UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended March 31, 2000
Commission File No.33-55254-42
QUANTITATIVE METHODS CORPORATION
(Exact name of small business issuer as specified in its charter)
NEVADA 87-0485310
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
203-6200 Taschereau Boulevard East
Brossard (Quebec) Canada
J4W 3J8
(Address of principal executive offices, including postal code)
Issuer's telephone number, including area code:(888) 713-2222
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 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. [X] Yes [] No
The number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.
Class Outstanding as of May 31, 2000
------------------------------------- ------------------------------------
$.001 PAR VALUE CLASS A COMMON STOCK 10,300,000 SHARES
DOCUMENTS INCORPORATED BY REFERENCE
NONE
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QUANTITATIVE METHODS CORPORATION
FORM 10-QSB/MARCH 31, 2000
TABLE OF CONTENTS
General
Index
PART I
Item 1. - Consolidated Financial Statements: (Unaudited)
Balance Sheets -
March 31, 2000 and December 31, 1999 F-1
Statements of Operations -
Three Months ended March 31, 2000 and 1999
and from Date of Inception to March 31, 2000 F-2
Statements of Cash Flows -
Three Months ended March 31, 2000 and 1999
and from Date of Inception to March 31, 2000 F-3
Notes to Consolidated Financial Statements F-4
Item 2. - Management's Discussion and Analysis of Financial
Condition and Results of Operations 4-6
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PART I
FINANCIAL INFORMATION
ITEM 1. - Financial Statements.
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QUANTITATIVE METHODS CORPORATION AND SUBSIDIARY
(A Development Stage Company)
UNAUDITED CONSOLIDATED BALANCE SHEETS
(expressed in Canadian dollars)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
---------------- ---------------
(Unaudited) (Unaudited)
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash $ - $ -
Accounts receivable 24,804 27,412
Income tax recoverable 115,135 111,185
Prepaid expenses 2,370 2,778
---------------- -------------
TOTAL CURRENT ASSETS 142,309 141,375
PLANT & EQUIPMENT 47,266 50,816
------------- -------------
OTHER ASSETS
Patents and trademarks 27,937 30,576
Deferred tax benefit 60,576 55,997
------------- -------------
88,513 86,573
------------- -------------
TOTAL ASSETS $ 278,088 $ 278,764
============= =============
LIABILITIES & EQUITY
CURRENT LIABILITIES
Bank indebtedness $ 41,418 $ 34,411
Bank loan 50,000 75,000
Accounts payable and accrued expenses 386,901 328,236
Current portion of long-term debt - 13,705
------------- -------------
TOTAL CURRENT LIABILITIES 478,319 451,352
LONG-TERM DEBT 147,041 127,621
------------- -------------
625,360 578,973
------------- -------------
STOCKHOLDERS' EQUITY Common Stock $.001 par value:
Authorized - 25,000,000 shares
Issued and outstanding
10,300,000 shares 15,475 15,475
Additional paid-in capital 1,851,072 1,851,072
Deficit accumulated during the ( 2,213,819) ( 2,166,756)
------------ ------------
development stage
TOTAL STOCKHOLDERS' EQUITY ( 347,272) ( 300,209)
------------ ------------
$ 278,088 $ 278,764
============= =============
</TABLE>
F - 1
<PAGE>
QUANTITATIVE METHODS CORPORATION AND SUBSIDIARY
(A Development Stage Company)
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(expressed in Canadian dollars)
<TABLE>
<CAPTION>
Three Months Ended Date of Inception
March 31, to March 31,
2000 1999 2000
---------------- --------------- ---------------
<S> <C> <C> <C>
SALES $ 0 $ 0 $ 0
-------------- ------------- -------------
General Administrative expenses
Professional fees 2,904 5,994 141,645
Consulting - 61,194 699,691
Salaries and fringe benefits 11,597 13,053 356,213
Rent 5,987 5,430 107,642
Traveling and business promotion 1,252 - 101,168
Office expenses 500 1,453 44,330
Research and development 11,222 25,006 109,593
Telephone and communication 972 2,292 92,579
Car expenses - - 18,235
Insurance, taxes and licenses 488 477 24,174
Interest and bank charges 2,961 1,639 60,057
Interest on bank loan 2,991 1,407 35,262
Loss on disposal of investment - - 34,845
Depreciation of fixed assets 3,550 4,527 97,485
Depreciation of deferred expenses 2,639 2,460 31,330
Decrease in value of
software development costs - - 149,573
-------------- ------------- -------------
Total general and administrative expenses 47,063 124,932 2,103,822
-------------- ------------- -------------
NET INCOME (LOSS)
BEFORE INCOME TAXES ( 47,063) ( 124,932) ( 2,103,822)
-------------- ------------- -------------
INCOME TAXES
DEFERRED - - ( -
-------------- ------------- -------------
NET INCOME (LOSS) ( 47,063) ( 124,932) ( 2,103,822)
TOTAL COMPREHENSIVE
INCOME (LOSS) $ ( 47,063) $ ( 124,932) $( 2,103,822)
============= ============= ==============
Net income (loss) per weighted
average share $ ( .00) $ ( .01)
============= =============
Weighted average number of common
shares used to compute net income
(loss) per weighted average share 10,300,000 9,300,000
============== =============
</TABLE>
F - 2
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QUANTITATIVE METHODS CORPORATION AND SUBSIDIARY
(A Development Stage Company)
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(expressed in Canadian dollars)
<TABLE>
<CAPTION>
Three Months Ended Date of Inception
March 31, to March 31,
2000 1999 2000
---------------- --------------- ---------------
OPERATING ACTIVITIES
<S> <C> <C> <C>
Net earnings (loss) $ ( 47,063) $ ( 124,932) $ ( 2,103,822)
Items not requiring cash outlays:
Foreign Exchange fluctuation ( 93) - ( 93)
Loss on disposal of investment - - 34,845
Depreciation of fixed assets
and deferred costs 6,189 6,987 128,815
Deferred income taxes - - -
Decrease in value of software
development costs - - 172,682
-------------- --------------- -------------
( 40,967) ( 117,945) ( 1,767,573)
Changes in non-working capital items 28,245 14,598 234,110
-------------- ------------- -------------
NET CASH PROVIDED
BY OPERATING ACTIVITIES ( 12,722) ( 103,347) ( 1,533,463)
------------- ------------ -------------
INVESTING ACTIVITIES
Acquisition of investment - - ( 100,747)
Proceeds of disposal of investment - - 65,902
Increase in software development costs - - ( 172,682)
Acquisition of fixed assets
and deferred expenses - ( 155) ( 204,018)
-------------- ------------ -------------
NET CASH (USED)
BY INVESTING ACTIVITIES - ( 155) ( 411,545)
-------------- ------------ -------------
FINANCING ACTIVITIES
Variation of advances from a shareholder 19,419 82,400 147,040
Net proceeds of issuance of shares - 500 1,756,550
Addition to long-term debt - - 134,680
Repayment of long-term debt ( 13,704) ( 8,333) ( 134,680)
------------- ------------- -------------
NET CASH (USED)
BY FINANCING ACTIVITIES 5,715 74,567 1,903,590
-------------- ------------- -------------
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS ( 7,007) ( 28,935) ( 41,418)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR ( 34,411) ( 42,556) -
------------- ------------- --------------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ ( 41,418) $ ( 71,491) $ ( 41,418)
============= ============= ==============
</TABLE>
F - 3
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QUANTITATIVE METHODS CORPORATION AND SUBSIDIARY
(A Development Stage Company)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000
The unaudited consolidated financial statements for the quarter ended March 31,
2000, have been prepared in accordance with the instructions to Form 10-QSB and,
therefore, do not include all information and footnotes necessary for a complete
presentation of financial position, results of operations, cash flows and
stockholder's deficit for the quarter then ended, in conformity with generally
accepted accounting principles. In the opinion of management, all adjustments
considered necessary for a fair presentation of the results of operations and
financial position have been included and all such adjustments are of a normal
recurring nature. The results of operations for interim periods are not
necessarily indicative of results to be achieved for full fiscal years. For
further information, refer to the Company's annual consolidated financial
statements and related footnotes included on Form-10KSB for the year ended
December 31, 1999.
NOTE 1: INCORPORATION AND NATURE OF BUSINESS
Quantitative Methods Corporation, a development stage enterprise, was
incorporated under the laws of the State of Nevada on July 26, 1990.
The Company acquired 100% ownership of Softguard Enterprises, Inc.,
incorporated in June 23, 1995, to engage in the technical product
research and development and commercialization of the "SLNS" and
"QUORUM" products for use in the field of information systems
management and security. Softguard is a development stage enterprise
and has had no revenues to date.
The historical financial statements prior to December 31, 1998 are
those of Softguard Enterprises Inc.
NOTE 2: BASIS OF FINANCIAL STATEMENT PRESENTATION AND GOING CONCERN ASSUMPTION
The consolidated financial statements are expressed in Canadian dollars
and have been prepared in accordance with accounting principles
generally accepted in the United States of America on the basis that it
is a going concern which contemplates the realization of assets and
satisfaction of liabilities in the normal course of business for the
foreseeable future.
The Company has incurred operating losses since inception. At March 31,
2000, the subsidiary has an accumulated deficit of $2,213,819 and
current liabilities exceeded current assets by $336,010.
In view of these matters, the Company's continued existence is dependent upon
its ability to generate sufficient cash flow to cover operating expenses and to
invest in future operations.
Management's goals are to increase revenues and shareholder value through
acquisitions of business opportunities in the technology sector. QTTM's
management believes that actions presently being taken to obtain additional
capital investments through private placement or other financing will provide
adequate working capital over the next twelve months and enable the Company to
continue as a going concern, without creating new debt.
F - 4
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QUANTITATIVE METHODS CORPORATION AND SUBSIDIARY
(A Development Stage Company)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
March 31, 2000
NOTE 3: SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
Accounting Method
The Company recognizes income and expenses based on the accrual method
of accounting.
Consolidation
The consolidated financial statements for March 31, 2000 include the
accounts of the Company and its wholly owned subsidiary, Softguard
Enterprises, Inc. ("Softguard") whose primary business is software
development.
Softguard is currently the main line of business for the Company. All
significant inter company transactions have been eliminated on
consolidation.
Cash and Cash Equivalents
For financial statement purposes, the Company considers all highly
liquid investment with an original maturity of three months or less
when purchased to be cash equivalents.
Dividend Policy
The Company has not yet adopted any policy regarding payment of
dividends.
Earnings (Loss) Per Share
Earnings or loss per common and common equivalent share is computed by
dividing net earnings (loss) by the weighted average common shares
outstanding during each period.
Fixed Assets and Deferred expenses
Depreciation and Amortization
Fixed assets and deferred expenses are accounted for at cost. The
Company depreciates its fixed assets and deferred expenses according to
the following methods and annual rates:
Computer equipment Declining-balance method 30%
Computer software Declining-balance method 30%
Furniture and fixtures Declining-balance method 20%
Office equipment Declining-balance method 20%
Leasehold Improvements Straight-line method 33%
Deferred expenses Straight-line method 20%
The carrying value of the property and equipment is evaluated whenever
significant events of changes occur that might indicate an impairment
through comparison of the carrying value to the net recoverable amount.
Revenue Recognition
The Company has not recognized any revenue to date.
Research and Development Costs
All research and development costs, which establish technological
advancement, are charged to operations in the year in which they are
incurred.
F - 5
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QUANTITATIVE METHODS CORPORATION AND SUBSIDIARY
(A Development Stage Company)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
March 31, 2000
Income Taxes
The Company records the income tax effect of transactions in the same
year that the transactions enter into the determination of income,
regardless of when the transactions are recognized for tax purposes.
Tax credits are recorded in the year realized.
The Company uses the assets and liabilities approach for financial
accounting and reporting of income taxes. Under this method, deferred
tax assets and liabilities are recognized for the expected future tax
consequences of events that have been recognized in the financial
statements or tax returns. Deferred tax assets and liabilities are
measured using tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered
or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in earnings in the period in which
the change occurs.
Use of Estimates
The financial statements have been prepared in conformity with
generally accepted accounting principles, and as such, requires
management to make estimates and assumptions that affect the reported
amounts of assets, liabilities, revenues and expenses during the
reporting period. Estimates also affect the disclosure of contingent
assets and liabilities at the date of the financial statements. Actual
results could differ from the estimates. Such estimates of significant
accounting sensitivity are allowance for doubtful accounts.
Fair Value of Financial Instruments
Due to their short-term maturity, the carrying values of certain
financial instruments were assumed to approximate their fair values.
The financial instruments include: sales tax receivable and advances to
common control company included in current assets, trade accounts
payable, accrued liabilities, due to a director and demand loans
included in current liabilities.
The fair value of these financial instruments is not significantly
different than their carrying amounts.
Credit Risk
The Company's exposure to credit risk is nil.
Interest Rate Risk
The subsidiary is exposed to interest rate risk on the bank loan.
Changes in the interest rate of 1% would not have a significant effect
on the net loss, deficit or financial position of the Company.
Translation of Foreign Currencies
Monetary assets and liabilities are translated at the year-end exchange
rate. Any gain or loss due to exchange fluctuation is charged to the
statement of loss.
F - 6
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ITEM.2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
History and Purpose
Quantitative Methods Corporation ("QTTM" or the "Company") was incorporated
under the laws of the State of Nevada on July 26th, 1990. The Company's common
stock is currently traded on the OTC Bulletin Board under the symbol "QTTM".
On January 8th, 1999, the board of directors of QTTM entered into an Agreement
with Softguard Enterprises Inc. ("Softguard"), a private Canadian corporation,
whereby the Company issued and delivered 7,650,000 shares of its Common Stock
bearing a restrictive legend, in exchange for which issuance; QTTM acquired all
of the outstanding shares of Softguard. The transaction was exempt from the
registration requirements of the Securities Act of 1933 by virtue of Section
4(2) thereof.
Following the transaction the former shareholders of Softguard owned 82% of the
outstanding shares of the Company. No material relationship exists between the
former management and directors of Quantitative Methods Corporation and the
current management and directors.
Business Activities
Since its incorporation in June 1995, Softguard Enterprises Inc. has dedicated
itself to the research and product development of technologies for use in the
field of information systems management and security. To ensure that customer
security, performance and robustness of purpose requirements will be met at all
times; Softguard has engineered a unique Internet client/server system
technology based on a series of Master, Sub-Station and Proxy servers.
Softguard is a development stage enterprise and has had no revenues to date.
Softguard's resources have been committed to the implementation of
state-of-the-art Internet protocols to create leading-edge software security
solutions in the development of a discreet, non-intrusive, intelligent and
universal architecture. The system was developed in a Unix environment, based on
Linux. The free POSIX operating system architecture is robust, efficient and
stable.
Reaching the final development stages of the system and core architecture, this
work has primarily consisted of the creation of two products that fall under the
following categories: A) Software License Notification Service ("SLNS"), and B)
Quorum Document Authentication System.
The working prototype of SLNS was designed to provide customers with a secure,
private and efficient means of verifying the origin, legality or integrity of
software within their computing environment. It also provides timely access to
product upgrade and security information.
Quorum provides technology for document validation, version control, and
distributed annotation and approval for organizations that need to verify that a
given file is an authentic replica of an original.
Softguard has submitted a patent application for SLNS to the U.S. Department of
Commerce, Patent and Trademark Office. The application has been examined and
allowed for issuance. Softguard also has patent pending for the SLNS in Canada
and the contracting state of the European Patent Convention.
Softguard's objective is to expand the core technology and the majority of the
existing code to support numerous applications in the secure circulation of
digital information, including sound and image files, online copyright control,
document security and confidentiality audit, as well as virus protection; in
short, supporting the intellectual property protection of every kind of
computerized data.
Management is of the opinion that the Company's SLNS technology, while as yet
untested in the marketplace, represents a viable business opportunity. The SLNS
will enable the corporate or other users to ascertain if their systems contain
unlicenced, unauthorized or other "rogue" software. Management believes that the
market for this product is significant. Management is unaware of any other
product currently available that addresses this need.
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At the present time, the Company's main focus is to take advantage of the
tremendous growth of the multi-billion dollar Internet industry that is creating
virtually unlimited acquisition and merger possibilities. To meet the objectives
of its business plan in the short-term and to invest in and ensure sustainable
growth of a diversified portfolio of emerging e-business, these potential
business ventures would provide a source of eventual profit to the Company.
During 1999, the Company entered into a verbal agreement to acquire 100%
interest in SolarPro Reg'd (Gestion Danpe Inc.) ("SolarPro"), a Canadian-based
solar technology equipment manufacturer and distributor located in Asbestos
(Quebec) Canada. With this acquisition, the Company would receive manufacturing
equipment, prototypes, inventory, accounts receivable and an established market
presence in Canada and the United States. Gestion Danpe, Inc. was incorporated
in March 1991 and has operated under the registered name of SolarPro since
August 1996.
The Company hopes to finalize this acquisition in the third quarter of 2000,
pending the approval and markings from the Canadian Standards Association (CSA)
for the National Recognized Testing Laboratories (NRTL) certification for the
solar units. SolarPro is the top-line and unique manufacturer using anodized
extruded aluminum in the construction of high-end solar units that have minimal
assembly requirements. The primary advantage of these units is the durable, high
quality finish that extends the useful life of the product line for commercial
use.
Based on funding from QTTM, SolarPro will develop a significant
business-to-business e-model and relocate their manufacturing facilities in
order to expand operations and focus resources on product development, sales and
distribution.
The Company has also initiated discussions which are nearing the contract stage,
with SysDem, Inc. ("SysDem"), a Canadian corporation based in Longueuil (Quebec)
Canada. SysDem is an Internet marketing service bureau incorporating proprietary
server technology that offers a better, faster, cheaper and simpler way of
marketing with personalized email. The integration of the best database
marketing practices into high volume mail merge functionality allows the massive
delivery of highly personalized messages to permission-granted customers. Since
the product launch in April 1999, this system has delivered double digit
response rates for clients. QTTM's management believes that the combination of
Softguard's technology with SysDem's personalized email delivery system would be
a major development for on-line marketing.
The Company intends to implement a cost-effective marketing strategy by
developing a public relations campaign to take advantage of the opportunities
that are being presented in the technology industry with emphasis on
Internet-related businesses. The Company plans to prepare detailed marketing
material, and intends to step-up its marketing activities in 2000 to solicit new
business.
Operating Results
The Company incurred a net loss of $47,063 during the quarter ended March 31,
2000 ("the first quarter"), compared to a net loss of $124,932 for the same
period in 1999, which represents a decrease of $77,869. The decreased loss of
$61,194 in general and administrative expenses for this period is primarily
attributable due to the decrease in consulting fees related to project
management and also a decrease of $13,784 in research and development costs.
The majority of the losses incurred by the Company during this quarter were the
result of the on-going efforts of the Company's subsidiary Softguard to advance
the development of its software security and document authentication programs.
Management believes that by substantially reducing the corporate overhead costs
the Company will be able to provide additional cash flow for the Company's
growth phase.
Softguard is currently attempting to finalize a business alliance with a highly
reputable Montreal-based information technology solution provider specializing
in the field of security. Established in 1988, this firm has an excellent track
record and well established client base that consists of major organizations in
a multitude of industries. The objective of this arrangement is to complete the
development activities and customize Softguard's Quorum product to fulfil each
of their client's specific requirements. As a result
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of the association, Softguard's research and development staff would be
transferred to their premises in order to oversee the project management and
provide necessary leadership and technical expertise.
Liquidity and Capital Resources
The Company is currently in negotiations with a major investor to raise
additional equity financing capital to meet its short and long-term growth
objectives, including the acquisition of potentially favorable business
opportunities. Although there can be no assurance that the Company will be
successful in its endeavors, management is also seeking additional capital
investment through other sources to fulfill research and development
requirements.
The significant reduction in scientific research and experimental development
grants has made a substantial impact on the Company's cash flow. Softguard's
eligibility status to qualify for these investment tax credits has changed
because it is no longer a Canadian controlled corporation. In addition, the
reduction of research and development staff was a result of Softguard focusing
efforts on the final development stage of the SLNS product. The majority of the
development of the Quorum product was put on hold until more outside funding is
available.
Marketing Plan
The Company intends to implement a cost-effective marketing strategy through a
process of developing a public relations campaign to take advantage of the
opportunities that are being presented in the technology industry with emphasis
on Internet-related businesses. The Company plans to prepare detailed marketing
material, and intends to step-up its marketing activities in 2000 to solicit new
business.
Conclusion
Management's goals are to increase revenues and shareholder value through the
acquisition of potentially favorable business opportunities. To realize its
business plan, QTTM will need to obtain additional capital through private
placements or other financing to pursue acquisitions in the technology sector
and increase sales that will permit the Company to satisfy its working capital
requirements and to continue as a going concern.
The market for the Company's Internet products is highly competitive, and QTTM
expects to encounter an increase in competition. More and more companies are
turning their interests and resources towards security issues since the
resolution of the Y2K problem. It is likely that the competing entities will
have significantly greater experience, resources, facilities, contacts and
managerial expertise and as a result will be in a better position than the
Company to obtain access and engage in the proposed business. The Company may
not be in a position to compete with larger and more experienced entities.
Consequently, business opportunities in which the Company may ultimately
participate are likely to be very risky and extremely speculative. Many of the
Company's competitors have significantly greater research and development,
marketing and financial resources and therefore, represent substantial
competition.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
QUANTITATIVE METHODS CORPORATION
Dated: June 21, 2000 By: s\ Robert L. Seaman
ROBERT L. SEAMAN, President and Director
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