THE FOLLOWING ITEMS WERE THE
SUBJECT OF A FORM 12b-25 AND ARE
INCLUDED HEREIN: (A) PART I, ITEM 1
(FINANCIAL STATEMENTS); (B) PART I,
ITEM 2 (MANAGEMENT'S DISCUSSION
AND ANALYSIS); (C) EXHIBIT 27.1
(FINANCIAL DATA SCHEDULE).
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1 TO
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, 2000
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
333-6440
(Commission File Number)
Q-SEVEN SYSTEMS, INC.
(Exact Name of Small Business Issuer as Specified in its Charter)
UTAH 87-0567618
(State or Other Jurisdiction of (IRS Employer Identification No.)
Incorporation or Organization)
MITTELSTR. 11-13 011-49-2173-392 20
40789 MONHEIM, GERMANY (Issuer's Telephone number)
(Address of Principal Executive Offices)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 [ ]
1
<PAGE>
The number of shares outstanding of the issuer's commons stock, $0.001 par
value, as of May 19, 2000 was 12,500,000.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
2
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements.
Q-SEVEN SYSTEMS, INC. AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000 and December 31, 1999
<TABLE>
<CAPTION>
Q-SEVEN SYSTEMS, INC. AND SUBSIDIARY
Consolidated Balance Sheets
ASSETS
March 31, December 31,
2000 1999
----------------- -----------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalent $ 314,243 $ 57,534
Accounts receivable 420,393 388,112
Interest receivable - related party 5,219 -
Due from related party 24,564 -
----------------- -----------------
Total Current Assets 764,419 445,646
----------------- -----------------
FIXED ASSETS, NET 565 622
----------------- -----------------
TOTAL ASSETS $ 764,984 $ 446,268
================= =================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 197,536 $ 200,571
Accrued expenses 255,732 167,073
Income taxes payable 35,674 35,674
Investor deposit 250,000 -
----------------- -----------------
Total Current Liabilities 738,942 403,318
----------------- -----------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock, 50,000,000 shares authorized
of $0.001 par value, no shares issued or outstanding - -
Common stock, 100,000,000 shares authorized of
$0.001 par value, 12,500,000 shares issued and
outstanding 12,500 12,500
Additional paid-in capital (deficit) (8,343) (8,343)
Retained earnings 21,885 38,793
----------------- -----------------
Total Stockholders' Equity 26,042 42,950
----------------- -----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 764,984 $ 446,268
================= =================
</TABLE>
<PAGE>
Q-SEVEN SYSTEMS, INC. AND SUBSIDIARY
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
For the
Three Months Ended
March 31,
---------------------------------------
2000 1999
----------------- -----------------
<S> <C> <C>
NET SALES $ 455,810 $ 210,669
COST OF SALES 213,813 112,414
----------------- -----------------
GROSS PROFIT 241,997 98,255
----------------- -----------------
OPERATING EXPENSES
Selling, general and administrative 259,892 107,944
Depreciation and amortization 57 -
----------------- -----------------
Total Operating Expenses (17,952) (9,689)
----------------- -----------------
NET LOSS FROM OPERATIONS (17,952) (9,689)
OTHER INCOME 1,044 -
----------------- -----------------
NET LOSS BEFORE INCOME TAXES (16,908) (9,689)
INCOME TAXES - -
----------------- -----------------
NET LOSS $ (16,908) $ (9,689)
================= =================
BASIC LOSS PER SHARE $ (0.00) $ (0.00)
================= =================
WEIGHTED AVERAGE NUMBER OF SHARES 12,500,000 12,500,000
================= =================
</TABLE>
<PAGE>
Q-SEVEN SYSTEMS, INC. AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
Additional
Common Stock Paid-In
---------------------------------- Capital Retained
Shares Amount (Deficit) Earnings
----------------- ---------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Balance, December 31, 1998 7,900,000 $ 7,900 $ 53,525 $ 72,010
Recapitalization 4,600,000 4,600 (75,265) -
Capital contribution - - 13,397 -
Net loss for the year ended
December 31, 1999 - - - (33,217)
----------------- ---------------- ----------------- -----------------
Balance, December 31, 1999 12,500,000 12,500 (8,343) 38,793
Net loss for the three months
ended March 31, 2000
(unaudited) - - - (16,908)
----------------- ---------------- ----------------- -----------------
Balance, March 31, 2000
(unaudited) 12,500,000 $ 12,500 $ (8,343) $ 21,885
================= ================ ================= =================
</TABLE>
<PAGE>
Q-SEVEN SYSTEMS, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
For the
Three Months Ended
March 31,
---------------------------------------
2000 1999
------------------ -------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (16,908) $ (9,689)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation 57 -
Increase in interest receivable (5,219) -
Increase in due from related parties (24,564) -
Increase in accounts receivable (32,281) (30,364)
Increase (decrease) in accounts payable (3,035) 53,628
Increase in accrued expenses 88,659 -
------------------ ------------------
Cash Provided by Operating Activities 6,709 13,575
------------------ ------------------
CASH FLOWS PROVIDED BY INVESTING ACTIVITIES - -
------------------ ------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Investor deposit 250,000 -
Capital contribution - 13,397
------------------ ------------------
Cash Provided by Financing Activities 250,000 13,397
------------------ ------------------
NET INCREASE IN CASH 256,709 26,972
CASH AT BEGINNING OF PERIOD 57,534 4
------------------ ------------------
CASH AT END OF PERIOD $ 314,243 $ 26,976
================== ==================
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for:
Interest $ - $ -
Income taxes $ - $ -
</TABLE>
<PAGE>
Q-SEVEN SYSTEMS, INC. AND SUBSIDIARY
Notes to the Consolidated Financial Statements
March 31, 2000
NOTE 1 - CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements have been
prepared by the Company without audit. In the opinion of
management, all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position,
results of operations and cash flows at March 31, 2000 and 1999
and for all periods presented have been made.
Certain information and footnote disclosures normally included in
consolidated financial statements prepared in accordance with
generally accepted accounting principles have been condensed or
omitted. It is suggested that these condensed consolidated
financial statements be read in conjunction with the financial
statements and notes thereto included in the Company's December
31, 1999 audited consolidated financial statements. The results of
operations for periods ended March 31, 2000 and 1999 are not
necessarily indicative of the operating results for the full
years.
<PAGE>
Item 2. Management's Discussion and Analysis.
OVERVIEW
Q-Seven Systems, Inc., a Utah corporation (collectively with our direct
subsidiary, Q- Seven Systems, Inc., a Nevada corporation ("Q-Seven Nevada"), and
our indirect subsidiary, X-Real Intertainment, Inc. Ltd., a Bahamian corporation
("X-Real"), "our company" or "we"), currently engages in two lines of Internet
related business: (i) the sale of licenses to the Q-Seven User Management
Software and (ii) the operation, through X-Real, of Internet adult entertainment
websites.
Q-Seven User Management Software
We sell licenses to a modulized software suite, the Q-Seven User Management
Software (the "User Management Software" or "our software"), that allows
Internet content providers to efficiently build, operate and manage Internet
environments, especially entertainment environments. Our software consists of
different modules which can be combined and customized to provide Internet
solutions for our customers' specific needs. The User Management Software has
been developed and is owned by Q-Seven Systems GmbH, a German corporation, which
has granted us the exclusive right to license the User Management Software to
our customers. Q-Seven Systems GmbH is not a subsidiary of our company but is
owned by Messrs. Kriependorf, Kamp and Cordt, our officers, directors and
principal shareholders. The licenses that we sell with regard to our software
allow our customers to use the User Management Software in accordance with their
respective license agreements with us. Our customers pay us a fee for the grant
of such licenses and the use of our software. Our customers usually make a
downpayment on the license fee at the time we grant them a license to our
software; the remainder of the license fee is paid to us in equal installments
over a period of one to two years. Q-Seven Systems GmbH delivers the User
Management Software to our customers and installs and configures it on our
customers' servers. These services are included in the license fee that our
customers pay to us. Q-Seven Systems GmbH is providing these services to our
customers at no charge to us, other than the portion of our fee that we must pay
to them for our own license.
Internet Adult Entertainment
Our indirect subsidiary, X-Real, owns and operates six adult entertainment
websites, which are exclusively directed to viewers in Germany. Four of these
websites operate solely on a subscription basis and subscribers of these
websites pay X-Real a monthly membership fee. The other two websites operate on
both a subscription and non-subscription basis. Certain areas of those websites
are accessible to subscribing members only; other areas are accessible also to
non-members who pay a fee to X-Real based on the amount of time they spend
viewing the site.
X-Real has received a commitment from Infobridge International Ltd., a
company organized under the laws of the Bahamas ("Infobridge"), to invest in
X-Real DM 1,000,000 (the "Infobdridge Investment"), which amount equals
approximately $456,000 on the basis of the Federal Reserve Bank of New York May
17, 2000 noon buying rate of $1 = Euro 0.8921 and the fixed exchange rate of
Euro 1 = DM 1.95583. X-Real has agreed to issue a certain number of its shares
to Infobridge in exchange for the Infobridge Investment. At this time, no
written agreement regarding the Infobridge Investment exists between X-Real and
Infobridge. In March 2000, X-Real received the first tranche of the Infobridge
Investment in an amount of DM 500,000, which amount equals approximately
$228,000 on the basis of the Federal Reserve Bank of New York May 17, 2000 noon
buying rate of $1 = Euro 0.8921 and the fixed exchange rate of Euro 1 = DM
1.95583. The remainder of the Infobridge Investment is to be paid to X-Real upon
our management's request. Our management expects that the number of shares to be
issued to Infobridge will be approximately equal to the number of shares that
are currently issued and outstanding; Q-Seven Nevada intends to retain an equity
interest in X-Real slightly exceeding 50% in order to allow us to continue to
consolidate X-Real's results in our financial statements. As a result, Q-Seven
Nevada will soon in all likelihood own only slightly more than 50% of X-Real's
stock.
ACCOUNTING TREATMENT OF Q-SEVEN NEVADA ACQUISITION
For accounting purposes, our acquisition (the "Q-Seven Nevada Acquisition")
in May 1999 of Q-Seven Nevada is considered a reverse merger, i.e., an
acquisition of our company by Q-Seven Nevada and its wholly owned direct
subsidiary X-Real. At the time of the Q-Seven Nevada Acquisition, our company
was essentially inactive and had no operations and minimal assets. The exchange
of 7,900,000 shares of our common stock for all shares of common stock of
Q-Seven Nevada had the effect that the former shareholders of Q-Seven Nevada
obtained control of our company. Accordingly, Q-Seven Nevada and its wholly
owned direct subsidiary X-Real became the continuing entities for accounting
purposes and the Q-Seven Nevada Acquisition was accounted for as a
recapitalization of Q-Seven Nevada and its wholly owned subsidiary X-Real with
no adjustments to the basis of Q-Seven Nevada's and X-Real's assets and
liabilities that were acquired and assumed, respectively. For legal purposes,
our company is the surviving entity of the Q-Seven Nevada Acquisition.
Due to the accounting treatment of the Q-Seven Nevada Acquisition as a
reverse merger, all results which relate to the quarter ended March 31, 1999 and
appear in our interim financial statements for this period or in the following
Management's Discussion and Analysis solely reflect the results of Q- Seven
Nevada and its wholly owned subsidiary X-Real. Any results that relate to the
operations of our company prior to the Q-Seven Nevada Acquisition were
eliminated. The reader should keep this in mind when comparing our interim
financial statements for the quarter ended March 31, 2000 to financial
statements of our company relating to periods prior to the Q-Seven Nevada
Acquisition.
CONSOLIDATED RESULTS OF OPERATIONS
Revenues
The following table and discussion highlights our revenues for the three
months ended March 31, 2000 and March 31, 1999:
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
March 31, 2000 March 31, 1999
<S> <C> <C> <C> <C>
Revenues from the sale of licenses to the User $100,000 21.89% $0 0%
Management Software
Revenues from X-Real's adult entertainment $355,810 77.88% $210,669 100%
websites
Other revenues $1,044 0.23% $0 0%
Total revenues $456,854 100% $210,669 100%
</TABLE>
Our total revenues rose from $210,669 for the three months ended March 31,
1999 to $456,854 for the three months ended March 31, 2000. In the first quarter
of 2000, revenues from the sale of licenses to our software were $100,000 or
21.89% of our total revenues for the three months ended March 31, 2000, whereas
revenues from X-Real's adult entertainment websites were $355,810 or 77.88% of
our total revenues. Our management expects that during the second quarter of
2000 the amount and the importance of revenues generated from the sale of
licenses to our software will increase further. In addition, our management
expects that the revenues generated through X-Real are likely to decrease in the
second quarter of the 2000 fiscal year due to the fact after the completion of
the Infobridge Investment we will in all likelihood own only slightly more than
50% of X-Real's stock and, consequently, will participate in only approximately
50% of X-Real's revenues.
Sale of Licenses to the User Management Software
In the three months ended March 31, 2000, we generated $100,000 from the
sale of licenses and the collection of installments on previous sales of
licenses to our software. We sold the first license to our software in September
1999 and, accordingly did not generate any revenues from this business in the
three months ended March 31, 1999. In the first quarter of 2000, we continued to
concentrate on selling licenses to the newly developed casino module of the User
Management Software, while Q-Seven Systems GmbH concentrated on research and
development with regard to the User Management Software. In January 2000, we
attended the International Casino Exhibition ICE 2000 in London. Contacts made
by our management during this tradeshow led to discussions and negotiations with
potential new customers of our software.
On May 24, 2000, we entered into a preliminary agreement (the "Preliminary
Agreement") with Omni Software Systems, Inc., a company organized under the laws
of Antigua. The Preliminary Agreement has been filed as an exhibit to this
amendment of our quarterly report and is incorporated herein by reference. Omni
Software Systems, Inc. is affiliated with I-Gaming Solutions, Inc., a company
organized under the laws of Dominica ("I-Gaming"), which has operated in the
online gaming industry for over two years. I-Gaming provides consulting services
to operators of online casinos and helps them to obtain gaming licenses and
market their services. In the Preliminary Agreement, we have agreed to grant
Omni Software Systems, Inc. a non-exclusive license to sell to its customers the
User Management System of our software in combination with a gaming module
developed by Omni Software Systems, Inc. Omni Software Systems, Inc. has agreed
to pay us a fixed license fee for each sale of the User Management Systems of
our software to one of its customers. In addition to this fixed license fee,
Omni Software Systems, Inc. has agreed to pay us on a monthly basis a continuing
license fee, the amount of which is determined by the amount of revenues
generated by Omni Software Systems, Inc.'s customers from the use of gaming
software which includes the User Management System of our software. While Omni
Software Systems, Inc. will market and sell licenses to our software in
connection with Internet gaming applications, we will concentrate on the sale of
licenses to our software for the use in other fields.
On May 10, 2000, the House Banking Committee Chairman James A. Leach
(R-Iowa) and the committee's ranking Democrat, Rep. John J. LaFalce (N.Y.),
introduced legislation (H.R. 4419) that would prohibit the use of credit cards,
checks, or electronic fund transfers in internet gambling. The bill, intended to
complement the Internet Gambling Prohibition Act (H.R. 3125), which the House
Judiciary Committee approved in April, would extend a current ban on gambling
over telephone lines to the Internet. If these bills were enacted, it could
affect our customers' interest in our gaming module software and could have a
material adverse effect on our business, revenues, operating results and
financial condition.
X-Real's Adult Entertainment Websites
X-Real generates revenues by charging a fee to viewers of its six adult
entertainment websites. Our revenues generated through X-Real increased from
$210,669 for the three months ended March 31, 1999 to $355,810 for the three
months ended March 31, 2000. This increase was primarily attributable to the
addition, in spring 1999, of two new websites to X-Real's adult entertainment
business and increased subscriptions for X-Real's websites as a result of an
affiliate program with webmasters which advertise X-Real's websites for a
percentage of the revenues generated by X-Real as a result of such advertising.
Upon the completion of the Infobridge Investment, our management expects
that the funds received by X-Real will be used to improve the marketing for
X-Real's services and products. Online, offline and television advertising
campaigns for X-Real's services and products are expected to be launched in
Germany. Our management expects that funds from the Infobridge Investment will
also be used to improve X-Real's services, to implement new forms of payment and
to launch new innovative products, e.g., anonymous high speed access through
special phone numbers. The new investor, Infobridge, has marketing experience
and contacts to the television and audiotext industry in Germany and our
management expects that this experience will contribute to the anticipated
advertising campaign in Germany.
COSTS AND EXPENSES
The following table and discussion highlight our costs and expenses for the
quarters ended March 31, 2000 and March 31, 1999:
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
March 31, 2000 March 31, 1999
<S> <C> <C> <C> <C>
Total revenues $456,854 $210,669
Costs and expenses:
Cost of sales $213,813 45.13% $112,414 51.01%
Selling, general and administrative $259,892 54.86% $107,944 48.99%
Depreciation and amortization $57 0.01% $0 0%
Total costs and expenses $473,762 100% $220,358 100%
</TABLE>
Cost of Sales
Cost of sales for the three months ended March 31, 2000 includes primarily
costs associated with the management, operation and maintenance of X-Real's
adult entertainment websites, computer and network equipment costs in connection
with X-Real's servers and royalties paid to Q-Seven Systems GmbH for our right
to license the User Management Software.
Our cost of sales during the three months ended March 31, 2000 was
$213,813, as compared to $112,414 for the three months ended March 31, 1999.
This increase is primarily attributable to increased costs associated with the
operation of X-Real's websites due to the addition, in spring 1999, of two new
webpages and the payment of a royalty fee to Q-Seven Systems GmbH for our right
to license the User Management Software to our customers. Approximately $123,813
or 58% of our total cost of sales are attributable to the operation of X-Real's
websites, whereas approximately $90,000 or 42% relate to the sale of licenses to
our software. During the three months ended March 31, 2000, we paid
approximately $123,813 to Cyberotic Media A.G. for managing, operating and
maintaining X-Real's websites and $90,000 to Q-Seven Systems GmbH as royalty fee
for our right to license the User Management Software to our customers. Our
management expects that our cost of sales relating to X-Real's websites is
likely to decrease in the second quarter of 2000 due to the fact that after the
completion of the Infobridge Investment in all likelihood we will own only
slightly more than 50% of X-Real's stock and, consequently, will participate
only in approximately 50% of the cost of sales relating to X-Real's websites.
The aggregate royalty fee that we pay to Q-Seven Systems GmbH for the right to
license our software will increase in the second quarter of 2000, as compared to
the first quarter, if we sell more licenses to our software and generate higher
license fees, since the fee we pay to Q-Seven Systems GmbH is a percentage of
the fee we receive from our customers.
General and Administrative
Selling, general and administrative expenses for the three months ended
March 31, 2000 consist primarily of legal and accounting expenses in connection
with the compliance with periodic reporting requirements under the securities
laws and advertising costs for X-Real's websites.
Our selling, general and administrative expenses during the three months
ended March 31, 2000 were $259,892, as compared to $107,944 for the three months
ended March 31, 1999. This increase is primarily attributable to increased legal
and accounting expenses in connection with the compliance with the periodic
reporting requirements under the securities laws and increased advertising costs
for X-Real's websites. Approximately $173,711 or 67% of the general and
administrative expenses during the three months ended March 31, 2000 are
attributable to the operation of X-Real's websites, whereas approximately
$86,181 or 33% of such expenses are attributable to the sale of licenses to our
software.
Depreciation and Amortization
Depreciation and amortization expenses increased from $0 for the three
months ended March 31, 1999 to $57 for the three months ended March 31, 2000.
LIQUIDITY AND CAPITAL RESOURCES
We are currently financing our operations primarily through cash generated
from operations. Net cash provided by operating activities was $6,709 in the
three months ended March 31, 2000 compared to net provided by operating
activities of $13,575 in the three months ended March 31, 1999. The decrease in
net cash provided by operating activities is primarily due to a decrease in net
income. Net cash provided by financing activities was approximately $250,000 and
$13,397 for the three months ended March 31, 2000 and March 31, 1999,
respectively. The approximately $250,000 resulted from the receipt of the first
tranche of the Infobridge Investment
We expect to continue financing our ongoing operations primarily through
cash generated from operations. Our management anticipates that cash on hand,
cash provided by operating activities and cash available from the capital
markets will be sufficient to fund our operations for the next twelve months.
Our current assets increased by $318,773, from $445,646 at March 31, 1999
to $764,419 at March 31, 2000, while our current liabilities increased by
$300,624, from $403,318 to $703,942, over the same period. The increase in
current assets was primarily attributable to an increase in cash and accounts
receivable generated by our operations. The increase in current liabilities was
primarily due to an increase in accrued expenses and accounts payable resulting
from our operations. Our fixed assets at March 31, 2000 consisted of office
equipment valued at $565.
YEAR 2000
Many currently installed computer systems and software products are coded
to accept only two digit entries in the date code field and cannot distinguish
21st century dates from 20th century dates. These date code fields need to
distinguish 21st century dates from 20th century dates and, as a result, many
companies' software and computer systems had to be upgraded or replaced in order
to comply with such "Year 2000" requirements. Neither we nor any of our
subsidiaries have experienced any significant Year 2000 disruptions, and neither
we nor our subsidiaries have incurred any material costs in connection with Year
2000 remediation.
FORWARD LOOKING STATEMENTS
Our company has made certain forward-looking statements in this report.
They use such words as "may," "will," "expect," "believe," "plan" and other
similar terminology. These statements reflect our management's current
expectations and involve a number of risks and uncertainties. Actual results
could differ materially due to the success of operating initiatives, advertising
and promotional efforts, continuing Year 2000 compliance efforts, as well as
changes in global and local business and economic conditions; currency exchange
and interest rates; labor and other operating costs; political or economic
instability in local markets; competition; consumer preferences, spending
patterns and demographic trends; legislation and government regulation; and
accounting policies and practices.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
There are no actions, suits, proceedings or governmental investigations
pending, or to the knowledge of our management threatened, against our company
or any of our subsidiaries.
Item 2. Changes in Securities and Use of Proceeds.
Not applicable.
Item 3. Default Upon Senior Securities.
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
There were no matters submitted to a vote of the holders of our common
stock through the solicitation of proxies of otherwise during the first quarter
of the year 2000.
Item 5. Other Information.
The Consulting Agreement with our former officer and director, Barry A.
Ellsworth, has been terminated effective August 5, 1999 pursuant to a
Termination Agreement dated April 17, 2000. A copy of the Termination Agreement
has been filed as Exhibit 10.4 to our Quarterly Report on Form 10- QSB and is
incorporated herein by reference.
Item 6. Exhibits and Reports on Form 8-K.
EXHIBITS
EXHIBIT NO. DESCRIPTION
3.1 Articles of Incorporation, as amended: Incorporated herein
by reference to Exhibit 3.1 to the report on Form 10-QSB for
the quarter ended June 30, 1999.
3.2 By-laws, as amended: Incorporated herein by reference to
Exhibit 3.2 to the report on Form 10-QSB for the period
ended September 30, 1999.
3.3 Form of Stock Certificate: Incorporated herein by reference
to Exhibit 3.3 to the Registration Statement on Form 8-A,
filed on October 29, 1999.
10.1 License Agreement between Q-Seven Systems GmbH and Q-Seven
Nevada: Incorporated herein by reference to Exhibit 10.1 to
the Report on Form 10-QSB for the quarter ended June 30,
1999.
10.2 Agreement and Plan of Share Exchange dated May 24, 1999:
Incorporated herein by reference to Exhibit III to the
Report on Form 8-K filed on June 9, 1999.
10.3 Consulting Agreement dated May 27, 1999 between Q-Seven
Systems, Inc. and Mr. Barry A. Ellsworth: Incorporated
herein by reference to Exhibit 10.3 to the Report on Form
10-KSB for the fiscal year ended December 31, 1999.
10.4 Termination Agreement dated April 17, 2000 between Q-Seven
Systems, Inc. and Mr. Barry A. Ellsworth: Incorporated
herein by reference to Exhibit 10.4 to the Report on Form
10-QSB for the quarter ended March 31, 2000.
10.5 Agreement dated May 24, 2000 between Q-Seven Systems, Inc.
and Omni Software Systems, Inc.* **
27.1 Financial Data Schedule.*
- --------
* Filed herewith.
** Certain material from this agreement has been omitted and confidential
treatment is being requested therefor pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934, as amended. All such omitted material is
being filed separately with the Commission.
REPORTS ON FORM 8-K
There were no reports on Form 8-K filed by us with the Securities and
Exchange Commission during the first quarter of the year 2000.
<PAGE>
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.
Date: May 26, 2000 /s/ Philipp S. Kriependorf
__________________________________
Philipp S. Kriependorf
President, Chief Executive Officer
and Chief Financial Officer
<PAGE>
INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT
3.1 Articles of Incorporation, as amended: Incorporated herein
by reference to Exhibit 3.1 to the report on Form 10-QSB for
the period ended June 30, 1999.
3.2 By-laws, as amended: Incorporated herein by reference to
Exhibit 3.2 to the report on Form 10-QSB for the period
ended September 30, 1999.
3.3 Form of Stock Certificate: Incorporated herein by reference
to Exhibit 3.3 to the Registration Statement on Form 8-A,
filed on October 29, 1999.
10.1 License Agreement between Q-Seven Systems GmbH and Q- Seven
Nevada: Incorporated herein by reference to Exhibit 10.1 to
the report on Form 10-QSB for the period ended June 30,
1999.
10.2 Agreement and Plan of Share Exchange dated May 24, 1999:
Incorporated herein by reference to Exhibit III to the
Report on Form 8-K filed on June 9, 1999.
10.3 Consulting Agreement dated May 27, 1999 between Q-Seven
Systems, Inc. and Mr. Barry A. Ellsworth: Incorporated
herein by reference to Exhibit 10.3 to the Report on Form
10-KSB for the fiscal year ended December 31, 1999.
10.4 Termination Agreement dated April 17, 2000 between Q-Seven
Systems, Inc. and Mr. Barry A. Ellsworth: Incorporated
herein by reference to Exhibit 10.4 to the Report on Form
10-QSB for the quarter ended March 31, 2000.
10.5 Agreement dated May 24, 2000 between Q-Seven Systems, Inc.
and Omni Software Systems, Inc.* **
27.1 Financial Data Schedule.*
- -------
* Filed herewith.
** Certain material from this agreement has been omitted and confidential
treatment is being requested therefor pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934, as amended. All such omitted material is
being filed separately with the Commission.
TERMS OF AGREEMENT
Q-Seven will sell the User Management System to Omni Software Systems, Inc, aka
Omni Gaming, an Antigua company for the use with internet gaming sites.
Sites shall include but not be limited to casinos, bingo, sportsbooks, lottery,
raffles and any other internet gaming sites for play or live wagering and for
use on TV.
MODEL A: OPERATOR LICENSE AGREEMENT CALLING FOR A ONE TIME FEE PLUS A
PERCENTAGE OF MONTHLY GROSS WIN.
Omni Gaming will pay to Q-Seven a one-time fee of set up fee of $[CONFIDENTIAL
TREATMENT REQUESTED]* for each independent gaming site.
Q-Seven technical team will:
a) provide a completed SDK to Omni Technical team
b) interface the UMS with the front end games developed by Omni Gaming.
c) interface the back office with various e-commerce processing solutions to
facilitate licensees ability to accept live wagers.
Additional Compensation:
Q-Seven will receive [CONFIDENTIAL TREATMENT REQUESTED]* % of the monthly gross
win for each Licensee that is processed through the User Management Software
less any charge backs or bad debt.
Gross win shall be defined as the difference of the total amount of real wagers
played through the system and the total amount payed out. No allowance percent
is due Omni or Q-Seven in the event of play for fun activity.
- --------
* [CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN
OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT IS BEING REQUESTED. ALL SUCH
OMITTED MATERIAL IS BEING FILED WITH THE COMMISSION PURSUANT TO RULE 24b-2
PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
<PAGE>
Q-Seven will provide Omni Gaming:
1) Gross Win Accounting
On or before the 3rd of each month, Q-Seven shall provide an accounting of gross
win for each licensee of Omni Gaming to Omni. Omni will bill the Licensees
directly with payment due within 5 working days of receipt.
Omni will forward Q-Seven their portion as outlined in this agreement within 5
days of receipt of cleared funds from the Licensee.
2) Project Manager: Assign a 24/7 Project Manager to Omni Gaming. One per 5
licensees aggregate of Model A and B.
3) and their relevant Licensees using the UMS 24/7 Technical Support for the
Backend and automatic upgrades to the back office system as upgrades and new
technology become available.
MODEL B: OPERATOR LICENSE AGREEMENT CALLING FOR A ONE TIME FEE MONTHLY
MAINTENANCE FEE NO PERCENT OF MONTHLY GROSS WIN
Omni Gaming will pay to Q-Seven a one-time fee of set up fee of $[CONFIDENTIAL
TREATMENT REQUESTED]* for each independent gaming site.
Q-Seven technical team will:
a) provide a completed SDK to Omni Technical team
b) interface the UMS with the front end games developed by Omni Gaming.
c) interface the back office with various e-commerce processing solutions to
facilitate licensees ability to accept live wagers.
Additional Compensation:
Q-Seven will receive 50% of the monthly maintenance fee received from the
licensee each month. This is due and payable from Licensee on the 1st of each
month. Q-Seven will receive their portion within 5 working days of Omni's
receipt of cleared funds.
- --------
* [CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN
OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT IS BEING REQUESTED. ALL SUCH
OMITTED MATERIAL IS BEING FILED WITH THE COMMISSION PURSUANT TO RULE 24b-2
PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
<PAGE>
Q-Seven will provide Omni Gaming:
1) Project Manager: Assign a 24/7 Project Manager to Omni Gaming. One per 5
licensees aggregate of Model A and B..
2) and their relevant Licensees using the UMS 24/7 Technical Support for the
Backend and automatic upgrades to the back office system as upgrades and new
technology become available.
The parties agree to the above terms and conditions which will be incorporated
in a formal agreement to be prepared by:
/s/ Philipp Kriependorf May 24, 2000
- --------------------------------------------------------------
Philipp Kriependorf, President Dated
Q-Seven Inc.
/s/ Liz Grayson 24 May '00
- --------------------------------------------------------------
Liz Grayson Dated
For and on behalf of Omni Software Systems, Inc.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM Q-SEVEN
SYSTEMS, INC. MARCH 31, 2000 10-QSB AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> DEC-31-2000
<CASH> 314243
<SECURITIES> 0
<RECEIVABLES> 450176
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 764419
<PP&E> 1359
<DEPRECIATION> 794
<TOTAL-ASSETS> 764984
<CURRENT-LIABILITIES> 738942
<BONDS> 0
0
0
<COMMON> 12500
<OTHER-SE> 13542
<TOTAL-LIABILITY-AND-EQUITY> 764984
<SALES> 455810
<TOTAL-REVENUES> 456854
<CGS> 213813
<TOTAL-COSTS> 473762
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (16908)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (16908)
<EPS-BASIC> (0.00)
<EPS-DILUTED> 0
</TABLE>
