There looks to be a significant discrepancy between QRS' announced revenue (i.e. in ASX releases), and the revenue actually booked in the full year results.
Thus, for FY03, $475k in revenue was announced to the market on 15/5/03 (with the additional claim that "further revenue is expected before the end of FY03"), but only $342k of revenue ($318k in actual product sales) was booked in the full year results. If Kevin Russeth (QRS' CEO) had been stating expected revenue accurately on 15/5/03, at least $475k should have been booked as product sales in the full year results. But only 318k was booked. Where is the missing $157k? It is hard to avoid the conclusion that either Russeth significantly overstated the amount of the product sale in the original ASX release on 15/5/03 by $157k, or the initial $475 figure was accurate and the unaccounted $157k was 'tucked away' for later use.
For FY04, 975k in new revenue was announced to the market on 21/8/03 and 21/1/04, but only $612k was booked in the full year results (only $514k of this was recorded as product sales, the rest was grant and interest income). Again, if Russeth had been broadly accurate when he made the sales statements to the market on 21/8/03 and 21/1/04, we would expect around $975k to be recorded as product sales in the full year results. But only $514k was recorded. Where is the missing $416k? Again, it looks like Russeth has either significantly overstated the value of the product sales in the initial ASX releases, or the $416k has somehow been "tucked away" for later use. (Incidentally, in the 21/8/03 ASX release, Russeth spoke of an "additional order" over and above the $375k. Apparently this additional order never materialised, but, true to form, Russeth never informed the market of this fact).
To my eyes, for FY03 and FY04 at least $570k of revenue has 'gone missing'.
As for FY 05, so far Russeth has told the market (just before capital raisings or option expiry dates) that QRS has sold four stand-alone QR units (if we assume that the TSA contract involved the sale of one T3 unit). He is now being careful not to state the dollar figure of the sales, except for the TSA contract ($400k). But on the assumption QRS has not altered its prices from previous product sales (=$300k per unit, plus 75-100k in support income per unit), I estimate that the sale of 4 stand-alone T3 units, plus support income should have generated at least $1.45mill in new revenue. It will be interesting to see how much of this new revenue is actually booked in the 05 full year results. If past patterns are maintained, my guess is that only around $1mill will be booked, leaving a further $450k unaccounted.
Summing up, it seems to me that Russeth (or QRS' former CFO) is possibly guilty of one of two wrong-doings over a number of years. Either (1) he overstated the dollar figures in the original ASX releases, but booked the revenue accurately in the full year results, or (2), he has stated the initial dollar figures accurately in the ASX releases, but UNDERSTATED revenue on the full year balance sheet. (2) is a more serious wrong-doing than (1). If (2) did actually happen (and I have no proof that it did), QRS could potentially use the non-booked revenue and pretend this is 'new' revenue on the FY06 balance sheet. Hence, I remain suspicious about Russeth's FY06 revenue projection.
QRS' cash flow statements also make interesting reading. Actual cash received from customers for FY04 was only $41k. $515k remained as receivables (=cash expected to be received within 12 months of balance sheet date). So, despite $514k of sales being made (with products delivered), only $41k in cash was received. Debtors are certainly taking their time to pay. Why?
So far this FY, QRS has received only $486k from customers, but is owed more than $2mill in cash (if recent product sales are included). I have no way of knowing if this 486k is cash from sales made in FY04 or new sales in 05. It will be interesting to see what the final figure is in the 05 full year results. If past patterns are maintained, my guess is that actual cash received will be minimal, with most of the outstanding $2mill booked as receivables. If by June 30 QRS has not received the cash owed from sales made in FY04, it is possible that one or two debtors (viz., QRS' licensees) have decided not to pay because of technical problems with goods received.
Just to cover myself, I should state that I do not know if Russeth or anyone else in QRS has engaged in any wrong-doing (hence the question marks on the subject heading of this post). I have simply gone through public documents and found what, to me, appear to be significant and important discrepancies, and am thus raising questions. If anyone has an alternative explanation for the discrepancies I have pointed to, I would be interested to read it.
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