UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1999
-------------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________________ to ______________________
Commission File Number
---------------------------------------------------------
KOLORFUSION INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
COLORADO 84-1317836
- ------------------------------------ ---------------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
14510 East Fremont Ave., Englewood, CO 80112
------------------------------------------------------
(Address of principal executive offices)
(303) 690-2910
------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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 ___
19,157,561 Common Shares were outstanding as of February 15, 2000
- ----------------
<PAGE>
KOLORFUSION INTERNATIONAL, INC.
I N D E X
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Balance Sheets
December 31, 1999 (Unaudited) and
June 30, 1999 1
Statements of Operations
Three months ended December 31, 1999 and 1998
and Six months ended December 31, 1999 and 1998 (Unaudited) 2
Condensed Statements of Cash Flows
Six months ended December 31, 1999 and 1998 3
Selected Notes to Condensed Financial
Statements (Unaudited) 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 5
PART II. OTHER INFORMATION 6-7
<PAGE>
Part I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
KOLORFUSION INTERNATIONAL, INC.
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, June 30,
ASSETS 1999 1999
------------ ------------
(Unaudited) (Audited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 41,701 $ 118,867
Trade accounts receivable 17,102 56,978
Inventories 75,537 74,067
Prepaid expenses -- --
------------ ------------
Total current assets 134,340 249,912
OTHER ASSETS:
Patents, net 2,092,361 2,779,721
Other -- 1,270
------------ ------------
2,092,361 2,780,991
LEASEHOLD IMPROVEMENTS AND EQUIPMENT, net 223,259 260,127
------------ ------------
$ 2,449,960 $ 3,291,030
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 111,470 $ 111,327
Current obligation on payable to individual 189,000 189,000
Current portion of long-term debt 9,979 11,000
Payable to stockholders 280,000 200,000
Accrued interest payable 225,906 132,905
Other accrued expense 2,123 --
------------ ------------
Total current liabilities 818,478 644,232
PAYABLE TO INDIVIDUAL 1,804,898 1,804,898
LONG-TERM DEBT 7,679 7,679
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock 19,158 18,933
Additional paid-in capital 7,829,899 7,650,124
Accumulated deficit (8,030,152) (6,834,836)
------------ ------------
(181,095) 834,221
------------ ------------
$ 2,449,960 $ 3,291,030
============ ============
</TABLE>
Note: The balance sheet at June 30, 1999 has been taken from the audited
financial statements at that date, and has been condensed.
See Notes to Condensed Financial Statements.
1
<PAGE>
KOLORFUSION INTERNATIONAL, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31 December 31
----------------------------- -----------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues $ 37,212 $ 51,052 $ 105,529 $ 128,194
Expenses:
Cost of sales 83,443 70,736 204,251 146,471
Selling, general and administrative 252,727 261,712 523,838 520,640
Impairment loss 564,210 -- 564,210 --
Other income (expense) (1,019) (1,097) (8,546) (80,407)
------------ ------------ ------------ ------------
Net loss $ (864,187) $ (282,493) $ (1,195,316) $ (619,324)
============ ============ ============ ============
Loss per common share $ (.05) $ (.02) $ (.06) $ (.04)
============ ============ ============ ============
Loss per common share assuming dilution $ (.05) $ (.02) $ (.06) $ (.04)
============ ============ ============ ============
Weighted average outstanding shares 19,115,894 16,959,480 19,074,228 15,817,192
============ ============ ============ ============
</TABLE>
See Notes to Condensed Financial Statements.
2
<PAGE>
KOLORFUSION INTERNATIONAL, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
December 31
-----------------------------
1999 1998
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (1,195,316) $ (619,324)
Depreciation and amortization 162,488 165,416
Impairment loss 564,210 --
Change in:
Accounts receivable 39,876 38,438
Inventories (1,470) (28,033)
Accounts payable 143 23,467
Other accrued expenses 95,124 66,782
------------ ------------
Net cash used in operating activities (334,945) (353,254)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of leasehold improvements
and equipment (2,470) (27,815)
Decrease in other assets 1,270 --
------------ ------------
Net cash used in investing activities (1,200) (27,815)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of common stock 180,000 670,000
Proceeds from payable to stockholder 80,000 --
Payments on long-term debt (1,021) (139,232)
------------ ------------
Net cash provided by financing activities 258,979 530,768
------------ ------------
Net increase (decrease) in cash (77,166) 149,699
Cash and cash equivalents:
Beginning of period 118,867 57,334
------------ ------------
End of period $ 41,701 $ 207,033
============ ============
</TABLE>
See Notes to Condensed Financial Statements.
3
<PAGE>
KOLORFUSION INTERNATIONAL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Condensed Financial Statements:
The condensed balance sheet as of December 31, 1999, the statement of
operations for the periods ended December 31, 1999 and 1998, and the
condensed statement of cash flows for the periods then ended 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 changes in cash flows at December 31, 1999 and for all
periods presented have been made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is suggested
that these condensed financial statements be read in conjunction with
the financial statements and notes thereto included in the Company's
June 30, 1999 audited financial statements. The results of operations
for the period ended December 31, 1999 are not necessarily indicative
of the operating results for the full year.
Note 2. Impairment Loss:
Based on an assessment of the value of its patents, the Company
determined that the carrying amount was impaired and reduced the
patent value by $564,210. The remaining amount is being amortized over
nine years.
Note 3. Stockholders' Equity:
During the six months ended December 31, 1999, stockholders' equity
changed for net loss of $1,195,316 and for the issuance of common
stock for $180,000.
4
<PAGE>
KOLORFUSION INTERNATIONAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Based on the assessment of the value of the patents held by the Company
the value of the patents was reduced by $564,210 in the six months ended
December 31, 1999. As a result of the lower value of the patents stockholders'
equity was reduced from a positive amount to a deficit of $181,095.
Revenues decreased in the quarter ended December 31, 1999 to $37,212
from $51,052 in 1998. The decline is due to the lack of long term processing
contracts.
Cost of sales increased in the quarter ended December 31, 1999 to
$83,443 from $70,736 in 1998. The cost of sales increase was due to the
allocation of salary overhead and the expansion of leased facilities and
equipment. The Company expects the profit margin to increase as it acquires new
customers. Selling, general and administrative expenses decreased in 1999 to
$252,727 from $261,712 in 1998.
The result was a net loss in the quarter ended December 31, 1999 of
$864,187 compared to a net loss of $282,493 in the same quarter in 1998.
Revenues decreased in the six months ended December 31, 1999 to
$105,529 from $128,194 in 1998. The decline is due to the lack of long term
processing contracts.
Cost of sales increased in the six months ended December 31, 1999 to
$204,251 from $146,471 in 1998. The cost of sales increase was due to the
allocation of salary overhead and the expansion of leased facilities and
equipment. The Company expects the profit margin to increase as it acquires new
customers. Selling, general and administrative expenses increased in 1999 to
$523,838 from $520,640 in 1998.
The result was a net loss in the six months ended December 31, 1999 of
$1,195,316 compared to a net loss of $619,324 in the same period in 1998.
5
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is aware of no legal proceeding which is pending or
threatened to which the Company is a party or of which its property is
subject.
Item 6. Exhibits and Reports on Form 8-K
(b) No reports on Form 8-K were filed during the three months ended
December 31, 1999.
6
<PAGE>
SIGNATURE
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.
KOLORFUSION INTERNATIONAL, INC.
Date: By: /s/ Steve Nagel
-------------------------------------
Chairman of the Board and Director
President
7
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> OCT-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 41,701
<SECURITIES> 0
<RECEIVABLES> 17,102
<ALLOWANCES> 0
<INVENTORY> 75,537
<CURRENT-ASSETS> 134,340
<PP&E> 394,197
<DEPRECIATION> 170,938
<TOTAL-ASSETS> 2,449,960
<CURRENT-LIABILITIES> 818,478
<BONDS> 0
0
0
<COMMON> 19,158
<OTHER-SE> (200,253)
<TOTAL-LIABILITY-AND-EQUITY> 2,449,960
<SALES> 37,212
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 901,399
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (864,187)
<INCOME-TAX> 0
<INCOME-CONTINUING> (864,187)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (864,187)
<EPS-BASIC> (0.05)
<EPS-DILUTED> (0.05)
</TABLE>
