U.S. 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 September 30, 1998
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 0-27542
DIVERSICON HOLDINGS CORP.
(Exact Name of Small Business Issuer as Specified in its Charter)
<TABLE>
<CAPTION>
<S> <C>
Delaware 11-3157259
(State or Other Jurisdiction of (IRS Employer Identification No.)
Incorporation or Organization)
</TABLE>
290 Wild Avenue, Staten Island, New York 10314
(Address of Principal Executive Offices)
(718) 477-2733
(Issuer=s Telephone Number, Including Area Code)
FUN TYME CONCEPTS, INC.
(Former Name, Former Address, and Former Fiscal Year,
if Changed Since Last Report)
Check whether the Issuer (1) 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 registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes [X] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13, or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the Issuer=s classes of
common equity, as of the latest practicable date: Common stock, par value $.001
per share: 2,497,991 shares outstanding as of November 12, 1998.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
<PAGE>
DIVERSICON HOLDINGS CORPORATION AND SUBSIDIARIES
(Formerly Fun Tyme Concepts, Inc. and Subsidiaries)
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page Number
Item 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
<S> <C> <C> <C> <C> <C>
SEPTEMBER 30, 1998 AND MARCH 31, 1998 (UNAUDITED) 2
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
SIX MONTHS AND THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997 (UNAUDITED) 3
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY SIX MONTHS ENDED SEPTEMBER 30, 1998 (UNAUDITED)
4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED SEPTEMBER 30, 1998 AND 1997 (UNAUDITED) 5
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 6-10
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 11-12
PART II. OTHER INFORMATION 13
Item 1. LEGAL PROCEEDINGS 13
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 13
Item 3. DEFAULTS UPON SENIOR SECURITIES 13
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 13-14
Item 5. OTHER INFORMATION 14
Item 6. EXHIBITS AND REPORTS ON FORM 8-K 14
Signatures 15
</TABLE>
<PAGE>
DIVERSICON HOLDINGS CORPORATION AND SUBSIDIARIES
(Formerly Fun Tyme Concepts, Inc. and Subsidiaries)
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1998 AND MARCH 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
September 30, March 31,
ASSETS 1998 1998
Current assets:
<S> <C> <C>
Cash and cash equivalents ....................................................... $ 25,454 $ 639,572
Certificate of deposit .......................................................... 267,267
Notes receivable ................................................................ 49,000
Other current assets ............................................................ 34,040 96,438
----------- -----------
Total current assets ............................. 108,494 1,003,277
Property and equipment, net ................................................................. 6,169,172 1,263,821
Investment in equity investee ............................................................... 282,000
Advances to officers ........................................................................ 43,645 57,200
Other assets ................................................................................ 72,045 71,198
----------- -----------
TOTALS ............................................................... $ 6,675,356 $ 2,395,496
=========== ===========
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses ........................................... $ 520,494 $ 136,647
Customer deposits ............................................................... 10,238 17,857
Note payable - officer .......................................................... 60,000
Notes payable - other ........................................................... 460,440
----------- -----------
Total current liabilities ............................................ 1,051,172 154,504
Other liabilities ........................................................................... 30,692 28,794
----------- -----------
----------- -----------
Total liabilities .................................................... 1,081,864 183,298
----------- -----------
Stockholders' equity:
Preferred stock, par value $.01 per share; 500,000 shares authorized; none issued
Common stock, par value $.001 per share; 50,000,000 and 10,000,000
shares authorized; 2,497,991 and 2,761,965 shares issued and outstanding
2,498 2,762
Additional paid-in capital ...................................................... 8,463,816 3,954,552
Accumulated deficit ............................................................. (2,872,822) (1,745,116)
----------- -----------
Total stockholders' equity ............................. 5,593,492 2,212,198
----------- -----------
TOTALS ............................................................... $ 6,675,356 $ 2,395,496
=========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part hereof.
3
<PAGE>
DIVERSICON HOLDINGS CORPORATION AND SUBSIDIARIES
(Formerly Fun Tyme Concepts, Inc. and Subsidiaries)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
SIX MONTHS AND THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Revenues ......................................... $ 678,195 $ 509,927 $ 346,413 $ 306,546
----------- ----------- ----------- -----------
Costs and expenses:
Operating expenses ..................... 792,076 756,888 453,766 524,692
Selling, general and administrative exp 693,634 271,751 220,382 178,070
----------- ----------- ----------- -----------
Totals ............. 1,485,710 1,028,639 674,148 702,762
----------- ----------- ----------- -----------
Loss from operations ............................. (807,515) (518,712) (327,735) (396,216)
----------- ----------- ----------- -----------
Other income (expense):
Interest income ........................ 18,009 46,517 1,568 18,717
Interest expense ....................... (11,200) (3,827) (6,689) (1,816)
Charge for officers compensation
paid by parent company ............ (327,000)
----------- ----------- ----------- -----------
Totals ............. (320,191) 42,690 (5,121) 16,901
----------- ----------- ----------- -----------
Net loss ......................................... $(1,127,706) $ (476,022) $ (332,856) $ (379,315)
=========== =========== =========== ===========
Basic net loss per share ......................... $ (0.58) $ (0.19) $ (0.13) $ (0.15)
Basic weighted average common and common
equivalent shares outstanding .......... 1,934,999 2,512,465 2,497,991 2,512,465
=========== =========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part hereof.
<PAGE>
DIVERSICON HOLDINGS CORPORATION AND SUBSIDIARIES
(Formerly Fun Tyme Concepts, Inc. and Subsidiaries)
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
SIX MONTHS ENDED SEPTEMBER 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
Additional
Common Stock Paid-in Accumulated
Shares Amount Capital Deficit Total
<S> <C> <C> <C> <C> <C>
Balance, April 1, 1998 ...... 2,761,965 $ 2,762 $ 3,954,552 $(1,745,116) $ 2,212,198
Issuance of shares to
acquire business ....... 7,230,000 7,230 4,174,770 4,182,000
Contribution to capital
arising from officers'
compensation effectively
paid by parent company . 327,000 327,000
Effects of 1 for 4 reverse
stock split ............ (7,493,974) (7,494) 7,494
Net loss .................... (1,127,706) (1,127,706)
----------- ----------- ----------- ----------- -----------
Balance, September 30, 1998 . 2,497,991 $ 2,498 $ 8,463,816 $(2,872,822) $ 5,593,492
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part hereof.
5
<PAGE>
DIVERSICON HOLDINGS CORPORATION AND SUBSIDIARIES
(Formerly Fun Tyme Concepts, Inc. and Subsidiaries)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
Operating activities:
<S> <C> <C>
Net loss ...................................................... $(1,127,706) $ (476,022)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization ............................... 101,001 82,802
Charge for officers' compensation paid by parent company
327,000 Changes in operating assets and liabilities:
Other current assets .................................... 62,398 45,267
Other assets ............................................ (847) (84,069)
Accounts payable and accrued expenses ................... 383,847 (32,707)
Customer deposits ....................................... (7,619) (7,860)
Other liabilities ....................................... 12,348
----------- -----------
Net cash used in operating activities .............. (249,578) (472,589)
----------- -----------
Investing activities:
Redemption of certificate of deposit .......................... 267,267
Short-term loans .............................................. (49,000)
Purchase of property and equipment ............................ (941,352) (445,823)
Repayment of advances to officers ............................. 13,555
----------- -----------
Net cash used in investing activities ....................... (709,530) (445,823)
----------- -----------
Financing activities:
Loan from officer ............................................. 60,000
Repayments of capital lease obligations ....................... (10,450) (63,494)
Other loans ................................................... 295,440
Purchase of treasury stock .................................... (24,017)
----------- -----------
Net cash provided by (used in) financing activities ......... 344,990 (87,511)
----------- -----------
Decrease in cash and cash equivalents .......................................... (614,118) (1,005,923)
Cash and cash equivalents, beginning of period ................................. 639,572 2,155,460
----------- -----------
Cash and cash equivalents, end of period ....................................... $ 24,454 $ 1,149,537
=========== ===========
Supplemental disclosures of cash flow information:
Interest paid ................................................. $ 11,200 $ 3,827
=========== ===========
Income taxes paid ............................................. $ 22,093
===========
</TABLE>
The accompanying notes to financial statements are an integral part hereof.
<PAGE>
DIVERSICON HOLDINGS CORPORATION AND SUBSIDIARIES
(Formerly Fun Tyme Concepts, Inc. and Subsidiaries)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 Business activities:
As of September 30, 1998, Diversion Holdings Corporation (formerly Fun Tyme
Concepts, Inc.) and its subsidiaries (the ACompany@) were operating two
children=s entertainment centers in Staten Island, New York and Edmonton,
Alberta, Canada for children ages two through twelve. The Company also operates
a day camp program at its Staten Island facility during the summer months which
includes indoor and outdoor activities for children ages three through fourteen.
The Edmonton facility was opened in August 1997. The Company was also renovating
a facility it is leasing in East Brunswick, New Jersey, which is expects to open
in the last half of fiscal 1999.
In concurrent transactions during May 1998, the Company became an
81.6%-owned subsidiary of BBS Holdings, LLC ("BBS Holdings") and acquired 100%
of the outstanding shares of common stock of Resource Marketing, Inc. (formerly
Play Co. Capital Corp.) ("RMI") from BBS Holdings. As of the date of
acquisition, RMI held a 50% interest in a company that had commenced sales of
jewelry in April 1998 and held an option to acquire the facilities comprising an
inactive ski resort (see Note 4).
Note 2 Basis of presentation:
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements reflect all adjustments, consisting of normal
recurring accruals, necessary to present fairly the financial position of the
Company as of September 30, 1998, and its results of operations and cash flows
for the six months ended September 30, 1998 and 1997. Information included in
the consolidated balance sheet as of March 31, 1998 has been derived from the
audited balance sheet in the Company=s Annual Report on Form 10-KSB for the year
ended March 31, 1998 (the "10-KSB") previously filed with the United States
Securities and Exchange Commission. These unaudited consolidated financial
statements should be read in conjunction with the financial statements, notes to
financial statements and the other information in the 10-KSB.
The results of the Company's operations for the six months ended September
30, 1998 are not necessarily indicative of its results of operations for the
full year ending March 31, 1999.
7
<PAGE>
DIVERSICON HOLDINGS CORPORATION AND SUBSIDIARIES
(Formerly Fun Tyme Concepts, Inc. and Subsidiaries)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 3 Earnings (loss) per share:
Effective March 31, 1998, the Company adopted the provisions of Statement
of Financial Accounting Standards No. 128, Earnings per Share (ASFAS 128@),
which requires the presentation of Abasic@ and Adiluted@ earnings (loss) per
common share, as further explained in Note 2 of the notes to the audited
consolidated financial statements of the Company.
Since the Company had losses applicable to common stock in the six and
three months ended September 30, 1998 and 1997, the assumed effects of the
exercise of outstanding stock options and warrants were anti-dilutive and,
accordingly, dilutive per share amounts have not been presented in the
accompanying unaudited condensed consolidated statements of operations. In
addition, the basic per share and weighted average share amounts presented in
the accompanying 1997 unaudited condensed consolidated statement of operations
which were computed in accordance with SFAS 128 do not differ from those
computed under previously promulgated accounting standards.
All references to numbers of shares and per share amounts in these notes
and, where appropriate the accompanying financial statements have been
retroactively restated for a 1 for 4 reverse stock split, approved by the
Company's shareholders on August 18, 1998 (see Note 7).
Note 4 Acquisition of the Company by BBS Holdings and acquisition
of RMI by the Company:
The Company became an 81.6%-owned subsidiary of BBS Holdings and acquired
100% of the outstanding shares of common stock of RMI from BBS Holdings as a
result of the transactions described below that took place pursuant to the stock
purchase agreement dated and effective as of May 28, 1998 (the AAgreement@).
BBS Holdings received a total of 230,500 shares of common stock of the
Company, or approximately 33.4% of the Company's 690,500 common shares
outstanding prior to the Agreement, from two companies, each of which was
wholly-owned by two directors of the Company, who also serve as executive
officers of the Company, in exchange for an aggregate 20% interest in BBS
Holdings.
The Company issued 1,807,500 shares of its common stock directly to BBS
Holdings in exchange for 100% of the outstanding shares of the common stock of
RMI, which increased the number of shares held by BBS Holdings to 2,038,000
shares, or approximately 81.6% of the 2,498,000 shares of the Company=s common
stock outstanding after the transactions on May 28, 1998.
8
<PAGE>
DIVERSICON HOLDINGS CORPORATION AND SUBSIDIARIES
(Formerly Fun Tyme Concepts, Inc. and Subsidiaries)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 4 Acquisition of the Company by BBS Holdings and acquisition
of RMI by the Company (continued):
As of May 28, 1998, RMI owned (i) all rights, title, and interest to a
contract (the "Contract") to purchase lease rights and certain real and personal
property comprising the Cortina Mountain Ski Resort ("Cortina") for $540,000 and
(ii) a 50% interest in Prestige Fine Jewelry, LLC ("Prestige"). Those assets had
been transferred to BBS Holdings and RMI as initial capital contributions by
certain of their members and stockholders.
Cortina is located on approximately 300 acres in upstate New York. The ski
area, which occupies approximately 106 acres, has 18 slopes/trails and a lodge
with restaurant, motel, and other facilities. Cortina's ski operations, which
had been operating for approximately 25 years, closed during the 1996/1997 ski
season and remained closed for all of the 1997/1998 ski season.
Prestige, which was organized as a limited liability company on March 31,
1998, commenced sales of jewelry primarily made of gold in April 1998 pursuant
to an operating and sales agreements with Prestige Chain, Inc. ("PCI"), an
established manufacturer and wholesaler of jewelry. Prestige was formed as the
exclusive marketing arm of PCI.
The Company has accounted for the acquisition of RMI as a purchase. The
1,807,500 shares of the Company's common stock issued to BBS Holdings as
consideration for the acquisition of RMI were valued at $4,182,000 of which
$3,900,000 was attributable to the interest in the Contract and $282,000 was
attributable to the interest in Prestige as explained below:
The cost of the interest in the Contract is equal to the cost of $4,065,000
incurred by the member of BBS Holdings to acquire, from an affiliate of said
member, the Contract on February 12, 1998; the member contributed the Contract
to BBS Holdings and RMI on that date in exchange for its initial 75% interest in
BBS Holdings and the assumption by BBS Holdings of a note payable in the
principal amount of $165,000. The balance of the note, which bears interest at
6%, was due in June 1998 but remained unpaid as of September 30, 1998.
The cost of the interest in Prestige is equal to the fair value of 25% of
the 1,807,500 shares of common stock of the Company issued to BBS Holdings for
the 100% interest in RMI based on the fair market value of $.625 per share for
the Company's common stock on May 28, 1998; the member contributed its 50%
interest in Prestige to BBS Holdings and RMI on February 12, 1998 in exchange
for its initial 25% interest in BBS Holdings.
9
<PAGE>
DIVERSICON HOLDINGS CORPORATION AND SUBSIDIARIES
(Formerly Fun Tyme Concepts, Inc. and Subsidiaries)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 4 Acquisition of the Company by BBS Holdings and acquisition
of RMI by the Company (concluded):
At the date of acquisition, RMI's only material assets and liabilities were
the interests in the Contract and Prestige and the note payable related to the
purchase of the Contract. The acquisition of RMI by the Company in exchange for
shares of common stock and the assumption of the note was a non-cash transaction
that is not reflected in the accompanying unaudited condensed consolidated
statement of cash flows for the six months ended September 30, 1998.
The Company has accounted for its 50% interest in Prestige since the
acquisition pursuant to the equity method. Prestige generated approximately
$650,000 of sales and broke even for its initial six months of operations
through September 30, 1998 and, accordingly, the Company's proportionate share
of Prestige's results of operations for the period from the date of acquisition
to September 30, 1998 was immaterial. Information as to the unaudited pro forma
results of operations of the Company and RMI assuming the acquisition had been
consummated on April 1, 1997 has not been presented because such information
would not differ materially from the information in the accompanying historical
statements of operations of the Company for the six months ended September 30,
1998 and 1997.
If the companies owned by the directors of the Company had retained the
230,500 shares of common stock of the Company they owned prior to the business
combination and transferred in exchange for their 20% interest in BBS Holdings,
they would have owned 9.2% of the 2,498,000 outstanding shares of the Company
immediately after the acquisition; instead, as a result of the transfer of the
shares to BBS Holdings, they acquired a 16.3% indirect interest in the Company
as of the date of the acquisition. Accordingly, the executive officers received
a premium for their shares of approximately 7% from BBS Holdings which is deemed
to be compensation paid by BBS Holdings on behalf of the Company and a
contribution to the Company's capital. As a result, the Company recorded a
non-cash charge of $327,000 for officers' compensation in the accompanying
unaudited condensed consolidated statement of operations for the six months
ended September 30, 1998, which was equivalent to approximately 7% of the fair
value of the Company's outstanding shares prior to the acquisition and the fair
value of the assets acquired.
Note 5 Exercise of Option To Purchase Cortina :
On July 27, 1998 the Company exercised its rights under the Contract and
paid approximately $540,000 to the owner of the Cortina facilities for the
Cortina lease, including ownership of certain real property included therein
(see Note 4).
10
<PAGE>
DIVERSICON HOLDINGS CORPORATION AND SUBSIDIARIES
(Formerly Fun Tyme Concepts, Inc. and Subsidiaries)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 6 Notes Payable :
In July, 1998 the Company borrowed $273,440 from New York Printing &
Publishing LLC, a company owned by an officer of the Company. The proceeds were
used as partial funding for the purchase of Cortina. The note is payable on
demand and bears interest at 6% per annum.
Anthony DiMatteo, an officer of the Company, advanced the Company $60,000
during July, 1998 to help fund the purchase of Cortina. The note bears interest
at 18% per annum and is payable on demand
The Company also borrowed $22,000 from an unrelated individual in July
1998. The note bears interest at 6% per annum and is payable on demand.
Note 7 Stockholders' Equity :
On August 18, 1998, the stockholders of the Company approved amendments to
the Company=s Certificate of Incorporation that increased the number of shares
of common stock authorized for issuance by the Company from 10,000,000 to
50,000,000 shares and changed the Company=s name from Fun Tyme Concepts, Inc. to
Diversicon Holdings Corp. They also approved the 1 for 4 reverse stock split of
the Company=s outstanding shares of common stock.
Note 8- Subsequent Events :
On October 13, 1998, the Company borrowed $600,000 and issued a note that
is secured by the Cortina facilities, bears interest at an annual rate of 13%
that is payable monthly and requires the repayment of the principal balance on
November 1, 2000. Simultaneously and in accordance with the terms of the note,
the Company purchased certain additional real property underlying the Cortina
lease, pursuant to an option contained in the lease, for $150,000.
11
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
During the three months ended September 30, 1998, revenues of the Company
were $346,413 as compared to $306,546 for the three months ended September 30,
1997. This increase of $39,867 was attributable to an increase in operating
revenues in the Company's Edmonton and Staten Island locations. A portion of the
increase is attributable to increased revenues from the Company's summer camp at
the Staten Island facility and the fact that the Edmonton facility was in
operation for only two months during the same quarter in the prior year.
Revenues for the six months ended September 30, 1998 were $678,195, an
increase of $168,268, as compared to $509,927 for the same period ended
September 30, 1997. This increase was a result of an increase in operating
revenues at the Staten Island facility and an increase in operating revenues
from the Edmonton facility which was only in operation for two months during the
six months ended September 30, 1997.
Operating expenses of $453,766 for the three months ended September 30,1998
decreased $70,926 as compared to $524,692 for the three months ended September
30, 1997. This decrease was achieved through operating economies.
Operating expenses of $792,076 for the six months ended September 30, 1998
increased $35,188 as compared to $756,888 for the six months ended September 30,
1997. This increase was primarily due to the addition of the Company's Edmonton
facility which only operated for two months in the same period during the prior
year.
Selling, general, and administrative expenses of $220,382 for the three
months ended September 30, 1998 increased $42,312 as compared to $178,070 for
the three months ended September 30, 1997. This increase was primarily due to
additional administrative expenses required to manage the Company with its new
corporate structure.
Selling, general, and administrative expenses of $693,634 for the six
months ended September 30, 1998 increased $421,883 as compared to $271,751 for
the three months ended September 30, 1997. This increase was attributable to
consulting services provided by investment bankers, other special consulting
projects, additional professional fees, and expenses incurred at the Company's
Edmonton and East Brunswick facilities.
Financial Condition
At September 30, 1998, the Company had a working capital deficiency of
$942,678 and stockholders equity of $5,593,492. Included in the working capital
deficiency is approximately $520,000 in short term debt incurred in connection
with the Company's acquisition of Play Co. Capital Corp. and the related
purchase of the Cortina Mountain Ski Resort. Also included in the balance of the
working capital deficiency are accounts payable for the capital improvements to
the Company's East Brunswick facility of approximately $200,000.
On July 27,1998, the Company exercised its option and paid $537,935 for the
Cortina lease, which it had acquired with the acquisition of Play Co. Capital
Corp. on May 28, 1998. The contract included ownership of certain real and
personal property included therein. In order to partially fund the transaction,
the Company borrowed approximately $273,000 in the form of a short term demand
note from a company owned by an officer of the Company and an officer of the
Company advanced an additional $60,000 to the Company.
On October 13, 1998, the Company borrowed $600,000 and issued a mortgage
note that is secured by the Cortina property, bears interest at 13% per annum,
is payable monthly, and requires the repayment of the principal balance on
November 1, 2000. Simultaneously and in accordance with the terms of the note,
the Company purchased certain real property underlying the lease for $150,000.
The Company is in the process of making capital improvements to Cortina and
planning its opening this fall. The total anticipated expenses for this phase of
improvements is expected to be approximately $300,000, which was provided by the
proceeds of the aforementioned loan. To date, approximately $250,000 of these
improvements have been completed.
<PAGE>
Management expects that the Company will need capital resources of $750,000
during the period from October 1, 1998 through September 30, 1999. Included in
the need for capital resources are $300,000 for improvements necessary to make
the East Brunswick facility operational and approximately $450,000 for working
capital to fund the Company's various operations. Management expects, but cannot
assure, that the Company will be able to obtain additional capital resources to
meet its requirements during the aforementioned period. The Company is exploring
various means of financing including asset financing, purchase order financing,
and equipment lease financing.
12
<PAGE>
PART II
Item 1 Legal Proceedings: None
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:
On August 18, 1998, the Company held an annual meeting of its
stockholders, at which the following was voted on, as follows:
1. The results of the proposal to elect three (3) Directors to the
Company's Board of Directors to hold office for a period of one year or until
their successors are duly elected and qualified are as follows:
<TABLE>
<CAPTION>
Votes Cast Withhold
Nominees For Authority to Vote
-------- ---------- -----------------
<S> <C> <C>
Daniel Catalfumo 9,138,598 13,300
Richard Rosso 9,138,598 13,300
Anthony DiMatteo 9,138,598 13,300
</TABLE>
2. The proposal to amend the Company's Certificate of Incorporation to
increase the authorized number of shares of Common Stock from 10 million to 50
million:
<TABLE>
<CAPTION>
Votes Cast Votes Cast
For Against Abstain
---------- ---------- -------
<S> <C> <C> <C>
9,105,648 42,050 4,200
</TABLE>
3. The proposal to amend the Company's Certificate of Incorporation to
effect a change of the Company's name from Fun Tyme Concepts, Inc. to Diversicon
Holdings Corp.:
<TABLE>
<CAPTION>
Votes Cast Votes Cast
For Against Abstain
---------- ---------- -------
<S> <C> <C> <C>
9,131,598 19,650 650
</TABLE>
4. The proposal to reverse-split the Company's outstanding shares of Common
Stock on a 1 for 4 basis;
<TABLE>
<CAPTION>
Votes Cast Votes Cast
For Against Abstain
---------- ---------- -------
<S> <C> <C> <C>
9,115,598 35,550 750
</TABLE>
<PAGE>
5. The proposal to authorize a change of the Company=s domicile (state of
incorporation) from New York to Delaware; and
<TABLE>
<CAPTION>
Votes Cast Votes Cast
For Against Abstain
<S> <C> <C> <C>
8,355,674 19,314 400
</TABLE>
13
<PAGE>
6. The proposal to authorize an amendment to the Company=s Senior
Management Incentive Plan to increase the number of shares of common stock
authorized thereunder from 150,000 to 1,000,000.
<TABLE>
<CAPTION>
Votes Cast Votes Cast
For Against Abstain
---------- ---------- -------
<S> <C> <C> <C>
8,273,027 99,861 2,500
</TABLE>
Item 5. Other Information:
a. On July 27, 1998, the Company exercised its rights under the contract to
purchase Cortina Mountain Ski Resort and paid approximately $540,000 to purchase
the lease and certain real property included therein.
b. In October 1998, the Company borrowed $600,000 and issued a note that is
secured by the Cortina facilities, bears interest at an annual rate of 13% that
is payable monthly and requires the repayment of the principal balance on
November 1, 2000. Simultaneously and in accordance with the terms of the note
the Company purchased certain additional real property underlying the Cortina
lease, pursuant to an option contained in the lease.
Item 6. Exhibits and Reports on Form 8-K:
a. Form 8-K filings since the end of the prior quarter:
On July 30, 1998, the Company filed a Form 8-K disclosing the resignation
of Herbert P. Marks as an officer and director of the Company.
Exhibits filed with this Form 10-QSB: None
14
<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 under
signed thereunto duly authorized.
Dated: November 19, 1998
Diversicon Holdings Corp.
(formerly Fun Tyme Concepts, Inc.)
By: /s/ Daniel Catalfumo
Daniel Catalfumo, President
By: /s/ Richard Rosso
Richard Rosso, Secretary
15
