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 June 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)
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<CAPTION>
<S> <C>
Delaware 11-3157259
(State or Other Jurisdiction of (IRS Employer Identification No.)
Incorporation or Organization)
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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
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PART I. FINANCIAL INFORMATION Page Number
Item 1. FINANCIAL STATEMENTS
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CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, 1998 AND MARCH 31, 1998 (UNAUDITED) 2
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1998 AND 1997 (UNAUDITED) 3
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS'
EQUITY THREE MONTHS ENDED JUNE 30, 1998 (UNAUDITED) 4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED JUNE 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
JUNE 30, 1998 AND MARCH 31, 1998
(Unaudited)
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<CAPTION>
June 30, March 31,
ASSETS 1998 1998
------ ----------- --------------
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 96,169 $ 639,572
Certificate of deposit 267,267
Advances to equity investee 250,000
Notes receivable from loans to:
Officers 65,000
Others 49,000
Other current assets 56,768 96,438
------------- -------------
Total current assets 516,937 1,003,277
Property and equipment, net 1,481,750 1,263,821
Option to acquire property 4,065,000
Investment in equity investee 282,000
Other advances to officers 52,200 57,200
Other assets 119,442 71,198
------------ -------------
Totals $6,517,329 $2,395,496
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 318,773 $ 136,647
Customer deposits 83,986 17,857
Notes payable 165,000
------------
Total current liabilities 567,759 154,504
Other liabilities 23,222 28,794
------------- -------------
Total liabilities 590,981 183,298
------------ ------------
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 (2,539,966) (1,745,116)
----------- -----------
Total stockholders' equity 5,926,348 2,212,198
----------- -----------
Totals $6,517,329 $2,395,496
========== ==========
</TABLE>
The accompanying notes to financial statements are an integral part hereof.
2
<PAGE>
DIVERSICON HOLDINGS CORPORATION AND SUBSIDIARIES
(Formerly Fun Tyme Concepts, Inc. and Subsidiaries)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1998 AND 1997
(Unaudited)
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<CAPTION>
1998 1997
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Revenues $ 331,782 $ 203,381
---------- ----------
Costs and expenses:
Operating expenses 338,310 256,344
Selling, general and administrative expenses 473,252 69,630
----------- ------------
Totals 811,562 325,974
----------- -----------
Loss from operations (479,780) (122,593)
----------- -----------
Other income (expense):
Interest income 16,441 27,897
Interest expense (4,511) (2,011)
Charge for officers= compensation paid by parent company (327,000)
----------
Totals (315,070) 25,886
---------- ----------
Net loss $ (794,850) $ (96,707)
=========== ===========
Basic net loss per share $(.58) $(.15)
===== =====
Basic weighted average common and common equivalent
shares outstanding 1,365,821 628,870
========== =========
</TABLE>
The accompanying notes to financial statements are an integral part hereof.
3
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DIVERSICON HOLDINGS CORPORATION AND SUBSIDIARIES
(Formerly Fun Tyme Concepts, Inc. and Subsidiaries)
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
THREE MONTHS ENDED JUNE 30, 1998
(Unaudited)
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<CAPTION>
Addi-
tional Accum-
Common Stock Paid-in ulated
Shares Amount Capital Deficit Total
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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 (794,850) (794,850)
Balance, June 30, 1998 2,497,991 $2,498 $8,463,816 $(2,539,966) $5,926,348
========= ====== ========== =========== ==========
</TABLE>
The accompanying notes to financial statements are an integral part hereof.
4
<PAGE>
DIVERSICON HOLDINGS CORPORATION AND SUBSIDIARIES
(Formerly Fun Tyme Concepts, Inc. and Subsidiaries)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED JUNE 30, 1998 AND 1997
(Unaudited)
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<CAPTION>
1998 1997
---------- ---------
Operating activities:
<S> <C> <C>
Net loss $(794,850) $ (96,707)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 50,798 30,609
Charge for officers' compensation paid by parent company 327,000
Changes in operating assets and liabilities:
Other current assets 39,670 (2,778)
Other assets (48,244) (17,760)
Accounts payable and accrued expenses 182,126 (70,679)
Customer deposits 66,129 57,261
----------- -------------
Net cash used in operating activities (177,371) (100,054)
---------- ------------
Investing activities:
Redemption of certificate of deposit 267,267
Short-term loans to officers and others (114,000)
Purchases of property and equipment (268,727) (250,306)
Advances to equity investee (250,000)
Repayment of other advances to officers 5,000
------------
Net cash used in investing activities (360,460) (250,306)
---------- ------------
Financing activities:
Repayments of capital lease obligations (5,572) (4,879)
Purchases of treasury stock (24,017)
---------------- -------------
Net cash used in financing activities (5,572) (28,896)
------------ -------------
Decrease in cash and cash equivalents (543,403) (379,256)
Cash and cash equivalents, beginning of period 639,572 2,155,460
---------- -----------
Cash and cash equivalents, end of period $ 96,169 $1,776,204
========== ==========
Supplemental disclosures of cash flow information:
Interest paid $ 4,511 $ 2,011
=========== =============
Income taxes paid $ 1,404
=============
</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)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 Business activities:
As of June 30, 1998, Diversion Holdings Corporation (formerly Fun
Tyme Concepts, Inc.) and its subsidiaries (the "Company") 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 14. 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 June 30, 1998, and its
results of operations and cash flows for the three months ended June
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 three months
ended June 30, 1998 are not necessarily indicative of its results of
operations for the full year ending March 31, 1999.
6
<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 ("SFAS 128"), which requires the presentation of "basic" and
"diluted" 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
three months ended June 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 one for four reverse
stock split, approved by the Company's shareholders on August 18, 1998
(see Note 6).
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 "Agreement").
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.
7
<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 for 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, from an affiliate
of said member, to acquire 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 June 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.
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 (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 three months ended June 30, 1998.
The Company has accounted for its 50% interest in Prestige since
the acquisition pursuant to the equity method. Prestige generated
approximately $355,000 of sales and broke even for its initial three
months of operations through June 30, 1998 and, accordingly, the
Company's proportionate share of Prestige's results of operations for
the period from the date of acquisition to June 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 three months ended June 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 three months ended June
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 Advances to equity investee:
During April 1998, the Company made loans totaling $250,000 to
Prestige that were outstanding as of June 30, 1998. These loans bore
an interest rate of 18% per annum and were payable on demand.
Subsequent to June 30, 1998, Prestige repaid the loan in varying
installments, including a final payment in September 1998.
Accordingly, the balance receivable as of June 30, 1998 was classified
as a current asset in the accompanying unaudited condensed
consolidated balance sheet.
9
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DIVERSICON HOLDINGS CORPORATION AND SUBSIDIARIES
(Formerly Fun Tyme Concepts, Inc. and Subsidiaries)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 6 Subsequent events:
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.
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 lease rights and the real and personal property
comprising Cortina (see Note 4).
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.
10
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Diversicon Holdings, Inc., (formerly Fun Tyme Concepts, Inc.) was
incorporated in the State of New York in April 1993. The Company
changed its domicile to Delaware in October 1998. Prior to May 1998,
the Company's operations consisted of: (i) its Staten Island
entertainment facility, (ii) its wholly-owned subsidiary, ER of
Edmonton, Inc. (formerly Fun Tyme of Edmonton, Inc.), operating its
Edmonton, Canada entertainment facility (commencing operations in
August 1997), and (iii) its wholly-owned subsidiary ER of East
Brunswick, Inc. (formerly Fun Tyme of East Brunswick, Inc.), which is
currently developing a new entertainment facility in East Brunswick,
New Jersey with a target opening date during the last quarter of
fiscal 1999.
Prior to, but in accordance with, the May 1998 acquisition of
RMI, the Company reorganized its structure and transferred all of its
assets in the Staten Island facility to ER of Staten Island, Inc., a
newly formed wholly-owned subsidiary of Entertainment Resources, Inc.
("ERI") a newly formed wholly-owned subsidiary of the Company. In May
1998, RMI owned (i) all rights, title, and interest in the Contract to
purchase Cortina for $540,000 and (ii) a 50% interest in Prestige, a
gold jewelry marketing company.
Upon the acquisition of RMI, the Company assigned all rights,
title, and interest in the Contract to purchase Cortina to a newly
formed wholly-owned subsidiary of ERI, ER of Tannersville, Inc. With
the formation of ER of Tannersville, Inc., ERI controlled four
wholly-owned subsidiaries: (i) ER of East Brunswick, Inc., (ii) ER of
Edmonton, Inc., (iii) ER of Staten Island, Inc. and (iv) ER of
Tannersville, Inc. In addition to ERI and its subsidiaries, the
Company continued to hold its 50% interest in Prestige through RMI.
Due to the Company's acquisition of RMI, the results of operations for
the quarter ended June 30, 1998, are not directly comparable to the
results of operations for the quarter ended June 30, 1997, which did
not include the Edmonton facility, Prestige, or ER of Tannersville,
Inc.
Statements contained in this report which are not historical
facts may be considered forward looking information with respect to
plans, projections, or future performance of the Company as defined
under the Private Securities Litigation Reform Act of 1995. These
forward looking statements are subject to risks and uncertainties
which could cause actual results to differ materially from those
projected.
Results of Operations
During the three months ended June 30, 1998, revenues of the
Company were $331,782, as compared with $203,381 during the three
months ended June 30, 1997. This increase was attributable partly to
an increase in operating revenues at the Company's Staten Island
facility and the addition of revenues from the Company's Edmonton
facility which was not operating in the same period during the prior
year. This increase was due to the increased volume in attendance at
the facilities as well as increased attendance in the Company's
Edmonton, Canada Learning Center, and Staten Island Summer Camp
programs.
Operating expenses for the three months ended June 30, 1998
increased by approximately $82,000 as compared to the expenses for the
three months ended June 30, 1997. This increase was primarily due to
additional operating costs incurred at the Company's Edmonton facility
which was not operating in the same period during the prior year.
11
<PAGE>
Selling, general, and administrative expenses for the three
months ended June 30, 1998 increased by approximately $404,000 as
compared to the expenses for the three months ended June 30, 1997.
Approximately $81,000 of the increase was attributable to consulting
services provided by investment bankers, $122,000 to other special
consulting projects, $65,000 to additional professional fees, and
$47,000 to expenses incurred at the Edmonton and East Brunswick
facilities. The results of the ski and jewelry operations acquired by
the Company through the purchase of RMI were not material during the
period from the date of acquisition through June 30, 1998.
Interest income for the three months ended June 30, 1998
decreased by approximately $11,000 compared to the interest earned for
the three months ended June 30, 1997 primarily as a result of the
redemption of a certificate of deposit.
On May 28, 1998, 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 certain exchanges of
shares of common stock between the Company and BBS Holdings and
certain stockholders of the Company and owners of BBS Holdings which
are further described in Note 4 to the unaudited condensed
consolidated financial statements included herein. The executive
officers received a premium for the shares they exchanged valued at
$327,000. During the three months ended June 30, 1998, the Company
recorded a non-cash charge for officers' compensation in the
accompanying unaudited condensed consolidated statement of operations
and a capital contribution in the accompanying unaudited condensed
consolidated statement of stockholders' equity of $327,000, based on
the fair value of the premium.
Financial Condition
At June 30, 1998, the Company had a working capital deficiency of
$50,822 and stockholders' equity of $5,926,348. During the quarter
ended June 30, 1998, the Company redeemed a certificate of deposit in
the amount of $267,267. These proceeds were used to partially fund
non-recurring costs in connection with the acquisition of RMI which
owned, inter alia, the rights to purchase the Cortina Mountain Ski
Resort. The aforementioned acquisition was effectuated on May 28, 1998
and the Company exercised its option to purchase Cortina on July 27,
1998.
During the quarter ended June 30, 1998, the Company also
purchased equipment and expended funds for leasehold improvements
approximating $269,000 in connection with the East Brunswick, New
Jersey location. The Company also advanced $250,000 to Prestige, a
gold jewelry marketing company. The Company acquired a 50% interest in
Prestige as a result of its acquisition of RMI on May 28, 1998.
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. The Company is in the
process of making capital improvements to Cortina and is planning its
reopening this fall. The total anticipated expenses for this phase of
improvements is expected to be approximately $300,000, which has been
provided by the proceeds of the aforementioned loan. To date,
approximately $250,000 of these improvements have been completed.
12
<PAGE>
Management expects that the Company will need capital resources
during the period from November 16, 1998 through June 30, 1999 to fund
the improvements necessary to the opening of Cortina and the East
Brunswick facilities, and provide working capital needed for its
operations. The Company is presently seeking debt or equity financing
of approximately $400,000 to $600,000, though its has not entered into
any agreements to date to acquire such additional capital. Management
cannot guarantee that the Company will be able to obtain such
financing.
13
<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>
9,115,598 35,550 750
</TABLE>
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>
14
<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. During April 1998, the Company made 18% interest bearing advances of
$250,000 to Prestige in order to enable Prestige to purchase raw materials for
jewelry orders received. The loans were paid on demand and were paid in varying
installments, including a final payment in September 1998.
b. 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.
c. 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. The following are the Form 8-K filings since the end of the prior
quarter:
On April 2, 1998, the Company filed a Form 8-K disclosing the
resignation of Moussa El-Maadawy as director of the Company.
On May 4, 1998, the Company filed a Form 8-K disclosing the
termination of its relationship with its auditors Richard A. Eisner &
Company, LLP and the engagement of J.H. Cohn LLP as the Company's, new
auditors. On May 13, 1998, the Form 8-K was amended.
On June 12, 1998, the Company filed a Form 8-K disclosing its
acquisition of the rights to purchase Cortina Valley Ski Area in
Tannersville, New York. On July 8, 1998, the Form 8-K was amended.
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.
The following are the exhibits filed with this Form 10-QSB:
<TABLE>
<CAPTION>
<S> <C>
3.4 - Certificate of Merger of the Company filed October 14, 1998, as reflecting the Company's re-domicile
in Delaware.
10.10 - $600,000 promissory note issued October 13, 1998. (To be filed by amendment)
</TABLE>
15
<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 17, 1998
Diversicon Holdings Corp.
(formerly Fun Tyme Concepts, Inc.)
By: /s/ Daniel Catalfumo
Daniel Catalfumo, President
By: /s/ Richard Rosso
Richard Rosso, Secretary
16
Exhibit 3.4
CERTIFICATE OF MERGER
OF
FUN TYME CONCEPTS, INC.
(a New York Corporation)
INTO
DIVERSICON HOLDINGS CORP.
(a Delaware Corporation)
The undersigned corporation
DOES HEREBY CERTIFY:
FIRST: That the name and state of incorporation of each of the constituent
corporations of the merger is as follows:
NAME STATE OF INCORPORATION
Diversicon Holdings Corp. Delaware
Fun Tyme Concepts, Inc. New York
SECOND: That an agreement of merger between the parties to the merger has
been approved, adopted, certified, executed and acknowledged by each of the
aforesaid constituent corporations in accordance with the requirements of
subsection (c) of section 252 of the General Corporation Law of the State of
Delaware.
THIRD: Pursuant to a proxy statement and shareholder approval, a change in
domicile of company is hereby being effected, whereby, Fun Tyme Concepts, Inc.,
will merge into Diversicon Holdings Corp., with Diversicon Holdings Corp. being
the surviving corporation of the merger. The name of the surviving Corporation
shall be Diversicon Holdings Corp., a Delaware corporation.
FOURTH: That the Certificate of Incorporation of Diversicon Holdings Corp.,
as now in force and effect, shall continue to be the Certificate of
Incorporation of the surviving corporation. The effective date of the merger
shall be October 15, 1998.
FIFTH: The shareholders vote tabulation report prepared by the inspectors
of the shareholders meeting approving the change in domicile and plan of merger
are on file at the principal place of business of the surviving corporation. The
address of said principal place of business is 290 Wild Avenue, Staten Island,
New York 10314.
<PAGE>
SIXTH: The total number of shares of all classes of stock which Fun Tyme
Concepts, Inc. has authority to issue is FIFTY MILLION FIVE HUNDRED THOUSAND
(50,350,000) shares, consisting of FIFTY MILLION (50,000,000) shares of Common
Stock, par value $.001 per share (hereinafter, the "Common Stock"), and THREE
HUNDRED FIFTY THOUSAND (350,000) shares of preferred stock, par value $.01 per
share (hereinafter, the "Preferred Stock") subject to the relative rights,
preferences and limitations to be determined by the board of directors.
SEVENTH: The shareholders vote tabulation report prepared by the inspectors
of the shareholders meeting approving the change in domicile and the plan of
merger will be furnished on request and without cost to any stockholder of any
constituent corporation.
Diversicon Holdings Corp.
By: /s/ Daniel Catalfumo
Daniel Catalfumo, President
ATTEST:
By: /s/ Richard Rosso
Richard Rosso, Secretary
