U.S. Securities and Exchange Commission
Washington, D. C. 20549
----------------------------------------
Form 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
------------------
Commission file number 0-26155
ICY SPLASH FOOD & BEVERAGE, INC.
(Exact name of small business issuer as specified in its charter)
New York 11-3329510
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9-15 166th Street, Suite 5-B
Whitestone, New York 11357
(Address of principal executive offices)
(718) 746-3585
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days.
Yes [_] No [X]
The number of shares outstanding of the issuer's common stock
as of September 30, 1999 was 6,600,000
<PAGE>
INDEX
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a) Balance Sheets as of June 30, 1999
and December 31, 1998..............................3
b) Statements of Operations for the
Three and Six Months Ended
June 30, 1999 and 1998.............................4
c) Statements of Cash Flows for the
Six Months Ended June 30, 1999
and 1998...........................................5
d) Notes to Financial Statements................6 to 11
ITEM 2. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULT OF OPERATIONS...................................12
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS..........................................14
ITEM 6. EXHIBITS AND REPORTS
ON FORM 8-K................................................14
a) EXHIBITS..........................................14
b) REPORTS ON FORM 8-K...............................14
2
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ICY SPLASH FOOD AND BEVERAGE, INC.
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
- ASSETS -
June 30, December 31,
1999 1998
--------- ---------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 1,494 $ 20,314
Accounts receivable, net of allowance for doubtful accounts of
$6,108 and $4,163 for June 30 and December 31, respectively 106,624 69,833
Notes receivable (Note 3) 13,329 34,610
Inventory (Note 2d) 104,700 60,881
Prepaid expenses 3,000 3,000
--------- ---------
TOTAL CURRENT ASSETS 229,147 188,638
--------- ---------
FIXED ASSETS (Note 2c):
Warehouse equipment 5,000 5,000
Office equipment 12,279 9,394
--------- ---------
17,279 14,394
Less: accumulated depreciation 6,173 4,673
--------- ---------
11,106 9,721
--------- ---------
$ 240,253 $ 198,359
========= =========
- LIABILITIES AND SHAREHOLDERS' EQUITY -
CURRENT LIABILITIES:
Notes payable (Note 4) $ 65,000 $ 65,000
Accounts payable 58,868 53,900
Accrued expenses and other current liabilities 17,727 15,537
Income taxes payable 454 454
--------- ---------
TOTAL CURRENT LIABILITIES 142,049 134,891
--------- ---------
LONG-TERM LIABILITIES
Shareholders' loans 13,000 --
--------- ---------
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 1999 and 1998 -- --
Common stock, $.001 par value, 50,000,000 shares authorized,
6,600,000shares issued and outstanding 6,600 6,600
Additional paid-in capital 158,456 174,587
Accumulated deficit (79,852) (117,719)
--------- ---------
85,204 63,468
--------- ---------
$ 240,253 $ 198,359
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
ICY SPLASH FOOD AND BEVERAGE, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
NET SALES (Note 5) $ 206,205 $ 149,904 $ 315,014 $ 181,896
COST OF SALES 127,738 87,007 209,237 106,133
--------- --------- --------- ---------
GROSS PROFIT 78,467 62,897 105,777 75,763
--------- --------- --------- ---------
OPERATING EXPENSES (Note 5):
Selling expenses - Schedule 1 25,554 22,476 35,459 27,512
General and administrative expenses - Schedule 2 19,660 16,106 28,521 25,850
--------- --------- --------- ---------
45,214 38,582 63,980 53,362
--------- --------- --------- ---------
INCOME FROM OPERATIONS 33,253 24,315 41,797 22,401
OTHER INCOME (EXPENSES):
Interest expense (1,625) (19) (3,250) (19)
--------- --------- --------- ---------
INCOME (LOSS) BEFORE TAXES 31,628 24,296 38,547 22,382
Provision for income taxes (Note 2f) -- -- 680 712
--------- --------- --------- ---------
NET INCOME $ 31,628 $ 24,296 $ 37,867 $ 21,670
========= ========= ========= =========
EARNINGS (LOSS) PER SHARE (Note 2k):
Basic $ -- $ -- $ 0.01 $ --
========= ========= ========= =========
Diluted $ -- $ -- $ 0.01 $ --
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements
4
<PAGE>
ICY SPLASH FOOD AND BEVERAGE, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
<TABLE>
<CAPTION>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS:
1999 1998
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net profit (loss) $ 37,867 $ 21,670
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation 1,500 1,100
Provision for bad debts 8,445 10,070
Changes in assets and liabilities:
Increase in accounts receivable (38,736) (57,944)
Increase in inventories (43,819) (16,500)
Increase in accounts payable 4,968 15,372
Decrease in accrued expenses and other current liabilities (4,310) (6,066)
-------- --------
Net cash provided by operating activities (34,085) (32,298)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets (2,885) (2,691)
Increase in note receivable -- (30,860)
Repayments of note receivable 21,281 --
-------- --------
Net cash provided (used) in investing activities 18,396 (33,551)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of common stock -- 13,700
Proceeds from short-term debt 65,000 --
Repayments of short-term debt (65,000) --
Net cost from issuance of common stock (16,131) (32,703)
Proceeds from shareholder loans 13,000 87,402
Deferred offering costs -- 27,287
-------- --------
Net cash provided (used) by financing activities (3,131) 95,686
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (18,820) 29,837
Cash and cash equivalents, at beginning of period 20,314 --
-------- --------
CASH AND CASH EQUIVALENTS, AT END OF PERIOD $ 1,494 $ 29,837
======== ========
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.
5
<PAGE>
ICY SPLASH FOOD AND BEVERAGE, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
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.
6
<PAGE>
ICY SPLASH FOOD AND BEVERAGE, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
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:
June 30, December 31,
1999 1998
-------- --------
Finished product $ -- $ --
Flavoring , bottles and packaging materials 104,700 60,881
-------- --------
$104,700 $ 60,881
======== ========
(e) Deferred Offering Costs:
Deferred offering costs were incurred by the Company in conjunction
with a private placement offering (see Note 6). Although the exercise
of warrants has not been completed these costs were charged against
additional paid-in capital upon the completion of the offering.
(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.
7
<PAGE>
ICY SPLASH FOOD AND BEVERAGE, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
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
(i) Advertising Costs:
Advertising costs, which are included in selling expenses, are
expensed as incurred. For six months ended June 30, 1999 and 1998
advertising costs, including promotion, aggregated $14,845 and
$19,002, 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:
Six months ended June 30, 1999 1998
--------- ---------
Basic 6,600,000 6,334,144
Diluted 7,550,000 6,779,017
(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.
8
<PAGE>
ICY SPLASH FOOD AND BEVERAGE, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 3 - NOTES RECEIVABLE:
At June 30, 1999 and December 31, 1998 the Company was owed $1,485 and
$15,565, respectively, from a vendor who is a co-packer of the
Company's products. The vendor had agreed to pay back the loan by
providing services equal to $1,500 a month for 12 months beginning
June 1, 1998. At June 30, 1998, the co-packer had not provided
services to make payments. At June 30, 1999 the co-packer has provided
services and made payments. Management believes the remaining balance
at June 30, 1999 is fully collectible.
At June 30, 1999 and December 13, 1998 the company was owed $24,844
and $25,544, respectively, 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 June 30, 1999, the customer had paid
approximately five of eleven 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 $13,000
has been recorded against this note.
NOTE 4 - NOTE PAYABLE:
On June 30, 1999, the Company received a bank loan aggregating $65,000
with an annual interest rate of 4.5%, payable on December 22, 1999.
The bank loan is secured by certificates of deposit belonging to two
major shareholders. Proceeds from the note were used to repay a
$65,000 loan due on May 31, 1999 and extended to June 30, 1999 by the
lender at the request of the Company.
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 six months ended June 30, 1999, sales were $184,077. At June 30,
1999 accounts receivable were $48,602.
(b) 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 , at a value of $1,600. To date, the
shares of stock have not been issued, although the accompanying
financial statements reflect an accrual for compensation expense in
1998.
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.
9
<PAGE>
ICY SPLASH FOOD AND BEVERAGE, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
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 June 30, 1999, all 10,000 units have been
sold. Costs in excess of proceeds received aggregating $44,444 were
reflected as a reduction of shareholders' equity at June 30, 1999.
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.
10
<PAGE>
ICY SPLASH FOOD AND BEVERAGE, INC.
SCHEDULES SUPPORTING STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
SELLING EXPENSES - Schedule 1:
Freight and delivery $ 8,229 $ 9,358 $16,557 $ 8,090
Promotion 14,667 -- 14,667 --
Slotting fees -- -- 712 --
Advertising -- 12,698 178 19,002
Other selling expenses 2,658 420 3,345 420
------- ------- ------- -------
TOTAL SELLING EXPENSES $25,554 $22,476 $35,459 $27,512
======= ======= ======= =======
GENERAL AND ADMINISTRATIVE EXPENSES-Schedule 2:
Automotive expenses $ 1,104 $ 1,724 $ 2,439 $ 3,196
Bad debt expense 8,445 10,070 8,445 10,070
Depreciation 750 550 1,500 1,100
Insurance 2,991 -- 5,367 754
Interest 1,625 19 3,250 19
Miscellaneous expense 164 285 149 490
Professional fees 1,717 -- 1,717 4,000
Rent -- -- 1,079 --
Repairs and maintenance -- -- 898 --
Office expense 387 31 538 31
Telephone 2,815 1,963 4,865 3,366
Travel and entertainment 1,287 1,483 1,524 2,843
------- ------- ------- -------
TOTAL GENERAL AND ADMINISTRATIVE EXPENSES $21,285 $16,125 $31,771 $25,869
======= ======= ======= =======
</TABLE>
11
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Net sales for Icy Splash Food & Beverage, Inc. (the "Company") increased
37.6%, from $149,904 to $206,205, in the second quarter of 1999 and 73.2%, from
$181,896 to $315,014, year to date versus comparable periods in the prior year.
The increase reflects the introduction of a new line of products, Icy Splash -
Second Generation, at the end of December 1998. While the Company's original
product, Icy Splash - Clear, accounted for all beverage sales in the first two
quarters of 1998, it accounted for 32% of beverage sales for the second quarter
and 34% year to date in 1999.
The gross profit margin decreased to 38.1% in the second quarter of 1999
from 42.0% in the second quarter of 1998 and to 33.6% year to date in 1999 from
41.7% for the same period in 1998. The decrease in profit margin for both
periods was caused by the introduction of the lower profit margin line of
products, Icy Splash - Second Generation, into the sales mix.
Selling expenses were $25,554 in the second quarter of 1999, compared with
$22,476 in the second quarter of 1998, 12.4 % and 15.0 % of sales, respectively.
For the first six months of the year selling expenses were $35,459 in 1999,
compared with $27,512 for the same period in 1998, 11.3% and 15.1% of sales,
respectively. The increase in the dollar volume of selling expenses in 1999 is
due to the increase in sales volume, while the decrease in percentage of sales
is due to the lower selling costs associated with the new product line. During
the first six months of 1999, $14,667 of promotion expenses (sales discounts and
giveaways) were expended to promote sales of the Icy Splash - Second Generation
product line, compared with none in 1998. During the first six months of 1998
there were advertising expenditures of $19,002 for advertising media, including
video, compared to $178 in 1999.
General and administrative expenses were $19,660 in the second quarter of
1999, compared with $16,106 in the second quarter of 1998, 9.5% and 10.7% of
sales, respectively. For the first six months of 1999 general and administrative
expenses were $28,521 in 1999, compared with $25,850 for the same period in
1998, 9.1% and 14.2% of sales, respectively. While the decrease of general and
administrative expenses as a percent of sales demonstrates that growth of sales
has been accomplished without a corresponding growth of overhead expenses, there
has been a significant increase in insurance, due to more comprehensive
insurance coverage in 1999. Bad debt expense is $8,445 for the first six months
of 1999 versus $10,070 for the same period of 1998, 2.7% and 5.5.% of sales,
respectively. The Company anticipates continuing lower bad debt expense as a
percent of sales for 1999 due to the quality of its current distributors
(customers). Other expenses with significant differences are temporary, timing
differences.
Income from operations for the second quarter of 1999 was $33,253, an
increase of $8,938 from the second quarter of 1998, with an operating margin of
16.1% for 1999 and 16.2% for 1998, reflecting an increase in sales volume, an
increase in operating costs and lower gross profit margin for Icy Splash -
Second Generation. Income from operations and operating margin for the six
months ended June 30, 1999 were $41,797 and 13.3%, compared to $22,401 and 12.3%
for the six months ended June 30, 1998.
12
<PAGE>
Interest expense increased from $19 to $1,625, in the second quarter of
1999 and from $19 to $3,250 year to date versus comparable periods in the prior
year. There was an outstanding $65,000 note payable during 1999 and no note in
1998.
LIQUIDITY AND CAPITAL RESOURCES
Working capital increased $33,351 from December 31, 1998 to June 30, 1999
because proceeds of profitable operations were used to fund inventory and
receivables.
Net cash flow used by operating activities was $34,085 and $32,298 for the
six months ended June 30, 1999 and 1998, respectively. Cash was predominantly
used to fund increases in accounts receivable and inventory in order to
facilitate increases in sales volume.
During the second quarter of 1999, $20,781 was collected against notes
receivable from vendors, while during the second quarter of 1998 $30,860 was
loaned to a vendor. There was negligible activity for the first quarter of both
years. The Company made a loan to a vendor to help fund capital improvements.
Repayment was recorded as the vendor performed services for the Company.
During the second quarter of 1999, a $65,000 note payable was refinanced.
During the second quarter of 1998, the Company received $13,700 of equity from a
private placement and $74,852 of shareholder loans. During the six months ended
June 30, 1998 $87,402 of shareholder loans and $13,700 of private placement
equity were received. Shareholder loans and private placement equity were used
to fund increased sales volume and costs for a planned private offering under
Regulation D of the Securities Act of 1933, as amended, of $16,131 and $32,703
for 1999 and 1998, respectively.
YEAR 2000 COMPLIANCE
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.
The Company does not expect to be affected by Year 2000 as it does not rely
on date-sensitive software or affected hardware. The Company's current
accounting and other systems were purchased "off-the-shelf". The Company intends
to timely update its 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. The Company does 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.
13
<PAGE>
Management has not yet contacted other companies on whose services the
Company depend to determine whether such companies' systems are Year 2000
compliant. If the systems of the companies or other companies on whose services
we depend, including the Company's customers, are not Year 2000 compliant, there
could be a material adverse effect on the Company's financial condition or
result of operations.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On March 19,1997, the Company 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 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibit 27 - Financial Data Schedule.
b) The Registrant did not file any reports on Form 8-K for events which
occurred during the six months ended June 30, 1999.
14
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ICY SPLASH FOOD & BEVERAGE, INC.
Dated: October 12, 1999 By: /s/ Joseph Aslan
-----------------------------------
Joseph Aslan,
President
Dated: October 12, 1999 By: /s/ Charlie Tokarz
-----------------------------------
Charlie Tokarz,
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the financial
statements for the six months ended June 30, 1999 and is qualified in its
entirety by reference to such statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 1,494
<SECURITIES> 0
<RECEIVABLES> 139,061
<ALLOWANCES> 19,108
<INVENTORY> 104,700
<CURRENT-ASSETS> 229,147
<PP&E> 17,279
<DEPRECIATION> 6,173
<TOTAL-ASSETS> 240,253
<CURRENT-LIABILITIES> 142,049
<BONDS> 0
0
0
<COMMON> 6,600
<OTHER-SE> 78,604
<TOTAL-LIABILITY-AND-EQUITY> 240,253
<SALES> 315,014
<TOTAL-REVENUES> 315,014
<CGS> 209,237
<TOTAL-COSTS> 63,980
<OTHER-EXPENSES> 680
<LOSS-PROVISION> 8,445
<INTEREST-EXPENSE> 3,250
<INCOME-PRETAX> 38,547
<INCOME-TAX> 680
<INCOME-CONTINUING> 37,867
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 37,867
<EPS-BASIC> 0.01
<EPS-DILUTED> 0.01
</TABLE>
