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 October 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 October 31, 2000, 5,762,125 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
OCTOBER 31, 2000
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
Current Assets:
Cash and cash equivalents .................................... $ 68,815
Trading securities ........................................... 4,950
------------
Total current assets .................................. 73,765
Property and equipment (net of accumulated depreciation of $469) 2,658
Other investments .............................................. 250,000
Security deposits .............................................. 4,058
------------
$ 330,481
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current Liabilities:
<S> <C>
Accounts payable ............................................. $ 1,265,220
Accrued expenses ............................................. 990,750
Accrued wages and related expenses ........................... 553,296
Accrued interest payable ..................................... 87,046
Notes payable ................................................ 365,000
Notes payable - stockholders - current portion ............... 452,796
------------
Total current liabilities ............................. 3,654,108
Notes payable - stockholders - long-term ....................... 190,000
------------
3,844,108
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; 5,952,625 shares issued ................. 59,526
Common stock; Class B, $.01 par value, 5,000,000 shares
authorized; no shares issued and outstanding ............... --
Treasury stock; 190,500 Class A shares at cost ............... ( 166,848)
Additional paid-in capital ................................... 19,883,505
Accumulated deficit .......................................... (23,289,810)
------------
Total shareholders' deficit ........................... ( 3,513,627)
------------
$ 330,481
</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>
<CAPTION>
Nine Months Ended Three Months Ended
October 31, October 31,
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues ..................................... $ -- $ -- $ -- $ --
----------- ----------- ----------- -----------
Costs and expenses:
Selling, general and administrative expenses 4,537,221 -- ( 31,657) --
----------- ----------- ----------- -----------
Total costs and expenses ............ 4,537,221 -- ( 31,657) --
----------- ----------- ----------- -----------
Income (loss) from operations ................ (4,537,221) -- 31,657 --
----------- ----------- ----------- -----------
Other income (expense):
Interest expense ........................... ( 24,375) ( 52,112) ( 8,125) ( 11,320)
Dividend and interest income ............... 633 -- 17 --
Gain (loss) on sale of trading securities .. 10,257 -- ( 7,006) --
Unrealized loss on trading securities ...... ( 27,050) -- ( 11,425) --
----------- ----------- ----------- -----------
Total other income (expense) ........ ( 40,535) ( 52,112) ( 26,539) ( 11,320)
----------- ----------- ----------- -----------
Income (loss) before loss from discontinued
operations ................................. (4,577,756) ( 52,112) 5,118 ( 11,320)
Discontinued operations:
Loss from operations of abandoned business . -- (4,742,729) -- (1,271,507)
----------- ----------- ----------- -----------
Net income (loss) ............................ $(4,577,756) $(4,794,841) $ 5,118 $(1,282,827)
=========== =========== =========== ===========
Weighted average common shares outstanding ... 5,815,904 4,221,288 5,950,886 4,378,326
=========== =========== =========== ===========
Net loss per common share - basic:
Operations ................................. $ (.79) $( .02) $ ( .01) $ (.00)
Discontinued operations .................... -- ( 1.12) -- ( .29)
----------- ----------- ----------- -----------
Net loss ................................... $ (.79) $ (1.14) $ (.01) $ (.29)
=========== =========== =========== ===========
</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>
Nine Months Ended
October 31,
2000 1999
----------- -----------
Operating activities:
<S> <C> <C>
Loss from continuing operations .......................... $(4,577,756) $ (52,112)
----------- -----------
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization ........................ 469 147,821
Increase in allowance for doubtful accounts and sales
returns and allowances ............................. -- 124,306
Stock issued for services and other .................. 4,407,408 1,745,290
Stock based compensation ............................. -- 432,248
Stock issued as debt issuance expense ................ -- 481,250
Write down of property and equipment ................. -- 147,108
Write down of inventories ............................ -- 52,394
Unrealized loss on trading securities ................ 27,050 --
Gain on sale of trading securities ................... ( 10,257) --
Changes in operating assets and liabilities:
(Increase) in accounts receivable .................. -- ( 137,821)
Decrease in inventories ............................ -- 57,410
(Increase) in trading securities ................... ( 21,743) --
Decrease in prepaid expenses ....................... -- 10,347
(Increase) in security deposits .................... ( 4,058) --
(Decrease) in accounts payable and accrued expenses ( 643,776) ( 719,240)
----------- -----------
Total adjustments ................................. 3,755,093 2,341,113
----------- -----------
Loss from discontinued operations .................... -- (4,742,729)
----------- -----------
Net cash (used) in operating activities .................... ( 822,663) (2,453,728)
----------- -----------
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) 1,138
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 ..................... -- ( 725,000)
Proceeds from exercise of stock options and sale of common
stock .................................................. -- 215,000
Proceeds from issuance of notes payable - related parties -- 420,296
Proceeds from sale of common stock ....................... 1,290,159 2,543,300
Expenses of stock offerings .............................. ( 177,901) ( 604,783)
Purchase of treasury stock ............................... ( 116,298) ( 29,500)
----------- -----------
Net cash provided by financing activities .................. 960,976 2,457,707
----------- -----------
Net increase in cash and cash equivalents .................. ( 114,814) 46
Cash and cash equivalents, beginning of period ............. 183,629 --
----------- -----------
Cash and cash equivalents, end of period ................... $ 68,815 $ 46
=========== ===========
</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>
Nine Months Ended
October 31,
2000 1999
Supplemental disclosure of cash flow information:
<S> <C> <C>
Cash paid for interest .............................................. $ -- $ 14,856
============== ========
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
============== ========
Issuance of 65,000 shares of Class A common stock
for payment of unsecured note payable ............................... $ -- $300,000
============== ========
Warrants granted as payment of accrued interest ....................... $ -- $212,813
============== ========
Expenses of stock offering ............................................ $ -- $ 77,500
============== ========
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
OCTOBER 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 nine months ended October 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.
Trading securities are summarized as follows:
<TABLE>
<CAPTION>
<S> <C>
Marketable equity securities, at cost $ 32,000
Less: Unrealized losses 27,050
----------
Trading securities, at aggregate market value $ 4,950
==========
</TABLE>
<PAGE>
FUSION FUND, INC.
(F/K/A OUTLOOK SPORTS TECHNOLOGY, INC.)
NOTES TO FINANCIAL STATEMENTS
OCTOBER 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 469
----------
$ 2,658
==========
</TABLE>
NOTE 5 - Other Investments
In May, 2000 the Company purchased a $250,000 principal amount promissory
note of InfoActive, Inc., a Pennsylvania corporation. The note was convertible
into 1,562,500 shares of common stock of InfoActive, Inc.
In June, 2000 the Company converted the promissory note and was issued
1,562,500 shares of common stock of InfoActive, Inc. The Company is using the
cost method of accounting for its investment in InfoActive, Inc. and has
classified such investment as other investments.
NOTE 6 - Commitments and Contingencies
Litigation
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. On or about December 11,
2000, the Company entered into a settlement agreement with Fusion Ventures,
which requires that the Company change its name and cease using the name Fusion
Fund, Inc. in any of its operations. In anticipation of compliance with this
settlement agreement, the Fusion Ventures litigation has been dismissed without
prejudice. The Company anticipates that it will fully comply with the terms of
this settlement agreement prior to January 22, 2001. 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
OCTOBER 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.
During the quarter ended October 31, 2000 the Company issued 20,000 shares
of common stock to related parties for services and other compensation. The
Company recognized a charge of $57,500 during the current period in connection
with issuance of these shares.
During the quarter ended October 31, 2000, the Company purchased 500 shares
of common stock for $1,918. 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 nine 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 nine months ended October 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.
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 October 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 October 31, 2000 our working capital
deficiency was approximately $3,580,000 and for the nine months ended October
31, 2000 we incurred a net loss of approximately $4,577,000. 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 October 31, 2000 Compared To Quarter Ended October, 1999
The Company incurred net income of approximately $5,000 during the quarter
ended October 31, 2000 compared to a net loss of approximately $1,283,000 for
the quarter ended October 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
October 31, 1999.
The net loss of approximately $1,283,000 for the quarter ended October 31,
1999 resulted primarily for the discontinued operations of the abandoned golf
business. Loss from discontinued operations was approximately $1,272,000 during
the quarter ended October 31, 1999.
During the quarter ended October 31, 2000, the Company incurred net income
of approximately $5,000 . The net income was the primarily the result of
selling, general and administrative expenses incurred in the amount of
approximately $144,000, reduced by settlements to creditors of approximately
$176,000. The Company also incurred other expenses of approximately $27,000,
which consisted primarily of realized and unrealized losses from trading
activities of approximately $18,000.
Nine Months Ended October 31, 2000 Compared To Nine Months Ended
October 31, 1999
The Company incurred a net loss of approximately $4,577,000 during the nine
months ended October 31, 2000 compared to a net loss of approximately $4,795,000
for the nine months ended October 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 nine months
ended October 31, 1999.
The net loss of approximately $4,795,000 for the nine months ended October
31, 1999 resulted primarily for the discontinued operations of the abandoned
golf business. Loss from discontinued operations was approximately $4,743,000
during the nine months ended October 31, 1999.
During the nine months ended October 31, 2000 the Company incurred a net
loss of approximately $4,578,000. The net loss was primarily the result of
selling, general and administrative expenses incurred in the amount of
approximately $4,537,000, of which approximately $4,407,000 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 sought 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. On or about
December 11, 2000, the Company entered into a settlement agreement with Fusion
Ventures, which requires that the Company change its name and cease using the
name Fusion Fund, Inc. in any of its operations. In anticipation of compliance
with this settlement agreement, the Fusion Ventures litigation has been
dismissed without prejudice. The Company anticipates that it will fully comply
with the terms of this settlement agreement prior to January 22, 2001. 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.
On November 20, 2000, Foley, Hoag & Eliot LLP threatened to take legal
action against the Company, seeking payment for services rendered in the amount
of approximately $470,000. The Company is not aware that Foley, Hoag & Eliot LLP
has taken any legal action regarding this claim. 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 October 31, 2000, the Company owed approximately
$3,844,108 to various creditors. As of October 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
<PAGE>
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: December 15, 2000 By: /s/ Adam Goldberg
Adam Goldberg, Treasurer
Date: December 15, 2000 By: /s/ Steven Angel
Steven Angel, Secretary
