-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SSrxRdMNH94g6qm0JGCOKghHAhrgnRs9145aBrQZ0uX/yBg6VSUKnJfRatpswfQy 4xvqKeipKSBlQpaPSuZ6mQ== 0000939802-02-000422.txt : 20021114 0000939802-02-000422.hdr.sgml : 20021114 20021114130840 ACCESSION NUMBER: 0000939802-02-000422 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20020930 FILED AS OF DATE: 20021114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CBQ INC CENTRAL INDEX KEY: 0000814926 STANDARD INDUSTRIAL CLASSIFICATION: BLANK CHECKS [6770] IRS NUMBER: 841047159 STATE OF INCORPORATION: CO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-28831 FILM NUMBER: 02823547 BUSINESS ADDRESS: STREET 1: 48 S.W. STREET CITY: DANIA BEACH STATE: FL ZIP: 33004 BUSINESS PHONE: (954) 450-2888 MAIL ADDRESS: STREET 1: 48 S.W. STREET CITY: DANIA BEACH STATE: FL ZIP: 33004 FORMER COMPANY: FORMER CONFORMED NAME: YORKSHIRE LEVERAGED GROUP INC DATE OF NAME CHANGE: 19890301 FORMER COMPANY: FORMER CONFORMED NAME: FREEDOM FUNDING INC DATE OF NAME CHANGE: 19961205 10QSB 1 form10qsb093002.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Form 10-QSB (Mark One) [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: September 30, 2002 ------------------------------ [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT For the transition period from to --------------- ----------------- Commission file number 0-28831 ------------------------------------ CBQ, Inc. -------------------------------------------------------------------------- (Exact name of small business issuer as specified in its charter) Colorado 84-1047159 - ------------------------------------------------------------------------------- (State or other jurisdiction (IRS Employer of incorporation or organization) Identification No.) 48 S.W. Street, Dania Beach, FL 33004 ------------------------------------- (Address of principal executive offices) (954) 450-2888 ------------------------------------------- Issuer's telephone number 655 15th Street NW, Ste 460, Washington, D.C. 20005 (Former name, former address and former fiscal year, if changed since last report.) APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDING DURING THE PRECEDING FIVE YEARS Check whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes ----- No ----- APPLICABLE ONLY TO CORPORATE ISSUERS State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practical date: November 11, 2002 Approximately 79,621,299 shares Transitional Small Business Disclosure Format (check one). Yes ; No X ---- ----- PART I Item 1. Financial Statements INDEPENDENT ACCOUNTANT'S REPORT To the Board of Directors and Shareholders CBQ, Inc. and Subsidiaries We have reviewed the accompanying consolidated balance sheets of CBQ, Inc. and Subsidiaries as of September 30, 2002 and December 31, 2001 and the related consolidated statements of operations for the three and nine months and cash flows for the nine month periods ended September 30, 2002 and 2001. These consolidated financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statement taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the accompanying consolidated financial statements for them to be in conformity with generally accepted accounting principles. Respectfully submitted /s/ Robison, Hill & Co. ------------------------------------------- Certified Public Accountants Salt Lake City, Utah November 11, 2002 CBQ, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
(Unaudited) September 30, December 31, 2002 2001 ------------------ ------------------ Assets: Current assets: $ - $ - Other non-current assets: Investments 274,000 250,000 ------------------ ------------------ Total assets $ 274,000 $ 250,000 ================== ==================
CBQ, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Continued)
(Unaudited) September 30, December 31, 2002 2001 ------------------ ------------------ Liabilities and Stockholders' Deficit: Current liabilities: Line of credit payable $ 577,157 $ 577,157 Current portion of long-term debt 2,860,460 2,860,460 Accounts payable, trade 693,651 692,451 Accrued expenses 330,600 517,356 Due to related party 1,215 1,215 Due to shareholders 139,000 115,000 Net liabilities of discontinued operations 1,311,025 1,311,025 ------------------ ------------------ Total current liabilities 5,913,108 6,074,664 ------------------ ------------------ Non-current liabilities: Preferred stock of subsidiaries 525,000 525,000 ------------------ ------------------ Total non-current liabilities 525,000 525,000 Total Liabilities 6,438,108 6,599,664 ------------------ ------------------ Stockholders' Deficit: Preferred Stock, par value $.001 per share Authorized 100,000,000 shares, 70,000 shares issued and outstanding at September 30, 2002 and December 31, 2001 70 70 Common Stock, par value $.0001 per share Authorized 500,000,000 shares, Issued 79,516,835 Shares at September 30, 2002 and December 31, 2001 7,952 7,952 Additional paid-in capital 3,518,141 3,518,141 Accumulated deficit (10,238,271) (9,875,827) ------------------ ------------------ Total Stockholders' Deficit (6,712,108) (6,349,664) ------------------ ------------------ Total Liabilities and Stockholders' Deficit $ (274,000) $ 250,000 ================== ==================
See accompanying notes and accountants' report. CBQ, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months For the Nine Months Ended September 30, Ended September 30, ----------------------------------- -------------------------------------- 2002 2001 2002 2001 ------------------ ---------------- ------------------ ------------------ Continuing operations: Revenues $ - $ - $ - $ - Costs and expenses: General and administrative 1,200 155,334 72,700 317,009 Interest expense 108,748 31,958 289,744 223,405 ------------------ ---------------- ------------------ ------------------ Net Loss from Continuing Operations (109,948) (187,292) (362,444) (540,414) ------------------ ---------------- ------------------ ------------------ Discontinued operations: Income (Loss) from operations of discontinued operations - (250,541) - (718,884) Loss on disposal of discontinued operations - - - - ------------------ ---------------- ------------------ ------------------ Net Income (loss) from discontinued operations - (250,541) - (718,884) ------------------ ---------------- ------------------ ------------------ Net Income (Loss) $ (109,948)$ (437,833) $ (362,444) $ (1,259,298) ================== ================ ================== ================== Weighted Average Shares Outstanding 79,516,835 78,726,725 79,516,835 75,525,122 ================== ================ ================== ================== Loss per Common Share $ - $ (0.01) $ - $ (0.02) ================== ================ ================== ==================
See accompanying notes and accountants' report. CBQ, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) For the Nine months ended September 30, ------------------------------------- 2002 2001 ----------------- ------------------ CASH FLOWS FROM OPERATING ACTIVITIES: Continuing operations: Net Income (Loss) $ (362,444) $ (540,414) Adjustments necessary to reconcile net loss to net cash used in operating activities: Increase (decrease) in accounts payable 1,200 16,849 Increase (decrease) in accrued expenses 361,244 238,999 ----------------- ------------------ Net Cash Used in continuing operations - (284,566) ----------------- ------------------ Cash flows from discontinued operations - (1,028,836) ----------------- ------------------ CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of investment - (250,000) Increase in deposits (24,000) - ----------------- ------------------ Net cash provided by (used) investing activities (24,000) (250,000) ----------------- ------------------ CASH FLOWS FROM FINANCING ACTIVITIES: Borrowing on line of credit - 577,157 Other increases in long-term debt - 771,245 Increase in payable to shareholder 24,000 - Common stock issued for cash - 215,000 ----------------- ------------------ Net Cash Provided by Financing Activities 24,000 1,563,402 ----------------- ------------------ Net (Decrease) Increase in Cash and Cash Equivalents - - ----------------- ------------------ Cash and Cash Equivalents at Beginning of Period - - ----------------- ------------------ Cash and Cash Equivalents at End of Period $ - $ - ================= ==================
CBQ, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Continued
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest $ - $ 223,404 Franchise and income taxes $ - $ -
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: On March 1, 2001, the Company purchased Easy Soft International, Inc. ("Easy Soft"). The purchase price was 5,625,000 shares of common stock in exchange for assets valued at $580,596 (receivables in the approximate amount of $95,665, equipment and other assets of $5,181 and goodwill of $479,750) less liabilities of $9,305. On March 27, 200l the Company purchased certain assets of Technet Computers Services, Inc. and Networkland, Inc. for 7,800,000 shares of common stock and a 10% note payable of $700,000 in exchange for which the Company received assets valued at $1,794,748 ( receivables $1,553,273, inventory $27,067, equipment $20,417, goodwill $192,671 and other assets $1,320) and assumed liabilities of $688,029. In April 2001, the Company settled approximately $120,000 in disputed charges with a third party for $17,000 in cash and 900,000 shares of the Company's common stock. See accompanying notes and accountants' report. CBQ, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001 --------------------------------------------------------------- NOTE 1 - NATURE OF OPERATIONS AND GOING CONCERN The accompanying financial statements have been prepared on the basis of accounting principles applicable to a "going concern", which assume that the Company will continue in operation for at least one year and will be able to realize its assets and discharge its liabilities in the normal course of operations. Several conditions and events cast doubt about the Company's ability to continue as a "going concern". The Company has incurred net losses of approximately $362,000 for the nine months ended September 30, 2002 and losses of approximately $4,505,000 for the year ended December 31, 2001, has a liquidity problem, and requires additional financing in order to finance its business activities on an ongoing basis. The Company is actively pursuing alternative financing and has had discussions with various third parties, although no firm commitments have been obtained. The Company's future capital requirements will depend on numerous factors including, but not limited to, continued progress in developing its products, and market penetration and profitable operations from its software development outsourcing, web development, custom software development, network systems integration and management. These financial statements do not reflect adjustments that would be necessary if the Company were unable to continue as a "going concern". While management believes that the actions already taken or planned, will mitigate the adverse conditions and events which raise doubt about the validity of the "going concern" assumption used in preparing these financial statements, there can be no assurance that these actions will be successful. If the Company were unable to continue as a "going concern", then substantial adjustments would be necessary to the carrying values of assets, the reported amounts of its liabilities, the reported revenues and expenses, and the balance sheet classifications used. Organization and Basis of Presentation 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. Nature of Business The Company has ceased all operations except to attempt to settle liabilities and to seek a new business opportunity. Currently, the Company has not determined which industry to pursue opportunities and will not do so until such time as those uncertainties presently facing the Company are resolved. The Company's previous lines of businesses included software development outsourcing, web development, custom software development, network systems integration and management. CBQ, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001 --------------------------------------------------------------- (Continued) NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This summary of accounting policies for CBQ, Inc. and Subsidiaries is presented to assist in understanding the Company's consolidated financial statements. The accounting policies conform to generally accepted accounting principles and have been consistently applied in the preparation of the financial statements. Interim Reporting The unaudited financial statements as of September 30, 2002 and for the three month and nine month periods ended September 30, 2002 and 2001 reflect, in the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to fairly state the financial position and results of operations for the three and nine months. Operating results for interim periods are not necessarily indicative of the results which can be expected for full years. Principles of Consolidation The consolidated financial statements for the three months and nine months ended September 30, 2002 and 2001 include the accounts of the parent entity and all of its subsidiaries: Quantum Group and its subsidiary, ProWare, Inc. ("ProWare"); China Partners, Inc. (from the date of its formation in March 2000); CyberQuest, Inc. ("CyberQuest"); Reliance Technologies, Inc. ("Reliance") and its subsidiary, TopherNet, Inc. ("TopherNet"); and Priority One Electronic Commerce Corporation ("Priority One"). All significant intercompany balances and transactions have been eliminated. Pervasiveness of Estimates The preparation of financial statements in conformity with generally accepted accounting principles required management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those 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. CBQ, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001 --------------------------------------------------------------- (Continued) NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) - ---------------------------------------------------------------- Loss per Share The reconciliations of the numerators and denominators of the basic loss per share computations are as follows:
Income Shares Per-Share (Numerator) (Denominator) Amount ------------------ ------------------- ------------------ For the Three Months Ended September 30, 2002 ----------------------------------------------------------- Basic Income per Share Income to common shareholders $ (109,948) 79,516,835 $ - ================== =================== ================== For the Three Months Ended September 30, 2001 ----------------------------------------------------------- Basic Loss per Share Loss to common shareholders $ (437,833) 78,726,725 $ (0.01) ================== =================== ================== =================== ================== For the Nine Months Ended September 30, 2002 --------------------===================--================== Basic Income per Share Income to common shareholders $ (362,444) 79,516,835 $ - ================== =================== ================== For the Nine Months Ended September 30, 2001 ----------------------------------------------------------- Basic Loss per Share Loss to common shareholders $ (1,259,298) 75,525,122 $ (0.02) ================== =================== ==================
The effect of outstanding common stock equivalents would be anti-dilutive for September 30, 2002 and 2001 and are thus not considered. Cash and Cash Equivalents For purposes of the statement of cash flows, the Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents to the extent the funds are not being held for investment purposes. Concentration of Credit Risk The Company has no significant off-balance-sheet concentrations of credit risk such as foreign exchange contracts, options contracts or other foreign hedging arrangements. CBQ, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001 --------------------------------------------------------------- (Continued) NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) - ---------------------------------------------------------------- Reclassifications Certain reclassifications have been made in the September 30, 2001 financial statements to conform with the September 30, 2002 presentation. NOTE 3 - INVESTMENTS On May 11, 1999, the Company acquired 19% of the outstanding interest of Global Logistics Partners, LLC ("GLP"), a privately held Texas limited liability company in a tax-free exchange. This interest was acquired solely for the issuance of 4,233,200 common shares. NOTE 4 - LINE OF CREDIT Quantum Group has an outstanding balance of $577,157 under its line of credit payable to a bank at September 30, 2002 with interest at the bank's prime rate or LIBOR plus 2.5% which expired on April 1, 2001. The line of credit is collateralized by substantially all of the company's assets, and is personally guaranteed by certain of the company's officers and stockholders. The line of credit agreement with the bank contains various covenants pertaining to maintenance of certain debt coverage and leverage ratios. In addition, the agreement restricted entrance into any merger or acquisition agreement without prior written consent of the bank. At September 30, 2002 the company was not in compliance with the covenants. Under the terms of the agreement, the bank may call the loan if the company is in violation of any restrictive covenant. NOTE 5 - PREFERRED STOCK OF SUBSIDIARY Quantum Group has two classes of preferred stock outstanding. Class B preferred stock has no dividend rights and an aggregate liquidation preference of $250,000. Class C preferred stock has total stated amount of $275,000. All of the Class C preferred stock has 8% cumulative dividend rights on the stated amount, which aggregates $275,000. Dividends on the Class C preferred stock were last declared and paid during the third quarter of 2000. NOTE 6 - LEASES As of September 30, 2002 all activities of the Company have been conducted by corporate officers from either their homes or business offices. Currently, there are no outstanding debts owed by the company for the use of these facilities and there are no commitments for future use of the facilities. CBQ, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001 --------------------------------------------------------------- (Continued) NOTE 7 - LONG-TERM DEBT Long-term debt at September 30, 2002 and December 31, 2001 consists of the following:
September 30, December 31, 2002 2000 ------------------- ------------------ Note payable, bank, with interest at 8.66%, payable in monthly installments of principal of $5,555 plus interest through April 30, 2003 $ 144,384 $ 144,384 Capital lease obligations, at interest rates ranging from 4.90% to 14.17%, payable in monthly installments of $3,461 through the maturity dates ranging from November 2000 to February 2004 - - Subordinated debenture due in monthly installments of 12% interest only until April 30, 2003; 13.5% beginning May 1, 2003; 14% beginning May 1, 2004 and continuing thereafter. Beginning May 1, 2002 monthly principal installments of $20,000 are due until maturity on April 30, 2006 1,476,076 1,476,076 Subordinated debenture due in monthly installments of 12% interest only until December 31, 2001; 13% beginning October 1, 2001; 14% beginning October 1, 2002 and continuing thereafter. Principal and any unpaid interest due at maturity date on October 1, 2005 500,000 500,000 Note payable, with interest of 10% payable in Quarterly installments of interest only. Principal and any unpaid interest due at maturity date on March 1, 2004 740,000 740,000 ------------------- ------------------ 2,860,460 2,860,460 Less amounts due within one year 2,860,460 2,860,460 ------------------- ------------------ $ - $ - =================== ==================
CBQ, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001 --------------------------------------------------------------- (Continued) NOTE 8 - DUE TO SHAREHOLDERS Due to shareholders at September 30, 2002 and December 31, 2001 consists of the following:
September 30, December 31, 2002 2001 ------------------- ------------------ Demand note payable, unsecured, with interest at 15%, payable monthly. Principal and accrued interest due on this note payable are subordinated to all bank debt. $ 50,000 $ 50,000 Advances, unsecured, non-interest bearing, due on demand 89,000 65,000 ------------------- ------------------ $ 139,000 $ 115,000 =================== ==================
NOTE 9 - PREFERRED STOCK The Company has the option to call the preferred stock as follows: 42,000 shares at the greater of $11.905 per share or the traded market value of the preferred stock on or before October 23, 2001 70,000 shares at the greater of $12.50 per share or the traded market value of the preferred stock on or before October 23, 2002 NOTE 10 - CONTINGENCIES CBQ, Inc. had an agreement with a funding source to sell certain receivables with recourse. In the event of the customer's default the company must repurchase the receivables from the funding source. As of December 31, 2001, the company is contingently liable in the amount of $935,275 relating to such receivables sold with recourse. In November, 2001 the funding source sued the Company, several of its subsidiaries and on officer of the Company in the Superior Court of New Jersey, Bergen County, Case No. BER-L-9684-01, alleging the sum of $935,275.25 was due from the defendants under the factoring arrangement. The Company and the remaining defendants have filed an answer and are vigorously defending the action. Management feels there is no merit to the claims. In September, 2001, a confession of judgement was entered against the Company and several of its subsidiaries by the Circuit Court in Annapolis, Maryland (Case No. C-2001-74735), in favor of CBQ, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001 --------------------------------------------------------------- (Continued) NOTE 10 - CONTINGENCIES (continued) Allegiance Capital Limited partnership. The confession was in the amount of $1,976,076.04, plus attorneys's fees of $296,411.41 and prejudgement interest in the amount of $802.75 per day after September 25, 2001, until the date of entry of final judgement. This suit was based on loans which Quantum had obtained prior to being acquired by the Company, all of which were guaranteed by the Company and its subsidiaries, as well as several individuals. The amount of the judgement has been included in the financial statements as part of the current portion of long-term debt and accrued expenses. On October 15, 2001, Anthony M. Sanders sued the Company and several of its former affiliates, in the United States District Court for the District of Maryland (Northern Division). The case number is MJG 01 CV 3062. Mr Sanders was a former officer, director and controlling shareholder of Quantum Technology who transferred his interest to the Company. The gravaman of Mr. Sanders' complaint is that the Company failed to redeem preferred shares in Quantum held by Mr. Sanders. Mr. Sanders is claiming breach of contract, negligent misrepresentation, intentional infliction of emotional distress and securities violations against the Company for this failure. Management feels there is no merit to Mr. Sanders' allegations as against the Company and that the complaint as filed is completely groundless. The Company has elected not to defend the case insofar as the Maryland court has no jurisdiction over this matter as it pertains to the Company and any judgement obtained by Mr. Sanders would be unenforceable against the Company. NOTE 11 - DISCONTINUED OPERATIONS The Company closed its operations including CBQ Networkland, Inc., CBQ Technet Computer Services, Inc., and Quantum Group and its subsidiaries. The Company is attempting to negotiate settlement of liabilities and will likely abandon any remaining assets. Item 2. Management's Discussion and Analysis or Plan of Operation This Quarterly Report contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to be covered by the safe harbors created thereby. Investors are cautioned that all forward-looking statements involve risks and uncertainty, including without limitation, the ability of the Company to continue its expansion strategy, changes in costs of raw materials, labor, and employee benefits, as well as general market conditions, competition and pricing. Although the Company believes that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and therefore, there can be no assurance that the forward-looking statements included in this Quarterly Report will prove to be accurate. In light of the significant uncertainties inherent in the forward- looking statements included herein, the inclusion of such information should not be regarded as a presentation by the Company or any other person that the objectives and plans of the Company will be achieved. As used herein the term "Company" refers to CBQ, Inc., a Colorado corporation and its predecessors and subsidiaries, unless the context indicates otherwise. Business of the Company and its Subsidiaries: Beginning in late 2001 and continuing through early 2002, we entered into a series of transactions that we believed would result in our resuming business operations, although in a significantly different industry and manner than the traditional industries in which we had operated. Those transactions included the following: o The Board of Directors decided to discontinue the retail portion of the business. The Company did not proceed with the development of any software business in Asia. Similarly the Company decided not to operate any retail business related to sale or and servicing of computer products. The Company began focusing on opportunities in the information technology industry. These latter efforts were not successful and, as a result, the Company was forced to cease all operations in the third quarter of 2002. o In November, 2001, the Company entered into a relationship with an unaffiliated third party to assist it in dealing with the events which transpired during the latter half of 2001 and to assist in the development and implementation of a viable business plan for the Company. These efforts were not successful and, consequently, the Company ceased all operations in the third quarter of 2002. o As of the date of this filing, the Company had filed answers to all law suits to which it had a defense; however, the Company no longer has any funds to further defend itself; therefore, the Company is uncertain of the ultimate outcome of the litigation pending against it. The Company has identified its debts, most of which are at the subsidiary level, and is in the process of negotiating a spun off to existing shareholders of these subsidiaries in return for stock. This will eliminate a large amount and number of debts; however, the majority in amount of debt is owed to a few large creditors, none of whom have indicated any willingness at present to work an accommodation for the satisfaction of this debt. The Company has worked an agreement to satisfy its obligations to its auditors and is now in the process of determining the appropriate structure in which to pursue subsequent business opportunities, although management seriously doubts the ability of the Company to pursue any business opportunities until such time as the capital and debt structures of the Company are adequately redefined and satisfied to attract an opportunity. o The Company has not determined which industry to pursue opportunities and will not do so until such time as those uncertainties presently facing the Company are resolved. All of the executive officers and directors of the Company and its subsidiaries have either resigned or been removed from office for failure to appear at meetings as of the date of this report, with the exception of Mr. Richard Gregory, who is now the sole executive officer and director of the Company. Results of Operations Plan of Operations - The Company was originally organized for the purpose of creating a corporate vehicle to seek, investigate and, if such investigation warranted, acquire an interest in one or more business opportunities presented to it by persons or firms who or which desired to seek the perceived advantages of a publicly held corporation. This, again, is the purpose of the Company. If the Company is successful in the implementation of this plan, it is anticipated that the Company would incur significant acquisition costs and issue a significant number of shares. The Company does not have sufficient funds to provide for any opportunity. If an opportunity is found, this would, in all likelihood, require the Company to either seek debt or equity financing from third parties. This would require the Company to give up a substantial portion of its capital. There is no assurance that the Company will be able either to obtain additional financing or interest third parties in providing funding for the further development, marketing and manufacturing of any opportunity acquired. Results of Operations - The Company, had no operations during 2001 and to the date of this report, other than its search for a business opportunity. During 2001 and 2000 the Company attempted to provide retail software, computer services and products that has since proved uneconomical and has been abandoned. Accordingly, comparisons with prior periods are not meaningful. Capital Resources and Liquidity The Company, has not generated any cash flows from operating or investing activities since it closed its operations at its subsidiaries. Operating capital was primarily provided from the proceeds of equity financing, bank loans and receivables financing, the latter two of which the Company is presently no longer entitled to enjoy and is in litigation over. The Company is presently seeking alternative sources of capital. The Company expects future development and expansion will be financed through cash flow from operations and other forms of financing such as the sale of additional equity and debt securities, capital leases and other credit facilities. There are no assurances that such financing will be available on terms acceptable or favorable to the Company. Item 3. Controls and Procedures The Company's Chief Executive Officer and Chief Financial Officer have concluded, based on an evaluation conducted within 90 days prior to the filing date of this Quarterly Report on Form 10-Q, that the Company's disclosure controls and procedures have functioned effectively so as to provide those officers the information necessary whether: (i) this Quarterly Report on Form 10-Q contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Quarterly Report on Form 10-Q, and (ii) the financial statements, and other financial information included in this Quarterly Report on Form 10-Q, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this Quarterly Report on Form 10-Q. There have been no significant changes in the Company's internal controls or in other factors since the date of the Chief Executive Officer's and Chief Financial Officer's evaluation that could significantly affect these internal controls, including any corrective actions with regards to significant deficiencies and material weaknesses. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Company is presently a party to several law suits. The material law suits are: Allegiance Capital: In September, 2001, a confession of judgement was entered against the Company and several of its subsidiaries by the Circuit Court in Annapolis, Maryland (Case No. C- 2001-74735), in favor of Allegiance Capital Limited Partnership. The confession was in the amount of $1,976,076.04, plus attorneys's fees of $296,411.41 and pre judgement interest in the amount of $802.75 per day after September 25, 2001, until the date of entry of final judgement. This suit was based on loans which Quantum, a subsidiary of the Company, had obtained prior to being acquired by the Company, all of which were guaranteed by the Company and its subsidiaries, as well as several individuals, including John Moran, Gino Manna, Raymond Kostkowski, Anne Sigman and J. Patrick Dowd. Pursuant to an Inter-Creditor Agreement between Suntrust Bank and Allegiance Capital, Allegiance Capital's claims are subordinate to such claims as Suntrust Bank may have against the Company. Platinum Funding: In November, 2001, Platinum Funding Corp. (Platinum) sued the Company, several of its subsidiaries, and Mr. Bart Fisher in the Superior Court of New Jersey, Bergen County, Case No. BER-L-9684-01, alleging that the sum of $935,275.25 being due from the defendants under a factoring arrangement which Platinum claims to have existed. The Company and the remaining defendants have filed an answer and are vigorously defending the action. Management feels there is no merit to the claims. Anthony M. Sanders: On October 15, 2001, Anthony M. Sanders sued the Company and several of its former affiliates, including Raymond Kostkowski, in the United States District Court for the District of Maryland (Northern Division). The case number is MJG 01 CV 3062. Mr. Sanders was a former officer, director and controlling shareholder of Quantum Technology who transferred his interest to the Company. The gravamen of Mr. Sanders' complaint is that the Company failed to redeem preferred shares in Quantum held by Mr. Sanders. Mr. Sanders is claiming breach of contract, negligent misrepresentation, intentional infliction of emotional distress and securities violations for this failure. Management feels there is no merit to Mr. Sanders' allegations and that the complaint as filed is completely groundless. The Company has elected not to defend the case insofar as the Maryland court has no jurisdiction over this matter and any judgement obtained by Mr. Sanders would be unenforceable against the Company. Suntrust Bank line of credit and term note: Quantum had a $4 million line of credit with Suntrust, which was guaranteed by five individual guarantors, including Ray Kostkowski, Anne Sigman, Skip Lewis, and Anthony Saunders. This line of credit was established prior to the Company acquiring this subsidiary. Quantum used approximately$1.3 million of this line of credit in addition and also obtained a $200,000 term loan from Suntrust. Suntrust is attempting to collect the foregoing amounts, as well as interest, costs and attorneys' fees, from the individual guarantors. Suntrust has not sued the Company but has threatened to sue. It is the position of the Company that it does not owe the money to Suntrust. ITEM 2. CHANGES IN SECURITIES: None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES: None/Not Applicable. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS: None/Not Applicable. ITEM 5. OTHER INFORMATION: None/Not Applicable ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBITS The following exhibits are included as part of this report: Exhibit Number Title of Document 99.1 Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 99.2 Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 99.2 Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 99.2 Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (b) Reports on Form 8-K. No reports on Form 8-K were filed during the period covered by this Form 10-QSB. SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, this 11th day of November, 2002. CBQ, Inc. /s/ Richard Gregory Richard Gregory, Chief Executive Officer and Chief Financial Officer November 11, 2002 I, Richard Gregory, certify that: 1. I have reviewed this quarterly report on form 10-QSB of CBQ, Inc. 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report. 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report. 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in exchange act rules 13a-14 and 15d-14) for the registrant and have: A) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; B) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "evaluation date"); and C) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the evaluation date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): A) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and B) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls. 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 11, 2002 /s/ Richard Gregory Richard Gregory CEO (Principal Executive Officer) I, Richard Gregory, certify that: 1. I have reviewed this quarterly report on form 10-QSB of CBQ, Inc. 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report. 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report. 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in exchange act rules 13a-14 and 15d-14) for the registrant and have: A) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; B) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "evaluation date"); and C) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the evaluation date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): A) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and B) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls. 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 12, 2002 /s/ Richard Gregory Richard Gregory CFO (Principal Financial and Accounting Officer) EX-99 3 form10qsb093002ex_99-1.txt Exhibit 99.1 CERTIFICATION PURSUANT TO 18 U.S.C. Sec. 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of CBQ, Inc. on Form 10-QSB for the period ending September 30, 2002, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Richard Gregory, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge and belief: (1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /s/ Richard Gregory Richard Gregory Chief Executive Officer November 11, 2002 EX-99 4 form10qsb093002ex_99-2.txt Exhibit 99.2 CERTIFICATION PURSUANT TO 18 U.S.C. Sec. 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of CBQ, Inc. on Form 10-QSB for the period ending September 30, 2002, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Richard Gregory, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge and belief: (1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /S/ Richard Gregory Chief Financial Officer November 11, 2002 -----END PRIVACY-ENHANCED MESSAGE-----