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Found this at
sec.gov
for 05-15-1998 10QSB 825517 QCS CORP
QCS Corporation (the "Company") is an electronic commerce service provider serving the worldwide retail industry. The Company's revenues are derived from its software products and services which include application software for a one time registration fee and network access for which the Company charges a fixed monthly fee and/or volume-based recurring usage fees. The Company from time to
time also derives revenues from consulting services. Based on the marketing agreement signed in December 1996, IBM will be assuming responsibility for much of the sales, marketing and end user support efforts for the Company. The Company believes this alliance with IBM to be an essential component of its business plan, but the involvement with IBM is still at a preliminary stage and the Company can give no assurance of when or if the alliance will ultimately be successful.
As of April 30, 1998, no significant sales have been generated from this alliance. From inception in 1993 through March 31, 1998, the Company has generated an accumulated deficit of $11,975,340. Since inception, the Company has incurred substantial costs to develop and enhance its technology, to create, introduce and enhance its product offerings, to establish marketing and distribution relationships, to recruit and train a sales and marketing group and to build an administrative organization. The Company's prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in their early stage of development, particularly companies in new, unproved and rapidly evolving markets. The limited operating history of the Company makes the prediction of future results of operations difficult or impossible, and, therefore, there can be no assurance that the Company will sustain growth or achieve profitability. The Company's success depends to a significant degree upon the continued contributions of key management, engineering, sales and marketing, and finance personnel, certain of whom would be difficult to replace. The loss of the services of any of the key personnel, the inability to attract or retain qualified personnel in the future or delays in hiring required personnel could have a material adverse effect on the Company's business, operating results or financial condition. Also, as indicated above, the Company's success is highly dependant on its and IBM's ability to execute in a timely manner the joint sales and marketing plan, of which no assurance can be made. If this fails to occur, the Company would be materially and adversely effected. Additionally, the Company is in immediate need of equity capital if it is to sustain current operations. See "Liquidity and Capital Resources."
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1998
The Company's network revenues decreased by 49% to $144,805 for the thirdquarter of fiscal year 1998 (Q3 98) as compared to $285,852 for the third quarter of fiscal year 1997 (Q3 97). This decrease is primarily attributed to the Company's lower sales of its full Notes based supplier stations and the related installation and monthly subscription fees. The loss of these revenues has not been compensated by revenues of the new Internet based QCS Supplier
Stations. Internet revenue for Q3 98 was $7,545 or 5% of network revenues. The Company entered into an service agreement with IBM Corporation to provide sales, marketing and end-user support services to assist in marketing QCS products. The revenue associated with this agreement in Q3 98 was $105,000. The combined network and consulting revenues of $249,805 represent a 13% decrease of total revenues of $285,852 from Q3 97. Cost of network revenues decreased by 66% to $73,624 for Q3 98 from $215,594 in Q3 97. Effective in Q3 98 cost of network revenues will be primarily calculated as a percentage of network revenues in accordance to the IBM revenue sharing arrangement. In Q3 97 cost of revenues included cost of purchasing network services, the cost of internal and external labor to install and support customer sites, and third party software and hardware for the existing Lotus Notes based product. Cost of consulting revenue in Q3 98 was $105,000, which represents the cost of services provided to IBM. Selling, general and administrative expenses (SG&A) consist primarily of personnel-related costs in the Company's sales, marketing and general management organizations and other administrative support costs such as external legal and
financial services. SG&A expenses decreased 33% to $521,496 in Q3 98 from$781,094 in Q3 97. The decrease was due in part to the aforementioned cost of sales, marketing and end-user support services, which are now invoiced to IBM. In Q3 98 the company realized savings of approximately $40,000 rents anddepreciation from the closure of the Nice and Hong Kong offices. The Company
recorded non-cash stock option compensation charges of $107,250 in Q3 98 and $25,688 in Q3 97. Research and development expenses increased by $41,541 to $118,347 in Q3 98 from last year, due to consulting services purchased for the development of back-end administrative features of the Company's new Internet product. |
