SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

|X|     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
        ACT OF 1934

        For the fiscal year ended December 31, 2001           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 No. 000-32109

                                   CBCOM, INC.
             (Exact name of registrant as specified in its charter)

               Delaware                                   95-4635025
    -------------------------------            --------------------------------
    (State or other jurisdiction of            (I.R.S. Employer Identification)
    incorporation or organization)

        16830 Ventura Blvd., Suite 211
           Encino, California                               91436
         -------------------                              ----------
(Address of principal executive offices)                  (Zip Code)

                                 (818) 461-0800
              ----------------------------------------------------
              (Registrant's telephone number, including area code)

Securities  registered  pursuant to Section  12(b) of the Act:  None  Securities
registered pursuant to Section 12(g) of the Act:

                     Common Stock, par value $.001 per share
                     --------------------------------------
                                (Title of Class)

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 |_|

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-B is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated  by reference  in Part III of this Form 10-KSB or any  amendment to
this Form 10-KSB. |_|

State issuer's revenues for its most recent fiscal year: $268,787

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<PAGE>
State  the  aggregate  market  value of  voting  and  non-voting  stock  held by
non-affiliates: $12,521,300 at March 29, 2002

Number of shares of Common Stock outstanding as of December 31, 2001: 22,020,642

                                   CBCOM, Inc.
                        2001 ANNUAL REPORT ON FORM 10-KSB

                                     PART I
Item 1. Description of Business

Overview
         CBCom,  Inc. was  incorporated  in Delaware in April,  1997.  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.  The  Company  has been in the  development  stage  since
inception and in 2001 the Company's  wholly owned subsidiary CBCom China started
to  generate  consulting  income.  At that  point,  the  Company  ceased to be a
development stage enterprise.

         On July 6, 2001,  CBCom,  Inc.  through its subsidiary in Beijing,  has
entered into a Management  Services  Agreement with Beijing  Chinet  Information
Technology Company  ("Chinet"),  an internet service provider (ISP) with offices
in Beijing  and  Shanghai,  PRC.  Under the  agreement,  CBCom  China,  provides
technical support,  equipment,  software maintenance,  accounting and management
consulting  services and receives eighty percent (80%) of the revenue  collected
on behalf of the ISP. In addition, CBCom, Inc. has loaned funds to the President
of Chinet,  who is also an officer of CBCom,  Inc.  for the purpose of acquiring
companies  operating as Internet Service  Providers in China. As of December 31,
2001 CBCom has 75  employees,  of which six are located in the United States and
sixty-nine are located in China.

         In August,  1997,  CBCom  acquired  selected  assets of  Beijing  CBCom
Telecommunications  and Consulting Co., Ltd., a Chinese private company owned by
Gordon Gao,  currently  a  shareholder  and  director  of CBCom.  Beijing  CBCom
Telecommunications  and Consulting Co., Ltd. was developing a Chinese  character
special purpose pager designed to download stock quotations.

         In October,  1997 CBCom and Beijing  Great Wall Century  Communications
Technology  Company,  Ltd., an established paging company in China established a
Sino-U.S. equity joint venture company called GCC CBCom (Tianjin) Communications
Company,  Ltd. to build a nationwide  paging network.  The joint venture has not
commenced  business,  the  business  license  has  lapsed  and CBCom will in all
probability not reactivate GCC CBCom.

         On  January  31,  1999,  the  Company  entered  into  a  Memorandum  of
Understanding "Memorandum") with Shanghai Stock Exchange Communications Co. Ltd.
and Shanghai Xingtong Telecommunication Science and Technology Co. Ltd. ("SXTST)
to develop a financial data network in China through  setting up an equity joint
venture invested by these three parties. The main strategy is to make full usage
of the existing capacity of VSAT satellite communication infrastructure owned by
Shanghai Stock Exchange  throughout  China.  The total capital  required in that


                                        2

<PAGE>
joint  venture is  currently  estimated  to be  US$3,000,000.  The Company  will
contribute 70% of that amount;  SSEC, 20%; and SXTST, 10%. The joint venture has
not yet been established as of December 31, 2001.

         Using  strategic  partnerships  in China,  combined with  acquisitions,
CBCom hopes to become  both an  Internet  Service  Provider  (ISP) and  Internet
Content Provider (ICP), serving China's huge and exponentially growing market of
new and existing  Internet  users. If it is able to enter this market now, CBCom
may  enjoy an early  lead  into  China's  young and  rapidly  growing  market of
Internet users.

         From  August,  1997  to  the  end  of  2000,  CBCom  has  maintained  a
representative  office  in  Beijing.  In  January  2001  the  Company  formed  a
subsidiary  called  CBCom  China to provide  management  consulting  services to
companies  in  China,  to  acquire   Chinese   companies  in  the  Internet  and
Telecommunications  businesses and for the purpose of oversight of the Company's
China projects.  From January,  1998 to March,  1999 CBCom had a  representative
office in Shanghai for the purpose of developing its business  relationship with
Shanghai Stock Exchange Communications Co. Ltd.

         On September 24, 1999 CBCom entered into a merger agreement with Abbacy
Corporation,  a public  reporting  company,  to  acquire  100% of its  equity in
exchange for 250,000  shares of common stock of CBCom.  On October 8, 1999,  the
Board of Directors and the majority shareholders of the constituent corporations
approved the merger. The merger was effected on October 18, 1999 with the filing
of the Certificate of Merger with the State of Delaware.

Internet Market

     From its  beginning of only 1700 users in 1993 (1), the Internet  market in
China has seen unprecedented growth. China's Internet population tripled in 1998
(2),  and  quadrupled  from 2.1 million in January of 1999 (3), to its  reported
level of 8.9 million in January of 2000 (4) to approximately 20 million in
December,  2000 and almost 30 million in December,  2001.  The growth rates will
drop,  but this trend is  expected to  continue.  China's  Internet  industry is
nonetheless  still in its infancy  and a majority  of China's  ISPs and ICPs are
struggling,  and in need of outside help to grow or even just to remain solvent.
This  presents a window of  opportunity  to capitalize on one of the largest and
fastest growing markets in the world. CBCom can combine its understanding of the
special needs and culture of China along with knowledge and lessons learned from
the successful American ISP and ICP markets.

         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 generate a profit.

                                        3

<PAGE>
         CBCom plans an  aggressive  campaign to search for a 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 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. 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.
<TABLE>
<S><C>
--------
1 "Asia-Pacific Internet & Interactive  Services",  The Strategis Group, January 1997
2 "China's  Internet  Population  Tripled in 1998", The Industry  Standard, January 1999
3  "Semi-annual  Report on the Internet",  China  Internet  Network Information Center,  July 1999
4 Kathlene Ohlson,  "China Internet Market on the Rise", The Industry Standard, September 1998
</TABLE>
































                                        4

<PAGE>
Acquisitions and Consolidation

         In order to quickly  reach a profitable  number of  subscribers,  CBCom
hopes  to try 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 relatively  fixed. The single
most important  component of profitability  is a high number of subscribers.  By
acquiring existing ISP businesses,  CBCom may immediately benefit from achieving
economies of scale.

         All  existing  ISP  companies,  regardless  of size,  require a minimum
infrastructure  to provide  customer access to the Internet.  The single smaller
ISPs lack sufficient  equipment to provide service beyond their local area. With
each  acquisition,  CBCom  will  acquire  local  telephone  numbers  and  lines,
computers  and  connectivity  equipment  that is  already  operating  throughout
different cities in China.

Memorandum of Understanding

         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 by
December 31, 2002, and thereafter obtain the required approvals from the Chinese
government  or  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


                                        5


<PAGE>
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. will be cancelled.

Shanghai Stock Exchange Communication Co., Ltd.

SSECC is in  charge of the  satellite  system  utilized  by the  Shanghai  Stock
Exchange to distribute real time data to its members. Shanghai Stock Exchange is
a  leading  stock  exchange  in  China  with  560  member  brokerage   companies
aggregating  2,700  brokerage  offices,  20,000  stockbrokers  and 33 non-member
regional security exchange centers throughout China.

Shanghai Xingtong Telecommunications Science & Technology Co.

         Shanghai  Xingtong  Telecommunications  is a  subsidiary  of the  China
Broadcast  Satellite   Communication  company  and  can  utilize  its  satellite
resources and operating license to provide specialized  satellite  communication
services.  Shanghai Xingtong  Telecommunications provides assistance to numerous
Chinese and other foreign companies in building telecommunications networks.

Satellite Network

         The  satellite  network  is used  to  transmit  daily  stock  data  and
information  to selected  brokerage  firms and  consists  of three  transponders
(relays)  with  satellite  Asia-1 which are  exclusively  leased by the Shanghai
Stock  Exchange  for use by it 24 hours per day.  The  Shanghai  Stock  Exchange
utilizes the satellite network  approximately 4 to 5 hours per day during market
hours to broadcast  real-time financial  information.  Even during this high use
period,  the  transponders  are  utilizing  only a fraction  of their 26 megabit
bandwidth  capacity.  CBCom estimates that  approximately only 20% to 30% of the
satellite network system capability is utilized with additional usage limited to
possible  transactional  growth.  CBCom  anticipates  that  it  will  be able to
broadcast on the unused  network  during off hours and on the unused  bandwidths
during high usage times.

Competition

         Presently,  there  are  four  Chinese  government-affiliated   Internet
service  providers that control direct access to the World Wide Web in China and
approximately  100 small  independent  Internet  Service  Providers that are not
linked  directly to the World Wide Web.  There are several  major ISPs which may
pose direct competition to the anticipated business of the joint venture.


ITEM 2. DESCRIPTION OF PROPERTIES.

         In  January,  2000 the Company  entered  into a 4-year  lease  expiring
December 31, 2003 for  approximately  2,169 square feet of office space at 16830
Ventura Boulevard, Suite 211, Encino, California at a monthly rental of $4,771.

         CBCom has entered into a 5-year lease for its China  headquarters  that
expires  February 28, 2003 for  approximately  6,000 square feet at A No. 9 Dong
Tucheng Road, Heping Street,  Chao Yang District,  Beijing,  China, at a monthly


                                        6
<PAGE>
rental of $5,208 per month  payable in the form of shares of CBCom common stock.
The  aggregate  rental  ($312,500)  has been  prepaid by the issuance of 625,000
shares of CBCom common stock to Far East Trading Company,  beneficially owned by
shareholders of CBCom.

         CBCom China is in the  process of  negotiating  a lease for  additional
space in the same building in Beijing.


ITEM 3. LEGAL PROCEEDINGS

         CBCom  entered into a settlement  agreement  with Bernard  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  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.  Mr.  Luskin
waived any rights to satisfy any claims against CBCom from any assets other than
those shares held in the escrow  account.  CBCom was  obligated to repay Polmont
the  amount  it 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 recognized prepaid interest of $220,000 and the corresponding  amount in
additional paid-in capital and amortized the prepaid interest over the period of
three years(now fully written off).

            As of September 30, 2000 the Company reached a final settlement with
the former CEO wherein he would accept an additional  190,000 shares held in the
escrow as full and final settlement of all claims.  The estimated value of those
shares was  $629,375.  As part of the  agreement  any interest in the  Company's
stock or options  would be  transferred  back to the  Company.  The  Company has
recognized the loan payable to Polmont,  the entire settlement has been paid and
the matter is finalized.

         On August 30, 1999,  a law suit 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  1, 2000,  Com Vu  Corporation,  in a letter  from its
counsel,  had  accepted  CBCom's  proposal  to resolve the  complaint  and cross


                                        7

<PAGE>
complaint in this matter by each side  releasing  the other and  dismissing  the
lawsuit.  Pursuant to this  agreement,  no payments will be made by or to either
side. This settlement has been memorialized in a formal settlement agreement.

         On June  11,  2001  CBCom,  Inc.  filed  a  lawsuit  against  a firm of
attorneys practicing in Los Angeles for professional  negligence relating to the
negotiation  and  preparation  of an employment  agreement for the former CEO of
CBCom,  Inc. On October 29, 2001 the firm of attorneys  settled the lawsuit with
the Company.

         In March 2002 a lawsuit was filed  against the Company by EMC  Holdings
based on an  alleged  breach of  contract  for  ill-defined  investor  relations
services and seeks damages of 210,000  shares of CBCom,  Inc. stock payable over
various periods. An independent contractor apparently engaged EMC Holdings while
purporting  to act on behalf of the  company.  CBCom,  Inc. was not aware of the
engagement  and EMC  Holdings  knew that the  contractor  was not an  officer or
director of the Company.  No services were  performed and the  contractor had no
actual or apparent authority to bind the Company.  The Company believes there is
no liability and intends to vigorously defend the case.


ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

         There were no matters  submitted to a vote of security  holders  during
the fourth quarter of 2001.


                               PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

          The  following  table  presents the high and low prices for the Common
Stock for 2001. The Company's Common Stock,  $.001 par value,  commenced trading
on May 21, 2001 and is quoted on the OTC  Bulletin  Board,  which is operated by
the NASDAQ Stock Market.


                      Quarter               High                     Low

2001                  First                 $0.0                     $0.00

                      Second                $2.50                    $1.75

                      Third                 $2.75                    $1.75

                      Fourth                $2.75                    $1.01


         The number of  shareholders  of record of the Common  Stock as of March
29,  2002 was 99. On March 29,  2002,  the  average of the closing bid and asked
prices on the OTC  Bulletin  Board was $0.79.  The Company has not  declared any
cash  dividends  during or since its two most recent fiscal  years.  The current
policy of the  Company's  Board of Directors is to retain  earnings,  if any, to
finance the operation of the Company's  business.  The payment of cash dividends


                                        8

<PAGE>
on the  Common  Stock in the  future  will  depend  on the  Company's  earnings,
financial  condition and capital needs and on other factors deemed  pertinent by
the Company's Board of Directors.

Recent Sales of Unregistered Securities

1997
         During  1997,  the  Company  sold  securities  that  were  exempt  from
registration under the Securities Act. These transactions are described below.

On April 23, 1997, the Company issued  2,000,000 shares of common stock at $0.20
per share to one of the founding shareholders for total proceeds of $400,000.

On April 23, 1997, the Company issued  937,5000  shares of common stock at $0.20
per  share to Mr.  Gordon  Gao in  exchange  for his  company's,  Beijing  CBCom
Telecommunications  and Consulting Co. Ltd.,  assets of $187,500  (mainly office
equipment, furniture and fixtures) located in Beijing, China.

         On December 31, 1997, the Company issued 200,000 shares of common stock
at $0.50 per share to Robert and Gilda Marx Family  Trust for total  proceeds of
$100,000.  Both  Robert  and  Gilda  Marx,  the  beneficiaries  of the trust are
personal friends of the former CEO and director of the Company,  Bernard Luskin.
The Marx's are sophisticated  and accredited  investors and they had full access
to  all  relevant   information  relating  to  the  Company  and  its  business.
Accordingly, this issuance was deemed to be exempt from registration pursuant to
Section 4(2) of the  Securities  Act and the shares are deemed to be  restricted
securities.

1998

         During  1998,  the  Company  sold  securities  that  were  exempt  from
registration under the Securities Act. These transactions are described below.

         On January 1, 1998, the Company issued 500,000, 250,000, and 125,000 (a
total of 875,000)  shares of common stock to its CEO,  CFO, and chief  engineer,
respectively,  at $.001 per share as a bonus for their  services from April 1997
to December  31,  1997.  The Company  received  proceeds of $875 and  recognized
compensation  cost of  $436,625,  based on a fair value of $.50 per  share.  The
transaction  was private in nature and the shares were issued to  affiliates  of
the Company who were  capable of  evaluating  the merits and risks of the shares
and had full access to all relevant  information relating to the Company and its
business.  Accordingly,  this issuance was deemed to be exempt from registration
pursuant to Section 4(2) of the  Securities  Act and the shares are deemed to be
restricted securities.

         On March 1, 1998,  the Company issued 625,000 shares of common stock at
$0.50 per share in exchange  for the future  rent in its Beijing  representative
office for the next five years. The prepaid rental of $312,500 will be amortized
over the next five  years.  The shares  were  issued to two  investors  residing
outside the United States and bear a legend regarding the restrictions on resale
in the United  States.  The  issuance of these  shares  were deemed  exempt from
registration pursuant to Regulation S of the Securities Act.

         On April 24, 1998, the Company issued  8,000,000 shares of common stock
at $0.20 per share to convert a loan from Mr. Sun, the President of the Company,


                                        9
<PAGE>
of $1,600,000.  This  conversion  price was specified on August 31, 1997 between
the original  founders  and the  Company.  The loan was made to the Company from
time to time on an as-needed  basis from June 15, 1997 to April 24, 1998 and was
not converted  into common stock until the loan totaled  $1,600,000.  From early
October to early December 1998, Mr. Sun converted an additional  $160,000 of his
loans into 320,000  shares of common stock at $0.50 per share in four  tranches.
The  issuance  of stock upon  conversion  of debt was  private in nature and the
shares were issued to an affiliate of the Company who was capable of  evaluating
the  merits  and  risks  of the  shares  and had  full  access  to all  relevant
information  relating  to the  Company  and  its  business.  Accordingly,  these
issuances were deemed to be exempt from registration pursuant to Section 4(2) of
the Securities Act and the shares issued are deemed to be restricted  securities
and  bear  a  legend  regarding  resale   restrictions.   Mr.  Sun  subsequently
transferred  6,962,500 of these shares to eleven individuals or entities who are
all  close  personal  friends  and/or  relatives  of Mr.  Sun and  sophisticated
investors.  All of the investors had the  opportunity to question Mr. Sun on the
business  and  financial  aspects of the  Company.  The  investors  also had the
opportunity to review any of the books and records of the Company.  Mr. Sun held
the securities approximately 8 months before conversion and transfer. All of the
certificates  issued to the investors have been affixed with legends restricting
transfers and sales.  Ten of the eleven  investors reside in and are citizens of
foreign  countries.  The resale of these  restricted  shares by Mr. Sun was made
pursuant to a claimed  Section "4 1/2"  exemption  in which a  non-issuer  sells
securities in a private transaction and, as to the ten foreign investors, also a
claimed Regulation S exemption.

         On December 31, 1998, the Company issued 400,000,  400,000, and 320,000
(a total of  1,120,000)  shares  of  common  stock at $0.50  per  share to three
directors, Max Sun, Frank Zhu and Gordon Gao, respectively,  as their employment
compensation of $200,000,  $200,000, and $160,000,  respectively for four months
in 1997  (recognized  in 1997)  and the year of 1998 in  accordance  with  their
respective employment agreements.  The transaction was private in nature and the
shares were issued to  affiliates  of the Company who were capable of evaluating
the  merits  and  risks  of the  shares  and had  full  access  to all  relevant
information relating to the Company and its business. Accordingly, this issuance
was  deemed to be exempt  from  registration  pursuant  to  Section  4(2) of the
Securities Act and the shares are deemed to be restricted securities.

         On December 31, 1998,  the Company  issued  1,250,000  shares of common
stock at  $0.001  per  share in  exchange  for the  promotion  and  facilitation
services provided by Sinoway Limited (Sinoway)  registered in the British Virgin
Islands,  with a corporate office in Hong Kong.  Sinoway is an affiliate company
of Shanghai Stock Exchange  Communication Co. Ltd. ("SSE").  Sinoway promised to
obtain  exclusive  licenses to use VSAT  satellite  systems owned by SSE and the
logo and name of SSE. Sinoway agreed to pay $0.001 per share for these 1,250,000
shares of common stock.  Accordingly,  the Company  recognized a notional  stock
subscription  of $1,250 and a  promotion  expense  for the  License/Contract  of
$623,750. If these licenses were obtained,  the cost would be amortized over the
life of  joint  venture  with  SSE  and  SXTST(?).  However,  these  shares  are
forfeitable  depending  on the  success of setting up the equity  joint  venture
among the Company,  SSE, and SXTST and obtaining the exclusive licenses.  If the
joint  venture  has  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 stock will be


                                       10

<PAGE>
canceled.  As of November 30, 2000, the license has not yet been  obtained.  The
shares were issued to one investor residing outside the United States and bear a
legend regarding the  restrictions for those residing in the United States.  The
issuance  of these  shares  were deemed  exempt  from  registration  pursuant to
Regulation S of the Securities Act.

1999

         During  1999,  the  Company  sold  securities  that  were  exempt  from
registration under the Securities Act. These transactions are described below.

         On February 1, 1999, the Company conducted a private placement to issue
600,000  warrants  at $0.25 per warrant in four  tranches to Cuong Hai Tran,  an
existing shareholder,  and received total proceeds of $135,000, net of a finders
fee of $15,000.  Each warrant  carries an exercise  price of $0.25 per share and
allows each holder of warrants to exercise at any time on or before  January 31,
2004.  Accordingly,  the Company reserved 600,000 shares of common stock for the
exercise of these warrants. The transaction was private in nature and the shares
were issued to an accredited individual who was capable of evaluating the merits
and risks of the shares and had full access to all relevant information relating
to the Company and its  business.  Accordingly,  this  issuance was deemed to be
exempt from registration  pursuant to Section 4(2) of the Securities Act and the
shares are deemed to be restricted securities.

         On May 10,  1999,  the Company  conducted a private  placement to issue
100,000  shares of common  stock at $0.50 per share to Theresa  Li and  received
total  proceeds of $45,000,  net of a finders fee of $5,000.  This  offering was
private in nature and the shares were sold to one sophisticated  investor who is
a personal friend of Mr. Sun and who the Company reasonably believes was capable
of evaluating  the merits and risks of an investment in the Company and had full
access to all relevant  information relating to the Company and its business and
the opportunity to ask Mr. Sun questions relating to the business.  Accordingly,
this offering was deemed to be exempt from registration pursuant to Section 4(2)
of the  Securities  Act  and the  shares  issued  are  deemed  to be  restricted
securities and bear a legend to that effect.

         From May 14, to June 4, 1999, the Company conducted a private placement
to issue 45,000  shares of common stock at $1.00 per share in three  tranches to
Mr. Nipa Konnerat and Universal  Trader,  Inc.,  and received  total proceeds of
$40,500,  net of a  finders  fee of  $4,500.  Suzanna  Gopez is the  controlling
shareholder  of Universal  Trader,  Inc. This offering was private in nature and
the shares were sold to two sophisticated  investors who the Company  reasonably
believes were capable of evaluating the merits and risks of an investment in the
Company and had full access to all relevant  information relating to the Company
and its  business.  Accordingly,  this  offering  was  deemed to be exempt  from
registration  pursuant  to  Section  4(2) of the  Securities  Act and the shares
issued are deemed to be restricted securities and bear a legend to that effect.

         On June 22, 1999,  the Company  issued 40,000 shares of common stock at
$0.50 per share to Theresa Li, an  existing  shareholder.  The Company  received
total  proceeds of $18,000,  net of a finders fee of $2,000.  This  offering was
private in nature and the shares were sold to one existing  shareholder who is a
sophisticated  investor and who the Company  reasonably  believes was capable of
evaluating  the merits and risks of an  investment  in the  Company and had full
access to all  relevant  information  relating to the Company and its  business.

                                       11

<PAGE>
Accordingly, this offering was deemed to be exempt from registration pursuant to
Section  4(2) of the  Securities  Act and the  shares  issued  are  deemed to be
restricted securities and bear a legend to that effect.

         On August 31, 1999, the Company  conducted a private placement to issue
23,000  shares of common stock at $1.00 per share in three  tranches to Vicky Dy
and Ming and Phet Houn, two accredited  individual  investors and received total
proceeds of $20,700,  net of a finders fee of $2,300.  This offering was private
in nature and the shares were sold to two  accredited  investors who the Company
reasonably  believes  were  capable  of  evaluating  the  merits and risks of an
investment  in the Company.  Accordingly,  this offering was deemed to be exempt
from registration  pursuant to Section 4(2) of the Securities Act and the shares
issued are deemed to be restricted securities and bear a legend to that effect.

         On August 25, 1999, the Company issued 30,000 shares of common stock at
$0.50  per share to an  Theresa  Li,  existing  shareholder.  Consequently,  the
Company received total proceeds of $13,500,  net of a finders fee of $1,500. The
transaction  was private in nature and the shares were issued to a sophisticated
investor  who the Company  reasonably  believes  was capable of  evaluating  the
merits  and  risks  of the  investment  and  had  full  access  to all  relevant
information relating to the Company and its business. Accordingly, this issuance
was  deemed to be exempt  from  registration  pursuant  to  Section  4(2) of the
Securities Act and the shares are deemed to be restricted securities.

         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 accredited  shareholders through Appletree Investment Company Limited, an
off-shore  investment  company in order to satisfy  its goal to be listed on the
NASDAQ OTC  Bulletin  Board.  On December 22, 1999,  the Company  completed  the
offering,  issued  50,000  shares  of  common  stock,  and  recognized  a merger
transaction expense of $49,950. The $50 cash was received subsequent to December
31, 1999. The shares are deemed to be restricted securities and bear a legend to
that effect. On November 30, 2000, this transaction was cancelled and the $50.00
was returned to Appletree and the 50,000 shares were cancelled.

         On September  15, 1999,  the Company  conducted a private  placement to
issue 20,000  shares of common stock at $1.00 per share to Nhon Vuong and Jackie
Khanthaphixay. Consequently, the Company received total proceeds of $18,000, net
of a finders fee of $2,000.  This  offering was private in nature and the shares
were sold to two  sophisticated  investors who the Company  reasonably  believes
were capable of evaluating  the merits and risks of an investment in the Company
and had full access to all relevant  information relating to the Company and its
business.  Accordingly,  this offering was deemed to be exempt from registration
pursuant to Section 4(2) of the  Securities Act and the shares issued are deemed
to be restricted securities and bear a legend to that effect.

         On September  24, 1999,  the Company sold 30,000 shares of common stock
at $0.50 per share to Theresa Li, an existing shareholder.  The Company received
total  proceeds of $13,500,  net of a finders fee of $1,500.  This  offering was
private  in  nature  and  the  shares  were  sold to an  existing  sophisticated
shareholder  who the Company  reasonably  believes was capable of evaluating the
merits and risks of an  investment  in the  Company  and had full  access to all
relevant information relating to the Company and its business. Accordingly, this
offering was deemed to be exempt from  registration  pursuant to Section 4(2) of
the Securities Act and the shares issued are deemed to be restricted  securities
and bear a legend to that effect.

                                       12
<PAGE>
         On September 24, 1999, the Company entered into a merger agreement with
Abbacy  Corporation (a public shell company),  to acquire 100% of its equity. On
October 8, 1999,  the Board of Directors  and the majority  shareholders  of the
constituent  corporations  approved the merger.  In  accordance  with the merger
agreement,  Abbacy filed a Form 8-K with the SEC on October 19, 1999 to indicate
that CBCom,  Inc.  would be the successor of the reporting  entity in accordance
with Rule 12 (g)(3) of the  Securities  Exchange  Act. On December  22, 1999 the
Company  issued  250,000 shares of common stock valued at $1.00 per share to the
sole  shareholder  of  Abbacy  in  exchange  for  100% of its  equity  interest.
Accordingly,  the Company recognized $250,000 of merger expense. The transaction
was private in nature and the shares were  issued in a  negotiated,  arms-length
transaction.  Through its due diligence,  Abbacy  Corporation had full access to
all relevant information relating to the Company and its business.  Accordingly,
this issuance was deemed to be exempt from registration pursuant to Section 4(2)
of the  Securities  Act  and the  shares  issued  are  deemed  to be  restricted
securities.

         On November 1, 1999,  the  Company's  principal  shareholder,  Mr. Sun,
converted  $70,000 of  shareholder  loan into 140,000  shares of common stock at
$0.50 per share.  The issuance of stock upon  conversion  of debt was private in
nature and the shares were issued to an affiliate of the Company who was capable
of  evaluating  the merits  and risks of the  shares and had full  access to all
relevant information relating to the Company and its business. Accordingly, this
issuance was deemed to be exempt from  registration  pursuant to Section 4(2) of
the Securities Act and the shares issued are deemed to be restricted  securities
and bear a legend regarding resale restrictions.

         On  December  30,  1999,  the  Company's   principal   shareholder  and
President, Mr. Sun, converted $578,370 of shareholder loan into 1,156,740 shares
of common stock at $0.50 per share. He subsequently sold the shares to Tan Siong
Bee, who is the beneficial holder for TSB International  Inc. Ms. Tan is an aunt
of Mr. Sun and an  accredited  individual.  Mr.  Sun  disclaims  any  beneficial
ownership in these  shares.  The issuance of stock upon  conversion  of debt was
private in nature and the shares were issued to the President of the Company who
was capable of evaluating the merits and risks of the shares and had full access
to  all  relevant   information  relating  to  the  Company  and  its  business.
Accordingly, these issuances were deemed to be exempt from registration pursuant
to Section  4(2) of the  Securities  Act and the shares  issued are deemed to be
restricted  securities  and bear a legend  regarding  resale  restrictions.  The
resale  of these  restricted  shares by the  President  was made  pursuant  to a
claimed  Section  "4  1/2"  exemption  in  which  a  person  (non-issuer)  sells
securities  in a private  transaction  and since  she is a foreign  investor,  a
claimed  Regulation S exemption.  The securities  were held by the President for
eighteen  months prior to conversion and sale to Ms. Bee. The shares received by
TSB  International  are  deemed  to  be  restricted  securities  and  the  stock
certificate bears a legend to that effect.

2000

         During  2000,  the  Company  sold  securities  that  were  exempt  from
registration under the Securities Act. These transactions are described below.

         In  April  and June  2000,  Mr.  Max Sun  converted  loans  aggregating
$270,400  into  468,500  shares of common  stock.  The  issuance  of stock  upon
conversion  of debt was  private  in nature  and the  shares  were  issued to an


                                       13
<PAGE>
affiliate of the Company who was capable of  evaluating  the merits and risks of
the shares  and had full  access to all  relevant  information  relating  to the
Company and its business.  Accordingly, these issuances were deemed to be exempt
from registration  pursuant to Section 4(2) of the Securities Act and the shares
issued are deemed to be restricted securities and bear a legend regarding resale
restrictions.

         In April and June 2000,  Mr. Steve  Meadows,  Chief  Engineer of CBCom,
Inc.  was issued an  aggregate  of 317,000  shares of common  stock for services
rendered since 1999. The Company has  recognized  compensation  cost of $226,500
and deemed payroll expense of $90,500. The transaction was private in nature and
the  shares  were  issued to an  affiliate  of the  Company  who was  capable of
evaluating  the  merits  and  risks of the  shares  and had full  access  to all
relevant information relating to the Company and its business. Accordingly, this
issuance was deemed to be exempt from  registration  pursuant to Section 4(2) of
the Securities Act and the shares are deemed to be restricted securities.

         On December 30, 2000 Polmont Investments, Ltd. converted loans totaling
$1,142,446 into 2,284,892 shares of common  stock  in accordance with the letter
of  agreement  between  Polmont Investments Ltd. and the Company dated March 27,
1999.

2001

         During  2001,  the  Company  sold  securities  that  were  exempt  from
registration under the Securities Act. These transactions are described below.

         On February 13, 2001, the Company's principal shareholder, Mr. Max Sun,
converted shareholder loan of $150,000 into 150,0000 shares of common stock. The
issuance of stock upon  conversion  of debt was private in nature and the shares
were issued to an  affiliate  of the Company who was capable of  evaluating  the
merits and risks of the shares and had full access to all  relevant  information
relating to the Company and its  business.  Accordingly,  these  issuances  were
deemed to be exempt from registration pursuant to Section 4(2) of the Securities
Act and the  shares  issued are deemed to be  restricted  securities  and bear a
legend regarding resale restrictions.

         On March 6, 2001,  the Board of Directors of the Company authorized the
issuance of 100,000  shares of common stock at $1.00 per share to raise $100,000
for business  development  purposes.  The cash  proceeds of this  issuance  were
$90,000,  net of a finders fees of $10,000.  This offering was private in nature
and the shares  were sold to two  existing  sophisticated  shareholders  and two
other accredited  investors who the Company  reasonably  believes was capable of
evaluating  the merits and risks of an  investment  in the  Company and had full
access to all  relevant  information  relating to the Company and its  business.
Accordingly, this offering was deemed to be exempt from registration pursuant to
Section  4(2) of the  Securities  Act and the  shares  issued  are  deemed to be
restricted securities and bear a legend to that effect.

         On May 15, 2001, one  officer  forgave  his  $275,000  of  compensation
receivable  from the  Company.  As an  incentive  to this  officer,  the Company
granted him 550,000 options to purchase  550,000 shares of common stock at $1.00
per share. The options were immediately  vested and will expire in 10 years. The
Company did not recognize any stock compensation in accordance with APB No. 25.


                                       14
<PAGE>
         In  May  2001,  the  Company's  principal  shareholder,  Mr.  Max  Sun,
converted  shareholder loans aggregating  $258,300 into 258,300 shares of common
stock.  The issuance of stock upon  conversion of debt was private in nature and
the  shares  were  issued to an  affiliate  of the  Company  who was  capable of
evaluating  the  merits  and  risks of the  shares  and had full  access  to all
relevant  information  relating to the Company  and its  business.  Accordingly,
these issuances were deemed to be exempt from  registration  pursuant to Section
4(2) of the  Securities  Act and the shares  issued are deemed to be  restricted
securities and bear a legend regarding resale restrictions.

         On May 25, 2001 the Company  issued  275,000 shares of its common stock
at $1.00 per share to an outside investor and received proceeds of 247,500,  net
of a finders fee of $27,500.  This offering was private in nature and the shares
were sold to two existing sophisticated  shareholders who the Company reasonably
believes were capable of evaluating the merits and risks of an investment in the
Company and had full access to all relevant  information relating to the Company
and its  business.  Accordingly,  this  offering  was  deemed to be exempt  from
registration  pursuant  to  Section  4(2) of the  Securities  Act and the shares
issued are deemed to be restricted securities and bear a legend to that effect.

         From July through September 2001, the Company's principal  shareholder,
Mr. Max Sun,  converted  shareholder  loans  aggregating  $696,000  into 696,000
shares of common  stock.  The  issuance  of stock  upon  conversion  of debt was
private in nature and the shares were issued to an  affiliate of the Company who
was capable of evaluating the merits and risks of the shares and had full access
to  all  relevant   information  relating  to  the  Company  and  its  business.
Accordingly, these issuances were deemed to be exempt from registration pursuant
to Section  4(2) of the  Securities  Act and the shares  issued are deemed to be
restricted securities and bear a legend regarding resale restrictions.

         On October 2, 2001 the Company  issued 12,350 shares of common stock at
$1.00 per share to pay two vendors, 7,350 shares to an individual, Mr. Zhi Wang,
for $7,350 rent owed on an apartment in Beijing  used by CBCom,  Inc.  employees
and 5,000 to an  individual,  Mr. Edward  Pendyk,  who provided  $5,000 worth of
engineering consulting services.

         On December 3, 2001, the Company's principal shareholder,  Mr. Max Sun,
converted shareholder loan of $150,000 into 150,0000 shares of common stock. The
issuance of stock upon  conversion  of debt was private in nature and the shares
were issued to an  affiliate  of the Company who was capable of  evaluating  the
merits and risks of the shares and had full access to all  relevant  information
relating to the Company and its  business.  Accordingly,  these  issuances  were
deemed to be exempt from registration pursuant to Section 4(2) of the Securities
Act and the  shares  issued are deemed to be  restricted  securities  and bear a
legend regarding resale restrictions.








                                       15


<PAGE>
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS.

      The  following  selected  financial  data is as of and for the years ended
December 31, 2001 and 2000.
                                                    ----------------------------
                                                    December 31,   December 31,
                                                           2001           2000
                                                    ------------   ------------
Statements of Operations Data:             (in thousands, except per share data)
Consulting Revenue  ..............                  $        269   $          -
                                                    ------------   ------------
Gross margin .....................                           269              -
Operating expenses:
  General and administrative .....                         1,684          1,823

  Merger Expense..................
                                                    ------------   ------------
    Total operating expenses .....                         1,684          1,823
                                                    ------------   ------------
(Loss) from operations ...                                (1,415)        (1,823)
Interest expense, net ............                         1,633          1,218
Other (income) expense, net ......                          (237)
                                                    ------------   ------------
(Loss) before income taxes     ..                         (2,811)        (3,041)
Provision (benefit) for income taxes                           1              1
                                                    ------------   ------------
Net (Loss)        ................                       $(2,812)       $(3,042)
                                                    ============   ============
Net (Loss) per common share  :
  Basic ..........................                       $ (0.13)       $ (0.17)
                                                    ============   ============
  Diluted ........................                       $ (0.13)       $ (0.17)
                                                    ============   ============
Common shares used in computing per share amounts:
  Basic ..........................                    21,349,951     17,604,656
                                                    ============   ============
  Diluted ........................                    21,349,951     17,604,656
                                                    ============   ============

                                                     December 31,  December 31,
                                                            2001          2000
                                                    ------------   ------------
Balance Sheet Data:                                (in thousands)
Cash and cash equivalents ........                  $          6   $          9
Total assets .....................                         1,639            209
Total liabilities ................                         2,331          1,558
Total stockholders' deficit .......                         (692)        (1,350)









                                       16

<PAGE>
Overview

         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
content providers (ICP) and operate through a series of sino-foreign joint
venture companies. The Company has been in the development stage since inception
and in 2001 the  Company's  wholly  owned  subsidiary  CBCom  China  started  to
generate  consulting  income and the Company  ceased to be a  development  stage
enterprise.
         The  Company,  through its  subsidiary  in Beijing,  has entered into a
Management Services Agreement with Beijing Chinet Information Technology Company
("Chinet"),  an  internet  service  provider  (ISP) with  offices in Beijing and
Shanghai,  PRC. Under the agreement,  CBCom China,  provides  technical support,
equipment,  software maintenance,  accounting and management consulting services
and receives eighty percent (80%) of the revenue collected on behalf of the ISP.
In addition,  CBCom,  Inc. has loaned funds to the  President of Chinet,  who is
also an officer of CBCom, Inc. for the purpose of acquiring  companies operating
as Internet Service Providers in China.
          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, 1999, 2000 and 2001.


        The following table summarizes certain key financial information:
        -----------------------------------------------------------------
                                          Change
                               2001        from          2000
                             ($000s)     prior year    ($000s)
-------------------------- ------------ ------------ ----------
 Consulting Revenue          $   269                   $     -
-------------------------- ------------ ------------ ----------
 Gross Margin                $     -                   $     -
-------------------------- ------------ ------------ ----------
 General and
 Administrative              $ 1,684        (8%)       $ 1,823
 Expenses
-------------------------- ------------ ------------ ----------
 Merger Expenses             $                         $
-------------------------- ------------ ------------ ----------
Interest Expense, Net        $  1633        34%        $ 1,218
Other (Income), Net          $   237                   $

-------------------------- ------------- ----------- ----------
 Provision (Benefit) for
   Income Taxes              $     1                   $     1
---------------------------------------------------------------

Results of Operations

Fiscal Years Ended December 31, 2001 and December 31, 2000

                                       17

<PAGE>
         In 2001,  the  company's  subsidiary  in  China  received  $268,787  in
consulting services revenue. The Company, through its subsidiary in Beijing, has
entered into a Management  Services  Agreement with Beijing  Chinet  Information
Technology Company  ("Chinet"),  an internet service provider (ISP) with offices
in Beijing  and  Shanghai,  PRC.  Under the  agreement,  CBCom  China,  provides
technical support,  equipment,  software maintenance,  accounting and management
consulting  services and receives eighty percent (80%) of the revenue  collected
on behalf of the ISP. In addition, CBCom, Inc. has loaned funds to the President
of Chinet for the purpose of acquiring  companies  operating as Internet Service
Providers in China.

         General and  administrative  expenses  consist  principally of business
development  expenses in China, and salaries and other overhead  expenses in the
United States,  as well as legal and other  professional  services.  General and
administrative  expenses  decreased  by 8%  from  2000 to year  2001.  The  main
difference between 2000 and 2001 was a large one-time compensation settlement of
$629,375 to the ex-CEO in 2000.

         The  total   general   and   administrative   expenses   in  2001  were
$139,000 less than in 2000; however there was a $629,375 a one-time compensation
settlement  in the year 2000.  Without this  one-time expenses,  expenses were
higher in 2001  because the  remainder  of the  Company's start-up costs
 in China, some of which were from prior years, were written off in 2001
totaling  $131,500.  In addition,  CBCom China  incurred  $100,000 in additional
salary expenses in order to earn its consulting  income.  Lastly, the additional
costs  of being a  public  company(legal,  accounting  and  investor  relations)
occurred in 2001.

         The  largest   component  of  operating  expense  has  been  management
salaries;  some of the  management  compensation  has been paid by  issuance  of
options on common stock and much of the salaries remain  accrued,  not yet paid.
In May 2001, Gordon Gao the company's president in China converted $275,000 into
550,000 stock options at an option price of $1.00 per share.

         In addition  to  management  salaries,  the most  significant  overhead
expenses of the Company have been legal and accounting  expenses,  and the costs
of being a public company.  The company incurred  $300,000 in legal,  accounting
and public  relations  expenses in 2001 which was $134,000 more than in the year
2000.  Further,  the Company acquired a significant amount of computer equipment
in China in order to provide  technical  services to Chinet,  its ISP partner in
China  and  depreciation  expense  increased  to  $81,000  in the year 2001 from
$19,000 in the year 2000.  The company  recognized  other  income  amounting  to
$167,500 due to a legal settlement.

         Interest  expense for the year 2001  totaled  $1,633,221  which was all
non-cash  expenditure and net of interest income of $7,196. An amount of $64,591
consisted of waived  interest on  shareholder  loan and accrued  interest on the
convertible  debenture.  The  balance of the  interest  was deemed  interest  of
$1,575,825.   The deemed interest is calculated at the excess of market price at
commitment  date  over  stated  conversion  rate of $1.00 per  share.   Interest
expense for year 2000 totaled  $1,218,817;  however all of the interest  expense
was  non-cash  expenditure.  The  majority  of  interest  expense  was the total
amortization of the remaining prepaid interest of  $165,000 relating to the loan
from Polmont  Investments  Limited plus  $985,262 of deemed  interest  caused by


                                       18

<PAGE>
converting  loans  advanced  by Polmont  during 2000 at $0.50 per share when the
fair market  value of the common stock of the Company was deemed to be $1.00 per
share.  The entire loan was converted to common stock on December  30,2000.  The
balance of the  interest  expense  consists  of interest  waived on  shareholder
loans.

Critical Accounting Policy

         The Company's operations have been financed by loans from shareholders.
Since  April 24,  1998,  the  Company has had an  in-effect  a  promissory  note
agreement  (the Note)  with the  principal  shareholder  of the  Company,  which
specified that the principal  shareholder  will continue to provide funds to the
Company  on a going  forward  basis and that any  balance  of the loan  bears an
interest rate of 7% per annum.  According to the Note, the  shareholder  has the
option to convert his outstanding  loan balance into the Company's  common stock
at a stated  conversion  price at any time prior to its maturity  date. The Note
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.  The
original  Note was due on April  24,  2000,  which  specified  a $0.50 per share
conversion  price,  the fair market value at the time. The extended Note,  dated
April 24, 2000, is due on April 23, 2002,  which modified the conversion rate to
$1.00 per  share,  again the fair  market  value at the  time.  Under  this Note
agreement,  the principal  shareholder converted $270,400 of the loan to 468,500
shares of common stock in 2000, and $1,116,800 to 1,116,800 shares in 2001.

         The Company's Common Stock commenced trading on May 21, 2001 on the OTC
Bulletin  Board.  Due to the  convertible  feature,  the Company  recorded total
deemed  interest  of  $1,575,875  in the  year  2001  at loan  commitment  dates
according  to EITF 98.5.  The deemed  interest  is  calculated  at the excess of
market price at the commitment date over the stated conversion rate of $1.00 per
share.  The  Note is due  for  renewal  on  April  24,  2002  and the  principal
shareholder  continues to advance funds to the Company under the Note.  Further,
the share price on the OTC:BB has  fluctuated  and is currently  below $1.00 per
share.  The Company is  considering  the fairest way to convert the  outstanding
balance of the Note at April 23,  2002 and how to rewrite  an  extended  note at
April 24, 2002.  The Company is  considering  how to effect  future  conversions
considering  the  fluctuations  in the  market  price  of the  shares.

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,Inc. listed its common shares on the OTC Bulletin Board and plans to
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 will remain  dependent upon its major  shareholders  for funds and would
have to alter its acquisition strategy and timetable.




                                       19
<PAGE>
         The  Company,  through its  subsidiary  in Beijing,  has entered into a
Management Services Agreement with Beijing Chinet Information Technology Company
("Chinet"),  an  internet  service  provider  (ISP) with  offices in Beijing and
Shanghai,  PRC. Under the agreement,  CBCom China,  provides  technical support,
equipment,  software maintenance,  accounting and management consulting services
and receives eighty percent (80%) of the revenue collected on behalf of the ISP.
In addition,  CBCom,  Inc. has loaned funds to the  President of Chinet,  who is
also an officer of CBCom, Inc. for the purpose of acquiring  companies operating
as Internet  Service  Providers  in China.  There had been some  question  about
whether a foreign-owned company could own an Internet Service Provider in China;
however,  after China's  admission to the World Trade  Organization in November,
2001, that question has been clarified. Accordingly, CBCom,Inc. plans later this
year to purchase an equity stake in Chinet.

         To limit the use of valuable cash reserves,  CBCom and its partner will
try to negotiate its first  acquisitions  using cash and CBCom shares. The terms
of any acquisition must give operating control of the acquired business to CBCom
and its partner.  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.

         ECommerce 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 and its  partner  plan an 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
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 and
its  partner  plan 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.



                                       20
<PAGE>
         CBCom,  Inc.  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
StockExchange.  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, 2002 or 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.

Liquidity and Capital Resources

         The Company has suffered losses in 1997,  1998, 1999, 2000 and 2001 and
had negative working capital in 1997,  1998, 1999, 2000 and 2001,  respectively.
The Company was funded  initially  by two of its  founding  shareholders  in the
amounts of $400,000  and  $1,600,000,  respectively.  During  1999,  the Company
raised  money  through a series of private  placements  netting  $304,000  after
selling  commissions.  In addition,  one of the  Company's  directors  and major
shareholders has provided the Company with loan funds that were convertible into
Common  Stock at a price of $0.50 per share  until  April  24,2000 and $1.00 per
share thereafter. Funds loaned to the Company equaled $679,000 in 1998, $136,900
in 1999, $599,706 in 2000 and $1,726,174 in 2001.


                                       21

<PAGE>
         One of the  Company's  directors  and major  shareholders  continues 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
Financial  Statements have been prepared assuming that the Company will continue
as a going  concern.  The audit report  indicates that the Company has a limited
operating history,  has incurred substantial losses and at December 31, 2000 has
a shareholders'  deficit and that those conditions 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.

Secured Convertible Loan

The Company  entered into a loan  agreement  for the  principal of $150,000 with
Ashland  Partners,  a  Delaware  corporation,  on June  6,  2001.  Per the  loan
agreement,  the loan bears 6.67% interest per annum and the Company is obligated
to pay back  $100,000 of principal  and accrued  interest on June 6, 2002 unless
the $100,000 is converted into common stock at $2.00 per share on or before June
6, 2002. The remaining  $50,000 must be converted into common stock,  anytime 30
days  after June 6, 2001 but in no event  later than June 6, 2002,  at the price
per share equal to eighty percent (80%) of the average  Closing Bid Price of the
Common Stock, as quoted by Bloomberg L.P. for ten (10) trading days  immediately
preceding the conversion  date. The loan holder elected to convert the mandatory
fifty thousand  dollars  ($50,000)  portion of the convertible  loan on July 25,
2001 and  received  23,585  shares of the  Company's  common stock at a price of
$2.12  according  to the  terms of the  loan.  Due to the  mandatory  conversion
feature, the Company recognized a deemed interest of $4,894 based on the $50,000
portion that was converted.

The Company, at its sole discretion, may elect to pay interest in cash or in the
form of common  stock.  If the  accrued  interest  is paid in the form of common
stock,  the shares of common  stock will be  calculated  as  follows:  the total
unpaid accrued interest divided by the value of common stock, which shall be the
Closing Bid Price on: (i) the date the  interest  payment is due; or (ii) if the
interest payment is not made when due, the date the interest payment is made. In
accordance with the loan agreement, this loan and all payments hereon, including
principal and interest,  shall be subordinate  and junior in right of payment to
all accounts  payable of the Company incurred in the ordinary course of business
and/or bank debt of the Company  not to exceed $1 million.  The Company  granted
the lender a security right in all of its assets until repayment of this loan.

Related Party Loan

            The  President  of Beijing  Chinet  Information  Technology  Company
("Chinet"),  Mr.  Gordon  Gao owns 90% of the  equity in  Chinet  and is also an
officer,  director and 5.5%  shareholder  of CBCom,  Inc. On June 15, 2001,  the
Company entered into a loan agreement, initially for $500,000, with Mr. Gao, who
will use the proceeds to conduct merger and  acquisition  activities of Internet
Service  Provider (ISP) targets he has found in China.  The  promissory  note is


                                       22
<PAGE>
secured by an equity  interest in Chinet and Mr. Gao has  committed to repay the
principal and interest  either in cash or in the form of the equity  interest he
has acquired in China. The Company has made additional  advances on the loan and
the balance at December 31, 2001 is $1,053,086. The loan will mature on November
30, 2010 with interest at 8% per annum.


RISK FACTORS

CBCom is currently operating at a loss.

          CBCom has had limited revenue to date and has had significant  losses.
CBCom has been forced to borrow funds to maintain its operations. Its ability to
develop  operations  is dependent  upon its ability to develop a profitable  ISP
business  or to  develop  the  proposed  China  Financial  Network.  Due  to the
Company's poor financial condition,  the Company's  independent certified public
accountants  modified their report on the Company's  December 31, 2001 financial
statements to include an explanatory paragraph in which they express substantial
doubt about the Company's ability to continue as a going concern.

CBCom commenced operations in 1997 and has a limited operating history.

         CBCom  commenced  operations in 1997 and has only a limited  history of
operations which to date have not been profitable. Its operations are subject to
the risks and  competition  inherent in the  establishment  of a relatively  new
business  enterprise.  There can be no assurance that future  operations will be
profitable.  Revenues and  profits,  if any,  will depend upon various  factors,
including market acceptance of its concepts,  market awareness,  reliability and
acceptance of the  Internet,  dependability  of its  distribution  network,  and
general economic  conditions.  There is no assurance that CBCom will achieve its
expansion  goals and the  failure  to achieve  such goals  would have an adverse
impact on it.

Need for additional capital.

         CBCom needs additional capital in order to implement its business plan,
to continue its operations and pay outstanding  liabilities.  CBCom  anticipates
that it will seek to raise additional  capital through the sale of its equity or
debt  securities or through  borrowings from  commercial  lending  institutions.
CBCom has no commitments  from any financial  sources for such funding and there
is no  assurance  that  CBCom  will be able to  locate  any  such  funding.  The
inability of CBCom to raise additional  capital could result in its inability of
continue its operations.

Prior joint venture did not succeed.

         CBCom entered into an earlier joint venture for the  development of its
paging  network.  CBCom was unable to provide the  capital  required to fund the
joint venture and the term of the joint  venture  expired  without  development.
There is no assurance  that CBCom will be able to provide the funding  necessary
in the  proposed  joint  venture  with  SSECC.  If it is unable to provide  such
capital,  the proposed  business  plan of the joint venture would not be able to
continue.



                                       23
<PAGE>
Enforceability of certain civil liabilities.

         Certain of CBCom's  officers and  directors  reside  outside the United
States.  Many of the assets of these persons are, and CBCom  anticipates  that a
substantial  portion of the assets that may  developed or acquired by it will be
located  outside the United  States.  As a result,  it may not be  possible  for
investors  to effect  service of process  within  the  United  States  upon such
persons, or to enforce against CBCom's assets or against such personal judgments
obtained in United States courts predicated upon the liability  provisions,  and
most  particularly  the  civil  liability  provisions,   of  the  United  States
securities laws or state corporation or other law.

Investment in Far East generally.

         The Company  anticipates  that it will initially  focus its development
efforts on telecommunication projects and opportunities located in China and the
Far East.  Because of government  controls and lack of  established  information
systems,  information  regarding  projects in which the Company may  participate
located in China and the Far East will be difficult for United States  investors
to obtain and investors will be unable to track the progress of the Company.  In
addition,  if the Company begins  operations in China or the Far East it will be
subject to the risks  incident to the  ownership  and  operation  of  businesses
therein.  These risks include,  among others, the risks of internal political or
civil  unrest,  war,  or  government  restrictions.  These risks are dynamic and
difficult  to  quantify.  The  Company  will be  subject  to the risks  normally
associated with changes in general national economic  conditions or local market
conditions,  competition,  patronage,  changes in market rates,  and the need to
periodically upgrade and replace equipment to maintain desirability,  and to pay
the costs thereof.  Although many of the governments of the countries of the Far
East have liberalized  policies on international  trade,  foreign  ownership and
development,   investment,   and   currency   repatriation,    increasing   both
international  trade and  investment  accordingly,  such  policies  might change
unexpectedly.  The  Company  will  be  affected  by the  rules  and  regulations
regarding   foreign   ownership  of  real  and  personal   property,   including
telecommunication  switching stations, land lines and other property. Such rules
may  change  quickly  and  dramatically  which  may have an  adverse  impact  on
ownership and may result in a loss without recourse of property or assets of the
Company.  Hong Kong is in a period of transition from British control over it to
control by China.  It is uncertain what changes may result from such  transition
with  regard  to  business,   foreign   property   ownership,   restrictions  on
development, taxes or other factors.

Investment in China in particular.

         Because the  operations  of the  Company are  expected to be based to a
substantial  extent in  China,  the  Company  will be  subject  to the rules and
restrictions  governing  China's  legal and  economic  system as well as general
economic and political conditions in that country. These include the following:

         Political  and  Economic  Matters.  Under its current  leadership,  the
government of the People's  Republic of China ("PRC") has been pursuing economic
reform policies,  which include the  encouragement of private economic  activity
and greater economic decentralization.  There can be no assurance, however, that
the Chinese  government  will  continue to pursue  such  policies,  or that such
policies will be successful if pursued.  Changes in policies made by the Chinese

                                       24

<PAGE>
government may result in new laws,  regulations,  or the interpretation thereof,
confiscatory  taxation,  restrictions on imports,  currency  devaluations or the
expropriation  of private  enterprise  which may, in turn,  adversely affect the
Company.  Furthermore,  business  operations in China can become  subject to the
risk of  nationalization,  which could result in the total loss of ownership and
control of any assets or  operations  that may be  developed  by the  Company in
China. Also, economic  development may be limited by the imposition of austerity
measures  intended  to  reduce  inflation,  the  inadequate  development  of  an
infrastructure,  and the potential  unavailability  of adequate power and water,
transportation, communication networks, raw materials and parts.

         Legal  System.  The PRC's legal  system is a civil law system  based on
written  statutes.  Unlike the common law system in the United  States,  decided
legal cases in the PRC have little  value as  precedents.  Furthermore,  the PRC
does not  have a  well-developed  body of laws  governing  foreign  enterprises.
Definitive  regulations  and  policies  with  respect  to  such  matters  as the
permissible  percentage of foreign  investment and  permissible  rates of equity
returns  have  not yet  been  published,  statements  regarding  these  evolving
policies have been  conflicting,  and any such policies,  as  administered,  are
likely to be  subject to broad  interpretation  and  modification,  perhaps on a
case-by-case basis. As the legal system in the PRC develops with respect to such
new forms of  enterprise,  foreign  investors  may be adversely  affected by new
laws, changes in existing laws (or interpretation thereof) and the preemption of
provincial or local laws by national laws. The Company's operations in China, if
any are  developed  (of which  there can be no  assurance)  will be  subject  to
administrative review and approval by various national and local agencies of the
PRC  government.  Management  intends that the Company's  operations will comply
with applicable administrative requirements; however, there is no assurance that
the Company will be able to timely obtain the necessary administrative approvals
for any projects that it determines to develop.

         Foreign Currency Exchange. The Renminbi ("Rmb"), the currency of China,
is not a freely  convertible  currency.  Both  conversion  of Rmb  into  foreign
currencies  and the  remittance of Rmb abroad are subject to the PRC  government
approval.  The Company intends to develop  telecommunication  systems in the Far
East including  China and  anticipates  that initially it may earn revenues,  if
any, and incur costs, in Rmb.

         Prior to  January  1, 1994,  Rmb  earned  within  China were not freely
convertible into foreign currencies except with government permission,  at rates
determined  at  swap   centers,   where  the  exchange   rates  often   differed
substantially  from the official rates quoted by the People's Bank of China.  On
January  1, 1994,  the  People's  Bank of China  introduced  a managed  floating
exchange  rate  system  based on the market  supply and demand and  proposed  to
establish a unified foreign exchange  inter-bank  market among designated banks.
In place of the  official  rate and the swap center rate,  the People's  Bank of
China  publishes  a daily  exchange  rate for Rmb  based on the  previous  day's
dealings in the  inter-bank  market.  It is expected  that swap  centers will be
phased out.  However,  the  unification  of  exchange  rates does not imply full
convertibility  of Rmb into United States  dollars or other foreign  currencies.
Payment for imported  materials and remittance of earnings  outside of China are
subject  to the  availability  of foreign  currency  which is  dependent  on the
foreign currency-denominated  earnings of the entity or allocated to the Company
by the government at official exchange rates.


                                       25
<PAGE>
         Approval for exchange at the exchange  center is granted to enterprises
in China for valid reasons such as purchases of imported goods and remittance of
earnings.  While conversion of Rmb into dollars or other foreign  currencies can
generally be effected at the exchange center,  there is no guarantee that it can
be  effected  at all  times.  There  is  still  uncertainty  as to  how  foreign
enterprises  will be treated under this new system or whether the system will be
changed again in the future. In the event of shortages of foreign currency,  the
Company may be unable to convert  sufficient  Renminbi into foreign  currency to
enable it to comply with foreign currency payment obligations it may have.

         PRC  Regulation  of the  Telecommunications  Industry.  The Ministry of
Posts  and  Telecommunications  (the  "MPT")  regulates  the  telecommunications
industry in China.  The MPT  directly  or  indirectly  regulates  entry into the
telecommunications industry, scope of permissible business,  interconnection and
transmission line arrangements,  technology and equipment  standards,  and other
aspects of the Chinese  telecommunications  industry.  Such regulation may limit
the Company's  flexibility to respond to certain development  opportunities.  In
addition,  changes in the  regulations  or policies  governing  such  regulatory
framework  could have an adverse effect on the Company.  The Company may have to
obtain  certain  licenses,  if  required,  from the MPT in order to commence its
proposed  business.  There is no  assurance  that it will be able to obtain such
licenses,  or if obtained,  that they will not be untimely revoked or suspended.
The rates that the Company will be  permitted  to charge for  telecommunications
services, if any are developed,  are subject to regulation by the State Planning
Commission,  the MPT, and relevant Provincial Price Bureaus.  Once authorized by
such regulatory agencies,  there can be no assurance that changes in the tariffs
and rates would not have a material  adverse effect on any Company  business and
results of operations, if any had been developed.  Management and affiliates own
enough  shares to control  shareholder  vote.  CBCom's  executive  officers  and
directors  beneficially own approximately  12.8% of the outstanding common stock
of CBCom.  These  officers and directors do not have  controlling  interest over
matters requiring shareholder approval. Over 6,500,000 shares of the outstanding
common  stock  of  CBCom is owned by  companies  or  individuals  with  familial
relationships  to the officers and directors of CBCom,  over which such officers
and directors claim no beneficial  ownership or voting control.  However,  taken
together the shares owned by the  executive  officers  and  directors  and those
individuals or entities with familial  relationships  have controlling  interest
over matters requiring stockholder approval, including the election of directors
and the  approval  of  material  corporate  matters  such as change  of  control
transactions.  The  effects of such  control  could be to delay or  prevent  any
attempt to change  control of CBCom  instigated by  shareholder  action  without
management support.

Issuance of future shares may dilute investors share value.

         The  Certificate of  Incorporation  as amended of CBCom  authorizes the
issuance of 80,000,000 shares of common stock and 20,000,000 shares of preferred
stock.  The future  issuance of all or part of the remaining  authorized  common
stock may result in  substantial  dilution in the  percentage  of the  Company's
common stock held by the its then existing  shareholders.  Moreover,  any common
stock  issued in the future may be valued on an  arbitrary  basis by CBCom.  The
issuance of the Company's  shares for future  services or  acquisitions or other
corporate  actions may have the effect of diluting  the value of the shares held
by investors,  and might have an adverse effect on any trading market,  should a
trading market develop for the Company's common stock.

                                       26
<PAGE>
The possibility of CBCom issuing  preferred  stock with certain  preferences may
depress market price of the common stock.

         CBCom  has  20,000,000   shares  of   non-designated   preferred  stock
authorized  which it may  issue  from  time to time by  action  of the  Board of
Directors.  The Board of Directors may designate  series or classes of preferred
shares without  shareholder  consent which  designations may give the holders of
the  preferred  stock  voting  control  and other  preferred  rights  such as to
liquidation and dividends. The authority of the Board of Directors to issue such
stock  without  shareholder  consent may have a depressive  effect on the market
price of CBCom's common stock even prior to any such  designation or issuance of
the preferred stock.

The  possibility  of issuing  preferred  stock for  anti-takeover  effect  could
prevent takeovers favored by shareholders.

         The Board of Directors has the authority,  without further  approval of
stockholders,  to issue  preferred  stock,  having such rights,  preferences and
privileges as the Board of Directors may determine.  Any such issuance of shares
of  preferred  stock,  under  certain  circumstances,  could  have the effect of
delaying or preventing a change in control of CBCom or other  take-over  attempt
and could  adversely  materially  affect  the rights of holders of shares of the
common stock.

Officers and directors have limited liability and have indemnity rights.

         The  Certificate  of  Incorporation  and By-Laws of CBCom  provide that
CBCom  indemnify  its  officers  and  directors   against  losses  sustained  or
liabilities  incurred  which arise from any  transaction  in such  officer's  or
director's  respective  managerial  capacity  unless  such  officer or  director
violates a duty of loyalty,  did not act in good faith,  engaged in  intentional
misconduct  or knowingly  violated the law,  approved an improper  dividend,  or
derived an improper benefit from the transaction.  The Company's  Certificate of
Incorporation  and By-Laws  also  provide for the  indemnification  by it of its
officers and directors against any losses or liabilities incurred as a result of
the manner in which such officers and directors  operate the Company's  business
or  conduct  its  internal  affairs,  provided  that in  connection  with  these
activities they act in good faith and in a manner which they reasonably  believe
to be in, or not opposed to, the best interests of the Company and their conduct
does  not  constitute  gross  negligence,  misconduct  or  breach  of  fiduciary
obligations.

Penny Stock Regulation

         Upon  commencement  of trading in the Company's  stock,  if a market is
developed  and if the Company is accepted for trading on the OTC Bulletin  Board
(of which there can be no assurance) the Company's  common stock may be deemed a
penny stock.  Penny stocks generally are equity  securities with a price of less
than  $5.00 per share  other than  securities  registered  on  certain  national
securities exchanges or quoted on the Nasdaq Stock Market, provided that current
price and volume  information with respect to transactions in such securities is
provided by the exchange or system.  The Company's  securities may be subject to
"penny  stock  rules" that impose  additional  sales  practice  requirements  on
broker-dealers  who sell such  securities  to  persons  other  than  established


                                       27

<PAGE>
customers and  accredited  investors  (generally  those with assets in excess of
$1,000,000 or annual income exceeding  $200,000 or $300,000  together with their
spouse).  For transactions covered by these rules, the broker-dealer must make a
special  suitability  determination for the purchase of such securities and have
received  the  purchaser's  written  consent  to the  transaction  prior  to the
purchase.  Additionally,  for any  transaction  involving a penny stock,  unless
exempt, the "penny stock rules" require the delivery,  prior to the transaction,
of a disclosure  schedule  prescribed  by the  Commission  relating to the penny
stock market.  The broker-dealer  also must disclose the commissions  payable to
both the broker-dealer and the registered  representative and current quotations
for the securities.  Finally,  monthly statements must be sent disclosing recent
price  information  on the limited  market in penny  stocks.  Consequently,  the
"penny  stock  rules" may  restrict  the ability of  broker-dealers  to sell the
Company's  securities.  The foregoing required penny stock restrictions will not
apply to the Company's  securities if such securities maintain a market price of
$5.00 or  greater.  There can be no  assurance  that the price of the  Company's
securities will reach or maintain such a level.

ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

            See Item 13 of this Report.

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE.

         On March 12, 2002,  pursuant to consent of the Board of Directors,  the
Company  approved the  engagement of Vasquez & Company,  LLC as its  independent
auditors for the fiscal year ending  December 31,  2001,  and in the  subsequent
interim periods to replace BDO International, who were dismissed as of March 13,
2002.  The full Board of  Directors  approved the change in auditors on the same
date.

         The report of BDO International on the Company's  financial  statements
for the fiscal year ended  December 31, 1999 and 2000 did not contain an adverse
opinion or a disclaimer of opinion and was not qualified (except that of a going
concern) or modified as to audit scope or accounting principles.  The report for
the fiscal  years 1999 and 2000,  contained  a  modification  stating  there was
substantial doubt as to the Company's ability to continue as a going concern.

         In connection with the audit of the Company's financial  statements for
the fiscal years ended December 31, 1999 and 2000,  and any  subsequent  interim
period  preceding  the date of  change,  there  were no  disagreements  with BDO
International,  on any matters of accounting principles or practices,  financial
statement disclosure, or auditing scope and procedures which, if not resolved to
the satisfaction of BDO International,  would have caused BDO International,  to
make reference to the matter in its report.










                                       28
<PAGE>


                              PART      III

ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

Name                         Age                        Title

Chian Yi (Max) Sun           37       Chairman of the Board, President, Director

Charles A. Lesser            55       Secretary,  Treasurer,   Chief   Financial
                                      Officer, Director

Gordon Xia Gao               32       General Manager, CBCom China and Director

MR. MAX SUN is Chairman,  President,  and a Director of the Company  since 1997.
Mr. Sun  founded  and was  President  of  Microtron,  Inc.,  a company  that has
developed and distributed  pagers in China.  Mr. Sun was a founding  shareholder
and Senior Vice  President,  International,  of Amtec,  Inc.  an American  Stock
Exchange Company constructing  telecommunications networks in China. Previously,
he was founder and President of  Interactive  TeleVideo,  Inc.  (ITV), a company
that  designed  interactive  circuitry  network  products.  Mr.  Sun has been an
investment  banker in Hong Kong and China. He holds a Bachelor of Arts degree in
Accounting from New York University.

Mr. CHARLES A. LESSER is Secretary,  Treasurer,  Chief  Financial  Officer and a
Director of the Company  since June,  1997.  Prior to joining  CBCom,  Inc.  Mr.
Lesser has served as an independent  Consultant to early stage  companies.  From
1994-1995, he was Vice President of Worldwide Corporate Finance, a company which
raised private capital.  Previously,  Mr. Lesser was Chief Financial  Officer of
Weider  Sporting  Goods,  Inc., a  manufacturer  and  distributor  of health and
fitness products. He has worked as both a management consultant and auditor with
Alder, Green & Hasson in Los Angeles,  KPMG Peat Marwick in Houston and Deloitte
& Touche in Johannesburg,  South Africa.  He holds an M.B.A. from the University
of the Witwatersrand in South Africa and a B.A. in Economics from the University
of Pittsburgh in Pennsylvania.

MR.  GORDON GAO is a Director  since 1997,  a founding  shareholder  and General
Manager of CBCom China, a representative  office of CBCom. His area of expertise
is telecommunications market development and fund raising. From 1995 to 1997, he
was  President of Beijing  CBCom  Telecommunications  and  Consulting  Co. Ltd.,
developing  a pager  for use in the  Chinese  market.  From  1993  to  1995,  he
wasExecutive  Assistant,  Director of Domestic  Branch  Offices and  Director of
Foreign  Investment and  Fund-raising  for Catch  Communications  Group, a major
telecommunications  company  in  China.  Mr.  Gao  has  extensive  start-up  and
operational  experiences in the paging industry in China.  Mr. Gao is a computer
science graduate of Beijing University.

ITEM 10 -- EXECUTIVE COMPENSATION

     The following table  summarizes the  compensation for the three most recent
fiscal periods ended December 31, 2001,  December 31, 2000 and December 31, 1999
of our Chief  Executive  Officer  and the three most  highly  compensated  other
executives and officers whose total annual salary and bonus exceed $100,000.


                                       29

<PAGE>
<TABLE>
<S>                                <C>        <C>           <C>          <C>            <C>            <C>
                           SUMMARY COMPENSATION TABLE
                                                        ANNUAL COMPENSATION               LONG TERM COMPENSATION
                                              ---------------------------------------   --------------------------
                                                                             OTHER       RESTRICTED     SECURITIES
                                                                            ANNUAL          STOCK       UNDERLYING
                                                               BONUS        COMPEN-        AWARDS         OPTIONS/
 NAME AND PRINCIPAL POSITION(1)      YEAR      SALARY($)        ($)       SATION ($)          ($)           SARS
--------------------------------   --------   -----------   ----------   ------------   ------------   -----------

Bernard J. Luskin, former            2001      $   0               0              0              0          0
Chairman and Chief                   2000       629,375            0              0              0       (500,000)
Executive Officer   (1)              1999       131,250            0              0              0        500,000

Chian Yi (Max) Sun                   2001      $150,000            0              0              0            0
Chairman and President (2)           2000       150,000            0              0              0        300,000
                                     1999       150,000            0              0              0           0

Charles A. Lesser                    2001      $150,000            0        $19,225              0        145,000
Chief Financial Officer  (3)         2000       150,000            0         16,000              0        150,000
                                     1999       150,000            0         16,000              0            0

Gordon Gao                           2001      $120,000            0              0              0        550,000
General Manager, CB   (2)            2000       120,000            0              0              0        150,000

China                                1999       120,000            0              0              0             0
</TABLE>

(1) Mr. Luskin left the company during 1999 and his salary and bonus was accrued
through May 15, 1999 in accordance with his settlement agreement. During 2000, a
final  settlement  was agreed  amounting  to  $629,375.  At December 31, 2000 no
compensation  is still owed.  Under the terms of the settlement  agreement,  Mr.
Luskin's  stock  options have been  cancelled  and revert back to the  company's
stock option plan.

(2) The total salary amount for 1999,2000 and 2001 has been accrued. The company
was unable to pay  compensation  and in  December,  1999  offered to convert the
amounts owed into Common  Stock at a price of $1.00 per share,  the current fair
market  value.  Salaries  due for 1997 and 1998 had been  converted at December,
1998 into Common stock at $0.50 share, the fair market value at that time.

(3) Salary of $75,000 for 2000 and $6,250 for 2001 has been accrued. The company
has offered to convert the amounts  owing into Common  Stock at a price of $1.00
per share, the current market value at May, 2001. Other Compensation consists of
an auto allowance and contribution to the company's 401 (k) plan.

(4) Gordon Gao  converted  $275,000 in accrued  salary into  550,000  options on
Common Stock at an option price of $1.00 per share.

OPTION/SAR GRANTS IN LAST FISCAL PERIOD

         The following  table sets forth the information  concerning  individual
grants of stock options and stock appreciation rights ("SARs") during the period
ended December 31, 2001.  All of the options  granted in the year ended December

                                       30
<PAGE>
31, 2001 have terms of ten (10) years.  A total of 810,275  options were granted
to three employees in the 12-month  period ended December  31,2001 under CBCom's
1998 Employee Stock Option Plan. . Options  totaling  187,500 expired as a prior
grantee  left the  employ of the  Company  in 1999 and the two year  period  for
exercise  has  passed.  Two  grantees  exercised a total  260,275  options at an
exercise  price of $1.00 per share.  In  accordance  with the Plan,  the Company
received two promissory notes in the amount of $260,275.


OPTION/SAR GRANTS IN LAST FISCAL PERIOD
                                               INDIVIDUAL GRANTS
                              --------------------------------------------------
                                NUMBER OF    % OF TOTAL
                               SECURITIES   OPTIONS/SARS
                               UNDERLYING    GRANTED TO   EXERCISE OR
                              OPTIONS/SARS  EMPLOYEES IN  BASE PRICE  EXPIRATION
             NAME              GRANTED(#)   FISCAL PERIOD   ($/SH)       DATE
----------------------------  ------------  ------------- ----------- ----------
Charles A. Lesser.......2001    145,000         17.9%       $ 1.00     05/15/11
Chian Yi (Max) Sun........... 2001        -
Gordon Gao       .......2001    550,000         67.9%       $ 1.00     05/15/11
Bernard Luskin.....       2001        -


--------------------------------------------------------------------------------
                        Aggregated Option Exercises in the 2001 Fiscal Year
                                 and Fiscal Year-End Option Value
--------------------------------------------------------------------------------
                          Number of Securities            Value of Unexercised
                    Underlying Unexercised Options        In the Money Options
                       Exercisable/Unexercisable       Exercisable/Unexercisable
--------------------------------------------------------------------------------
Chian Yi (Max) Sun             612,500/  0                   $1,251,563/$0.00
Charles A. Lesser              650,000/  0                   $1,425,000/$0.00
Gordon Gao                     825,000/  0                   $1,515,625/$0.00
Steven Meadows                 275,000/  0                   $  437,850/$0.00
--------------------------------------------------------------------------------


                        Aggregated Option Exercises in the 2001 Fiscal Year

                          Number of Securities            Value of Exercised
                              Exercised                         Options

Charles A. Lesser              145,000                         $145,000
Steven Meadows                 115,275                         $115,275


ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

         The following table contains information regarding the shareholdings of
CBCom's current  directors and executive  officers and those persons or entities
who  beneficially  own more than 5% of its common  stock  (giving  effect to the
exercise of warrants or options  exercisable within sixty days held by each such
person or entity):

                                       31
<PAGE>

                                             Amount of Common       Percent of
                                             Stock Beneficially     Common Stock
                                             Owned (1) (2)            Owned (2)

Chian Yi (Max) Sun (3)                           2,518,500              11.1%
President, Director
52, Jalan Kelochor
Kota Bharu, Kelantan, Malaysia

Charles A. Lesser (4)                              897,500               3.9%
Chief Financial Officer, Director
5801 Serrania Avenue
Woodland Hills, California 91367

Gordon Xia Gao (5)                               1,247,500               5.5%
Director
484 E California Blvd #11
Pasadena, California 91106

Wong Lip Ting                                    1,250,000               5.7%
Wake Little Treasure Ltd.
297 Prince Edward Road, Suite 6A
Erin Court, Hong Kong

Soon Cheh Siong
Jesmax Investment Ltd. (6))                      1,200,000               5.9%
Suite 12.33, Petama Komplek
Jalan Tunku Abdul Rahman
50100 Kuala Lumpur, Malaysia

Ren Zhen Tian (7)                                1,200,000               5.4%
7C, 1 Block Jia 2
Zuo Jia Zhuang Road
Chao Yang District
Beijing, China

Sinoway Co. Ltd. (8)                             1,250,000               5.4%
191 Java Road
North Point, Hong Kong

Sun Chiah Yee (9)                                3,534,892              16.1%
Polmont Investments, Ltd.
126, Jalan Dedap, Ampang Prima Jaya
68000 Ampang
Selangor, Malaysia

All directors and                                4,663,500              19.3%
executive officers as
a group (3 persons) (10)

--------------------




                                       32

<PAGE>
(1)      Based upon 22,020,642 outstanding shares of common stock.
(2)      Assumes  exercise  of  warrants,  options or other  rights,  if any, to
         purchase  securities held by the named shareholder  exercisable  within
         sixty days of the date hereof.
(3)      Includes  906,000 shares owned directly by Mr. Sun and 1,000,000 shares
         held by Joy Luck  Communication  Ltd. of which Mr. Sun may be deemed to
         be the beneficial  owner.  Mr. Sun also has options to purchase 612,500
         shares, of which all 612,500 are exercisable  within  60 days at prices
         ranging between $.425 and $1.00 per share.
(4)      Mr.  Lesser has options to purchase  650,000  shares of common stock of
         which all  650,000  are  exercisable  within 60 days at prices  ranging
         between $.425 and $1.00 per share.
(5)      Mr. Gao has options to purchase 825,000 shares of common stock held, of
         which all 825,000 are exercisable within 60 days at prices of $.425 and
         $1.00 per share.
(6)      Beneficially  owned by Mr. Soon Cheh Siong,  familially  related to Max
         Sun,  President and a director of the  company.  Mr.  Soon  also  holds
         200,000 shares in his own name. Mr. Sun disclaims beneficial  ownership
         of any of these shares.
(7)      Beneficially  owned by persons who are  familially  related to Zhu Hong
         Wei, a director of the Company.  Mr. Zhu disclaims beneficial ownership
         of these shares.
(8)      Beneficially  owned  by  Zhu  Yi  Wei  who  is  both  the   controlling
         shareholder and director of Sinoway Co. Ltd.
(9)      Polmont Investments,  Ltd., converted a promissory note on December 30,
         2000 and owns 2,784,8922  shares of common stock.  Ms. Sun owns 750,000
         shares in her own name. Ms. Sun, the principal owner of Polmont, is the
         sister  of Mr.  MaxSun,theCompany's  President  and a  director  of the
         Company.  Mr. Max Sun  disclaims  beneficial  ownership of Ms. Sun's or
         Polmont's shares.

(10)     Includes options to purchase 2,087,500 shares.

ITEM  12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         Since inception,  Mr. Max Sun, President,  a director,  and controlling
shareholder,  has extended credit to CBCom and is expected to continue to extend
credit to it. CBCom has executed a note for the funds  borrowed from Mr. Sun. On
April 24, 1998 CBCom  converted  $1,600,000 of its  outstanding  note and issued
8,000,000  shares of common stock to Mr. Sun or designee.  The outstanding  note
provides for interest at 7% per annum but such  interest  charge has been waived
by Mr. Sun. The note also contains conversion rights for all outstanding amounts
owed  subsequent  to April 24,  1998,  at a  conversion  rate of $.50 per share.
Between April 24, 1998 and December 31, 1998, $160,000 of the loan was converted
into  320,000  shares of common  stock.  During  1999,  $648,370 of the loan was
converted  into  1,296,740  shares of common  stock.  On April 24, 2000 the note
renewed and the conversion price was increased to $1.00 per share to reflect the
market value at that time. During 2000,  $270,400 of the loan was converted into
468,500 shares. During 2001, $1,116,800 of the loan was converted into 1,116,800
shares. At December 31, 2001 the balance owed to Mr. Sun was $930,027.

            The  President  of Beijing  Chinet  Information  Technology  Company
("Chinet"),  Mr.  Gordon  Gao owns 90% of the  equity in  Chinet  and is also an


                                       33


<PAGE>
officer,  director and 5.5%  shareholder  of CBCom,  Inc. On June 15, 2001,  the
Company entered into a loan agreement, initially for $500,000, with Mr. Gao, who
will use the proceeds to conduct merger and  acquisition  activities of Internet
Service  Provider (ISP) targets he has found in China.  The  promissory  note is
secured by an equity  interest in Chinet and Mr. Gao has  committed to repay the
principal and interest  either in cash or in the form of the equity  interest he
has acquired in China. The Company has made additional  advances on the loan and
the balance at December 31, 2001 is $1,053,086. The loan will mature on November
30, 2010 with interest at 8% per annum.


         Polmont  Investments,  Ltd. had agreed to pay on behalf of CBCom, Inc.,
through sale of up to 800,000 of the Amtec,  Inc. shares owned by it, the agreed
funds payable to Mr.  Bernard  Luskin in regard to CBCom's  settlement  with Mr.
Luskin.  Polmont  Investments,  Ltd., a British Virgin Islands  corporation,  is
controlled by a  shareholder  of CBCom and the sister of the president of CBCom,
Inc. According to a letter of agreement dated March 27, 1999, Polmont had agreed
to accept  repayment  in the form of shares of CBCom,  Inc.  valued at $0.50 per
share.  On  December  30, 2000  Polmont  converted  its entire  loan  balance of
$1,142,446  into  2,284,892  shares of common stock of the Company.  The Company
recorded  $985,262  of deemed  interest  expense on the  difference  between the
conversion  price of $0.50 per share and the deemed fair  market  value of $1.00
per share for all funds advanced by Polmont during the year 2000.


ITEM 13. EXHIBITS, FINANCIAL STATEMENTS, AND REPORTS ON FORM 8-K.

         (a)   See Index to Financial Statements  immediately  following Exhibit
               Index

         (b    There were no reports filed on Form 8-K.


         (c)   Exhibits

1.1           Agreement  and Plan of Merger  and  amendment            (2)
              thereto between Abbacy Corporation and CBCom,
              Inc. dated September 24, 1999

1.2           Certificate of Incorporation  of CBCom,  Inc.            (2)
              and amendments

1.3           By-Laws of CBCom, Inc.                                   (2)

10.1          CBCom, Inc. 1998 Stock Option Plan                       (2)

10.2          Convertible  Promissory  Note,  due April 24,            (3)
              2001 between CBCom, Inc. and Max Sun

10.3          Convertible  Promissory  Note,  due April 24,            (2)
              2000 between CBCom, Inc. and Max Sun





                                       34
<PAGE>
10.4          Memorandum of  Understanding  between  CBCom,            (2)
              Inc., Shanghai Stock Exchange  Communications
              Co. and Shanghai Xingtong  Telecommunications
              Science and Technology, Ltd.

10.5          Office  Lease  between  Cornerstone  Suburban            (2)
              Office, L.P. and CBCom, Inc. dated January 1,
              2000

10.6          Settlement Agreement Between Radio,  Computer            (2)
              &  Telephone,  Inc.  and CBCom,  Inc.,  dated
              April 16, 1999 regarding pager technology.

10.7          Letter   of   Agreement    between    Polmont            (2)
              Investment  Limited  and  CBCom,  Inc.  dated
              March 27, 1999  regarding  loan of securities
              as collateral for the employment agreement of
              Bernard Luskin.

10.8          Dismissal   Agreement   and  Mutual   General            (1)
              Release by and between ComVu  Corporation and
              CBCom, Inc. Max Sun and Charles Lesser

10.9          Share Subscription  Agreement,  March 6, 2001            (4)
              for 100,000 shares

10.10         Secured  Convertible  Debenture  due  June 6,            (5)
              2002

10.11         Management  Services  Agreement  with Beijing            (6)
              Chinet Information Technology Co.

10.12         Convertible   Promissory   Note,   due  April            Herein
              24,2002 between CBCom, Inc. and Max Sun

10.13         Demand Promissory Note, $145,000 from Charles            Herein
              Lesser

10.14         Demand Promissory Note,  $115,275 From Steven            Herein
              Meadows

10.15         Common  Stock  Purchase   Agreement   between            Herein
              Brighton  Opportunity  Fund,  L.P. and CBCom,
              Inc.

10.16         Stock  Purchase   Agreement  By  And  Between            Herein
              Brighton  Opportunity  Fund,  L.P. and CBCom,
              Inc.

1    Included with the filing of Form 10-QSB dated November 14, 2000
2    Included with the filing of Form 10SB12G dated December 11, 2000
3    Included with the filing of Form 10-KSB dated March 30, 2001
4    Included with the filing of Form 10-QSB dated May 14, 2001
5    Included with the filing of Form 10-QSB dated August 17, 2001
6    Included with the filing of Form 10-QSB dated November 19, 2001

                                       35
<PAGE>
                                   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 15th day of April, 2002.


                                   CBCOM, INC.


                               By /s/ Chian Yi Sun
                          ----------------------------
                                  Chian Yi Sun
                              Chairman of the Board

Date:  April 15, 2002

      Pursuant to the requirements of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
registrant and in the capacities and on the dates indicated.


/s/ Chian Yi Sun            Chairman of the Board                April 15, 2002
--------------------        (Principal Executive Officer)
    Chian Yi Sun


/s/ Charles A. Lesser       Chief Financial Officer/Director     April 15, 2002
----------------------      (Principal Financial Officer and
    Charles A. Lesser        Principal Accounting Officer)


/s/ Gordon X. Gao           Director                             April 15, 2002
----------------------
    Gordon X. Gao




















                                       36

<PAGE>
















                           CBCOM, INC. AND SUBSIDIARY


                        CONSOLIDATED FINANCIAL STATEMENTS


                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 2001

































                                       F-i
<PAGE>


                           CBCOM, INC. AND SUBSIDIARY

                          INDEX TO FINANCIAL STATEMENTS




Report of Independent Certified Public Accountants (December 31, 2001)    F-2
Report of Independent Certified Public Accountants (December 31, 2000)    F-2a

Financial Statements
     Consolidated Balance Sheets                                          F-3
     Consolidated Statements of Operations                                F-4
     Consolidated Statements of Shareholders' Deficit                  F-5 - F-6
     Consolidated Statements of Cash Flows                             F-7 - F-8

Notes to Financial Statements                                             F-9





































                                      F-1
<PAGE>

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


To the Board of Directors
CBCom, Inc. and Subsidiary

We have audited the accompanying  consolidated  balance sheet of CBCom, Inc. and
Subsidiary  as of December 31, 2001 and the related  consolidated  statements of
operations, shareholders' deficit, and cash flows for the year then ended. These
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is to express an opinion on these financial  statements based on
our audit. The financial  statements of CBCom,  Inc. as of December 31, 2000 and
for the year then  ended were  audited by other  auditors,  whose  report  dated
February 7, 2001 on those  statements  included an  explanatory  paragraph  that
described the  significant  operating loss from  operations and working  capital
deficiency discussed in Note 1 to the financial statements.

We conducted our audit in accordance with generally  accepted auditing standards
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit 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 audit 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 CBCom, Inc. and Subsidiary at
December 31, 2001 and the results of its  operations  and its cash flows for the
year then ended in conformity with generally accepted  accounting  principles in
the United States of America.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 1 to the
financial statements,  the Company has a limited operating history, has incurred
substantial  losses,  and at December 31, 2001, has a working capital deficiency
and  shareholders'  deficit  that raise  substantial  doubt about its ability to
continue as a going concern.  Management's  plans in regard to these matters are
also  described  in  Note  1.  The  financial  statements  do  not  include  any
adjustments that might result from the outcome of this uncertainty.



/Vasquez & Company LLP/
Los Angeles, California

March 29, 2002







                                      F-2
<PAGE>


               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


To the Board of Directors
CBCom, Inc. (a development stage company)

We have audited the accompanying  balance sheets of CBCom,  Inc., (a development
stage  company) as of December 31, 1999 and 2000 and the related  statements  of
operations,  stockholders'  deficit, and cash flows for the years ended December
31, 1999 and 2000. We also audited the statements of  operations,  stockholders'
deficit,  and cash flows for the period from inception  (April 23, 1997) through
December 31, 2000.  These  financial  statements are the  responsibility  of the
Company'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
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit 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 CBCom,  Inc. at December 31,
1999 and 2000 and the results of its operations and its cash flows for the years
ended 1999 and 2000,  and the period from  inception  (April 23,  1997)  through
December 31, 2000, in conformity with generally accepted  accounting  principles
in the United States of America.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 1 to the
financial statements,  the Company has a limited operating history, has incurred
substantial  losses,  and at December 31, 2000, has a working capital deficiency
and  shareholders'  deficit  that raise  substantial  doubt about its ability to
continue as a going concern.  Management's  plans in regard to these matters are
also  described  in  Note  1.  The  financial  statements  do  not  include  any
adjustments that might result from the outcome of this uncertainty.


                                       BDO International



------------------------
Shanghai, PRC
February 7, 2001





                                      F-2a
<PAGE>
                           CBCOM, INC. AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEETS
                                                           December 31,
                                                    ---------------------------
                                                        2000           2001
ASSETS                                              ------------   ------------
Current assets:
 Cash                                               $      9,241   $      6,139
 Other receivable                                              -         52,599
                                                    ------------   ------------
Total current assets                                       9,241         58,738
                                                    ------------   ------------
Furniture, fixtures and equipment, net (Note 2)           34,404        409,178
                                                    ------------   ------------
Other assets:
 Deposits                                                 29,722         21,389
 Receivable - Officer (Notes 1 and 5)                          -      1,053,086
 Prepaid expenses (Note 6)                               135,416         97,004
                                                    ------------   ------------
Total other assets                                       165,138      1,171,479
                                                    ------------   ------------
Total assets                                        $    208,783   $  1,639,395
                                                    ============   ============
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
  Accounts payable                                  $    261,526   $    311,230
  Salaries payable - employees                           760,200        786,150
  Accrued expenses                                       159,775         82,417
  Income tax payable                                       3,200            800
  Capital lease obligation - current (Note 6)             32,433         32,433
   Convertible loan                                            -        100,000
  Loan payable - other shareholders (Note 5)              11,988         88,173
                                                    ------------   ------------
Total current liabilities                              1,229,122      1,401,203

Loan payable - shareholder (Note 5)                      329,306        930,027
                                                    ------------   ------------
Total liabilities                                      1,558,428      2,331,230
                                                    ------------   ------------
Commitments and Contingencies (Notes 5, 6, 7, and 8)

Shareholders' deficit:
 Common stock at par value of $0.001 per share,
   80,000,000 shares authorized, 20,232,632
   and 22,020,642 shares issued and outstanding,
   respectively (Notes 7 and 8)                           20,233         22,021
 Additional paid-in capital                            8,824,966     12,504,376
 Stock subscription                                       (1,250)        (1,250)
 Employee notes receivable                                     -       (211,221)
 Accumulated deficit                                 (10,193,594)   (13,005,761)
                                                    ------------   ------------
Total shareholders' deficit                           (1,349,645)      (691,835)
                                                    ------------   ------------
Total liabilities and shareholders' deficit         $    208,783   $  1,639,395
                                                    ============   ============
                 See accompanying notes to financial statements.
                                       F-3
<PAGE>
                           CBCOM, INC. AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF OPERATIONS


                                                    Year ended December 31,
                                                -----------------------------
                                                   2000              2001
                                                ------------     ------------

Consulting Revenue                              $          -     $    268,787



General and administrative expenses                1,822,600        1,684,055
                                                ------------     ------------

Loss from operations                              (1,822,600)      (1,415,268)

Other income (expense):
   Interest expense, net                          (1,218,817)      (1,633,221)
   Other, net                                              -          237,122
                                                ------------     ------------

Loss before income taxes                          (3,041,417)      (2,811,367)

Income tax provision (Note 3)                            800              800
                                                ------------     ------------

Net loss                                        $ (3,042,217)    $ (2,812,167)
                                                ------------     ------------

Weighted average number of common shares
   outstanding                                    17,604,656       21,349,951

Basic and diluted loss per share                $      (0.17)    $      (0.13)



















                 See accompanying notes to financial statements.
                                       F-4
<PAGE>
                           CBCOM, INC. AND SUBSIDIARY
                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT
                               (See Notes 7 and 8)
<TABLE>
<S>                              <C>         <C>       <C>          <C>          <C>          <C>            <C>
                                      Common Stock     Additional                 Employee
                                 --------------------    Paid-In        Stock      Notes       Accumulated
                                   Shares     Amount     Capital    Subscription Receivable      Deficit         Total
                                 ----------  --------  -----------  ------------ ----------   -------------  -------------
Balance, December 31, 1999       17,212,240  $ 17,212  $ 6,021,943  $    (1,300) $        -   $ (7,151,377)  $ (1,113,522)

Proceeds of Regulation, D,
   Rule 506 issuance                      -         -            -           50           -              -             50
Conversion of shareholder loan
   to stock ($0.50 per share)       396,200       397      197,703            -           -              -        198,100
Conversion of shareholder loan
   to stock ($1.00 per share)        72,300        72       72,228            -           -              -         72,300
Settlement of payroll payable
   to stock ($1.00 per share)       317,000       317      316,683            -           -              -        317,000
Cancellation of Regulation D,
   Rule 506 issuance                (50,000)      (50)           -            -           -              -            (50)
Conversion of Polmont loan
   ($0.50 and $1.00 per share)    2,284,892     2,285    2,125,424            -           -              -      2,127,709
Forgiveness of interest on
   shareholder loans                      -         -       77,866            -           -              -         77,866
Compensation cost resulting
   from stock options                     -         -       13,119            -           -              -         13,119

Net loss                                  -         -            -            -           -     (3,042,217)    (3,042,217)
                                 ----------- --------  -----------  -----------  ----------   ------------   ------------
Balance, December 31, 2000       20,232,632  $ 20,233  $ 8,824,966  $    (1,250) $        -   $(10,193,594)  $ (1,349,645)

Conversion of shareholder loan
   to stock ($1.00 per share)     1,116,800     1,116    1,115,684            -           -              -      1,116,800
Issuance of stock for cash
   ($1.00 per share)                375,000       375      337,125            -           -              -        337,500
Options exercised
    ($1.00 per share)               260,275       260      260,015                 (260,275)             -              -
Forgiveness of shareholder's
   compensation                           -                275,000            -           -              -        275,000
Forgiveness of interest on
   shareholder loans                      -         -       35,435            -           -              -         35,435
Conversion of convertible
    loan                             23,585        24       54,870            -           -              -         54,894
Issuance of stock for
   services ($1.00 per share)        12,350        13       12,337            -           -              -         12,350
</TABLE>









                 See accompanying notes to financial statements.
                                       F-5
<PAGE>
                           CBCOM, INC. AND SUBSIDIARY
                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT
                               (See Notes 7 and 8)
<TABLE>
<S>                              <C>         <C>       <C>          <C>          <C>          <C>            <C>
                                      Common Stock     Additional                 Employee
                                 --------------------    Paid-In        Stock      Notes       Accumulated
                                   Shares     Amount     Capital    Subscription Receivable      Deficit         Total
                                 ----------  --------  -----------  ------------ ----------   -------------  -------------
Compensation cost resulting
   from stock options                     -         -       13,119            -           -              -         13,119
Repayment of employee notes
   receivable                             -         -            -            -      56,250              -         56,250
Interest on employee
     notes receivable                     -         -            -            -      (7,196)             -         (7,196)
Deemed interest on conversion
   of shareholder loan                    -         -    1,575,825            -           -              -      1,575,825

Net loss                                  -         -            -            -           -     (2,812,167)    (2,812,167)
                                 ----------- --------  -----------  -----------  ----------   ------------   ------------
Balance, December 31, 2001       22,020,642  $ 22,021  $12,504,376  $    (1,250) $ (211,221)  $(13,005,761)  $   (691,835)
                                 =========== ========  ===========  ===========  ==========   ============   ============
</TABLE>

































                 See accompanying notes to financial statements.
                                       F-6
<PAGE>
                           CBCOM, INC. AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                       Year ended December 31,
                                                     --------------------------
                                                         2000          2001
                                                     ------------  ------------
Cash flows from operating activities:
  Net loss                                           $ (3,042,217) $ (2,812,167)
  Adjustments to reconcile net loss to net cash
      provided by (used in)operating activities:
    Depreciation and amortization                          81,385        81,302
    Accrued interest expense on shareholder's loan         77,866        35,435
    Settlement on former CEO's claim- Note 5              629,375             -
    Deemed interest                                     1,150,262     1,580,719
    Compensation cost related to options granted           13,119        13,119
    Write-off of advance to subsidiary                          -       (69,622)
    Amortization of rent prepaid with common stock              -        62,500
    Issuance of stock for compensation cost                90,500             -
    Non-cash salary repayment of employee
      notes receivable                                          -        56,250
    Changes in operating assets and liabilities:
      Deposits                                             (9,825)        8,333
      Prepaid expenses                                      4,771       (24,087)
      Other receivable                                                  (52,599)
      Accounts payable                                    (69,886)      115,826
      Salaries payable - employees                        421,689       300,950
      Accrued liabilities and income tax payable           30,652        (3,573)
                                                     ------------  ------------
Net cash used in operating activities                    (622,309)     (707,614)
                                                     ------------  ------------
Cash flows from investing activities:
  Receivables - Officer and other                               -    (1,053,086)
  Purchase of fixed assets                                      -      (456,076)
                                                     ------------  ------------
Net cash used in investing activities                           -    (1,509,162)
                                                     ------------  ------------
Cash flows from financing activities:
  Reversal of Appletree private placement                     (50)            -
  Proceeds from shareholder loans                         599,706     1,950,174
  Repayments to shareholders                                    -      (224,000)
  Proceeds from convertible loan                                -       150,000
  Proceeds from issuance of stock                              50       337,500
                                                     ------------  ------------
Net cash provided by financing activities                 599,706     2,213,674
                                                     ------------  ------------
Net decrease in cash and cash equivalents                 (22,603)       (3,102)

Cash and cash equivalents, beginning of period             31,844         9,241
                                                     ------------  ------------
Cash and cash equivalents, end of period             $      9,241  $      6,139
                                                     ============  ============

                See accompanying notes to financial statements.

                                       F-7
<PAGE>
                           CBCOM, INC. AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                       Year ended December 31,
                                                     --------------------------
                                                         2000          2001
                                                     ------------  ------------

Supplementary information
Cash paid during the year:
  Interest                                           $          -  $      7,630
  Taxes Paid                                                              3,200

Supplemental disclosure of non - cash activities
  Conversion of shareholder loans and salary         $  1,639,346  $  1,116,800
  Conversion of officer salary to option                        -       275,000
  Repayment of employee note receivable                         -        56,250
  Conversion of convertible loan to common stock                -        50,000
  Deemed interest on shareholder loan conversion                -     1,580,719
  Forgiveness of interest accrued                          77,866        35,435



































                 See accompanying notes to financial statements.
                                       F-8
<PAGE>
                           CBCOM, INC. AND SUBSIDIARY

                          NOTES TO FINANCIAL STATEMENTS

NOTE 1--BASIS OF PRESENTATION

Background of Organization and Going Concern Uncertainty

CBCom,  Inc. and Subsidiary ("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.  In January  2001 the Company
established  a WFOE (wholly  foreign  owned  enterprise)  registered in Beijing,
China,  called  CBCom  China.  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 is seeking to
acquire existing Internet Service Providers (ISP) and web based Internet content
providers (ICP) and will operate 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's headquarters is located in Encino, California. From August 1997 to
December 2000, the Company maintained a representative office in Beijing for the
purpose of oversight of its China  projects.  In January 2001 the Company formed
its subsidiary in Beijing and continues to occupy the same offices.

The Company,  through its  subsidiary in Beijing,  has entered into a Management
Services   Agreement  with  Beijing  Chinet   Information   Technology   Company
("Chinet"),  an  internet  service  provider  (ISP) with  offices in Beijing and
Shanghai,  PRC. The major shareholder and President of Chinet is also an officer
and minority shareholder (5.5%) of the Company. Under the agreement, CBCom China
provides  technical support,  equipment,  software  maintenance,  accounting and
management  consulting services and receives eighty percent (80%) of the revenue
collected on behalf of the ISP. In addition,  CBCom,  Inc. and Subsidiary loaned
funds to this  officer of the  Company for the  purpose of  acquiring  companies
operating as internet service providers in China.

The Company's  consolidated financial statements as of December 31, 2001 and for
the year then ended have been  prepared  assuming the Company will continue as a
going concern,  which contemplates the realization of assets and satisfaction of
liabilities in the normal course of business.  The Company incurred  consecutive
losses in 1997,  1998,  1999, 2000 and 2001 and had negative  working capital in
each of those years 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
for its operations in China and 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.

                                      F-9
<PAGE>
                           CBCOM, INC. AND SUBSIDIARY

                          NOTES TO FINANCIAL STATEMENTS

NOTE 1--BASIS OF PRESENTATION (continued)

Basis of Accounting and Consolidation Policy

The financial  statements are prepared in accordance with accounting  principles
generally accepted in the United States of America (U.S. GAAP) and are presented
in U.S. dollars. The accompanying  consolidated financial statements include the
accounts  of CBCom,  Inc.  and its  wholly  owned  subsidiary.  All  significant
inter-company   transactions   and  balances   have  been   eliminated   in  the
consolidation.

Use of Estimates

The preparation of financial  statements in conformity  with generally  accepted
accounting  principles  in the United States of America  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. Actual results could differ from these estimates.

Cash and Cash Equivalents

The Company considers all highly liquid  investments  purchased with an original
maturity of three months or less to be cash equivalents.

Furniture, Fixtures and Equipment

Property and equipment are stated at cost.  Depreciation  is computed  primarily
using the estimated useful lives of the assets as follows:
                                                          Estimated Useful
                                                           Life (in years)
                                                         -------------------
       Furniture and fixtures                                     7
       Equipment                                                  5

Maintenance,  repairs and minor  renewals  are  charged  directly to expenses as
incurred.  Additions and  betterment to property and equipment are  capitalized.
When assets are disposed of, the related cost and accumulated  depreciation  are
removed  from the  accounts  and any  resulting  gain or loss is included in the
statement of operations.

Other Receivable

Other  receivable  consists  mainly  of  receivable  from  Chinet.  The  Company
periodically  evaluates the recoverability of these assets and writes it down to
net realizable value.

Fair Value of Financial Instruments

The carrying amounts of cash, accounts payable, accrued expenses, and short-term
loan payable are  reasonable  estimates of their fair value because of the short
maturity  of these  items.  The fair  value of the  non-convertible  loan is not
significantly  different from its carrying value due to the interest rate, which

                                      F-10
<PAGE>
                           CBCOM, INC. AND SUBSIDIARY

                          NOTES TO FINANCIAL STATEMENTS

NOTE 1--BASIS OF PRESENTATION (Continued)

approximates to the interest rate that the Company could get from third parties.
The convertible  shareholders  loan can be determined by the market price of the
common stock times the outstanding convertible shares. At December 31, 2001, the
fair value of the total $930,027  shareholder loan is approximately  $2,557,574.
The $100,000 convertible loan has fair value of $118,750.

Income Taxes

The Company accounts for income taxes using the liability method, which requires
an entity to recognize  deferred tax  liabilities  and assets.  Deferred  income
taxes are recognized  based on the  differences  between the tax bases of assets
and liabilities and their reported  amounts in the financial  statements,  which
will  result in taxable or  deductible  amounts in future  years.  Further,  the
effects of enacted tax laws or rate changes are included as part of deferred tax
expenses or benefits in the period that covers the  enactment  date. A valuation
allowance is recognized if it is more likely than not that some portion,  or all
of, a deferred tax asset will not be realized.

Revenue Recognition

Revenues  are  recognized  when  services  are  rendered.  Revenue  consists  of
consulting  fees earned from  computer  consulting  services,  usage of computer
equipment,  and  accounting  and  other  management  consulting  services  to an
internet service provider located in Beijing, China.

Stock-Based Compensation

Statement of Financial Accounting Standards No. 123, "Accounting for Stock-based
Compensation"  ("SFAS 123"),  establishes a fair value method of accounting  for
stock-based  compensation plans and for transactions in which a company acquires
goods or services from  non-employees in exchange for equity  instruments.  SFAS
123 also gives the option to account for  stock-based  employee  compensation in
accordance  with  Accounting  Principles  Board  Opinion  No.  25 (APB No.  25),
"Accounting  for Stock issued to Employees," or SFAS 123. The Company elected to
follow APB No. 25 which measures compensation cost for employee stock options as
the  excess,  if any,  of the fair market  price of the  Company's  stock at the
measurement date over the amount an employee must pay to acquire stock.

Earnings (Loss) Per Share

Effective  December 31,   1997,  the  Company  adopted  Statement  of  Financial
Accounting  Standards No. 128,  "Earnings per Share" ("SFAS 128"). The statement
replaces the calculation of primary and fully diluted  earnings (loss) per share
with basic and diluted  earnings  (loss) per share.  Basic  earnings  (loss) per
share includes no dilution and is computed by dividing  income (loss)  available
to common  shareholders  by the weighted  average  number of shares  outstanding
during the period.  Diluted  earnings  (loss) per share  reflects the  potential
dilution of securities that could share in the earnings of an entity, similar to


                                      F-11
<PAGE>
                           CBCOM, INC. AND SUBSIDIARY

                          NOTES TO FINANCIAL STATEMENTS



NOTE 1--BASIS OF PRESENTATION (Continued)

fully diluted  earnings (loss) per share.  The 2,100,000  options and 2,4,62,500
options  in 2000 and 2001 were not  included  in  calculating  weighted  average
outstanding shares as they have an anti-dilutive impact on loss per share.

Foreign Currency Translation and Comprehensive Income or Loss

The foreign  subsidiary's  assets and liabilities are translated  using rates of
exchange  as of the  balance  sheet  date and the  statements  of  earnings  are
translated  at the  average  rates of  exchange  for the  year.  Income  or loss
resulting  from foreign  currency  should be accounted for in the  comprehensive
statement of operation.  During 2001, the Company did not incur material  income
or loss from foreign  currency  translation  because the exchange  rate had been
consistent  throughout  the year.  Therefore,  the  comprehensive  statement  of
operation is not presented.

New Accounting Standards

         In June 2001, the Financial  Accounting Standards Board (FASB) SFAS No.
141, "Business  Combinations",  and SFAS No. 142, "Goodwill and Other Intangible
Assets." SFAS No. 141 requires the use of the purchase  method of accounting and
prohibits the use of the  pooling-of-interest  method of accounting for business
combinations  initiated after June 30, 2001. SFAS No. 141 also requires that the
Company recognize acquired intangible assets apart from goodwill if the acquired
intangible assets meet certain criteria. It also requires, upon adoption of SFAS
142 that the Company  reclassify the carrying  amounts of intangible  assets and
goodwill  based on the criteria in SFAS No. 141. The adoption of SFAS No. 141 is
not expected to have a material impact on the consolidated financial statements.
Under the new rules of SFAS No. 142,  goodwill and indefinite  lived  intangible
assets will no longer be amortized but will be reviewed annually for impairment.
Intangible  assets that are not deemed to have an indefinite  life will continue
to be amortized over their useful lives.  SFAS No. 142 requires that the Company
identify  reporting  units  for  the  purposes  of  assessing  potential  future
impairments of goodwill,  reassess the useful lives of other existing recognized
intangible   assets,  and  cease  amortization  of  intangible  assets  with  an
indefinite  useful life.  An  intangible  asset with an  indefinite  useful life
should be tested  for  impairment.  SFAS No.  142 is  required  to be applied in
fiscal  years  beginning  after  December  15,  2001 to all  goodwill  and other
intangible assets  recognized at the date,  regardless of when those assets were
initially  recognized.  SFAS No. 142 requires the Company to reassess the useful
lives of other intangible assets within the first interim quarter after adoption
of SFAS 142.





                                      F-12
<PAGE>
                           CBCOM, INC. AND SUBSIDIARY

                          NOTES TO FINANCIAL STATEMENTS

NOTE 1--BASIS OF PRESENTATION (Continued)


The FASB also issued SFAS No. 143,  "Accounting for Obligations  Associated with
the  Retirement  of Long-Lived  Assets,  and SFAS No. 144,  "Accounting  for the
Impairment  or  Disposal of  Long-Lived  Assets",  in August and  October  2001,
respectively.

SFAS  No.  143  establishes   accounting   standards  for  the  recognition  and
measurement  of  an  asset  retirement   obligation  and  its  associated  asset
retirement  cost. It also  provides  accounting  guidance for legal  obligations
associated  with the  retirement  of  tangible  long-lived  assets.  SFAS 143 is
effective in fiscal years  beginning  after June 15, 2002,  with early  adoption
permitted.  The Company  expects  that the SFAS No. 143 will not have a material
impact on its  consolidated  results of operations  and financial  position upon
adoption.

SFAS No.  144  establishes  a single  accounting  model  for the  impairment  or
disposal of long-lived assets, including discontinued  operations.  SFAS No. 144
superseded  Statement of Financial Accounting Standards No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be disposed of"
and APB Opinion No, 30,  "Reporting  the Results of  Operations - Reporting  the
Effects of Disposal of a Segment of a Business,  and Extraordinary,  Unusual and
Infrequently  Occurring Events and Transactions.  The provisions of SFAS 144 are
effective in fiscal years beginning after December 15, 2001, with early adoption
permitted and, in general, are to be applied prospectively. The Company does not
expect that the adoption will have a material impact on its consolidated results
of operation and financial position.

Cessation of Development Stage

In 2001 the Company's  wholly owned  subsidiary  CBCom China started to generate
consulting  income  pursuant to its  consulting  agreement  with Beijing  Chinet
Information   Technology   Company.   Therefore  the  Company  ceased  to  be  a
development-stage enterprise.

















                                      F-13
<PAGE>
                           CBCOM, INC. AND SUBSIDIARY

                          NOTES TO FINANCIAL STATEMENTS

NOTE 2--FURNITURE, FIXTURES AND EQUIPMENT

Furniture, fixtures and equipment consists of:
                                                   December 31,
                                           -----------------------------
                                               2000             2001
                                           ------------     ------------
 Furniture and fixtures                    $      7,216     $      7,216
 Equipment                                       89,124          545,200
                                           ------------     ------------
                                                 96,340          552,416

 Accumulated depreciation                       (61,936)        (143,238)
                                           ------------     ------------
 Net                                       $     34,404     $    409,178
                                           ============     ============

Depreciation  expense was $18,884 and $81,302 for the years ended  December  31,
2000, and 2001.

Included in equipment are the following assets held under capital leases:
                                                    December 31,
                                           -----------------------------
                                               2000             2001
                                           ------------     ------------
 Equipment                                 $     32,504     $     32,504

 Accumulated depreciation                       (22,755)         (29,256)
                                           ------------     ------------
 Net                                       $      9,749     $      3,248
                                           ============     ============

NOTE 3--INCOME TAXES

The provision for income taxes consists of:
                                              Year ended December 31,
                                           -----------------------------
                                              2000                2001
                                           ------------     ------------

 Income tax provision (state)              $        800     $        800
                                           ------------     ------------
       Total                               $        800     $        800
                                           ============     ============








                                      F-14
<PAGE>
                           CBCOM, INC. AND SUBSIDIARY

                          NOTES TO FINANCIAL STATEMENTS

NOTE 3--INCOME TAXES (continued)

The components of the net deferred tax asset and liability are as follows:
                                                    December 31,
                                           -----------------------------
                                              2000                2001
                                           ------------     ------------
Deferred tax assets:
     Net operating loss carryforwards      $  3,081,000     $  2,935,000
     Salary and bonus accrual                   303,000          337,000
     Capital loss carryforward                    7,000            5,000
     Other                                            -            3,000
                                           ------------     ------------
     Subtotal                                 3,391,000        3,280,000
     Valuation allowance                     (3,391,000)    $ (3,280,000)
                                           ------------     ------------
     Net                                   $          -     $          -
                                           ============     ============

Management is unable to determine  whether the  realization  of the net deferred
tax  asset is more  likely  than not to  realize,  therefore,  a 100%  valuation
allowance has been  established.  The Company's  effective tax rate differs from
the  expected  rate due  primarily  to the Company not  recognizing  the benefit
arising from its net operating  losses due to  uncertainty  regarding the use of
the tax benefit.

The Company had accumulated net operating losses of approximately  $6,850,000 as
of December 31, 2001,  for Federal and  California  state income tax purposes to
offset future taxable income, if any, which will expire at various dates through
the year 2021 for  federal  income tax  purposes  and  through the year 2006 for
California state income tax purposes.  However, the utilization of net operating
losses may be subject to certain limitations as prescribed by Section 382 of the
Internal  Revenue  Code.  At December  31,  2001 the Company has a capital  loss
carryforward of $11,494 that will expire in 2003.

The  Company's  wholly  owned  subsidiary  in  China  was in its  first  year of
operation in 2001 and was  exempted  from income tax. No current or deferred tax
was recognized for this subsidiary.

NOTE 4--JOINT VENTURE PROJECTS

The Company  signed a Memorandum of  Understanding  with Shanghai Stock Exchange
Communication Co. (SSEC), a subsidiary of the Shanghai Stock Exchange on January
31,  1999.  The purpose of the  Memorandum  of  Understanding  is to establish a
Sino-U.S. equity joint venture company, in which CBCom, Inc. and Subsidiary will
hold 70% of the equity.  The joint  venture  company will  distribute  real time
stock and  financial  data in China using the  satellite  communications  system
owned by Shanghai  Stock Exchange  Communication  Co. At a later time, the joint
venture plans to create an Internet Service Provider (ISP) in China. The Company
has incurred  $250,000 in start-up  expense  which was expensed  during 1998 and


                                      F-15
<PAGE>
                           CBCOM, INC. AND SUBSIDIARY

                          NOTES TO FINANCIAL STATEMENTS

NOTE 4--JOINT VENTURE PROJECTS (continued)

which could be credited  toward its capital  contribution  to the joint  venture
company when the joint venture is completed.

Licenses/Contracts

In 1998, the Company issued 1,250,000 shares of common stock valued at $0.50 per
share to Sinoway  Limited in  exchange  for  services  related to  obtaining  an
exclusive   license   to  use   SSEC's   VSAT   satellite   system   and   other
telecommunication  infrastructures  as well as the name and logo, etc., of SSEC.
Accordingly,  the Company recognized a notional stock subscription receivable of
$1,250 and  promotion  service for License and Contract of $623,750 in 1998.  As
the chance of obtaining the license is uncertain,  the fees paid for promotional
services  were  expensed  during  1998.  As of December  31,  2001,  the Company
believed  that it is  possible  that the said  joint  venture  could  take place
in2002. However, no assurances can be given that such an event will occur.

NOTE 5--RELATED PARTY TRANSACTIONS

Shareholder Loans

The  Company's   operations  have  been  financed  by  capital   injection  from
shareholders and loans from shareholders.

Since  April 24,  1998,  the  Company has had an  in-effect  a  promissory  note
agreement  (the Note)  with the  principal  shareholder  of the  Company,  which
specified that the principal  shareholder  will continue to provide funds to the
Company on a going  forward basis and that any balance of loan bears an interest
rate of 7% per annum.  According to the Note, the  shareholder has the option to
convert his outstanding loan balance into the Company's common stock at a stated
conversion price at any time prior to its maturity date. The Note 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. The original Note was
due on April 24, 2000, which specified a $0.50 per share  conversion  price. The
extended Note,  dated April 24, 2000, was due on April 23, 2001 and was extended
for another year to April 23 2002 and modified the conversion  rate to $1.00 per
share.

Under this Note agreement,  the principal shareholder converted $270,400 of loan
to 468,500  shares of common stock in 2000, and $1,116,800 to 1,116,800 in 2001.
In 2000 and 2001, the principal  shareholder  waived his interest  receivable of
$11,598 and $35,435, respectively.

On May 15, 2001, two officers exercised 260,275 options to buy 260,275 shares of
common  stock at a price of $1.00 per  share.  The  Company  accepted a one-year
promissory  note  collateralized  by, and in the same amount as salary and other
compensation owed to the two officers. from each of the officers. The note bears
interest at 5% per annum.  As of September 30, 2001, one of the officers  repaid
$56,250 on the note and there was a total of $7,196 in accrued  interest  income
on the notes receivable.

                                      F-16
<PAGE>
                           CBCOM, INC. AND SUBSIDIARY

                          NOTES TO FINANCIAL STATEMENTS

NOTE 5--RELATED PARTY TRANSACTIONS (continued)

Shareholder Loans (continued)

During the year 2001, two  shareholders who are officers of the Company advanced
$76,185 to the  Company.  These  advances  do not bear  interest,  do not have a
definite maturity date and have not been repaid at December 31, 2001.

Two other  shareholders  also  advanced  money to the Company in 1999.  However,
these  advances did not bear interest and do not have a definite  maturity date.
The balance of $11,988 has not been paid at December 31, 2001.

Loan Receivable from an Officer

On June 15, 2001,  the Company  entered  into a loan  agreement,  initially  for
$500,000,  with an  officer,  who will use the  proceeds  to conduct  merger and
acquisition  activities of Internet  Service Provider (ISP) targets he has found
in China.  The  promissory  note is secured by an equity  interest  in an ISP in
China that is owned 90% by the officer and the  officer has  committed  to repay
the principal and interest  either in cash or in the form of the equity interest
he has acquired in China.  The Company has made additional  advances on the loan
and the balance at  December  31,  2001 is  $1,053,086.  The loan will mature on
November 30, 2010 with interest at 8% per annum.

Loan from Polmont and Employment Agreements

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 15, 1999 plus
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 held in an escrow  account,  which shares were owned by
Polmont Investment  Limited (Polmont).  Polmont is an investment holding company
registered in British Virgin Island,  which is beneficially  owned by the sister
of the principal shareholder.

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.




                                      F-17
<PAGE>
                           CBCOM, INC. AND SUBSIDIARY

                          NOTES TO FINANCIAL STATEMENTS

NOTE 5--RELATED PARTY TRANSACTIONS (continued)

Loan from Polmont and Employment Agreements (continued)

The Company entered into an agreement with Polmont on March 27, 1999 whereby the
Company shall repay the loan balance on a  dollar-to-dollar  basis to Polmont on
or before March 26, 2002 for all amounts  paid to a former CEO for  compensation
from the sale of security by an escrow  agent,  plus simple  interest at 10% per
annum on the  outstanding  balance.  Also,  that  agreement  specified  that the
Company allow Polmont to convert the outstanding  obligation,  in whole or part,
into common stock at a  conversion  price of $0.50 per share.  Upon  conversion,
interest  earned by  Polmont on the  amount(s)  converted  shall be  waived.  In
addition,  the Company  designated  Polmont to purchase 500,000 shares of common
stock owned by the former CEO for $30,000 in total after the  repayment  process
is complete. Due to the nature of this off-balance sheet financing,  the Company
recognized  prepaid  interest  of  $220,000  and  the  corresponding  amount  in
additional paid-in capital and amortized the prepaid interest over the period of
three years.

During the period from April 1999 to June 30,  2000,  the escrow sold a total of
250,000  shares of a public  traded  company's  common  stock and the former CEO
received the entire claimed unpaid compensation of $520,833 plus $16,407 towards
the purchase of his Common Stock.

Regarding the relevant  compensation for the remaining terms on the former CEO's
employment contract,  the former CEO and the Company signed the final settlement
agreement on September 30, 2000. The former CEO agreed to accept the value of an
additional  190,000 shares of a public traded company's common stock as full and
final  settlement for all claims.  The total value of 190,000 shares of a public
traded company's stock was  approximately  $629,375 based on the market price of
that particular  stock on September 1, 2000.  After this  settlement,  the total
outstanding loan payable to Polmont totaled $1,142,446, which was converted into
2,284,892  shares of the Company's  common stock based upon the conversion  rate
specified in the agreement  dated March 27, 1999. In accordance  with EITF 98-5,
the Company recorded the deemed interest of $985,262 upon conversion.  According
to the terms specified in the  aforementioned  agreement between Polmont and the
Company,  Polmont waived its accrued interest  receivable of $66,278 at December
31, 2000.













                                      F-18
<PAGE>
                           CBCOM, INC. AND SUBSIDIARY

                          NOTES TO FINANCIAL STATEMENTS

NOTE 5--RELATED PARTY TRANSACTIONS (continued)

Loan from Polmont and Employment Agreements (continued)


The balance of loans payable to related parties is as follows:

<TABLE>
<S>                                           <C>          <C>           <C>
                                              Loans from    Loans from    Loans from
                                              Principal        Other       Polmont
                                              Shareholder  Shareholders      Ltd.
                                              ------------ ------------- ------------
Balance at December 31, 1999                  $          - $      11,988 $    157,184

New borrowings                                     599,706             -      985,262
Repayments including conversion into stock        (270,400)            -   (1,142,446)
                                              ------------  ------------ ------------
Balance at December 31, 2000                       329,306        11,988            -

New borrowings                                   1,950,174        76,185
Repayments including conversion into stock      (1,349,453)            -            -
                                              ------------  ------------ ------------
Balance at December 31, 2001                  $    930,027  $     88,173 $          -
                                              ============  ============ ============
</TABLE>


The above  $930,027  shareholder  loan will be due in April  2002.  The  Company
expects the loan to be renewed at the due date. Therefore,  the shareholder loan
is classified as non-current.

NOTE 6--COMMITMENTS AND CONTINGENCIES

Leases

The Company leases its facilities in the U.S. under a  non-cancelable  operating
lease that expires  December 31, 2003. The Company also leases equipment under a
non-cancelable  capital lease that expired June 2000. However, the Company had a
dispute with the leasing company and has not made payments at December 31, 2001.
As such, the Company is in default of the lease obligation at December 31, 2001.
Future minimum annual lease payments as of December 31, 2001 are as follows:

                                         Capital         Operating
Year ending December 31,                 Leases           Leases
-------------------------------       ------------     ------------
    2002                              $     32,433     $     57,252
    2003                                         -           57,252
                                      ------------      -----------
    Total lease payments              $     32,433     $    114,504
                                      ============     ============

                                      F-19
<PAGE>
                           CBCOM, INC. AND SUBSIDIARY

                          NOTES TO FINANCIAL STATEMENTS

NOTE 6--COMMITMENTS AND CONTINGENCIES (continued)

Leases (continued)

The Company sublet a portion of its facility and offset rent expense in 2000 and
2001. The net rental expense is presented as follows:
                                             Year ended December 31,
                                          ----------------------------
                                              2000            2001
                                          ------------    ------------
Gross rental expense (including
rent in Beijing, China)                   $    184,459    $    158,982

Sublet rental income                                           (11,000)
                                          ------------    ------------
Net rental expense                        $    184,459    $    147,982
                                          ============    ============

The Company  leases its  facilities in Beijing under a five-year  non-cancelable
operating  lease that  commenced  in 1998 and expires  February  28,  2003.  The
Company  issued 625,000 shares of common stock in exchange for $312,500 of rent.
The Company amortizes the prepaid rent at the rate of $5,208 per month.

Litigation

On August 30, 1999,  a lawsuit was filed in the  Superior  Court of the State of
California  against  the  Company  and its  officers  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 alleged  that the  Company  failed to
consummate the merger by failure to use its best efforts to effect it, failed to
pay  $50,000  in  outstanding  debts to two  shareholders  on  behalf of Com Vu,
terminated the agreement  improperly and breached a covenant of good faith.  Com
Vu was requesting payment of the $50,000 plus losses of approximately $15,000 in
expenses and costs.

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.

On June 11,  2001  CBCom,  Inc.  and  Subsidiary  filed  suit  against a firm of
attorneys practicing in Los Angeles for professional  negligence relating to the
negotiation  and  preparation  of an employment  agreement for the former CEO of
CBCom,  Inc. and Subsidiary.  On October 29, 2001 the firm of attorneys  settled
the suit with the Company.





                                      F-20
<PAGE>
                           CBCOM, INC. AND SUBSIDIARY

                          NOTES TO FINANCIAL STATEMENTS

NOTE 6--COMMITMENTS AND CONTINGENCIES (continued)

Litigation (continued)

In March 2002 a lawsuit was filed  against the Company by EMC Holdings  based on
an alleged breach of contract for ill-defined  investor relations services,  and
seeks damages of 210,000 shares of CBCom, Inc. and Subsidiary stock payable over
various periods.  An independent  contractor had apparently engaged EMC Holdings
while purporting to act on behalf of the company. CBCom, Inc. and Subsidiary was
not aware of the engagement and EMC Holdings knew that the contractor was not an
officer  or  director  of the  Company.  No  services  were  performed  and  the
contractor had no actual or apparent authority to bind the Company.  The Company
believes there is no liability and intends to vigorously defend the lawsuit.

NOTE 7--EQUITY TRANSACTIONS

2000

In April 2000,  the principal  shareholder  converted  $198,100 of a shareholder
loan into 396,200 shares of the Company's stock at $0.50 per share in accordance
with the terms  specified on the Note dated April 24, 1998 (See Note 5). In June
2000,  an advance of $72,300 made by the principal  shareholder  after April 24,
2000 was converted into 72,300 shares of common stock at $1.00 per share,  which
was specified in the extension of the Note.

During the second quarter of 2000, in terms of the conversion  rate of $0.50 per
share  reached in a 1999  agreement  between an employee  and the  Company,  the
Company  converted the $90,500 of compensation  due to the employee into 181,000
shares of the Company's  common stock in accordance  with EITF98-5.  The Company
recorded the compensation  cost of $90,500 upon  conversion.  In addition to the
$90,500  unpaid  compensation,  the Company also owed the  employee  $136,000 of
unpaid compensation,  which was converted into 136,000 shares of common stock at
$1.00 per share,  which was the fair value of the Company's common stock at that
time.

At December 5, 2000, the Company unilaterally rescinded the transaction in which
it issued 50,000 shares of common stock to Appletree  Investment in exchange for
a shareholder name list plus $50. Consequently,  the Company returned the $50 of
proceeds to Appletree.

At December 31, 2000,  Polmont converted  $1,142,446 of loan lent to the Company
into 2,284,892  shares of common stock at $.50 per share in accordance  with the
terms  specified in the loan  agreement  dated March 27, 1999. In addition,  the
Company  recorded  deemed  interest of $985,262.  Consequently,  the outstanding
deferred interest of $91,668 was written off as of December 31, 2000.

At December 31, 2000, the principal  shareholder  and Polmont forgave $77,866 of
interest  accrued on their loan.  The Company  recognized  $77,866 as additional
paid-in capital.



                                      F-21
<PAGE>
                           CBCOM, INC. AND SUBSIDIARY

                          NOTES TO FINANCIAL STATEMENTS

NOTE 7--EQUITY TRANSACTIONS (Continued)

2001

Pursuant to the convertible  promissory note dated April 24, 2000, the principal
shareholder continuously loaned funds to the Company. During 2001, the total new
borrowing from the shareholder  amounted to $1,950,174,  of which $1,116,800 was
converted to common stock at a stated conversion rate of $1.00 per share. Due to
the  convertible   feature,  the  Company  recorded  total  deemed  interest  of
$1,575,825.  The deemed  interest  is  calculated  at excess of market  price at
commitment  date over stated  conversion  rate of $1.00 per share.  The detailed
transactions of shareholder loan conversion are as follows:

o  February 13, 2001       $150,000 converted to 150,000 shares of common stock
o  May 21, 2001            $133,300 converted to 133,300 shares of common stock
o  May 25, 2001            $125,000 converted to 125,000 shares of common stock
o  July 19, 2001           $170,000 converted to 170,000 shares of common stock
o  August 7, 2001          $335,000 converted to 335,000 shares of common stock
o  August 9, 2001          $100,000 converted to 100,000 shares of common stock
o  September 18, 2001      $91,000 converted to 91,000 shares of common stock
o  December 3, 2001        $12,500 converted to 12,500 shares of common stock.

On March 6, 2001, the Board of Directors of the Company  authorized the issuance
of  100,000  shares of common  stock at $1.00  per share to raise  $100,000  for
business development purposes.  The cash proceeds of this issuance were $90,000,
net of a finder's fee of $10,000.

At March 31, 2001, the Company recognized $5,602 of interest accrued on the loan
payable to the principal shareholder.

On May 15, 2001,  one officer  forgave his $275,000 of  compensation  receivable
from the  Company.  As an  incentive to this  officer,  the Company  granted him
550,000  options to purchase  550,000 shares of common stock at $1.00 per share.
The options were immediately vested and will expire in 10 years. The Company did
not recognize any stock compensation in accordance with APB No. 25.

On May 25, 2001,  the Company issued 275,000 shares of its common stock at $1.00
per share to an outside  investor  and  received  proceeds of 247,500,  net of a
finder's fee of $27,500.

At June 30, 2001, the Company  recognized $5,747 of interest accrued on the loan
payable to the principal shareholder.

At September 30, 2001, the Company  recognized $7,936 of interest accrued on the
loan payable to the principal shareholder.

On October 2, 2001,  the Company  issued  12,350  shares of common  stock to two
vendors of the  Company  in  settlement  of two  outstanding  invoices  totaling
$12,352 at $1.00 per share when the market price was $2.10 per share.



                                      F-22
<PAGE>
                           CBCOM, INC. AND SUBSIDIARY

                          NOTES TO FINANCIAL STATEMENTS

NOTE 7--EQUITY TRANSACTIONS (Continued)

At December 31,2001,  the Company  recognized $16,150 of interest accrued on the
loan payable to the principal shareholder.

Secured Convertible Loan

The Company  entered into a loan  agreement  for the  principal of $150,000 with
Ashland  Partners,  a  Delaware  corporation,  on June  6,  2001.  Per the  loan
agreement,  the loan bears 6.67% interest per annum and the Company is obligated
to pay back  $100,000 of principal  and accrued  interest on June 6, 2002 unless
the $100,000 is converted into common stock at $2.00 per share on or before June
6, 2002. The remaining  $50,000 must be converted into common stock,  anytime 30
days  after June 6, 2001 but in no event  later than June 6, 2002,  at the price
per share equal to eighty percent (80%) of the average  Closing Bid Price of the
Common Stock, as quoted by Bloomberg L.P. for ten (10) trading days  immediately
preceding the conversion  date. The loan holder elected to convert the mandatory
fifty thousand  dollars  ($50,000)  portion of the convertible  loan on July 25,
2001 and  received  23,585  shares of the  Company's  common stock at a price of
$2.12  according  to the  terms of the  loan.  Due to the  mandatory  conversion
feature, the Company recognized a deemed interest of $4,894 based on the $50,000
portion that was converted.

The Company, at its sole discretion, may elect to pay interest in cash or in the
form of common  stock.  If the  accrued  interest  is paid in the form of common
stock,  the shares of common  stock will be  calculated  as  follows:  the total
unpaid accrued interest divided by the value of common stock, which shall be the
Closing Bid Price on: (i) the date the  interest  payment is due; or (ii) if the
interest payment is not made when due, the date the interest payment is made. In
accordance with the loan agreement, this loan and all payments hereon, including
principal and interest,  shall be subordinate  and junior in right of payment to
all accounts  payable of the Company incurred in the ordinary course of business
and/or bank debt of the Company  not to exceed $1 million.  The Company  granted
the lender a security right in all of its assets until repayment of this loan.

NOTE 8-- STOCK OPTIONS

The Company adopted a stock option plan (the Plan), which includes non-qualified
stock  options and  incentive  stock  options for its  employees,  officers  and
directors.

The stock  option plan  authorizes  the granting of options to purchase up to an
aggregate maximum of 2,500,000 shares of common stock. Under the incentive stock
option plan,  the exercise  price shall not be less than 100% of the fair market
value of common stock on the date of grant. If an incentive option is granted to
an  employee  who at the time of grant owns more than 10% of the total  combined
voting power of all classes of capital stock of the Company, the option exercise
price  shall be at least 110% of the fair  market  value of common  stock on the
date of grant.



                                      F-23
<PAGE>
                           CBCOM, INC. AND SUBSIDIARY

                          NOTES TO FINANCIAL STATEMENTS

NOTE 8-- STOCK OPTIONS (continued)

Under the non-qualified  stock option plan, the exercise price shall not be less
than 85% of the fair  market  value of common  stock on the date of grant.  Each
option under the plan shall become  exercisable  over a period not to exceed ten
years.

During  2000,  the Company  granted a total of 850,000  options with an exercise
price of  $1.00  per  share,  which is the  fair  value  of the  stock,  to four
employees and one consultant.  Of the 850,000 options  granted,  100,000 options
were granted to the consultant in exchange for his service. The first 50% of the
850,000 options were exercisable immediately and the remaining 50% would vest on
the  anniversary  of the grant date and these  options  can be  exercised  for a
period of ten years. The Company  accounted for the options granted to employees
as  provided  by APB No.  25. For the  consultant,  the  Company  used the Black
Scholes  model to  determine  the fair value of the 100,000  options,  which was
$26,238 or  approximately  $0.26 per share in  accordance  with of SFAS No. 123.
Based on the vesting term,  the Company  recognized $ 13,119 each year for stock
compensation expense in 2000 and 2001.

During  2001,  the Company  granted a total of 810,275  options with an exercise
price of $1.00  per  share,  which  was the fair  value of the  stock,  to three
employees. The 810,275 options were exercisable immediately and can be exercised
over a period of ten years.  The Company  accounted  for the options  granted to
employees  as  provided by APB No. 25.  Options  totaling  187,500  expired as a
grantee left the  employment  of the Company in 1999 before the two-year  period
for exercise has passed.  Two grantees  exercised a total 260,275  options at an
exercise  price of $1.00 per share.  In  accordance  with the Plan,  the Company
received two promissory notes in the amount of $260,275.

Had the  Company  determined  compensation  cost  based on the fair value at the
grant date for its stock  options  under SFAS No. 123,  the  Company's  net loss
would have been increased to the pro forma amount indicated below:

                                              Year ending December 31,
                                           -----------------------------
                                               2000             2001
                                           ------------     ------------
Net loss:
     As reported                           $ (3,042,217)    $ (2,812,167)
     Pro forma                             $ (3,265,257)    $ (3,056,117)

Loss per share:
     As reported                           $      (0.17)    $      (0.13)
     Pro forma                             $      (0.19)    $      (0.14)







                                      F-24
<PAGE>
                           CBCOM, INC. AND SUBSIDIARY

                          NOTES TO FINANCIAL STATEMENTS

NOTE 8-- STOCK OPTIONS (continued)

A summary of changes in stock options during each year is presented below:

                                                   December 31,
                                   --------------------------------------------
                                           2000                   2001
                                   --------------------  ----------------------
                                               Weighted              Weighted
                                                Average               Average
                                               Exercise              Exercise
                                     Shares     Price      Shares     Price
                                   ----------  --------  ----------  --------
Options outstanding at beginning
   of year                          1,250,000  $   0.43   2,100,000  $   0.66

Options  granted                      850,000      1.00     810,275      1.00

Options cancelled                                          (187,500)     0.43

Options exercised                           -         -    (260,275)     1.00
                                   ----------  --------  ----------  --------
Options at end of year              2,100,000  $   0.66   2,462,500  $   0.75
                                   ==========  ========  ==========  ========
Options and warrants exercisable
   at end of year                   1,675,000      0.57   2,462,500      0.75
                                   ==========  ========  ==========  ========
Weighted-average fair value of
   options granted during the year             $   0.26              $   0.32
                                               ========              ========

The following table summarizes  information about the stock options  outstanding
at December 31, 2001.

                        Options Outstanding        Options Exercisable
                ---------------------------------  --------------------
                             Weighted
                              Average    Weighted              Weighted
                             Remaining    Average               Average
                   Number   Contractual  Exercise    Number    Exercise
Exercise Price  Outstanding Life (Years)  Price    Exercisable   Price
                ----------- ------------ --------  ----------- --------
$0.43             1,062,500         6.92 $   0.43    1,062,500 $   0.43
$1.00             1,400,000         8.09     1.00    1,400,000     1.00

The fair value of the stock options  granted  during 2000 and 2001 was $0.26 and
$0.32 per  share,  respectively,  on the date of grant  using the Black  Scholes
option-pricing model. The weighted-average assumptions used were as follows:




                                      F-25
<PAGE>
                           CBCOM, INC. AND SUBSIDIARY

                          NOTES TO FINANCIAL STATEMENTS

NOTE 8-- STOCK OPTIONS (continued)

                                              Year ended December 31,
                                         --------------------------------
                                             2000                2001
                                         ------------        ------------

Discount rate - bond yield rate                6.18 %              4.75 %

Volatility                                        - %             50.35 %

Expected life                            5-10 years          5-10 years

Expected dividend yield                           -                   -


NOTE 9-- SUBSEQUENT EVENTS

On March 19, 2002, the Company entered into a Stock Purchase  Agreement with the
Brighton  Opportunity  Fund  wherein  the  Company  will  issue  and  sell up to
$10,000,000 of the Company's  Common Stock.  Also on March 19, 2002, the company
entered  into  an  additional   Stock  Purchase   Agreement  with  the  Brighton
Opportunity Fund to sell 390,000 shares of the Company's Common Stock at a price
of $0.64 per share.




























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