UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-QSB [X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended March 31, 2001 [ ] Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to Commission File Number: 0-28535 AQUISTAR VENTURES (USA) INC. ---------------------------- (Exact name of Small Business Issuer as specified in its charter) Nevada 91-1975651 - ------ ---------- (State or other jurisdiction of (IRS Employer incorporation ) Identification No.) 2300 W. Sahara Ave., Suite 500 Las Vegas, Nevada 89102 - ------------------------------ ----- (Address of principal executive offices (Zip Code) Issuer's telephone number, including area code (800) 894-4646 Suite 314-837 West Hastings Street, Vancouver, BC Canada, V6C 3N6 ----------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Check whether the issuer (1) 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 issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days [X ] Yes [ ] No State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 15,463,008 shares of Common Stock as of March 31, 2001. PART 1 - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS The accompanying un-audited financial statements have been prepared in accordance with the instructions to Form 10-QSB and, therefore, do not include all information and footnotes necessary for a complete presentation of financial position, results of operations, cash flows, and stockholders' deficit in conformity with generally accepted accounting principles. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature. Operating results for the three months ended March 31, 2001 are not necessarily indicative of the results that can be expected for the year ending December 31, 2001. AQUISTAR VENTURES (USA) INC. (A Development Stage Company) CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2001 AQUISTAR VENTURES (USA) INC. (A Development Stage Company) CONSOLIDATED BALANCE SHEETS - -------------------------------------------------------------------------- MARCH 31 JUNE 30 2001 2000 - -------------------------------------------------------------------------- ASSETS Current Cash $ 11,473 $ 1,490 Accounts receivable 1,010 - Loan receivable 25,000 - Prepaid expenses 6,763 - -------------------------- 44,246 1,490 Capital Assets 16,673 - -------------------------- $ 60,919 $ 1,490 ========================================================================== LIABILITIES Current Accounts payable and accrued liabilities $ 36,485 $ 24,713 Loan payable to shareholder - 16,097 Deferred revenue 173,527 101,639 -------------------------- 210,012 142,449 Convertible Note Payable 642,885 - -------------------------- 852,897 142,449 -------------------------- SHAREHOLDERS' DEFICIENCY Share Capital Authorized: 50,000,000 common shares with a par value of $0.001 per share at March 31, 2001 and June 30, 2000 Issued and Outstanding: 15,463,008 common shares at March 31, 2001 and June 30, 2000 15,231 3 Additional Paid-In Capital 35,044 18,947 Deficit Accumulated During The Development Stage (842,253) (159,909) -------------------------- (791,978) (140,959) -------------------------- $ 60,919 $ 1,490 ========================================================================== AQUISTAR VENTURES (USA) INC. (A Development Stage Company) CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT - ------------------------------------------------------------------------------ INCEPTION JUNE 28 THREE MONTHS ENDED NINE MONTHS ENDED 1999 TO MARCH 31 MARCH 31 MARCH 31 2001 2000 2001 2000 2001 - ------------------------------------------------------------------------------ Operating Expenses $ 264,956 $ 25,512 $ 682,344 $ 25,512 $ 842,253 --------------------------------------------------------- Loss For The Period (264,956) (25,512) (682,344) (25,512)$(842,253) ========= Accumulated Deficit, Beginning Of Period (577,297) - (159,909) - ------------------------------------------------ Accumulated Deficit, End Of Period $ (842,253)$ (25,512)$ (842,253)$ (25,512) ==================================================================== Loss Per Share $ (0.02)$ (0.01)$ (0.04)$ (0.01) ==================================================================== Weighted Average Number Of Shares Outstanding 15,463,008 15,463,008 15,463,008 15,463,008 ==================================================================== AQUISTAR VENTURES (USA) INC. (A Development Stage Company) CONSOLIDATED STATEMENT OF CASH FLOWS - ------------------------------------------------------------------------------ INCEPTION JUNE 28 THREE MONTHS ENDED NINE MONTHS ENDED 1999 TO MARCH 31 MARCH 31 MARCH 31 2001 2000 2001 2000 2001 - ------------------------------------------------------------------------------ Cash Flows From Operating Activities Loss for the period $ (264,956) $ (25,512)$(682,344)$ (25,512) $ (842,253) ------------------------------------------------------- Adjustments To Reconcile Loss To Net Cash Used By Operating Activities Amortization 238 - 539 - 539 Change in accounts receivable (214) - (214) - (214) Change in loan Receivable 29 - (25,000) - (25,000) Change in prepaid Expenses (663) - (6,763) - (6,763) Change in accounts payable and accrued liabilities 22,549 3,500 11,772 3,500 36,485 Change in deferred revenue - 22,012 71,888 22,012 173,527 ------------------------------------------------------- Total Adjustments 21,939 25,512 52,222 25,512 178,574 ------------------------------------------------------- (243,017) - (630,122) - (663,679) ------------------------------------------------------- Cash Flows From Investing Activities Purchase of capital assets (1,750) - (3,558) - (3,558) ------------------------------------------------------- Cash Flows From Financing Activities Issue of common shares - - - - 35,047 Convertible note payable 217,885 - 642,885 - 642,885 Cash acquired on acquisition of subsidiary 778 - 778 - 778 ------------------------------------------------------- 218,663 - 643,663 - 678,710 ------------------------------------------------------- Increase (Decrease) In Cash (26,104) - 9,983 - 11,473 Cash, Beginning Of Period 37,577 - 1,490 - - ------------------------------------------------------- Cash, End Of Period $ 11,473 $ - $ 11,473 $ - $ 11,473 ============================================================================= SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING AND INVESTING ACTIVITIES: During the period ended March 31, 2001, a loan payable to a shareholder in the amount of $16,097 was reclassified as a contribution to capital in connection with the Company's repurchase of common stock in preparation for the reverse take-over transaction. Effective February 2, 2001, the Company acquired 100% of the issued and outstanding shares of Custom Branded Networks, Inc. by issuing 25,000,000 common shares at the fair value of $15,228 (Note 2). AQUISTAR VENTURES (USA) INC. (A Development Stage Company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2001 1. BASIS OF PRESENTATION The unaudited consolidated financial statements as of March 31, 2001 included herein have been prepared without audit pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with United States generally accepted principles have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair a presentation have been included. It is suggested that these financial statements be read in conjunction with the June 30, 2000 audited financial statements and notes thereto of Custom Branded Networks, Inc. 2. ACQUISITION OF SUBSIDIARY Effective February 2, 2001, Aquistar Ventures (USA) Inc. ("Aquistar") acquired 100% of the issued and outstanding shares of Custom Branded Networks, Inc. ("Custom Branded") by issuing 25,000,000 common shares. Since the transaction resulted in the former shareholders of Custom Branded owning the majority of the issued shares of Aquistar, the transaction, which is referred to as a "reverse take-over", has been treated for accounting purposes as an acquisition by Custom Branded of the net assets and liabilities of Aquistar. Under this purchase method of accounting, the results of operations of Aquistar are included in these financial statements from February 2, 2001. Control of the net assets of Aquistar was acquired for the total consideration of $15,228 representing the fair value of the assets of Aquistar. Custom Branded is deemed to be the purchaser for accounting purposes. Accordingly, its net assets are included in the balance sheet at their previously recorded values. The acquisition is summarized as follows: Current assets (including cash of $778) $ 1,574 Capital assets 13,654 ---------- $ 15,228 ========== Consideration given at fair value of: Common shares $ 15,228 ========== ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION At the beginning of the quarter, the Company devoted its efforts as a natural resource company engaged in the acquisition, exploration and development of mineral properties. On February 2, 2001 the Company acquired 100% of the issued and outstanding capital stock of Custom Branded Networks, Inc. ("CBN"), a Delaware corporation. CBN provides turnkey private label Internet solutions to businesses and private organizations that desire to affiliate with a customer base via the Internet. Since the acquisition, the Company has completely shifted its emphasis to the operations of CNB. The company anticipates that it can meet its next 12 month budget requirements through the completion of financing on an existing debenture with OTC Investments and through either the private placement or public registration for sale of its securities. In addition, the company is in advanced discussions to acquire one or more private companies whose earnings will support the capital needs of the company on a consolidated basis. Lastly, the company has entered several contracts with customers, which contracts should provide revenues to assist in covering the capital needs of the company during the next 12 months. In the event that the Company is unable to raise capital as discussed above, the Company will have sufficient capital to meet its plan of operations for the next 60 days. The Company expects to incur additional research and development costs over the next twelve months. However, such expenditures are dependent upon the Company's ability to raise capital to support such operations. Forward Looking Statements The information contained in this section and elsewhere may at times represent management's best estimates of the Company's future financial and technological performance, based upon assumptions believed to be reasonable. Management makes no representation or warranty, however, as to the accuracy or completeness of any of these assumptions, and nothing contained in this document should be relied upon as a promise or representation as to any future performance or events. The Company's ability to accomplish these objectives, and whether or not it will be financially successful is dependent upon numerous factors, each of which could have a material effect on the results obtained. Some of these factors are within the discretion and control of management and others are beyond management's control. Management considers the assumptions and hypothesis used in preparing any forward looking assessments of profitability contained in this document to be reasonable; however, we cannot assure investors that any projections or assessments contained in this document, or otherwise made by management, will be realized or achieved at any level. 7 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS None ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS None ITEM 3. DEFAULT UPON SENIOR SECURITIES None ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None ITEM 5. OTHER INFORMATION None ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits None (b) Reports on Form 8-K Form 8-K/A was filed by the Company on April 20, 2001. The purpose of this filing was to amend Form 8-K filed on February 20, 2001. The only change reported on Form 8-K/A was the inclusion of necessary unaudited proforma financial statements. Form 8-K was filed by the Company on February 20, 2001. The purpose of this filing was to announce the acquisition by Aquistar of 100% of Custom Branded Networks, Inc. The acquisition took place on February 2, 2001. SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. AQUISTAR VENTURES (USA) INC. DATED: May 21, 2001 By: /s/ Steve Browning ------------------------------- Steve Browning, President