EX-2 4 tran0516.txt COMPOSITE EXH. 2 - ECOM COURT TRANSCRIPT DATED MAY 16, 2005 36 1 2 CERTIFICATE 3 4 The State of Florida 5 County of Palm Beach 6 7 I, JACQUELYN ANN JONES, Court Reporter, certify 8 that I was authorized to and did stenographically report 9 the foregoing hearing; and that the transcript is a true 10 record of my stenographic notes. 11 J farther certify that I am not a relative, 12 employee, attorney or counsel of any of the parties, nor 13 am I a relative or employee of any of the parties' 14 attorney or counsel connected with the action, nor am I 15 financially interested in the action. 16 17 In witness whereof I have hereunto set my hand 18 and seal this 5th day of June, 2005. 19 20 21 MY COMMISSION 100382130 EXPIRES: February 18,2009 JACQUELYN ANN JONES Bonded "Thru Notay Public Undwwrtten 22 Commission No- CC 995956 23 Expires Feb 18, 2005 24 25 1 2 3 4 UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF FLORIDA Judge Steven H. Friedman In Re :Case No. 04-35435-BKC-SHF ECOM ECOM.COM, INC., Debtor STATUS CONFERENCE RE: INVOLUNTARY CASE May 16, 2005 The above entitled cause came on for hearing before the HONORABLE STEVEN H. FRIEDMAN, one of the Judges in the UNITED STATES BANKRUPTCY COURT, in and for the SOUTHERN DISTRICT OF FLORIDA, at 1675 Palm Beach Lakes Boulevard, West Palm Beach, Palm Beach County, Florida, on May 16, 2005, commencing on or about 1:00 p.m., and the following proceedings were had: Reported by: Jacquelyn Ann Jones, Court Reporter OUELLETTE & MAULDIN COURT REPORTERS (305) 358-8875 1 APPEARANCES: 2 3 GAMBERG & ABRAMS By: JAY GAMBERG, ESQUIRE 4 On behalf of the Shareholder Company 5 6 TAPLIN & ASSOCIATES By: RONALD S. KANIUK, ESQUIRE 7 On behalf of the petitioning creditor/ American Capital Holdings 8 9 10 11 12 13 INDEX 14 Page 15 WITNESS: BARNEY RICHMOND 16 DIRECT EXAMINATION BY MR. KANIUK 9 17 CROSS EXAMINATION BY MR, GAMBERG 19 18 19 20 EXHIBITS 21 22 ACH Exhibit No. 1 marked 14 23 24 25 1 THE COURT: ECom eCom.com, Inc. This is a 2 status conference regarding the involuntary case. Now, 3 Mr. Kaniuk, you're representing the petitioning creditor. 4 MR. KANIUK: Yes. 5 THE COURT: And now, Mr. Gamberg, you are 6 here -- 7 MR. GAMBERG: Ifm representing the shareholder 8 family, not the company. 9 THE COURT: Okay, shareholder family. Can I 10 get names on that? 11 MR. PANAIA: P-a-n-a-i-a. 12 MR. GAMBERG: As Your Honor will hear, his 13 father was the chief operating officer of the company. 14 He passed away. The family is one of the major 15 shareholders of the company. 16 THE COURT: I'm sorry to learn that. 17 MR, PANAIA: Thank you, Your Honor. 18 THE COURT: This case was filed initially 19 November of 2004, and the involuntary Chapter 11 petition 20 was filed on that date. The matter remains a Chapter 11 21 case. 22 MR. KANIUK: And we are pleased to report today 23 that we've had conversations, all the parties in interest 24 and Barney Richmond, who is the principal of American 25 Capital Holdings and one of the creditors, and Mr. 26 Panaia, and therefs a general consent to the entry of an 27 order for relief in the bankruptcy case, 3 By way of background, these cases, ECom 4 eCom.com, Ifm going to let Mr. Richmond expand on the 5 history, but they had issued press releases for the 6 spin-off of ten companies. Those shares are out there 7 and traded but had never been issued. Ifm going to let 8 Mr. Richmond expand on that by"way of background, and 9 then I'll tell you where we are. 10 THE COURT: And Mr. Richmond? 11 MR. RICHMOND: Yes. 12 THE COURT: And your first name, sir, is? 13 MR. RICHMOND: Barney. 14 THE COURT: And are you counsel or you're just 15 involved with the company? 16 MR. RICHMOND: We're involved as a petitioning 17 creditor, 18 THE COURT: Then youfre an officer of American 19 Capital Holdings? 20 MR. RICHMOND: Yes, sir. 21 THE COURT: What is your position with American 22 Capital Holdings? 23 MR. RICHMOND: Chairman. CEO. 24 THE COURT: But Mr. Richmond, you're not an 25 attorney, just so I'm clear? 1 MR. RICHMOND: No, sir, 2 THE COURT: Then how can Mr. Richmond speak on 3 behalf of American Capital Holdings? 4 MR, KANIUK: Ifm representing them, I was just 5 going to -- to the extent that I may be incorrect or may 6 make a misstatement, I'll let him correct me, but what 7 happened was - Ifm representing American Capital, I'm 8 representing the petitioning creditors. 9 THE COURT: I understand that. 10 MR. KANIUK: Including American Capital. If 11 you have a problem with him making any statements'on the 12 record, I'll make them for him. 13 THE COURT: Unless you're going to call him as 14 a witness. 15 MR. KANIUK: I don't think we're going to need a 16 witness today, so I'll take care of everything. I 17 apologi ze 18 THE COURT: This is a status conference on an 19 involuntary Chapter 11 that was filed on November 29th, 20 2004, and this case has gone absolutely nowhere. If you 21 would like to know my input on it, that's the way I look 22 at it. 23 MR. KANIUK: I understand, Your Honor. The 24 untimely death of the chairman, David Panaia, was part of 25 the reason for the delay in getting us to this point. 26 I think now we're at a point where we believe we're going 27 to be able to propose a plan within the next 45 to 60 28 days. 4 THE COURT: Propose a plan? You don't even 5 have an adjudicated debtor, 6 MR. Kaniuk: Well, everybody is assuming -- 7 THE COURT: You have an involuntary case in a 8 Chapter 11 that's just sitting. And I was ready to sua 9 sponte dismiss this case today, and I stand ready to 10 dismiss this case. 11 MR. Kaniuk; I understand that. 12 THE COURT: So you're going to have to convince 13 me why I shouldn't. 14 MR. KANIUK: ECom eCom.com had issued, and I 15 have copies of them, but they had announced and filed 16 form 10 SB 12 registration statements for the spin-off of 17 ten companies. Those stocks were never issued, but those 18 shareholders have traded those stocks. What our hope 19 was, was to be able to recapture those shares and then 20 in the context of a bankruptcy case fund those companies, 21 American Capital Holdings is willing to fund those 22 companies for acquisitions of - those companies have no 23 assets, they just traded stocks. 24 THE COURT: Let me be sure I understand what 25 you just said. ECom eCom.com, Inc., was prepared to do 1 what with this ten companies? 2 MR. KANIUK: They had announced a spin-off of 3 shares of ten companies. Those companies do not have any 4 assets, but those shares had been traded and are trading. 5 What the hope was -- 6 THE COURT: Is ECom eCom.com, Inc. a publicly 7 registered company? 8 MR. KANIUK: Yes. And 10Q's and all the 9 appropriate SEC documents have been filed. 10 THE COURT: And that would thus permit these 11 other ten companies to have their shares publicly traded? 12 MR. KANIUK: Yes. 13 THE COURT: Really? 14 MR. KANIUK: That's my understanding. And 15 then -- and that they have been traded. 16 THE COURT: Well, I'll accept your 17 representation that they have been traded. That doesn't 18 mean that they're not in violation of Regulation 19 Securities and Exchange Commission, or the securities 20 laws. And that's what I'm concerned about. 21 - MR. KANIUK: I don't believe that they are. 22 THE COURT: Are you a securities law expert? 23 MR. KANIUK: No, Your Honor. I've consulted 24 with securities lawyers, but I am not, and I do not 25 profess to be a securities lawyer or securities expert. 1 THE COURT: So you don't know for a fact 2 whether the trading of these shares is proper or isn't 3 proper. 4 MR. KANIUK: No, 1 don't. I know what my 5 understanding is, but I can't -- I'm not going to profess 6 to be an expert. But those companies have no assets. 7 THE COURT; That makes it even more worrisome 8 to me. 9 MR, KANIUK: It is worrisome. What we wanted to 10 was to be able to recapture those shares based on SEC 11 regulations, and fund those companies to make real 12 acquisitions to provide to the underlying shareholder 13 creditors, and exempt those shares under 1145 of the 14 Bankruptcy Code and avoid the expenses that would be in 15 connection with those, if we were going to proceed under 16 normal SEC regulations, 17 THE COURT: And Mr. Kaniuk, am I pronouncing 18 that correctly? 19 MR. KANIUK: Yes. 20 THE COURT: How does one recapture those 21 shares? 22 MR. KANIUK: It's my understanding that, and if 23 necessary I'll call Mr. Richmond as a witness, but it's 24 my understanding that those shares, because they've been 25 spun-off within a year, may be recaptured. 1 THE COURT; Do you have to pay for them, or you 2 just decide to take them back, or do you know? 3 MR. Kaniuk: I don't know the answer. My 4 preference would be at this time to call Mr. Richmond as 5 a witness to allow the Court or myself to ask any 6 questions of him as necessary. 7 THE COURT: Mr. Gamberg, do you have any 8 objection to having - 9 MR, GAMBERG: No objections. 10 THE COURT: Mr. Richmond, if you'll please 11 rise, come on over to the chair over here, please. 12 Remain standing while my court reporter administers an 13 oath. 14 THEREUPON, 15 BARNEY RICHMOND, 16 being by the undersigned notary first duly sworn to 17 testify the whole truth, as hereinafter certified, 18 testified as follows: 19 THE WITNESS: Yes, I do. 20 THE COURT: Please be seated. Proceed, 21 DIRECT EXAMINATION 22 BY MR. KANIUK: 23 Q. Please state your name for the record. 24 A. Barney A. Richmond, 25 Q. And your capacity -- are you an officer with 10 1 American Capital Holdings? 2 A. I'm chairman of American Capital Holdings, 3 Q. Could you describe for the Court what American 4 Capital Holdings is? 5 A. American Capital Holdings is an insurance and 6 financial services company. 7 Q. Could you describe for the Court the 8 relationship between American Capital Holdings and ECom 9 eCom.com, Inc. 10 A. Yes. American Capital Holdings was derived 11 from the spin-off out of ECom eCom, a company called USA 12 Sports, which was a wholly owned subsidiary of eCom. 13 Q. And presently is American Capital Holdings a 14 creditor of ECom eCom.com? 15 A. Yes, it is. 16 Q. And could you explain what circumstances, other 17 than moneys owed, led American Capital Holdings to be 18 concerned about Ecom eCom.com? 19 A. What first occurred is that the accounting firm 20 was deemed, regarding the spin off, was deemed to be not 21 independent because they were owed money by Ecom eCom, 22 and when an auditor is a creditor they're deemed not to 23 be independent. And so we ended up paying the accounting 24 bills, past due accounting bills, as well as other 25 expenses that in order to honor what had already been put 11 1 out in the form of press releases by the former CEO of 2 ECom. And so we had to get audits off. We're a public 3 company as well. 4 Q. In the context of spin-offs, ECom eCom, it's my 5 understanding, that ECom eCom.com had announced spin-offs 6 in addition to the prior spin-off of American Capital? 7 A. Right, There's several press releases that are 8 in these books that you have there, were put out to the 9 public, I think a couple of A-Ks, which is Information 10 statements that were filed with the SEC. They said the 11 companies had been - the spin-offs had been completed. 12 And subsequently that - for the spin-offs to actually be 13 completed the shares have to be, we discovered later, 14 have to be actually mailed to the shareholders. The date 15 of record is one day after they're actually put in the 16 mail. 17 MR* KANIUK; Your Honor, these are copies, these 18 are marked for the record, if you would allow the witness 19 to look at, they're copies of several press releases. 20 Additionally the creditors were around 7 or 21 $800,000, I think in accounts payable and bills that we 22 discovered were past due as well, over and above us. 23 THE COURT: How much in bills? 24 THE WITNESS: 7 or $800,000. 25 THE COURT: Owed by ECom eCom? 12 1 THE WITNESS: Yes. To various vendors that are 2 in the schedules. 3 BY MR. KANIUK: 4 Q. Could you explain the potential recapture of 5 the shares of the spin-offs? 6 A. Sure. I would like to make one statement here. 7 One of the things, and I understand, Your Honor, the 8 concern for the delay, but Mr. Panaia became ill towards 9 last November. He was in the hospital, in and out three 10 or four times, and we granted, every time an extension 11 was asked by us we went along with it, because we didn't, 12 number one, didn't want to be here in the first place, 13 but secondly, we didn't feel it was fair, him being 14 in the hospital he couldn't respond. 15 THE COURT: Who is Mr. Panaia? 16 THE WITNESS: Dave Panaia, the person that 17 passed away. He was the CEO. He went in about, I think 18 December. When was the first time - 19 THE COURT: You're testifying, sir. 20 THE WITNESS: I'm sorry, I didn't mean to -- 21 THE COURT: If you don't know the answer to a 22 question, then just simply say you don't know. 23 THE WITNESS: Approximately around December he 24 went in the hospital, and it was two or three times 25 thereafter. And so we did - we were asked to grant 13 1 extensions and we did. 2 THE COURT: Yes, I did. Even though the -- 3 BY MR. Kaniuk: 4 Q, Could you explain the recapture of the -- the 5 proposed recapture of the shares and the reassurance -- 6 A. Number one - 7 THE COURT: Excuse me, but what qualifications 8 does this man have to discuss recapture? All I know is 9 that he's the chairman of the board of some entity by the 10 name of American Capital Holdings. 11 MR. KANIUK: Withdrawn. I'll do background. 12 THE COURT: I don't know what American Capital 13 Holdings is, I donft know anything about that. So with 14 due respect, I don't know what ability he has to testify 15 to that. By the way, sir, do you want these documents 16 marked? 17 MR. KANIUK: If I could, marked as Exhibit A. 18 THE COURT: Mr, Gamberg, do you have any 19 objection? 20 MR. GAMBERG: No objection. 21 THE COURT: Do you have other exhibits that 22 you're going to have marked? 23 MR, KANIUK: No. That's all. And I just got 24 them today. I apologize for not getting them to Your 25 Honor in advance. 14 1 THE COURT: I allowed you to appear pro hac 2 vice in this case, sir? 3 MR. KANIUK: Yes. I was subsequently admitted 4 to the Southern District by examination and submitted an 5 affidavit to that effect. 6 THE COURT: So then you're familiar with our 7 local rules? 8 MR. Kaniuk: Yes, I am. 9 THE COURT: Particularly the rules regarding 10 premarking of exhibits? 11 MR. Kaniuk: Yes. The exhibits were only 12 provided to me via fax an hour before the hearing, and I 13 apologize for not being able to get anything together 14 earlier. 15 THE COURT: One moment. Madame Court Reporter, 16 would you please mark that document as ACH Exhibit 1, 17 please. 18 (ACH Exhibit 1 marked.) 19 THE COURT: And I'll have an exhibit register 20 made, since you haven't done that. 21 MR. Kaniuk: I'll have one made afterwards. I 22 apologize again to the Court. 23 THE COURT: I'll have it taken care of, sir. 24 Do you have any other questions? 25 MR. KANIUK: Yes. If you'll allow. 15 1 BY MR. Kaniuk; 2 Q. Mr. Richmond, could you set forth to the Court 3 your education and business experience? 4 A, Ifve got a high school education. If?e been in 5 business since, and for myself, since 1970. Ifve worked 6 on, over the years, many type of financings, 7 restructurings such as this one here. Currently we have, 8 American Capital has insurance operations, we're licensed 9 in 49 states right now. We have two other insurance 10 acquisitions that are under way. And pretty much my 11 experience has been through just hard work and 12 financing. 13 Q. What experience in the area of stock and SEC 14 involvement? 15 A. We've carried numerous companies over the 16 years, via some reverse mergers, via some underwriting 17 from the different underwriters that we assisted over the 18 years, and we've done numerous of those. 19 Q. What experience in terms of recapture of spun 20 off stocks? 21 A. What it amounts to is that American Capital 22 merged with USA Sports Net, which is basically some of 23 the same shareholders of ECom for American Capital 24 shareholders. Those were handled accordingly and they 25 were issued and held in escrow. Because of health 16 1 reasons and other various reasons the balance of these 2 spin-offs did not get actually issued from the transfer 3 agent. The reason was primarily, I think financial 4 constraints by the company. Notwithstanding that, many 5 people purchased shares based on information that was 6 filed in a public domain through either press releases or 7 AKl's, and once they were announced then a lot of 8 additional trading began, 9 Q. I'm showing you a document marked ACH No. 1. 10 Are you familiar with these? 11 A. Uh-huh. 12 Q. Could you set forth to the Court what they 13 are? 14 A. Basically they're just press releases that came 15 from, it says ECom spin-offs filed to registration 16 statement to the SEC, which was one of those which -- two 17 of them that were companies that we - that were spun-off 18 out of ECom that we controlled and we filed the form 19 lOSBs with the SEC. It goes on in these releases to say 20 that the balance of them, you know, the spin-offs had 21 been completed. 22 Q. But itfs your understanding those spin-offs 23 were not complete? 24 A, No- 25 Q. What is the consequence of those spin-offs 17 1 having been announced but not completed? 2 A. It's my opinion, I'm not an attorney, but my 3 opinion is that there could be some contingent 4 liabilities that based on those spin offs, I mean the 5 purchase shares based on whether they were going to get a 6 dividend with these shares maybe that they might have a 7 contingent liability. 8 What we were trying to do, is in order, because 9 all the things we had done to, Mr. Panaia quit talking to 10 us, so what we were trying to do is complete what had 11 been said and what had been put out in public domain. 12 And we didn't have really standing to do that at that 13 particular point. We owned, as American Capital, a 14 million and a half shares of ECom stock, friends that we 15 know, family, different people had bought in, and what we 16 were trying to do is get it completed. 17 We did take care of all the SEC auditing 18 requirements. We advanced those. We did many, many 19 things administratively trying to get it done, and then 20 when it came time for American Capital to get their audit 21 we couldn't get confirmation done under the management of 22 ECom to confirm our statements of money we advanced, 23 certain other things that were done, and so we were 24 forced at the end to, you know, file an involuntary 25 because there was nowhere to go. I mean, ECom had shut 18 1 their phones off. People were calling our offices 2 because they were the only phones that were ringing and 3 people would answer, and we became totally inundated with 4 that. 5 We discovered that none of the tax returns were 6 done. Those two books are nothing but tax returns that 7 we had SEC auditors do. Our name kind of got attached to 8 it, and I didn't want our name to be -- that, you know, 9 we didn't do all of these things, and so we got all the 10 lOQs ready, which is about at least 18 to 20, we had to 11 get some lOKs ready, we had to get - eCom was four years 12 of tax returns hadn't been filed. We went in and paid 13 for those to get done just to bring in compliance what 14 they had said they were going to do. And we were getting 15 a tremendous amount of pressure, not a tremendous, a lot 16 of pressure every day from different people contacting us 17 to do something, do something about it, 18 The equity value of this company at one time, 19 ECom, was $250,000,000. And we have been contacted by 20 shareholders that, you know, bought shares as high as 21, 21 all the way down to 4 and $5, $3, that are actually 22 economically devastating, and nothing was happening, and 23 you know, Mr. Panaia helped certain - he wasn't able, as 24 we discovered later, to maybe do this and do what was 25 said. So we kind of inherited a lot of this by reverse 19 1 osmosis trying to do the right thing and do what was said 2 and properly get it into a form that we could basically 3 reorganize under the court supervision, submit a plan 4 that makes sense, not only for creditors, which we are, 5 but as well as other creditors that are employees that 6 mortgaged their house, to pay credit card bills they paid 7 for on behalf of the company that are just really upside 8 down on the whole thing. 9 So you know, we know how we think we can 10 present a plan that is win win for everybody that works 11 out to, including with the SEC is not a problem, it works 12 out with what we deal with them daily, but all this lost 13 value has a shot at being recaptured. We're in the 14 middle of a lot of deals and deal flow, people come to 15 us, and we have that pretty substantial companies that 16 have talked to us about being acquired and merging to 17 recapture this value thatfs been lost. 18 MR. GAMBERG: I have a few questions. 19 CROSS EXAMINATION 20 BY MR. GAMBERG: 21 Q". Are you somewhat familiar with the financial 22 affairs of ECom? 23 A. I've seen the audits, yes. Mr. Turner is more 24 than I am because hefs the CPA, but I'm familiar with 25 them, yes, sir 20 1 Q. And at one time you were an officer of the 2 company? 3 A. Yes, sir. He asked me to become an officer of 4 the company, and we did in order to help, and after that 5 the relationship, because of health and various reasons, 6 just deteriorated, and I resigned way back in November, 7 something like that, October. 8 Q. You've examined the financial affairs of the 9 company as best you could as they exist today? 10 A. Yes, sir. 11 Q. And the company has liabilities that you're 12 aware of? 13 A. Yes, sir. 14 Q. And the company has assets of any kind that 15 you're aware of? 16 A. Well, they've got some assets, but those assets 17 are pretty much, because of the passing away has 18 discontinued operations, and I don't know what value you 19 would place on that in liquidation. It couldn't be much. 20 Q. But you believe there are assets that could be 21 developed through the course of a Chapter 11 22 proceeding? 23 A. Yes, sir, I think we can recapture a lot of 24 value. 25 Q. And today if the company were liquidated would 21 1 there be any kind of distribution to creditors? 2 A. Nor to any equity security as well. I don't 3 think you'd get - very little, 4 Q. And if the company has a chance to reorganize 5 and your plan were successful if approved by the Court do 6 you believe there would be available money to pay 7 creditors? 8 A. I believe we could pay a hundred percent pay 9 out to the creditors, and more importantly, restore some 10 of the equity security holders value. Because a lot of 11 people have got their retirement in this company, at 12 least I've been told, and you know, it's pretty 13 compelling when they get you on the phone. 14 Q. And you've done a lot of the work internally in 15 preparation to getting the plan of reorganization filed 16 with the court? 17 A. There's books with every current tax return, 18 every 10Q, the current 10K or year ends, 531, which is 19 just around the corner -- 20 Q. Are are you referring to these two volumes 21 which I had Federal Expressed to me on Friday 22 afternoon? 23 A. Yes. And there is just a tremendous amount of 24 legal and accounting been put in to bring in compliance 25 what we had to do, and we did this just because you know, 22 1 with the SEC you have got to do your filings, you have to 2 file your tax returns, you have to do these type of 3 things. And so our office, we do that up there, and 4 that's what we did, and we went out and got the audits 5 done by SEC independent auditors and tried our best to 6 clean it up in preparation of trying to do something 7 here. 8 Q. Just two more questions. Could you have been 9 in a position to file a plan before this work had been 10 accomplished? 11 A, No, not really, because in your disclosure 12 statement, you know, with the SEC and with the Court, you 13 know, it's got to be very accurate and precise 14 information and with audits, and we now have that. 15 Q. Do you have the source of funding to make a 16 plan feasible? 17 A. Yes. As far as the parent company, it's got 18 about a 6 and a half million dollar tax law secured for 19 it, itfs been certified by the accountants. We've got a 20 company that we're talking to, First Commercial 21 Insurance, good friends of ours, and they did 140 million 22 last year and very profitable, based on a market capital 23 comparable, which is Sea Bright (phonetic), it would be 24 120 to 150 million market cap based on that comparable, 25 you know, for the shareholders that could be recaptured. 23 1 And we're -- 2 Q. My question was, do you personally - does your 3 company have the sources and the actual funding? 4 necessary 5 A. Yes, sir. 6 THE COURT: Mr. Richmond, please wait until Mr. 7 Gamberg asks his question before you answer the 8 question. 9 THE WITNESS: Sorry. 10 BY MR. GAMBERG: 11 Q. Is there cash available for funding to fund 12 both the cost of the reorganization and any capital 13 contribution that needs to be made to remove the debtor 14 from Chapter 11? 15 A. Yes- 16 Q. Do you have those funds available today? 17 A. Yes, sir. 18 Q. Approximately how much? 19 A. For just the ECom and this work here, a half a 20 million, just in administrative expenses, 21 -MR. GAMBERG: Thank you. 22 THE COURT: One moment. 23 Mr. Richmond, I believe that I heard you to say 24 that it is your understanding that the debtor, that's 25 ECom ECom.com, Inc., has no tangible assets. 24 1 THE WITNESS: In my personal opinion there 2 is - I mean, itfs a small amount. They have some paint 3 ball - 4 THE COURT: Have some what? 5 THE WITNESS: Paint ball, like where these 6 paint balls, they shoot guns that they -- and it's very 7 limited sales that they have going on there, and I don't 8 know what that would be worth. 9 THE COURT: They have an inventory of paint 10 balls; is that what you're saying? 11 THE WITNESS: A small amount of inventory, 12 yeah, the paint ball gun equipment. 13 THE COURT: Where is that located? 14 THE WITNESS: In a warehouse that they have. 15 The Panaia family knows the exact location. I don't, 16 THE COURT: Is that in South Florida? 17 THE WITNESS: Yes, sir, in Palm Beach County 18 here, yes, sir, 19 THE COURT: What else does ECom eCom.com, Inc. 20 own besides a small inventory of paint ball gun 21 equipment, and that is tangible assets? 22 THE WITNESS: Just some computers I think, and 23 desks and miscellaneous. 24 THE COURT: Is that located in the same spot as 25 the paint ball gun equipment? 25 1 THE WITNESS; I think so, sir, I think so. 2 THE COURT: Have you seen any of these assets? 3 THE WITNESS: I haven1t seen, since they moved 4 from Riviera Beach where they were there, I haven't seen 5 the new location, no, sir, but I've seen it when it was 6 there. 7 THE COURT: So this company has a small 8 inventory of paint ball gun equipment, computers, desks, 9 and then I think you said miscellaneous? 10 THE WITNESS; Yes, sir. 11 THE COURT: Whatever that means. 12 THE WITNESS: I think some phones and maybe a 13 little office equipment. 14 THE COURT: Did ECom eCom.com, Inc. ever 15 operate? 16 THE WITNESS: Yes, sir. Years ago it operated 17 and did several - but it was a .com company and I think 18 it got caught in the same, as many, many others, and just 19 kind of started hemorrhaging and failed to get additional 20 financing and money to develop the business plan. That's 21 what it appears. I wasn't around then. 22 THE COURT: So then you stated at one time that 23 the equity value of the debtor was 250,000 million 24 dollars? 25 THE WITNESS: According to the charts and 26 1 trading back in '99 and 2000 that was going, yes, sir. 2 THE COURT: And that 250 million dollars, that 3 was cash or some form of - 4 THE WITNESS; That was market value of the 5 outstanding shares that were multiplied times the stock 6 prices that were traded. 7 THE COURT: That wasn't based upon any assets 8 that ECom eCom.com, Inc. owned? 9 THE WITNESS: Well, not to my knowledge. It 10 was based on -- well, I mean, the underlying financial 11 statements they had on file with the SEC and the market 12 value of their potential business model and 13 opportunities, so I don't know how the people come to 14 that value other than, you know, buying the shares based 15 on whatever their -- financial advice or whatever they 16 believe at that point in time. And the market cap today 17 is about 3 million with everything outstanding. And 18 there's really not any trading occurring too much today 19 because people realize that he passed away and that 20 there's really not anything going on 21 THE COURT: When you say market cap today is 22 only 30 million -- 23 THE WITNESS: 3. 24 THE COURT: 3 million? 25 THE WITNESS; Yes, sir. It's 7 cent times 27 1 about 40 million shares outstanding. It's the last that 2 I have looked at. 3 THE COURT: But that just represents 4 theoretically what someone is willing to pay for some 5 paper? 6 THE WITNESS: That's about what - you're 7 right, yes, sir, it is. Because you know, we're trying 8 to put fundamentals back in the business to put real 9 value underlying it. I mean, is the stock worth 7 cents 10 today? No. I won't buy it. People buy it maybe 11 averaging down at $2, but that's what a lot of that is. 12 THE COURT: So then how would you be able to 13 inject value in this company? 14 THE WITNESS: Well, to go get a shareholder 15 base of 6, 7,000 in shareholders, which that shareholder 16 base will qualify you for the New York Stock Exchange, it 17 takes 5,000 shareholders, and what you do is you've got 18 to find a company that it can acquire, set it up, get 19 financing behind it that can come out and that wants to 20 grow through the access to the public capital markets. 21 * THE COURT: So what you would really need to 22 find, it seems to me, is you need to find somebody who 23 can use a 6.5 million dollar tax loss carry forward -- 24 THE WITNESS: Yes, sir. 25 THE COURT: -- and is willing to invest a 28 1 substantial amount of money in a shell to use for their 2 own purposes? 3 THE WITNESS: Yes, sir, that's it pretty much. 4 And we have those people. We're willing to invest in, 5 you know, future securities, a substantial amount of 6 money in a plan that we can be involved in, and were not 7 say control, but we know the management and we know the 8 people in that. 9 In addition to that, the spun-off companies, 10 therefs a very good chance that we can recapture all the 11 shareholder value if we go to work on it and do it 12 prudently and do it right and do the things to keep in 13 compliance. American Capital has got, you know, between 14 equity and debt and the various people in there that 15 we've been asking, we've got, you know, 6, 700,000 in 16 this game now, and you know, we're willing to go more to 17 make a finish line to work through it. 18 Mr. Kaniuk, do you have any other questions? 19 MR. KANIUK: I have no other questions 20 THE COURT: Mr. Gamberg? 21 ' MR. GAMBERG: No, sir. 22 THE COURT: Thank you. You can remain right 23 there. Are there going to be any other witnesses? 24 MR. GAMBERG: No. 25 MR. KANIUK: No. 29 1 THE COURT: So then Mr. Kaniuk, what would you 2 propose that the Court do today? 3 MR, KANIUK: I would ask the Court to enter an 4 order for the bankruptcy and allow us to proceed. If the 5 Court wants me to get co-counsel, 1 could either ask Mr. 6 Gamberg to work with me, or I'll talk with the attorneys 7 with Kluger Peretz with whom my firm has a relationship. 8 But it would be our plan to, within the next 60 days, to 9 propose a plan of reorganization. 10 THE COURT: How could Mr. Gamberg work with you 11 if Mr. Gamberg represents American Capital Holdings? 12 MR. KANIUK: No. I represent American Capital 13 Holdings. 14 THE COURT: I beg your pardon. 15 MR. KANIUK: Mr, Gamberg represents other 16 shareholder investors in the company. 17 My goal would be to look to minimize costs, so 18 I was suggesting multiple alternatives to the Court. But 19 the real goal is to be able to preserve some value for 20 the shareholders who have traded these shares that have 21 no value, and we believe that we can do that in the 22 context of this Chapter 11, propose a plan, be able to 23 invest real money, make acquisitions and exit the Chapter 24 11 within 60 to 90 days. 25 THE COURT: And you, Mr. Kaniuk, say that you 30 1 are going to do all of this representing American Capital 2 Holdings, is that my understanding? Do you represent 3 American Capital Holdings? 4 MR. KANIUK: Yes. 5 THE COURT; I have that right. And you1re 6 going to orchestrate all of this representing American 7 Capital Holdings, that's your plan? 8 MR. Kaniuk; Because American Capital Holdings 9 would be the one that is willing to fund this plan. 10 THE COURT: Mr. Gamberg, do you care to say 11 anything? 12 MR. GAMBERG; Judge, I think we have a not good 13 situation here. The Court realizes that. I think that a 14 lot of -- 15 THE COURT: I think Mr. Kaniuk, in stating to 16 the Court that he's going to do all of this and 17 orchestrate all of this, has a skewered concept of what a 18 bankruptcy is, and I donft see how he can represent 19 American Capital Holdings, who is a creditor of ECom 20 eCom.com, Inc. and also in effect, represent the debtor. 21 _ MR. GAMBERG: They would have to be the plan 22 proponent, if that's the route that they want to take. 23 The debtor itself, Judge, since the death of its 24 principal, needs to have a little bit of internal 25 corporate reorganization and voting of officers and 31 1 directors, but therefs no reason why the creditor 2 couldnft be the proponent of a plan and have a plan 3 filed. They've done a lot of the work to try to get that 4 done. Absent that, this company, if the case were 5 dismissed or converted to a Chapter 7, there would be 6 nothing for anybody. 7 THE COURT.- But now there is something for 8 somebody? A company that owns paint ball guns. 9 MR. GAMBERG: No. I said there would be 10 nothing for anybody if the case were converted or 11 dismissed. That's clear. 12 What I further said is that if they can propose 13 this plan, which we discussed preliminarily this morning, 14 there is an ability to reorganize the company and see 15 some value both for the creditors and the shareholders. 16 THE COURT: And that would be by -- through the 17 efforts of American Capital Holdings? 18 MR. GAMBERG: Yes, sir. 19 THE COURT: Them raising funds. 20 MR. GAMBERG: Them raising funds, them filing a 21 plan with a disclosure statement, 22 THE COURT: And they would raise those funds by 23 selling stock? 24 MR. GAMBERG: No. I understood from the 25 testimony that we elicited earlier that those funds are 32 1 presently available in American Capital Holdings. 2 THE COURT: So then how do you propose, or how 3 do you suspect that those funds would make their way into 4 some bank account maintained by eCom eCora.com, Inc. 5 MR. GAMBERG; I don't know that they have to go 6 into that bank account, Judge. What they would need to 7 do is pay for the cost of administration to get the plan 8 done and filed, they would then have to perhaps put some 9 equity into the business to have the business be able to 10 operate, whether they would take additional stock for 11 that, I would assume that would be part of the game plan, 12 But the testimony was they have 5 to $700,000 available 13 to accomplish that, and absent that, I don't see any 14 value to anyone as it exists today in this company. 15 THE COURT; So you would have me continue this 16 matter? 17 MR, GAMBERG: No. Enter an order for relief, 18 require a plan to be filed in 45 to 60 days. In the 19 interim the debtor will have to file its schedules and 20 operating statements, and we111 either have a confirmed 21 plan in 90 days, or we111 have a Chapter 7 or a 22 dismissal. I guess, Judge, what Ifm saying is, there's 23 no harm in letting them try. 24 THE COURT: I could see substantial harm, Mr. 25 Gamberg. I could see representations being made as to 33 1 all the great things that ECom eCom.com, Inc. was going 2 to do, about the tremendous value that is there because 3 of all the stock that is being held by shareholders, and 4 that based on that I could see other people advancing 5 funds based on that. And as a result I could see a 6 further loss by other people. That's what I could see. 7 Tell me where I'm wrong. 8 MR. GAMBERG: Perhaps we could require no 9 further press releases during this interim period. 10 MR. KANIUK: Those press releases were 11 issued -- we wouldn't be issuing press releases or 12 soliciting money absent any court approval. We certainly 13 wouldn't -- my understanding, and as Mr. Gamberg pointed 14 out in testimony, was that American Capital Holdings had 15 that money presently available in its company to fund the 16 plan, not that it would be going out to solicit 17 additional funds based on representations of what might 18 happen. 19 THE COURT; One moment. I'll take the 20 following action. Mr. Kaniuk, since you represent 21 American Holdings, I'm going to require you to submit an 22 order. 23 MR. KANIUK: Okay. 24 THE COURT: I am going to adjudicate eCom 25 eCom.com, Inc. as a Chapter 11 debtor. That's number 34 1 one. 2 Number two, within 15 days I will require the 3 debtor to retain counsel, and in the event the debtor 4 fails to retain counsel within 15 days the case will be 5 dismissed sua sponte. 6 Third, I will set a status conference for June 7 6th, 2005 at 1:30 p.m., and at that status conference the 8 Court will consider dismissal of this case should the 9 debtor fail to comply with this order. I want that in 10 the order. Transmit a copy of that order to Mr. Gamberg 11 before you submit the order for consideration by the 12 Court. 13 MR. Kaniuk: Okay. 14 THE COURT: If something is going to happen 15 with ECom eCom.com, Inc., it better happen very fast. 16 Ifm not going to allow any further scam, if a scam has 17 already been perpetrated, I won't allow any further scam 18 to be perpetrated upon any other persons, 19 Any questions about what I've ruled? 20 MR. KANIUK: I fully understand. 21 ' THE COURT: Mr. Gamberg? 22 MR. GAMBERG: I understand, Your Honor. 23 THE COURT: Very well. Thank you, I'd like 24 that order submitted no later than Friday. 25 MR. KANIUK: That's fine. I'll prepare it 35 1 today, I'll get it to Mr. Gamberg, and we will get it to 2 the Court. 3 THE COURT: Fine. The exhibit will be retained 4 by my courtrooin deputy. Thank you very much. 5 (The proceedings were concluded.) 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25