<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal quarter ended March 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 0-27551
QORUS.COM, INC.
(Name of Small Business Issuer in its Charter)
FLORIDA 65-0358792
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
11350 RANDOM HILLS ROAD
SUITE 650
FAIRFAX, VIRGINIA
(Address of principal executive offices)
(703) 279-6430
(Issuer's telephone number, including area code:)
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities 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
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Number of shares outstanding of each of the issuer's classes of common stock, as
of May 12, 2000: 11,354,407
Transitional Small Business Disclosure Format (Check One):
Yes No X
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PART I
FINANCIAL INFORMATION
Item 1. Financial Statements.
The following financial statements required by this item are filed herewith:
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Page
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Balance Sheet (Unaudited), March 31, 2000 F-1
Statement of Operations (Unaudited) for the three months
ended March 31, 2000 F-3
Statement of Stockholders' Equity for (Unaudited) for the
three months ended March 31, 2000 F-4
Statement of Cash Flows (Unaudited) for the three months
ended March 31, 2000 F-5
Notes to Financial Statements (Unaudited) F-7
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Item 2. Management's Discussion and Analysis or Plan of Operation
The information contained in this report may contain certain
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such
statements are intended to be covered by the safe harbors created by such
provisions. These statements include the plans and objectives of management for
future growth of Qorus, including plans and objectives related to the
consummation of future private and public issuances of Qorus' equity and debt
securities. The forward-looking statements included herein are based on current
expectations that involve numerous risks and uncertainties. Assumptions relating
to the foregoing involve judgments with respect to, among other things, future
economic, competitive and market conditions and future business decisions, all
of which are difficult or impossible to predict accurately and many of which are
beyond the control of Qorus. Although Qorus believes that the assumptions
underlying the forward-looking statements are reasonable, any of the assumptions
could be inaccurate and, therefore, there can be no assurance that the
forward-looking statements included in this Form 10-QSB 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 representation by Qorus or any other person that the
objectives and plans of Qorus will be achieved.
Qorus' revenue for the three months ended March 31, 2000 totaled $29,500
and was from one customer, Moore Business Systems, who has paid $8,200 for
engineering services related to customizing the service offering of Qorus for
its customers and $21,300 for recurring revenue for messaging services to its
customers.
In connection with the agreement with Moore Business Communications
Services, we entered into a Commission Agreement with NetDox to compensate
NetDox for its efforts in securing this contract. Under the Commission
Agreement, NetDox will be entitled to a commission in the amount of 20% of all
gross revenues (excluding development fees or other non-recurring revenues)
received by us under the Master Agreement with Moore Business Communications
Services. To date, we have paid no commissions to NetDox pursuant to the
Commission Agreement. According to the Commission Agreement, NetDox earns the
commission when it is paid by the customer.
Inasmuch as Qorus will continue to have a high level of operating expenses,
Qorus will continue to be required to make certain up-front expenditures in
connection with its system engineering efforts to prepare the messaging service
for each customer's service launch. It will also incur up-front expenses to
continue its sales and marketing effort. Qorus anticipates that losses will
continue for the foreseeable future.
Qorus also has agreements with two telecommunications companies and one
Internet service provider, all three of which intend to use the Qorus service to
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provide unified messaging to their customers. One telecommunications company
launched the unified messaging system in April 2000. We expect the second
telecommunications company to launch in May 2000. Qorus expects to receive
revenue from the two telecommunications companies in the second quarter of 2000
and also expects to receive revenues from the ISP in the third quarter of 2000.
Qorus' expenses have exceeded net revenues since inception. For the three months
ended March 31, 2000, Qorus sustained net losses of $1,349,000.
PLAN OF OPERATION FOR NEXT 12 MONTHS
Qorus' capital requirements have been and will continue to be significant,
and its cash requirements have exceeded cash flow from operations since
inception. As a result, Qorus was substantially dependent on the proceeds of its
earlier private placement of debt and equity securities to satisfy its working
capital requirements. Qorus is currently dependent upon a bridge loan from three
related parties of $1.5 million described in the paragraph below. Qorus will be
dependent upon the proceeds of future private placement offerings to satisfy
working capital requirements, to fund certain marketing activities and to
continue implementing our expansion strategy.
To fund immediate cash requirements, Qorus has executed and delivered to
each of Thurston Interests, L.L.C., Apex Investment Fund III and Apex Strategic
Partners promissory notes in the aggregate amount of $1,500,000. After deducting
fees owed to the Thurston Group in connection with this financing, net funds
available for operations will be approximately $1,380,000. The notes bear
interest at 10% and are due on the earlier to occur of (i) October 6, 2000 or
(ii) the date of closing of the next equity or quasi-equity financing of Qorus,
or any of its subsidiaries. Upon the closing of an offering by Qorus of shares
of its preferred stock resulting in cash proceeds of $5,000,000 or more, the
notes will automatically convert into shares of the same series of preferred
stock as sold in such private sale. At March 31, 2000, Qorus has drawn down
$597,000 of these funds.
Qorus believes that this loan will satisfy the cash requirements of Qorus
until additional funds are raised. Qorus intends to raise additional funds for
operations through a private placement offering of between $10 million to $15
million. Qorus is in the preliminary stages of organizing such an offering and
expects to complete the offering by the third or fourth quarter 2000.
Qorus believes, based on current proposed plans and assumptions relating to
its operations, that this private placement, together with anticipated revenues
from operations, will be sufficient to fund Qorus's operations and working
capital requirements over the next 12 months. In the event that Qorus's plans or
assumptions relating to its operations change or prove to be inaccurate, or if
the net proceeds of future private placements together with revenues generated
from operations prove to be insufficient (due to, among other things,
unanticipated expenses, increased competition, unfavorable
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general economic conditions, inability to successfully market Qorus' messaging
services, or other unforeseen circumstances), Qorus could be required to seek
other less desirable alternatives. There can be no assurance that additional
financing from any source will be available to Qorus when needed, on
commercially reasonable terms, or at all. Qorus is dependent upon the Thurston
Group to raise sufficient funds for Qorus to meet its cash requirements. Should
additional cash be required prior to completion of a private placement, Qorus is
dependent upon its founding shareholders to provide additional cash at
commercially reasonable terms.
Qorus intends to generate revenues from its existing four customers that
signed contracts with it in 1999, of which two have begun using the messaging
services. In February 2000, Moore Business Systems began offering Qorus'
messaging service and we began earning revenues from Moore for such services.
C2C Communications has begun offering Qorus' unified messaging service in April
2000. We anticipate that Alpha Telecom will also begin to offer our unified
messaging service by May 2000. We anticipate that our fourth customer,
CyberGate, will begin offering our unified messaging service no later than the
third quarter of 2000. To achieve these commencement dates, Qorus has assigned
full-time account managers to each of the customers to assist them with the
successful commercial offering of our unified messaging service.
Qorus intends to focus on signing contracts with new customers such as
Internet service providers, competitive local exchange carriers, paging
companies and mobile telephone carriers who will in turn market our unified
messaging service to their customers. To accomplish this, Qorus will market its
service in two ways. First, by establishing a direct sales force that will call
upon, sell and service these potential telecommunications and internet
companies. To date Qorus has employed two direct salespersons and has over 20
companies in its sales pipeline. The second way we will reach these potential
customers is through co-marketing programs with hardware and software companies
that currently offer complementary products to the same market. These
co-marketing partners will provide sales leads to the direct sales force. Qorus
also intends to pursue international telecommunications and Internet service
providers by the end of the second quarter of 2000. Qorus has currently employed
two international business development managers for this task.
The third component of our operational plan for the next 12 months
encompasses expanding our services to our target markets. Qorus intends to begin
offering to its customers telephone service capabilities using the Internet.
This will be a key product addition to our unified messaging service as it will
generate revenues from new services. As part of this service, Qorus will offer
billing services, settlement services and customer relationship management
services. These are the basic services necessary for an Internet service
provider to expand into telephone services using the Internet. Combined with
these basic telephone services, Qorus will offer new enhanced services such as
"find-me-follow-me" service, conference calling, fax services using the Internet
and advanced document delivery services.
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We believe that cash from operations along with the proceeds from the
anticipated private placement offerings will be sufficient to provide working
capital to operate Qorus for the next 12 months.
RESULTS OF OPERATIONS
During the three months ended March 31, 2000, Qorus incurred significant
expenses. The majority of these expenses are employee-related expenses and
professional fees. Salaries and wages for the period approximated $580,000, and
recruiting and new-hire expenses totaled $88,000. Professional fees included
legal and accounting services totaling $204,000. Management expects to continue
incurring significant professional fees for additional capital requirements,
marketing and legal and accounting services. Interest expense of $6,000 was
attributable to notes payable to related parties and interest due on past-due
payables to vendors.
As a result of the foregoing, net losses for the period ended March 31,
2000 were $1,349,000.
LIQUIDITY AND CAPITAL RESOURCES
Qorus' capital requirements have been and will continue to be significant
and its cash requirements have been exceeding its cash flow from operations. At
March 31, 2000, Qorus had negative working capital of approximately $1,142,000
and unrestricted cash and cash equivalents of $12,000. At March 31, 2000 Qorus
had an available credit line of approximately $1,000,000. Qorus continues to
satisfy its working capital requirements through limited cash flow generated
from operations, the issuance of equity and debt securities, and loans from
stockholders and related parties.
Net cash used in operating activities was $1,434,000 for the three months
ended March 31, 2000, primarily as a result of significant operating losses.
Qorus also prepaid approximately $115,000 for software license fees.
Net cash used by investing activities was $35,000 for the three months
ended March 31, 2000. $1,400 was received from the sale of used office
equipment, and $36,000 was used for the purchase of office and computer
equipment.
Financing activities provided $597,000 in cash. Qorus borrowed $597,000
from Thurston Interests, L.L.C., Apex Investment Fund III and Apex Strategic
Partners, all of which are related parties.
Qorus has operating leases payable to a third-party leasing company. One
such lease is for the telephone-related equipment necessary to operate the
unified messaging service. This 36-month operating lease which began in July
1999 and ends June 2002 requires
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a monthly payment of $6,842 plus appropriate taxes. The other operating leases
are for computer equipment necessary to operate the messaging systems. These
two simultaneous 18-month operating leases began September 1999 and end February
2001 and require a total monthly payment of $21,806 plus appropriate taxes.
Qorus also has a property lease for its operations offices in Los Angeles,
California. This lease expires June 15, 2002. Monthly rental is $3,714. In
addition, Qorus entered into a 6-month lease for additional office space in
Fairfax, Virginia. This lease expires June 30, 2000. Monthly rental is
approximately $7,000 and includes furniture and some office services. Future
minimum payments under the leases are as follows:
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CALENDAR YEAR ENDED
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2000................................................... 317,000
2001................................................... 181,000
2002................................................... 70,000
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Total............................................. $568,000
</TABLE>
Qorus had approximately $12,000 in cash and cash equivalents remaining as
of March 31, 2000. In March 2000, Qorus entered into an agreement with Thurston
Interests, L.L.C., Apex Strategic Partners and Apex Investment Fund which
provides Qorus with $1,500,000. The convertible notes bear interest at 10% per
annum and are due and payable in October 2000 or the date of closing of the
next equity or quasi-equity financing, whichever is earlier. At March 31, 2000
Qorus has used $597,000 of this available credit.
GOING CONCERN
Qorus has had minimal revenues and incurred losses from operations since
inception. Qorus' independent auditors included an explanatory paragraph in
their report for the period ended December 31, 1999, which indicated a
substantial doubt as to the ability of Qorus to continue as a going concern.
YEAR 2000 EFFECT
As of April 30, 2000, management is not aware of any problems that have
affected the company, its hardware, software or its operations as a result of
any year 2000 issues.
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PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
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EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
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2.1 Acquisition Agreement between Golf Ball World, Inc., a Florida
corporation, and the stockholders of Qorus.com. Inc., a Delaware
corporation (incorporated by reference to Exhibit 6.2 of the
Registration Statement on Form 10-SB, as amended, filed by
Qorus.com, Inc.)
2.2 Amendment No. 1 to Acquisition Agreement between Golf Ball World,
Inc., a Florida corporation, and the stockholders of Qorus.com,
Inc., a Delaware corporation (incorporated by reference to Exhibit
6.4 of the Registration Statement on Form 10-SB, as amended, filed
by Qorus.com, Inc.)
2.3 Amendment No. 2 to Acquisition Agreement between Golf Ball World,
Inc., a Florida corporation, and the stockholders of Qorus.com,
Inc., a Delaware corporation (incorporated by reference to Exhibit
6.9 of the Registration Statement on Form 10-SB, as amended, filed
by Qorus.com, Inc.)
3.1 Articles of Incorporation (incorporated by reference to Exhibit
No. 2.1 of the Registration Statement on Form 10-SB, as amended,
filed by Qorus.com, Inc.)
3.2 Bylaws (incorporated by reference to Exhibit No. 2.2 of the
Registration Statement on Form 10-SB, as amended, filed by
Qorus.com, Inc.)
4.1 Form of Common Stock Certificate of Qorus.com, Inc. (incorporated
by reference to Exhibit No. 3.1 of the Registration Statement on
Form 10-SB, as amended, filed by Qorus.com, Inc.)
10.1 1999 Stock Option Plan of Qorus.com, Inc. (incorporated by
reference to Exhibit No. 6.1 of the Registration Statement on Form
10-SB, as amended, filed by Qorus.com, Inc.)
10.2 Acquisition Agreement between Golf Ball World, Inc., a Florida
corporation, and the stockholders of Qorus.com, Inc., a Delaware
corporation (incorporated by reference to Exhibit No. 6.2 of the
Registration Statement on Form 10-SB, as amended, filed by
Qorus.com, Inc.)
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10.3 Employment Agreement dated May 24, 1999, between Qorus.com, Inc.,
a Delaware corporation and Michael Sohn (incorporated by reference
to Exhibit No. 6.3 of the Registration Statement on Form 10-SB, as
amended, filed by Qorus.com, Inc.)
10.4 Amendment No.1 to Acquisition Agreement between Golf Ball World,
Inc., a Florida corporation, and the stockholders of Qorus.com,
Inc., a Delaware corporation (incorporated by reference to Exhibit
No. 6.4 of the Registration Statement on Form 10-SB, as amended,
filed by Qorus.com, Inc.)
10.5 Software License Agreement between Tornado Development, Inc., a
California corporation, and Qorus.com, Inc., a Delaware
corporation (incorporated by reference to Exhibit No. 6.5 of the
Registration Statement on Form 10-SB, as amended, filed by
Qorus.com, Inc.)
10.6 Tornado Development, Inc. Class A Common Stock Purchase Warrant
(incorporated by reference to Exhibit No. 6.6 of the Registration
Statement on Form 10-SB, as amended, filed by Qorus.com, Inc.)
10.7 Registration Rights Agreement by and between Qorus.com, Inc., a
Delaware corporation, and Tornado Development, Inc., a Delaware
corporation, dated April 15, 1999 (incorporated by reference to
Exhibit No. 6.7 of the Registration Statement on Form 10-SB, as
amended, filed by Qorus.com, Inc.)
10.8 Authorized Reseller Agreement by and between Qorus.com, Inc., a
Delaware corporation, and Alpha Telecom (UK) Ltd., a Limited
Company, dated June 10, 1999 (incorporated by reference to Exhibit
No. 6.8 of the Registration Statement on Form 10-SB, as amended,
filed by Qorus.com, Inc.)
10.9 Authorized Reseller Agreement by and between Qorus.com, Inc., a
Delaware corporation, and C2C Telecom, Inc., a Delaware
corporation, dated September 21, 1999 (incorporated by reference
to Exhibit No. 6.9 of the Registration Statement on Form 10-SB, as
amended, filed by Qorus.com, Inc.)
10.10 Authorized Reseller Agreement by and between Qorus.com, Inc., a
Delaware corporation, and CyberGate, Inc. Dated August 31, 1999
(incorporated by reference to Exhibit No. 6.10 of the Registration
Statement on Form 10-SB, as amended, filed by Qorus.com, Inc.)
</TABLE>
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10.11 Master Agreement by and between Qorus.com, Inc., a Delaware
corporation, and Moore Business Communication Services, a division
of Moore North America, Inc., dated September 10, 1999
(incorporated by reference to Exhibit No. 6.11 of the Registration
Statement on Form 10-SB, as amended, filed by Qorus.com, Inc.)
10.12 Statement of Work #NWA-1 issued under Master Agreement by and
between Qorus.com, Inc., a Delaware corporation, and Moore
Business Communications Services, a division of Moore North
America, Inc. (incorporated by reference to Exhibit No. 6.12 of
the Registration Statement on Form 10-SB, as amended, filed by
Qorus.com, Inc.)
10.13 Bill of Sale, Assignment and Assumption Agreement by and between
Qorus.com, Inc., a Delaware corporation, and NetDox, Inc., a
Delaware corporation, dated July 15, 1999 (incorporated by
reference to Exhibit No. 6.13 of the Registration Statement on
Form 10-SB, as amended, filed by Qorus.com, Inc.)
10.14 Rescission Agreement by and between Qorus.com, Inc., a Delaware
corporation, and NetDox, Inc., a Delaware corporation, dated
December 31, 1999 (incorporated by reference to Exhibit No. 6.14
of the Registration Statement on Form 10-SB, as amended, filed by
Qorus.com, Inc.)
10.15 Commission Agreement by and between Qorus.com, Inc., a Delaware
corporation, and NetDox, Inc., a Delaware corporation, dated
December 31, 1999 (incorporated by reference to Exhibit No. 6.15
of the Registration Statement on Form 10-SB, as amended, filed by
Qorus.com, Inc.)
10.16 Consulting Agreement by and between Qorus.com, Inc., a Delaware
corporation, and Thurston Group, Inc., a Delaware corporation,
dated March 1, 1999 (incorporated by reference to Exhibit No. 6.16
of the Registration Statement on Form 10-SB, as amended, filed by
Qorus.com, Inc.)
10.17 Lease and Service Agreement by and between Southern European
Communications Corp., a Delaware corporation, and VANTAS/Fair Oaks
dated December 23, 1999 (incorporated by reference to Exhibit No.
6.17 of the Registration Statement on Form 10-SB, as amended,
filed by Qorus.com, Inc.)
10.18 Internet Data Center Services Agreement by and between Qorus.com,
Inc., a Delaware corporation, and Exodus Communications, Inc.
(incorporated by reference to Exhibit No. 6.18 of the Registration
Statement on Form 10-SB, as amended, filed by Qorus.com, Inc.)
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10.19 Amendment No. 2 to Acquisition Agreement between Golf Ball World,
Inc., a Florida corporation, and the stockholders of Qorus.com,
Inc., a Delaware corporation (incorporated by reference to Exhibit
No. 6.19 of the Registration Statement on Form 10-SB, as amended,
filed by Qorus.com, Inc.)
10.20 Settlement Agreement and Release by and between Qorus.com, Inc.
and Tornado Development, Inc. Dated October 28, 1999 (incorporated
by reference to Exhibit No. 6.20 of the Registration Statement on
Form 10-SB, as amended, filed by Qorus.com, Inc.)
10.21 Amendment No. 1 to Software License Agreement dated October 28,
1999 by and between Qorus.com, Inc. and Tornado Development, Inc.
(incorporated by reference to Exhibit No. 6.21 of the Registration
Statement on Form 10-SB, as amended, filed by Qorus.com, Inc.)
10.22 Employment Agreement, dated as of March 1, 2000, by and between
Qorus.com, Inc., a Florida corporation, and James W. Blaisdell
(incorporated by reference to Exhibit No. 6.22 of the Registration
Statement on Form 10-SB, as amended, filed by Qorus.com, Inc.)
10.23 Promissory Note, dated as of November 1, 1999, payable to Thomson
Kernaghan & Co., Ltd. in the original principal amount of
$100,000.00 (incorporated by reference to Exhibit No. 6.23 of the
Registration Statement on Form 10-SB, as amended, filed by
Qorus.com, Inc.)
10.24 Subscription Agreement, dated as of November 1, 1999, by and
between Qorus.com, Inc., a Florida corporation, and Thomson
Kernaghan & Co., Ltd. (incorporated by reference to Exhibit No.
6.24 of the Registration Statement on Form 10-SB, as amended,
filed by Qorus.com, Inc.)
10.25 Agreement for Professional Services, dated as of
__________________, 2000, by and between Qorus.com, Inc., a
Florida corporation, and Leighton W. Smith (incorporated by
reference to Exhibit No. 6.25 of the Registration Statement on
Form 10-SB, as amended, filed by Qorus.com, Inc.)
10.26 Amendment to Agreement for Professional Services, dated as of
________________, 2000, by and between Qorus.com, Inc., a Florida
corporation, and Leighton W. Smith (incorporated by reference to
Exhibit No. 6.26 of the Registration Statement on Form 10-SB, as
amended, filed by Qorus.com, Inc.)
10.27 Agreement for Professional Services, dated as of March 2, 2000, by
and between Qorus.com, Inc., a Florida corporation, and Michael J.
Labedz (incorporated by reference to Exhibit No. 6.27 of the
Registration Statement on Form 10-SB, as amended, filed by
Qorus.com, Inc.)
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10.28 Agreement for Professional Services, dated as of March 2, 2000, by
and between Qorus.com, Inc., a Florida corporation, and Willard C.
McNitt, Jr. (incorporated by reference to Exhibit No. 6.28 of the
Registration Statement on Form 10-SB, as amended, filed by
Qorus.com, Inc.)
10.29 Form of Nonqualified Stock Option Agreement (incorporated by
reference to Exhibit No. 6.29 of the Registration Statement on
Form 10-SB, as amended, filed by Qorus.com, Inc.)
10.30 Warrant, dated March 27, 2000, issued to First Portland
Corporation (incorporated by reference to Exhibit No. 6.30 of the
Registration Statement on Form 10-SB, as amended, filed by
Qorus.com, Inc.)
10.31 Promissory Note, dated as of March 27, 2000, payable to Thurston
Interests, L.L.C. in the original principal amount of $750,000
(incorporated by reference to Exhibit No. 6.31 of the Registration
Statement on Form 10-SB, as amended, filed by Qorus.com, Inc.)
10.32 Promissory Note, dated as of March 27, 2000, payable to Apex
Investment Fund III in the original principal amount of $703,425
(incorporated by reference to Exhibit No. 6.32 of the Registration
Statement on Form 10-SB, as amended, filed by Qorus.com, Inc.)
10.33 Promissory Note, dated as of March 27, 2000, payable to Apex
Strategic Investors in the original principal amount of $46,575
(incorporated by reference to Exhibit No. 6.33 of the Registration
Statement on Form 10-SB, as amended, filed by Qorus.com, Inc.)
27* Financial Data Schedule
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* Filed herewith.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter for which this
report is filed.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
QORUS.COM, INC.
Date: May 15, 2000 By: /s/ James W. Blaisdell
-------------------------
James W. Blaisdell
Executive Chairman and
Chief Executive Officer
Date: May 15, 2000 By: /s/ Jack N. Woodruff
-------------------------
Jack N. Woodruff
Chief Financial Officer
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QORUS.COM, INC.
BALANCE SHEET
March 31, 2000
(UNAUDITED)
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ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 12,396
Accounts receivable 110,316
Prepaid expenses and other current assets 63,454
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Total current assets 186,166
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PROPERTY AND EQUIPMENT:
Furniture and fixtures 3,397
Office equipment 35,760
Production equipment 98,297
Leasehold improvements 9,722
-------------
Total property and equipment 147,176
Less accumulated depreciation (22,626)
-------------
Property and equipment, net 124,550
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INVESTMENT 518,752
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OTHER ASSETS:
Software licenses:
Related party, net of accumulated
amortization of $167,450 68,950
Other, net of accumulated
amortization of $32,800 45,920
Other assets 72,272
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Total other assets 187,142
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TOTAL ASSETS $ 1,016,610
=============
(Continued)
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QORUS.COM, INC.
BALANCE SHEET - Continued
March 31, 2000
(UNAUDITED)
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accrued expenses and other current liabilities $ 631,842
Notes payable to related party 697,000
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Total current liabilities 1,328,842
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COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, par value $.01; 5,000,000 shares
authorized and no shares issued
Common stock, par value $.001; 50,000,000 shares
authorized and 11,354,407 shares issued and
outstanding 11,354
Additional paid-in capital 4,168,051
Accumulated deficit (4,491,637)
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Total stockholders' equity (312,232)
-------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,016,610
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</TABLE>
See accompanying notes to financial statements.
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QORUS.COM, INC.
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS
ENDED MARCH 31, 2000
(UNAUDITED)
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REVENUES $ 29,541
COST OF REVENUES 218,831
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GROSS LOSS (189,290)
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OPERATING EXPENSES:
Selling and marketing 140,519
General and administrative 1,013,105
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Total operating expenses 1,153,624
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LOSS FROM OPERATIONS (1,342,914)
-------------
OTHER INCOME (EXPENSE):
Interest income 656
Interest expense (6,124)
Loss on sale of assets (743)
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Other expense, net (6,211)
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NET LOSS $ (1,349,125)
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BASIC AND DILUTED LOSS PER SHARE $ (.12)
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See accompanying notes to financial statements.
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QORUS.COM, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS
ENDED MARCH 31, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
Total
Additional Stock- Stock-
Shares Common Paid-in holders' holders'
Outstanding Stock Capital Deficit Equity
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BALANCE, DECEMBER 31, 1999 11,354,407 $ 11,354 $ 4,168,051 $ (3,142,512) $ 1,036,893
NET LOSS (1,349,125) (1,349,125)
------------- -------------
BALANCE, MARCH 31, 2000 11,354,407 $ 11,354 $ 4,168,051 $ (4,491,637) $ (312,232)
============= ============= ============= ============= =============
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE> 18
QORUS.COM, INC.
STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS
ENDED MARCH 31, 2000
(UNAUDITED)
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (1,349,125)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation 9,167
Amortization 39,390
Loss on sale of property 743
Changes in operating assets and liabilities:
Accounts receivable (29,541)
Prepaid expenses and other assets 81,786
Accrued expenses (186,099)
-------------
Net cash used by operating activities (1,433,679)
-------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (36,831)
Sale of property 1,402
-------------
Net cash used by investing activities (35,429)
-------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Notes payable borrowings 597,000
-------------
Net cash provided by financing activities 597,000
-------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (872,107)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 884,503
-------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 12,396
=============
(Continued)
</TABLE>
F-5
<PAGE> 19
QORUS.COM, INC.
STATEMENT OF CASH FLOWS - Continued
FOR THE THREE MONTHS
ENDED MARCH 31, 2000
(UNAUDITED)
<TABLE>
<S> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 21
Income taxes $ -0-
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE> 20
QORUS.COM, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements are presented in accordance
with the requirements for Form 10-QSB and Article 10 of Regulation S-X and
Regulation S-B. Accordingly, they do not include all the disclosures
normally required by generally accepted accounting principles. Reference
should be made to the Qorus.com, Inc. (the "Company") Form 10-SB and Form
10-KSB for the year ended December 31, 1999, for additional disclosures
including a summary of the Company's accounting policies, which have not
significantly changed.
The information furnished reflects all adjustments (all of which were normal
recurring nature) which, in the opinion of management, are necessary to
fairly present the financial position, results of operations, and cash flows
on a consistent basis. Operating results for the three months ended March
31, 2000, are not necessarily indicative of the results that may be expected
for the year ended December 31, 2000.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
LICENSES - The Company has an agreement with a related party (Tornado
Development, Inc., which licenses certain technology. The term of the
license is for three years (expiring May 2002). The agreement provides for a
prepaid license fee totalling $150,000 for the minimum number of subscribers
to the Company's product in the first year. Additional fees are due for
subscribers over the minimum number in the first year. License fees for the
remaining term are based on a sliding scale for the number of subscribers.
The agreement also provides for a royalty fee on certain components utilized
by the Company to service the subscribers. The minimum royalty for the first
year is $86,400 with additional royalties due based on a sliding scale over
the term of the agreement. The License and Royalty expenses totaled $29,550
for the three months ended March 31, 2000.
F-7
<PAGE> 21
The Company also has license agreements with third parties for the software
programming and internet support. The aggregate license fee for these
agreements totaled $78,720. The agreements provide for varying terms from 2
years to perpetual. License expense to third parties for the three months
ended March 31, 2000 totaled $9,840.
SIGNIFICANT CUSTOMER - One customer accounted for all revenues during the
period and total accounts receivable at March 31, 2000.
PERVASIVENESS OF ESTIMATES - The preparation of financial statements in
conformity with generally accepted accounting principles requires 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.
GOING CONCERN - The Company has not received significant revenues and has
incurred significant expenses in developing its product and strategic
relationships. The financial statements have been prepared assuming the
Company will continue to operate as a going concern which contemplates the
realization of assets and the settlement of liabilities in the normal course
of business. No adjustment has been made to the recorded amount of assets or
the recorded amount or classification of liabilities which would be required
if the Company were unable to continue its operations. As discussed in Note
7, management has developed an operating plan which they believe will
generate sufficient cash to meet its obligations in the normal course of
business.
F-8
<PAGE> 22
3. STOCKHOLDERS' EQUITY
NON-QUALIFIED STOCK OPTIONS
<TABLE>
<CAPTION>
Option Price
Shares per Share
--------- --------------
<S> <C> <C> <C>
Outstanding at
January 1, 1999 1,505,000 $ 1.00 - $5.25
--------- ------ -----
Cancelled -0- $ -0-
Granted during the period 1,685,500 $ 1.00 - $1.25
--------- ------ -----
Outstanding at
March 31, 2000 3,190,500 $ 1.00 - $5.25
========= ====== =====
</TABLE>
4. NOTE PAYABLE TO RELATED PARTY
The Company has a note payable of $100,000 at March 31, 2000 due to a
related party, which accrues interest at 10% per annum and is due on April
30, 2000. In addition, the Company has committed to sell to the holder of
the note, 20,000 shares of common stock at par value. The Company has
recorded the difference in fair market value ($5.25) and par value as a
charge to interest expense ($105,000).
The Company has notes payable of $597,000 at March 31, 2000 as a result a
financing agreement with Thurston Interests LLC, Apex Strategic Partners
and Apex Investment Fund III which provides the Company with $1.5 million in
available notes. The convertible notes bear interest at 10% and are due and
payable on the earlier to occur of October 2000 or the date of closing of
the next equity or quasi-equity financing by the Company. The notes also
shall automatically convert into Preferred Stock if the Company executes a
sale of Preferred Stock of at least $5,000,000. In connection with the
financing, the Board of Directors has authorized the issuance of 1,500,000
shares of its common stock for $.01 per share as additional consideration
for the loan. The Company will record a charge to interest expense of
approximately $1,900,000 as a beneficial interest feature to the loan in the
quarter ended June 30, 2000 when the stock sale occurred.
F-9
<PAGE> 23
5. INCOME TAXES
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets at December 31, 1999 are substantially
composed of the Company's net operating loss carryforwards, for which the
Company has made a full valuation allowance. In assessing the realizability
of deferred tax assets, management considers whether it is more likely than
not that some portion or all of the deferred tax assets will not be
realized. The ultimate realization of deferred tax assets is dependent upon
the generation of future taxable income during the periods in which those
temporary differences become deductible. Management considers the scheduled
reversal of deferred tax liabilities, projected future taxable income and
tax planning strategies in making this assessment.
At March 31, 2000, the Company had net operating loss carryforwards for
Federal tax purposes of approximately $3.4 million, which is available to
offset future taxable income, if any, through 2019.
6. RELATED PARTY TRANSACTIONS
The Company has an agreement with NetDox (a company with common ownership)
to provide a commission of 20% of all gross revenues (excluding development
fees or other non-recurring revenues) received under the Company's contract
with Moore Business Communications Services. As of March 31, 2000, no
commissions were due to NetDox.
7. MANAGEMENT PLANS
During the period ended March 31, 2000, the Company received loans from
three related parties in advanced of an agreed upon bridge credit line of
$1,500,000. At March 31, 2000 the Company has used $597,000 of the line and
has $903,000 remaining. Management believes that available cash resources
and increased sales will be insufficient to meet its cash flow requirements
through December 2000. Management has developed alternate plans which
include, but are not limited to, raising additional debt and equity
financing and identifying companies with additional complimentary services
for merger or acquisition with the Company.
F-10
<PAGE> 24
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------ ----------------------
<S> <C>
2.1 Acquisition Agreement between Golf Ball World, Inc., a Florida
corporation, and the stockholders of Qorus.com. Inc., a Delaware
corporation (incorporated by reference to Exhibit 6.2 of the
Registration Statement on Form 10-SB, as amended, filed by
Qorus.com, Inc.)
2.2 Amendment No. 1 to Acquisition Agreement between Golf Ball World,
Inc., a Florida corporation, and the stockholders of Qorus.com,
Inc., a Delaware corporation (incorporated by reference to
Exhibit 6.4 of the Registration Statement on Form 10-SB, as
amended, filed by Qorus.com, Inc.)
2.3 Amendment No. 2 to Acquisition Agreement between Golf Ball World,
Inc., a Florida corporation, and the stockholders of Qorus.com,
Inc., a Delaware corporation (incorporated by reference to
Exhibit 6.9 of the Registration Statement on Form 10-SB, as
amended, filed by Qorus.com, Inc.)
3.1 Articles of Incorporation (incorporated by reference to Exhibit
No. 2.1 of the Registration Statement on Form 10-SB, as amended,
filed by Qorus.com, Inc.)
3.2 Bylaws (incorporated by reference to Exhibit No. 2.2 of the
Registration Statement on Form 10-SB, as amended, filed by
Qorus.com, Inc.)
4.1 Form of Common Stock Certificate of Qorus.com, Inc. (incorporated
by reference to Exhibit No. 3.1 of the Registration Statement on
Form 10-SB, as amended, filed by Qorus.com, Inc.)
10.1 1999 Stock Option Plan of Qorus.com, Inc. (incorporated by
reference to Exhibit No. 6.1 of the Registration Statement on
Form 10-SB, as amended, filed by Qorus.com, Inc.)
10.2 Acquisition Agreement between Golf Ball World, Inc., a Florida
corporation, and the stockholders of Qorus.com, Inc., a Delaware
corporation (incorporated by reference to Exhibit No. 6.2 of the
Registration Statement on Form 10-SB, as amended, filed by
Qorus.com, Inc.)
</TABLE>
<PAGE> 25
<TABLE>
<S> <C>
10.3 Employment Agreement dated May 24, 1999, between Qorus.com, Inc.,
a Delaware corporation and Michael Sohn (incorporated by reference
to Exhibit No. 6.3 of the Registration Statement on Form 10-SB, as
amended, filed by Qorus.com, Inc.)
10.4 Amendment No.1 to Acquisition Agreement between Golf Ball World,
Inc., a Florida corporation, and the stockholders of Qorus.com,
Inc., a Delaware corporation (incorporated by reference to Exhibit
No. 6.4 of the Registration Statement on Form 10-SB, as amended,
filed by Qorus.com, Inc.)
10.5 Software License Agreement between Tornado Development, Inc., a
California corporation, and Qorus.com, Inc., a Delaware
corporation (incorporated by reference to Exhibit No. 6.5 of the
Registration Statement on Form 10-SB, as amended, filed by
Qorus.com, Inc.)
10.6 Tornado Development, Inc. Class A Common Stock Purchase Warrant
(incorporated by reference to Exhibit No. 6.6 of the Registration
Statement on Form 10-SB, as amended, filed by Qorus.com, Inc.)
10.7 Registration Rights Agreement by and between Qorus.com, Inc., a
Delaware corporation, and Tornado Development, Inc., a Delaware
corporation, dated April 15, 1999 (incorporated by reference to
Exhibit No. 6.7 of the Registration Statement on Form 10-SB, as
amended, filed by Qorus.com, Inc.)
10.8 Authorized Reseller Agreement by and between Qorus.com, Inc., a
Delaware corporation, and Alpha Telecom (UK) Ltd., a Limited
Company, dated June 10, 1999 (incorporated by reference to Exhibit
No. 6.8 of the Registration Statement on Form 10-SB, as amended,
filed by Qorus.com, Inc.)
10.9 Authorized Reseller Agreement by and between Qorus.com, Inc., a
Delaware corporation, and C2C Telecom, Inc., a Delaware
corporation, dated September 21, 1999 (incorporated by reference
to Exhibit No. 6.9 of the Registration Statement on Form 10-SB, as
amended, filed by Qorus.com, Inc.)
10.10 Authorized Reseller Agreement by and between Qorus.com, Inc., a
Delaware corporation, and CyberGate, Inc. Dated August 31, 1999
(incorporated by reference to Exhibit No. 6.10 of the Registration
Statement on Form 10-SB, as amended, filed by Qorus.com, Inc.)
</TABLE>
<PAGE> 26
<TABLE>
<S> <C>
10.11 Master Agreement by and between Qorus.com, Inc., a Delaware
corporation, and Moore Business Communication Services, a division
of Moore North America, Inc., dated September 10, 1999
(incorporated by reference to Exhibit No. 6.11 of the Registration
Statement on Form 10-SB, as amended, filed by Qorus.com, Inc.)
10.12 Statement of Work #NWA-1 issued under Master Agreement by and
between Qorus.com, Inc., a Delaware corporation, and Moore
Business Communications Services, a division of Moore North
America, Inc. (incorporated by reference to Exhibit No. 6.12 of
the Registration Statement on Form 10-SB, as amended, filed by
Qorus.com, Inc.)
10.13 Bill of Sale, Assignment and Assumption Agreement by and between
Qorus.com, Inc., a Delaware corporation, and NetDox, Inc., a
Delaware corporation, dated July 15, 1999 (incorporated by
reference to Exhibit No. 6.13 of the Registration Statement on
Form 10-SB, as amended, filed by Qorus.com, Inc.)
10.14 Rescission Agreement by and between Qorus.com, Inc., a Delaware
corporation, and NetDox, Inc., a Delaware corporation, dated
December 31, 1999 (incorporated by reference to Exhibit No. 6.14
of the Registration Statement on Form 10-SB, as amended, filed by
Qorus.com, Inc.)
10.15 Commission Agreement by and between Qorus.com, Inc., a Delaware
corporation, and NetDox, Inc., a Delaware corporation, dated
December 31, 1999 (incorporated by reference to Exhibit No. 6.15
of the Registration Statement on Form 10-SB, as amended, filed by
Qorus.com, Inc.)
10.16 Consulting Agreement by and between Qorus.com, Inc., a Delaware
corporation, and Thurston Group, Inc., a Delaware corporation,
dated March 1, 1999 (incorporated by reference to Exhibit No. 6.16
of the Registration Statement on Form 10-SB, as amended, filed by
Qorus.com, Inc.)
10.17 Lease and Service Agreement by and between Southern European
Communications Corp., a Delaware corporation, and VANTAS/Fair Oaks
dated December 23, 1999 (incorporated by reference to Exhibit No.
6.17 of the Registration Statement on Form 10-SB, as amended,
filed by Qorus.com, Inc.)
10.18 Internet Data Center Services Agreement by and between Qorus.com,
Inc., a Delaware corporation, and Exodus Communications, Inc.
(incorporated by reference to Exhibit No. 6.18 of the Registration
Statement on Form 10-SB, as amended, filed by Qorus.com, Inc.)
</TABLE>
<PAGE> 27
<TABLE>
<S> <C>
10.19 Amendment No. 2 to Acquisition Agreement between Golf Ball World,
Inc., a Florida corporation, and the stockholders of Qorus.com,
Inc., a Delaware corporation (incorporated by reference to Exhibit
No. 6.19 of the Registration Statement on Form 10-SB, as amended,
filed by Qorus.com, Inc.)
10.20 Settlement Agreement and Release by and between Qorus.com, Inc.
and Tornado Development, Inc. Dated October 28, 1999 (incorporated
by reference to Exhibit No. 6.20 of the Registration Statement on
Form 10-SB, as amended, filed by Qorus.com, Inc.)
10.21 Amendment No. 1 to Software License Agreement dated October 28,
1999 by and between Qorus.com, Inc. and Tornado Development, Inc.
(incorporated by reference to Exhibit No. 6.21 of the Registration
Statement on Form 10-SB, as amended, filed by Qorus.com, Inc.)
10.22 Employment Agreement, dated as of March 1, 2000, by and between
Qorus.com, Inc., a Florida corporation, and James W. Blaisdell
(incorporated by reference to Exhibit No. 6.22 of the Registration
Statement on Form 10-SB, as amended, filed by Qorus.com, Inc.)
10.23 Promissory Note, dated as of November 1, 1999, payable to Thomson
Kernaghan & Co., Ltd. in the original principal amount of
$100,000.00 (incorporated by reference to Exhibit No. 6.23 of the
Registration Statement on Form 10-SB, as amended, filed by
Qorus.com, Inc.)
10.24 Subscription Agreement, dated as of November 1, 1999, by and
between Qorus.com, Inc., a Florida corporation, and Thomson
Kernaghan & Co., Ltd. (incorporated by reference to Exhibit No.
6.24 of the Registration Statement on Form 10-SB, as amended,
filed by Qorus.com, Inc.)
10.25 Agreement for Professional Services, dated as of
__________________, 2000, by and between Qorus.com, Inc., a
Florida corporation, and Leighton W. Smith (incorporated by
reference to Exhibit No. 6.25 of the Registration Statement on
Form 10-SB, as amended, filed by Qorus.com, Inc.)
10.26 Amendment to Agreement for Professional Services, dated as of
________________, 2000, by and between Qorus.com, Inc., a Florida
corporation, and Leighton W. Smith (incorporated by reference to
Exhibit No. 6.26 of the Registration Statement on Form 10-SB, as
amended, filed by Qorus.com, Inc.)
10.27 Agreement for Professional Services, dated as of March 2, 2000, by
and between Qorus.com, Inc., a Florida corporation, and Michael J.
Labedz (incorporated by reference to Exhibit No. 6.27 of the
Registration Statement on Form 10-SB, as amended, filed by
Qorus.com, Inc.)
</TABLE>
<PAGE> 28
<TABLE>
<S> <C>
10.28 Agreement for Professional Services, dated as of March 2, 2000, by
and between Qorus.com, Inc., a Florida corporation, and Willard C.
McNitt, Jr. (incorporated by reference to Exhibit No. 6.28 of the
Registration Statement on Form 10-SB, as amended, filed by
Qorus.com, Inc.)
10.29 Form of Nonqualified Stock Option Agreement (incorporated by
reference to Exhibit No. 6.29 of the Registration Statement on
Form 10-SB, as amended, filed by Qorus.com, Inc.)
10.30 Warrant, dated March 27, 2000, issued to First Portland Corporation
(incorporated by reference to Exhibit No. 6.30 of the Registration
Statement on Form 10-SB, as amended, filed by Qorus.com, Inc.)
10.31 Promissory Note, dated as of March 27, 2000, payable to Thurston
Interests, L.L.C. in the original principal amount of $750,000
(incorporated by reference to Exhibit No. 6.31 of the Registration
Statement on Form 10-SB, as amended, filed by Qorus.com, Inc.)
10.32 Promissory Note, dated as of March 27, 2000, payable to Apex
Investment Fund III in the original principal amount of $703,425
(incorporated by reference to Exhibit No. 6.32 of the Registration
Statement on Form 10-SB, as amended, filed by Qorus.com, Inc.)
10.33 Promissory Note, dated as of March 27, 2000, payable to Apex
Strategic Investors in the original principal amount of $46,575
(incorporated by reference to Exhibit No. 6.33 of the Registration
Statement on Form 10-SB, as amended, filed by Qorus.com, Inc.)
27* Financial Data Schedule
</TABLE>
- ---------
* Filed herewith.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 12,396
<SECURITIES> 518,752
<RECEIVABLES> 110,316
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 186,166
<PP&E> 147,176
<DEPRECIATION> (22,626)
<TOTAL-ASSETS> 1,016,610
<CURRENT-LIABILITIES> 1,328,842
<BONDS> 0
0
0
<COMMON> 11,354
<OTHER-SE> 4,168,051
<TOTAL-LIABILITY-AND-EQUITY> 1,016,610
<SALES> 29,541
<TOTAL-REVENUES> 29,541
<CGS> 218,831
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,153,624
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,124
<INCOME-PRETAX> (1,349,125)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,349,125)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,349,125)
<EPS-BASIC> (.12)
<EPS-DILUTED> (.12)
</TABLE>
