SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB/A
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [FEE REQUIRED]
For the fiscal year ended: December 31, 1999 OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
Commission file number: 33-4707-NY
CBQ, Inc.
(Exact name of registrant as specified in its charter)
Colorado 84 1047159
(State or other jurisdiction) (I.R.S. employer
of incorporation or organization) Identification number)
4851 Keller Springs Rd., Ste. 228, Addison, Texas 75001
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:(972) 732 1100
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Common Stock, $.0001 Par Value
(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 Rule 405
of Regulation S-K 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-K or any amendment to this
Form 10-K. [ ]
State the aggregate market value of the voting stock held by non-affiliates of
the registrant. The aggregate market value shall be computed by reference to the
price at which the stock was sold, or the average bid and asked prices of such
stock, as of a specified date within 60 days prior to the date of filing: On
April 6, 2000, the closing inside bid and asked prices for the shares of common
stock of registrant, which is the sole voting stock outstanding of registrant,
were $8.25 and $8.75, respectively. On that date, there were 56,661,857 shares
of common stock outstanding. Affiliates held 28,320,615 shares of this stock;
thus, the aggregate market value of the voting stock held by non-affiliates
approximated $310,164,031.
<PAGE>
Registrant had $720,925 in revenues in 1999.
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.
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the documents incorporated by reference and the Part of this Form
10-KSB into which the document is incorporated: None.
Registrant has elected to restate its financial statements for the following
reasons:
1. The balance sheet was restated to reflect long-term liabilities.
2. The statement of stockholders' equity was revised to reflect 100,000 shares
of common stock issued for services in 1998.
3. The text of the document has not been changed in any material respect.
<PAGE>
PART I
Item 1. Description of Business:
Subsidiary Acquisitions:
Acquisition of CyberQuest:
On November 19, 1998, 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: Redeemable, Convertible Preferred Stock of the
Company to the shareholders of CyberQuest in exchange for the issued and
outstanding shares of this subsidiary.
Acquisition of Reliance Technologies:
On March 15, 1999, the Company acquired Reliance Technologies, Inc., a privately
held Texas corporation (Reliance Technologies), soley 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 will allow them to acquire up to
100,000 shares of common stock at market when the options are granted. Reliance
Technologies owns Tophernet, Inc., as a wholly-owned subsidiary.
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.
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.
<PAGE>
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.
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. At
December 31, 1999, CBQ's majority owned Internet subsidiaries included Reliance
Technologies, Priority One Electronic Commerce Corporation, Tophernet, and
Cyberquest. CBQ also owns and operates Bid4it.com, an Internet Auction site and
EmbeddedISP.com, an internet service designed for the Embedded Device industry.
On January 14, 2000, CBQ acquired Chinasoft. On January 2, 2000 CBQ created
China Partners as a subsidiary.
CHINASOFT
ChinaSoft's joint venture partner in China is CCSoft Technology Development
Company (CCSoft). Services that ChinaSoft markets outside China on behalf of the
joint venture include software development for enterprise computing and Internet
development services. ChinaSoft, as a result of this joint venture, has
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.
<PAGE>
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 also will offer services in China that best meet customer needs in the
market, including the marketing of versions of its current services and
developing new services tailored to specific opportunities in China.
ChinaSoft will use 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.
CHINA PARTNERS
This subsidiary was formed 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>
RELIANCE TECHNOLOGIES
Reliance Technologies is a full-service Internet Web site and e-commerce
consulting and development firm. This subsidiary's services include consulting,
custom software solutions for Internet applications, network integration,
database programming, and administration, Web site hosting, Internet development
and dedicated Internet access.
With over 30 years of combined business and Web technology experience, Reliance
Technologies' Internet specialists have the breadth of knowledge and expertise
to help companies initiate and nurture their e-business enterprise from start-up
through the growth process. The hosting service provides stability for
e-commerce enterprises 24 hours a day, seven days a week. Major clients include
United Media (Dilbertzone.com and Snoopiezone.com), Texas Trial Lawyers
Association, Mattress Giant, Snelling Personnel Services, and a range of
manufacturing and distribution companies.
PRIORITY ONE ELECTRONIC COMMERCE CORPORATION
Founded in 1995, Priority One is 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 is developing CBQ's primary online electronic transaction
enterprise, PriorityCash, which will be completely Linux-compatible, using the
Red Hat platform, for easy deployment, reliability and speed.
Priority One's clients include iPower, Inc., developers of a unique
XML-intelligent technology tool with broad-based problem solving capabilities
for organizations, businesses, banks and individuals; Financial Services
Network-USA, a membership organization with over 250,000 members that provides
financial services through a network of leading financial services companies
that offer special terms to members; and Voice-Tel Communications, a subsidiary
of Premiere Technologies, Inc., which provides innovative communications
solutions in 32 countries by combining the power of the Internet with the reach
of telephone service.
CBQ announced in December of 1999 an agreement with LCI Technology Group N.V. to
implement the LCI-SMARTpen security solution for authentication of transaction
signatures in the first quarter of 2000. 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.
TOPHERNET
Founded in 1995 as a regional ISP, Tophernet has built a loyal following in the
Dallas/Ft. Worth Region. Its Internet service comprises access, email and home
page serving. It offers the following access methods: Dialup, Dedicated, and
broadband DSL.
<PAGE>
INTERNET PROPERTIES:
BID4IT.COM
Relaunched in 1999, CBQ's online interactive market exchange, bid4it.com, 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-time demand information. The system can also be integrated
with CBQ's EFT and credit card 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.
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.
CBQ is in discussion with two manufacturers of Internet appliances and is
actively seeking additional service bundling opportunities. Dial-up service is
available on a trial basis in the Dallas/Fort Worth area.
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 will be offered to all CBQ
clients, who in turn may 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 can offer 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.
<PAGE>
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.
Item 2. Description of Property: The Company, as of the date of this report,
owned no real or personal property, tangible or intangible, other than the
shares of its subsidiaries and its interest in GLP. The executive offices of the
Company are located in leased premises at 4851 Keller Springs Rd., Ste. 228,
Dallas, Texas 75248. The telephone number at this address is (972) 732 1100. The
Company and its subsidiaries lease their office space from unaffiliated third
parties at what is felt to be market rates.
Item 3. Legal Proceedings: 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 4. Submission of Matters to a Vote of Security Holders: There were no
meetings of security holders during the period covered by this report.
Part II
Item 5. Market for Common Equity and Related Shareholder Matters: As of April 6,
2000, there were approximately 56,661,857 shares of Common Stock issued and
outstanding, which were held of record by approximately 475 shareholders. The
Common Stock is currently quoted on the Bulletin Board maintained by the
National Association of Securities Dealers, Inc. (NASD), under the symbol CBQI.
The following table sets forth the range of high, low and closing bid and asked
prices per share of the Common Stock as reported by the NASD's OTC:BB for the
period indicated.
Calendar Quarter High Bid Low Bid High Ask Low Ask
---------------- -------- ------- -------- -------
March 31, 1998 0.25 0.125 0.375 0.25
June 30, 1998 0.25 0.15625 0.75 0.3125
September 30, 1998 0.21875 0.125 0.625 0.375
December 31, 1998 7.00 0.125 8.25 0.50
March 31, 1999 9.25 2.125 10.00 3.00
June 30, 1999 6.0625 2.25 6.3125 2.4375
September 30, 1999 4.125 1.25 4.5 1.5625
December 31, 1999 9.25 1.3125 9.5 1.5625
The above prices represent inter-dealer quotations without retail mark-up,
mark-down or commission, and may not necessarily represent actual transactions.
On April 6, 2000, the closing inside bid and asked prices for the Common Stock
were $8.25 and $8.75, respectively. On that date there were eleven market makers
publishing quotes.
<PAGE>
The Company has paid no dividends on the Common Stock since inception and does
not expect to pay dividends in the foreseeable future. There are, however, no
restrictions on the payment of dividends.
Item 6. Management's Discussion and Analysis of Financial Condition and Results
of Operations:
Results of Operations: The Company acquired Cyberquest on November 19, 1998,
Reliance Technologies and its subsidiary, Tophernet, on March 15, 1999, Priority
One on April 14, 1999, its minority interest in GLP on May 11, 1999, and
Chinasoft on January 14, 2000. Cyberquest, Priority One and Chinasoft were
start-up entities; therefore, no comparison may be made to prior periods. The
operations shown are the result of the operations acquired in Reliance
Technologies and Tophernet and reflect the results of the efforts of the Company
to provide for the further development of the businesses in Cyberquest and
Priority One.
Liquidity: Operating capital was primarily provided from (1) the revenues
provided by the operations of Reliance Technologies and Tophernet, (2) loans
from shareholders, (3) the exercise of stock options and (4) increases in
accounts and trade payables, among other debt.
Compliance with Beneficial Ownership Reporting Rules: Section 16(a) of the
Securities Act of 1934, as amended (Exchange Act), does not apply to the Company
since it is required to file its periodic reports by virtue of Section 15(d) of
the Securities Act. The Company anticipates that it will, subsequent to the
filing of this report, file to list its common stock under Section 12 of the
Exchange Act and, thereby, to become subject to Sections 13 and 16 of the
Exchange Act.
Item 7. Financial Statements:
<PAGE>
HALLIBURTON, HUNTER & ASSOCIATES, P.C.
Certified Public Accountants
To the Board of Directors and Shareholders
CBQ, Inc. and Subsidiaries
(A development stage company)
We have audited the accompanying balance sheets of CBQ, Inc. and Subsidiaries (a
development stage company) as of December 31, 1999, and December 31, 1998, and
the related statements of operations, stockholders' equity, and cash flows for
the three years 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.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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, based on our audit, the financial statements referred to above
present fairly, in all material respects, the financial position of CBQ, Inc.
and Subsidiaries (a development stage company), as of December 31, 1999, and
December 31, 1998, and the results of its operations and cash flows for the
three years then ended in conformity with generally accepted accounting
principles.
/s/ Halliburton, Hunter & Associates, P.C.
------------------------------------------
Halliburton, Hunter & Associates, P.C.
Littleton, Colorado
March 23, 2000
<PAGE>
CBQ, Inc. and Subsidiaries
(a development stage company)
BALANCE SHEETS
December 31,
---------------------
1999 1998
---- ----
Assets:
Current Assets:
Cash $ 37,812 $ 97,907
Account receivable 110,692 --
Less allowance for
doubtful accounts 35,000 --
-------- --------
75,692 97,907
-------- --------
Total current assets 113,504 97,907
-------- --------
Equipment, at cost:
Computers and
related equipment 219,518 68,905
Office Equipment 11,964 5,954
Software 5,289 --
-------- --------
Less accumulated depreciation 128,213 33,960
-------- --------
108,558 40,899
-------- --------
Other assets:
bid4it technology, net of
amortization of -- 37,500
Organization costs, less
amortization of
$1,434 and $133 9,458 667
Goodwill, less amortization of
$88,426 and $12,000 333,508 48,000
Deposits -- 7,257
Investments 46,163 --
-------- --------
Total of other assets 389,129 93,424
-------- --------
Total Assets: $611,191 $232,230
======== ========
<PAGE>
CBQ, Inc. and Subsidiaries
(a development stage company)
BALANCE SHEETS
(Continued)
December 31,
---------------------
1999 1998
---- ----
Liabilities and Stockholders' Equity:
Current Liabilities:
Note Payable, bank, unsecured $ 2,610 --
Accounts payable, trade 128,546 $ 105,918
Accounts payable, other 24,525 2,500
Accrued expenses 13,362 110,585
Unearned income 37,567 --
Due to related income 1,215 --
--------- ---------
Total Current Liabilities 207,825 219,003
--------- ---------
Long-Term Liabilities:
Loans from stockholders 116,718 2,575
Other 85,000 --
--------- ---------
Total Long-Term Liabilities 201,718 2,575
--------- ---------
Stockholders' Equity:
Preferred stock,
par value $.001 per share
Authorized 100,000,000
shares; 70,000 shares issued 70 70
Common stock,
par value $.0001 per
share. Authorized
500,000,000 shares;
issued 26,790,769 in 1999
and 20,375,332 in 1998 2,679 2,037
Additional
paid-in capital 812,783 210,285
Accumulated deficit
during development
stage (613,884) (201,740)
--------- ---------
Total stockholders' equity
(deficit) 201,648 10,652
--------- ---------
Total liabilities and
stockholders'
equity (deficit) $ 611,191 $ 232,230
========= =========
See accompanying Notes to Financial Statements
<PAGE>
CBQ, Inc. and Subsidiaries
(a development stage company)
STATEMENTS OF OPERATIONS
Years ended December 31,
1999 1998 1997
---- ---- ----
Revenues $ 720,925 $ -- $ --
----------- ----------- -----------
Costs and expenses:
Costs of revenues 113,032 -- --
Selling, general and
administrative costs 869,611 21,579 55,020
Depreciation and
amortization 150,426 -- --
----------- ----------- -----------
1,133,069 21,579 55,020
----------- ----------- -----------
Net Income (Loss) $ (412,144) $ (21,579) $ (55,020)
=========== =========== ===========
Net income per common shares * * *
* (Less than $.01 per share)
See accompanying Notes to Financial Statements
<PAGE>
<TABLE>
<CAPTION>
CBQ, Inc. and Subsidiaries
(a development stage company)
STATEMENTS OF STOCKHOLDER'S EQUITY
Preferred Common Additional
Preferred Par Common Par Paid-in Retained
Shares Value Shares Value Capital Earnings Total
------ ----- ------ ----- ------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996 -- $ -- 2,301,300 230 124,910 $ (125,140) $ --
Stock issued for services -- -- 6,000,000 600 -- -- 600
Net Loss for year ended
December 31, 1997 -- -- -- -- -- (55,021) (55,021)
Balance at December 31, 1997 -- -- 8,301,300 830 124,910 (180,161) (54,421)
Reverse 1:5 Share Split -- -- (6,125,968) (613) 613 -- --
Stock issued for services -- -- 100,000 10 54,411 -- 54,421
Stock issued for 100% of the
stock of CyberQuest 70,000 70 18,000,000 1,800 30,361 -- 32,231
Net Loss for year ended
December 31, 1998 -- -- -- -- -- (21,579) (21,579)
Balance at December 31, 1998 70,000 70 20,275,332 $ 2,027 210,295 (201,740) 10,652
Stock issued for services:
January 12, 1999 -- -- 200,000 20 99,980 -- 100,000
February 15, 1999 -- -- 102,235 10 51,107 -- 51,117
April 25, 1999 -- -- 80,000 8 39,992 -- 40,000
Stock issued for 100% of the
stock of Reliance Technologies: -- -- 1,000,000 100 261,078 -- 261,178
Stock issued for 100% of
Priority One Electronics
Commerce: -- -- 900,002 90 103,936 -- 104,026
Stock issued for 19% of
Global Logistics Partners,
LLC -- -- 4,233,200 424 46,395 -- 46,819
Net loss for year ended
December 31, 1999 -- -- -- -- -- (412,144) (412,144)
70,000 $ 70 26,790,769 $ 2,679 $ 812,783 $ (613,884) $ 201,648)
====== ======= ============ ============ ============ ============ ============
See accompanying Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CBQ, Inc. and Subsidiaries
(a development stage company)
STATEMENTS OF CASH FLOW
Years Ended December 31,
1999 1998 1997
---- ---- ----
Cash flows from operating activities:
<S> <C> <C> <C>
Net (loss) $(412,144) $ (21,579) $ (55,021)
Depreciation
and amortization 150,426 5,403 --
--------- --------- ---------
(261,718) 16,176 (55,021)
Changes in assets and liabilities:
Increase in accounts receivable (75,692) -- --
Increase in notes payable 2,610 -- --
Increase in accounts
payable, trade 22,628 (62,471) 54,421
Increase in accounts
payable, other 22,025 225 --
(Decrease) in accrued expenses (97,223) -- --
Increase in unearned income 37,576 -- --
Increase in due to
related company 1,215 -- --
Decrease in deposits 7,257 2,500 --
--------- --------- ---------
Cash (used in operations (341,331) (75,992) (600)
--------- --------- ---------
Cash flows from investing activities:
Equipment additions (109,024) (6,182) --
--------- --------- ---------
Cash used in investing activities (109,024) (6,182) --
--------- --------- ---------
Cash flows from financing activities:
Increase in long-term debt 199,143 -- --
Sale of common stock 191,117 180,001 600
--------- --------- ---------
Cash provided by financing
activities 390,260 180,001 600
--------- --------- ---------
Increase (decrease) in cash (60,095) 97,907 --
Cash balance at beginning of year 97,907 -- --
--------- --------- ---------
Cash balance at end of year $ 37,812 $ 97,907 $ --
========= ========= =========
See accompanying Notes to Financial Statements
</TABLE>
<PAGE>
CBQ, Inc. and Subsidiaries
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1999, and 1998
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. On November 19,
1999, the Company acquired a wholly owned subsidiary, CyberQuest, Inc., which
had recently purchased the assets and business of CyberQuest, Ltd. The Company
on March 15, 1999, 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. 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. As a result of these acquisitions, the Company is now a full service
internet development company, specializing in developing, implementing and
maintaining creative business WebSites, Commercial Sites and Database
Development.
2. Basis of Accounting: The Company recognizes income and expenses on the
accrual basis as earned or incurred. Equipment is recorded at cost. Computers
and related equipment are depreciated on a 3 year life and furniture and
fixtures on a 7 year life. The Bid4it technology, with an original cost of
$150,000, is being amortized over a 5 year life. Goodwill is also amortized over
a 5 year period, as are organization costs.
Use of estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that effect the financial statements at and during the reporting
periods. Actual results could differ from these estimates.
Income taxes: The Company has a net operating loss for income taxes. Due to the
regulatory limitations in utilizing the loss, it is uncertain whether the
Company will be able to realize a benefit from these losses. Therefore, a
deferred tax asset has not been recorded. There are no significant tax
differences requiring deferral.
3. Results of Operations: The Company had no operations until the acquisition of
CyberQuest on November 18, 1998. In 1999 the Company reported the operations of
CyberQuest for the entire year, of Reliance Technologies commencing March 15,
1999, and Priority One commencing April 9, 1999.
<PAGE>
4. Investment: 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 soely
for the issuance of 4,233,200 common shares.
5. Subsequent event (acquisition of ChinaSoft, Inc.): 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.
5. Common Stock Exchange: During 1998, the Company settled liabilities of
$54,421 in exchange for 200,000 shares of common stock. During 1999, the Company
settled liabilities of $191,117 in exchange for 382,235 shares of common stock
6. Preferred stock redemption: The preferred stock is redeemable as follows:
7,000 shares at the greater of $10.00 per share or the traded market value of
the preferred stock on or before October 23, 1999
14,000 shares at the greater of $10.715 per share or the traded market value of
the preferred stock on or before October 23, 2000
21,000 shares at the greater of $11.905 per share or the traded market value of
the preferred stock on or before October 23, 2001
28,000 shares at the greater of $12.50 per share or the traded market value of
the preferred stock on or before October 23, 2002
8. 1999 Stock Option Plan dated August 30, 1999: The purpose of the 1999 Stock
Option Plan of the Company (Plan) is to advance the interest of the Company by
providing an opportunity for ownership of the stock of the Company by employees,
agents and directors of, and consultants to, the Company and its subsidiaries.
By providing an opportunity for such stock ownership, the Company seeks to
attract and retain qualified personnel, and otherwise to provide additional
incentive to promote the success of its business. The total number of shares of
the authorized common stock for which options may be granted under the Plan is
2,600,000 shares, subject to adjustment. If an option expires or terminates for
any reason without having been exercised in full, the unpurchased shares are
again available for subsequent grants under the Plan. Common stock issuable on
exercise of an option is subject to such restrictions, if any, as the board
determines.
To date, options have been granted to two officers of the Company for a total of
975,000 shares during a five year period from April 1, 2000, to March 31, 2005
at a price of $2.125 per share. The Plan was subsequently amended to include
options to purchase up to 1,200,000 shares of common stock at a price of $2.25
per share owned in the aggregate by two directors. The options have a five year
life and are currently exercisable.
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure: This item is not applicable to the Company.
<PAGE>
PART III
Item 9. Directors and Executive Officers of the Company: The following table
sets forth all current directors, executive officers and significant employees
of the Company and of its subsidiary, as well as their ages:
Name Age Position with Company
---- --- ---------------------
Bart S. Fisher 56 Chairman of the Board of
Directors of the Company
J. Patrick Dowd 52 Director
John Harris 38 Director, Chief Executive and
Financial Officer and President
of the Company, Priority One,
Chinasoft and China Partners
Director and Chief Financial
Officer of Reliance Technologies
and Tophnet
Greg Allen 37 Director of the Company and of
Reliance Technologies and Tophernet,
President and Chief Executive
Officer of Reliance Technologies
and Tophernet, Chief Operations
Officer of the Company, Reliance
Technologies, Tophernet, Priority
One, Chinasoft and China Partners
Xu Ling 38 Director of the Company
Chang Guomin 35 Director of the Company
Scott Lowden 60 Director of the Company
Dan Groves 42 Director of the Company
No current director has any arrangement or understanding whereby he is or will
be selected as a director or nominee. Directors and executive officers will hold
office until the next annual meeting of shareholders and until their respective
successors have been duly elected and qualified or until they earlier
resignation. Officers are generally elected by the Board of Directors at its
annual meeting immediately following the shareholders' annual meeting and hold
office until their death or until they earlier resign or are removed from
office. The Company does not have any standing audit, nominating or compensation
committees, or any committees performing similar functions.
Profiles of Directors and Executive Officers of the Company and of its
Subsidiary:
<PAGE>
Management Team:
Dr. Bart S. Fisher has been a member and the Chairman of the Board of Directors
since January 14, 2000. He is currently counsel with the law firm of Porter,
Wright, Morris & Arthur in Washington D.C. Previously, he practiced law with
Patton, Boggs, and Arent Fox Kintner Plotkin & Kahn, both based in Washington
D.C. While at Patton Boggs he was on the Management Committee and Chair of the
International Trade Practice Group.
Dr. Fisher attended Harvard Law School (JD 1972), The Johns Hopkins School of
Advanced International Studies in Washington, DC, and Bologna, Italy,(MA 1967
and PhD 1970) and Washington University (BA 1963). He was elected to Phi Beta
Kappa at Washington University, and awarded the Brookings Institution Fellowship
in 1968.
Dr. Fisher is an Adjunct Professor in International Relations at the Georgetown
University School of Foreign Service, and has been a Professorial Lecturer in
International Relations at The Johns Hopkins School of Advanced International
Studies, and Senior Lecturer in International Transactions at the International
Institute of George Mason University. He was a Fellow in the Foreign Policy
Studies Division at the Brookings Institute (1968 to 1969).
Dr. Fisher is a member of the International Bar Association and an ex-officio
member of the Board of Governors, International Practice Section, Virginia State
Bar. He serves on the Program Committee of Georgetown University Leadership
Seminar, which he co-founded in 1981, and as a participating member of the
International Trade Working Group of the President's Council on Year 2000
Conversion, and is a nationally syndicated columnist for News/USA.
Dr. Fisher is Managing Partner of Capital House Merchant Banking, LLC, and
President of Capital Baseball, Inc. He formerly served as a Director of Total
Health, a New York-based health maintenance organization. As a Managing Partner
of Capital House, Dr. Fisher has been actively involved and engaged by Lycos(R)
(Nasdaq: LCOS), to obtain financing and joint venture partners for unique
Internet Portals.
Dr. Fisher is a member of the Board of Directors of the National Marrow Donor
Program, The Marrow Foundation, and the Aplastic Anemia Foundation (which he
formed in 1983). He is a member of the American Legion, and listed in the Who's
Who in the World, Who's Who in American Law, and Who's Who in America.
Dr. Fisher has also published works is many books about international trade, and
has written numerous articles published in business and law journals. Most
noteworthy was "International Trade and Investment: Regulating International
Business", a book co-authored with John Bart, which is used as the standard
casebook on international trade in many law schools in the United States.
Mr. J. Patrick Dowd has been a director of the Company since January 14, 2000.
He is Managing Partner of Capital House, L.L.C., and has a 21-year background in
corporate and international shipping operations. He is a Notre Dame graduate,
and holds an MA from the Fletcher School of Law and Diplomacy, as well as and
MBA from the INSEAD School of international business in France. He as also
worked in New York in the investment banking operations of Smith Barney and
Lehman Brothers.
<PAGE>
As a Managing Partner of Capital House, Mr. Dowd has been involved in national
and international corporate acquisitions, internet-related investments,
international joint ventures, infrastructure projects in telecommunications and
port development, emerging biotechnology companies, and real estate development.
Mr. Dowd, with a long-standing background in the transportation market, took the
lead on a private placement for capital that put Midway Airlines back in
operation back in 1994. Today Midway, with a new hub in the Raleigh Airport, is
well on its way to recovery as a successful U.S. airline.
Mr. John Harris has been a director and the Chief Executive and Financial
Officer and President of the Company since October, 1999. He has also been a
director of the subsidiaries of the Company and their Chief Financial Officer
since October, 1999.
In 1999, and until joining the Company in October, 1999, Mr. Harris served as
President of Paragon Innovations, Inc., a privately held computer software
corporation based in Richardson, Texas. Mr. Harris assisted this entity in
changing the focus of its business to the embedded device industry, forming
alliances with NetSilicon, Wind River Systems and other major internet
technology vendors to the embedded device community, the result of which was the
award of a significant contract with Motorola Software Tools Division.
From 1986 through 1998, Mr. Harris was the President and CEO of CompuNet Support
Systems, Inc., in Dallas, Texas. He founded this organization, which eventually
serviced over 1,500 companies in the Dallas-Ft. Worth metroplex. These clients
represented approximately 100,000 personal computer users. CompNet specialized
in networking, systems integration and business building applications. Mr.
Harris guided CompuNet through triple-digit revenue growth from 1990 until 1997,
resulting in the implementation of a business strategy that resulted in a 400%
increase in net operating income in fiscal 1998. CompuNet as a Dallas 100
finalist in 1994, 1995, 1996
Mr. Dan Groves is a director of the Company and is the Vice President of Finance
for First Continental Capital, L.P. He has been associated with this entity
since April, 1985. While Mr. Groves oversees the accounting, personnel,
purchasing and other operational areas of the business, his primary thrust and
integral role to the organization is his financial analysis and computer
modeling abilities, which are essential for pricing and structuring financing
transactions for clients.
Mr. Groves was employed by North Dallas Bank prior to joining First Continental.
While at the bank, Mr. Groves was credit department manager for four years and,
previous to that, loan workout and foreclosed real estate officer for three
years, auditor for two years and comptroller for three years. The bank had two
affiliated corporations for which he served as treasurer of one and president of
the other. He has also performed independent consulting activities in
accounting.
Mr. Groves was a director for Compunet Support Systems for five years prior to
the corporation being sold in 1997. He is a former member of the North Dallas
Chapter of the National Association of Accountants. In 1984, 1985 and 1988 he
served as a director and on the board of that organization. He received a BBA
from Southern Methodist University with majors in business statistics and
marketing.
<PAGE>
Mr. Scott Lowden is a director of the Company. He is primarily engaged in the
practice of law in Dallas, Texas, with Bennack & Lowden, LLP. Mr. Lowden has
practiced law since 1967. He is a member of the bars of Texas, North Carolina,
and Massachusetts. He has served as an executive and the head of legal
departments for two Fortune 100 companies and was first listed in Who's Who in
America in 1982 and in Who's Who in American Law in 1983. His practice
concentrates on corporate and international law, mergers and acquisitions,
corporate governance, and mediation of legal disputes. Mr. Lowden has published
law review articles and articles in The Business Lawyer and The Texas Lawyer on
subjects ranging from international trade to the use of mediation to resolve
internal and external corporate conflicts. He is a frequent lecturer at
universities and bar association events on a variety of corporate and
international legal subjects.
Mr. Lowden is a member of the Dallas Bar Association, and is a member of this
association's Sections of Alternative Dispute Resolution, Business Litigation,
Corporate Counsel (Council member), and International Law (Council member). He
served as Chairman of the association's Law Day Committee in 1999.
Mr. Lowden received his JD from Harvard Law School in 1966; was a Fulbright
Fellow, University of Madrid, Spain, 1963; and attended Wesleyan University,
Middletown, Connecticut, receiving a degree in 1962.
Mr. Greg Allen has been a director of the Company since March 15, 1999. He was a
founder of Reliance Technologies and Tophernet in 1995 and currently serves as a
director and the Chief Executive Officer and President of these entities. Mr.
Allen serves the Company, Reliance Technologies, Tophernet, Priority One,
Chinasoft and China Partners as Chief Operations Officer.
From October 1994, until September 1995, he was a software manager with Canmax
Retail Systems.
Mr. Allen received a Bachelor of Science Degree in Computer Science from Texas
A&M University in 1991. He also took courses towards obtaining a Master of
Science Degree in Computer Science from East Texas State University, but did not
complete the degree.
Ms. Xu Ling has been a director of the Company since January 14, 2000. She
graduated in 1983 with Bachelors degree in from Yan Jing Overseas Chinese
University. She is currently the general manager of Asia-European Bridge
Corporation, Ltd. This firm specializes in international business transactions
primarily in the high technology sector. Mrs Xu also provides consulting to
foriegn businesses who seek to do business in the Chinese market.
Mr. Chang Guomin has been a director of the company since January 14, 2000. He
is currently Chairman of CCSoft Technology Developing Co., Ltd CCSoft provides
outsource software development services to many companies in China, including
China Telecom and China Unicom. He is also Chairman of KWOK Man Group. KWOK Man
Group holds significant real estate investments in China and Austrailia.
<PAGE>
Employment Agreements:
Mr. Allen entered into an agreement with the Company beginning October 1, 1999,
the initial term of which expired on March 31, 2000. The agreement is
automatically extended for additional six month terms unless either the Company
or Mr. Allen elect to terminate the agreement by giving 30 day's written notice
prior to lapse of the initial or any subsequent term. Under the agreement, Mr.
Allen has agreed to serve as President and a member of the Board of Directors of
the Company and of certain of its subsidiaries. The agreement provides a base
salary of $85,000 per annum during the initial term and any subsequent
extension. The base salary is subject to review by the board from time to time,
but not less frequently than at the end of each fiscal year. In addition to the
base salary, the Company may pay Mr. Allen a bonus in accordance with the sole
and unconditioned discretion of the board. Mr. Allen is also entitled to
participate in the 1999 Stock Option and Stock Award Plan of the Company. He
received, effective on execution of the Agreement, an option to acquire 25,000
shares of the Company's common stock. Mr. Allen effective automatically
exercised the option January 1, 2000, in lieu of a bonus for the year ended
December 31, 1999. The option price was $2.125 per share, the market price for
the common stock on the date of the Agreement. Mr. Allen paid the price through
the delivery of services for the period beginning October 1, 1999, and ending
December 31, 1999. The option vested on December 31, 1999. Mr. Allen also
received, effective on execution of the agreement, an option to acquire 475,000
shares of the Company's common stock during a five year period beginning April
1, 2000, and ending March 31, 2005, at a price of $2.215 per share, that being
the market price for such stock on the date of the Agreement. This option vested
on March 31, 2000.
Mr. Harris entered into an agreement with the Company beginning October 1, 1999,
the initial term of which expired on March 31, 2000. The agreement is
automatically extended for additional six month terms unless either the Company
or the Mr. Harris elect to terminate this Agreement by giving 30 day's written
notice prior to lapse of the initial or any subsequent term. Under the
agreement, Mr. Harris has agreed to serve as Chief Executive Officer and a
member of the Board of Directors of the Company and of certain of its
subsidiaries. The agreement provides a base salary of $85,000 per annum during
the initial term and any subsequent extension. The base salary is subject to
review by the board from time to time, but not less frequently than at the end
of each fiscal year. In addition to the base salary, the Company may pay Mr.
Harris a bonus in accordance with the sole and unconditioned discretion of the
board. Mr. Harris is also entitled to participate in the 1999 Stock Option and
Stock Award Plan of the Company. He received, effective on execution of the
Agreement, an option to acquire 25,000 shares of the Company's common stock. Mr.
Harris effective automatically exercised the option January 1, 2000, in lieu of
a bonus for the year ended December 31, 1999. The option price was $2.125 per
share, the market price for the common stock on the date of the Agreement. Mr.
Harris paid the price through the delivery of services for the period beginning
October 1, 1999, and ending December 31, 1999. The option vested on December 31,
1999. Mr. Harris also received, effective on execution of the agreement, an
option to acquire 500,000 shares of the Company's common stock during a five
year period beginning April 1, 2000, and ending March 31, 2005, at a price of
$2.215 per share, that being the market price for such stock on the date of the
Agreement. This option vested on March 31, 2000.
Item 11. Security Ownership of Management and Certain Others: Based on
information which has been made available to the Company by its stock transfer
agent, the following table sets forth, as of April 6, 2000, the shares of Common
Stock owned by each current director, by directors and executive officers as a
Group and by each person known by the Company to own more than 5% of the
outstanding Common Stock:
<PAGE>
Title of Name of Number of Percent of
Class Beneficial Owner Shares Class(1)
----- ---------------- ------ --------
Common Stock Bart S Fisher 6,214,706(3) 10.97%
Common Stock J. Patrick Dowd 4,255,982(3) 7.51%
Common Stock John Harris 25,000(4) (2)
Common Stock Greg Allen 461,577(4) (2)
Common Stock Xu Ling 3,000,000(5) 5.29%
Common Stock Chang Guomin 6,214,706(5) 10.97%
Common Stock Lynn Elliott 3,496,050 6.17%
Common Stock Cynthia Jared 3,496,050 6.17%
Common Stock R. Wayne Duke 3,446,050 6.08%
Common Stock Rick Williamson 4,233,200 7.47%
Common Stock Cyberquest, Ltd. 2,699,000 4.76%
Common Stock Scott Lowden -0- (2)
Common Stock Dan Groves -0- (2)
Directors and Executive 20,171,971 35.60%
Officers as a Group:
(1) Based on approximately 56,661,857 shares of common stock issued and
outstanding on March 22, 2000.
(2) Less than 1%
(3) Does not include options to acquire up to 600,000 shares of common stock
each at a price of $2.125 per share, which are owned by Messrs. Fisher and Dowd.
These options are currently exercisable. Mr. Dowd's figure includes 1,800,000
shares held as custodian for his minor children. Mr. Dowd disclaims beneficial
ownership of his childrens' shares.
(4) Does not include options to acquire 475,000 shares each by Messrs. Harris
and Allen. The options are currently available for exercise, and the strike
price per share is $2.125. The options have five-year terms, which began April
1, 2000.
(5) Does not include options to acquire 50,000 and 750,000 shares, respectively,
by Ms. Xu and Mr. Chang. The options are currently available for exercise, and
the strike price per share is $2.125. The options have five-years terms.
Item 12. Certain Transactions:
This item is not applicable.
Item 13. Exhibits and Reports on Form 8-K:
(a) Exhibits:
10.3 Allen Employment Agreement
10.4 Harris Employment Agreement
10.5 ChinaSoft Acquisition Agreement (Included in Form 8-KSB set forth in (b)
below.
(b) Forms 8-KSB: Form 8-KSB dated December 22, 1999
<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
Pursuant to the requirements of the Securities Exchange Act of 1934, the
following person on behalf of the registrant has signed this report below in the
capacity on this 28th day of August 2000.
/s/ Bart Fisher
---------------
Bart Fisher, Director
/s/ J. Patrick Dowd
-------------------
J. Patrick Dowd, Director
/s/ John Harris
---------------
John Harris, Director
/s/ Xu Ling
-----------
Xu Ling, Director
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8 KSB
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
December 22, 1999
-----------------
(Date of Report)
CBQ, Inc.
---------
(Exact name of registrant as specified in its charter)
Colorado
--------
(State or other jurisdiction of incorporation)
33-14707-NY 84-1047159
----------- ----------
(Commission File Number) (IRS Employer Identification Number)
4851 Keller Springs Rd., Ste. 228, Dallas, Texas 75248
------------------------------------------------------
(Address of principal executive offices including zip code)
(972) 732-1100
--------------
(Registrant's telephone number including area code)
Not Applicable
-----------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
Item 1. Change in Control of Registrant: See Item 5, below.
Item 2. Acquisition or Disposition of Assets: See Item 5, below.
Item 3. Bankruptcy or Receivership: Not Applicable.
Item 4. Changes in Registrant's Certifying Accountant: Not Applicable.
Item 5. Other Events: Acquisition of CyberQuest, Inc.
Reorganization Agreement: On December 22, 1999, CBQ, Inc., a Colorado
corporation (CBQI or the Company), entered into a reorganization agreement
(Reorganization Agreement) with ChinaSoft, Inc., District of Columbia
corporation (ChinaSoft), and 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 is subject to a due diligence period discussed immediately below. If
the acquisition is consummated, ChinaSoft will become a wholly-owned subsidiary
of the Company and the shareholders of ChinaSoft will acquire a controlling
interest in the Company. The reorganization has been structured as a tax-free
triangular merger.
The closing of the acquisition of ChinaSoft has been scheduled to take place at
the offices of Porter, Wright, Morris & Arthur at 1667 K Street NW, Suite 1100,
Washington, D.C. Closing will occur on the conclusion of certain due diligence
by both parties. This due diligence must be completed by the close of business
on January 14, 2000. The Reorganization Agreement provides that the Company and
ChinaSoft each may conduct whatever due diligence they feel necessary to verify
the truth and accuracy of the various representations and warranties made to one
another in the Reorganization Agreement. Either party has the right to rescind
the Reorganization Agreement in case of a material breach.
The Reorganization Agreement does not require a change of either the name or the
outstanding capitalization of the Company.
The Company, under the Reorganization Agreement, will issue and deliver at
closing approximately thirty million shares of its restricted common stock to
the shareholders of ChinaSoft on a pro rata basis. The shares issued will
constitute no less than 51% of the outstanding proprietary interest of CBQI on a
fully diluted basis immediately after their issuance and delivery. The CBQI
Shares will have been fully paid for and will be non assessable and restricted,
as defined in Regulation D and Rule 144 of the Securities Act of 1933, as
amended.
<PAGE>
Concurrent with the execution and deliver of the Reorganization Agreement, Mr.
William J. Flannery and Ms. Barbara Reihl resigned as directors, leaving Messrs.
John Harris, Greg Allen and Richard Schwartz as the sole remaining directors.
The executive officers of the Company remained unchanged. If closing occurs,
four additional directors will be appointed. These will be Mr. Bart S. Fisher
(who shall also act as Chairman), Mr. J. Patrick Dowd, Ms. Song Zhi De, and Mr.
Chang Guomin. The current executive officers of the Company will remain
unchanged immediately subsequent to closing. The directors of ChinaSoft,
immediately subsequent to closing, will be Bart S. Fisher (who shall also act as
Chairman), Song Zhi De and Xu Ying.
Overview of ChinaSoft:
Founding and Business Summary: ChinaSoft was incorporated to promote the
export of Chinese software services and solutions to the U.S. market. Eventually
ChinaSoft will spin out and be its own entity, at which time it will make an
initial public stock offering on the U.S. and Hong Kong exchanges. Recently,
ChinaSoft and Beijing Zhongruan Zhixun Technology Development Co., Ltd., the
marketing affiliate of the China National Software & Service Technologies
Company (CS&S, an arm of the Chinese government), entered into a joint venture.
Strategic Management Team: Bart S. Fisher, Chairman of the Board. Mr.
Fisher is Counsel with the law firm of Porter, Wright, Morris & Arthur in
Washington, DC. From 1972 through April, 1994, he practiced law with Patton,
Boggs in Washington, DC, where he was a partner as of January 1, 1978. While at
Patton Boggs he was on the Management Committee and Chair of the International
Trade Practice Group. From May, 1994, until August 1, 1995, he was a partner
with the law firm Arent Fox Kintner Plotkin & Kahn in Washington, DC.
He attended Harvard Law School (JD 1972), The Johns Hopkins School of Advanced
International Studies in Washington, DC, and Bologna, Italy (MA 1967 and PhD
1970) and Washington University (BA 1963). He was elected to Phi Beta Kappa at
Washington University, and awarded the Brookings Institution Fellowship in 1968.
Dr. Fisher is an Adjunct Professor in International Relations at the Georgetown
University School of Foreign Service, and has been a Professorial Lecturer in
International Relations at The Johns Hopkins School of Advanced International
Studies, and Senior Lecturer in International Transactions at the International
Institute of George Mason University. He was a Fellow in the Foreign Policy
Studies Division at the Brookings Institute (1968 to 1969).
He is a member of the International Bar Association and an ex-officio member of
the Board of Governors, International Practice Section, Virginia State Bar. He
serves on the Program Committee of Georgetown University Leadership Seminar,
which he co-founded in 1981, as a Director of The Institute at Mars Hill
College, as a participating member of the International Trade Working Group of
the President's Council on Year 2000 Conversion, and is a nationally syndicated
columnist for NewsUSA.
<PAGE>
He is Managing Partner of Capital House Merchant Banking, LLC, and President of
Capital Baseball, Inc. From 1991-1994 he was Vice President of the Prince
William Cannons Professional Baseball Club and a member of its Board of
Directors. He formerly served as a Director of Total Health, a New York-based
health maintenance organization.
He is a member of the Board of Directors of the National Marrow Donor Program,
The Marrow Foundation, and the Aplastic Anemia Foundation (which he founded in
1983), and has served as President of the Aplastic Anemia Foundation. He is a
member of the American Legion Parkville Post.
Dr. Fisher is listed in Who's Who in the World, Who's Who in American Law, and
Who's Who in America.
The biographies for Mr. J. Patrick Dowd, Ms. Song Zhi De, and Mr. Chang Guomin
are currently being prepared.
Market Analysis: The U.S. market for software is very large, as is the
market for software in China. ChinaSoft will seek to provide software solutions
for both the U.S. and China markets. ChinaSoft will focus initially on
applications in the telecommunications area.
Market Opportunity: ChinaSoft intends to benefit from its relationships in
China in both an export and import capacity. Along with the exportation of
Chinese software services and solutions, ChinaSoft wants to help U.S. companies
engaging in joint ventures in China with software projects in China. ChinaSoft
will compete with India's market for offshore engineering solutions. China has a
competitive advantage in the labor market for software engineers. A college
graduate in China earns just $3,000 a year as a programmer compared to the over
$60,000 per year earned by U.S. graduates.
ChinaSoft plans to export Chinese software services and solutions over the
Internet. In this manner, U.S. companies can easily access Chinese engineers for
projects. The time difference between the United States and China will be a
beneficial factor in this regard. Chinese engineers can work on projects while
U.S. customers are asleep and, in some cases, have it delivered by morning.
Target Market: The target market will consist of two types of customers:
(1) people who want to do IT work in China who currently go to India, and (2)
direct customers that have a shortage of IT people. Prospective customers
include KPMG, Motorola, and CyberCash.
<PAGE>
Market Size: China is a market with 1.3 billion people, with per capita
incomes varying substantially depending on the part of the country surveyed.
Initially, ChianSoft will focus on the coastal provinces including Beijing,
Shanghai, Shandong, and Fujian. The per capita income in the coastal areas of
China is around $1,000 per person. It is on the order of $300 per capita for the
inland provinces, which will be a later target of opportunity.
Business Strategy: ChinaSoft plans to pursue its business in China on three
different levels. First and foremost, ChinaSoft will promote the exportation of
Chinese software services and solutions. Second, ChinaSoft hopes to become an
Internet Service Provider (ISP) in China. Currently, there are only a few ISPs,
including the Government of China. There is no foreign investment in the Chinese
Internet except for the WTO. ChinaSoft may invest up to 50 percent in a Chinese
Internet company. ChinaSoft believes that it can compete in the area of
e-payments. Finally, ChinaSoft hopes to compete in the telecommunications
industry in China by entering into wireless web market.
ChinaSoft also plans to sell software and software solutions on the Internet
through ChinaSoftInternational.com.
Strategic Relationships: ChinaSoft's key strategic relationship is its
joint venture with China National Computer Software & Technology Service
Corporation/Beijing Zhongruan Zhixun Technology Development Co., Ltd., which is
a marketing arm of China National Compurter Software & Technology Service
Corporation ("CS&S"). The Chairman of the Board of Beijing Zhongruan Zhixun
Technology Development Co., Ltd. is Chang Guomin, who has very good
relationships with the Government of China and the business community within
China.
Intellectual Property: The key intellectual property possessed by ChinaSoft
is know-how related to computer programming.
Item 6. Resignation of Registrant's Directors: Not Applicable.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits: Not
Applicable
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CBQ, Inc.
(Registrant)
By: /s/ John Harris
------------------------------------
John Harris, Chief Executive Officer
Date: January 6, 1999
