SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended: March 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _________________ to __________________
Commission file number: 33-4707-NY
CBQ, INC.
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(Exact name of small business issuer as specified in its charter)
Colorado 84-1047159
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(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification number)
4851 Keller Springs Dr. 75001
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (972) 732-1100
Indicate by check mark whether the issuer (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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: As of August 24, 2000, there
were approximately 69,191,447 common shares outstanding.
Registrant is filing this amended quarterly report for the following reasons:
Registrant has elected to restate its consolidated financial statements as of
March 31, 2000 and for the three months then ended. The restated consolidated
financial statements reflect Registrant's determination to reflect the merger
with ChinaSoft, Inc. as a pooling of interests rather than a purchase, and
additional disclosures have been made in the Notes to Consolidated Financial
Statements.
Registrant also has elected to revise its Management's Discussion and Analysis
of Financial Condition and Results of Operations to reflect the revised
consolidated financial statements.
<PAGE>
Item 1. Financial Statements
CBQ, Inc. and Subsidiaries
(formerly FREEDOM FUNDING, INC.)
(a development stage company)
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
2000 1999
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(Unaudited)
Assets:
Current Assets:
Cash $ 21,354 $ 37,812
Accounts Receivable 97,094 75,692
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Total Current Assets $ 118,448 $ 113,504
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Equipment, at cost (net at March 31)
Computers and related equipment 220,209 219,518
Furniture and fixtures 12,955 11,964
Software 5,289 5,289
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238,453 236,771
Less accumulated depreciation 141,768 128,213
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96,685 108,558
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Other assets (net):
Organization costs 9,133 9,458
Goodwill 315,136 333,508
Investments 46,163 46,163
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Total Assets $ 585,565 $ 611,191
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Liabilities and Stockholders' Equity :
Current Liabilities:
Note, payable, bank, unsecured $ -- $ 2,610
Accounts payable 166,427 153,071
Accrued expenses 22,411 13,362
Deferred revenues 38,500 37,567
Due to related party 1,215 1,215
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Total Current Liabilities $ 228,553 $ 207,825
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Long-term liabilities:
Notes Payable to Bank 116,718
Notes to shareholders 71,958 85,000
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Total Long-term liabilities 71,958 201,718
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Stockholders' Equity:
Preferred stock, 70,000 shares issued 70 70
Common stock,
issued at March 31, 56,912,337 5,691 2,679
issued at December 31, 26,790,769
Additional paid-in capital 1,069,103 812,783
Accumulated deficit (789,810) (613,884)
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Total stockholders' equity (deficit) 285,054 201,648
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Total liabilities and stockholders'
equity (deficit) $ 585,565 $ 611,191
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See accompanying Notes to Financial Statements
<PAGE>
CBQ, Inc. and Subsidiaries
(formerly FREEDOM FUNDING, INC.)
(a development stage company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended March 31,
-------------------------------
2000 1999
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Revenues $ 219,916 $ 18,852
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Costs and expenses
Costs of revenues 849 7,232
Sales and marketing 9,832 19,070
General and administrative 351,361 106,063
Depreciation and amortization 32,252 21,209
Interest expense 1,548 1,847
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395,842 155,421
Net income (loss) $ (175,926) $ (136,569)
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Net income (loss) per common share * *
Weighted average number of
common shares outstanding 52,242,494 20,278,432
* Less than $.01 per share
See accompanying Notes to Financial Statements
<PAGE>
CBQ, Inc. and Subsidiaries
(formerly FREEDOM FUNDING, INC.)
(a development stage company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended March 31,
----------------------------
2000 1999
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OPERATING ACTIVITIES:
Net (loss) $(175,926) $(136,569)
Adjustments necessary to reconcile net loss
to net cash used in operating activities:
Depreciation and amortization 32,252 21,209
Decrease (increase) in accounts receivable (21,204) (2,075)
(Increase) in other current assets -- (2,260)
Decrease in deposits receivable; -- 7,259
Decrease in accounts payable 13,356 (23,043)
Increase in royalties payable -- 50,000
Increase (decrease) in other accrued expenses 9,060 (24,322)
Increase in deferred revenues 933 7,434
Decrease in officer advances -- (2,575)
Decrease in sales tax payable -- (941)
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Net cash used in operating activities (141,529) (105,883)
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INVESTING ACTIVITIES:
Acquisition of equipment (1,682) --
Net assets acquired in acquisition of
Reliance Technologies, Inc. -- (261,178)
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Net cash used in investing activities (1,682) (261,178)
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FINANCING ACTIVITIES:
Restricted common stock issued in
acquisition of Reliance Technologies, Inc. 261,743
Restricted common stock issued in
merger with ChinaSoft, Inc. 1,000 --
Restricted common stock issued in
exercise of stock options 258,332
Loans from shareholders 30,355
Repayment of notes payable (132,579) (526)
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Net cash provided in financing activities 126,753 291,572
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NET INCREASE (DECREASE)
IN CASH AND CASH EQUIVALENTS (16,458) (75,489)
CASH AND CASH EQUIVALENTS
BEGINNING OF PERIOD 37,812 97,907
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END OF PERIOD $ 21,354 $ 22,418
========= =========
See accompanying Notes to Financial Statements
<PAGE>
CBQ, Inc. and Subsidiary
(formerly FREEDOM FUNDING, INC.)
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000
Basis of Presentation: In the opinion of management of CBQ, Inc. (CBQI or the
Company), the accompanying consolidated financial statements, which have not
been audited by independent certified public accounts, contain all adjustments
necessary to present fairly the Company's consolidated financial position,
results of its operations, and its cash flows for the periods reported. The
consolidated financial statements contain the accounts of the Company and its
subsidiaries. The consolidated statement of operations for the three months
ended March 31, 2000 reflects the operations of the Company and all of its
subsidiaries (ChinaSoft, Inc., Reliance Technologies, Inc. and its subsidiaries,
and Priority One Electronic Commerce Corporation). The consolidated statement of
operations for the three months ended March 31, 1999 reflects the results of
Reliance Technologies, Inc., and its subsidiaries for the period from March 15,
1999 (date of acquisition) to March 31, 1999. All significant intercompany
balances and transactions have been eliminated. The consolidated results of
operations for the three months ended March 31, 1999 are not necessarily
indicative of the consolidated results to be expected for a full year.
Note 1. Organization and Nature of Business: CBQ, Inc., (formerly Freedom
Funding, Inc.) a Colorado corporation, was incorporated September 18, 1986,
under the laws of the State of Delaware, and changed its situs to Colorado in
1989. Since inception, the Company has been in the development stage. The
Company's primary intended activity is to engage in all aspects of review and
evaluation of private companies, partnerships or sole proprietorships for the
purpose of completing mergers or acquisitions with the Company, and to engage in
mergers and acquisitions with any or all varieties of private entities.
Note 2. Summary of Significant Accounting Policies: A summary of significant
accounting policies is currently on file with the U.S. Securities and Exchange
Commission in registrant's previous filings under the Exchange Act.
Note 3. Acquisitions: On November 18, 1998, the Company acquired a wholly-owned
subsidiary, CyberQuest, Inc. ("CyberQuest"), which had recently purchased the
assets and business of CyberQuest, Ltd. CyberQuest was acquired for the issuance
of 18,000,000 restricted common shares, plus 70,000 preferred shares of the
Company.
The acquisition of CyberQuest was treated as a reverse acquisition of the
Company by CyberQuest. In a reverse acquisition the shareholders of a Company
own less than 50% of the post acquisition shares. The shareholders of CyberQuest
received approximately 80% of the post acquisition shares of the Company and
therefore, CyberQuest is the accounting acquirer. The financial information
presented is therefore that of CyberQuest for 1997 and 1998. Common stock and
additional paid-in capital have been restated such that the total dollar value
of common stock and additional paid-in capital for 1998 is split to reflect the
same ratio as the Company's common stock and additional paid-in capital at that
time.
On March 15, 1999, the Company acquired all of the outstanding shares of
Reliance Technologies, Inc., a privately-held Texas corporation ("Reliance"), in
a tax free exchange. Reliance was acquired solely for the issuance of 1,000,000
restricted common shares of the Company. This acquisition was treated as a
purchase for accounting purposes.
<PAGE>
The Company on April 9, 1999, acquired all of the outstanding shares of Priority
One Electronic Commerce Corp., a privately held Pennsylvania corporation
("Priority One"), in a tax free exchange. Priority One was acquired solely for
the issuance of 900,000 restricted common shares of the Company. This
acquisition was treated as a purchase for accounting purposes.
On January 14, 2000, the Company merged with ChinaSoft, Inc. ("ChinaSoft") in a
tax-free, three-way triangular reverse merger. This merger was treated as a
pooling of interests for accounting purposes. Since ChinaSoft was formed in
September 1999 and had no operations prior to the merger with the Company, no
restatement of operations of any prior period is necessary.
Note 4. The loss per share was computed by dividing net loss by the weighted
average number of shares of common stock outstanding during the period.
Note 5. Registrant has not declared or paid dividends on its common shares since
inception.
Note 6. The accompanying unaudited consolidated condensed financial statements
have been prepared in accordance with the instructions to Form 10-Q and do not
include all information and footnotes required by generally accepted accounting
principles for complete consolidated financial statements.
Note 7. Income taxes have not been provided for in that registrant has not had a
tax liability from inception through the date of this filing, due to operating
losses.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This report contains certain forward-looking statements with respect to the
Company's operations, financial condition and liquidity. These statements
reflect management's best assessment of a number of risks and uncertainties. The
Company's results could differ materially from the results anticipated in these
forward looking statements as a result of a number of factors described in this
report and other risks described in the Company's other filings with the
Securities and Exchange Commission.
Results of Operations:
Acquisition of CyberQuest: On November 19, 1998, CBQ, Inc., formerly known as
Freedom Funding, Inc., a Colorado corporation (Company), entered into a
reorganization agreement (Reorganization Agreement) with CyberQuest, Inc., a
Colorado corporation (CyberQuest), as well as the shareholders of CyberQuest,
pursuant to which the Company acquired all of the outstanding proprietary
interest of CyberQuest in a stock for stock exchange which resulted in
CyberQuest becoming a wholly owned subsidiary of the Company and the
shareholders of CyberQuest acquiring control of the Company through their stock
ownership. The Company, under the Reorganization Agreement, issued 18,000,000
common shares and 70,000 shares of the Class A Convertible Preferred Stock of
the Company to the shareholders of CyberQuest in exchange for the issued and
outstanding shares of this subsidiary. Certain shares of Class A Convertible
Preferred Stock is redeemable at the option of the Company at Octboer 23, 2000,
2001 and 2002 CyberQuest was a wholly-owned subsidiary of the Company during
each of the fiscal 1999 and fiscal 2000 periods under discussion.
<PAGE>
Acquisition of Reliance Technologies: On March 15, 1999, the Company acquired
Reliance Technologies, Inc., a privately held Texas corporation (Reliance
Technologies), solely in exchange for 1,000,000 shares of common stock. Further,
the Company established a stock option plan for the employees of Reliance
Technologies which allowed them to acquire up to 100,000 shares of common stock
at market when the options were granted. Reliance Technologies owns Tophernet,
Inc., as a wholly-owned subsidiary. The results of operations for Reliance
Technologies were included only from March 15, 1999, through March 31, 1999, but
were included for all of the first quarter of fiscal 2000.
Acquisition of POECC: On April 14, 1999, the Company acquired all of the
outstanding shares of Priority One Electronic Commerce Corporation, a
privately-held Pennsylvanian corporation (POECC), in a tax free exchange. POECC
was acquired solely for the issuance of 900,000 restricted common shares of the
Company. Concurrently with the closing, the Company engaged the president of
POECC, Mr. Sidney Lieberman, as a consultant. Mr. Lieberman, in accordance with
the terms of his consulting agreement was granted an option to acquire 100,000
common shares of the Company at the market price therefor on the date of
closing, which was then $3.00 per share. The common shares which the Company
optioned to Mr. Lieberman on exercise of his option were registered under the
Securities Act of 1933. Mr. Lieberman also agreed to serve on the board of
directors for the Company. Mr. Lieberman fulfilled his consulting contract and
subsequently resigned from the board. The results of POECC's operations are not
included for the first quarter of fiscal 1999, but are included for the first
quarter of fiscal 2000.
Acquisition of GLP: On May 11, 1999, the Company acquired 19% of the outstanding
interest of Global Logistics Partners, LLC, a privately-held Texas limited
liability company (GLP), in a tax free exchange. This interest was acquired
solely for the issuance of 4,233,200 restricted common shares of the Company.
Concurrenty with the closing, Mr. Richard Williamson assumed the positions of
Chairman of the Board of Directors, CEO and President of the Company, and GLP
assumed operational control of the Company. Mr. Williamson subsequently resigned
all positions with the Company. The results of GLP's operations are not included
in this report because the Company does not own 20% or more of this entity.
Acquisition of ChinaSoft: On December 22, 1999, the Company entered into a
reorganization agreement (Reorganization Agreement) with ChinaSoft, Inc., a
District of Columbia corporation (ChinaSoft), as well as all of the shareholders
of ChinaSoft. The Reorganization Agreement resulted in the Company agreeing to
acquire all of the outstanding stock of ChinaSoft in a stock-for-stock exchange.
Consummation of the acquisition was subject to a due diligence period which
concluded on January 14, 2000. On the closing date ChinaSoft became a
wholly-owned subsidiary of the Company, and the shareholders of ChinaSoft
acquired a controlling interest in the Company. The reorganization was
structured as a tax-free triangular merger. The Company, under the
Reorganization Agreement, issued and delivered approximately thirty million
shares of its restricted common stock to the shareholders of ChinaSoft on a pro
rata basis. The shares constituted approximately 51% of the outstanding
proprietary interest of the Company on a fully diluted basis immediately after
their issuance and delivery. Concurrent with and subsequent to the execution and
delivery of the Reorganization Agreement, several directors resigned and new
directors were appointed; however, the executive officers of the Company
remained unchanged. As ChinaSoft had no operations from inception until its
merger with the Company, no restatement of prior periods consolidated results of
operations is necessary.
<PAGE>
Present Business of the Company and its Subsidiaries: The Company and its
consolidated subsidiaries, (collectively, CBQ or the Company and the
subsidiaries) develop and operate Internet service businesses. The Company's
internet strategy includes the internal development and operation of
majority-owned subsidiaries, as well as taking strategic positions in other
Internet companies that have demonstrated synergies with CBQ's core businesses.
The Company's strategy also envisions and promotes opportunities for synergistic
Internet business relationships among the subsidiaries in its portfolio.
Management anticipates that a substantial portion of its efforts will be devoted
for the near term in the development of the business of ChinaSoft.
Operations of ChinaSoft: ChinaSoft's joint venture partner in China is CCSoft
Technology Development Company (CCSoft). ChinaSoft began during the first
quarter of fiscal 2000 to market services of the joint venutre outside China. No
revenues have yet been generated as a result of these efforts. These services
include software development for enterprise computing and Internet development
services. ChinaSoft, as a result of this joint venture, gained significant
software development expertise and large-scale project capabilities, supported
by a staff of several thousand programmers. This resource represents a
high-quality, extremely competitive value for business in the United States and
elsewhere who want to take advantage of offshore software development. ChinaSoft
serves as the distributor of the e-business solutions of CCSoft and China
National Software & Technology Service Corporation (CS&S). CS&S is a state-owned
company of the People's Republic of China that provides software, integrated
computer solutions and service to the 6,000 state-owned enterprises in China.
CS&S is among the top ten systems integrators in China and the top 100
electronic companies in China. CBQ has also begun to offer services in China,
including versions of current services and new services tailored to specific
opportunities. No revenues have yet been gained from these efforts, however.
ChinaSoft uses traditional and Internet-based marketing channels and develop a
strong sales effort. On January 19, 2000, a marketing alliance with
TechnologyNet.com was launched that will introduce CBQ to 25,000 resellers of IT
services in 103 countries.
Operations of China Partners: This subsidiary was formed by CBQ to support
Chinapartners.net, an Internet trade portal for business-to-business e-commerce
and trade development services. Chinapartners.net is the first trade portal that
supports both Chinese and U.S. languages and currencies to facilitate business
transactions between Chinese and U.S. companies. Additionally, China Partners
works with state-owned trading companies and private exporters in China to
promote sales to the U.S. market of new product offerings from China. Imports
from China are distributed directly to U.S. retailers using the
Chinapartners.net portal. Chinapartners.net provides language translation,
currency translation and trade development services directly from this portal.
China Partners sponsors trade delegations to China for its members and guides
companies that are seeking trade and investment opportunities. The first
delegation was organized for January, 2000, in order to firm up Chinese
technology and content alliances. Additionally, Chinapartners.net will develop
Chinese Language Web sites for its U.S. customers and English language Web sites
for its Chinese customers. Chinapartners.net is a logical extension of CBQ's
E-Business Marketplace for expansion into the Chinese market, permitting CBQ and
other companies to take advantage of high-quality products and services with
competitive price advantages. Chinapartners.net, through CBQ's Internet
properties PriorityCash.com and PriorityLink.net, supports direct
business-to-business e-commerce. CBQ anticipates additional alliances with
banks, insurance companies, import/export agencies, attorneys, shipping
companies, and other trade-related services in the future.
<PAGE>
Operations of Reliance Technologies: Reliance Technologies contributed the
significant portion of revenues and operating cash during the first quarter of
fiscal 2000. This subsidiary continued its operations as a full-service Internet
Web site and e-commerce consulting and development firm. These services included
consulting, custom software solutions for Internet applications, network
integration, database programming, and administration, Web site hosting,
Internet development and dedicated Internet access.
Operations of Priority One Electronic Commerce Corporation: This subsidiary
continued to be engaged in the development and implementation of Internet
electronic payment technology which allows business to handle electronic funds
transfer (EFT) and credit card processing (ACHH) over the Internet. Priority One
continued its development of CBQ's primary online electronic transaction
enterprise, PriorityCash, which is Linux-compatible using the Red Hat platform
for easy deployment, reliability and speed.
In December, 1999, CBQ entered into an agreement with LCI Technology Group N.V.
to implement the LCI-SMARTpen security solution for authentication of
transaction signatures. The device is a ball-point pen that writes on regular
paper and uses biometric sensors to identify individuals with virtually no
chance for tampering or error. The pen insures authentication of signatures, as
well as time of day and location. PriorityCash.com will use the LCI-SMARTpen to
secure credit card transactions and EFTs, with an emphasis on deployment for
business use.
Operations of Tophernet: This subsidiary continued in its service as a regional
ISP in the Dallas/Ft. Worth area. Its Internet service comprised access, email
and home page serving. It offers the following access methods: Dialup,
Dedicated, and broadband DSL.
Operations of Internet Properties: BID4IT.COM This product was again launched in
1999 and contributed to operations of CBQ on a consolidated basis with its
subsidiaries during the first quarter of fiscal 2000. This interactive market
exchange allows customers to auction off industrial products, computers,
peripherals, consumer electronics, avionics, collectibles, gifts and more. The
bid4it.com system operates like a virtual stock exchange, raising or lowering
the asking price of an item based on real-tim demand information. The system can
also be integrated with CBQ's EFT and ACHH processing capabilities for seamless
transactions online. CBQ entered a partnership with Bidland.com in December of
1999 to re-launch bid4it.com as an innovative resource for business-to-business
auctions that facilitates liquidation of excess inventory more profitably than
through traditional methods. CBQ has also entered a partnership with Park Royal
Galleries, Ltd. to auction luxury items on the site.
Operations of Internet Properties: EMBEDDEDISP.COM CBQ announced plans to launch
EmbeddedISP.com in the U.S and abroad in January, 2000. EmbeddedISP.com will
offer complete turnkey services to Internet appliance manufacturers and
designers. Management believes that the non-PC Internet appliance industry is
poised for dramatic growth over the next several years. A recent International
Data Corporation study estimates Internet appliances will account for nearly
half of all Web access by 2002. The estimated unit size is over 43 million by
the end of 2001 and over 150 million units in 2002. The study evaluated the
impact of Web-enabled PDAs, video game consoles, telephones and television
set-top boxes. EmbeddedISP.com connectivity will allow devices such as
television set-top boxes, VCRs, refrigerators, medical devices, game consoles,
PDAs, cell phones and other electronic equipment to interact with the Internet
through a secure environment. As more devices are Web-enabled, EmbeddedISP.com
will offer companies a one-stop resource for connectivity and management of
their devices.
<PAGE>
Operations of Internet Properties: PRIORITYLINK.NET Due to the changing ISP
industry, CBQ launched PriorityLink.net in 1999, which is CBQ's division for all
of its Internet access offerings, including digital subscriber line, wireless,
high speed, and free dial-up Internet access. These offerings are designed for
the business customer and are offered to all CBQ clients, who in turn offer
access as an incentive to their customers. PriorityLink.net is an enhanced
service offered in partnership with 1stUP.com Corporation (1stup.com) and
MyWay.com. Both 1stup.com and MyWay.com are subsidiaries of CMGI, Inc. Through
this partnership, CBQ offers unlimited Web access through 1stup.com virtually
anywhere in the U.S. or Canada to employees, owners and customers of small to
medium sized businesses. Access is free in exchange for keeping a compact,
movable navigation bar that carries advertisements and links to CBQ Internet
properties and other leading Web sites. This partnership also adds dynamically
generated personalized content to PriorityLink.net users, bringing them a more
productive and personal online experience. MyWay.com allows mouse click access
to up-to-the-minute information about news, stocks, travel, shopping, sports,
and more. Users can instantly personalize their start pages content, color,
features and design to reflect unique lifestyles and interests. MyWay.com
personalization tools have allowed Internet access providers to achieve among
the highest retention and duration metrics on the Web today.
Liquidity: Liquidity during the first quarter of fiscal 2000 was primarily
generated from the infusion of cash into CBQ by present management through the
exercise of stock options.
PART II - OTHER INFORMATION
Item 1. Litigation: No material legal proceedings to which the Company (or any
officer or director of the Company, or any affiliate or owner of record or
beneficially of more than five percent of the Common Stock, to management's
knowledge) is a party or to which the property of the Company is subject is
pending and no such material proceeding is known by management of the Company to
be contemplated.
Item 2. Change in Securities: This item is not applicable to the Company for the
period covered by this report.
Item 3. Defaults Upon Senior Securities: This item is not applicable to the
Company for the period covered by this report.
Item 4. Submission of Matters to a Vote of Security Holders: There were no
meetings of security holders during the period covered by this report; thus,
this item is not applicable.
Item 5. Other Information: There is no additional information which the Company
is electing to report under this item at this time.
Item 6. Exhibits and Reports on Form S-K: Two Forms 8-KSB were filed by the
Company during the period covered by this report. These are each attached as
exhibits.
<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 this 28th day of August,
2000.
CBQ, INC. (Registrant)
By: /s/ Bart S. Fisher
----------------------
Bart S. Fisher, Chairman and Chief Executive Officer
By: /s/ Eugene Yano
-------------------
Eugene Yano, Chief Financial Officer
