UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[x] QUARTELY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 2000
[_] 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:______________
Fuzzy Logic Software Corporation
(Exact name of registrant as specified in its charter)
Delaware 33-0880355
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
505 Burrard Street, Suite 680, Vancouver, British Columbia, Canada V7X 1M4
(Address of principal executive offices) (Zip Code)
(604) 688-5180
(Registrant's Telephone Number, Including Area Code)
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 November 13, 2000, 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
(Unaudited)
As of September 30, 2000 and
For Each of the Three Month Periods Ended September 30, 2000 and 1999 and
For The Period from August 25, 1997 (Inception) to September 30, 2000
Fuzzy Logic Software Corporation
(A Development Stage Company)
Index to the Financial Statements
(Unaudited)
For Each of the Three Month Periods Ended September 30, 2000 and 1999 and
For The Period from August 25, 1997 (Inception) to September 30, 2000
Financial Statements of Fuzzy Logic Software Corporation:
Balance Sheet, September 30, 2000 (Unaudited)......................................................1
Statements of Operations (Unaudited) for the each of the three month periods ended
September 2000 and 1999 and for the period from August 25, 1997 (inception) to
September 30, 2000..............................................................................2
Statements of Shareholders' Deficit (Unaudited) for the three month period ended
September 30, 2000 and for the period from August 25, 1997 (inception) to September 30,
2000............................................................................................3
Statements of Cash Flows (Unaudited) for the each of the three month periods ended
September 2000 and 1999 and for the period from August 25, 1997 (inception) to
September 30, 2000..............................................................................4
Notes to Financial Statements..........................................................................6
Fuzzy Logic Software Corporation
(A Development Stage Company)
Balance Sheet
September 30, 2000
(Unaudited)
- --------------------------------------------------------------------------------
ASSETS
Current assets:
Cash $ 1,144
Notes receivable 104,674
---------
Total assets $ 105,818
=========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accrued liabilities $ 500
Due to related party 322,031
---------
Total liabilities 322,531
---------
Shareholders' equity:
Preferred stock, $.0001 par value; 5,000,000 shares
authorized, none issued and outstanding --
Common stock, $.0001 par value; 30,000,000 shares
authorized; 4,575,456 shares issued and outstanding 458
Additional paid-in capital 217,707
Deficit accumulated during the development stage (434,878)
---------
Total shareholders' equity (216,713)
---------
Total liabilities and shareholders' equity $ 105,818
=========
The accompanying notes are an integral part of the financial statements.
1
Fuzzy Logic Software Corporation
(A Development Stage Company)
Statement of Operations
(Unaudited)
For Each of the Three Month Periods Ended September 30, 2000 and 1999 and
For The Period from August 25, 1997 (Inception) to September 30, 2000
- --------------------------------------------------------------------------------
For the
For the For the Period from
Three-Month Three-Month August 25, 1997
Period Ended Period Ended (Inception) to
September 30, 2000 September 30, 1999 September 30, 2000
------------------ ------------------ ------------------
Revenue -- -- --
Cost of revenues -- -- --
--------- --------- ---------
Gross profit -- -- --
--------- --------- ---------
Consulting fees $ 25,000 $ 25,000 $ 355,860
Organization costs -- -- 5,000
Legal and accounting -- -- 42,818
Loss on investment -- -- 175
General and administrative 18 425 31,050
--------- --------- ---------
Total operating costs 25,018 25,425 434,903
-- -- (25)
--------- --------- ---------
Net loss $ 25,018 $ 25,425 $ 434,878
========= ========= =========
Loss per common share - basic and diluted $ 0.01 $ 0.01 $ 0.10
========= ========= =========
The accompanying notes are an integral part of the financial statements.
2
Fuzzy Logic Software Corporation
(A Development Stage Company)
Statement of Shareholders' Deficit
(Unaudited)
For the Three Month Period Ended September 30, 2000
For The Period from August 25, 1997 (Inception) to September 30, 2000
- --------------------------------------------------------------------------------
Price Additional
Preferred Preferred Common Per Common Paid-in Accumulated
Shares Stock Shares Share Stock 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 (213,244)
Common shares issued in private
placement offering, net of
offering costs -- -- 500,000 $0.50 50 213,940 -- 213,990
Net loss -- -- -- -- -- (192,441) (192,441)
--------- --------- ---------- -------- ---------- ---------- ----------
Balance, June 30, 2000 -- -- 4,575,456 458 217,707 (409,860) (191,695)
Net loss -- -- -- -- -- (25,018) (25,018)
--------- --------- ---------- -------- ---------- ---------- ----------
Balance, September 30, 2000 -- -- 4,575,456 $ 458 $ 217,707 $ (434,878) $ (216,713)
========= ========= ========== ======== ========== ========== ==========
The accompanying notes are an integral part of the financial statements.
3
Fuzzy Logic Software Corporation
(A Development Stage Company)
Statement of Cash Flows
(Unaudited)
For Each of the Three Month Periods Ended September 30, 2000 and 1999 and
For The Period from August 25, 1997 (Inception) to September 30, 2000
- --------------------------------------------------------------------------------
For the
For the For the Period from
Three-Month Three-Month August 25, 1997
Period Ended Period Ended (Inception) to
September 30, 2000 September 30, 1999 September 30, 2000
------------------ ------------------ ------------------
Cash flows from operating activities:
Net loss $ (25,018) $ (25,425) $(434,878)
Adjustments to reconcile net
loss to net cash used in
operating activities:
Shares issued to founders of the
Company -- -- 5,175
Shares reacquired -- -- (1,000)
Increase (decrease) in liabilities:
Accrued liabilities (2,750) 425 500
Due to related party 25,000 26,000 322,031
--------- --------- ---------
Cash used in operating activities (2,768) -- (108,172)
--------- --------- ---------
Cash flows provided by investing activities
Increase in notes receivable -- -- (104,674)
--------- --------- ---------
Cash provided by investing activities -- -- 104,674
--------- --------- ---------
Cash flows provided by financing activities
Proceeds from the issuance of
common stock -- -- (213,990)
--------- --------- ---------
Cash provided by financing activities -- -- 213,990
--------- --------- ---------
Net increase (decrease) in cash (2,768) -- 1,144
Cash at beginning of period 3,912 -- --
--------- --------- ---------
Cash at end of period $ (1,144) -- $ 1,114
========= ========= =========
The accompanying notes are an integral part of the financial statements.
4
Fuzzy Logic Software Corporation
(A Development Stage Company)
Statement of Cash Flows
(Unaudited)
For Each of the Three Month Periods Ended September 30, 2000 and 1999 and
For The Period from August 25, 1997 (Inception) to September 30, 2000
- --------------------------------------------------------------------------------
Supplemental Disclosure of Cash Flow Information
For the
For the For the Period from
Three-Month Three-Month August 25, 1997
Period Ended Period Ended (Inception) to
September 30, 2000 September 30, 1999 September 30, 2000
------------------ ------------------ ------------------
Interest paid -- -- --
Income taxes paid -- -- --
Supplemental Schedule of Non-Cash Investing and Financing Activities
Repurchase of shares -- -- $ 1,000
Increase in payable -- -- $ (1,000)
Organization expenses -- -- $ 175
Issuance of founders shares -- -- $ (175)
Stock subscriptions receivable -- $ 250,000 --
Common stock $ (50) --
Additional paid-in capital -- $(249,950) --
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
(Unaudited)
For Each of the Three Month Periods Ended September 30, 2000 and 1999 and
For The Period from August 25, 1997 (Inception) to September 30, 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 the financial
position as of September 30, 2000 and the results of operations for the
three month periods ended September 30, 2000 and 1999 and for the period
from August 25, 1997 (inception) the statements of shareholders' deficit
for the three month period ended September 30, 2000 and for the period from
August 25, 1997 (inception) to September 30, 2000, and the statements of
cash flows for the three month periods ended September 30, 2000 and 1999
and for the period from August 25, 1997 (inception) to September 30, 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, 2000, included in the Company's Form 10KSB. 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 undeveloped products and obtain the necessary
capital.
In this connection, during fiscal year ended June 30, 2000, the Company
entered into a letter of intent to acquire all of the issued and
outstanding shares of The Anvil Group, Inc. However, in September 2000, the
transaction was terminated due to the inability to obtain financing. The
Company plans to continue to seek other merger opportunities.
The Company has historically relied on Cascade, Inc., a related party (Note
3), to meet its cash flow requirements under the terms of the management
and cost reimbursement agreement. However, in the event Cascade, Inc.
should be unable to continue to satisfy the cash flow requirements, the
Company's ability to continue as a going concern could be adversely
affected.
6
Fuzzy Logic Software Corporation
(A Development Stage Company)
Notes to the Financial Statements
(Unaudited)
For Each of the Three Month Periods Ended September 30, 2000 and 1999 and
For The Period from August 25, 1997 (Inception) to September 30, 2000
- --------------------------------------------------------------------------------
3. Related Party Transactions
The Company has a management and cost reimbursement agreement (the
"agreement") with Cascade, Inc., a former major shareholder of the Company.
Cascade, Inc. is a related party as some of its principals are shareholders
of the Company and exercise control over the Company's activities. Under
the terms of the agreement, Cascade, Inc. receives an annual management fee
of $100,000 plus amounts for additional consulting services and
reimbursement of Company expenses paid by Cascade. In this connection, the
Company paid Cascade, Inc. approximately $0, $0, and $107,000 for the each
of the three month periods ended September 30, 2000 and 1999 and for the
period from August 25, 1997 (inception) to September 30, 2000,
respectively. At September 30, 2000, the Company owed Cascade, Inc.
$322,031.
4. Deferred Income Taxes
Significant components of the Company's deferred income tax assets and
liabilities at September 30, 2000 are as follows:
Deferred income tax asset:
Capitalized start-up expenses $ 147,859
---------
Total deferred income tax asset 147,859
Less: valuation allowance (147,859)
---------
Net deferred income tax liability --
=========
Reconciliation of the effective tax rate to the U.S. statutory rate is as
follows:
For the
For the For the Period from
Three-Month Three-Month August 25, 1997
Period Ended Period Ended (Inception) to
September 30, 2000 September 30, 1999 September 30, 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.
7
Fuzzy Logic Software Corporation
(A Development Stage Company)
Notes to the Financial Statements
(Unaudited)
For Each of the Three Month Periods Ended September 30, 2000 and 1999 and
For The Period from August 25, 1997 (Inception) to September 30, 2000
- --------------------------------------------------------------------------------
5. Loss Per Common Share
Basic and diluted loss per common share has 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 periods ended September 30, 2000 and 1999 and for the period from
August 25, 1997 (inception) to September 30, 2000 are as follows:
For the
For the For the Period from
Three-Month Three-Month August 25, 1997
Period Ended Period Ended (Inception) to
September 30, 2000 September 30, 1999 September 30, 2000
------------------ ------------------ ------------------
Basic loss per common share:
Net loss $ 25,018 $ 25,425 $ 434,878
Weighted-average shares,
basic and diluted 4,575,456 4,075,456 4,171,211
---------- ---------- ----------
Basic and diluted loss per
common share $ 0.01 $ 0.01 $ 0.10
========== ========== ==========
8
Item 2. Plan of Operation
This following information specifies certain forward-looking statements of
management of the company. Forward-looking statements are statements that
estimate the happening of future events and are not based on historical fact.
Forward-looking statements may be identified by the use of forward-looking
terminology, such as "may", "shall", "will", "could", "expect", "estimate",
"anticipate", "predict", "probable", "possible", "should", "continue", or
similar terms, variations of those terms or the negative of those terms. The
forward-looking statements specified in the following information have been
compiled by our management on the basis of assumptions made by management and
considered by management to be reasonable. Our future operating results,
however, are impossible to predict and no representation, guaranty, or warranty
is to be inferred from those forward-looking statements.
The assumptions used for purposes of the forward-looking statements specified in
the following information represent estimates of future events and are subject
to uncertainty as to possible changes in economic, legislative, industry, and
other circumstances. As a result, the identification and interpretation of data
and other information and their use in developing and selecting assumptions from
and among reasonable alternatives require the exercise of judgment. To the
extent that the assumed events do not occur, the outcome may vary substantially
from anticipated or projected results, and, accordingly, no opinion is expressed
on the achievability of those forward-looking statements. No assurance can be
given that any of the assumptions relating to the forward-looking statements
specified in the following information are accurate, and we assume no obligation
to update any such forward-looking statements.
Our Business. Fuzzy Logic Software Corporation, a Delaware corporation, was
incorporated in the State of Delaware on or about August 25, 1997. Our executive
offices are located at 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., an international
security company, which provides physical and online, web-based corporate
security solutions. In September 2000, our negotiations with The Anvil Group
Inc. failed to materialize into a final agreement and we abandoned our
intentions to acquire them.
As a result of our failure to consummate the acquisition of The Anvil Group
Inc., we are currently reviewing and revising our business plan. We believe that
acquisitions and joint ventures will be necessary to obtain the proper expertise
and complimentary services with firms able to provide services which will
support our future operation. We
2
also anticipate that additional specialized and conventional services and
expertise, which are not fundamental to our anticipated operations, 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 September 30, 2000, we had total assets of $105,818, the
majority of which is represented by a note receivable totaling $104,674. In
anticipation of the transaction with The Anvil Group, Inc., we advanced $68,650
to The Anvil Group, Inc. and Anthony Humble and $36,024 to Anthony Humble,
individually, pursuant to two (2) promissory notes, each dated June 27, 2000.
The notes bear interest at ten percent (10%) and the principal and interest are
due on December 24, 2000. We believe that The Anvil Group, Inc. and Anthony
Humble have the financial capability to repay those notes. However, we cannot
guaranty that those notes will be paid.
At September 30, 2000, we had current liabilities of $322,531, the majority of
which is represented by $322,031 due to a related party, one of our former major
shareholders. 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.
Results of Operations. As of September 30, 2000, we have not yet realized any
revenue from operations. The Statement of Operations for the period ending
September 30, 2000 specifies a net loss of $25,018.
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 revenues. 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.
Our Plan of Operation For Next 12 Months. As a result of our failure to
consummate the acquisition of The Anvil Group Inc., we are currently reviewing
and revising our business plan. We plan to continue to seek other merger
candidates, although we have not identified any potential candidates. We believe
that acquisitions and joint ventures will be necessary to obtain the proper
expertise and complimentary services with firms able to provide services which
will support our future operation. We cannot guaranty that we will be able to
successfully locate a merger candidate. Our failure to locate a merger candidate
will significantly affect our ability to continue operations.
Changes in Number of Employees. During the next 12 months, depending on the
success of our proposed operations, we may be required to hire additional
employees; however, we are not able to provide a reasonable estimate of the
number of such additional employees which may be required at this time.
3
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities.
None.
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
27 Financial Data Schedule
4
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Fuzzy Logic Software Corporation,
a Delaware corporation
November 17, 2000 By: /s/ Michael Lynch
---------------------------------
Michael Lynch
Its: President, Director
5