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 MARCH 31, 2000
[ ] 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 jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification No.)
organization)
505 Burrard Street, Suite 680, Vancouver, British Columbia, Canada V7X 1M4
- ------------------------------------------------------------------ -------
(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 March 31, 2000, there were
4,575,456 shares of the issuer's $.0001 par value common stock issued and
outstanding.
1
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Fuzzy Logic Software Corporation
(A Development Stage Company)
Financial Statements
As of March 31, 2000 and for
The Three Month and Nine Month Periods Ended March 31, 2000 and 1999 and for
The Period from August 25, 1997 (Inception) to March 31, 1999
(Unaudited)
2
Fuzzy Logic Software Corporation
(A Development Stage Company)
Index to the Financial Statements
As of March 31, 2000 and for
The Three Month and Nine Month Periods Ended March 31, 2000 and 1999 and for
The Period from August 25, 1997 (Inception) to March 31, 2000
- --------------------------------------------------------------------------------
Financial Statements of Fuzzy Logic Software Corporation:
Balance Sheet (Unaudited), March 31, 2000 4
Statements of Operations (Unaudited) for the three month
and nine month periods ended March 31, 2000 and 1999 and for
the period from August 25, 1997 (inception) to March 31,
2000 5
Statements of Shareholders' Deficit (Unaudited) for the nine
month period ended March 31, 2000 and for the period from
August 25, 1997 (inception) to March 31, 2000 6
Statements of Cash Flows (Unaudited) for the nine month
periods ended March 31, 2000 and 1999 and for the period
from August 25, 1997 (inception) to March 31, 2000 7
Notes to Financial Statements 9
3
Fuzzy Logic Software Corporation
(A Development Stage Company)
Balance Sheet
(Unaudited)
March 31, 2000
- --------------------------------------------------------------------------------
ASSETS
Cash $ 104,214
---------
Total assets $ 104,214
=========
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Accrued liabilities $ 9,012
Due to related party 237,031
---------
Total liabilities 246,043
---------
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 (396,004)
---------
Total shareholders' deficit (141,829)
---------
Total liabilities and shareholders' deficit $ 104,214
=========
The accompanying notes are an integral part of the
financial statements.
4
Fuzzy Logic Software Corporation
(A Development Stage Company)
Statements of Operations
(Unaudited)
For The Three Month and Nine Month Periods Ended March 31, 2000 and 1999 and for
The Period from August 25, 1997 (Inception) to March 31, 2000
- --------------------------------------------------------------------------------
Period from
Three Month Three Month Nine Month Nine Month August 25, 1997
Period Ended Period ended Period Ended Period ended (Inception) to
March 31, 2000 March 31, 1999 March 31, 2000 March 31, 1999 March 31, 2000
-------------- -------------- -------------- -------------- --------------
Revenue -- -- -- -- --
Gross profit -- -- -- -- --
Consulting fees $ 69,354 $ 25,000 $119,354 $ 75,000 $319,354
Organization costs -- -- -- -- 5,000
Legal and accounting 22,745 -- 46,212 -- 51,580
Loss on investment -- -- -- 175 175
General and administrative expenses 2,399 1,534 13,044 4,394 19,920
-------- -------- -------- -------- --------
Loss from operations 94,498 26,534 178,610 79,569 396,029
Interest income -- -- 25 -- 25
-------- -------- -------- -------- --------
Loss before provision for (benefit from)
income taxes 94,498 26,534 178,585 79,569 396,004
Provision for (benefit from) income taxes -- -- -- -- --
-------- -------- -------- -------- --------
Net loss $ 94,498 $ 26,534 $178,585 $ 79,569 $396,004
======== ======== ======== ======== ========
Loss per common share - basic and diluted $ 0.02 $ 0.01 $ 0.04 $ 0.02 $ 0.10
======== ======== ======== ======== ========
The accompanying notes are an integral part of the
financial statements.
5
Fuzzy Logic Software Corporation
(A Development Stage Company)
Statements of Shareholders' Deficit
For the Nine Month Period Ended March 31, 2000 and for
The Period from August 25, 1997 (Inception) to March 31, 2000
- --------------------------------------------------------------------------------
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 $508 -- $ 4,667 -- $ 5,175
Purchase and
retirement of common
stock -- -- (1,000,000) (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 -- -- -- -- 50 249,950 -- 250,000
Issuance of common
stock on collection of
stock subscription
receivable -- -- 500,000 50 (50) -- -- --
Net loss -- -- -- -- -- -- (178,585) (178,585)
-------- ------ ---------- ------- ------ ------ --------- ---------
Balance, March 31, 2000
(unaudited) -- -- 4,575,456 $458 -- $253,717 $(396,004) $(141,829)
======== ====== ========== ======= ====== ======== ========== =========
The accompanying notes are an integral part of the
financial statements.
6
Fuzzy Logic Software Corporation
(A Development Stage Company)
Statements of Cash Flows
(Unaudited)
For the Nine Month Periods Ended March 31, 2000 and 1999 and for
The Period from August 25, 1997 (Inception) to March 31, 2000
- --------------------------------------------------------------------------------
For the For the Period from
Nine Month Nine Month August 25, 1997
Period Ended Period Ended (Inception) to
March 31, 2000 March 31, 1999 March 31, 2000
-------------- -------------- --------------
Cash flows from operating
activities:
Net loss $(178,585) $ (79,569) $(396,004)
Adjustments to reconcile
net loss to net cash
used in operating
activities:
Shares issued for expenses
paid by founders of the
Company -- -- 5,000
Loss on investment -- 175 175
Increase (decrease) in
liabilities:
Accrued liabilities 7,799 265 8,012
Due to related party 25,000 79,129 237,031
--------- --------- ---------
Cash used in operating
activities (145,786) -- (145,786)
--------- --------- ---------
Financing activities
Proceeds from private
placement 250,000 -- 250,000
--------- --------- ---------
Cash provided by financing
activities 250,000 -- 250,000
--------- --------- ---------
Net increase (decrease) in cash 104,214 -- 104,214
Cash at beginning of period -- -- --
--------- --------- ---------
Cash at end of period $ 104,214 $ -- $ 104,214
========= ========= =========
The accompanying notes are an integral part of the
financial statements.
7
Fuzzy Logic Software Corporation
(A Development Stage Company)
Statements of Cash Flows
(Unaudited)
For the Nine Month Periods Ended March 31, 2000 and 1999 and for
The Period from August 25, 1997 (Inception) to March 31, 2000
- --------------------------------------------------------------------------------
Supplemental Disclosure of Cash Flow Information
Period from
Nine Month Nine Month August 25, 1997
Period Ended Period Ended (Inception) to
March 31, 2000 March 31, 1999 March 31, 2000
-------------- -------------- --------------
Interest paid -- -- --
Income taxes paid -- -- --
Supplemental Schedule of Non-Cash Financing Activities
Repurchase of shares -- -- $ 1,000
Increase in payable -- -- $(1,000)
Investment -- -- $ 175
Issuance of founders shares -- -- $ (175)
The accompanying notes are an integral part of the
financial statements.
8
Fuzzy Logic Software Corporation
(A Development Stage Company)
Notes to Financial Statements
(Unaudited)
For The Three Month and Nine Month Periods Ended March 31, 2000 and 1999 and for
The Period from August 25, 1997 (Inception) to March 31, 2000
- --------------------------------------------------------------------------------
1. Basis of Presentation
In the opinion of the management 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, necessary to present fairly its financial
position as of March 31, 2000, the results of its operations for the three
month and nine month periods ended March 31, 2000 and 1999 and for the
period from August 25, 1997 (inception) to March 31, 2000, the statements
of shareholders' deficit for the nine month period ended March 31, 2000 and
for the period from August 25, 1997 (inception) to March 31, 2000, and the
statements of cash flows for the nine month periods ended March 31, 2000
and 1999 and for the period from August 25, 1997 (inception) to March 31,
2000.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted principles have
been condensed or omitted pursuant to the rules and regulations promulgated
by the Securities and Exchange Commission The statements should be read in
conjunction with the financial statements and footnotes for the year ended
June 30, 1999 included in the Company's Form 10SB. The results of
operations for the interim period are not necessarily indicative of the
results to be expected for the full year.
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.
9
Fuzzy Logic Software Corporation
(A Development Stage Company)
Notes to Financial Statements
(Unaudited)
For The Three Month and Nine Month Periods Ended March 31, 2000 and 1999 and for
The Period from August 25, 1997 (Inception) to March 31, 2000
- --------------------------------------------------------------------------------
3. Deferred Income Taxes
Significant components of the Company's deferred income tax assets and
liabilities at March 31, 2000 are as follows:
Deferred income tax asset:
Capitalized start-up expenses $ 134,641
------------
Total deferred income tax asset 134,641
Valuation allowance (134,641)
------------
Net deferred income tax liability --
============
Reconciliation of the effective tax rate to the U.S. statutory rate is as
follows:
Three Month Three Month
Period Ended Period Ended
March 31, 2000 March 31, 1999
-------------- --------------
Tax expense at U.S. statutory rate% (34.0)% (34.0)%
Change in the valuation allowance 34.0 34.0
------ ------
Effective income tax rate -- --
====== ======
Period from
Nine Month Nine Month August 25, 1997
Period Ended Period Ended (Inception) to
March 31, 2000 March 31, 1999 March 31, 2000
-------------- -------------- --------------
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.
10
Fuzzy Logic Software Corporation
(A Development Stage Company)
Notes to Financial Statements
(Unaudited)
For The Three Month and Nine Month Periods Ended March 31, 2000 and 1999 and for
The Period from August 25, 1997 (Inception) to March 31, 2000
- --------------------------------------------------------------------------------
4. 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 shares for the period.
The computations of basic and diluted loss per common share for the three
month and nine month periods ended March 31, 2000, and 1999, and for the
period from August 25, 1997 (inception) to March 31, 2000 are as follows:
Three Month Three Month
Period Ended Period Ended
March 31, 2000 March 31, 1999
-------------- --------------
Basic loss per common share:
Net loss $ 94,498 $ 26,534
Weighted-average shares basic and
diluted 4,529,701 4,034,701
---------- ----------
Basic and diluted loss per common
share $ 0.02 $ 0.01
========== ==========
Period from
Nine Month Nine Month August 25, 1997
Period Ended Period Ended (Inception) to
March 31, 2000 March 31, 1999 March 31, 2000
-------------- -------------- --------------
Basic loss per common share:
Net loss $ 178,585 $ 79,569 $ 396,004
Weighted-average shares basic
and diluted 4,355,456 4,116,211 3,945,927
---------- ---------- ----------
Basic and diluted loss per common
share $ 0.04 $ 0.02 $ 0.10
========== ========== ==========
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.
11
Fuzzy Logic Software Corporation
(A Development Stage Company)
Notes to Financial Statements
(Unaudited)
For The Three Month and Nine Month Periods Ended March 31, 2000 and 1999 and for
The Period from August 25, 1997 (Inception) to March 31, 2000
- --------------------------------------------------------------------------------
5. Private Placement Offering
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 into one share of common stock at a price of $.50 per share,
is exercisable at any time and expires two years after the closing date of
the offering.
12
Item 2. Management's Discussion and Analysis or Plan of Operation
Business of the Registrant. Fuzzy Logic Software Corporation, a Delaware
corporation, was incorporated in the State of Delaware on or about August 25,
1997. Our executive offices have recently changed to 505 Burrard Street, Suite
680, Vancouver, British Columbia, Canada. Our telephone number is 604.688.5180.
We were 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 and with us. Prior to the merger,
FZZ had not conducted any operations. In July 1999, our management changed and
new management decided to establish an environmental remediation business.
In October 1999, we entered into a Letter of Intent with Ethxx International
Inc., an Ontario corporation, to acquire environmental remediation technology.
Our negotiations with Ethxx International Inc. failed to materialize into a
final agreement to acquire the environmental remediation technology.
In April 2000, we entered into a Letter of Intent to acquire all of the issued
and outstanding shares of common stock of The Anvil Group Inc. ("Anvil"). Anvil
is an international security company that provides physical and online,
web-based corporate security solutions. Since 1988, Anvil's core business has
been to provide its clients with a "crisis avoidance" service developed by its
expert staff with extensive experience in military special forces techniques.
However, in the 1990s, the need for fully integrated information technology
security services has increased significantly. In 1998, Anvil introduced the
Virtual Security Office, a real-time, online, web-based corporate security
monitoring and alert system to enhance the level of computer security for
corporate clients. We anticipate that we will further develop Anvil's
information technology security services and market those enhanced security
services to multinational corporations.
Acquisitions and Joint Ventures. We believe that acquisitions and joint ventures
will be necessary to obtain the proper expertise and complimentary services with
firms able to provide business operations which will support those services
provided by Anvil. We also anticipate that additional specialized and
conventional services and expertise which are not fundamental to our
technologies will be procured as required from time to time by contract, joint
venture and/or acquisition.
Liquidity. We have been in the development stage since August 25, 1997
(inception). As of March 31, 2000, we had current assets of $104,214, all of
which is represented in cash. At March 31, 2000, we had current liabilities of
$246,043, the majority of which is represented by $237,031 due to a related
party, a former major shareholder of ours. At inception, we entered into a fee
and cost reimbursement arrangement with this former major shareholder. In
connection with this arrangement, a management fee of $100,000 per year is
charged to us.
We are not aware of any trends, demands, commitments or uncertainties that will
result in our liquidity decreasing or increasing in a material way. We believe
that from our current cash resources we will be able to maintain our current
operations. However, should these resources prove to be insufficient, we may be
required to raise additional funds or arrange for additional financing over the
next 12 months to adhere to our development schedule. No assurance can be given,
however, that we will have access to additional cash in the future, or that
funds will be available on acceptable terms to satisfy our cash requirements.
13
Results of Operations. As of March 31, 2000, we have not yet realized any
revenue from operations. The Statement of Cash Flows for the three month period
ended March 31, 2000 specifies a net loss of $94,498.
Our success is materially dependent upon our ability to satisfy additional
financing requirements. We are reviewing our options to raise substantial equity
capital. We cannot presently estimate when we will begin to realize positive
gross revenue. In order to satisfy our requisite budget, management has held and
continues to conduct negotiations with various investors. We anticipate that
these negotiations will result in additional investment income for us. To
achieve and maintain competitiveness, we may be required to raise additional
substantial funds. We anticipate that we will need to raise significant capital
to develop, promote and conduct our 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 our operations will be available
under favorable terms, if at all. If adequate funds are not available, we may be
required to curtail operations significantly or to obtain funds by entering into
arrangements with collaborative partners or others that may require us to
relinquish rights to certain products and services that we 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
14
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: May 12, 2000 FUZZY LOGIC SOFTWARE CORPORATION
By: /s/ Michael Lynch
-------------------------------
Michael Lynch
Its: President