losses since its organization and has a
working capital deficiency of $154,342 at August 31, 2000.
Management intends to raise additional equity financing to
finance the Company's operations and any acquisitions. However,
there can be no assurance that such additional funds will be
available to the Company when required or on terms acceptable to
the Company. Such limitations could have a material adverse
effect on the Company's business, financial condition or
operations and these financial statements do not include any
adjustments that could result therefrom.
Note 3 - Sale of Common Stock by Subsidiary
The Company's subsidiary Cybercastingcorp.com
("Cybercastingcorp") issued 270,000 shares of its capital stock
by private placement sale at a price of $0.50 per share in the
period, for proceeds of $135,000. Cybercastingcorp was 100%
owned prior to the above sale with the Company holding all
34,000,000 shares issued and outstanding. The effect of the
private placement was to reduce the Company's equity percentage
to approximately 99% at August 31, 2000.
The book value of the Company's investment in Cybercastingcorp is
nominal only. The proceeds of $135,000 received from the non-
controlling shareholders of Cybercastingcorp has been recognized
as Additional Paid In Capital ($133,936) to the extent of the
excess of the proceeds received over the amount initially
recorded as minority interest ($1,064).
The Company has not recognized a gain on this transaction as
Cybercastingcorp is a development stage company and realization
is not assured.
As a result of an operating loss for the period, the minority
interest in Cybercastingcorp has been reduced to a nominal $1 at
August 31, 2000.
<PAGE>
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ENCOUNTER.COM, INC.
(A Development Stage Enterprise)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
August 31, 2000
(Unaudited)
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Note 4 - Common Stock
Common Stock Issued to May 31, 1998
The issued common stock was subject to reverse splits on a 500:1
basis in fiscal 1998, and a 20:1 basis in fiscal 1999. The
number of shares outstanding and the amounts recorded for common
stock and additional paid in capital have been restated
retroactively to inception to effect these reverse splits.
Warrants
to Addition
Number Acquire Sub- -al
of Common scription Paid-In
Shares Amount shares Receivable Capital
Balance at inception,
June 4, 1986 - $ - $ - $ - $ -
Issued for cash
$0.001 - $0.05 per share 195 69,350
$0.10 per share 500 1 100 499,999
Issued for services
$0.001 per share 185 1,850
Issued for distribution
rights
$0.001 per share 140 -
Share issue costs (135,418)
-----------------------------------------------------------------------------
Balance, May 31, 1987 1,020 1 100 - 435,781
Issued for cash
$0.02 per share 10 2,000
-----------------------------------------------------------------------------
Balance, May 31, 1988 1,030 1 100 - 437,781
Warrants expired in year (100) 100
-----------------------------------------------------------------------------
Balance, May 31, 1989 and 1990 1,030 1 - - 437,881
Issued for services
$0.002 per share 1,518 2 28,472
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Balance, May 31, 1991 2,548 3 - - 466,353
Issued for services
$0.002 per share 652 1 12,582
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Balance, May 31, 1992 3,200 4 - 478,935
Issued in settlement of
Liabilities 1,366 1 (2,407) 6,378
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Balance, May 31, 1993 4,566 5 - (2,407) 485,313
Subscription settled - - 2,407 (2,407)
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Balance, May 31, 1994,
1995, 1996 and 1997 4,566 5 - - 482,906
Issued for cash
$0.05 per share 157,500 157 157,343
Share issue costs -
legal fees paid (18,000)
-----------------------------------------------------------------------------
Balance, May 31, 1998 162,066 $162 $ - $ - $622,249
=============================================================================
<PAGE>
ENCOUNTER.COM, INC.
(A Development Stage Enterprise)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
August 31, 2000
(Unaudited)
Note 5 - Contingency
The Company in the year ended May 31, 1999 advanced $40,333 under
a Letter of Intent to acquire 100% of the shares of SA
Interactive Information Technology, Inc. ("Interactive"), a
private British Columbia, Canada corporation. The Letter of
Intent also required the Company to issue 9,000,000 common
shares, advance a further $140,000, raise a total of $2,500,000
in financing within 18 months of closing, and issue options to
the vendors of the private company to acquire 750,000 shares at a
price of $0.20 per share exercisable within 2 years of closing.
The proposed acquisition, which was not proceeded with, was
intended to provide the Company with an entry into the field of
voice personals, upon which to develop an Internet presence.
Interactive and its shareholder filed a Statement of Claim in the
Supreme Court of British Columbia (Canada) on April 23, 1999
against the Company, and certain companies and individuals
related to the Company at the time. The claim pertains to the
termination of the proposed acquisition of Interactive, and the
continued development of businesses by the Company in the same or
similar fields as Interactive. The Plaintiff seeks various
injunctions restricting the Company from competing against
Interactive, damages for breach of contract and breach of
fiduciary duty, punitive damages and interest.
The Company filed a Statement of Defense on November 12, 1999
responding that the actions of the Plaintiff in attempting to
renegotiate the terms of the Letter of Intent abrogated all
agreements between them, and that the Company has no fiduciary
duties to the Plaintiff and that the Plaintiff has no exclusive
rights to the businesses being developed by the Company.
There have been no filings with the Court following the
Statements of Defense filed by the Company on November 12, 1999
and the other defendants on November 17, 1999. No motions have
been calendered and no hearings have been set.
The Company intends to continue to defend itself vigorously
against this action. The probable outcome of this action is not
determinable at this time.
The Company is also continuing with its action against the
plaintiffs above for return of the funds advanced ($40,333)
towards the proposed acquisition.
<PAGE>
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
----------------------------------------------------------------
GENERAL
----------------------------------------------------------------
The following discussion should be read in conjunction with the
Company's consolidated financial statements (including the notes
thereto), included elsewhere herein.
This document contains forward-looking statements and information
that are based on the beliefs of management as well as
assumptions made by and information currently available to the
Company. When used in this document, the words "anticipate",
"believe", "plans", "estimate" and "expect" and similar
expressions, as they relate to the Company or its management, are
intended to identify forward-looking statements. Such statements
reflect the current views of the Company with respect to future
events and are subject to certain risks, uncertainties and
assumptions. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those described in this
document. For a more detailed description of these risks and
factors, please see the Company's additional filings with the
Securities and Exchange Commission.
OVERVIEW
The Company is developing products and services for marketing to
small and medium-sized businesses that provide them "e-commerce
capability". These products and services represent an "out-
sourcing" option for customers to develop and maintain an
Internet solution in the most efficient manner.
Anticipated products include Internet access, colocation space
rental and wireless broadband Internet access. Professional
services include project evaluation and design consulting.
Managed services include day-to-day, round-the-clock management
and maintenance of customers' Internet network operations. These
services include load balancing, data backup, multi-homing,
caching, clustering, server rental, security, and systems
monitoring.
The Company's strategy is to sell the aforementioned products and
services under long-term contracts, thereby creating annuity
income and gaining control of the customer. Further, the Company
believes that key infrastructure components necessary to deliver
Internet proficiency, such as bandwith availability and
colocation facilities, are trending toward an "over-supply"
condition, resulting in dramatic decreases in selling prices.
This trend has created an opportunity for the Company to obtain
strategic partner agreements with owners of colocation
facilities, whereby the Company can sell Internet access and
managed services within the facility and earn a commission on the
sale of colocation rental space. These agreements eliminate the
need to employ risk capital in infrastructure investment while at
the same time allowing control of the recurring revenue stream.
<PAGE>
RESULTS OF OPERATIONS
First Quarter ended August 31, 2000, versus First Quarter ended
August 31, 1999
There has been no revenue since inception, February 5, 2000,
through August 31, 2000. The Company anticipates initial
revenues will occur in January 2001.
A net loss of $228,287 resulted in the quarter ended August 31,
2000, compared to a net loss of $85,076 in the quarter ended
August 31, 1999. Major costs in the quarter ended August 31,
2000, were administrative expenses $88,545, travel and promotion
$60,210, specialized development components $35,000, and legal
fees $23,364. Expenses incurred in the three months ended August
31, 1999, are not comparable because they apply to a business
discontinued prior to the reverse merger on February 4, 2000.
The Company's working capital deficiency increased from $64,049
as of May 31, 2000, to $154,342 as of August 31, 2000. The
$90,273 increase in working capital deficiency resulted primarily
from a net loss in the three-month period ended August 31, 2000,
of $228,287 and the reclassification of $20,000 long term debt to
a current liability, offset by proceeds from the sale of a
minority interest in a subsidiary of $135,000.
The Company has made no payments on a note payable to 574125 B.C.
Ltd. At August 31, 2000, the current debt on that note payable
was $94,573.20, plus accrued interest, $20,000 of which is now
past due.
LIQUIDITY AND CAPITAL RESOURCES
The Company's Business Plan anticipates opening ten markets in
2001 and one market each month thereafter through 2003. Funding
required to execute the Plan is $5.0 million beginning January 1,
2001, but could increase substantially due to unknown factors.
The Company, through a self-underwriting, had placed 270,000
shares of its subsidiary, CyberCastingCorp.com, Inc.'s capital
stock for proceeds of $135,000 as of August 31, 2000. As of
September 25, 2000, the Company closed this offering with total
sales of 400,000 shares, yielding net proceeds of approximately
$200,000.
The Company has formed a second subsidiary, CybAirCorp., to
conduct its e-commerce solutions business and anticipates funding
this business initially through a private placement of its Common
Stock. There is no assurance that such offerings, if any, will
be successful.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
There have been no material new developments concerning any legal
proceedings involving the Company during the time period for this
report.
Item 2. Changes in Securities and Use of Proceeds
The Company issued a total of 100,000 shares of the Company's
common stock during the period from June 1, 2000 to August 31,
2000, the period covered by this report.
Of the shares issued, all 100,000 were issued at a price of $0.25
to one accredited investor pursuant to Rule 504 of Regulation D
of the 1933 Act. The shares issued to the investor were
"restricted" securities", as defined by the 1933 Act. No
commissions paid.
Item 3. Defaults Upon Senior Securities: None
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.
(a) Exhibits: Financial Data Schedule
(b) Reports on Form 8-K: None
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ENCOUNTER.COM INC.
Date: January 11, 2001
/s/ Dennis J. Hinton
By:_______________________
Dennis J. Hinton
President
