UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 for the quarterly period ended July 31, 2000
[ ] TRANSITION REPORT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 For the Transition Period from _______________ TO _______________.
333-89941
(Commission File Numbers)
FUSION FUND, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 6799
(State or other jurisdiction of (Primary Standard Industrial
incorporation or organization) Classification Code Number)
1 World Trade Center, Suite 7967
New York, New York 10048
(Address of principal executive offices)
(212) 775-7020
(Registrants' telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the Registrants (1) have 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
Registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days. YES [ X ] NO [ ]
As of August 31, 2000, 5,932,625 shares of Common Stock, par value $.01 per
share, of Fusion Fund, Inc. were issued and outstanding.
<PAGE>
FUSION FUND, INC.
(F/K/A OUTLOOK SPORTS TECHNOLOGY, INC.)
BALANCE SHEET
JULY 31, 2000
-------------
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
Current Assets:
<S> <C>
Cash and cash equivalents ................................................ $ 241,013
Trading securities ....................................................... 34,375
------------
Total current assets .............................................. 275,388
Property and equipment (net of accumulated depreciation of $313) ........... 2,814
Other investments .......................................................... 250,000
Security deposits .......................................................... 4,058
------------
$ 532,260
============
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current Liabilities:
Accounts payable ......................................................... $ 1,424,398
Accrued expenses ......................................................... 969,340
Accrued wages and related expenses ....................................... 609,851
Accrued interest payable ................................................. 78,922
Notes payable ............................................................ 365,000
Notes payable - stockholders - current portion ........................... 452,796
------------
Total current liabilities ......................................... 3,900,307
Notes payable - stockholders - long-term ................................... 190,000
------------
4,090,307
------------
Commitments and contingencies
Shareholders' Deficit:
Preferred stock; $.01 par value, 5,000,000 shares authorized,
none issued and outstanding ............................................ --
Common stock; Class A, $.01 par value, 15,000,000
shares authorized; 5,932,625 shares issued ............................. 59,326
Common stock; Class B, $.01 par value, 5,000,000 shares
authorized; no shares issued and outstanding ........................... --
Treasury stock; 190,000 Class A shares at cost ........................... (164,930)
Additional paid-in capital ............................................... 19,842,485
Accumulated deficit (23,294,928)
------------
Total shareholders' deficit ....................................... ( 3,558,047)
------------
$ 532,260
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
FUSION FUND, INC.
(F/K/A OUTLOOK SPORTS TECHNOLOGY, INC.)
STATEMENTS OF OPERATIONS
------------------------
(Unaudited)
<TABLE>
Six Months Ended Three Months Ended
July 31, July 31,
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues ..................................... $ -- $ -- $ -- $ --
----------- ----------- ----------- -----------
Costs and expenses:
Selling, general and administrative expenses 4,568,878 -- 446,995 --
----------- ----------- ----------- -----------
Total costs and expenses ............ 4,568,878 -- 446,995 --
----------- ----------- ----------- -----------
Loss from operations ......................... (4,568,878) -- ( 446,995) --
----------- ----------- ----------- -----------
Other income (expense):
Interest expense ........................... ( 16,250) ( 40,792) ( 8,125) ( 16,015)
Dividend and interest income ............... 616 -- 433 --
Gain on sale of trading securities ......... 17,263 -- 17,263 --
Unrealized loss on trading securities ...... ( 15,625) -- ( 15,625) --
----------- ----------- ----------- -----------
Total other income (expense) ........ ( 13,996) ( 40,792) ( 6,054) ( 16,015)
----------- ----------- ----------- -----------
Loss before loss from discontinued operations (4,582,874) ( 40,792) ( 453,049) ( 16,015)
Discontinued operations:
Loss from operations of abandoned business . -- (3,471,222) -- (2,385,456)
----------- ----------- ----------- -----------
Net loss ..................................... $(4,582,874) $(3,512,014) $ (453,049) $(2,401,471)
=========== =========== =========== ===========
Weighted average common shares outstanding ... 5,747,672 4,126,006 5,902,842 4,294,088
=========== =========== =========== ===========
Net loss per common share - basic:
Operations ................................. $ (.80) $( .01) $( .08) $( .01)
Discontinued operations .................... -- ( .84) -- ( .55)
----------- ----------- ----------- -----------
Net loss ................................... $ (.80) $( .85) $( .08) $( .56)
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
FUSION FUND, INC.
(F/K/A OUTLOOK SPORTS TECHNOLOGY, INC.)
STATEMENTS OF CASH FLOWS
------------------------
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
July 31,
2000 1999
Operating activities:
<S> <C> <C>
Loss from continuing operations ........................................... $(4,582,874) $ (40,792)
----------- -----------
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization ......................................... 313 96,885
Increase in allowance for doubtful accounts and sales
returns and allowances .............................................. -- 94,587
Stock issued for services and other ................................... 4,282,468 1,632,790
Stock issued as debt issuance expense ................................. -- 50,000
Unrealized loss on trading securities ................................. 15,625 --
Gain on sale of trading securities .................................... ( 17,263) --
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable .......................... -- (146,000)
(Increase) decrease in inventories .................................. -- (32,915)
(Increase) in trading securities .................................... ( 32,737) --
Decrease in prepaid expenses ........................................ -- 10,347
(Increase) in security deposits ..................................... ( 4,058) --
(Increase) in accounts payable and accrued expenses ................. ( 313,857) ( 511,561)
----------- -----------
Total adjustments .................................................. 3,930,491 1,194,133
----------- -----------
Loss from discontinued operations ..................................... -- (3,471,222)
----------- -----------
Net cash (used) in operating activities ..................................... ( 652,383) (2,317,881)
----------- -----------
Investing activities:
Purchase of note receivable ............................................... ( 250,000) --
Capital expenditures ...................................................... ( 3,127) ( 3,933)
----------- -----------
Net cash (used) in investing activities ..................................... ( 253,127) ( 3,933)
----------- -----------
Financing activities:
Proceeds (payments) from (to) line of credit .............................. ( 34,984) 542
Advances (payments) from (to) officers .................................... -- (25,000)
Proceeds from issuance of unsecured notes payable ......................... -- 665,000
Proceeds (payments) from (to) factor ...................................... -- (2,744)
Repayment of unsecured notes payable ...................................... -- (690,000)
Proceeds from exercise of stock options and sale of common
stock ................................................................... -- 215,000
Proceeds from issuance of notes payable - related parties ................. -- 250,000
Proceeds from sale of common stock ........................................ 1,290,159 2,543,300
Expenses of stock offerings ............................................... ( 177,901) ( 604,784)
Purchase of treasury stock ................................................ ( 144,380) ( 29,500)
----------- -----------
Net cash provided by financing activities ................................... 962,894 2,321,814
----------- -----------
Net increase in cash and cash equivalents ................................... 57,384 --
Cash and cash equivalents, beginning of period .............................. 183,629 --
----------- -----------
Cash and cash equivalents, end of period .................................... $ 241,013 $ --
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
FUSION FUND, INC.
(F/K/A OUTLOOK SPORTS TECHNOLOGY, INC.)
STATEMENTS OF CASH FLOWS
------------------------
(Unaudited)
(Continued)
<TABLE>
<CAPTION>
Six Months Ended
July 31,
2000 1999
<S> <C> <C>
Supplemental disclosure of cash flow information:
Cash paid for interest .............................................. $ -- $ 1,218
============== ========
Supplemental disclosure of non-cash investing and financing activities:
Issuance of 10,000 shares of Class A common stock
as debt issuance expense ............................................ $ -- $ 50,000
============== ========
Issuance of 44,669 shares of Class A common stock
as consideration for accrued liabilities ............................ $ -- $223,345
============== ========
Cashless exercise of 151,793 common stock purchase
warrants ............................................................ $ 1,106,377 $ --
============== ========
Issuance of 10,000 shares of common stock as consideration
for accrued liabilities ............................................. $ 83,720 $ --
============== ========
Conversion of note receivable into other investments .................. $ 250,000 $ --
============== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
FUSION FUND, INC.
(F/K/A OUTLOOK SPORTS TECHNOLOGY, INC.)
NOTES TO FINANCIAL STATEMENTS
JULY 31, 2000
-------------
(Unaudited)
NOTE 1 - Basis of Presentation
In the opinion of the Company, the accompanying unaudited financial
statements reflect all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position, results of
operations and cash flows for the periods presented.
The results for interim periods are not necessarily indicative of the
results to be obtained for a full fiscal year.
NOTE 2 - Organization and Basis of Presentation
Fusion Fund, Inc. (the "Company") was originally incorporated in the State
of Delaware as Outlook Sports Technology, Inc. on February 8, 1996. Outlook
Sports Technology, Inc. was a designer and marketer and, through the use of
contracted parties, a manufacturer of golf equipment, apparel and accessories
under the TEGRA(TM)brand name. During March 2000, Outlook Sports Technology,
Inc. formed a wholly owned Delaware subsidiary, Fusion Fund, Inc., which it
merged with and into for the sole purpose of changing its name to Fusion Fund,
Inc.
During January 2000, Outlook Sports Technology, Inc. formally abandoned the
golf business and during March 2000 launched its redefined business mission as
an Internet technology and e-commerce incubator. Accordingly, the accompanying
financial statements reflect the results of discontinued operations of the
abandoned golf business for the six months ended July 31, 1999.
During the quarter ended July 31, 2000 the Company wrote-off its accounts
receivable and inventories from the discontinued golf business against their
related allowance accounts in the amounts of $275,206 and $116,000 respectively.
NOTE 3 - Marketable Securities
The Company accounts for its investments in marketable securities in
accordance with Statement of Financial Accounting Standards No. 115, "Accounting
for Certain Investments in Debt and Equity Securities."
Management determines the appropriate classification of all securities at
the time of purchase and re-evaluates such designation as of each balance sheet
date. The Company classifies its marketable equity securities as trading
securities. The Company's trading securities are classified as current assets
and are recorded at fair value. Unrealized holding gains and losses are included
in earnings.
<TABLE>
<CAPTION>
Trading securities are summarized as follows:
<S> <C>
Marketable equity securities, at cost $ 50,000
Less: Unrealized losses 15,625
----------
Trading securities, at aggregate market value $ 34,375
==========
</TABLE>
<PAGE>
FUSION FUND, INC.
(F/K/A OUTLOOK SPORTS TECHNOLOGY, INC.)
NOTES TO FINANCIAL STATEMENTS
JULY 31, 2000
-------------
(Unaudited)
NOTE 4 - Property and Equipment
<TABLE>
<CAPTION>
Property and equipment consist of the following:
<S> <C>
Office equipment $ 3,127
Less: Accumulated depreciation 313
----------
$ 2,814
==========
</TABLE>
NOTE 5 - Other Investments
In May, 2000 the Company purchased a $250,000 principal amount promissory
note of InfoActiv, Inc., a Pennsylvania corporation. The note was convertible
into 1,562,500 shares of common stock of InfoActiv, Inc.
In June, 2000 the Company converted the promissory note and was issued
1,562,500 shares of common stock of InfoActiv, Inc. The Company is using the
cost method of accounting for its investment in InfoActiv, Inc. and has
classified such investment as other investments.
NOTE 6 - Commitments and Contingencies
In August 2000 a complaint was filed against the Company alleging trademark
infringement under federal and state laws and unfair competition under state
law. The complaint seeks a declaratory judgment for these alleged violations, a
permanent injunction of, among other things, the Company's use of the name
Fusion Fund, Inc., and unspecified monetary damages. The Company is unable to
determine what impact, if any, the resolution of this matter will have on its
financial position or results of operation.
<PAGE>
FUSION FUND, INC.
(F/K/A OUTLOOK SPORTS TECHNOLOGY, INC.)
NOTES TO FINANCIAL STATEMENTS
JULY 31, 2000
-------------
(Unaudited)
NOTE 7 - Shareholders' Deficit
Effective February 1, 2000, the Company entered into a one year consulting
agreement. As provided for in the consulting agreement, the consultant was paid
compensation of 162,500 shares of the Company's common stock, such shares having
been registered using Form S-8. The Company recognized a charge of $1,828,125 in
the current period in connection with the issuance of these shares.
Effective March 28, 2000, the Company entered into a one year consulting
agreement with an investment banker. As provided for in the consulting
agreement, the investment banker was paid compensation of 50,000 shares of the
Company's common stock. The Company recognized a charge of $525,000 in the
current period in connection with the issuance of these shares.
During the quarter ended April 30, 2000, the Company issued 150,500 shares
for services and other compensation. The Company recognized a charge of
$1,654,938 in the current period in connection with the issuance of these
shares.
During the quarter ended April 30, 2000, the Company privately sold an
aggregate of 184,241 shares of common stock for gross proceeds of $1,220,164.
The Company netted $1,059,757 after offering expenses of $160,407.
During the quarter ended April 30, 2000, the Company issued an aggregate of
151,793 shares of common stock in connection with the exercise of common stock
purchase warrants.
During the quarter ended July 31, 2000, the Company privately sold 10,494
shares of common stock for the gross proceeds of $69,995. The Company netted
$52,501 after offering expenses of $17,494.
During the quarter ended July 31, 2000, the Company issued 45,000 shares
for services and other compensation. The Company recognized a charge of $258,125
during the current period in connection with the issuance of these shares.
During the quarter ended July 31, 2000 the Company purchased 15,000 shares
of its common stock for $114,380. Such shares have been recorded as treasury
stock.
<PAGE>
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion should be read in conjunction with our financial
statements, any notes related thereto, and the other financial data included
elsewhere herein. This discussion contains forward-looking statements that
involve risks and uncertainties. Our actual results may differ materially from
those anticipated in these forward-looking statements as a result of certain
factors discussed herein.
Overview
In the first six months of the year 2000, the Company underwent significant
management changes and redirected its business mission. On January 11, 2000,
Paul H. Berger resigned from his positions as Chairman of the Company's Board of
Directors and Treasurer and Jim Dodrill resigned from his positions as
President, General Counsel, and Director of the Company. After a brief
restructuring period, Mae Davis Group, an investment banking firm whose clients
hold a majority interest in the Company, approached several of their business
associates to redirect and manage the Company. In February 2000, the Company
appointed Adam Goldberg as it's President and Chairman of the Board of
Directors, and Steven Angel as its Secretary and Executive Vice President.
In March 2000, the Company set forth to strengthen its financial position and
redefine its business mission. On May 1, 2000, the Company completed a private
placement of approximately $1,284,000 of its common stock to accredited
investors. The proceeds from this private placement are currently being used to
satisfy certain debt, in addition to supplementing the Company's working
capital. While the Company is making every effort to satisfy these obligations,
it may be forced to seek legal protection from its creditors under United States
Bankruptcy Code in the event that these efforts are unsuccessful.
In March 2000, the Company launched its redefined business mission as an
Internet technology and e-commerce incubator. Accordingly, the accompanying
financial statements reflect the results of discontinued operations of the
abandoned golf business for the six months ended July 31, 2000. The Company's
new business model provides early stage client companies with extensive
management, marketing, finance and business development resources in exchange
for equity positions in their businesses. In light of this shift in focus, the
Company formed a wholly owned Delaware subsidiary, Fusion Fund, Inc., which it
merged with and into the Company on March 27, 2000, for the sole purpose of
changing its name to Fusion Fund, Inc.
On or about July 10, 2000, the Company obtained a minority interest in
InfoActiv, Inc., a computer telephony integration company and the Company's
first incubation partner ("InfoActiv"). Pursuant to their agreement, the Company
loaned InfoActiv $250,000 in exchange for a senior secured convertible
promissory note, which the Company converted to approximately 1.5 million shares
of InfoActiv's common stock.
Liquidity and Capital Resources
Our primary source of liquidity has historically consisted of sales of equity
securities and high yield debt. In March 1999, we completed an initial public
offering of our Class A common stock. Through this offering, we sold a total of
438,500 shares of our Class A common stock. Net proceeds of this offering, were
approximately $1,768,000, inclusive of certain unpaid offering expenses.
Additionally, during the year ended January 31, 2000 we borrowed approximately
$603,000 from two former officers and directors.
From March 2000 through July 31, 2000 we raised approximately $1,290,000 gross
proceeds through the sale of 194,735 shares of common stock to private
investors. We netted approximately $1,112,000 from the sale of these securities.
We believe that we will need to raise additional funds from either debt or
equity financings in order to achieve our redefined business mission.
Notwithstanding the funds we raised in the private placement and other
borrowings, we are currently experiencing a severe working capital deficiency
and are incurring significant losses. As of July 31, 2000 our working capital
deficiency was approximately $3,625,000 and for the six months ended July 31,
2000 we incurred a net loss of approximately $4,583,000. At this time, we are
not generating any revenues but we are incurring substantial costs and expenses
in connection with the launching of our Internet technology and e-commerce
incubator business.
<PAGE>
Results of Operations
Quarter Ended July 31, 2000 Compared To Quarter Ended July 31, 1999
The Company incurred a net loss of approximately $453,000 during the quarter
ended July 31,2000 compared to a net loss of approximately $2,401,000 for the
quarter ended July 31, 1999.
The Company formally abandoned its golf business in January 2000 and during
March 2000 launched its redefined business mission as an Internet technology and
e-commerce incubator. Accordingly the following discussion reports the results
of discontinued operations of the abandoned golf business for the quarter ended
July 31, 1999.
The net loss of approximately $2,401,000 for the quarter ended July 31, 1999
resulted primarily for the discontinued operations of the abandoned golf
business. Loss from discontinued operations was approximately $2,385,000 during
the quarter ended July 31, 1999.
During the quarter ended July 31, 2000 the Company incurred a net loss of
approximately $453,000. The net loss was primarily the result of selling,
general and administrative expenses incurred in the amount of approximately
$447,000, of which approximately $258,000 was for non-cash issuances of common
stock for services and other compensation. The largest component of selling,
general and administrative expenses consisted of issuances of common stock in
connection with two consulting agreements. The Company issued an aggregate of
35,000 shares of common stock and recognized a charge to operations of
approximately $258,000 in connection with these issuances.
Six Months Ended July 31, 2000 Compared To Six Months Ended July 31, 1999
The Company incurred a net loss of approximately $4,583,000 during the six
months ended July 31, 2000 compared to a net loss of approximately $3,512,000
for the six months ended July 31, 1999.
The Company formally abandoned its golf business in January 2000 and during
March 2000 launched its redefined business mission as an Internet technology and
e-commerce incubator. Accordingly the following discussion reports the results
of discontinued operations of the abandoned golf business for the six months
ended July 31, 1999.
The net loss of approximately $3,512,000 for the six months ended July 31, 1999
resulted primarily for the discontinued operations of the abandoned golf
business. Loss from discontinued operations was approximately $3,471,000 during
the six months ended July 31, 1999.
During the six months ended July 31, 2000 the Company incurred a net loss of
approximately $4,583,000. The net loss was primarily the result of selling,
general and administrative expenses incurred in the amount of approximately
$4,569,000, of which approximately $4,283,000 was for non-cash issuances of
common stock for services and other compensation. The largest component of
selling, general and administrative expenses consisted of issuances of common
stock in connection with four consulting agreements. The Company issued an
aggregate of 247,500 shares of common stock and recognized a charge to
operations of approximately $2,411,000 in connection with these issuances.
<PAGE>
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On August 22, 2000, Fusion Ventures, LLC, a North Carolina limited liability
company ("Fusion Ventures"), filed a complaint against the Company, in United
States Federal Court in the Southern District of New York, alleging trademark
infringement under federal and state laws and unfair competition under state
law. Fusion Ventures' complaint seeks a declaratory judgment for these alleged
violations, a permanent injunction of, among other things, the Company's use of
the name Fusion Fund, Inc., and unspecified monetary damages. The Company is
unable to determine what impact, if any, the resolution of this matter will have
on its financial position or results of operation.
Other than the aforementioned proceeding, the Company is not currently involved
in any legal proceeding that could have a material adverse effect on the results
of operations or the financial condition of the Company. From time to time, the
Company may become a party to litigation incidental to its business. There can
be no assurance that any future legal proceedings will not have a material
adverse affect on the Company.
In addition, as of July 31, 2000, the Company owed approximately $4,090,000 to
various creditors. As of July 31, 2000, none of the aforementioned obligations
have resulted in any legal proceeding that could have a material adverse effect
on the results of operations or the financial condition of the Company.
Nonetheless, while the Company is actively pursuing adequate resolution and
satisfaction of these obligations, the failure to reach an adequate resolution
with these creditors may result in litigation that could have a material adverse
effect on the results of operations or the financial condition of the Company
and/or may force the Company to seek legal protection from its creditors under
United States Bankruptcy Code.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 27: Financial Data Schedule
(b) Reports on Form 8-K
None
<PAGE>
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.
FUSION FUND, INC.
Date: September 14, 2000 By: /s/ Adam Goldberg
Adam Goldberg, Treasurer
Date: September 14, 2000 By: /s/ Steven Angel
Steven Angel, Secretary
