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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-QSB
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 For the quarterly period ended: March 31, 2007
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 Commission File Number: 0-28351
 KOLORFUSION INTERNATIONAL, INC.
  COLORADO
    
    84-1317836(State or other jurisdiction of 
incorporation or organization)
    
    (IRS Employer Identification Number)
 16075 E. 32nd Ave. Unit A, CO 80011  (Address and zip code of principal executive offices)
 (303) 340-9994  (Registrants telephone number, including area code)
 þ o
 o þ
 24,309,540 1,076,923




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KOLORFUSION INTERNATIONAL, INC.
 INDEX
 PagePART I
    
    FINANCIAL INFORMATIONItem 1.
    
    Condensed Financial Statements (Unaudited)
    
    
    1Condensed Balance Sheets March 31, 2007 (Unaudited) and June 30, 2006
    
    
    1Condensed Statements of Operations Three and Nine month periods ended March 31, 2007 and 2006 (Unaudited)
    
    
    2Condensed Statements of Cash Flows Nine month periods ended March 31, 2007 and 2006 (Unaudited)
    
    
    3Selected Notes to Condensed Financial Statements (Unaudited)
    
    
    4-8Item 2.
    
    Management's Discussion and Analysis of Financial Condition and Results of Operations
    
    
    9Item 3.
    
    Controls & Procedures
    
    
    11PART II
    
    OTHER INFORMATION
    
    
    12Exhibit 31.1Exhibit 32.1




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KOLORFUSION INTERNATIONAL, INC.
 
 PART I  FINANCIAL INFORMATION
 
 Item 1. FINANCIAL STATEMENTS
 
 CONDENSED BALANCE SHEETS
 March 31,
    
    
    June 30,2007
    
    
    2006(Unaudited)
    
    
    (Audited)ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    10,918
    
    
    $
    139,424Trade accounts receivable, net of allowance for doubtful
accounts of $8,500 and $8,500, respectively
    
    
    197,487
    
    
    
    177,366Inventories
    
    
    227,375
    
    
    
    198,266Prepaid rent
    
    
    12,711
    
    
    
    Total current assets
    
    
    448,491
    
    
    
    515,056LEASEHOLD IMPROVEMENTS AND EQUIPMENT, NET
    
    
    194,584
    
    
    
    87,685OTHER ASSETS:Patents, less accumulated amortization of $3,384,831 and
$3,200,205, respectively
    
    
    307,699
    
    
    
    492,325Other
    
    
    102,600
    
    
    
    104,507Total Other Assets
    
    
    410,299
    
    
    
    596,832Total Assets
    
    $
    1,053,374
    
    
    $
    1,199,573LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)CURRENT LIABILITIES:Accounts payable
    
    $
    154,245
    
    
    $
    175,665Deferred revenue
    
    
    123,777
    
    
    
    296,647Current portion of capital lease obligation
    
    
    22,533
    
    
    
    Current portion of long-term debt
    
    
    398,118
    
    
    
    301,949Accrued expenses
    
    
    20,790
    
    
    
    13,600Accrued expenses due stockholders
    
    
    333,373
    
    
    
    333,373Total current liabilities
    
    
    1,052,836
    
    
    
    1,121,234Capital lease obligation, net of current portion
    
    
    46,992
    
    
    
    Long-term debt, net of current portion
    
    
    555,238
    
    
    
    563,148Deferred revenue
    
    
    20,812
    
    
    
    Total Liabilities
    
    
    1,675,878
    
    
    
    1,684,382STOCKHOLDERS EQUITY (DEFICIT):Preferred stock, $.001 par value, 10,000,000 shares
authorized, 1,076,923 shares issued and outstanding
    
    
    1,077
    
    
    
    1,077Common stock, $.001 par value, 100,000,000 shares
authorized, 24,309,540 shares issued and outstanding
    
    
    24,310
    
    
    
    24,310Additional paid-in capital
    
    
    11,272,382
    
    
    
    11,266,894Accumulated deficit
    
    
    (11,920,273
    )
    
    
    (11,777,090
    )Total Stockholders deficit
    
    
    (622,504
    )
    
    
    (484,809
    )Total Liabilities and Stockholders deficit
    
    $
    1,053,374
    
    
    $
    1,199,573
   1




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KOLORFUSION INTERNATIONAL, INC.
CONDENSED STATEMENTS OF OPERATIONS
 Three Months Ended
    
    
    NIne Months EndedMarch 31
    
    
    March 312007
    
    
    2006
    
    
    2007
    
    
    2006Revenues
    
    $
    356,181
    
    
    $
    317,557
    
    
    $
    1,230,882
    
    
    $
    1,347,605Cost of sales
    
    
    152,379
    
    
    
    195,976
    
    
    
    619,678
    
    
    
    677,007Gross Profit
    
    
    203,802
    
    
    
    121,581
    
    
    
    611,204
    
    
    
    670,598Selling, general and administrative expenses
    
    
    222,410
    
    
    
    274,225
    
    
    
    733,993
    
    
    
    843,826Operating loss
    
    
    (18,608
    )
    
    
    (152,644
    )
    
    
    (122.789
    )
    
    
    (173,228
    )Other income (expenses):
    
    
    
    
    
    
    261
    
    
    
    264
    
    
    
    377Interest Expense
    
    
    (8,830
    )
    
    
    (13,208
    )
    
    
    (20,658
    )
    
    
    (38,503
    )Total Other Expense
    
    
    (8,830
    )
    
    
    (12,947
    )
    
    
    (20,854
    )
    
    
    (38,126
    )Loss before income taxes
    
    $
    (27,438
    )
    
    $
    (165,591
    )
    
    $
    (143,183
    )
    
    $
    (211,354
    )Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net loss
    
    $
    (27,438
    )
    
    $
    (165,591
    )
    
    $
    (143,183
    )
    
    $
    (211,354
    )Net (loss) per common share  basic and diluted
    
    $
    0.00
    
    
    $
    (0.01
    )
    
    $
    (0.01
    )
    
    $
    (0.01
    )Weighted average outstanding shares  basic and
diluted
    
    
    24,309,540
    
    
    
    24,307,453
    
    
    
    24,309,540
    
    
    
    24,180,847
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KOLORFUSION INTERNATIONAL, INC.
CONDENSED STATEMENTS OF CASH FLOWS
 2007
    
    
    2006CASH FLOWS FROM OPERATING ACTIVITIES:Net Loss
    
    $
    (143,183
    )
    
    $
    (211,354
    )Adjustments to reconcile net loss to net cash used in operating activities:Stock compensation
    
    
    5,488Depreciation and amortization
    
    
    198,371
    
    
    
    209,742Loss on disposal of leasehold improvements & equipment
    
    
    45,259Change in operating assets and liabilities(Increase) decrease in trade accounts receivable
    
    
    (20,121
    )
    
    
    135,177Increase in inventories
    
    
    (29,109
    )
    
    
    (105,067
    )Increase in prepaid rent
    
    
    (12,711
    )Decrease in other assets
    
    
    1,907
    
    
    
    86,599(Decrease) increase in accounts payable
    
    
    (21,420
    )
    
    
    154,405Decrease in deferred revenue
    
    
    (152,058
    )
    
    
    (383,611
    )Increase in accrued expenses
    
    
    7,190
    
    
    
    11,763Net cash used in operating activities
    
    
    (120,387
    )
    
    
    (102,346
    )CASH FLOWS FROM INVESTING ACTIVITIES:Purchases of leasehold improvements and equipment
    
    
    (39,173
    )
    
    
    (18,526
    )CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from debt
    
    
    85,000
    
    
    
    Principal payments on capital leases
    
    
    (11,675
    )
    
    
    Net proceeds from preferred stock issuance
    
    
    
    
    
    
    599,644Payments on long-term debt
    
    
    (42,271
    )
    
    
    Net cash provided by financing activities
    
    
    31,054
    
    
    
    599,644Increase (decrease) in cash and cash equivalents
    
    
    (128,506
    )
    
    
    478,772Cash and cash equivalents:Beginning of period
    
    
    139,424
    
    
    
    152,093End of period
    
    $
    10,918
    
    
    $
    630,865SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:Cash payments for interest
    
    $
    20,658
    
    
    $
    36,319NON-CASH TRANSACTIONS:Accrued expenses due stockholder converted to paid in capital
    
    $
    
    
    
    $
    350,000Long-term debt assumed in preferred stock offering
    
    $
    
    
    
    $
    100,000Cash payments for interest
    
    $
    20,658
    
    
    $
    36,319Equipment financed with capital lease obligation
    
    $
    81,200
    
    
    $
    
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KOLORFUSION INTERNATIONAL, INC.
 NOTES TO CONDENSED FINANCIAL STATEMENTS
            4




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KOLORFUSION INTERNATIONAL, INC.
 NOTES TO CONDENSED FINANCIAL STATEMENTS
 Three months ended
    
    
    Nine months endedMarch 31, 2006
    
    
    March 31, 2006Net loss to common shareholders-as reported
    
    $
    (165,591
    )
    
    $
    (211,354
    )Less: total stock-based employee compensation
expense determined under fair value based method for
all awards, net of related tax effects
    
    
    (3,927
    )
    
    
    (9,414
    )Net loss pro-forma
    
    $
    (169,518
    )
    
    
    (220,768
    )Basic & diluted net loss per common share-as reported
    
    $
    (0.01
    )
    
    $
    (0.01
    )Basic & diluted net loss per common share-pro-forma
    
    $
    (0.01
    )
    
    $
    (0.01
    )
    WeightedAverageWeighted
    
    
    
    
    
    
    remainingaverage
    
    
    Aggregate
    
    
    contractualNumber
    
    
    exercise
    
    
    intrinsic
    
    
    termof options
    
    
    price
    
    
    value
    
    
    (years)Outstanding at June 30, 2006
    
    
    2,780,000
    
    
    $
    0.70Granted
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Forfeited or expired
    
    
    (30,000
    )
    
    $
    0.50Outstanding at March 31, 2007
    
    
    2,750,000
    
    
    $
    0.70
    
    
    $
    0.00
    
    
    
    4.64Exercisable at March 31, 2007
    
    
    2,600,000
    
    
    $
    0.68
    
    
    $
    0.00
    
    
    
    4.41
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KOLORFUSION INTERNATIONAL, INC.
 NOTES TO CONDENSED FINANCIAL STATEMENTS
     March 31, 2007
    
    
    June 30, 2006(unaudited)
    
    
    (audited)Unsecured notes payable to related
party, due dates expired and extended
on a month-to-month basis, plus
interest at 12%
    
    $
    100,197
    
    
    $
    94,192Note payable to bank, payable on
demand but no later than July 12,
2007, including interest at 5.50% at
March 31, 2007 collateralized by
substantially all assets and
guaranteed by a Company stockholder
and officer
    
    
    200,000
    
    
    
    201,757Equipment loan payable to a company
in monthly installments of $3,157
through October 2007
    
    
    22,102
    
    
    
    Note payable to bank in monthly
installments of principal and
interest of $3,000 at 10.25% interest
through February 2008. This note is
guaranteed by a Company stockholder
and officer
    
    
    31,523
    
    
    
    Note payable bank in monthly
installments of principal and
interest of $558.46 at 9.75% interest
through September 2008,
collateralized by specific equipment
and guaranteed by a Company
stockholder
    
    
    9,296
    
    
    
    13,910Note Payable to related party at 8%
interest payable $2,500/ month
    
    
    35,000Payable to individual-See detail below
    
    
    555,238
    
    
    
    555,238Totals
    
    $
    953,356
    
    
    
    865,097Less: Current portion
    
    
    (398,118
    )
    
    
    (301,949
    )Long-term debt portion
    
    $
    555,238
    
    
    $
    563,148
 Note Payable to Individual
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KOLORFUSION INTERNATIONAL, INC.
 NOTES TO CONDENSED FINANCIAL STATEMENTS
            7




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KOLORFUSION INTERNATIONAL, INC.
 NOTES TO CONDENSED FINANCIAL STATEMENTS
    8




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KOLORFUSION INTERNATIONAL, INC.
 
 Item 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
       For the Three-Month Period Ended March 31, 2007 compared to the Three-Month Period Ended March
31, 2006.
  For the Nine-Month Period Ended March 31, 2007 compared to the Nine-Month Period Ended March
31, 2006.
   9




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10




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Item 3. CONTROLS & PROCEDURES
   
    11




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PART II  OTHER INFORMATION
 Item 1. Legal Proceeedings
  Item 2. Changes in Securities and Use of Proceeds
  Item 3. Defaults Upon Senior Securities
  Item 4. Submission of Matters to a Vote of Security Holders
  Item 5. Other Information
  Item 6. Exhibits and Reports on Form 8-K
 (a)
    
    Exhibits:
 31.1
    
    
    Certification of Chief Executive Officer and Chief Financial
Officer pursuant to Securities Exchange Act of 1934 Rule
13a-14(a) or 15d-14(a).*32.1
    
    
    Certification of Chief Executive Officer and Chief Financial
Officer pursuant to Securities Exchange Act of 1934 Rule
13a-14(a) or 15d-14(a) as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.*
 (b)
    
    No reports on Form 8-K were filed during the nine months ended March 31, 2007.
 *
    
    Files herewith.
 SIGNATURE
  KOLORFUSION INTERNATIONAL, INC.Date: May 14, 2007
    By:
    /s/ Stephen NagelDirector, President  12




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EXHIBIT INDEX
 ExhibitNo.
    
    Description31.1
    
    Certification of Chief Executive Officer and Chief Financial Officer pursuant
to Securities Exchange Act of 1934Rule 13a-14(a) or 15d-14(a).32.1
    
    Certification of Chief Executive Officer and Chief Financial Officer pursuant
to Securities Exchange Act of 1934Rule 13a-14(a) or 15d-14(a) as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 *
    
    Filed herewith.
  13