SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 For the fiscal year ended December 31, 1999
[_] TRANSITION REPORT UNDER 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 Registrant as Specified in its Charter)
<TABLE>
<CAPTION>
NEW YORK 11-3329510
<S> <C>
(State or other jurisdiction of incorporation) (IRS Employer Identification Number)
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9-15 166th Street, Suite 5-B, Whitestone, NY 11357
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (718) 746-3585
Securities registered under Section 12(b) of the Exchange Act:
Title of each class registered: None Name of each exchange on
which registered: None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, par value $0.001
(Title of class)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 [_]
Check if no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is contained in this form, and no disclosure will be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]
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State the issuer's revenues for its most recent fiscal year: $600,086
State the aggregate market value of the voting and non-voting stock held by
non-affiliates computed by reference to the price at which the stock was sold,
or the average bid and asked prices of such stock, as of a specified date within
the past 60 days. The aggregate market value of the voting and non-voting stock
held by non-affiliates of the registrant is approximately $40,000 as of March
28, 2000.
State the number of shares outstanding of each of the registrant's classes of
common equity as of the latest practicable date: 6,600,000 shares of the
registrant's common stock are issued and outstanding as of March 28, 2000.
DOCUMENTS INCORPORATED BY REFERENCE
If the following documents are incorporated by reference, briefly describe them
and identify the part of the Form 10-KSB into which the document is
incorporated: (1) any annual report to security holders; (2) any proxy or
information statement; and (3) any prospectus filed pursuant to Rule 424 (b) or
(c) of the Securities Act of 1933. None
Transitional Small Business Disclosure Format (check one): Yes [_] No [X]
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TABLE OF CONTENTS
Page
PART I
Item 1. Description of Business.......................................... 4
Item 2. Description of Property.......................................... 9
Item 3. Legal Proceedings................................................ 9
Item 4. Submission of Matters to a Vote of Security Holders.............. 9
PART II
Item 5. Market for Common Equity and Related Stockholder Matters......... 10
Item 6. Management's Discussion and Analysis or Plan of Operation........ 11
Item 7. Financial Statements............................................. 12
Item 8. Changes In and Disagreements With Accountants on Accounting
and Financial Disclosure......................................... 12
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons..... 13
Item 10. Executive Compensation........................................... 14
Item 11. Security Ownership of Certain Beneficial Owners and Management... 14
Item 12. Certain Relationships and Related Transactions................... 15
Item 13. Exhibits and Reports on Form 8-K................................. 16
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Forward-Looking Statements
This report contains forward-looking statements. The forward-looking statements
include all statements that are not statements of historical fact. The
forward-looking statements are often identifiable by their use of words such as
"may," "expect," "believe," "anticipate," "intend," "could," "estimate," or
"continue," "plans" or the negative or other variations of those or comparable
terms. Our actual results could differ materially from the anticipated results
described in the forward-looking statements. Factors that could affect our
results include, but are not limited to, those discussed in Item 6,
"Management's Discussion and Analysis or Plan of Operation" and included
elsewhere in this report.
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In this Annual Report, "Icy Splash," "the Company," "we," "us," and "our"
each refers to Icy Splash Food & Beverage, Inc.
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PART I
Item 1. Description of Business.
Overview
Icy Splash is a New York corporation which was incorporated on June 17,
1996. We were initially authorized to issue an aggregate of 200 shares of no par
common stock. The Company is now authorized to issue 50,000,000 shares of common
stock, par value of $0.001 per share and 1,000,000 shares of preferred stock,
par value of $0.001 per share. As of March 28, 2000, 6,620,000 shares of our
authorized shares of common stock were issued and outstanding assuming the
issuance of 20,000 shares of common stock to Charlie Tokarz, our Chief Financial
Officer, Treasurer and Director, as described in Mr. Tokarz's consulting
agreement dated March 19, 1998.
Business of Icy Splash
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 independent co-packer bottling facility. The
components include prelabeled bottles, caps, labels, 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.
We are a regional enterprise, with distribution and sales limited primarily
to the New York, New Jersey and Connecticut area. We are dependent on the
efforts of local distributors. We currently have no employees, with the
exception of two of our executive officers. The Company's expansion would depend
on the hiring of qualified employees and reliance on national distributors,
which would be a significant change from the operating policies followed by the
Company since its inception.
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.
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Icy Splash Products 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 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. 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 products.
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 local distributors functioning
effectively in this marketplace. The sales persons typically deal with the store
owners on a weekly basis.
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Icy Splash - Second Generation is packaged and distributed in cases of 24 ounce,
2 liter 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 of Icy Splash Products and Dependence on Major Customers
The primary distributors of our products are I Epstein, Haddon House and NY
Soft Drink Distributors ("NYSD"). The product line is distributed primarily to
supermarket chains, and, to a lesser extent, to grocery stores and convenience
stores in the New York, New Jersey and Connecticut area. 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.
As a result of our distribution arrangement with NYSD, a significant
portion of our sales during the year ended December 31, 1999 were to NYSD.
During this period, the Company's total sales were $600,086, of which $308,700
of product was sold to NYSD. Such sales to NYSD can be attributed to the launch
of our latest product line Icy Splash - Second Generation. If sales to NYSD were
removed from our results of operations, our gross profit would decrease from
$192,648 to approximately $116,100 for the year ended December 31, 1999.
Accordingly, management believes that the loss of NYSD as a distributor would
have a material adverse effect on our sales and operations.
Sources and Availability of Raw Materials and Suppliers
We will specialize in production and distribution of soft drinks and other
beverage products. 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.
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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 which produce and
distribute brands 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 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.
Government 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 state of New
York.
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We cannot predict the impact of possible changes that may be required in
response to future legislation, rules or inquires 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.
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 $3,146 in 1998 and $2,617 in 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.
Trademarks
The Company's registered trademark is "Icy Splash". We intend to apply for
United States and International patent, trademark and copyright protection,
where applicable, in connection with certain of our products and property.
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. Additionally, there is no assurance
that we will be able to prevent competitors from using the same or similar
marks, products or appearances of the Company. All trademarks or service marks
appearing in this annual report that do not relate to our products are the
property of their respective holders.
Employees
The Company presently has no employees, with the exception of Joseph Aslan,
the Company's President, and Shlomo Aslan, the Company's Vice President and
Secretary, who devote all of their time to the business management and financing
of the Company. Charles Tokarz, the Company's Chief Financial Officer and
Treasurer, primarily provides bookkeeping services and assistance in the
preparation of audited and unaudited financials statements and disclosure
required under the Securities Exchange Act of 1934, as amended. Mr. Tokarz
serves as an independent contractor of the Company pursuant to his consulting
agreement. See "Certain Relationships and Related Transactions."
8
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Item 2. 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 NYSD, the primary distributor of our products. 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 and will not be
required to make any lease payments for the use of office space owned by Mr.
Aslan or NYSD.
We 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. Adjacent
to the building lies a parcel of land aggregating approximately 20,000 square
feet. The purchase price of the premises was $800,000. We received an Inducement
Resolution acknowledging that the New York City Industrial Development Agency
would provide certain tax benefits to us if we acquired the property.
In early September 1999, management recognized that the Company could not
obtain any financing to purchase the property. As a result, the Company assigned
the contract to Aslan Holding Corp., a corporation wholly owned by Shlomo Aslan,
an executive officer and director of the Company.
In addition to the office space located in Whitestone, New York, the
Company currently occupies approximately 120 square feet of office space at 535
Wortman Avenue, Brooklyn, New York 11208. The space is subletted from Aslanco,
Inc., a corporation owned by Joseph Aslan, an executive officer and director of
the Company. Rent of $400 per month will be accrued and paid beginning January
1, 2000.
Item 3. 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 New York 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 no assurance can be given.
Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted to a vote of security holders during the fourth
quarter of 1999.
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PART II
Item 5. Market for Common Equity and Related Stockholder Matters.
Market Information
There is no public market for Icy Splash common stock.
Holders
On March 28, 2000, there were 35 holders of record of Icy Splash common
stock.
Dividends
The Company has never declared or paid cash dividends on its common stock.
The Company currently intends to retain earnings, if any, to support its growth
strategy and does not anticipate paying cash dividends in the foreseeable
future. Payment of future dividends, if any, will be at the discretion of the
Company's Board of Directors after taking into account various factors,
including the Company's financial condition, operating results, current and
anticipated cash needs and plans for expansion.
Recent Sales of Unregistered Securities
During the period from March 1998 to October 1998, we issued an aggregate
of 10,000 units pursuant to Rule 504 under Regulation D of the Securities Act of
1933, as amended (the "Private Placement"). Each unit consists of 50 shares of
common stock at $5.00 per unit, and 95 redeemable Common Stock Purchase Warrants
(the "Warrants"). All 10,000 units were sold to a total of thirty investors. The
Company incurred costs of $28,813 in excess of proceeds received from the
Private Placement.
Each 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 preceding the date fixed for redemption
provided that there is a registration statement in effect or there is an
exemption from such registration. The Company has extended the expiration date
of the Warrants to January 20, 2002. 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.
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Item 6. Management's Discussion and Analysis or Plan of Operation.
Results of Operations
Net sales for the Company increased 87.1%, from $320,802 in 1998 to
$600,086 in 1999. 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 86.4% of beverage
sales in 1998, it accounted for 33.9% of beverage sales in 1999. Icy Splash -
Second Generation sales are less seasonal than Icy Splash - Clear, making the
Company's sales volume less susceptible to dramatic decreases in sales volume.
The gross profit margin decreased to 32.1% in 1999 from 41.8% in 1998. The
decrease in profit margin was caused by the introduction of the lower profit
margin line of products, Icy Splash - Second Generation, into the sales mix.
Selling expenses were $63,105 in 1999, compared with $55,319 in 1998, 10.5%
and 17.2% 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 1999, $24,592 of promotion expenses (sales discounts and
giveaways) were expended predominately to promote sales of the Icy Splash
- -Second Generation product line, compared with $0 to promote Icy Splash - Clear
in 1998. However, during 1998 there were advertising expenditures of $22,504 for
advertising media, including video, compared to $4,072 in 1999.
General and administrative expenses were $95,514 in 1999, compared with
$50,981 in 1998, 15.9% and 15.9% of sales, respectively. While the percentage of
sales has remained constant, there have been disproportionate increases and
decreases in some items. Insurance increased from $1,483 in 1998 to $9,444 in
1999, 1.6% in 1999 versus 0.5% in 1998, due to more comprehensive insurance
coverage. Professional fees were $40,416 in 1999, compared with $6,600 in 1998,
6.7 % and 2.1 % of sales, respectively. As the Company completes its SB-2
registration with the Securities and Exchange Commission and continues filing
quarterly and annual reports, professional fees will probably continue to
increase. Bad debt expense was $15,786 for 1999 versus $16,570 for 1998, 2.6%
and 5.2% of sales, respectively. The Company anticipates continuing favorable
bad debt expense as a percentage of sales for 2000 due to the quality of its
current distributors (customers).
Income from operations in 1999 was $34,029, an increase of $6,149 from
1998, with an operating margin of 5.7% for 1999 and 8.7% for 1998, reflecting an
increase in sales volume, an increase in operating costs, lower gross profit
margin for Icy Splash - Second Generation and a seasonal fluctuation of sales
volume. Net income and net income as a percent of sales for 1999 were $41,745
and 7.0%, compared to $24,665 and 7.7% for 1998.
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The Company expects the gross profit for 2000 to remain similar to 1999 as
it continues to expand its market for Icy Splash - Second Generation. However,
the operating margin and net income as a percent of sales are expected to
increase, as the proceeds from the Company's sale of common stock provide funds
for expansion of sales volume.
Interest expense increased from $2,535 to $4,378 in 1999 versus 1998. There
was an outstanding $65,000 note payable for the whole year during 1999 and a
$100,000 note payable (paid down to $65,000) for only four months during 1998.
Liquidity and Capital Resources
Working capital increased $42,220 from December 31, 1998 to December 31,
1999 because proceeds of profitable operations were used to fund inventory and
receivables.
Net cash flow used by operating activities was $29,759 for 1999, while
$9,698 was provided by operations during 1998. During 1999 and 1998, cash was
predominately used to fund increases in accounts receivable and inventory in
order to facilitate increases in sales volume. However, during 1998 a more
significant increase in accounts payable created a net provision of cash from
operations.
During 1999, $15,282 was collected against notes receivable, while during
1998, $53,620 was loaned to a vendor and $38,054 of the loaned amount was
repaid. The Company made a loan to a vendor to help fund capital improvements.
Repayment was recorded as the vendor performed services for the Company. The
Company purchased $2,885 of fixed assets during 1999 and $3,449 in 1998.
During 1999, a $65,000 note payable was refinanced. During 1998, the
Company borrowed $100,000 from a third party and repaid $35,000 of the loan.
Also during 1998, shareholder loans of $34,442 were repaid Costs of $28,813 were
expended in 1998 for a private offering under Regulation D of the Securities Act
of 1933, as amended.
Item 7. Financial Statements.
In response to this Item, the information contained on pages 18 to 29 of
this annual report for the year ended December 31, 1999 is incorporated herein
by reference.
Item 8. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure.
There were no changes in or disagreements with the Company's principal
independent accountant during the two most recent fiscal years.
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PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons.
The following table sets forth the current officers and directors of Icy
Splash:
Name Age Position
- ---- --- --------
Joseph Aslan 44 President and Director
Shlomo Aslan 50 Vice President, Secretary and Director
Charles Tokarz 52 Chief Financial Officer, Treasurer and
Director
Sy Aslan 55 Director
Directors are elected in accordance with the Company's by-laws to serve
until the next annual stockholders meeting and until their successors are
elected in their stead. Icy Splash does not currently pay compensation to
directors for services in that capacity. Officers are elected by the Board of
Directors and hold office until their successors are chosen and qualified, until
their death or until they resign or have been removed from office. All corporate
officers serve at the discretion of the Board of Directors.
Joseph Aslan, Shlomo Aslan and Sy Aslan are brothers.
Joseph Aslan has served as the Company's President and Director since the
Company's inception in June 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 June 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.
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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, 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 of the Company. He has held this position since the
Company's incorporation in June 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.
Item 10. Executive Compensation.
To date, no member of management has collected any compensation from the
Company in excess of $100,000 in any fiscal year.
Item 11. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth certain information regarding beneficial
ownership of the Company's common stock as of March 28, 2000, by (i) each person
known by the Company to be the beneficial owner of more than 5% of the
outstanding common stock; (ii) each director of the Company; (iii) each
executive officer of the Company; and (iv) all executive officers and directors
of the Company as a group.
Number of Shares Percentage of Common Equity
Beneficially Beneficially
Name of Beneficial Owner(1) Owned Owned(2)
- --------------------------- ----- --------
Joseph Aslan(3) 2,970,000 44.9%
Shlomo Aslan(4) 2,970,000 44.9%
Charles Tokarz(5) 20,000(6) .30%
Sy Aslan(7) 100,000 1.5%
All officers and directors
as a group 6,060,000 91.5%
14
<PAGE>
- ----------
(1) To our knowledge, except as set forth in the footnotes to this table, we
believe that the persons named in this table have sole voting and
investment power with respect to the shares shown. Except as otherwise
indicated, the address of each of the directors and executive officers in
this table is as follows: Icy Splash Food & Beverage, Inc., 9-15 166th
Street, Suite 5-B, Whitestone, New York 11357.
(2) Percentage beneficially owned is based upon 6,620,000 shares of common
stock issued and outstanding as of March 28, 2000, including 20,000 shares
issuable to Charles Tokarz and not including shares issuable upon the
exercise of 950,000 Warrants issued in the Private Placement.
(3) Joseph Aslan is the President and Director of the Company.
(4) Shlomo Aslan is the Vice President, Secretary and Director of the Company.
(5) Charles Tokarz is the Chief Financial Officer, Treasurer and Director of
the Company.
(6) Such shares have not yet been issued to Mr. Tokarz.
(7) Sy Aslan is a Director of the Company.
Item 12. Certain Relationships and Related Transactions.
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. The agreement with Charles Tokarz was obtained on terms
as favorable as could have been obtained from a non-affiliated party.
During the Private Placement, certain immediate family members of one
officer and one director of the Company purchased 300 units and 600 units for
$1,500 and $3,000, respectively. The amount paid in each transaction was the
full offering price of $5.00 per unit.
The Company currently occupies approximately 120 square feet of office
space subletted from Aslanco, Inc., a corporation wholly owned by Joseph Aslan,
an executive officer and director of the Company. See "Description of Property."
Rent of $400 per month will be accrued beginning January 1, 2000.
All future transactions, including loans, if any, between the Company and
its officers, directors and principal shareholders and their affiliates and any
transactions between the Company and any entity with which its officers,
directors or principal shareholders are affiliated will be subject to the
approval of a majority of the Company's board of directors, including the
majority of the independent and disinterested outside directors of the board of
directors and must be on terms no less favorable to the Company than could be
obtained from unaffiliated third parties.
15
<PAGE>
Item 13. Exhibits and Reports on Form 8-K.
(a) Exhibits
EXHIBIT NO. DESCRIPTION
3.1 Certificate of Incorporation of Icy Splash*
3.2 By-Laws of Icy Splash*
4.1 Specimen Common Stock certificate of Icy Splash*
4.2 Specimen Common Stock Purchase Warrant certificate of Icy
Splash*
10.1 Revised Financial Consulting Agreement between Icy Splash
and The Southern Companies, dated April 27, 1999*
10.2 Consulting Agreement between Charles Tokarz and Icy Splash,
dated March 19, 1998*
10.3 Contract of Sale of 494-504 Wortman Avenue, Brooklyn, N.Y.*
11.1 Statement re: Computation of Per Share Earnings
21.1 List of Subsidiaries (Icy Splash has no subsidiaries)
27.1 Financial Data Schedule
- ----------
* Previously filed as an exhibit to our registration statement on Form 10-SB,
which was filed on May 21, 1999, and incorporated herein by reference.
(b) Reports on Form 8-K
Icy Splash did not file any reports on Form 8-K during the fiscal year
ended December 31, 1999.
16
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) 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.
By: /s/ Joseph Aslan
-----------------------
Joseph Aslan,
President and Director
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the Registrant and in the capacities and on
the dates indicated:
Signature Title Date
- --------- ----- ----
/s/ Joseph Aslan President and Director April 14, 2000
- ----------------------
Joseph Aslan
/s/ Shlomo Aslan Vice President, Secretary and April 14, 2000
- ---------------------- Director
Shlomo Aslan
/s/ Charles Tokarz Chief Financial Officer, Treasurer April 14, 2000
- ---------------------- and Director
Charles Tokarz
/s/ Sy Aslan Director April 14, 2000
- ----------------------
Sy Aslan
17
<PAGE>
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING
The Company's management is responsible for the preparation of the Financial
Statements in accordance with generally accepted accounting principles and for
the integrity of all the financial data included in this Form 10-KSB. In
preparing the Financial Statements, management makes informed judgements and
estimates of the expected effects of events and transactions that are currently
being reported.
Management maintains a system of internal accounting controls that is designed
to provide reasonable assurance that assets are safeguarded and that
transactions are executed and recorded in accordance with management's policies
for conducting its business. This system includes policies which require
adherence to ethical business standards and compliance with all laws to which
the Company is subject. The internal controls process is continuously monitored
by direct management review.
The Board of Directors are responsible for determining that management fulfils
its responsibility with respect to the Company's Financial Statements and the
system of internal accounting controls.
/s/ Joseph Aslan /s/ Charles Tokarz
- ------------------------ --------------------------
President Chief Financial Officer
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, 1999 and 1998, and the related statements of income, changes in
shareholders' equity and cash flows for the two years in the period ended
December 31, 1999. 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, 1999 and 1998, and the results of its operations and its cash
flows for the two years in the period ended December 31, 1999, in conformity
with generally accepted accounting principles.
/s/ LAZAR LEVINE & FELIX LLP
----------------------------
LAZAR LEVINE & FELIX LLP
New York, New York
March 23, 2000
18
<PAGE>
ICY SPLASH FOOD AND BEVERAGE, INC.
BALANCE SHEETS
AS OF DECEMBER 31, 1999 AND 1998
- ASSETS -
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 3,802 $ 20,314
Accounts receivable, net of allowance for doubtful accounts of
$2,000 and $4,163 for 1999 and 1998, respectively (Notes 6 and 8) 96,529 69,833
Notes receivable (Note 3) 1,485 34,610
Inventory (Note 2d) 129,147 60,881
Prepaid expenses 17,970 3,000
Deferred taxes (Note 5) 13,000 --
--------- ---------
TOTAL CURRENT ASSETS 261,933 188,638
--------- ---------
FIXED ASSETS (Note 2c):
Warehouse equipment 5,000 5,000
Office equipment 12,279 9,394
--------- ---------
17,279 14,394
Less: accumulated depreciation 8,033 4,673
--------- ---------
9,246 9,721
--------- ---------
$ 271,179 $ 198,359
========= =========
- LIABILITIES AND SHAREHOLDERS' EQUITY -
CURRENT LIABILITIES:
Notes payable (Note 4) $ 65,000 $ 65,000
Accounts payable 78,157 53,900
Accrued expenses and other current liabilities 21,279 15,537
Shareholders' loans 850 --
Income taxes payable (Notes 2e and 5) 680 454
--------- ---------
TOTAL CURRENT LIABILITIES 165,966 134,891
--------- ---------
COMMITMENTS AND CONTINGENCIES (Notes 6,8 and 9)
SHAREHOLDERS' EQUITY (Note 7):
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 shares issued and outstanding for 1999 and 1998 6,600 6,600
Additional paid-in capital 174,587 174,587
Accumulated deficit (75,974) (117,719)
--------- ---------
105,213 63,468
--------- ---------
$ 271,179 $ 198,359
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
19
<PAGE>
ICY SPLASH FOOD AND BEVERAGE, INC.
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
1999 1998
--------- ---------
NET SALES (Notes 2i, 6 and 8) $ 600,086 $ 320,802
--------- ---------
COST OF GOODS SOLD:
Inventory - beginning of year 60,881 35,316
Purchases 475,704 212,187
--------- ---------
536,585 247,503
Inventory - end of year 129,147 60,881
--------- ---------
TOTAL COST OF GOODS SOLD 407,438 186,622
--------- ---------
GROSS PROFIT 192,648 134,180
--------- ---------
OPERATING EXPENSES (Note 6):
Selling expenses 63,105 55,319
General and administrative expenses 95,514 50,981
--------- ---------
158,619 106,300
--------- ---------
INCOME FROM OPERATIONS 34,029 27,880
OTHER INCOME (EXPENSES):
Interest expense (4,378) (2,535)
--------- ---------
INCOME BEFORE TAXES 29,651 25,345
Provision for income taxes (Note 2e and 5) (12,094) 680
--------- ---------
NET INCOME $ 41,745 $ 24,665
========= =========
EARNINGS PER SHARE (Note 2j):
Basic $ 0.01 $ --
========= =========
Diluted $ 0.01 $ --
========= =========
The accompanying notes are an integral part of these financial statements.
20
<PAGE>
ICY SPLASH FOOD AND BEVERAGE, INC.
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 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, 1997 6,100,000 $ 6,100 $ 203,900 $(142,384) $ 67,616
Net costs from issuance of common stock
and warrants - private placement offering (Note 7) 500,000 500 (29,313) -- (28,813)
Net income, December 31, 1998 -- -- -- 24,665 24,665
--------- --------- --------- --------- ---------
Balance, December 31, 1998 6,600,000 6,600 174,587 (117,719) 63,468
Net income, December 31, 1999 -- -- -- 41,745 41,745
--------- --------- --------- --------- ---------
BALANCE, DECEMBER 31, 1999 6,600,000 $ 6,600 $ 174,587 ($ 75,974) $ 105,213
========= ========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
21
<PAGE>
ICY SPLASH FOOD AND BEVERAGE, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS:
1999 1998
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 41,745 $ 24,665
Adjustments to reconcile net income to net cash (used in) provided by
operating activities:
Depreciation 3,360 2,579
Provision for bad debts 15,786 16,570
Changes in assets and liabilities:
Increase In accounts receivable (24,638) (45,822)
Increase in inventories (68,266) (25,565)
Increase in prepaid expenses (14,970) --
Increase in deferred taxes (13,000) --
Increase in accounts payable 24,257 47,557
Increase (decrease) in accrued expenses and other current liabilities 5,967 (10,286)
--------- ---------
Net cash (used) provided by operating activities (29,759) 9,698
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets (2,885) (3,449)
Increase in note receivable -- (53,620)
Repayments of note receivable 15,282 38,054
--------- ---------
Net cash provided (used) by investing activities 12,397 (19,015)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term debt 65,000 100,000
Repayments of short-term debt (65,000) (35,000)
Net cost from issuance of common stock -- (28,813)
Proceeds from shareholders loans 850 --
Repayments of shareholders loans -- (34,442)
Deferred offering costs -- 27,886
--------- ---------
Net cash provided by financing activities 850 29,631
--------- ---------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (16,512) 20,314
Cash and cash equivalents, at beginning of year 20,314 --
--------- ---------
CASH AND CASH EQUIVALENTS, AT END OF YEAR $ 3,802 $ 20,314
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
During the year ended December 31, 1998, the Company transferred a customer's
accounts receivable balance to notes receivable in the amount of $25,544
Cash during the period for:
Income taxes paid $ 680 $ 1,527
========= =========
Interest paid $ 1,128 $ 131
========= =========
</TABLE>
22
<PAGE>
ICY SPLASH FOOD AND BEVERAGE, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 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.
23
<PAGE>
ICY SPLASH FOOD AND BEVERAGE, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 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 mainly of raw materials.
Inventory consists of the following:
1998 1999
-------- --------
Finished product $ 13,791 $ --
Flavoring , bottles and packaging materials 115,356 60,881
-------- --------
$129,147 $ 60,881
======== ========
(e) 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, 1999, of approximately $50,000 which may be applied
against future taxable income, and which expires in the year 2012 (See
Note 5).
(f) Statements of Cash Flows:
For purposes of the statements of cash flows, the Company considers
all highly liquid investments purchased with an original maturity of
three months or less to be cash equivalents.
(g) Comprehensive Income:
In June 1997, the Financial Accounting Standards Board issued
Statement No. 130 "Reporting Comprehensive Income"("SFAS 130"), which
prescribes standards for reporting other 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 other comprehensive income, a statement of comprehensive income is
not yet required.
24
<PAGE>
ICY SPLASH FOOD AND BEVERAGE, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):
(h) Advertising Costs:
Advertising costs, which are included in selling expenses, are
expensed as incurred. For the years ended December 31, 1999 and 1998
advertising costs, including promotion, aggregated $28,664 and
$22,504, respectively.
(i) Revenue Recognition:
The Company recognizes operating revenue at the point of passage of
title, which is generally upon shipment of goods to customers.
(j) 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:
Year ended December 31, 1999 1998
------- -------
Basic 6,600,000 6,290,945
Diluted 7,550,000 6,653,741
(k) Stock-Based Compensation:
Financial Accounting Standards Board Statement No. 123 "Accounting For
Stock Based Compensation" ("SFAS 123") 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
disclosures required by SFAS No. 123.
NOTE 3 - NOTES RECEIVABLE:
At December 31, 1999 and 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 December 31, 1999 the co-packer has provided such
services and made payments. Management believes the remaining balance
at December 31, 1999 is fully collectible.
25
<PAGE>
ICY SPLASH FOOD AND BEVERAGE, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
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 had agreed to
pay at least $1,000 a month beginning August 15, 1998, with no
interest if the entire balance was 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 and a
collection allowance of $6,500 was recorded. During 1999, only $1,200
was paid by the customer and the note was deemed uncollectible by
Management and accordingly reserved 100% as a bad debt.
NOTE 4 - NOTE PAYABLE:
On June 25, 1999, the Company received a bank loan aggregating $65,000
with an annual interest rate of 4.5%, payable on December 22, 1999,
which was subsequently renewed and is now due on June 22, 2000. The
bank loan is secured by certificates of deposit belonging to two major
shareholders. Proceeds from the note were used to repay a prior
$65,000 loan due on June 30, 1999.
NOTE 5 - INCOME TAXES:
The components of the provision for income taxes are as follows:
1999 1998
-------- --------
Current:
Federal $ -- $ --
State 906 680
-------- --------
906 680
-------- --------
Deferred:
Federal (5,000) --
State (8,000) --
-------- --------
(13,000) --
-------- --------
Provision for income taxes $(12,094) $ 680
======== ========
The tax effects of temporary differences that give rise to deferred
tax assets are presented below:
1999 1998
-------- ---------
Net operating losses $ 13,000 $ 25,000
Valuation allowances -- (25,000)
-------- ---------
$ 13,000 $ --
======== =========
26
<PAGE>
ICY SPLASH FOOD AND BEVERAGE, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE 5 - INCOME TAXES:
A reconciliation of the difference between the expected tax rate using
the statutory federal tax rate and the Company's effective tax rate is
as follows:
Years Ended December 31 1999 1998
----------------------- ---- ----
U.S. Federal income tax statutory rate (15.0)% --
State income tax, net of federal income tax benefit (25.8) 2.7%
----- ----
Effective tax rate (40.8)% 2.7%
===== ====
NOTE 6 - RELATED PARTY TRANSACTIONS:
(a) During December 1998, the Company initiated sales of product to a
distributor. Certain members of management of the company personally
agreed to provide financing and organizational support to the
distributor. In exchange for the financial support, the distributor
agreed to provide experience, sales representatives, contacts and a
full-service operating distribution business including a warehouse
for, but not limited to, the Company's product. The shareholders have
not received any form of compensation or other benefits for their
loans and managerial assistance. Management believes that all
transactions between the Company and the distributor are at arm's
length. For the year ended December 31, 1999, approximate sales to the
distributor and accounts receivable were $308,700 and $61,100,
respectively. For the year ended December 31, 1998, approximate sales
to the distributor and accounts receivable were $43,500 and $40,600,
respectively. At December 31, 1999, financing provided to this
distributor by members of management aggregated approximately
$160,000.
(b) During September 1999, the Company initiated sales of product to a
distributor which is owned by one of the Company's shareholders. For
the year ended December 31, 1999 approximate sales and promotion
expense passthroughs were $19,700 and $2,400, respectively. Accounts
receivable at December 31, 1999 of approximately $21,000 was paid in
January 2000.
(c) During the Company's 1998 private placement (See Note 7) certain
immediate family members of one officer and one director of the
Company purchased 300 units and 600 units for $1,500 and $3,000,
respectively. The amount paid in each transaction was the full
offering price of $5.00 per unit.
NOTE 7 - STOCKHOLDERS' EQUITY:
Private Placement Offering:
During 1998, the Company commenced selling common stock through a
private placement memorandum. The offering was 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, 2002. As of December 31, 1998, all 10,000 units had
been sold. Costs in excess of proceeds received aggregating $28,813
were reflected as a reduction of shareholders' equity at December 31,
1998.
27
<PAGE>
ICY SPLASH FOOD AND BEVERAGE, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE 7 - STOCKHOLDERS' EQUITY (continued):
Private Placement Offering (continued):
The common stock and warrants included in the units 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.
Subsequent Event:
On January 7, 2000, the Company filed a Form SB-2 registration
statement with the Securities and Exchange Commission to register the
950,000 shares of common stock issuable upon the exercise of the
Common Stock Purchase Warrants. A comment letter was received from the
Securities and Exchange Commission during February 2000. A response to
the comment letter has been prepared and will be submitted subsequent
to the completion of the Company's Form 10-KSB.
NOTE 8 - ECONOMIC DEPENDENCY:
For the year ended December 31, 1999 sales to two customers each
exceeded 10% of the Company's total sales. The approximate sales to
these customers were $308,700 and $152,000, respectively. The
corresponding accounts receivable from these customers were $61,100
and $15,700, respectively.
For the year ended December 31, 1998 sales to three customers each
exceeded 10% of the Company's total sales. The approximate sales to
these customers were $43,500, $157,300 and $53,600, respectively. The
corresponding accounts receivable from these customers were $40,600,
$32,200 and $0, respectively.
NOTE 9 - COMMITMENTS AND CONTINGENCIES:
Litigation:
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. Depositions have been conducted and a
notice of trial will be filed on or before May 1, 2000. Management
believes this suit will be resolved in favor of the Company.
28
<PAGE>
ICY SPLASH FOOD AND BEVERAGE, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE 9 - COMMITMENTS AND CONTINGENCIES (continued):
Consulting Agreement:
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.
29
ICY SPLASH FOOD AND BEVERAGE, INC.
STATEMENT RE: COMPUTATON OF PER SHARE EARNINGS
YEARS ENDED DECEMBER 31, 1999 1998
- --------------------------------------------------------------------------------
BASIC EARNINGS PER SHARE:
Net income $ 41,745 $ 24,665
---------- ----------
Weighted average shares outstanding 6,600,000 6,290,945
Basic earnings per share $ 0.01 $ 0.00
========== ==========
DILUTED EARNINGS PER SHARE:
Net income $ 41,745 $ 24,665
---------- ----------
Weighted average and dilutive shares:
Weighted average shares outstanding 6,600,000 6,290,945
Dilutive shares 950,000 362,796
---------- ----------
7,550,000 6,653,741
---------- ----------
Diluted earnings per share $ 0.01 $ 0.00
========== ==========
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial inofrmation extracted from the financial
statements for the year ended December 31, 1999 and is qualified in its
entirety by reference to such statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 3,802
<SECURITIES> 0
<RECEIVABLES> 100,014
<ALLOWANCES> 2,000
<INVENTORY> 129,147
<CURRENT-ASSETS> 261,933
<PP&E> 17,279
<DEPRECIATION> 8,033
<TOTAL-ASSETS> 271,179
<CURRENT-LIABILITIES> 165,966
<BONDS> 0
0
0
<COMMON> 6,600
<OTHER-SE> 98,613
<TOTAL-LIABILITY-AND-EQUITY> 271,179
<SALES> 600,086
<TOTAL-REVENUES> 600,086
<CGS> 407,438
<TOTAL-COSTS> 407,438
<OTHER-EXPENSES> 142,833
<LOSS-PROVISION> 15,786
<INTEREST-EXPENSE> 4,378
<INCOME-PRETAX> 29,651
<INCOME-TAX> (12,094)
<INCOME-CONTINUING> 41,745
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 41,745
<EPS-BASIC> 0.01
<EPS-DILUTED> 0.01
</TABLE>
