U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(MARK ONE)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1999
[_] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE TRANSITION PERIOD FROM _________ TO _________
COMMISSION FILE NUMBER:
FUZZY LOGIC SOFTWARE CORP.
(Exact name of small business issuer as specified in its charter)
DELAWARE 562910 33-0880355
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of incorporation Industrial Classification Identification No.)
or organization) Code Number)
609 Granville Street, Suite 1600,
Vancouver, British Columbia, Canada V7Y 1C3
(Address of principal executive offices) (Zip Code)
(604) 688-5180
(Issuer's Telephone Number, including Area Code)
Thomas E. Stepp, Jr.
Stepp & Beauchamp LLP
1301 Dove Street, Suite 460
Newport Beach, California 92660
Telephone: 949.660.9700
Facsimile: 949.660.9010
(Name, Address and Telephone Number of Agent for Service)
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 practical date. As of December 31, 1999, there were
4,575,456 shares of the issuer's $.0001 par value common stock issued and
outstanding.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Fuzzy Logic Software Corporation
(A Development Stage Company)
Financial Statements
As of December 31, 1999 and for
The Three Month and Six Month Periods
Ended December 31, 1999 and 1998
and for The Period from August 25,
1997 (Inception) to December 31, 1999
(Unaudited)
Fuzzy Logic Software Corporation
(A Development Stage Company)
Index to the Financial Statements
As of December 31, 1999 and for
The Three Month and Six Month Periods
Ended December 31, 1999 and 1998
and for The Period from August 25,
1997 (Inception) to December 31,
1999
- --------------------------------------------------------------------------------
Financial Statements of Fuzzy Logic Software Corporation:
Balance Sheet, December 31, 1999 1
Statements of Operations for the three month and
six month periods ended December 31, 1999 and 1998
and for the period from August 25, 1997 (inception)
to December 31, 1999 2
Statements of Shareholders' Deficit for the six month
period ended December 31, 1999 and for the period
from August 25, 1997 (inception) to December 31, 1999 3
Statements of Cash Flows for the six month periods
ended December 31, 1999 and 1998 and for the period
from August 25, 1997 (inception) to December 31, 1999 4
Notes to Financial Statements 6
Fuzzy Logic Software Corporation
(A Development Stage Company)
Balance Sheet
December 31, 1999
- --------------------------------------------------------------------------------
ASSETS
Cash $ 198,713
---------
Total assets $ 198,713
=========
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Accrued liabilities $ 9,013
Due to related party 237,031
---------
Total liabilities 246,044
---------
Shareholders' deficit:
Common stock, $.0001 par value; 30,000,000 shares authorized;
4,575,456 shares issued and outstanding. 458
Preferred stock, $.0001 par value; 5,000,000 shares
authorized, none issued and outstanding --
Additional paid-in capital 253,717
Deficit accumulated during the development stage (301,506)
---------
Total shareholders' deficit (47,331)
---------
Total liabilities and shareholders' deficit $ 198,713
=========
The accompanying notes are an integral part of the financial statements.
1
Fuzzy Logic Software Corporation
(A Development Stage Company)
Statements of Operations
For the Three Month and Six Month Periods Ended December 31, 1999 and for
The Period from August 25, 1997 (Inception) to December 31, 1999
- --------------------------------------------------------------------------------
Period from
Three Month Three Month Six Month Six Month August 25, 1997
Period Ended Period ended Period Ended Period ended (Inception) to
December 31, 1999 December 31, 1998 December 31, 1999 December 31, 1998 December 31, 1999
----------------- ----------------- ----------------- ----------------- -----------------
Revenue -- -- -- -- --
Gross profit -- -- -- -- --
Consulting fees $25,000 $25,000 $50,000 $50,000 $250,000
Organization costs -- -- -- -- 5,000
Legal and accounting 23,467 -- 23,467 -- 28,835
Loss on investment -- -- -- 175 175
General and administrative expenses 10,220 1,550 10,645 2,861 17,521
------- ------- ------- ------- --------
Net loss from operating activities 58,687 26,550 84,112 53,036 301,531
Interest income 25 -- 25 -- 25
------- ------- ------- ------- --------
Net loss $58,662 $26,550 $84,087 $53,036 $301,506
======= ======= ======= ======= ========
Loss per common share - basic and diluted $ 0.01 $ 0.01 $ 0.02 $ 0.01 $ 0.07
======= ======= ======= ======= ========
The accompanying notes are an integral part of the financial statements.
2
Fuzzy Logic Software Corporation
(A Development Stage Company)
Statements of Shareholders' Deficit
For the Six Month Period Ended December 31, 1999 and for
The Period from August 25, 1997 (Inception) to December 31, 1999
- --------------------------------------------------------------------------------
Price Common Additional
Preferred Preferred Common Per Common Stock Paid-in Accumulated
Shares Stock Shares Share Stock Subscribed Capital (Deficit) Total
------ ----- ------ ----- ----- ---------- ------- --------- -----
Formation of
corporation,
August 25, 1997 -- -- -- -- -- -- -- --
Common shares issued
to the founders
of the Company -- -- 5,075,456 0.001 $ 508 -- $ 4,667 -- $ 5,175
Purchase and
retirement of
common stock -- -- (1,000,000) 0.001 (100) -- (900) -- (1,000)
Net loss -- -- -- -- -- -- $ (111,636) (111,636)
------ ----- --------- ----- ---------- ----------- ---------- ---------- ---------
Balance,
June 30, 1998 -- -- 4,075,456 408 -- 3,767 (111,636) (107,461)
Net loss -- -- -- -- -- -- (105,783) (105,783)
------ ----- --------- ----- ---------- ----------- ---------- ---------- ---------
Balance,
June 30, 1999 -- -- 4,075,456 408 -- 3,767 (217,419) (213,244)
Common stock
subscribed -- -- -- 0.50 -- 50 249,950 -- 250,000
Issuance of
common stock
on collection
of stock
subscription
receivable -- -- 500,000 50 (50) -- -- --
Net loss -- -- -- -- -- -- (84,087) (84,087)
------ ----- --------- ----- ---------- ----------- ---------- ---------- ---------
Balance,
December 31, 1999 -- -- 4,575,456 $ 458 $ -- $ 253,717 $ (301,506) $ (47,331)
====== ===== ========= ===== ========== =========== ========== ========== =========
The accompanying notes are an integral part of the financial statements.
3
Fuzzy Logic Software Corporation
(A Development Stage Company)
Statements of Cash Flows
For the Six Month Periods Ended
December 31, 1999 and 1998 and for
The Period from August 25, 1997
(Inception) to December 31, 1999
- --------------------------------------------------------------------------------
For the For the Period from
Six Month Six Month August 25, 1997
Period Ended Period Ended (Inception) to
December 31, 1999 December 31, 1998 December 31, 1999
----------------- ----------------- -----------------
Cash flows from operating activities:
Net loss $ (84,087) $ (53,036) $(301,506)
Adjustments to reconcile net loss to net cash
used in operating activities:
Shares issued to founders of the Company -- -- 5,175
Investment received in connection with
the issuance of shares to founders -- -- (175)
Shares reacquired -- -- (1,000)
Loss on investment -- 175 175
Increase (decrease) in liabilities:
Accrued liabilities 7,800 (1,268) 9,013
Due to related party 25,000 54,129 237,031
--------- --------- ---------
Cash used in operating activities (51,287) -- (51,287)
--------- --------- ---------
Financing activities
Proceeds from private placement 250,000 -- 250,000
--------- --------- ---------
Cash provided by financing activties 250,000 -- 250,000
--------- --------- ---------
Net increase (decrease) in cash 198,713 -- 198,713
Cash at beginning of period -- -- --
--------- --------- ---------
Cash at end of period $ 198,713 $ -- $ 198,713
========= ========= =========
The accompanying notes are an integral part of the financial statements.
4
Fuzzy Logic Software Corporation
(A Development Stage Company)
Statements of Cash Flows
For the Six Month Periods Ended
December 31, 1999 and 1998 and for
The Period from August 25, 1997
(Inception) to December 31, 1999
- --------------------------------------------------------------------------------
Supplemental Disclosure of Cash Flow Information
Period from
Six Month Six Month August 25, 1997
Period Ended Period Ended (Inception) to
December 31, 1999 December 31, 1998 December 31, 1999
----------------- ----------------- -----------------
Interest paid -- -- --
Income taxes paid -- -- --
Supplemental Schedule of Non-Cash Financing Activities
Repurchase of shares -- -- $ 1,000
Increase in payable -- -- $(1,000)
Organization expenses -- -- $ 5,175
Issuance of founders shares -- -- $(5,175)
The accompanying notes are an integral part of the financial statements.
5
Fuzzy Logic Software Corporation
(A Development Stage Company)
Notes to the Financial Statements
For the Six Month Periods Ended December 31, 1999 and 1998 and for
The Period from August 25, 1997 (Inception) to December 31, 1999
- --------------------------------------------------------------------------------
1. Basis of Presentation
In the opinion of Fuzzy Logic Software Corporation (a development stage
company) (the "Company"), the accompanying unaudited condensed financial
statements contain all adjustments, consisting of only normal recurring
adjustments, except as noted elsewhere in the notes to the financial
statements, necessary to present fairly its financial position as of
December 31, 1999, the results of its operations for the three month and
six month periods ended December 31, 1999 and 1998 and the related
statements of shareholders' equity and cash flows for the six month periods
ended December 31, 1999 and 1998 and for the period from August 25, 1997
(inception) to December 31, 1999.
2. Development Stage Operations
The Company was incorporated in the state of Delaware on August 25, 1997.
It has no operating history, no revenues, no products nor technology. The
Company's initial business plan anticipated the development of computer
hardware and software. As such, the Company is subject to the risks and
uncertainties associated with a new business. The success of the Company's
future operation is dependent upon the Company's ability to successfully
develop and market its yet unidentified products and obtain the necessary
capital.
3. Deferred Income Taxes
The components of the provision for income taxes are as follows:
Period from Period from
August 25, 1997 August 25, 1997
Year Ended (Inception) to (Inception) to
December 31, 1999 December 31, 1999 December 31, 1999
----------------- ----------------- -----------------
Current tax expense
Federal -- -- --
State -- -- --
--------- --------- ---------
-- -- --
--------- --------- ---------
Deferred tax expense:
Federal -- -- --
State -- -- --
-- -- --
--------- --------- ---------
Total provision -- -- --
========= ========= =========
6
Fuzzy Logic Software Corporation
(A Development Stage Company)
Notes to the Financial Statements
For the Six Month Periods Ended December 31, 1999 and 1998 and for
The Period from August 25, 1997 (Inception) to December 31, 1999
- --------------------------------------------------------------------------------
3. Deferred Income Taxes, Continued
Significant components of the Company's deferred income tax assets and
liabilities at December 31, 1999 and 1998 are as follows:
Period from
Six month Six month August 25, 1997
Period Ended Period Ended (Inception) to
December 31, 1999 December 31, 1998 December 31, 1999
----------------- ----------------- -----------------
Deferred income tax asset:
Capitalized start-up expenses $102,512 55,988 102,512
-------- ------ -------
Total deferred income tax asset 102,512 55,988 102,512
Valuation allowance (102,512) (55,988) (102,512)
-------- ------ -------
Net deferred income tax liability -- -- --
======== ====== =======
Reconciliation of the effective tax rate to the U.S. statutory rate is as follows:
Tax expense at U.S. statutory rate (34.0)% (34.0)% (34.0)%
Change in the valuation allowance 34.0 34.0 34.0
-------- ------ -------
Effective income tax rate -- -- --
======== ====== =======
The Company, based upon its history of losses and management's assessment
of when operations are anticipated to generate taxable income, has
concluded that it is more likely than not that none of the net deferred
income tax assets will be realized through future taxable earnings and has
established a valuation allowance for them.
4. Stock Transactions
Founders Shares
In August 1997, the Company issued 5,175,456 shares to the founders.
Additionally, the Company received from the founders, an investment of
non-market grade corporate stock valued at $175. In the year ended December
31, 1999, the shares received were deemed worthless.
Stock Repurchase
In October 1997, the Company reacquired and retired 1,000,000 shares of its
outstanding common stock from a major shareholder for $1,000 (par value).
7
Fuzzy Logic Software Corporation
(A Development Stage Company)
Notes to the Financial Statements
For the Six Month Periods Ended December 31, 1999 and 1998 and for
The Period from August 25, 1997 (Inception) to December 31, 1999
- --------------------------------------------------------------------------------
4. Stock Transactions, Continued
Private Placement
In September 1999, the Company completed a private placement offering of
500,000 units at a price of $.50 per unit. Each unit consists of one share
of the Company's common stock and one share purchase warrant. Each warrant
is exercisable at any time and expires two years after the closing date of
the offering. In November 1999, the Company collected $250,000 in proceeds
from the private placement offering.
5. Loss Per Common Share
Basic and diluted loss per common share have been computed by dividing the
loss available to common shareholders by the weighted-average number of
common share for the period.
The computations of basic and diluted loss per common share for the three
month and six month periods ended December 31, 1999, and 1998, and for the
period from August 25, 1997 (inception) to December 31, 1999 are as
follows:
Three Month Three Month
Period Ended Period Ended
December 31, 1999 December 31, 1998
----------------- -----------------
Basic loss per common share:
Net loss $ 58,662 $ 26,550
Weighted-average shares basic and diluted 4,330,891 4,075,456
---------- ----------
Basic and diluted loss per common share $ 0.01 $ 0.01
========== ==========
Period from
Six Month Six Month August 25, 1997
Period Ended Period Ended (Inception) to
December 31, 1999 December 31, 1998 December 31, 1999
----------------- ----------------- -----------------
Basic loss per common share:
Net loss $ 84,087 $ 53,036 $ 301,506
Weighted-average shares basic and diluted 4,203,173 4,075,456 4,038,470
---------- ---------- ----------
Basic and diluted loss per common share $ 0.02 $ 0.01 $ 0.07
========== ========== ==========
8
Fuzzy Logic Software Corporation
(A Development Stage Company)
Notes to the Financial Statements
For the Six Month Periods Ended December 31, 1999 and 1998 and for
The Period from August 25, 1997 (Inception) to December 31, 1999
- --------------------------------------------------------------------------------
5. Loss Per Common Share, Continued
The effect of the 500,000 warrants issued pursuant to the Company's private
placement in November 1999 have not been included in the computation of the
diluted loss per share, because to do so would have been antidilutive for
the periods presented.
9
Item 2. Management's Discussion and Analysis or Plan of Operation
Business of the Registrant. Fuzzy Logic Software Corporation, a Delaware
corporation ("Registrant"), was incorporated in the State of Delaware on or
about August 25, 1997. The executive offices of the Registrant are located at
609 Granville Street, Suite 1600, Vancouver, British Columbia, Canada V7Y 1C3.
The Registrant's telephone number is 604.688.5180.
The Registrant was originally incorporated for the purpose of developing
software programs and manufacturing control boards and computer chips for "Fuzzy
Logic" control applications. Fuzzy Logic is a computer modeling language that
recognizes multi-valued states between zero and one, thereby allowing computers
to represent or manipulate terms with greater complexity; and to exercise
"human-like" judgment in the automation of sophisticated tasks. This system
eliminates the on/off rigidity typical of computer control systems and results
in more flexible and subtle process controls. On September 16, 1997, FZZ, Inc.,
a Colorado corporation ("FZZ") was merged into the Registrant. Prior to the
merger, FZZ had not conducted any operations. In July 1999, management of the
Registrant changed and new management decided to establish an environmental
remediation business.
In October 1999, the Registrant entered into a Letter of Intent with Ethxx
International Inc., an Ontario corporation, to acquire environmental remediation
technology. Environmental remediation services are used to remove and detoxify
contaminants from existing sites where the generation of wastes has ceased and
to restore the sites to acceptable environmental standards. Environmental
remediation services are also required in ongoing manufacturing and chemical
processing operations to collect, process and detoxify harmful emissions which
would otherwise be released into the environment.
The environmental remediation business involves the processing or conversion of
certain waste products and materials, including certain toxic waste products and
materials, into products or materials which can be disposed of or otherwise
dealt with in an environmentally safe manner. The business is expected to derive
its revenues from payments for the processing or conversion of such products or
materials, including revenues for services rendered or charges for the removal
and disposal of such materials. Revenues from product or by-product sales are
expected to be a secondary source of revenues.
Pearson Gas Reformer Technology. The Registrant anticipates that its remediation
technology will consist of the proprietary "Pearson Gas Reformer Technology"
used to convert carbon, hydrocarbon and toxic waste environmental contaminants
originally derived from fossil fuels (whether as a product, by-product,
derivative chemical or processed waste) into synthetic gas for use as a fuel.
The conversion process uses steam gasification to convert the waste products
into synthetic gas which can be used for cogeneration, such as firing a steam
turbine or a boiler. The Registrant believes that the conversion process will
filter out the waste products so that any remaining by-products can be
encapsulated for proper disposal. Key pieces of equipment such as the gasifier
will be transportable from site to site for smaller projects. For more sustained
environmental remediation projects, the equipment will be permanently installed
at the facilities being serviced.
Acquisitions and Joint Ventures. The Registrant believes that acquisitions and
joint ventures will be necessary to obtain the proper expertise and
complimentary services with firms able to provide business operations such as
dredging and excavation, electrical cogeneration, demolition, transportation,
material containment and other similar operations. The Registrant also
anticipates that additional specialized and conventional services and expertise
which are not fundamental to the Registrant's technologies will be procured as
required from time to time by contract, joint venture and/or acquisition.
10
Liquidity. The Registrant has been in the development stage since August 25,
1997 (inception). As of December 31, 1999, the Registrant had current assets of
$198,713, all of which is represented in cash. At December 31, 1999, the
Registrant had current liabilities of $246,044, the majority of which is
represented by $237,031 due to a related party, a former major shareholder of
the Registrant. At inception, the Registrant entered into a fee and cost
reimbursement arrangement with this former major shareholder of the Registrant.
In connection with this arrangement, a management fee of $100,000 per year is
charged to the Registrant. All of the Registrant's expenses are paid by the
related party and have been accrued.
The Registrant is not aware of any trends, demands, commitments or uncertainties
that will result in the Registrant's liquidity decreasing or increasing in a
material way. The Registrant believes that from its current cash resources it
will be able to maintain its current operations. However, should these resources
prove to be insufficient, the Registrant may be required to raise additional
funds or arrange for additional financing over the next 12 months to adhere to
its development schedule. No assurance can be given, however, that the
Registrant will have access to additional cash in the future, or that funds will
be available on acceptable terms to satisfy the cash requirements of the
Registrant.
Results of Operations. As of December 31, 1999, the Registrant has not yet
realized any revenue from operations. The Statement of Cash Flows for the six
month period ended December 31, 1999 specifies a net loss of $84,087.
The Registrant's success is materially dependent upon its ability to satisfy
additional financing requirements. The Registrant is reviewing its options to
raise substantial equity capital. The Registrant cannot presently estimate when
it will begin to realize positive gross revenue. In order to satisfy its
requisite budget, management has held and continues to conduct negotiations with
various investors. The Registrant anticipates that these negotiations will
result in additional investment income for the Registrant. To achieve and
maintain competitiveness, the Registrant may be required to raise additional
substantial funds. The Registrant anticipates that it will need to raise
significant capital to develop, promote and conduct its operations. Such capital
may be raised through public or private financing as well as borrowing and other
sources. There can be no assurance that funding for the Registrant's operations
will be available under favorable terms, if at all. If adequate funds are not
available, the Registrant may be required to curtail operations significantly or
to obtain funds by entering into arrangements with collaborative partners or
others that may require the Registrant to relinquish rights to certain products
and services that the Registrant would not otherwise relinquish.
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
None
11
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.
Dated: February 14, 2000 FUZZY LOGIC SOFTWARE CORPORATION
By: /s/ Michael Lynch
--------------------------
Michael Lynch
Its: President