<PAGE>

                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549

                                   FORM 10-Q

(Mark One)

[X]  QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
     OF 1934

For the quarter ended April 02, 2000
                      ----------------------------------------------------------
                                      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 No.: 0-18114
                     -----------------------------------------------------------

VIRTUALFUND.COM, INC.
--------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)

     Minnesota                                          41-1612861
--------------------------------------------------------------------------------
(State or other jurisdiction of                (IRS Employer Identification No.)
incorporation or organization)

7090 Shady Oak Road, Eden Prairie, Minnesota                 55344
--------------------------------------------------------------------------------
(Address of principal executive offices)                  (Zip code)


                                (952) 941-8687
--------------------------------------------------------------------------------
             (Registrant's telephone number, including area code)


--------------------------------------------------------------------------------
             (Former name, former address and formal fiscal year,
                         if changed since last report)


     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
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:

     Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.                                         Yes  X      No
                                                                  ---        ---

                     APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:

Class                                           Outstanding at 4/30/2000
-----                                           ------------------------

Common Stock, $.01 par value                           17,083,856


<PAGE>

                         PART I. FINANCIAL INFORMATION

 ITEM 1.  FINANCIAL STATEMENTS

                    VIRTUALFUND.COM, INC. AND SUBSIDIARIES
                    CONSOLIDATED BALANCE SHEETS (UNAUDITED)
                    ---------------------------------------

<TABLE>
<CAPTION>
                                    ASSETS
                                    ------
                                                                           April 02,              June 30,
                                                                             2000                   1999
                                                                         ------------           ------------
<S>                                                                      <C>                    <C>
     CURRENT ASSETS:
      Cash and cash equivalents                                          $    169,792           $    250,792
      Accounts receivable, less allowance for
        Doubtful accounts and sales returns of
        $769,000 and $1,234,000, respectively                               9,543,188             12,858,200
      Receivable - related parties                                          1,691,710              1,378,749
      Inventory                                                             6,548,962              8,630,576
      Other current assets                                                  1,969,913              2,094,433
      Deferred income taxes                                                13,288,000
                                                                         ------------           ------------
          TOTAL CURRENT ASSETS                                             33,211,565             25,212,750

PROPERTY AND EQUIPMENT, NET                                                 3,517,579              3,632,243

GOODWILL, less accumulated amortization
    of $3,058,848 and $1,338,246, respectively                              8,411,821             10,132,423

DEFERRED INCOME TAXES                                                         712,000

OTHER ASSETS                                                                  674,446                223,676
                                                                         ------------           ------------
                                                                         $ 46,527,411           $ 39,201,092
                                                                         ============           ============
                     LIABILITIES AND STOCKHOLDERS' EQUITY
                     ------------------------------------

CURRENT LIABILITIES:
      Notes payable                                                      $  1,961,100           $  3,868,002
      Notes payable - related parties                                       2,250,037              2,235,766
      Current maturities of long-term debt                                    589,981                720,830
      Accounts payable                                                     12,012,763             12,737,616
      Accrued payroll and payroll taxes                                     2,818,492              2,380,492
      Other current liabilities                                             1,953,382              1,757,822
      Deferred revenue                                                      1,791,044              1,442,288
                                                                         ------------           ------------
          TOTAL CURRENT LIABILITIES                                        23,376,799             25,142,816

LONG-TERM DEBT, less current maturities                                       255,952                614,245

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
      Series A convertible preferred stock, $.01 par value;
        Authorized 5,000,000 shares; 1,499,998 shares issued
         and outstanding; redeemable; $7,500,000 liquidation
         preference                                                         7,500,000              7,500,000
      Common stock, $.01 par value; authorized 50,000,000
         shares; 16,172,616 and 15,803,866 shares issued
         and outstanding, respectively                                        161,726                158,039
      Additional paid in capital                                           33,968,518             33,040,170
      Accumulated deficit                                                 (18,735,584)           (27,254,178)
                                                                         ------------           ------------
          TOTAL STOCKHOLDERS' EQUITY                                       22,894,660             13,444,031
                                                                         ------------           ------------
                                                                         $ 46,527,411           $ 39,201,092
                                                                         ============           ============
</TABLE>

                See notes to consolidated financial statements.

                                       2
<PAGE>

                    VIRTUALFUND.COM, INC. AND SUBSIDIARIES
               CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
               -------------------------------------------------

<TABLE>
<CAPTION>
                                                                  Three Months Ended                Nine Months Ended
                                                            -------------------------------  -----------------------------
                                                               April 2,         April 4,       April 2,        April 4,
CONTINUING OPERATIONS                                            2000             1999           2000            1999
                                                            --------------    -------------  -------------   -------------
<S>                                                         <C>               <C>            <C>             <C>
  NET SALES                                                 $    1,635,884    $   2,020,004  $   5,134,889   $   2,506,910

  COST OF SALES                                                  1,274,388        1,354,198      4,177,928       1,713,198
                                                            --------------    -------------  -------------   -------------
       GROSS PROFIT                                                361,496          665,806        956,961         793,712

  OPERATING EXPENSES:
       Sales & Marketing                                           716,730          483,336      1,995,574         807,790
       Research & Development                                      740,691          189,482      1,798,547         672,652
       General & Administrative                                  2,002,584        1,566,772      5,284,824       3,369,930
       Goodwill Amortization                                       573,534          448,533      1,720,602         639,711
                                                            --------------    -------------  -------------   -------------
                                                                 4,033,539        2,688,123     10,799,547       5,490,083
                                                            --------------    -------------  -------------   -------------
  OPERATING LOSS                                                (3,672,043)      (2,022,317)    (9,842,586)     (4,696,371)

  OTHER INCOME (EXPENSE):
       Interest Expense                                            (77,160)         (33,738)      (265,627)        (95,106)
       Interest Income                                              25,517           24,796         75,717          56,791
       Other Income                                                 29,490           33,917         32,178          33,260
                                                            --------------    -------------  -------------   -------------
                                                                   (22,153)          24,975       (157,732)         (5,055)
                                                            --------------    -------------  -------------   -------------
  LOSS FROM CONTINUING OPERATIONS
      BEFORE INCOME TAXES                                       (3,694,196)      (1,997,342)   (10,000,318)     (4,701,426)
  INCOME TAX BENEFIT                                               651,000          240,000     15,672,000          27,000
                                                            --------------    -------------  -------------   -------------

   (LOSS) EARNINGS FROM CONTINUING OPERATIONS                   (3,043,196)      (1,757,342)     5,671,682      (4,674,426)
                                                            --------------    -------------  -------------   -------------
EARNINGS FROM DISCONTINUED OPERATIONS,
   Net of income tax provision of $651,000 and $1,672,000
   for the three months and nine months ended April 2,
   2000 and $240,000 and $27,000 for the three months and
   nine months ended April 4, 1999, respectively                 1,108,704          409,313      2,846,912          46,496
                                                            --------------    -------------  -------------   -------------
NET (LOSS) EARNINGS                                         $   (1,934,492)   $  (1,348,029) $   8,518,594   $  (4,627,930)
                                                            ==============    =============  =============   =============

BASIC (LOSS) EARNINGS PER COMMON SHARE
    (LOSS) EARNINGS FROM CONTINUING OPERATIONS              $         (.18)   $        (.11) $         .35   $         (29)
    EARNINGS FROM DISCONTINUED OPERATIONS                   $          .07    $         .02  $         .18   $         .00
                                                            --------------    -------------  -------------   -------------
    NET (LOSS) EARNINGS PER COMMON SHARE                    $         (.11)   $        (.09) $         .53   $        (.29)
                                                            ==============    =============  =============   =============

DILUTIVE (LOSS) EARNINGS PER COMMON SHARE
    (LOSS) EARNINGS FROM CONTINUING OPERATIONS              $         (.18)   $        (.11) $         .30   $        (.29)
    EARNINGS FROM DISCONTINUED OPERATIONS                   $          .07    $         .02  $         .15   $         .00
                                                            --------------    -------------  -------------   -------------
    NET (LOSS) EARNINGS PER COMMON SHARE                    $         (.11)   $        (.09) $         .45   $        (.29)
                                                            ==============    =============  =============   =============

Weighted average common shares outstanding                      16,828,439       15,778,866     16,145,058      15,778,866
Weighted average common and dilutive
    Potential common shares outstanding                         16,828,439       15,778,866     18,854,239      15,778,866
</TABLE>

                See notes to consolidated financial statements.

                                       3
<PAGE>

                    VIRTUALFUND.COM, INC. AND SUBSIDIARIES
               CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED)
               ------------------------------------------------

<TABLE>
<CAPTION>
                                                                                  Nine Months Ended
                                                                           --------------------------------
                                                                             April 2,            April 4,
                                                                               2000                1999
                                                                           ------------         -----------
<S>                                                                        <C>                  <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net Earnings (loss)                                                   $  8,518,594         $(4,627,930)
     Adjustments to reconcile net earnings (loss) to net
          cash provided by (used in) operating activities:
              Depreciation and amortization                                   1,592,881           1,503,367
              Amortization of goodwill                                        1,720,602             639,711
              Loss on sale of property and equipment                              7,066               4,079
              Deferred income taxes                                         (14,000,000)
          Change in current assets and current liabilities:
              Accounts receivable                                             3,267,186           3,399,856
              Inventory                                                       2,081,614            (843,744)
              Other current assets                                              124,520            (328,243)
              Accounts payable                                                 (724,853)          1,671,074
              Accrued payroll and payroll taxes                                 438,000            (280,338)
              Other current liabilities                                         209,831            (540,204)
              Deferred revenue                                                  348,756             (74,238)
                                                                           ------------         -----------
   NET CASH PROVIDED BY OPERATING ACTIVITIES                                  3,584,197             523,390

CASH FLOWS FROM INVESTING ACTIVITIES:
     Loans to related parties                                                  (265,135)           (846,873)
     Collection of notes receivable - related party                                                 351,181
     Additions to property and equipment                                     (1,199,538)           (786,771)
     Proceeds from sale of property and equipment                                 3,195              15,590
     Additions to other assets                                                 (629,314)            (17,230)
     Payment for acquisition of K&R Technical
         Services Inc., net of cash acquired                                                     (1,388,655)
                                                                           ------------         -----------
NET CASH USED IN INVESTING ACTIVITIES                                        (2,090,792)         (2,672,758)

CASH FLOWS FROM FINANCING ACTIVITIES:
     Net (payments) borrowing under revolving credit lines                   (1,906,902)            584,489
     Payments on long-term debt                                                (599,538)           (730,934)
     Payment of related party note payable                                                       (1,798,588)
     Payment of debenture                                                                          (375,866)
     Proceeds from long-term debt                                                                   228,908
     Issuance of common stock                                                   932,035
                                                                           ------------         -----------
NET CASH USED IN FINANCING ACTIVITIES                                        (1,574,405)         (2,091,991)
                                                                           ------------         -----------

DECREASE IN CASH AND CASH EQUIVALENTS                                           (81,000)         (4,241,359)

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                250,792           5,011,181
                                                                           ------------         -----------

CASH AND CASH EQUIVALENTS AT END OF PERIOD                                 $    169,792         $   769,822
                                                                           ============         ===========
</TABLE>

                See notes to consolidated financial statements.

                                       4
<PAGE>

                    VIRTUALFUND.COM, INC. AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  ------------------------------------------


1. Basis of presentation -

   The accompanying unaudited consolidated financial statements have been
   prepared in accordance with generally accepted accounting principles for
   interim financial information and with the instructions to Form 10-Q and Rule
   10-01 of Regulation S-X. They do not include all information and footnotes
   required by generally accepted accounting principles for complete financial
   statements. However, except as disclosed herein, there has been no material
   change in the information disclosed in the notes to consolidated financial
   statements included in the Annual Report on Form 10-K of VirtualFund.com,
   Inc. and subsidiaries (the "Company") for the year ended June 30, 1999. In
   the opinion of management, all adjustments (consisting of normal recurring
   accruals) considered necessary for a fair presentation have been included.
   Operating results for the three months and nine months ended April 2, 2000
   are not necessarily indicative of the results that may be expected for the
   year ending June 30, 2000.



2. Business Combinations

   On December 18, 1998, the Company, through its wholly owned subsidiary
   B2BXchange, Inc., issued 1,499,998 shares of Series A Convertible Preferred
   Stock and notes payable of $3,678,258, in exchange for all of the common
   stock of K&R Technical Services, Inc. d/b/a TEAM Technologies, a privately
   held information technology consulting company. The acquisition has been
   accounted for using the purchase method of accounting. Accordingly, the
   aggregate purchase price of approximately $11,278,000, including transaction
   costs, has been allocated to the assets acquired and liabilities assumed
   based upon the fair values at the date of acquisition.

   The operating results of the acquired business have been included in the
   consolidated statement of income from the effective date of acquisition,
   which was December 1, 1998. The following pro forma results of operations for
   the three months and nine months ended April 2, 2000 and April 4, 1999 assume
   the acquisition occurred as of July 1, 1997:
<TABLE>
<CAPTION>


                                                 Three Months Ended            Nine Months Ended
                                             --------------------------    ------------------------------
                                               April 2,      April 4,        April 2,        April 4,
                                                 2000          1999            2000            1999
                                                Actual        Actual          Actual         Pro Forma
                                             ------------  ------------    ------------   ---------------
<S>                                          <C>           <C>             <C>            <C>
Net sales                                    $ 1,635,884   $ 2,020,004     $  5,134,889   $     5,519,309
(Loss) earnings from
   continuing operations                      (3,043,196)   (1,757,342)       5,671,682        (6,034,169)
(Loss) earnings per common share -basic             (.18)         (.11)             .35              (.38)
(Loss) earnings per common share -diluted           (.18)         (.11)             .30              (.38)

</TABLE>

                                       5
<PAGE>

3. Discontinued Operations

   Management has indicated its intent to sell the Digital Graphics Business
   Unit ("DGBU"), which is comprised of ColorSpan Corporation ("CSC"), its
   subsidiaries and Kilborn Photo Products, Inc., and, as a result, all DGBU
   operations are disclosed herein as discontinued operations. Net sales from
   discontinued operations for the three months and nine months ended April 2,
   2000 were $16,786,642 and $52,109,837, respectively, compared to $17,193,734
   and $50,110,921 in the same periods one year ago. The results from
   discontinued operations do not include any general corporate overhead
   expense. Debt and the corresponding interest expense relating to the DGBU
   reside within the operating companies of the discontinued operations. The
   components of net assets of discontinued operations included in the
   Consolidated Balance Sheets at April 2, 2000 and June 30, 1999 are as
   follows:

                                             April 2,       June 30,
                                              2000            1999
                                           ------------   ------------

          Accounts and notes receivable    $ 8,474,314   $ 12,374,195
          Inventory                          6,548,962      8,630,576
          Other current assets               1,788,671      1,976,591
          Property and equipment, net        1,711,984      2,109,494
          Other assets                         129,971        107,659
          Notes payable                      1,891,591      3,237,835


4. Earnings Per Share Calculation -

   The following table summarizes the reconciliation of the basic and diluted
   average common shares outstanding:
<TABLE>
<CAPTION>

                                      Three Months Ended             Nine Months Ended
                                   -------------------------      -------------------------
                                     April 2,       April 4,         April 2,     April 4,
                                       2000           1999             2000         1999
                                   ----------     ----------      -----------   -----------
<S>                                <C>            <C>              <C>           <C>
Average common shares outstanding  16,828,439(1)  15,778,866       16,145,058(1) 15,778,866
 Effect of dilutive shares:
  Stock options and warrants                                        1,458,280
  Convertible preferred stock                                       1,250,901
                                   ----------     ----------      -----------   -----------
   Diluted average shares          16,828,439     15,778,866       18,854,239    15,778,866
                                   ==========     ==========       ==========    ==========
</TABLE>

(1) Included in the three and nine month average common shares outstanding are
    758,241 and 249,097 equivalent shares of contingently mandatorily
    convertible preferred stock where the conversion trigger was met during the
    third quarter.

   The following table summarizes securities that could potentially dilute basic
   earnings per share in the future that were not included in the computation of
   diluted earnings (loss) per share because to do so would have been
   antidilutive for the periods presented:
<TABLE>
<CAPTION>


                                      Three Months Ended             Nine Months Ended
                                   -----------------------      -------------------------
                                     April 2,     April 4,         April 2,     April 4,
                                       2000         1999             2000         1999
                                   ----------   ----------      -----------   -----------
<S>                                <C>          <C>              <C>           <C>
Stock options                       4,419,139    3,741,139        1,018,700     3,741,139
Warrants                            4,404,953    3,034,953        3,034,953     3,034,953
Convertible preferred stock           741,757    1,499,998                      1,499,998
                                   ----------   ----------      -----------   -----------
                                    9,565,849    8,276,090        4,053,653     8,276,090
                                   ==========  ===========      ===========   ===========

</TABLE>

                                       6
<PAGE>

5. Inventory -
<TABLE>
<CAPTION>

DGBU inventory consists of the following:
                                                                          April 2,           June 30,
                                                                            2000               1999
                                                                       --------------     -------------
<S>                                                                    <C>                <C>
 Raw materials                                                         $  3,530,394        $ 4,372,616
 Work in process                                                            250,966            204,451
 Finished goods:
  Consumables                                                             1,540,042          2,509,904
  Hardware                                                                1,227,560          1,543,605
                                                                       ------------        -----------
                                                                       $  6,548,962        $ 8,630,576
                                                                       ============        ===========

6. Supplemental disclosure of cash flow information and non-cash financing activities -

                                                                               Nine Months Ended
                                                                       --------------------------------
                                                                          April 2,           April 4,
                                                                            2000               1999
                                                                       --------------     -------------
<S>                                                                    <C>                <C>
 The Company paid and received cash for the following items:

  Interest paid                                                        $    929,365         $  547,454

  Financing transactions not affecting cash:
    Capital lease obligations                                               110,396            101,178

    1,499,998 shares of convertible preferred stock
    issued for acquisition of K&R Technical Services, Inc.                                   7,500,000

    Notes payable issued for acquisition of K&R
    Technical Services, Inc.                                                                 3,678,258

</TABLE>

7. Income Taxes -

   On October 21, 1999, the Company announced its intention to sell its DGBU.
   Since the date of the announcement, management has been proceeding with the
   divestiture of the DGBU operations. This significant change in the Company's
   business plan, the estimated likelihood of a sale, the expected sale price
   and the tax basis of the assets of the DGBU have been considered by
   management in assessing the recoverability of the Company's deferred tax
   assets.

   At this time, the sale of the business unit is expected to provide proceeds
   that will allow the utilization of all of the Company's deferred tax assets,
   which total $14 million. These assets have previously been valued at zero by
   a valuation allowance required under SFAS #109  "Accounting for Income Taxes"
   which provides the professional guidance for this matter. Due to the changes
   described above, the Company has revalued its deferred tax assets in
   conformity with SFAS #109 guidelines and has reversed the deferred tax
   valuation allowance. The reversal was recorded as an income tax benefit in
   the quarter ended January 2, 2000.

                                       7
<PAGE>

8. Subsequent Event -

   During April 2000, 911,240 shares of the Company's Series A convertible
   preferred stock were converted into shares of its common stock on a one-for-
   one basis. As part of the acquisition of TEAM Technologies, 1,499,998 Series
   A convertible preferred shares were issued and carried a $5.00 per share
   guaranteed value on their maturity date of December 17, 2000. The conversion
   was triggered under the Automatic Conversion process defined in the
   "Certificate of Designation of the Powers, Preferences and Rights, and
   Qualifications, Limitations and Restrictions, of Series A Convertible
   Preferred Stock" after VirtualFund.com, Inc. common stock closed at or above
   $5.00 per share for 30 consecutive calendar days. In connection with the
   terms of the Automatic Conversion, the Company waived the two-year, no-trade
   clause associated with these shares on February 17, 2000. As of April 30,
   2000, a balance of 588,758 shares of Series A convertible preferred stock
   remains unconverted. For earnings per share purposes, all of the shares were
   treated as converted on February 17, 2000 per FAS #128 "Earnings Per Share."


9. Letter of Intent -

   On April 19, 2000 the Company signed a letter of intent with a subsidiary of
   MacDermid, Inc. to sell the DGBU for $50 million in cash. The proposed sale
   is subject to due diligence by both parties, Federal Trade Commission
   approval and approval by each company's Board of Directors. The sale price is
   subject to certain post closing adjustments as agreed upon by both parties.

                                       8
<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
         FINANCIAL CONDITION AND RESULTS OF OPERATIONS

General

This Management's Discussion and Analysis contains "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995 (the
"Act").  These forward-looking statements are subject to a number of risks,
including our continuing need for additional cash, sensitivity of the Company to
technology changes and intense competition, our dependence on sales of newer
products with untested market acceptance, dependence on numerous product
components that are available from single sources, fluctuations in quarterly
operating performance, the strength of our intellectual property protection, the
risks associated with the acquisition and integration of new businesses, the
outcome of litigation, and the size of our international operations.  These and
other factors, which are set forth in Exhibit 99 to this Form 10-Q, have caused
wide fluctuations in the market price of our common stock and can be expected to
cause similar fluctuations in the future.  Refer to Exhibit 99 of this Form 10-Q
for certain important cautionary factors, risks and uncertainties related to
forward-looking statements.


Liquidity and Discontinued Operations

We have indicated our intent to sell the DGBU and, as a result, all DGBU
operations are disclosed herein as discontinued operations.

The Internet Services Business Unit (ISBU) provides information system design,
implementation and support services, develops and sells Internet-based
electronic commerce software, and provides Internet hosting services. This
business unit will be the primary operating company going forward.

Net cash provided by operating activities of both the ISBU and DGBU during the
nine months ended April 2, 2000 was $3.6 million compared to $523,000 in the
same period one year ago. Cash flow in the nine months ended April 2, 2000 was
positively affected by a reduction in accounts receivable of $3.3 million and a
reduction in inventory of $2.1 million. Cash flow was negatively affected by a
$725,000 decrease in accounts payable.

Net cash used in investing activities of both the ISBU and DGBU was $2.1
million during the nine months ended April 2, 2000 compared to $2.7 million in
the same period one year ago. Investment in capital equipment was $1.2 million
in the nine months ended April 2, 2000 compared to $787,000 in the same period
one year ago. Investment in intellectual property was $629,000 and loans to
related parties were $265,000 during the nine months ended April 2, 2000.

Net cash used in financing activities of both the ISBU and DGBU was $1.6 million
in the nine months ended April 2, 2000 compared to $2.1 million in the same
period one year ago. Net repayments under revolving credit lines were $1.9
million in the nine months ended April 2, 2000 compared to net borrowing of
$584,000 in the same period one year ago. During the nine months ended April 2,
2000 issuance of common stock resulting from the exercise of employee stock
options provided $932,000. As a result of the Kilborn acquisition, we assumed a
liability for a note payable to one of the Kilborn shareholders. The note in the
amount of $1.8 million was paid in full during the nine months ended April 4,
1999.

During the nine months ended April 2, 2000 we incurred a net loss before income
taxes of $5.5 million. During fiscal 1999, we incurred a net loss of $7.8
million, including a special tax adjustment of $4.8 million. As of April 2,
2000, we had an accumulated deficit in stockholders' equity of $18.7 million.
In addition, CSC's revolving credit facility with its senior lender, General
Electric Capital Corporation ("GECC"), expired in January 1999 and has been
extended to June 30, 2000. The assets of the DGBU are pledged as security for
this loan. As of April 30, 2000, $1.4 million was outstanding on this credit
facility. Upon sale of the DGBU, we expect that this debt will be retired. The
ISBU's revolving
                                       9
<PAGE>

credit facility has also expired, and we were able to negotiate an extension
through June 22, 2000. As of April 30, 2000 approximately $50,000 was
outstanding on this loan. Upon sale of the DGBU, we expect that this debt will
be retired.

In an effort to shift future activities toward software-based products with
higher gross margins, we have taken steps to pursue opportunities outside our
traditional business. In this regard, we are developing a new operating business
segment in the electronic commerce market. This segment will leverage more than
15 years experience in bringing technology products to the marketplace. This
strategy allows us to leverage our software development and project management
expertise to provide business-to-business solutions via the Internet. The
development of this market has required substantial cash. Further development is
planned and may result in further losses during the start-up period. We have
been developing this new segment based in the business-to-business electronic
commerce market in our Internet Services Business Unit for the past two years.
We believe we have significant opportunities in this new market and have been
investing in development activities which have been financed to date by the cash
flow and the working capital provided by the Digital Graphics Business Unit.

In order to provide the capital to continue to grow this opportunity, we
announced our intention to sell the DGBU, which is comprised of ColorSpan
Corporation, its subsidiaries and Kilborn Photo Products, Inc., on October 21,
1999. On April 19, 2000 we announced details of the letter of intent for the
sale of the Digital Graphics Business Unit to MacDermid Graphic Arts, Inc., a
division of MacDermid Incorporated. The sale price is $50 million in cash,
subject to certain post closing adjustments as agreed upon between the two
companies. Terms of the proposed acquisition are subject to, among other items,
completion of due diligence, Federal Trade Commission approval, and approval by
the Board of Directors of MacDermid and VirtualFund.com. The sale proceeds will
be used for investment and development of additional Internet initiatives, and
to fund the Internet Services Business Unit.

We expect that the sale of the Digital Graphics Business Unit to MacDermid will
close during the June quarter (fourth quarter of fiscal 2000). During the
interim, we continue to finance the ISBU development activities from existing
cash flow.

Our longer-term financing needs will depend on the results of our B2BXchange
product, and the availability of new product opportunities. If sales from this
product and our other products are not sufficient to fund operations and our
growth plans, we will be required to seek additional financing and/or alter our
plans related to product development and business acquisitions.

Results of Operations

ISBU net sales, which represent continuing operations, were $1.6 million and
$5.1 million for the three months and nine months ended April 2, 2000,
respectively. ISBU sales for the three months ended April 4, 1999 were $2.0
million. The decrease in net sales from the prior year is a result of lower
staff augmentation revenues due to an emphasis on internet services which will
be the core business going forward. ISBU net sales are the result of the
December 1998 acquisition of K&R Technical Services, Inc., therefore, the
comparable prior year contains only four months of operations. Net loss from
continuing operations, including a $651,000 income tax benefit, was $3.0 million
or $.18 per share for the three months ended April 2, 2000. Net earnings from
continuing operations, including a $15.7 million income tax benefit, were $5.7
million or $.35 per share for the nine months ended April 2, 2000. Net loss from
continuing operations for the three months and nine months ended April 4, 1999
were $1.8 million or $.11 per share and $4.7 million or $.29 per share,
respectively.

                                       10
<PAGE>

The following table sets forth certain items from our Consolidated Statements of
Operations expressed as a percentage of net sales:
<TABLE>
<CAPTION>
                                                               Three Months Ended                Nine Months Ended
                                                         ------------------------------  ----------------------------------
                                                                April 2,        April 4,        April 2,          April 4,
                                                                  2000            1999            2000              1999
                                                               -------         -------          ------             -------
<S>                                                      <C>                  <C>             <C>                <C>
Net Sales                                                        100.0%          100.0%          100.0%              100.0%
Cost of goods sold                                                77.9            67.0            81.4                68.3
                                                               -------         -------          ------             -------
     Gross Profit                                                 22.1            33.0            18.6                31.7
Operating Expenses:
     Sales and Marketing                                          43.8            23.9            38.9                32.2
     Research and Development                                     45.3             9.4            35.0                26.9
     General and Administrative                                  122.4            77.6           102.9               134.4
     Goodwill Amortization                                        35.1            22.2            33.5                25.5
                                                               -------         -------          ------             -------
Total Operating Expenses                                         246.6           133.1           210.3               219.0
                                                               -------         -------          ------             -------
Operating Loss                                                  (224.5)         (100.1)         (191.7)             (187.3)
                                                               -------         -------          ------             -------
Other Income (Expense):
     Interest expense                                             (4.7)           (1.7)           (5.1)               (3.8)
     Interest income                                               1.6             1.2             1.5                 2.3
     Other                                                         1.8             1.7             0.6                 1.3
                                                               -------         -------          ------             -------
Loss From Continuing Operations Before Income Taxes             (225.8)          (98.9)         (194.7)             (187.5)
Income Tax Benefit                                                39.8            11.9           305.2                 1.0
                                                               -------         -------          ------             -------
(Loss) Earnings From Continuing Operations                      (186.0)          (87.0)          110.5              (186.5)
                                                                               -------          ------             -------
Earnings From Discontinued Operations                             67.8            20.3            55.4                 1.9
                                                               -------         -------          ------             -------
Net (Loss) Earnings                                            (118.2)%        ( 66.7)%          165.9%            (184.6)%
                                                               =======         =======          ======             =======
</TABLE>


Net Sales.  The following table sets forth net sales by product line expressed
in thousands and as a percent of net sales:
<TABLE>
<CAPTION>

                                            Quarter Ended        Quarter Ended
Net Sales                                   April 2, 2000        April 4, 1999
                                          ----------------      ---------------
<S>                                         <C>       <C>         <C>      <C>
Internet Services Business Unit:
    VAR Product Sales.............        $   265     16.2%       $ 267    13.2%
    Hosting/Access Revenue........            313     19.1          231    11.4
    Remote Support................            144      8.8          115     5.7
    Staff Augmentation............            486     29.7          732    36.2
    Internet Services.............            413     25.3          468    23.2
    Consulting and Other..........             15      0.9          207    10.3
                                          -------    -----      -------   -----
Total net sales...................        $ 1,636    100.0%     $ 2,020   100.0%
                                          =======    =====      =======   =====
</TABLE>

We anticipate sales to increase in future quarters as we have developed
automated billing software and are able to convert free subscribers of
B2BXchange into paying customers who use storage, bandwidth and applications
associated with adopting B2BXchange.

Gross Profit.  Gross profit expressed as a percent of net sales, was 22.1% in
the quarter ended April 2, 2000 compared to 15.2% in the quarter ended January
2, 2000 and 33.0% in the same period one year ago.

                                       11
<PAGE>

We anticipate gross margins in the ISBU should increase as software and Web-
based products gain market share. Gross margins on software and Web-based
products are much higher than those achieved from professional services where
employee related costs are significant in generating revenue. Revenue in the
ISBU during the quarter ended April 2, 2000 was primarily from professional
services.

Operating Expenses. Sales and Marketing expenses for the quarter ended April 2,
2000 were $717,000, compared to $483,000 in the same period one year ago and
$711,000 in the quarter ended January 2, 2000. The increase in expense over the
prior year is related to additional sales staff, additional vertical exchange
marketing managers and Web designers in preparation of continuing roll out of
the B2BXchange product.

Research and Development expenses were $741,000 in the quarter ended April 2,
2000, compared to $189,000 in the same period one year ago, and $604,000 in the
quarter ended January 2, 2000. The increases in research and development
expenses are directly related to the B2BXchange product development.

General and Administrative expenses were $2.0 million for the quarter ended
April 2, 2000, compared to $1.6 million in the same period one year ago, and
$1.9 million in the quarter ended January 2, 2000. General and administrative
expenses include corporate overhead costs, which are not allocated to
discontinued operations. We expect some of these costs will decrease when the
DGBU is sold.

Goodwill Amortization relating to the acquisition of K&R Technical Services,
Inc. was $574,000 for the quarter ended April 2, 2000 compared to $449,000 in
the same period one year ago. The purchase price of $11,278,000 and the
liabilities assumed in excess of tangible assets acquired of $193,000 has been
recorded as goodwill in the amount of $11,471,000 and is being amortized on a
straight-line basis over five years.

Other. Interest expense was $77,000 for the quarter ended April 2, 2000
compared to $34,000 in the same period one year ago.

Income Taxes. As a result of our announcement on October 21, 1999 to sell the
Digital Graphics Business Unit, management has reassessed the recoverability of
our deferred tax assets. The sale is expected to provide proceeds that will
allow the utilization of all of our deferred tax assets, which total $14
million. These assets have previously been valued at zero by a valuation
allowance required under SFAS #109 "Accounting for Income Taxes".  Due to this
significant change in our business plan, we have revalued deferred tax assets in
conformity with SFAS #109 guidelines and have reversed the deferred tax
valuation allowance. The reversal was recorded as a $14 million income tax
benefit in the quarter ended January 2, 2000.


Discontinued Operations

Net sales of the DGBU, which is being treated as discontinued operations, were
$16.8 million in the quarter ended April 2, 2000, compared to $17.2 million for
the same period one year ago. Hardware sales were $4.7 million in the quarter
ended April 2, 2000 compared to $6.7 million in the same period one year ago.
Hardware sales should increase in the fourth quarter of fiscal 2000 in part due
to the introduction of the new FabriJet textile printer. Initial shipments of
the FabriJet began in the last week of the quarter ended April 2, 2000.
Consumable sales, consisting primarily of ink, media, film, maintenance
contracts and spare parts, were $12.1 million in the quarter ended April 2, 2000
compared to $10.5 million in the same period one year ago. Gross profit for the
DGBU was 44.6% in the quarter ended April 2, 2000 compared to 42.4% in the
quarter ended January 2, 2000 and 44.3% in the same period one year ago.

Net income from discontinued operations was $1.1 million for the quarter ended
April 2, 2000 compared to $409,000 for the same period one year ago.

                                       12
<PAGE>

                          PART II.  OTHER INFORMATION

ITEM 1:  LEGAL PROCEEDINGS

We are involved in various legal proceedings related to customer credit and
product warranty and performance issues in the normal course of business.  In
certain proceedings the claimants have alleged claims for exemplary or punitive
damages which may or may not bear a direct relationship to the alleged actual
incurred damages, and therefore could have a material adverse effect on the
Company. At this time we are not aware of any proceedings or claims which are
expected to have a material effect on the Company's operations or financial
position.

See Exhibit 99, attached, for additional discussion of risk factors related to
legal proceedings.

ITEM 2:  CHANGES IN SECURITIES

On February 17, 2000 all 1,499,998 shares of series A Convertible Preferred
Stock became automatically convertible to shares of common stock on a one-to-one
basis.

ITEM 3:  DEFAULTS UPON SENIOR SECURITIES

Nothing to report.

ITEM 4:  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Nothing to report

ITEM 5:  OTHER INFORMATION

Nothing to report.

ITEM 6:  EXHIBITS AND REPORTS ON FORM 8-K

(a)  Listing of Exhibits

     10.1 Fifteenth Amendment and Consent to Credit Agreement, dated
     March 30, 2000 between ColorSpan Corporation and General Electric Capital
     Corporation.

     99.  Cautionary Factors Under Private Securities Litigation Reform Act of
     1995.

(b)  Reports on Form 8-K

     None

                                       13
<PAGE>

                                   SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.


VIRTUALFUND.COM, INC.




/s/Melvin L. Masters
-----------------------------------
Melvin L. Masters
Chief Executive Officer



/s/ Timothy N. Thurn
-----------------------------------
Timothy N. Thurn
Chief Financial Officer and Principal Accounting Officer



Dated:  May 16, 2000

                                       14
<PAGE>

                                   SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.


VIRTUALFUND.COM, INC.




-----------------------------------
Melvin L. Masters
Chief Executive Officer



-----------------------------------
Timothy N. Thurn
Chief Financial Officer and Principal Accounting Officer



Dated:  May 16, 2000

                                       15