U.S. Securities and Exchange Commission
Washington, D.C. 20549
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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 September 30, 2000
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
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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 incorporation (I.R.S. Employer
or organization) Identification No.)
9-15 166th Street, Suite 5-B
Whitestone, NY 11357
(Address of principal executive offices)
(718) 746-3585
(Issuer's telephone number, including area code)
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 [X] No [_]
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 6,600,000 shares of common
stock as of August 14, 2000.
Transitional Small Business Disclosure Format (check one)
Yes [_] No [X]
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<S> <C>
a) Balance Sheets as of September 30, 2000 (unaudited)
and December 31, 1999 .................................... 1
b) Statements of Operations for the three and nine months
ended September 30, 2000 and 1999 (unaudited) ............ 2
c) Statements of Cash Flows for the nine months
ended September 30, 2000 and 1999 (unaudited) ............ 3
d) Notes to Financial Statements (unaudited) ................ 4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS ............................... 5
PART II OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) EXHIBITS ................................................. 7
b) REPORTS ON FORM 8-K ...................................... 7
SIGNATURES ....................................................................... 8
EXHIBIT 11.1 ..................................................................... 9
EXHIBIT 27........................................................................ 10
</TABLE>
<PAGE>
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
ICY SPLASH FOOD AND BEVERAGE, INC.
BALANCE SHEETS
- ASSETS -
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
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(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash $ 7,704 $ 3,802
Accounts receivable, net of allowance for doubtful accounts of
$5,000 and $2,000 for September 30 and December 31, respectively 21,211 85,871
Notes receivable -- 1,485
Inventory 232,362 137,798
Deferred taxes 6,000 6,000
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TOTAL CURRENT ASSETS 267,277 234,956
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FIXED ASSETS:
Warehouse equipment 5,000 5,000
Office equipment 14,749 12,279
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19,749 17,279
Less: accumulated depreciation 11,033 8,033
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8,716 9,246
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$ 275,993 $ 244,202
========= =========
- LIABILITIES AND SHAREHOLDERS' EQUITY -
CURRENT LIABILITIES:
Notes payable $ 65,000 $ 65,000
Accounts payable 43,627 78,157
Accrued expenses and other current liabilities 18,941 21,279
Shareholders' loans 121,784 850
Income taxes payable 639 680
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TOTAL CURRENT LIABILITIES 249,991 165,966
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COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred stock, $.001 par value, 1,000,000 shares authorized,
zero shares issued and outstanding for 2000 and 1999 -- --
Common stock, $.001 par value, 50,000,000 shares authorized,
6,600,000 shares issued and outstanding 6,600 6,600
Additional paid-in capital 174,587 174,587
Accumulated deficit (155,185) (102,951)
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26,002 78,236
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$ 275,993 $ 244,202
========= =========
</TABLE>
See notes to financial statements.
1
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ICY SPLASH FOOD AND BEVERAGE, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
NET SALES $ 104,009 $ 177,472 $ 398,614 $ 523,804
COST OF SALES 80,325 119,407 303,813 351,443
--------- --------- --------- ---------
GROSS PROFIT 23,684 58,065 94,801 172,361
--------- --------- --------- ---------
OPERATING EXPENSES:
Selling expenses 7,450 21,458 55,787 58,572
General and administrative expenses 34,795 19,804 87,795 63,656
--------- --------- --------- ---------
42,245 41,262 143,582 122,228
--------- --------- --------- ---------
(LOSS) INCOME FROM OPERATIONS (18,561) 16,803 (48,781) 50,133
OTHER EXPENSES:
Interest expense (1,081) (657) (2,943) (3,907)
--------- --------- --------- ---------
(LOSS) INCOME BEFORE TAXES (19,642) 16,146 (51,724) 46,226
Provision for income taxes 170 -- 510 680
--------- --------- --------- ---------
NET (LOSS) INCOME $ (19,812) $ 16,146 $ (52,234) $ 45,546
========= ========= ========= =========
EARNINGS (LOSS) PER SHARE:
Basic $ -- $ -- $ (.01) $ .01
========= ========= ========= =========
Diluted $ -- $ -- $ (.01) $ .01
========= ========= ========= =========
</TABLE>
See notes to financial statements.
2
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ICY SPLASH FOOD AND BEVERAGE, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Nine Months Ended
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS: September 30,
2000 1999
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $ (52,234) $ 45,546
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Depreciation 3,000 2,250
Provision for bad debts 3,000 11,799
Changes in assets and liabilities:
Decrease (increase) in accounts receivable 61,660 (105,471)
Increase in inventories (94,564) (32,898)
Increase (decrease) in accounts payable (34,530) 52,171
Decrease in accrued expenses and other current liabilities (2,379) (4,957)
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Net cash used by operating activities (116,047) (31,560)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets (2,470) (2,885)
Repayments of note receivable 1,485 25,031
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Net cash provided (used) in investing activities (985) 22,146
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term debt -- 65,000
Repayments of short-term debt -- (65,000)
Proceeds from shareholders loans 120,934 56,500
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Net cash provided by financing activities 120,934 56,500
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NET INCREASE IN CASH AND CASH EQUIVALENTS 3,902 47,086
Cash and cash equivalents, at beginning of year 3,802 20,314
--------- ---------
CASH AND CASH EQUIVALENTS, AT END OF PERIOD $ 7,704 $ 67,400
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash during the period for:
Income taxes paid $ 551 $ 680
Interest paid $ 2,943 $ 657
</TABLE>
See notes to financial statements.
3
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NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30,2000
(UNAUDITED)
NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES:
In the opinion of management, the accompanying unaudited interim financial
statements of Icy Splash Food and Beverage, Inc. contain all adjustments
necessary to present fairly the Company's financial position as of September 30,
2000 and December 31, 1999 (audited) and the results of operations for the three
and nine months ended September 30, 2000 and 1999 and cash flows for the nine
months ended September 30, 2000 and 1999.
The results of operations for the three and nine months ended September 30, 2000
and 1999 are not necessarily indicative of the results to be expected for the
full year.
The accounting policies followed by the Company are set forth in Note 1 to the
Company's financial statements included in its Annual Report on Form 10-KSB for
the year ended December 31, 1999, with the one exception noted in the following
paragraph.
The Company has historically recognized operating revenue for all of its
customers (distributors) at the point of passage of title, which is generally
upon shipment of goods to distributors. The Company has changed its recognition
of operating revenue for one distributor, which is a related party, to point of
shipment of goods by the distributor to its customers. These financial
statements have been retroactively adjusted to reflect this change in revenue
recognition.
NOTE 2 - SHAREHOLDERS' LOANS:
At September 30, 2000 and December 31, 1999 the Company owed an aggregate of
$121,784 and $850, respectively to one of its shareholders. The loan is
non-interest bearing and has no formal repayment terms.
4
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Net sales for the Company decreased 41.4% from $177,472 in the third quarter of
1999 to $104,009 in the third quarter of 2000 and decreased 23.9%, from $523,804
in the nine months ended September 30, 1999 to $398,614 in the nine months ended
September 30, 2000. The decrease reflects the Company's lack of capital to fund
an increase in sales. The ongoing regulatory approval process to allow the
Company to raise equity by selling securities has taken longer than anticipated,
and has curtailed growth. For the nine months ended September 30, 2000, sales of
Icy Splash - Clear, Icy Splash - Second Generation and other manufacturers'
products were 32.2%, 23.8% and 44.0%, respectively. For the nine months ended
September 30, 1999 sales of Icy Splash - Clear, Icy Splash - Second Generation
and other manufacturers' products were 30.5%, 59.9% and 9.6%, respectively.
The gross profit margin decreased to 22.8% in the third quarter of 2000 from
32.7% in the third quarter of 1999 and decreased to 23.8% in the first nine
months of 2000 from 32.9% in the first nine months of 1999. The decrease in
profit margin was predominately caused by the disproportionately large
percentage of sales of other manufacturers' products during the first nine
months of 2000 - $175,939 in 2000 versus $50,349 in 1999. There were two reasons
: (1) opportunities to establish relationships with other distributors and
manufacturers in accordance with the Company's long-term business plan; and (2)
payment terms for purchase of other manufacturer's products more favorable than
the Company's co-packers' terms to produce its own products. Management
anticipates a product sales mix more heavily weighted towards the Company's own
products during 2001.
Selling expenses were $7,450 in the third quarter of 2000, compared with $21,458
in the third quarter of 1999, 7.2% and 12.1% of sales, respectively. Selling
expenses were $55,787 in the first nine months of 2000, compared with $58,572 in
the first nine months of 1999, 14.0% and 11.2% of sales, respectively.
General and administrative expenses were $34,795 in the third quarter of 2000,
compared with $19,804 in the third quarter of 1999, 33.5% and 11.2% of sales,
respectively, and $87,795 in the first nine months of 2000, compared with
$63,656 in the first nine months of 1999, 22.0% and 12.2% of sales,
respectively. Both the amount and percentage of expenses have increased for the
year to date as the Company is positioning itself for higher sales volume after
the anticipated raising of equity through the exercise of warrants and sale of
stock during 2001. The following items specifically explain the increased
activity. Rent was $3,218 for the third quarter of 2000, compared with $0 for
the third quarter of 1999, 3.1% and 0% of sales, respectively, and $6,677 in the
first nine months of 2000, compared with $1,079 in the first nine months of
1999, 1.7 % and 0.2 % of sales, respectively. The Company moved into a better
equipped office in January 2000. While the 1999 first nine months rent expense
was a one-time expense for equipment rental, office rent will continue in 2000.
Professional fees were $17,398 in the third quarter of 2000, compared with
$6,682 in the third quarter of 1999, 16.7 % and 3.8 % of sales, respectively,
and were $42,189 in the first nine months of 2000, compared with $23,730 in the
first nine months of 1999, 10.6 % and 4.5 % of sales, respectively. Insurance
expenses were $4,745 in the third quarter of 2000, compared with $1,644 in the
third quarter of 1999, 4.6 % and 0.9 % of sales, respectively, and were $12,499
in the first nine months of 2000, compared with $7,011 in the first nine months
of 1999, 3.1 % and 1.3 % of sales, respectively. Office expenses were $1,843 for
the third quarter of 2000, compared with $356 for the third quarter of 1999, 1.8
% and 0.2 % of sales, respectively, and were $2,678 in the first nine months of
2000, compared with $894 in the first nine months of 1999, 0.7 % and 0.2 % of
sales, respectively.
Bad debt expense was $1,000 for the third quarter of 2000 versus $3,354 for the
third quarter of 1999, 1.0% and 1.9% of sales, respectively, and was $3,000 for
the first nine months of 2000 versus $11,799 for the first nine months of 1999,
0.8% and 2.3% of sales, respectively. Last year's expense was greater because
there was a bad debt allowance for a delinquent note receivable and this year's
estimated allowance is for accounts receivable only. The Company anticipates
continuing favorable bad
5
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debt expense as a percentage of sales for 2000 due to the quality of its current
distributors (customers).
There was a loss from operations for the third quarter of 2000 of $18,561,
compared with a profit of $16,803 for the third quarter of 1999, with an
operating margin (loss) of (17.8%) for the third quarter of 2000 and 9.5% for
the third quarter of 1999. There was a loss from operations for the first nine
months of 2000 of $48,781, compared with a profit of $50,133 for the first nine
months of 1999, with an operating (loss) margin of (12.2%) for the first nine
months of 2000 and 9.6% for the first nine months of 1999. Net income (loss) and
net income (loss) as a percent of sales for the third quarter of 2000 were
($19,812) and (19.0%), compared to $16,146 and 9.1% for the third quarter of
1999. Net income (loss) and net income (loss) as a percent of sales for the
first nine months of 2000 were ($52,234) and (13.1%), compared to $45,546 and
8.7% for the first nine months of 1999.
Interest expense increased from $657 to $1,081 in the third quarter of 2000
versus the third quarter of 1999, and decreased from $3,907 to $2,943 in the
first nine months of 2000 versus the first nine months of 1999, because the
Company refinanced a $65,000 note on September 30, 1999 at a more favorable
interest rate.
LIQUIDITY AND CAPITAL RESOURCES
Working capital decreased $51,704 from December 31, 1999 to September 30, 2000
predominately from the net loss in the first nine months of 2000.
Net cash flow used by operating activities was $116,047 and $31,560 for the
first nine months of 2000 and 1999, respectively.
During the first nine months of 1999, $25,031 repayments of notes receivable
were received, while only $1,485 was received in the first nine months of 2000.
The Company purchased $2,470 of fixed assets during the first nine months of
2000 and $2,885 during the first nine months of 1999.
During the first nine months of 2000, the Company borrowed $120,934 from
shareholders and during the first nine months of 1999 it borrowed $56,500 from
shareholders. During the first nine months of 2000, the shareholder loan funds
were used predominately to fund a $94,564 increase in inventory, including
$28,928 increase in finished goods, in order to service distributors requiring
immediate delivery.
OTHER
This report contains forward-looking statements and information that is based on
management's beliefs and assumptions, as well as information currently available
to management. When used in this document, the words "anticipate," "estimate,"
"expect," "intend" and similar expressions are intended to identify
forward-looking statements. Although the Company believes that the expectations
reflected in such forward-looking statements are reasonable, it can give no
assurance that such expectations will prove to be correct. Such statements are
subject to certain risks, uncertainties and assumptions. Should one or more of
these risks or uncertainties materialize, or should the underlying assumptions
prove incorrect, actual results may vary materially from those anticipated,
estimated or expected.
6
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PART II OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibit 11.1 - Computation of Earnings Per Share, is filed as an
exhibit to this report.
Exhibit 27 - Financial Data Schedule, is filed as an exhibit to
this report.
b) Reports on Form 8-K
The Company did not file any Current Reports on Form 8-K during
the three month period ended September 30, 2000
7
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed by the undersigned thereunto
duly authorized.
ICY SPLASH FOOD & BEVERAGE, INC.
November 14, 2000 By: /s/ Joseph Aslan
----------------------------
Joseph Aslan,
President and Principal
Accounting Officer
8
