As filed with the Securities and Exchange Commission on August 10, 1999
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U.S. Securities and Exchange Commission
Washington, D. C. 20549
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Form 10-SB/A
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g)
of the Securities Exchange Act of 1934
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ICY SPLASH FOOD & BEVERAGE, INC.
(Name of small business issuer in its charter)
New York 11-3329510
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(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Icy Splash Food & Beverage, Inc.
9-15 166th Street, Suite 5-B
Whitestone, New York 11357
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number, (718) 746-3585
Securities to be registered under Section 12(b) of the Act: None
Securities to be registered under Section 12(g) of the Act:
Common Stock, Par Value $0.001 Per Share
(Title of Class)
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Icy Splash Food & Beverage, Inc.
CROSS REFERENCE SHEET
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Item Number and Caption in Form 10-SB Caption in Form 10-SB
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<S> <C> <C>
1. Item 101. Description of Business ......................... Description of Business
2. Item 303. Management's Discussion and Analysis Management's Discussion and
or Plan of Operation ....................................... and Analysis
3. Item 102. Description of Property ......................... Description of Property
4. Item 403. Security Ownership of Certain Security Ownership of Certain
Beneficial Owners and Management ........................... Beneficial Owners and Management
5. Item 401. Directors, Executives Officers, Directors, Executives Officers,
Promoters and Control Persons .............................. Promoters and Control Persons
6. Item 402. Executive Compensation........................... Executive Compensation
7. Item 404. Certain Relationships and Related Certain Relationships and Related
Transactions ............................................... Transactions
8. Item 202. Description of Securities ....................... Description of Securities
9. Item 201. Market for Common Equity and Market for Common Equity and
Related Stockholder Matters ................................ Related Stockholder Matters
10. Item 103. Legal Proceedings ............................... Legal Proceedings
11. Item 304. Changes in and Disagreements with Changes in and Disagreements with
Accountants on Accounting and Financial Accountants and Financial
Disclosure ................................................. Disclosure
12. Item 701. Recent Sales of Unregistered Securities ......... Recent Sales of Unregistered
Securities
13. Item 702. Indemnification of Directors and Indemnification of Directors and
Officers ................................................. Officers
14. Item 601. Index to Exhibits ............................... Index to Exhibits
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Icy Splash Food & Beverage, Inc.
TABLE OF CONTENTS
Part Item Description of Item Page
- ---- ---- -------------------
Part I Item 1 Description of Business ............................. 5
Business Development ........................... 5
Business of the Issuer ......................... 5
Reports to Securities Holders .................. 10
Item 2 Management's Discussion and Analysis and Results of
Operations .......................................... 11
Forward-Looking Statements ..................... 11
Results of Operation ........................... 11
Liquidity and Capital Resources ................ 13
Seasonality .................................... 15
Impact of the Year 2000 on Information Systems . 15
Item 3 Description of Property ............................. 16
Item 4 Security Ownership of Certain Beneficial Owners and
Management .......................................... 16
Item 5 Directors, Executive Officers, Promoters and Control
Persons ............................................. 18
Directors and Executive Officers ............... 18
Business Experience ............................ 18
Directors of Other Reporting Companies ......... 19
Significant Employees .......................... 19
Involvement in Certain Legal Proceedings ....... 19
Item 6 Executive Compensation .............................. 19
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Item 7 Certain Relationships and Related Transactions ...... 20
Item 8 Description of Securities ........................... 20
Common Stock ................................... 20
Preferred Stock ................................ 21
Private Placement Units ........................ 21
"Anti-Takeover" Provisions ..................... 21
Part II Item 1 Market Price of and Dividends on Registrant's Common
Equity and Related Shareholder Matters .............. 22
Market Information ............................. 22
Holders ........................................ 22
Dividends ...................................... 22
Item 2 Legal Proceedings ................................... 22
Item 3 Changes in and Disagreements with Accountants ....... 22
Item 4 Recent Sales of Unregistered Securities ............. 23
Item 5 Indemnification of Directors and Officers ........... 24
Part F/S Item 1 Financial Statements ................................ 26
Part III Item 1 Index to Exhibits ................................... 26
Item 2 Index to Financial Statements........................ 27
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
a. Business Development
Icy Splash Food & Beverage, Inc. is a New York Corporation which was
incorporated on June 17, 1996 (hereinafter, "Icy Splash;" "the Company;" "we;"
"us;" and "our;" will each refer to Icy Splash Food & Beverage, Inc.). We were
authorized to issue an aggregate of 200 shares of no par common stock.
As of May 6, 1998, we were authorized to issue 50,000,000 shares of common
stock with a par value of $0.001 per share and 1,000,000 shares of preferred
stock with a par value of $0.001 per share. As of August 10, 1999, 6,600,000
shares of our authorized shares of common stock were issued and outstanding.
To our knowledge we have not been subject to bankruptcy, receivership or
any similar proceedings.
Icy Splash maintains an office at 9-15 166th Street, Suite 5-B, Whitestone,
New York 11357.
b. Business of the Issuer
In 1997, the United States soft drink industry reported annual sales of
approximately $55 billion. Soft drinks are carbonated beverages, excluding clear
carbonated beverages and natural sodas, which belong to a category called "New
Age" or "Alternative Beverages." Alternative Beverage sales were approximately
$13 billion in 1997. This category of alternative beverages include still
waters, teas, juices, juice drinks, sparkling waters and natural sodas. Icy
Splash is a producer and distributor of Icy Splash soft drinks, an innovative
and refreshing line of carbonated beverages. We market and distribute two lines
of soft drinks: (1) Icy Splash - Clear, a naturally fruit-flavored, clear,
carbonated soda; and (2) Icy Splash - Second Generation, a colored,
fruit-flavored and cola, carbonated soda. The product line is offered to
supermarket chains, grocery stores and convenience stores primarily in the New
York, New Jersey and Connecticut area.
Production and distribution of our products is entirely outsourced.
Independent contractors produce components for production to exact
specifications and ship them to an
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independent co-packer bottling facility. The components include prelabeled
bottles, caps, flavors and preprinted boxes. The product is directly shipped
from the bottling plant in trailer loads to distributors and chain stores. The
direct delivery system has allowed us to eliminate our warehouse facility, which
we maintained until June 1997. This has greatly reduced overhead expenses and
has improved our bottom line.
Acquisition of Distributors: As part of our business operations, we expect
to explore the prospect of acquiring full-service distributors and marketers of
our products and other beverage products. Through direct ownership of
distribution facilities, we believe that it may lower distribution costs and
increase distribution volume of Icy Splash products. Also, the distribution of
large name brand beverages would give management greater negotiating power to
command shelf space for Icy Splash products in more competitive markets. To
date, we have not entered into any agreements or letters of intent to purchase
such entities.
The Product and Marketing: The Company's flagship product, Icy Splash -
Clear, comes in four flavors: Blackberry; Wild Cherry; Lime Kiwi; and Raspberry
& Boysenberry. Icy Splash products are produced using all natural flavors. The
drink is most appealing to young adults, sport fans and health conscious
individuals. We believe that customers from these market segments are generally
well informed and health conscious, and prefer an all-natural flavored drink
with no artificial colors or additives.
We initially created Icy Splash - Clear in order to focus on the clear
carbonated
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beverage industry rather than competing with the larger beverage corporations
who offer a more extensive line of soft drinks. Also, we have marketed Icy
Splash as a leader of "new age" and water beverages in order to distance
ourselves from the more competitive leading soda brand names. Icy Splash - Clear
is strategically placed with bottled water and other alternative beverages on
supermarket shelves to identify with the fast-growing alternative beverage
market segment. The Company packages and distributes Icy Splash - Clear in 24-
packs of plastic 20 oz. bottles, although customers of retailers can purchase
one bottle at a time.
The primary targets for Icy Splash - Clear are the major supermarket chain
stores in the New York, New Jersey and Connecticut area. In order to sell
Icy-Splash - Clear in supermarkets and grocery stores, we must spend money to
obtain shelf space for our product. In other words, the Company must pay
retailers to have the clear products placed on their shelves to be sold for a
set amount of time. This arrangement is standard in "new age" and water beverage
retailing. In addition to shelf space, the retailer will also promote Icy Splash
- - Clear by publishing and distributing coupons and placing promotional displays
on its shelves.
Icy Splash - Second Generation is a new line of soft drinks which was
launched in December of 1998. It comes in 14 flavors including Natural Lemon
Tea; Blue Raspberry; Orange; Pineapple; Fruit Punch; Root Beer; Black Cherry;
Lemon Lime; Grape; Kola Champagne; Strawberry; Peach; Ginger-Ale; and Cola.
Although there are a few cola flavors, most of the line is fruit flavored and
will capitalize on the growth trend for non-cola beverages. This new line of
product has been developed with the same care, quality, and attention to the
desires of consumers as the clear product.
Unlike the clear product, Icy Splash - Second Generation has been developed
for the "Up and Down the Street" market, consisting of neighborhood grocery
stores and small grocery chains in the New York City boroughs. This market
requires a different type of distributor, with only local distributors
functioning effectively in this marketplace. The sales persons typically deal
with the store owners on a weekly basis. Icy Splash - Second Generation is
packaged and distributed in 24-packs of plastic 24 oz. bottles. Most flavors are
also sold in plastic 2 and 3 liter bottles. Again, customers of retailers can
purchase one bottle at a time.
Rather than spending money to obtain shelf space, as required in "new age"
and water retailing to supermarkets and food chains, distributors of Icy Splash
- - Second Generation sell the product to store owners at prices and terms usually
agreed upon on a weekly basis. Furthermore, our distributors promote the product
through product give-away and significant retail price discounting.
Distribution: The primary distributors of our products are I Epstein,
Hadden House and NYSD. The product line is distributed primarily to supermarket
chains, and, to a lesser
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extent, to grocery stores and convenience stores in the New York, New Jersey and
Connecticut area. We currently sell to the following supermarket chain stores:
Waldbaums NY; Key Food NY; Food Town NJ; King Kullen NJ; Edwards NJ; Shop Rite
NJ; C-Town NY; Bravo NY; Associated NY; A&P NY/NJ; Acme NJ; and Drug Fair Cost
Cutters NJ. Our products are also being sold in D'agostino and Gristedes
supermarkets in Manhattan. Some of the aforementioned retailers only carry our
products in the summer months. While Icy Splash enjoys a long term relationship
with I Epstein, Hadden House and NYSD, the loss of these companies as
distributors could have an adverse effect upon our business.
Status of Publicly Announced New Products or Services: To date, we have not
yet begun to sell previously announced new products or services. We had
announced that we will obtain new food and beverage products through development
and acquisition of intellectual property rights, exclusive distribution rights
for domestic and foreign products and distributorships owning rights to viable
products. Although these plans have not yet been fully developed, management
anticipates that future products will be introduced to the public in the near
future, although there can be no assurance.
Competition: The beverage industry is highly competitive. Our products are
sold in competition with all liquid refreshments. The soft drink business is
highly competitive and there can be no assurance that we will be able to compete
successfully. Many of our competitors have far greater financial, operational
and marketing resources than the Company. Furthermore, the soft drink industry
is characterized by rapid changes, including changes in consumer tastes and
preferences, which may result in product obsolescence or short product life
cycles. As a result, competitors may be developing products of which we are
unaware which may be similar or superior to our products. Accordingly, there is
no assurance that we will be able to compete successfully or that our
competitors or future competitors will not develop products that render our
products less marketable.
Competitors in the soft drink industry include bottlers and distributors of
nationally advertised and marketed products as well as chain store and private
label soft drinks. The principal method of competition include brand
recognition, price and price promotion, retail space management, service to the
retail trade, new product introductions, packaging changes, distribution methods
and advertising.
Icy Splash - Clear is primarily competing in the clear carbonated beverage
industry. Our direct competitors are large corporations such as Mystic, Canada
Dry, Adirondack and Crystal Bay. We believe that our flexibility and innovation
in developing and implementing new methods of marketing and distributing our
product will permit us to compete effectively against these competitors.
Icy Splash - Second Generation is primarily competing against bottlers and
distributors of nationally advertised and marketed products, such as Top Pop,
City Club and Stars and Stripes products, as well as chain store and private
label soft drinks. Because of
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greater financial resources, as well greater experience in the soft drink
business, these companies have greater brand recognition of their products.
Management believes that the Company's unique capability to offer products
that are fresh, nutritious, economical and aesthetically appealing to the
consumer will make Icy Splash a viable competitor in the soft drink industry.
Our products will be differentiated from those of our competitors on the basis
of taste, appearance and quality at competitive price points.
Sources and Availability of Raw Materials and Suppliers and Dependence on
Major Customers: We will specialize in production and distribution of soft
drinks. Therefore, the Company will be dependent upon a ready supply of raw
materials including, but not limited to, water, concentrates, syrups, carbon
dioxide, plastic bottles, closures and other packaging materials. The prices for
these materials are determined by the market, and may change at any time.
Furthermore, we are not engaged in any purchasing agreements with our suppliers
which provide for mechanisms alleviating price fluctuations of raw materials.
Therefore, increases in prices for any of these raw materials could have a
material adverse impact on our financial position. While management believes
that there are numerous alternative suppliers for the raw materials, the loss of
a supplier could disrupt the Company's operations. While we believe that
alternatives to these suppliers and manufacturers are readily available, the
time to effect a change could adversely impact our business in the short term
should a change become necessary.
To date, we believe that our business is not dependent on any major
customer.
Patents and Trademarks: The Company's registered trademark is "Icy
Splash(R)". We intend to apply for numerous United States and International
patents, trademarks and copyrights in connection with certain of our products.
Although intellectual property may derive the Company some value, at the present
time, we believe that other factors, such as product innovations, are of more
significance in the Company's particular industry. We attempt to avoid
infringing patents of others by monitoring on a regular basis patents issued
with respect to food processing equipment.
All trademarks or service marks appearing in this Form 10-SB that do not
relate to our products are the property of their respective holders.
Governmental Approval and Effect of Governmental Regulation: The
production, distribution and sale of our products are subject to the Federal
Food, Drug and Cosmetic Act, the Occupational Safety and Health Act and various
federal and state statutes regulating the production, sale, safety, advertising,
labeling and ingredients of such products. Compliance with all such regulations
may be time-consuming and expensive. To the best of management's knowledge, the
Company complies with necessary state and federal laws necessary to operate a
beverage production and distribution company in the
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state of New York.
We cannot predict the impact of possible changes that may be required in
response to future legislation, rules or inquiries made from time to time by
governmental agencies. Food and Drug Administration regulations may, in certain
circumstances, affect the ability of the Company, as well as others in the
industry, to develop and market new products. However, we do not presently
believe that existing applicable legislative and administrative rules and
regulations will have a significant impact on operations.
Employees: Because all production, distribution and marketing of our
products are outsourced to independent contractors, the Company has not hired
any full or part-time employees.
Amount Spent on Research and Development: To date, we have not made any
expenditures for research and development of our products.
Cost and Effects of Compliance with Environmental Laws: We believe that our
current environmental compliance programs adequately address federal, state and
local environmental laws and that we are in compliance with such laws. In all of
our markets, we offer our bottled products in returnable containers in
compliance with applicable recycling laws. Also, in compliance with applicable
recycling laws, we employ the services of various recycling companies to recycle
our used bottles. The cost to the Company of these recycling services were
$2,187.81 in 1997, $3,145.59 in 1998 and $732.61 for the first three months
ended March 31, 1999. Compliance with, or any violation of, current and future
laws or regulations could require material expenditures by us or otherwise have
a material adverse effect on our business.
c. Reports to Security Holders
Prior to filing this Form 10-SB, we have not been required to deliver
annual reports. However, once we become a reporting company, we shall deliver
annual reports to securities holders as required by the Securities Exchange Act
of 1934 (the "Exchange Act"), as amended. Also, we shall deliver annual reports
to securities holders as required by the rules or regulations of any exchange
upon which our shares may be traded. If we are not required to deliver annual
reports, it is not likely that we will go to the expense of producing and
delivering such reports. If we are required to deliver annual reports, such
reports will contain audited financial statements as required.
Prior to the filing of this Form 10-SB, we have not filed reports with the
Securities and Exchange Commission (the "Commission"). Once we become a
reporting company, management anticipates that Forms 3, 4, 5, 10-K-SB, 10-Q-SB,
8-K and Schedules 13D along with appropriate proxy materials will have to be
filed as they come due. If we issue additional shares, then we may file
additional registration statements for those shares.
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The public may read and copy any materials Icy Splash files with the
Commission at the Commission's Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. The public may obtain information on the operation of
the Public Reference Room by calling the Commission at 1-800-SEC-0330. The
Commission maintains an Internet site that contains reports, proxy and
information statements, and other information regarding issuers that file
electronically with the Commission. The Internet address of the Commission's Web
site is http://www.sec.gov.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATION
a. Forward-Looking Statements
Some of the information in this Form 10-SB may constitute forward-looking
statements which are subject to various risks and uncertainties. Such statements
can be identified by the use of forward-looking terminology such as "may,"
"will," "expect," "anticipate," "estimate," "continue," "plan," or other similar
words. These statements discuss future expectations, contain projections of
results of operations or of financial conditions or state other forward-looking
information. Actual results could differ materially from those contemplated by
the forward-looking statements as a result of certain factors, including but not
limited to: competitive factors and pricing pressures; relationships with its
manufacturers and distributors; legal and regulatory requirements; general
economic conditions; and other risk factors which may be described in our future
filings with the Commission. We do not promise to update forward-looking
information to reflect actual results or changes in assumptions or other factors
that could affect those statements. In addition, when considering such
forward-looking statements, you should keep in mind the factors described in
other cautionary statements appearing elsewhere in this Form 10-SB. Such
statements describe circumstances which could cause actual results to differ
materially from those contained in any forward-looking statement.
This Form 10-SB may also include statistical data regarding the beverage
and soft drink industries. This data may have been obtained from industry
publications and reports which we believe to be reliable sources. We have not
independently verified such data nor sought the consent of any organizations to
refer to their reports herein.
b. Results of Operations
Three Months ended March 31, 1999 and March 31, 1998:
Icy Splash's net sales for the three months ended March 31, 1999 and March
31, 1998 were $108,809 and $31,992 respectively, an increase of 240%. The
significant volume for the first three months of 1999 was partially due to the
success of Icy Splash - Second Generation which was introduced in December of
1998. In the three months ended March 31, 1999, sales of
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Icy Splash - Second Generation accounted for approximately 38% of sales of Icy
Splash products. Additionally, the increase in net sales can also be attributed
to the high volume and efficiency of distribution of Icy Splash products through
NYSD which began in January of 1999.
Gross profits for the three months ended March 31, 1999 and 1998 were
$27,310 and $12,866 respectively, an increase of 112%. The increase in gross
profits is attributable to the sharp increase in net sales as discussed above.
General and administrative expenses for the three months ended March 31,
1999 and March 31, 1998 were $10,486 and $9,744 respectively, an increase of
7.6%. Although the Company did not incur any professional fees in 1999, compared
with like expenses of $4,000 for the three months ended March 31, 1998, the
nominal increase in general and administrative expenses in 1999 is attributable
to several factors including but not limited to sharp increases in insurance,
interest, rent and office expenses.
Selling expenses for the three months ended March 31, 1999 and 1998 were
$9,905 and $5,036 respectively, an increase of 96.7%. This increase is primarily
attributable to an increase in freight and delivery expenses which increased
from a credit adjustment of $1,268 for the three months ended March 31, 1998 to
$8,328 for the comparable period in 1999. The increase in freight and delivery
expenses is attributable to the increase in volume of Icy Splash sales in 1999.
Although advertising expenses have decreased from $6,304 for the first three
months of 1998 to only $179 for the first three months of 1999, only the type of
advertising and promotion has changed. During 1998, there were significant
expenditures for advertising media, including video. During 1999, $5,425 of
sales discounts were given to promote sales of the Icy Splash - Second
Generation product line, compared with none in 1998. Sales discounts are
recorded as an offset to sales rather than an advertising expense.
Net income for the three months ended March 31, 1999 was $6,239 compared to
a loss of $2,626 for the comparable period in 1998, an increase of 136%.
Management believes that the increase in net income is due to the aggressive
distribution and marketing of Icy Splash - Second Generation which commenced in
the beginning of 1999.
Years Ended December 31, 1998 and December 31, 1997:
Icy Splash's net sales for the years ended December 31, 1998 and 1997 were
$320,802 and $224,490 respectively, an increase of 43%. Management believes that
this increase resulted from increased market penetration of the Icy Splash brand
in the Northeastern United States through existing distributors and new
distributors. Through our relationship with NYSD, I Epstein and Hadden House
distributors, we have had success in reaching new and more lucrative markets,
including large supermarkets and grocery stores. In addition, we believe that
our intense promotion, including payment of $22,504 for advertising in 1998, an
increase of over 350% from the previous year, resulted in an increase in sales.
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The gross profit in the year ended December 31, 1998 increased to $134,180
from $60,880 the previous year. This represents an increase from 27.1% of sales
in 1997 to 41.8% in 1998. The large increase is attributed predominantly to the
introduction of a new co-packer and increased purchasing power from buying
larger quantities of raw materials.
General and administrative expenses for the years ended December 31, 1998
and December 31, 1997 were $49,381 and $32,304 respectively. The increase was
primarily due to an increase in bad debt expenses. Bad debt expense increased
from $8,402 (3.74% of sales) in 1997 to $16,570 (5.17% of sales) in 1998. Bad
debt expense is a mathematical estimate (or allowance) based on an analysis of
total amounts due and total days outstanding, as well as specific accounts which
may not be collectible. The 1998 estimate reflects only a $10,070 expense for
accounts receivable and a $6,500 expense for a note receivable from a
distributor (customer) dated August 15, 1998, relating to sales in December of
1997. The Company no longer grants credit to that distributor. A $10,070 bad
debt expense for accounts receivable only for 1998 is 3.14% of sales, indicating
a decreasing trend in bad debts. The major components of general and
administrative expenses for the year ended December 31, 1998 were bad debt
expenses of $16,570, automotive expenses of $9,748, telephone expenses of $7,163
and professional fees of $5,000. The major components of the expenses for the
year ended December 31, 1997 were bad debt expenses of $8,402 and administrative
expenses of $5,662.
Selling expenses for the years ended December 31, 1998 and December 31,
1997 were $55,319 and $52,860 respectively. Although selling expenses remained
constant in these periods, freight and delivery expenses declined sharply from
$24,370 in the year ended December 31, 1997 to $11,657 in the year ended
December 31, 1998. This decline was attributable to changing co-packers. The new
co-packer provided plastic bottles, which had previously been purchased from
another vendor and shipped to the co-packer.
Net income for the year ended December 31, 1998 amounted to $26,265 after
the Company incurred a net loss of $24,964 for the year ended December 31, 1997.
The increase in net income was due to management increasing sales by 43% and
gross profit by 14.7%, while increasing sales and general and administrative
expenses by only 26%, from $85,164 in 1997 to $107,235 in 1998. Increases in
sales were due to engaging new and additional distributors in late 1997 and
improved gross profit was achieved by hiring a more efficient co-packer in 1998.
c. Liquidity and Capital Resources:
Three Months Ended March 31, 1999 and March 31, 1998:
Cash flow generated by operations were $(3,076) for the three months ended
March 31, 1999 and $(8,492) for the three months ended March 31, 1998. Negative
cash flow from operating activities for the first three months of 1998 is
primarily attributable to a $20,002 increase in accounts receivable. There was a
decrease in accounts receivable of $16,924 for the comparable period in the
following year which increased cash flow from operating activities. However, a
decrease in accounts payable of $20,297 and an increase in inventories of $7,895
resulted in negative net cash provided by operating activities in 1999.
Cash used for investing activities during the three months ended March 31,
1999 was $2,385 which was primarily used to purchase computer equipment. There
was no cash
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provided or used by investing activities during the same period in 1997.
Cash flow generated from financing activities was $1,866 for the three
months ended March 31, 1999 and $9,227 for the three months ended March 31,
1998. Net cash provided by financing activities decreased due to a significant
increase in deferred offering costs. While proceeds from shareholder loans only
increased by $450 from the first three months of 1998 to the comparable period
in 1999, deferred offering costs increased from $3,323 to $11,134 during the
same periods.
Cash decreased during the three months ended March 31, 1999 by $3,595 and
increased by $735 for the same period in 1998. Although profitable operations
produced a smaller cash usage in 1999 - $3,076 in 1999 compared with $8,492 in
1998 - cash was used to purchase equipment during 1999 and the cost of making
Icy Splash a reporting company in order to engage in proposed financing
activities was nearly $8,000 greater in 1999 than the cost of the Company's
initial private placement offering. See "Recent Sales of Unregistered
Securities."
Years Ended December 31, 1998 and December 31, 1997:
Cash flow generated by operations were $9,698 for the year ended December
31, 1998 and $3,986 for the year ended December 31, 1997. Positive cash flow
from operating activities for the year ended December 31, 1997 was achieved,
despite a net loss of $24,964, primarily due to an decrease in inventories and
an increase in accrued expenses and other current liabilities. With net income
for the year ended December 31, 1998 of 26,265, cash flow from operating
activities increased to $9,698 despite significant increases of $45,822 in
accounts receivable and $25,565 in inventories. This was primarily due to an
increase in accounts payable of $47,557
Cash flow from investing activities were negative for the years ended
December 31, 1998 and 1997. Net cash used in investing activities for the years
ended December 31, 1998 and 1997 were $19,015 and $8,295 respectively. The
significant increase in net cash used in investing activities in 1998 was
primarily due to a sharp increase of $53,620 in notes receivable in 1998 owed by
a co-packer of the Company's products and by a distributor of the Company's
products. Both have agreed with the Company to make their notes current through
alternative payment plans.
Financing cash flows were provided by loans and issuance of stock for the
year ended December 31, 1998. The Company had a negative cash flow from
financing activities of $3,816 for the year ended December 1, 1997 due to
deferred offering costs which exceeded proceeds from shareholder loans. Positive
cash flow from operating activities for the year ended December 31, 1998 was
attributable to proceeds from short-term debt on an unsecured loan aggregating
$100,00 with an annual interest rate of 10%, payable on May 31, 1999. At
December 31, 1998 the loan balance was $65,000. In addition, positive financing
cash flow was attributable to net proceeds of $33,837 raised in a private
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placement offering under Rule 504 of the Securities Act, as amended. In this
offering, 10,000 private placement units were sold, with each unit consisting of
50 shares of common stock at $5.00 per unit, and 95 redeemable stock purchase
warrants ("1998 Private Placement"). Each redeemable stock purchase warrant
entitles the registered holder to purchase one share of the Company's common
stock for $1.00.
We anticipate that a market for trading our securities will be established
on the system of the National Association of Securities Dealers, Inc. known as
the OTC - Bulletin Board (the "Bulletin Board") for the 500,000 shares of common
stock sold in the 1998 Private Placement, although we cannot be certain of this.
If such a market is established, and the market price for our common stock
exceeds the exercise price of our warrants, it may result in the exercise of
950,000 warrants sold in the 1998 Private Placement. There are no assurances
that we will become eligible to be quoted on the Bulletin Board or that a
trading market will be accomplished. The creation of a trading market in our
common stock and warrants may provide us with a basis upon which we can procure
additional capital through an exercise of the warrants or a sale by us of
additional common stock. A failure to create this secondary market for our
shares of common stock may require us to seek other financing. See "Recent Sales
of Unregistered Securities" and "Description of Business - Acquisitions of
Distributors and Strategic Alliances."
d. Seasonality:
The Company's sales are seasonal. The soft drink beverage industry
generally experiences its highest sales by volume during the spring and summer
months and its lowest sales by volume during the winter months. As a result, our
working capital requirements and cash flow vary substantially throughout the
year. Consumer demand for our products are affected by weather conditions. Cool,
wet spring or summer weather could result in decreased sales of our products and
could have an adverse effect on our financial position.
e. Impact of the Year 2000 on Information Systems:
The Year 2000 issue arises as the result of computer programs having been
written, and systems having been designed, using two digits rather than four to
define the applicable year ("Year 2000"). Consequently, such software has the
potential to recognize a date using "00" as the year 1900 rather than the year
2000. This could result in a system failure or miscalculation causing
disruptions of operations, including, among other things, a temporary inability
to process transactions, send invoices, or engage in similar normal business
activities.
We do not expect to be affected by Year 2000 as we do not rely on
date-sensitive software or affected hardware. Our current accounting and other
systems were purchased "off-the-shelf". We intend to timely update our
accounting and other systems which are determined to be affected by Year 2000 by
purchasing Year 2000 compliant software and hardware available from retail
vendors at reasonable cost.
To date, the Company, has not devised a contingency plan for a worst case
scenario resulting from Year 2000. We do not intend to create a contingency plan
at this time since Management has determined that such a contingency plan would
not be cost beneficial to the Company where it only relies on software and
systems for internal accounting purposes.
We have not yet contacted other companies on whose services we depend to
15
<PAGE>
determine whether such companies' systems are Year 2000 compliant. If the
systems of the companies or other companies on whose services we depend,
including our customers, are not Year 2000 compliant, there could be a material
adverse effect on the Company's financial condition or result of operations.
ITEM 3. DESCRIPTION OF PROPERTY
Since December 1997, the Company has been conducting its business from
office space located at 9-15 166th Street, Suite 5-B, Whitestone, New York
11357. This property, aggregating approximately 2,500 square feet, is owned by
Joseph Aslan. From January 1, 1999 to July 1, 1999, we also occupied office
space leased by one of our distributors. We discontinued use of such office
space and continued to operate all of our business from the office space owned
by Mr. Aslan. To date, the Company has not made any lease payments for the use
of office space owned by Mr. Aslan or leased by the distributor.
We have signed an agreement to purchase a commercial property located at
494-504 Wortman Avenue, Brooklyn, New York 11208. There is a commercial building
situated on the premises, aggregating approximately 25,000 square feet, which
will provide warehouse and office space for a majority of our business
operations. Adjacent to the building lies a parcel of land aggregating
approximately 20,000 square feet which we may decide to develop for business
purposes at a later date. The purchase price for the premises is $800,000. We
have received an inducement resolution acknowledging that the New York City
Industrial Development Agency will provide certain tax benefits to us if we
acquire the property. The closing date for the purchase has not yet been
determined.
We intend to finance the purchase of the property through mortgage loans
for the entire acquisition cost, although we have not yet received any loan
commitment offers. However, our two principal shareholders, Joseph Aslan and
Shlomo Aslan, have agreed to provide financing if we do not obtain a mortgage
loan, or to lend to us the shortfall between any mortgage loan received and the
acquisition costs.
We intend to cover a major portion of the carrying costs for the property
by leasing a portion of the premises to NYSD and other companies which are
affiliates of Joseph Aslan and Shlomo Aslan. We believe that ownership of the
property will not materially change our operating costs.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of shares of voting
stock of
16
<PAGE>
Icy Splash, as of August 10, 1999, of (i) each person known by Icy Splash to
beneficially own 5% or more of the shares of outstanding common stock; (ii) each
of Icy Splash's executive officers and directors; and (iii) all of Icy Splash's
executive officers and directors as a group. Except as otherwise indicated, all
shares are beneficially owned, and investment and voting power is held by the
persons named as owners.
Amount and
Name and Address of Nature of Shares Percentage
Title of Class Beneficial Owner Beneficially Owned Ownership
- -------------- ---------------- ------------------ ---------
Common Joseph Aslan(1)(2)(6) 2,970,000 45%
Common Shlomo Aslan(1)(3)(6) 2,970,000 45%
Common Sy Aslan(1)(4)(6) 100,000 1.5%
Common Charles Tokarz(1)(5)(7) 20,000 0.30%
Common All officers and 6,060,000 91.8%
directors as a group(4
persons)
- ----------
(1) The business address for Joseph Aslan, Shlomo Aslan and Charles Tokarz
is 9-15 166th Street, Suite 5B, Whitestone, New York 11357.
(2) Joseph Aslan serves as the Company's President and as a Director.
(3) Shlomo Aslan serves as the Company's Vice President, Secretary and as
a Director.
(4) Sy Aslan serves as a Director of the Company.
(5) Charles Tokarz serves as the Company's Chief Financial Officer,
Treasurer and as a Director.
(6) Joseph, Shlomo and Sy Aslan are brothers.
(7) Charles Tokarz has the right to acquire beneficial ownership of these
20,000 shares of common stock pursuant to a consulting agreement dated
April 1, 1998. These shares have not yet been issued. See "Certain
Relationships
17
<PAGE>
and Related Transactions."
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS
a. Directors and Executive Officers:
As of May 21, 1999, the directors and executive officers of the Company,
their ages, positions in the Company and the dates of their initial election or
appointment as director or executive officer are as follows:
Positions and Offices Presently Held with
Name Age the Company
- ---- --- -----------
Joseph Aslan 44 President, Director
Shlomo Aslan 50 Vice President, Secretary, Director
Charles Tokarz 52 Chief Financial Officer, Treasurer, Director
Sy Aslan 55 Director
b. Business Experience
Joseph Aslan has served as the Company's President and Director since the
Company's inception in July of 1996. Prior to joining the Company, from 1994 to
1996, Mr. Aslan was the co-owner and manager of Tribeca Classics, Inc., his
family-owned textile business. Mr. Aslan has over 15 years of experience in
finance and business management.
Shlomo Aslan has served as the Vice President, Secretary and Director of
the Company since the Company's inception in July of 1996. Prior to joining the
Company, from 1994 to 1996, Mr. Aslan was the co-owner of Tribeca Classics,
Inc., his family textile business. He has more than 25 years of business
ownership experience, particularly in the restaurant and textile business. Mr.
Aslan holds a BA in Accounting.
Charles Tokarz is the Chief Financial Officer, Treasurer and Director of
the Company. He has held this position since April of 1998. Prior to joining the
Company, Mr. Tokarz served, from 1997 to 1998 as Chief Financial Officer and
Treasurer for Silver Star International, Inc., a publicly traded wholesale
distributor of clothing and novelty items. From 1987 to 1997, he was
self-employed as a Certified Public Accountant ("CPA"). From 1986 to 1987, Mr.
Tokarz served as President of Gardner Capital, Corp., a small NASD broker-dealer
specializing in equity financing for real estate projects. From 1984 to 1986, he
served as Vice President of Finance for Retirement Corporation of America, a
developer and manager of elderly housing and nursing home facilities. From 1978
to 1984, he served as Vice President and Controller for Fininvest, Ltd. and
Appalachian Joint Venture,
18
<PAGE>
developers of luxury condominiums and office buildings. From 1976 to 1978, he
served as Comptroller of the California Club, Inc., a country club owned by
Caesar's World, Inc., a Company listed on the New York Stock Exchange. He is a
CPA and has over 20 years of business, financial and financial planning
experience. Mr. Tokarz holds a BS and an MBA.
Sy Aslan is a Director. He has held this position since the Company's
incorporation in July of 1996. Since 1989, he has served as Director of
Operations of United Management Technologies, a consulting firm focusing on
developing and supporting effective management practices. He has been involved
in the development and implementation of strategic management solutions for
numerous Fortune 500 financial institutions for over 20 years. Mr. Aslan holds
BS and MS degrees in management and Industrial Engineering.
c. Directors of Other Reporting Companies
None of the directors are directors of other reporting companies.
d. Significant Employees
The officers and directors who are identified above are the significant
employees of the Company.
e. Involvement in Certain Legal Proceedings
None of the officers and directors of the Company have been involved in the
past 5 years in any of the following:
(1) Bankruptcy proceedings; or
(2) Subject to criminal proceedings or convicted of a criminal act; or
(3) Subject to any order, judgment or decree entered by any Court for
violating any laws relating to business, securities or banking
activities; or
(4) Subject to any order for violation of federal or state securities laws
or commodities laws.
ITEM 6. EXECUTIVE COMPENSATION
To date, management has not collected any compensation from the Company. No
other executive officers earned over $100,000 in any fiscal year.
19
<PAGE>
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
At December 31, 1997, Icy Splash was owed $13,466 by a former shareholder.
As of December 31, 1997 we deemed this receivable uncollectible and accordingly
reserved 100% as a bad debt.
On January 18, 1998, we authorized the issuance of 2,970,000 shares of
common stock to Joseph Aslan and 2,970,000 shares of common stock to Shlomo
Aslan in forgiveness of loans extended to the Company by the Aslans in the
amount of $210,000.
On March 19, 1998, we entered into a consulting agreement with Charles
Tokarz, our Chief Financial Officer, Treasurer and director, for services
rendered as Chief Financial Officer. The agreement provides that beginning March
20, 1998, Mr. Tokarz would provide services to the Company including assistance
in correspondence and due diligence, liaisons with auditors, assistance in
preparation of financial projections and assumptions, review of accounting
reports and systems, analysis of acquisitions and preparation of quarterly
unaudited financial statements. In consideration for these services, Icy Splash
would provide payments of: (i) 20,000 shares of Icy Splash common stock; (ii) a
retainer of $500; and (iii) payment of $35.00 per hour for services rendered as
Chief Financial Officer.
ITEM 8. DESCRIPTION OF SECURITIES
We are authorized to issue 50,000,000 shares of common stock, with a par
value of $0.001 per share, and 1,000,000 shares of preferred stock, with a par
value of $0.001 per share.
a. Common Stock:
Holders of common stock do not have subscription, redemption, conversion or
preemptive rights. The shares of common stock held by shareholders are fully
paid and non-assessable. Each share of common stock is entitled to
20
<PAGE>
participate pro rata in distribution upon liquidation, subject to the rights of
holders of preferred stock, and to one vote on all matters submitted to a vote
of shareholders. The shareholders of common stock may receive cash dividends as
declared by the Board of Directors out of funds legally available therefor,
subject to the rights of any shareholders of preferred stock. Shareholders of
common stock are entitled to elect all directors.
b. Preferred Stock:
The Company's certificate of incorporation, as amended, authorizes the
issuance of up to 1,000,000 shares of preferred stock, with a par value of
$0.001 per share. The preferred stock shall have such voting rights,
designations, preferences and relative participating, optional or other rights,
qualifications, limitations or restrictions as may be determined and set forth
in resolution or resolutions adopted from time to time by the Board of Directors
of the Company.
c. Private Placement Units:
On January 20, 1998, we issued an aggregate of 10,000 units pursuant to
Rule 504 under Regulation D of the Securities Act, as amended. Each unit
consists of 50 shares of common stock at $5.00 per unit, and 95 redeemable stock
purchase warrants. Each redeemable stock purchase warrant entitles the
registered holder to purchase one share of the Company's common stock for $1.00.
The exercise price of the warrants and the number of shares issuable upon
exercise of such warrants is subject to adjustment to protect against dilution
in the event of stock dividends, stock splits, combinations, subdivisions and
reclassification. Furthermore, the Company may redeem the warrants at a price of
$.01 per warrant by giving not less than 30 days prior written notice to the
record holders if the closing bid price of the common stock equals or exceeds
$2.50 for the 10 consecutive trading days ending on the third day prior to the
date on which the notice of redemption is given. In the event the Company
notifies record holders of its intent to redeem any warrants, the record holders
may exercise at any time prior to the close of business on the day immediately
preceeding the date fixed for redemption provided that there is a registration
statement in effect or there is an exemption from such registration. Unless
extended by the Company at its discretion, the warrants will expire on January
20, 2000. The Company reserves the right to lower the exercise price of the
warrants, which reduction may be for a limited time, not less than 60 days, or
the balance of the term of the warrants.
d. "Anti-Takeover" Provisions:
Although management is not presently aware of any takeover attempts, our
Certificate of Incorporation defers to provisions in the New York Business
Corporation Law (the "B.C.L.") which may be deemed to be "anti-takeover" in
nature in that such provisions may deter, discourage or make more difficult the
assumption of control of the Company by another entity or person.
21
<PAGE>
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS
a. Market Information
The common stock of Icy Splash currently is not trading on any exchange.
Management anticipates that the Company's shares will be qualified on the
Bulletin Board.
There has been no market for the Company's stock in the last two years.
Accordingly, the Company has no range of high and low bid prices for the
Company's common stock to report.
b. Holders
There were 35 holders of record of the Company's common stock as of August
10, 1999.
c. Dividends
The Company has never paid cash dividends on its stock and does not intend
to do so in the foreseeable future. We currently intend to retain our earnings
for the operation and expansion of the business. Our continued need to retain
earnings for operations and expansion are likely to limit our ability to pay
dividends in the future.
ITEM 2. LEGAL PROCEEDINGS
On March 19,1997, we filed suit against Icy Splash, Inc., a predecessor of
the Company, and a former shareholder of Icy Splash, Inc. This case is presently
pending in the Supreme Court, Kings County. The Company secured a preliminary
injunction against the defendants enjoining them from misappropriating the
Company's intellectual property rights including the use of the trademark "Icy
Splash." The defendants initially filed a notice of appeal relating to the
injunction. However, their time to perfect the appeal has expired. The case to
convert the preliminary injunction to a permanent injunction is proceeding on
the merits. Management believes that this suit will be resolved in favor of the
Company, although there can be no assurance.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
There have been no disagreements with our independent accountants over any
item involving the Company's financial statements. Our independent accountants
are Lazar
22
<PAGE>
Levine & Felix LLP, Certified Public Accountants, 350 Fifth Avenue, Suite 6820,
New York, NY 10118-0170.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
On January 20, 1998, we issued an aggregate of 10,000 private placement
units pursuant to Rule 504 under Regulation D of the Securities Act, as amended.
All 10,000 units were sold to a total of thirty investors. We received $33,837,
net of commission and offering costs.
Each unit consists of 50 shares of common stock at $5.00 per unit, and 95
redeemable stock purchase warrants. Each redeemable stock purchase warrant
entitles the registered holder to purchase one share of the Company's common
stock for $1.00. See "Description of Securities - Private Placement Units."
All 10,000 private placement units were sold to a total of thirty investors
as follows:
Date of Number of Units
Purchaser Purchase Purchased
- --------- -------- ---------
Arvin Scott 4/4/98 400
Steven Michaels 4/16/98 400
Meshulam Elmaliach 3/24/98 100
Tova Sadka 3/25/98 300
Gatznyo Moshe 4/3/98 400
Emile Ohayon 3/24/98 200
George Tsatsos 4/4/98 400
Yehuda Tzur 4/9/98 400
Debra Millman 5/6/98 300
Bianka Dalal 5/7/98 300
Victoria Tokarz 7/30/98 600
Robert and Karen Eaves 9/3/98 1,000
Dennis Olden 9/10/98 300
Edward Roach and Elizabeth Cronin 9/14/98 500
23
<PAGE>
Elaine O'Neil 9/14/98 250
John J. O'Neil 9/14/98 250
John A. O'Neil 9/14/98 500
Donna O'Neil 9/14/98 500
George Gerson 9/15/98 500
Deborah Kline 9/17/98 400
Arthur Krepps, III 9/18/98 500
Krista Killius 10/2/98 100
James Killius 10/2/98 100
Gina Russo 10/8/98 100
W. Gordon and Sharon Freeman 10/8/98 100
Huon Consulting, Inc. 10/8/98 500
Quinn Truckenbrod 10/3/98 100
Mia Truckenbrod 10/3/98 100
Diane Leon Pekarek 10/9/98 200
Bruce Pekarek 10/9/98 200
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our Certificate of Incorporation contains certain provisions permitted
under the B.C.L. relating to the liability of directors. The provisions
eliminate a director's liability for monetary damages for a breach of fiduciary
duty, except in certain circumstances involving wrongful acts, such as the
breach of a director's duty of loyalty or acts or omissions which involve
intentional misconduct or a knowing violation of law. Our Certificate of
Incorporation also contains provisions obligating the Company to indemnify its
directors and officers to the fullest extent permitted by the B.C.L.
Such indemnification provisions are intended to increase the protection
provided to directors and, thus, increase our ability to attract and retain
qualified persons to serve as directors. Because directors liability insurance
is only available at considerable cost and with low dollar limits of coverage
and broad policy exclusions, we do not currently maintain a liability insurance
policy for the benefit of our directors, although we may attempt to
24
<PAGE>
acquire such insurance in the future. We believe that the substantial increase
in the number of lawsuits being threatened or filed against corporations and
their directors and the general unavailability of directors liability insurance
to provide protection against the increased risk of personal liability resulting
from such lawsuits have combined to result in a growing reluctance on the part
of capable persons to serve as members of boards of directors of companies,
particularly of companies which intend to become public companies. We also
believe that the increased risk of personal liability without adequate insurance
or other indemnity protection for our directors could result in overcautious and
less effective direction and management of Icy Splash. Although no directors
have resigned or have threatened to resign as a result of our failure to provide
insurance or other indemnity protection from liability, it is uncertain whether
our directors would continue to serve in such capacities if improved protection
from liability were not provided.
The provisions affecting personal liability do not abrogate a director's
fiduciary duty to Icy Splash and its shareholders, but eliminates personal
liability for monetary damages for breach of that duty. The provisions do not,
however, eliminate or limit the liability of a director for failing to act in
good faith, for engaging in intentional misconduct or knowingly violating a law,
for authorizing the illegal payment of a dividend or repurchase of stock, for
obtaining an improper personal benefit, for breaching a director's duty of
loyalty (which is generally described as the duty not to engage in any
transaction which involves a conflict between the interest of the Company and
those of the director) or for violations of the federal securities laws. The
provisions also limit or indemnify against liability resulting from grossly
negligent decisions including grossly negligent business decisions relating to
attempts to change control of the Company.
The provisions regarding indemnification provide, in essence, that we will
indemnify our directors against expenses (including attorney's fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred in
connection with any action, suit or proceeding arising out of the director's
status as a director of Icy Splash, including actions brought by or on behalf of
the Company (shareholder derivative actions). The provisions do not require a
showing of good faith. Moreover, they do not provide indemnification for
liability arising out of willful misconduct, fraud, or dishonesty, for
"short-swing" profits violations under the federal securities laws, or for the
receipt of illegal remuneration. The provisions also do not provide
indemnification for any liability to the extent such liability is covered by
insurance. One purpose of the provisions is to supplement the coverage provided
by such insurance. However, as mentioned above, we do not currently provide such
insurance to our directors, and there is no guarantee that we will provide such
insurance to our directors in the near future, although we may attempt to obtain
such insurance.
These provisions diminish the potential rights of action which might
otherwise be available to shareholders by limiting the liability of officers and
directors to the maximum extent allowable under New York law and by affording
indemnification against most damages and settlement amounts paid by a director
of the Company in connection with any
25
<PAGE>
shareholder derivative action. However, the provisions do not have the effect of
limiting the right of a shareholder to enjoin a director from taking actions in
breach of his fiduciary duty, or to cause the Company to rescind actions already
taken, although as a practical matter courts may be unwilling to grant such
equitable remedies in circumstances in which such actions have already been
taken. Also, because we do not presently have directors liability insurance and
because there is not assurance that we will retain such insurance or that if
such insurance is procured it will provide coverage to the extent directors
would be indemnified under the provision, we may be forced to bear a portion or
all of the cost of the director's claims for indemnification under such
provisions. If we are forced to bear the cost for indemnification, the value of
our stock may be adversely affected.
Insofar as indemnification for liabilities arising under the Securities
Act, as amended, may be permitted to directors, officers and controlling persons
of Icy Splash pursuant to the foregoing provisions, or otherwise, Icy Splash has
been advised that such indemnification, in the opinion of the SEC, is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable.
We believe that these provisions will assist the Company in attracting and
retaining qualified individuals to serve as directors.
PART F/S
ITEM 1. FINANCIAL STATEMENTS
For information regarding this item, reference is made to the "Index of
Financial Statements."
PART III
ITEM 1. INDEX TO EXHIBITS
The following is a complete list of exhibits which have been previously
filed as exhibits to the Company's report on Form 10-SB dated May 21, 1999 and
are incorporated by reference as part of this registration statement.
Assigned
Number Description of Exhibit
- ------ ----------------------
3.1 ........... Certificate of Incorporation.
3.2 ........... Certificate of Amendment of Certificate of Incorporation,
dated April 20, 1999.
3.3 ........... By-Laws.
10.1 .......... Revised Financial Consulting Agreement between Icy Splash
and The Southern Companies, dated April 27, 1999.
10.2 .......... Consulting Agreement between Icy Splash and Charles Tokarz,
dated March 19, 1998.
10.3 .......... Contract of Sale for 494-504 Wortman Avenue, Brooklyn, N.Y.
11208.
26
<PAGE>
ITEM 2 INDEX TO FINANCIAL STATEMENTS
The following documents are filed as part of this Registration Statement:
Assigned
Number Description of Exhibit
- ------ ----------------------
F-1 .............. Internal Preparer's Letter for Unaudited Financial
Statements for the three months ended March 31, 1999 and
1998.
F-2 .............. Unaudited Balance Sheets as of March 31, 1999 and 1998.
F-3 .............. Unaudited Statements of Operations for the three months
ended March 31, 1999 and 1998.
F-4 .............. Unaudited Statements of Changes in Shareholders' Equity for
the three months ended March 31, 1999 and 1998.
F-5 .............. Unaudited Statements of Cash Flows for the three months
ended March 31, 1999 and 1998.
F-6 to F-10....... Notes to Financial Statements for the three months ended
March 31, 1999 and 1998.
F-11 ............. Unaudited Schedules Supporting Statements of Operations for
the three months ended March 31, 1999 and 1998.
F-14.............. Independent Auditors' Report for Audited Financial
Statements for the years ended December 31, 1998 and 1997.
F-15.............. Audited Balance Sheets for the years ended December 31, 1998
and 1997.
F-16 ............. Audited Statements of Operations for the years ended
December 31, 1998 and 1997.
F-17 ............. Audited Statements of Changes in Shareholders' Equity for
the years ended December 31, 1998 and 1997.
F-18 ............. Audited Statements of Cash Flow for the years ended December
31, 1998 and 1997.
F-19 to F-23...... Notes to Financial Statements for the years ended December
31, 1998 and 1997.
F-24 ............. Independent Auditors' Report on Supplemental Information for
the years ended December 31, 1998 and 1997.
F-25 ............. Audited Schedules Supporting Statements of Operations for
the years ended December 31, 1998 and 1997.
27
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized.
Date: August 10, 1999
ICY SPLASH FOOD & BEVERAGE, INC.
By: /s/ Joseph Aslan
----------------------------
Joseph Aslan, President
By: /s/ Shlomo Aslan
----------------------------
Shlomo Aslan, Secretary
28
<PAGE>
ICY SPLASH FOOD AND BEVERAGE, INC.
FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
<PAGE>
Icy Splash Food and Beverage, Inc.
INTERNAL PREPARER'S LETTER
The Board of Directors
Icy Splash Food and Beverage, Inc.
The attached balance sheet of Icy Splash Food and Beverage, Inc. ("the Company")
as of March 31, 1999 and 1998, and the related statements of operations,
shareholders' equity and cash flows for the periods then ended were prepared
internally, in accordance with generally accepted accounting principles, from
the Company's accounting records by Company personnel and have not been audited.
The most recent audit was conducted as of December 31, 1998.
I am aware of no material errors or misrepresentations in the statements as to
the financial position of Icy Splash Food and Beverage, Inc.
/s/ Charles Tokarz
Chief Financial Officer
April 30, 1999
F-1
<PAGE>
ICY SPLASH FOOD AND BEVERAGE, INC.
BALANCE SHEETS
AS OF MARCH 31, 1999 AND 1998
<TABLE>
<CAPTION>
- ASSETS -
1999 1998
--------- ---------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 16,719 $ 735
Accounts receivable, net of allowance for doubtful accounts of
$4,163 and $0 for 1999 and 1998, respectively 52,909 79,627
Notes receivable (Note 3) 34,110
Inventory (Note 2d) 68,776 29,216
Prepaid expenses 3,000 3,000
--------- ---------
TOTAL CURRENT ASSETS 175,514 112,578
FIXED ASSETS (Note 2c):
Warehouse equipment 5,000 5,000
Office equipment 12,279 5,945
--------- ---------
17,279 10,945
Less: accumulated depreciation 5,423 2,645
--------- ---------
11,856 8,300
OTHER ASSETS:
Deferred offering costs (Note 2e) 73,784 31,209
--------- ---------
$ 261,154 $ 152,087
========= =========
- LIABILITIES AND SHAREHOLDERS' EQUITY -
CURRENT LIABILITIES:
Notes payable (Note 4) $ 65,000 $ --
Accounts payable 33,603 14,286
Accrued expenses and other current liabilities 15,140 25,819
Income taxes payable 454 --
--------- ---------
TOTAL CURRENT LIABILITIES 114,197 40,105
LONG-TERM LIABILITIES
Shareholders' loans (Note 6) 13,000 46,992
--------- ---------
COMMITMENTS AND CONTINGENCIES (Note 7)
SHAREHOLDERS' EQUITY (Note 5):
Preferred stock, $.001 par value, 1,000,000 shares authorized,
zero shares issued and outstanding for 1999 and 1998 -- --
Common stock, $.001 par value, 50,000,000 shares authorized, 6,600,000
and 6,193,833 shares issued and outstanding for 1999 and 1998, respectively 6,600 6,100
Additional paid-in capital 237,237 203,900
Accumulated deficit (109,880) (145,010)
--------- ---------
133,957 64,990
--------- ---------
$ 261,154 $ 152,087
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
ICY SPLASH FOOD AND BEVERAGE, INC.
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
1999 1998
-------- --------
NET SALES (Note 5) $108,809 $ 31,992
COST OF SALES 81,499 19,126
-------- --------
GROSS PROFIT 27,310 12,866
OPERATING EXPENSES (Note 5):
Selling expenses - Schedule 1 9,905 5,036
General and administrative expenses - Schedule 2 10,486 9,744
-------- --------
20,391 14,780
-------- --------
INCOME FROM OPERATIONS 6,919 (1,914)
Provision for income taxes (Note 2f) 680 712
-------- --------
NET INCOME $ 6,239 $ (2,626)
======== ========
EARNINGS (LOSS) PER SHARE (Note 2k):
Basic $ -- $ --
======== ========
Diluted $ -- $ --
======== ========
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
ICY SPLASH FOOD AND BEVERAGE, INC.
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
<TABLE>
<CAPTION>
Common Stock Additional
--------------------- Paid-in Accumulated
Shares Amount Capital Deficit Total
----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1998 6,600,000 $ 6,600 $ 237,237 $(116,119) $ 127,718
Net income, March 31, 1999 -- -- -- 6,239 6,239
--------- --------- --------- --------- ---------
BALANCE, MARCH 31, 1999 6,600,000 $ 6,600 $ 237,237 $(109,880) $ 133,957
========= ========= ========= ========= =========
Balance, December 31, 1997 6,100,000 $ 6,100 $ 203,900 $(142,384) $ 67,616
Net loss, March 31, 1998 -- -- -- (2,626) (2,626)
--------- --------- --------- --------- ---------
BALANCE, MARCH 31, 1998 6,100,000 $ 6,100 $ 203,900 $(145,010) $ 64,990
========= ========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
ICY SPLASH FOOD AND BEVERAGE, INC.
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS:
CASH FLOWS FROM OPERATING ACTIVITIES:
Net profit (loss) $ 6,239 $ (2,626)
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation 750 550
Changes in assets and liabilities:
Decrease (increase) in accounts receivable 16,924 (20,002)
Decrease (increase) in inventories (7,895) 6,100
Increase (decrease) in accounts payable (20,297) 7,943
Increase (decrease) in accrued expenses and other current liabilities 1,203 (457)
-------- --------
Net cash provided by operating activities (3,076) (8,492)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets (2,885) --
Repayments of note receivable 500 --
-------- --------
Net cash used in investing activities (2,385) --
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from shareholder loans 13,000 12,550
Deferred offering costs (11,134) (3,323)
-------- --------
Net cash provided by financing activities 1,866 9,227
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (3,595) 735
Cash and cash equivalents, at beginning of period 20,314 --
-------- --------
CASH AND CASH EQUIVALENTS, AT END OF PERIOD $ 16,719 $ 735
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash during the period for:
Income taxes paid $ -- $ 680
Interest paid $ -- $ --
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
ICY SPLASH FOOD AND BEVERAGE, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
NOTE 1 - NATURE OF BUSINESS:
Icy Splash Food and Beverage, Inc. (the "Company") is the
producer and distributor of an all natural, fruit flavored, clear
and colored, carbonated, refreshing soft drink. The product line
is currently supplied in a variety of flavors to supermarkets,
grocery stores and convenience stores in the tri-state area. The
Company was incorporated in the State of New York on June 17,
1996.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The Company's accounting policies are in accordance with
generally accepted accounting principles. Outlined below are
those policies considered particularly significant.
(a) Use of Estimates:
In preparing financial statements in accordance with generally
accepted accounting principles, management makes certain
estimates and assumptions, where applicable, that affect the
reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial
statements, as well as the reported amounts of revenues and
expenses during the reporting period. While actual results could
differ from these estimates, management does not expect such
variances, if any, to have a material effect on the financial
statements.
(b) Concentration of Credit Risk/Fair Value:
Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of cash.
The Company, from time-to-time, may maintain cash balances which
exceed the federal depository insurance coverage limit. The
Company performs periodic reviews of the relative credit rating
of its bank to lower its risk.
The carrying amounts of cash, accounts receivable, accounts
payable and accrued expenses approximate fair value due to the
short-term nature of these items.
(c) Fixed Assets and Depreciation:
Fixed assets are reflected at cost. Depreciation and amortization
are provided on a straight-line basis over the following useful
lives:
Warehouse equipment 5 years
Office equipment 5 years
Maintenance and repairs are charged to expense as incurred; major
renewals and betterments are capitalized.
F-6
<PAGE>
ICY SPLASH FOOD AND BEVERAGE, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):
(d) Inventories:
Inventories are stated at the lower of cost or market (first-in
first-out method) and consist of finished product as well as raw
materials.
<TABLE>
<CAPTION>
Inventory consists of the following: March 31, March 31,
1998 1999
<S> <C> <C>
Finished product $ 1,664 $ --
Flavoring , bottles and packaging materials 67,112 29,216
------ ------
$68,776 $29,216
======= =======
</TABLE>
(e) Deferred Offering Costs:
Deferred offering costs, a portion of which is still reflected on
the balance sheet, was incurred by the Company in conjunction
with a private placement offering (See Note 6). These costs will
be charged against additional paid-in capital upon the completion
of the offering (exercise of warrants), or charged to operations
if warrants expire unexercised.
(f) Income Taxes:
The Company utilizes Financial Accounting Standard Board
Statement No. 109, "Accounting for Income Taxes"("SFAS 109"),
which requires the use of the asset and liability approach of
providing for income taxes. SFAS 109 requires recognition of
deferred tax liabilities and assets for the expected future tax
consequences of events that have been included in the financial
statements or tax returns. Under this method deferred tax
liabilities and assets are determined based on the difference
between the financial statement and tax basis of assets and
liabilities using enacted tax rates in effect for the year in
which the differences are expected to reverse. Under SFAS 109,
the effect on deferred tax assets and liabilities of a change in
tax rates is recognized in income in the period that includes the
enactment date.
The Company has a net operating loss carryforward as of its year
end, December 31, 1998, of approximately $100,000 which may be
applied against future taxable income, and which expires in the
year 2012. Since there is no assurance that the Company will
generate future taxable income to utilize the deferred tax asset
resulting from the net operating loss carryforward, the Company
has not recognized this asset.
(g) Statements of Cash Flows:
For purposes of the statement of cash flows, the Company
considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
F-7
<PAGE>
ICY SPLASH FOOD AND BEVERAGE, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):
(h) Comprehensive Income:
In June 1997, the Financial Accounting Standards Board issued
Statement No. 130 "Reporting Comprehensive Income"("SFAS 130"),
which prescribes standards for reporting comprehensive income and
its components. SFAS 130 is effective for fiscal years beginning
after December 15, 1997. Since the Company currently does not
have any items of comprehensive income, a statement of
comprehensive income is not yet required.
(i) Advertising Costs:
Advertising costs, which are included in selling expenses, are
expensed as incurred. For the three months ended March 31, 1999
and 1998 advertising costs aggregated $178 and $6,304,
respectively.
(j) Revenue Recognition:
The Company recognizes operating revenue upon shipment of goods
to customer.
(k) Earnings Per Share
The Company has adopted Financial Accounting Standards Board
Statement No. 128 "Earnings Per Share" ("SFAS 128"), which has
changed the method for calculating earnings per share. SFAS 128
requires the presentation of basic and diluted earnings per share
on the face of the statement of operations. Earnings per common
share is computed by dividing net income by the weighted average
number of common shares outstanding and for diluted earnings per
share also common equivalent shares outstanding.
The following average shares were used for the computation of
basic and diluted earnings per share:
Three Months Ended March 31, 1999 1998
--------------------------- --------- ---------
Basic 6,600,000 6,193,833
Diluted 7,550,000 6,372,117
(l) Stock Based Compensation
SFAS No. 123 "Accounting For Stock Based Compensation" requires
the Company to either record compensation expense or to provide
additional disclosure with respect to stock awards and stock
option grants made after December 31, 1994. The accompanying
notes to financial statements include the disclosure required by
SFAS No. 123.
F-8
<PAGE>
ICY SPLASH FOOD AND BEVERAGE, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
NOTE 3 - NOTES RECEIVABLE:
At March 31, 1999, the Company was owed $15,565 from a vendor who
is a co-packer of the Company's products. The vendor has agreed
to pay back the loan by providing services equal to $1,500 a
month for 12 months beginning June 1, 1998. At March 31, 1999,
the co-packer had not provided services to make payments, but
instead has paid two $1,500 payments. Management has an agreement
with the co-packer to provide services in April of 1999
sufficient to bring the note current.
At March 31, 1999, the company was owed $25,544 by a customer
(distributor) for the Company's products. The customer has agreed
to pay at least $1,000 a month beginning August 15, 1998, with no
interest if the entire balance is paid by June 1999 and 1.1%
interest per month on the unpaid balance thereafter. At March 31,
1999, the customer had paid approximately four of eight payments
due. A new agreement with the customer for brokerage services
should accelerate the payments by providing services for
payments. Although Management is confident the balance due will
ultimately be paid, a collection allowance of $6,500 has been
recorded against this note.
NOTE 4 - NOTE PAYABLE:
On August 31, 1998, the Company received an unsecured loan
aggregating $100,000 with an annual interest rate of 10%, payable
on May 31, 1999. At March 31, 1999 the loan balance was $65,000.
There are no penalties to prepay the loan.
NOTE 5 - RELATED PARTY TRANSACTIONS:
(a) During December 1998, the Company initiated sales of product to a
distributor. Certain members of management have personally agreed
to provide financing and organizational support to the
distributor. For the three months ended March 31, 1999, sales
were $80,215. At March 31, 1999 accounts receivable were $39,022.
(b) On March 19, 1998 the Company entered into an agreement with an
individual to act as the Company's Chief Financial Officer. As
part of the consideration for these services, the Company would
issue 20,000 shares of common stock. To date, the shares of stock
have not been issued.
NOTE 6 - STOCKHOLDERS' EQUITY:
Recapitalization:
On February 13, 1997 the stockholders and directors of the
Company adopted resolutions to amend the Certificate of
Incorporation to change the capitalization of the Company from
200 shares no par value to 50,000,000 shares at $.001 par value
and to restate the number of issued and outstanding shares to
6,100,000 shares.
F-9
<PAGE>
ICY SPLASH FOOD AND BEVERAGE, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
NOTE 6 - STOCKHOLDERS' EQUITY (Continued):
Private Placement Offering:
During 1998, the Company commenced selling common stock through a
private placement memorandum. The offering is for the sale of
10,000 units at an offering price of $5.00 per unit, of which,
each unit consists of 50 shares of common stock and 95 redeemable
common stock purchase warrants. The common stock and warrants may
be separately transferred at any time after issuance, subject to
restrictions contained in the private placement memorandum. Each
warrant entitles the holder to purchase one share of the
Company's common stock for $1. The exercise price of the warrants
and the number of shares issuable upon exercise of the warrants
are also subject to adjustment to protect against dilution. The
Company may also redeem the warrants at a price of $.01 per
warrant upon the occurrence of certain market conditions. Unless
extended by the Company, the warrants will expire on January 20,
2000. As of March 31, 1999, all 10,000 units have been sold. The
Company received $33,837, net of commission and offering costs.
The common stock and warrants included in the unit have not been
registered, and are not required to be, under the Securities Act
of 1933 ("the Act"). These securities have been offered in the
absence of any registration under the Act through the Company's
intended compliance with Rule 504 under Regulation D promulgated
under the Act. Pursuant to Rule 504, the shares are freely
transferable subject to various state securities laws.
NOTE 7 - COMMITMENTS AND CONTINGENCIES:
Litigation:
The Company was a defendant in a lawsuit involving leasehold
property for which the plaintiff claims the Company is
responsible. A motion to dismiss was pending before the court.
The likelihood of a favorable outcome was anticipated by the
Company's counsel, therefore no provision has been made in the
financial statements relating to this matter. As of December 31,
1998 this lawsuit was dismissed.
The Company is a plaintiff in a lawsuit with a predecessor
company, "Icy Splash, Inc.," and a former shareholder of Icy
Splash, Inc. This case is presently pending in the Supreme Court,
Kings County. The Company has secured a preliminary injunction
against the defendants enjoining them from misappropriating the
Company's intellectual property rights including the use of the
trademark "Icy Splash". The defendants initially filed a notice
of appeal relating to the injunction. However, their time to
perfect the appeal has expired. The case to convert the
preliminary injunction to a permanent injunction is proceeding on
the merits.
F-10
<PAGE>
ICY SPLASH FOOD AND BEVERAGE, INC.
SCHEDULES SUPPORTING STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
1999 1998
-------- --------
SELLING EXPENSES - Schedule 1:
Freight and delivery $ 8,328 $ (1,268)
Slotting fees 712 --
Advertising 178 6,304
Other selling expenses 687 --
-------- --------
TOTAL SELLING EXPENSES $ 9,905 $ 5,036
======== ========
GENERAL AND ADMINISTRATIVE EXPENSES - Schedule 2:
Automotive expenses $ 1,335 $ 1,472
Depreciation 750 550
Insurance 2,376 754
Interest 1,625 --
Miscellaneous expense (income) (15) 205
Professional fees -- 4,000
Rent 1,079 --
Repairs and maintenance 898 --
Office expense 151 --
Telephone 2,050 1,403
Travel and entertainment 237 1,360
-------- --------
TOTAL GENERAL AND ADMINISTRATIVE EXPENSES $ 10,486 $ 9,744
======== ========
F-11
<PAGE>
ICY SPLASH FOOD AND BEVERAGE, INC.
FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
F-12
<PAGE>
ICY SPLASH FOOD AND BEVERAGE, INC.
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
- CONTENTS -
Page(s)
Independent Auditors= Report 1.
Financial Statements:
Balance Sheets 2.
Statements of Operations 3.
Statements of Changes in Shareholders' Equity 4.
Statements of Cash Flows 5.
Notes to Financial Statements 6. - 10.
Additional Information:
Independent Auditors' Report on Supplemental Information 11.
Schedules Supporting Statements of Operations 12.
F-13
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
Icy Splash Food and Beverage, Inc.
Whitestone, New York
We have audited the balance sheets of Icy Splash Food and Beverage, Inc. as of
December 31, 1998 and 1997, and the related statements of operations, changes in
shareholders' equity and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, financial statements referred to above present fairly, in all
material respects, the financial position of Icy Splash Food and Beverage, Inc.
as of December 31, 1998 and 1997, and the results of its operations and its cash
flows for the periods then ended in conformity with generally accepted
accounting principles.
/s/ LAZAR LEVINE & FELIX LLP
----------------------------
LAZAR LEVINE & FELIX LLP
New York, New York
March 10, 1999
F-14
<PAGE>
ICY SPLASH FOOD AND BEVERAGE, INC.
BALANCE SHEETS
AS OF DECEMBER 31, 1998 AND 1997
- ASSETS -
<TABLE>
<CAPTION>
1998 1997
--------- ---------
CURRENT ASSETS:
<S> <C> <C>
Cash $ 20,314 $ --
Accounts receivable, net of allowance for doubtful accounts of
$4,163 and $16,721 for 1998 and 1997, respectively 69,833 59,625
Notes receivable (Note 3) 34,610 --
Inventory (Note 2d) 60,881 35,316
Prepaid expenses 3,000 3,000
--------- ---------
TOTAL CURRENT ASSETS 188,638 97,941
--------- ---------
FIXED ASSETS (Note 2c):
Warehouse equipment 5,000 5,000
Office equipment 9,394 5,945
--------- ---------
14,394 10,945
Less: accumulated depreciation 4,673 2,095
--------- ---------
9,721 8,850
--------- ---------
OTHER ASSETS:
Deferred offering costs (Note 2e) 62,650 27,886
--------- ---------
$ 261,009 $ 134,677
========= =========
- LIABILITIES AND SHAREHOLDERS' EQUITY -
CURRENT LIABILITIES:
Cash overdraft $ -- $ 677
Notes payable (Note 4) 65,000 --
Accounts payable 53,900 6,343
Accrued expenses and other current liabilities 13,937 24,919
Income taxes payable 454 680
--------- ---------
TOTAL CURRENT LIABILITIES 133,291 32,619
--------- ---------
LONG-TERM LIABILITIES
Shareholders' loans (Note 6) -- 34,442
--------- ---------
COMMITMENTS AND CONTINGENCIES (Note 7)
SHAREHOLDERS' EQUITY (Note 6):
Preferred stock, $.001 par value, 1,000,000 shares authorized,
zero shares issued and outstanding for 1998 and 1997 -- --
Common stock, $.001 par value, 50,000,000 shares authorized, 6,600,000
and 6,100,000 shares issued and outstanding for 1998 and 1997, respectively 6,600 6,100
Additional paid-in capital 237,237 203,900
Accumulated deficit (116,119) (142,384)
--------- ---------
127,718 67,616
--------- ---------
$ 261,009 $ 134,677
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-15
<PAGE>
ICY SPLASH FOOD AND BEVERAGE, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
1998 1997
--------- ---------
NET SALES (Note 5) $ 320,802 $ 224,490
--------- ---------
COST OF GOODS SOLD:
Inventory - beginning of year 35,316 55,048
Purchases 212,187 143,878
--------- ---------
247,503 198,926
Inventory - end of year 60,881 35,316
--------- ---------
TOTAL COST OF GOODS SOLD 186,622 163,610
--------- ---------
GROSS PROFIT 134,180 60,880
--------- ---------
OPERATING EXPENSES (Note 5):
Selling expenses - Schedule 1 55,319 52,860
General and administrative expenses - Schedule 2 49,381 32,304
--------- ---------
104,700 85,164
--------- ---------
INCOME (LOSS) FROM OPERATIONS 29,480 (24,284)
--------- ---------
OTHER INCOME (EXPENSES):
Interest expense (2,535) --
--------- ---------
INCOME (LOSS) BEFORE TAXES 26,945 (24,284)
Provision for income taxes (Note 2f) 680 680
--------- ---------
NET INCOME (LOSS) $ 26,265 $ (24,964)
========= =========
EARNINGS (LOSS) PER SHARE: (Note 2k)
Basic $ -- $ --
========= =========
Diluted $ -- $ --
========= =========
The accompanying notes are an integral part of these financial statements
F-16
<PAGE>
ICY SPLASH FOOD AND BEVERAGE, INC.
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
Common Stock Additional
------------------ Paid-in Accumulated
Shares Amount Capital Deficit Total
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1996 200 $ 200 $ 209,800 $(117,420) $ 92,580
Recapitalization (Note 6) 6,099,800 5,900 (5,900) -- --
Net loss, December 31, 1997 -- -- -- (24,964) (24,964)
--------- --------- --------- --------- ---------
Balance, December 31, 1997 6,100,000 6,100 203,900 (142,384) 67,616
Net proceeds from issuance of common stock
and warrants - private placement offering (Note6) 500,000 500 33,337 -- 33,837
Net income, December 31, 1998 -- -- -- 26,265 26,265
--------- --------- --------- --------- ---------
BALANCE, DECEMBER 31, 1998 6,600,000 $ 6,600 $ 237,237 $(116,119) $ 127,718
========= ========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-17
<PAGE>
ICY SPLASH FOOD AND BEVERAGE, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS:
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 26,265 $ (24,964)
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation 2,579 1,595
Provision for bad debts 16,570 8,402
Changes in assets and liabilities:
(Increase) in accounts receivable (45,822) (8,760)
(Increase) decrease in inventories (25,565) 19,732
Decrease in prepaid expenses -- 2,570
Increase (decrease) in accounts payable 47,557 (12,080)
(Decrease) increase in accrued expenses and other current liabilities (11,886) 17,491
--------- ---------
Net cash provided by operating activities 9,698 3,986
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets (3,449) (5,945)
Advances to former owner -- (2,350)
Increase in note receivable (53,620) --
Repayments of note receivable 38,054 --
--------- ---------
Net cash (used) in investing activities (19,015) (8,295)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term debt 100,000 --
Repayments of short-terrm debt (35,000) --
Net proceeds from issuance of common stock 33,837 --
Proceeds from shareholders loans -- 24,070
Repayment of shareholders loans (34,442) --
Deferred offering costs (34,764) (27,886)
--------- ---------
Net cash provided (used) by financing activities 29,631 (3,816)
--------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 20,314 (8,125)
Cash and cash equivalents, at beginning of year -- 8,125
--------- ---------
CASH AND CASH EQUIVALENTS, AT END OF YEAR $ 20,314 $ --
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
During the year ended December 31, 1998, the Company has transfered a
customers accounts receivable balance to notes receivable in
the amount of $25,544
Cash during the period for:
Income taxes paid $ 1,527 $ --
Interest paid $ 131 $ --
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-18
<PAGE>
ICY SPLASH FOOD AND BEVERAGE, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
NOTE 1 - NATURE OF BUSINESS:
Icy Splash Food and Beverage, Inc. (the "Company") is the
producer and distributor of an all natural fruit flavored, clear
and colored, carbonated, refreshing soft drinks. The product line
is currently supplied in a variety of flavors to supermarkets,
grocery stores and convenience stores in the tri-state area. The
Company was incorporated in the State of New York on June 17,
1996.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The Company's accounting policies are in accordance with
generally accepted accounting principles. Outlined below are
those policies considered particularly significant.
(a) Use of Estimates:
In preparing financial statements in accordance with generally
accepted accounting principles, management makes certain
estimates and assumptions, where applicable, that effect the
reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial
statements, as well as the reported amounts of revenues and
expenses during the reporting period. While actual results could
differ from these estimates, management does not expect such
variances, if any, to have a material effect on the financial
statements.
(b) Concentration of Credit Risk/Fair Value:
Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of cash.
The Company, from time-to-time, may maintain cash balances which
exceed the federal depository insurance coverage limit. The
Company performs periodic reviews of the relative credit rating
of its bank to lower its risk.
The carrying amounts of cash, accounts receivable, accounts
payable and accrued expenses approximate fair value due to the
short-term nature of these items.
(c) Fixed Assets and Depreciation:
Fixed assets are reflected at cost. Depreciation and amortization
are provided on a straight-line basis over the following useful
lives:
Warehouse equipment 5 years
Office equipment 5 years
Maintenance and repairs are charged to expense as incurred; major
renewals and betterments are capitalized.
F-19
<PAGE>
ICY SPLASH FOOD AND BEVERAGE, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):
(d) Inventories:
Inventories are stated at the lower of cost or market (first-in
first-out method) and consist of only raw materials.
Inventory consists of the following:
<TABLE>
<CAPTION>
December 31, December 31,
1998 1997
------------ -----------
<S> <C> <C>
Finished product $ - $ -
Flavoring , bottles and packaging materials 60,881 35,316
-------- --------
$ 60,881 $ 35,316
======== ========
</TABLE>
(e) Deferred Offering Costs:
Deferred offering costs, a portion of which is still reflected on the
balance sheet, was incurred by the Company in conjunction with a
private placement offering (see Note 6). These costs will be charged
against additional paid-in capital upon the completion of the offering
(exercise of warrants), or charged to operations if warrants expire
unexercised.
(f) Income Taxes:
The Company utilizes Financial Accounting Standard Board Statement No.
109, "Accounting for Income Taxes"("SFAS 109"), which requires the use
of the asset and liability approach of providing for income taxes.
SFAS 109 requires recognition of deferred tax liabilities and assets
for the expected future tax consequences of events that have been
included in the financial statements or tax returns. Under this method
deferred tax liabilities and assets are determined based on the
difference between the financial statement and tax basis of assets and
liabilities using enacted tax rates in effect for the year in which
the differences are expected to reverse. Under SFAS 109, the effect on
deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.
The Company has a net operating loss carryforward as of its year end,
December 31, 1998, of approximately $100,000 which may be applied
against future taxable income, and which expires in the year 2012.
Since there is no assurance that the Company will generate future
taxable income to utilize the deferred tax asset resulting from the
net operating loss carryforward, the Company has not recognized this
asset.
(g) Statements of Cash Flows:
For purposes of the statement of cash flows, the Company considers all
highly liquid investments purchased with an original maturity of three
months or less to be cash equivalents.
F-20
<PAGE>
ICY SPLASH FOOD AND BEVERAGE, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):
(h) Comprehensive Income:
In June 1997, the Financial Accounting Standards Board issued
Statement No. 130 "Reporting Comprehensive Income"("SFAS 130"), which
prescribes standards for reporting comprehensive income and its
components. SFAS 130 is effective for fiscal years beginning after
December 15, 1997. Since the Company currently does not have any items
of comprehensive income, a statement of comprehensive income is not
yet required.
(i) Advertising Costs:
Advertising costs, which are included in selling expenses, are
expensed as incurred. For the years ended December 31, 1998 and 1997
advertising costs aggregated $22,504 and $4,969, respectively.
(j) Revenue Recognition:
The Company recognizes operating revenue upon shipment of goods to
customers.
(k) Earnings Per Share:
The company has adopted Financial Accounting Standards Board Statement
No. 128 "Earnings Per Share" ("SFAS 128"), which has changed the
method for calculating earnings per share. SFAS 128 requires the
presentation of basic and diluted earnings per share on the face of
the statement of operations. Earnings per common share is computed by
dividing net income by the weighted average number of common shares
outstanding and for diluted earnings per share also common equivalent
shares outstanding.
The following average shares were used for the computation of basic
and diluted earnings per share:
Years Ended Dec 31, 1998 1997
------------------- --------- ---------
Basic 6,290,945 6,100,000
Diluted 6,653,741 6,100,000
(l) Stock-Based Compensation:
SFAS No. 123 "Accounting For Stock Based Compensation", requires the
Company to either record compensation expense or to provide additional
disclosures with respect to stock awards and stock option grants made
after December 31, 1994. The accompanying notes to financial
statements include the disclosures required by SFAS No. 123.
NOTE 3 - NOTES RECEIVABLE:
At December 31, 1998, the Company was owed $15,565 from a vendor who
is a co-packer of the Company's products. The vendor has agreed to pay
back the loan by providing services equal to $1,500 a month for 12
months beginning June 1, 1998. At December 31, 1998, the co-packer had
not provided services to make payments, but instead has paid two
$1,500 payments. Management has an agreement with the co-packer to
provide services in February and March of 1999 sufficient to bring the
note current.
F-21
<PAGE>
ICY SPLASH FOOD AND BEVERAGE, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
NOTE 3 - NOTES RECEIVABLE (continued):
At December 31, 1998, the Company was owed $25,544 by a customer
(distributor) for the Company's products. The customer has agreed to
pay at least $1,000 a month beginning August 15, 1998, with no
interest if the entire balance is paid by June 1999 and 1.1% interest
per month on the unpaid balance thereafter. At December 31, 1998, the
customer had paid approximately four of five payments due. A new
agreement with the customer for brokerage services should accelerate
the payments by providing services for payments. Although Management
is confident the balance due will ultimately be paid, a collection
allowance of $6,500 has been recorded against this note.
NOTE 4 - NOTE PAYABLE:
On August 31, 1998, the Company received an unsecured loan aggregating
$100,000 with an annual interest rate of 10%, payable on May 31, 1999.
At December 31, 1998 the loan balance was $65,000. There are no
penalties to prepay the loan.
NOTE 5 - RELATED PARTY TRANSACTIONS:
(a) At December 31, 1997, the Company was owed $13,466 by a former
shareholder. As of December 31, 1997 management deemed this receivable
uncollectible and accordingly reserved 100% as a bad debt.
(b) The Company occupied warehouse and office space which is owned by two
of its shareholders. As of December 31, 1996 the Company discontinued
use of this warehouse. Rent expense, for this facility, for the year
ended December 31, 1997 was $3,900.
(c) During December 1998, the Company initiated sales of product to a
distributor. Certain members of management have personally agreed to
provide financing and organizational support to the distributor. For
the year ended December 31, 1998, sales and accounts receivable were
$40,630.
(d) On March 19, 1998, the Company entered into a consulting agreement
with an individual to act as the Company's Chief Financial Officer. As
part of the consideration for these services, the Company would issue
20,000 shares of common stock. To date, the shares of stock have not
been issued.
NOTE 6 - STOCKHOLDERS' EQUITY:
Recapitalization:
On February 13, 1997, the stockholders and directors of the Company
adopted resolutions to amend the Certificate of Incorporation to
change the capitalization of the Company from 200 shares no par value
to 50,000,000 shares at $.001 par value and to restate the number of
issued and outstanding shares to 6,100,000 shares.
F-22
<PAGE>
ICY SPLASH FOOD AND BEVERAGE, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
NOTE 6 - STOCKHOLDERS' EQUITY (continued):
Private Placement Offering:
During 1998, the Company commenced selling common stock through a
private placement memorandum. The offering is for the sale of 10,000
units at an offering price of $5.00 per unit, of which, each unit
consists of 50 shares of common stock and 95 redeemable common stock
purchase warrants. The common stock and warrants may be separately
transferred at any time after issuance, subject to restrictions
contained in the private placement memorandum. Each warrant entitles
the holder to purchase one share of the Company's common stock for $1.
The exercise price of the warrants and the number of shares issuable
upon exercise of the warrants are also subject to adjustment to
protect against dilution. The Company may also redeem the warrants at
a price of $.01 per warrant upon the occurrence of certain market
conditions. Unless extended by the Company, the warrants will expire
on January 20, 2000. As of December 31, 1998, all 10,000 units have
been sold. The Company received $33,837, net of commission and
offering costs.
The common stock and warrants included in the unit have not been
registered, and are not required to be, under the Securities Act of
1933 ("the Act"). These securities have been offered in the absence of
any registration under the Act through the Company's intended
compliance with Rule 504 under Regulation D promulgated under the Act.
Pursuant to Rule 504, the shares are freely transferable subject to
various state securities laws.
NOTE 7 - COMMITMENTS AND CONTINGENCIES:
Litigation:
The Company was a defendant in a lawsuit involving leasehold property
for which the plaintiff claims the Company is responsible. A motion to
dismiss is pending before the court. The likelihood of a favorable
outcome is anticipated by the Company's counsel, therefore no
provision has been made in the financial statements relating to this
matter. As of December 31, 1998 this lawsuit was dismissed.
The Company is a plaintiff in a lawsuit with a predecessor company
"Icy Splash Inc." and a former shareholder of Icy Splash, Inc. This
case is presently pending in the Supreme Court, Kings County. The
Company has secured a preliminary injunction against the defendants
enjoining them from misappropriating the Company's intellectual
property rights including the use of the trademark "Icy Splash". The
defendants initially filed a notice of appeal relating to the
injunction. However, their time to perfect the appeal has expired. The
case to convert the preliminary injunction to a permanent injunction
is proceeding on the merits.
F-23
<PAGE>
INDEPENDENT AUDITORS= REPORT ON SUPPLEMENTAL INFORMATION
To The Board of Directors and Shareholders
Icy Splash Food and Beverage, Inc.
Whitestone, New York
Our audits of the basic financial statements of Icy Splash Food and Beverage,
Inc. for the years ended December 31, 1998 and 1997 were made primarily to form
an opinion on such financial statements taken as a whole. The supplemental
information presented hereinafter is presented for purposes of additional
analysis and is not a required part of the basic financial statements. Such
information has been subjected to the same audit procedures applied in the
audits of the basic financial statements and in our opinion, is fairly stated in
all material respects in relation to the basic financial statements taken as a
whole.
/s/ Lazar Levine & Felix LLP
----------------------------
LAZAR LEVINE & FELIX LLP
New York, New York
March 10, 1999
F-24
<PAGE>
ICY SPLASH FOOD AND BEVERAGE, INC.
SCHEDULES SUPPORTING STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
(See Independent Auditors' Report on Supplemental Information)
1998 1997
-------- ---------
SELLING EXPENSES - Schedule 1:
Freight and delivery $ 11,657 $ 24,370
Slotting fees 16,288 20,016
Advertising 22,504 4,969
Other selling expenses 4,870 3,505
-------- --------
TOTAL SELLING EXPENSES $ 55,319 $ 52,860
======== ========
GENERAL AND ADMINISTRATIVE EXPENSES - Schedule 2:
Administrative expenses $ -- $ 5,662
Automotive expenses 9,748 3,541
Bad debt expense 16,570 8,402
Depreciation 2,579 1,595
Insurance 1,483 697
Miscellaneous expense (income) 929 (1,279)
Professional fees 5,000 1,800
Rent -- 3,900
Office expense 2,038 658
Telephone 7,163 2,130
Temporary labor -- 3,931
Travel and entertainment 3,871 1,267
-------- --------
TOTAL GENERAL AND ADMINISTRATIVE EXPENSES $ 49,381 $ 32,304
======== ========
The accompanying notes are an integral part of these financial statements.
F-25
