<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 September 30, 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)


7100 Shady Oak Road, Eden Prairie, Minnesota                   55344
------------------------------------------------------------------------------
(Address of principal executive offices)                     (Zip code)


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


              7090 Shady Oak Road, Eden Prairie, Minnesota, 55344
------------------------------------------------------------------------------
  (Former name, former address and former 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      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 10/31/2000
-----                                                 -------------------------

Common Stock, $.01 par value                                 15,886,404

                                       1
<PAGE>

                         PART I. FINANCIAL INFORMATION

ITEM 1.      FINANCIAL STATEMENTS


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

<TABLE>
<CAPTION>
                                    ASSETS
                                    ------
                                                                                September 30,               June 30,
                                                                                   2000                       2000
                                                                                ------------              ------------
     <S>                                                                        <C>                       <C>
CURRENT ASSETS:
      Cash and cash equivalents                                                 $ 30,236,358              $ 39,641,785
      Accounts receivable, less allowance for doubtful
        accounts of $8,500 and $20,000, respectively                                 491,117                   311,271
      Receivable - related parties                                                 1,579,248                 1,915,405
      Other current assets                                                           669,901                   229,098
                                                                                ------------              ------------
          TOTAL CURRENT ASSETS                                                    32,976,624                42,097,559
PROPERTY AND EQUIPMENT, NET                                                        1,965,805                 1,697,212

OTHER ASSETS                                                                         562,324                   658,993
                                                                                ------------              ------------
                                                                                $ 35,504,753              $ 44,453,764
                                                                                ============              ============

                     LIABILITIES AND STOCKHOLDERS' EQUITY
                     ------------------------------------

CURRENT LIABILITIES:
      Notes payable - related parties                                                759,945                 2,398,381
      Current maturities of long-term debt                                           353,219                   475,630
      Accounts payable                                                             4,611,798                 3,338,799
      Accrued payroll and payroll taxes                                            1,431,366                 1,712,642
      Income taxes payable                                                                --                   843,440
      Other current liabilities                                                      180,904                   198,607
      Retained obligations of discontinued operations                              2,138,963                 2,320,789
                                                                                ------------              ------------
          TOTAL CURRENT LIABILITIES                                                9,476,195                11,288,288

LONG-TERM DEBT, less current maturities                                               53,565                    91,860

COMMITMENTS AND CONTINGENCIES                                                             --                        --

STOCKHOLDERS' EQUITY:
      Common stock, $.01 par value; authorized
         50,000,000 shares; 16,204,204 and 17,577,002
         Shares issued and outstanding, respectively                                 162,042                   175,770
      Additional paid in capital                                                  37,974,100                41,171,851
      Accumulated deficit                                                        (12,161,149)               (8,172,755)
      Receivable from exercise of stock options                                           --                  (101,250)
                                                                                ------------              ------------
          TOTAL STOCKHOLDERS' EQUITY                                              25,974,993                33,073,616
                                                                                ------------              ------------
                                                                                $ 35,504,753              $ 44,453,764
                                                                                ============              ============

</TABLE>
                See notes to consolidated financial statements.

                                       2
<PAGE>

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

<TABLE>
<CAPTION>
                                                                                       Three Months Ended
                                                                             ----------------------------------------
                                                                              September 30,                October 3,
                                                                                 2000                        1999
                                                                             -------------               ------------
<S>                                                                         <C>                         <C>
CONTINUING OPERATIONS
    NET SALES                                                                $  1,490,157                $  1,900,943

    COST OF GOODS SOLD                                                          1,218,222                   1,548,194
                                                                             ------------                ------------
         GROSS PROFIT                                                             271,935                     352,749

    OPERATING EXPENSES:
         Sales & Marketing                                                      1,234,535                     567,584
         Research & Development                                                 1,141,145                     453,925
         General & Administrative                                               2,435,468                   1,371,047
         Goodwill Amortization                                                         --                     573,534
                                                                             ------------                ------------
                                                                                4,811,148                   2,966,090
                                                                             ------------                ------------
    OPERATING LOSS                                                             (4,539,213)                 (2,613,341)

    OTHER INCOME (EXPENSE):
         Interest Expense                                                         (38,228)                   (100,256)
         Interest Income                                                          584,568                      26,290
         Other Income                                                               4,479                       7,223
                                                                             ------------                ------------
                                                                                  550,819                     (66,743)
                                                                             ------------                ------------
    LOSS FROM CONTINUING OPERATIONS
         BEFORE INCOME TAXES                                                   (3,988,394)                 (2,680,084)
    INCOME TAX BENEFIT                                                                 --                     466,000
                                                                             ------------               -------------
    LOSS FROM CONTINUING OPERATIONS                                            (3,988,394)                 (2,214,084)
                                                                             ------------                ------------
EARNINGS  FROM DISCONTINUED OPERATIONS,
       net of income tax provision of $466,000                                         --                     792,238
                                                                             ------------                ------------
NET LOSS                                                                     $ (3,988,394)               $ (1,421,846)
                                                                             ============                ============

BASIC AND DILUTIVE NET (LOSS)
   EARNINGS PER COMMON SHARE
        LOSS FROM CONTINUING OPERATIONS                                      $       (.23)               $       (.14)

        EARNINGS FROM DISCONTINUED OPERATIONS                                $         --                $        .05
                                                                             ------------                ------------
        NET LOSS PER COMMON SHARE                                            $       (.23)               $       (.09)
                                                                             ============                ============

Weighted average common shares outstanding                                     17,168,585                  15,804,524
</TABLE>

                See notes to consolidated financial statements.

                                       3
<PAGE>

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

<TABLE>
<CAPTION>
                                                                                                   Three Months Ended
                                                                                         --------------------------------------
                                                                                             September 30,         October 3,
                                                                                                 2000                 1999
                                                                                          -------------------     -------------

<S>                                                                                        <C>                     <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net Loss                                                                                    $ (3,988,394)    $ (1,421,846)
     Adjustments to reconcile net loss to net cash (used in) provided by
          operating activities:
              Discontinued operations                                                                (181,826)         895,813
              Depreciation and amortization                                                           348,690          181,444
              Amortization of goodwill                                                                     --          573,534
     Change in current assets and current liabilities:
              Accounts receivable                                                                    (179,846)        (529,596)
              Other current assets                                                                   (440,803)          (1,661)
              Accounts payable                                                                        189,733          325,296
              Accrued payroll and payroll taxes                                                      (281,276)          90,021
              Income taxes and other current liabilities                                             (861,143)         552,814
                                                                                                 ------------     ------------
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES                                                (5,394,865)         665,819

CASH FLOWS FROM INVESTING ACTIVITIES:
     Loans to related parties                                                                         (49,488)        (229,573)
     Collection of notes receivable - related party                                                   385,645               --
     Additions to property and equipment                                                             (516,195)        (133,321)
     Additions to other assets                                                                         (4,419)        (132,500)
                                                                                                 ------------     ------------
NET CASH USED IN INVESTING ACTIVITIES                                                                (184,457)        (495,394)

CASH FLOWS FROM FINANCING ACTIVITIES:
     Purchase of VirtualFund.com common stock                                                      (2,026,963)              --
     Proceeds from exercise of stock options                                                               --            7,813
     Payments of related party notes                                                               (1,638,436)              --
     Net payments borrowing under revolving credit lines                                                   --         (152,167)
     Payments on long-term debt                                                                      (160,706)        (179,040)
                                                                                                 ------------     ------------
NET CASH USED IN FINANCING ACTIVITIES                                                              (3,826,105)        (323,394)
                                                                                                 ------------     ------------
DECREASE IN CASH AND CASH EQUIVALENTS                                                              (9,405,427)        (152,969)

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                                   39,641,785          250,792
                                                                                                 ------------     ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                                                       $ 30,236,358     $     97,823
                                                                                                 ============     ============
</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, 2000. 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
      ended September 30, 2000 are not necessarily indicative of the results
      that may be expected for the year ending June 30, 2001.

2.    Discontinued Operations -

      On June 13, 2000, we sold the Digital Graphics Business Unit ("DGBU") to
      MacDermid Graphic Arts, a division of MacDermid Incorporated
      ("MacDermid"). As a result, all DGBU operations are disclosed herein as
      discontinued operations. We expect to receive at least an additional
      $1,000,000 in fiscal 2001 when consents to assign facility leases to
      MacDermid are received from the lessors. We received approximately $46
      million at closing and anticipate final cash proceeds to be between $46
      million and $48 million once additional post closing transactions are
      settled. Net sales from discontinued operations for the three months ended
      October 3, 1999 were $17,755,060. 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
      liabilities of discontinued operations included in the Consolidated
      Balance Sheets at September 30, 2000 and June 30, 2000 are as follows:

<TABLE>
<CAPTION>
                                                                                  September 30,      June 30,
                                                                                     2000              2000
                                                                                 -------------     -------------
                   <S>                                                           <C>               <C>
                   Accruals for liabilities retained by the
                    Discontinued Operations                                      $   2,085,427     $   2,141,000
                   Accrued severance                                                    53,536           179,789
                                                                                 -------------     -------------
                                                                                 $   2,138,963     $   2,320,789
                                                                                 =============     =============
</TABLE>

3.    Earnings Per Share Calculation -

      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
                                                     --------------------------------------
                                                     September, 30                October 3,
                                                         2000                       1999
                                                      ---------                   ---------
                  <S>                                 <C>                         <C>
                  Stock options                       4,968,301                   5,197,389
                  Warrants                            4,404,953                   3,034,953
                                                      ---------                   ---------
                                                      9,373,254                   8,232,342
                                                      =========                   =========
</TABLE>

                                       5
<PAGE>

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

<TABLE>
<CAPTION>
                                                                            Three Months Ended
                                                                     ----------------------------------
                                                                       September 30,        October 3,
                                                                           2000               1999
                                                                     ---------------       ------------
      <S>                                                            <C>                    <C>
      The Company paid and received cash for the following items:

          Interest paid                                               $  159,777             $   42,266

      Financing transactions not affecting cash:
          Capital lease obligations                                           --                 25,040

          VirtualFund.com common stock purchased not
          settled until after September 30, 2000                       1,083,266                     --

</TABLE>

5.   Subsequent Event -

     In October 2000, we acquired Rymatics Software, LLC for 500,000 shares of
     common stock and approximately $250,000 in cash. Rymatics is a small IT
     services company with 13 employees based in Tulsa, Oklahoma, specializing
     in software engineering, database architectures, user interface design, and
     business development services. Rymatics also operates a data center for web
     hosting. As an RSPNetwork pilot program, we intend to expand operations of
     this Tulsa-based company to increase our technical bandwidth by leveraging
     resources in geographic markets with inherently lower operating costs. We
     intend to continue seeking competitive Cost of Goods Sold operating
     advantages as we expand the global footprint of RSPNetwork, Inc.

     In October 2000, the Board of Directors, with Mr. Masters' abstaining,
     approved a loan to GRAMPI* for $430,000 to be paid back during calendar
     2001 or as approved by the Board of Directors. This loan will bear interest
     at the rate imputed by the U.S. Internal Revenue Service for loans between
     related parties and is guaranteed by Mr. Masters personally.

     In an effort to meet the anticipated customer demand for integration and
     support services of Metiom and additional Supply Chain Management ("SCM")
     tools and applications scheduled for deployment within and connected to the
     B2BXchange Platform, we are currently focusing on increasing the scale and
     scope of the RSPNetwork geographic footprint. RSPNetwork is seeking to
     secure relationships with solution integrators who have expertise in Supply
     Chain Management and related technologies. RSPNetwork intends to train,
     provide B2BXchange integration tools, and aggressively recruit licensed
     Solution Integrator Affiliates specializing in SCM sales, implementation
     and support. B2BXchange.net provides a scalable platform for RSPNetwork
     Affiliates to create and deploy e-business systems within the B2B economy.


     *   GRAMPI is Grandchildren's Realty Alternative Management Program I, LP,
         a Minnesota limited partnership, whose general partner is TimeMasters,
         Inc., a Minnesota corporation wholly owned by Melvin L. Masters.

                                       6
<PAGE>

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

General

We desire to take advantage of the "safe harbor" provisions contained in the
Private Securities Litigation Reform Act of 1995 (the "Act"). This Form 10-Q
contains statements, which are intended as "forward-looking statements" within
the meaning of the Act. The words or phrases "expects", "will continue", "is
anticipated", "we believe", "estimate", "projects", "hope" or expressions of a
similar nature denote forward-looking statements. Those statements are subject
to certain risks and uncertainties that could cause actual results to differ
materially from historical results or results presently anticipated or
projected. Those risks and uncertainties include those discussed in this Form
10-Q. We wish to caution you not to place undue reliance on forward-looking
statements. The factors listed in this Form 10-Q have affected our performance
in the past and could affect future performance. Those factors include, but are
not limited to, the risk that a product may not be available when expected or
may contain technical difficulties; uncertain demand for new or existing
products; the impact of competitor's advertising, products or pricing;
availability of sources of financing; economic developments, both domestically
and internationally; new accounting standards; risks associated with the
acquisition and integration of new businesses; risks related to the
diversification into new Internet software and information technology business;
and, the impact of the initiation, defense and resolution of litigation. Anyone
deciding to invest in our common stock will take on financial risk. In deciding
whether to invest, individuals should carefully consider the factors included in
this Form 10-Q and other information publicly available to them. If we are
unable to implement our plans successfully, we may lose our investment in one or
more of the programs described in this Form 10-Q.

Overview

VirtualFund.com, Inc. ("VirtualFund") is an Internet Venture Resource Company
actively engaged in business-to-business, or B2B, e-commerce. We develop, invest
in, license, and market technology solutions for the Internet-based B2B economy.
Our products and services target SME companies (Small businesses, Middle-market
companies, and Enterprise workgroups) operating on "Internet Time(R)" to provide
Internet technology that can help solve business problems. Our Commerce
Environment Operating System ("CEOS") provides a comprehensive suite of e-
commerce tools and services to electronically enable SME companies to do
business via the Internet. The CEOS platform is used by both our B2BXchange,
Inc. and RSPNetwork, Inc. wholly owned subsidiaries to provide business-to-
business solutions for companies of all sizes.

During the fiscal year ended June 30, 2000, we operated in two business
segments: the Digital Graphics Business Unit ("DGBU") and the Internet Services
Business Unit ("ISBU"). On October 21, 1999 we announced our intention to sell
the DGBU assets and to focus our future efforts on further developing the ISBU.

On June 13, 2000, we completed the sale of the DGBU assets to MacDermid
Incorporated ("MacDermid"). As a result, the DGBU operations are disclosed in
the financial data as discontinued operations. We believe that our new focus on
the Internet and B2B economy will allow us to capitalize on new opportunities
for the Internet-based technologies and business-to-business solutions.

                                       7
<PAGE>

Results of operations

Net Sales. Net sales were $1.5 million for the quarter ended September 30, 2000
and $1.9 million for the quarter ended October 3, 1999. The decrease in net
sales from the prior year is a result of lower VAR ("Value Added Reseller")
product sales, Internet services and consulting. This decrease was partially
offset by an increase in hosting/access and staff augmentation revenues.

<TABLE>
<CAPTION>
                                                                        Quarter Ended                       Quarter Ended
              Net Sales (in thousands)                                September 30, 2000                    October 3, 1999
                                                                  --------------------------           -------------------------
              <S>                                                 <C>            <C>                   <C>            <C>
              RSPNetwork, Inc.:
                VAR Product Sales                                     $  115         7.7%                 $  323        17.0%
                Hosting/Access Revenue                                   419        28.1                     211        11.1
                Remote Support                                           173        11.6                     231        12.1
                Staff Augmentation                                       588        39.5                     504        26.5
                Internet Services                                        194        13.1                     482        25.4
                Consulting and Other                                      --          --                     150         7.9
              B2BXchange Revenue                                           1          --                      --          --
                                                                      ------       -----                  ------       -----
              Total Net Sales                                         $1,490       100.0%                 $1,901       100.0%
                                                                      ======       =====                  ======       =====
</TABLE>

We expect to grow RSPNetwork through acquisitions of Systems Integration ("SI")
companies which have existing revenues or offer technical resources needed to
grow our core capabilities. Due to currently evolving relationships with third
party software suppliers, the fiscal 2001 RSPNetwork acquisition program will be
primarily focused on SI companies with experience in the area of Supply Chain
Management ("SCM") and the implementation of software tools which drive "Zero
Latency of Information Up and Down the Supply Chain.(TM)" We also expect to
generate additional revenues from the progressive introduction of new features
and services within our B2BXchange.net product. In the future, we intend to
generate incremental revenue by licensing some or all of the components of
future versions of our Commerce Environment Operating System(TM) ("CEOS(TM)").
We intend to generate current sales growth in B2BXchange.net from system usage,
application rental, transaction fees, and advertising. Additional revenues are
expected from RSPNetwork resulting from professional services, customization and
integration of backend system activities for B2BXchange.net customers and
third-party referred Supply Chain Management prospects. However, there can be no
assurances that these sales models will be successful or that we will be able to
increase or maintain our existing revenue base.

Gross Margins. Gross margins were 18.2% for the quarter ended September 30, 2000
compared to 18.6% for the quarter ended October 3, 1999. Gross margins for the
quarter ended September 30, 2000 were negatively impacted by B2BXchange.net
startup costs of $198,000 for Web services provided free of charge to B2BXchange
subscribers and $45,000 of other third party supplied content services. There
were no such costs for the quarter ended October 3, 1999. Together, these costs
could be looked at as startup marketing subsidies for new B2BXchange customers
rather than Costs of Goods Sold (COGS) against RSPNetwork revenues. Excluding
such costs, gross margins for RSPNetwork improved to 34.6% in the quarter ended
September 30, 2000 compared to 18.6% for the quarter ending October 3, 1999.
The improvement in gross margins excluding such startup costs was a result of
intentionally lower VAR product sales, which have a low gross margin, and
improved margins on hosting/access, staff augmentation and Internet services. We
anticipate continuing such marketing subsidies for B2BXchange startup customers
for, at least, the balance of fiscal 2001. We intend to continue to focus on
gross margin management and gross margin improvement activities.

                                       8
<PAGE>

We expect gross margins to increase as our 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. We believe B2BXchange.net's Application
Service Provider model (where you write software once, which you can sell many
times) will sustain consistently higher gross margins than the current
RSPNetwork systems integration model. We believe RSPNetwork gross margins will
continue to improve with the addition of a significant portion of new revenues
coming from customization and integration contracts which we expect to enter
into with B2BXchange customers who are seeking value-added services. We intend
to continue to improve and ultimately sustain higher gross margins than
traditional systems integrators, Application Service Providers, and "commodity
Web hosting" operations.

Sales and Marketing. Sales and marketing expenses for the quarter ended
September 30, 2000 were $1.2 million compared to $568,000 for the quarter ended
October 3, 1999. The increase in sales and marketing costs are related to
staffing for vertical marketing of B2BXchange.net, additional marketing
personnel costs, creation of a customer service department to support
B2BXchange.net customers, and advertising and trade show costs to promote the
B2BXchange Platform of 1,800+ vertical market trading communities. This increase
was partially offset by a reduction in sales personnel and related costs for
RSPNetwork. As we pursue our aggressive growth strategy, we expect to incur
increases in expenses for sales and marketing personnel, promotional activities,
and branding for the B2BXchange and RSPNetwork.

Research and Development. Research and development expenses for the quarter
ended September 30, 2000 were $1.1 million compared to $454,000 for the quarter
ended October 3, 1999. The increase in research and development costs was
primarily attributable to increased staffing levels in Product Development for
the CEOS and the B2BXchange.net Platform. To date, all software development
costs have been expensed in the period incurred. We intend to continue investing
resources in product development activities and expect expenditures to increase
in future periods.

General and Administrative. General and administrative expenses for the quarter
ended September 30, 2000 were $2.4 million compared to $1.4 million for the
quarter ended October 3, 1999. The increase in general and administrative costs
was, in part, attributable to increases in personnel costs, legal costs, domain
name amortization costs, facility costs resulting from the DGBU divestiture,
certain former DGBU staffing and related costs retained by us, and other
expenses related to the development of the B2BXchange Platform.

While quarterly General and Administrative expenses have increased by
approximately $1 million year to year for Continuing Operations, post
divestiture of the DGBU, we have retained some personnel previously expensed in
Discontinued Operations and retained some operating obligations of the DGBU not
assumed by MacDermid, to build the infrastructure of Continuing Operations in
advance of revenue development. We believe General and Administrative expenses
will increase in absolute dollars, as we expect to add personnel to support our
expanding operations, and to incur additional costs related to the growth of our
business and to meet our obligations to our customers, partners, employees and
shareholders.

Goodwill Amortization. There was no goodwill amortization for the quarter ended
September 30, 2000 compared to $574,000 for the quarter ended October 3, 1999.
In the fourth quarter of fiscal 2000, management conducted a regular impairment
assessment of the goodwill resulting from the December 1998 acquisition of K&R
Technical Services, Inc. d/b/a/TEAM Technologies. We concluded from our fourth
quarter fiscal 2000 impairment assessment that the discounted expected future
cash flows from the acquired operations would be insufficient to recover the
carrying amount of goodwill and, in accordance with SFAS No. 121, to reduce the
goodwill to fair value which was zero.

Other Income and Expense. Other income was $551,000 for the quarter ended
September 30, 2000 compared to other expense of $67,000 for the quarter ended
October 3, 1999. This increase in other income was primarily attributable to the
investment of cash proceeds from the sale of the DGBU which occurred on June 13,
2000.

                                       9
<PAGE>

Income Taxes. We incurred an operating loss for the quarter ended September 30,
2000. We have recorded a valuation allowance to reduce our deferred tax assets
for nearly all of our deferred tax assets, as management has determined it is
more likely than not that deferred tax assets will not be realized due to lack
of sufficient taxable income. We will continue to assess the need for this
allowance in the future.

Liquidity and Capital Resources

Operating activities consumed cash of $5.4 million for the quarter ended
September 30, 2000 compared to net cash provided by operations of $666,000 for
the quarter ended October 3, 1999. Net cash used in operating activities for the
quarter ended September 30, 2000 consisted primarily of net operating losses and
income tax payments. Net cash provided by operations for the quarter ended
October 3, 1999 were primarily related to the Discontinued Operations.

Net cash used in investing activities was $184,000 for the quarter ended
September 30, 2000 compared to $495,000 for the quarter ended October 3, 1999.
Net cash used in investing activities for the quarter ended September 30, 2000
primarily resulted from additions to equipment partially offset by payments
received on related party notes.

Net cash used in financing activities was $3.8 million for the quarter ended
September 30, 2000 compared to $323,000 for the quarter ended October 3, 1999.
Net cash used in financing activities for the quarter ended September 30, 2000
resulted from our stock repurchase program, repayment of $1.6 million in related
party notes issued in the acquisition of K&R Technical Services, Inc. and other
long-term debt.

The Company is developing a new operating segment in the business-to-business
electronic commerce market. The development of this market has required
substantial cash, which was financed by cash flow from the DGBU until its sale.
The proceeds from the sale will be used to further invest in and grow our
products for electronic commerce. Financing needs will depend on the results of
the continuing operations, expansion through acquisition, and the availability
of new product opportunities. We believe that the proceeds from the DGBU sale
will be sufficient to meet the working capital requirements of our current
business plan through the fiscal 2001 year and into the following year. If such
proceeds and sales from products are not sufficient to fund our technology
programs, operations growth plans and acquisitions, we will be required to seek
additional financing and/or alter our plans related to product development,
business development and acquisitions. Should further capital be required to
fund future technology and operations growth or acquisitions, the Company may
seek to raise additional capital through public or private financing of the
Company or its subsidiaries' stock or through debt financing. We can provide no
assurance that we will be successful in obtaining such financing on acceptable
terms or at all.

Discontinued Operations. We sold the assets of the DGBU to MacDermid in June of
2000 for $50 million in cash (less certain post-closing adjustments as agreed to
by both companies). The transaction provided for MacDermid to assume working
capital assets (DGBU inventory and receivables) and working capital liabilities
(DGBU accounts payable and accrued expenses). A post closing update on activity
now reflects a final settlement amount between $46 million and $48 million. One
million dollars of the final settlement amount had been held back until we
receive consents to assign facility leases to MacDermid from several third-party
lessors. We expect to receive the $1 million payment in the current fiscal year.

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Item 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our exposure to market risk relates primarily to interest rate risk for changes
to our investment portfolio. The primary objective of our investment activities
is to preserve principal while maximizing yields without significantly
increasing risk. This is accomplished by investing all cash and cash equivalents
in a highly liquid money market account and a diversified portfolio of short
term (under 30 days) high quality investment grade securities. Due to the
conservative nature of our investment portfolio, we believe that there is no
material risk exposure.

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                          PART II. OTHER INFORMATION

ITEM 1:  LEGAL PROCEEDINGS

We are involved in legal proceedings related to DGBU customers' credit and
product warranty issues in the normal course of business. In accordance with the
terms of the Asset Purchase Agreement between MacDermid and us, we retain
certain liability relating to claims made by customers who purchased equipment
from the DGBU prior to its sale to MacDermid. In certain proceedings, the
claimants have alleged or may allege claims for exemplary or punitive damages
which may not bear a direct relationship to the alleged actual incurred damages,
and therefore could have a material adverse effect on our business. At this time
none of the proceedings are expected to have a material effect on our operations
or financial condition.

In September 2000, we commenced suit against Jaffray Communications, Inc., doing
business as Vitesse Networks, Inc. ("Vitesse"), and its President and COO, Mark
Kittrell, in Hennepin County, Minnesota District Court for alleged breaches of
the agreements related to our acquisition of K&R Technical Services. The lawsuit
alleges that Mr. Kittrell violated his agreement not to compete against
VirtualFund and its subsidiaries and that he, contrary to his promises, has
recruited away RSPNetwork employees to Vitesse. It also alleges that Vitesse has
interfered with the contract rights of RSPNetwork that were intended to prevent
Mr. Kittrell from competing against RSPNetwork and VirtualFund and from
recruiting employees of RSPNetwork and VirtualFund. Finally, the suit alleges
certain securities law violations and misrepresentations by Mr. Kittrell in
connection with the conversion of VirtualFund preferred stock to common stock.
VirtualFund and RSPNetwork intend to vigorously pursue their claims.

We are involved in disputes and litigation in the normal course of business. We
do not believe that the outcome of those disputes or litigation will have a
material effect on the Company's financial condition or results of operations.
However, an unfavorable outcome of some or all of these matters could have a
material effect on our financial position or results of operations.

See Exhibit 99.1, attached, for additional discussion of risks factors related
to legal proceedings.

ITEM 6:  EXHIBITS AND REPORTS ON FORM 8-K

(a)   Listing of Exhibits

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

(b)   Reports on Form 8-K

      None

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                                  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:  November 13, 2000