UNITED STATES SECURITIES AND EXCHANGE
COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MAY 31, 2000
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 294339
TWISTEE TREAT CORPORATION
(NAME OF REGISTRANT IN ITS CHARTER)
DELAWARE 43-1796135
(STATE OF INCORPORATION) (I. R. S. EMPLOYER IDENTIFICATION NO.)
301 CLARK STREET
WARRENSBURG, MISSOURI 64093
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES AND PRINCIPAL
PLACE OF BUSINESS)
________________
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NONE
________________
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, PAR VALUE $.001
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Indicate by check mark whether the registrant (1) has 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) and has been subject to such filing
requirements for the past 90 days.
Yes X No
As of May 31, 2000, there were 15,769,950 shares of the issuer's Common Stock
issued and outstanding.
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PART I - FINANCIAL INFORMATION
Item I. Financial Statements
The registrant represents that the Consolidated Financial Statements furnished
herein have been prepared in accordance with generally accepted accounting
principles applied on a basis consistent with prior years, and that such
Consolidated Financial Statements reflect, in the opinion of the management of
the Company, all adjustments (which include only normal recurring adjustments)
necessary to present fairly the consolidated financial position of Twistee Treat
Corporation (the "Company"), as of May 31, 2000, and the results of its
operations and its cash flows for the three months then ended.
3
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Twistee Treat Corporation
Consolidated Financial Statements
May 31, 2000
4
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NOTES TO FINANCIAL STATEMENTS
5
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISK
This quarterly report may contain forward-looking statements within the meaning
of Section 21E of the Securities Exchange Act of 1934. These forward-looking
statements are based largely on the Company's expectations and are subject to a
number of risks and uncertainties, certain of which are beyond the Company's
control. Actual results could differ materially from these forward-looking
statements as a result of such risks and uncertainties, including, among others,
general economic conditions, governmental regulation and competitive factors,
and, more specifically, interest rate levels availability of financing, consumer
confidence and preferences, the effectiveness of the Company's competitors, and
costs of materials and labor. In light of these risks and uncertainties, there
can be no assurance that the forward-looking information contained in this
quarterly report will in fact occur. Forward-looking statements may be
identified by use of forward-looking terminology such as "believe,' "intends,"
"may," "will," "expects," "estimate," "anticipate," "continue," or similar
terms, variations of those terms or the negative of those terms.
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THIRTEEN WEEKS ENDED MAY 31, 2000 AND MAY 31, 1999.
------------------------------------------------------------
OVERVIEW.
--------
The Company operates and franchises soft-serve ice cream desserts and an
assortment of other foods and beverages in its proprietary cone-shaped buildings
and kiosks. Incorporated under the laws of Missouri in 1999, the Company
redomiciled by merger into a Delaware corporation in June of 1997 with the name
Twistee Treat Corporation. On April 6, 2000, the Company purchased a
publicly-reporting corporation, Perfection Plus, Inc., a Nevada corporation, as
described more fully in its Form 8-K filed with the Securities and Exchange
Commission on April 8, 2000, as subsequently amended. Effective January 1,
1999, Stephen Wells, formerly the President of the Company's largest franchisee
(Twistee Treat of the Southeast, Inc.), became the President and Chief Executive
Officer of the Company. Mr. Wells continued the testing program, begun in
1999, of the Company's "Express Grill" unit, a full-service restaurant loosely
based on the design of the Brazier units operating by "Dairy Queen." Management
believes that the "Express Grill" unit will help the Company expand its business
into cooler climates, offering a broader menu and inside seating capability.
NET SALES.
----------
The Net Sales made by the Company are derived from two separate sources, namely
the sale of ice cream products at retail and to franchisees of the Company, as
well as from the sale of licensing, regional development and franchise rights to
third parties desiring to own and operate individual Company franchises or the
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ability to develop regional franchise areas. For the three months ended May 31,
2000, the Company's Net Sales were $75,953, compared to $155,230 for the same
period ended May 31, 1999. Similarly, for the six months ended May 31, 2000,
Net Sales equaled $101,294, compared to the six-month period ended May 31, 1999,
in which Net Sales equaled $204,474. The decrease in Net Sales for the most
recent three-months and six-month periods is attributable to a decrease of
franchise sales. Out of the $75,953 in total Net Sales recorded for the period
ended May 31, 2000, thirty-nine percent (39%) was earned from the sale of ice
cream and other products to retail customers and franchisees for sale at
franchised locations, and twenty-six percent (26%) is attributable to revenues
earned from the sale of franchises, licenses and regional development
agreements, as well as from the payment of royalties on agreements entered into
in earlier periods by the Company.
COST OF SALES.
---------------
The Company experienced a slight decrease in the Cost of Sales for the three
months ended May 31, 2000, which was $22,986, as compared to the Cost of Sales
for the same period ended May 31, 1999, which equaled $37,125. For the
six-month period ended May 31, 2000, the Cost of Sales equaled $32,163, and for
the same period ended May 31, 1999, the Cost of Sales equaled $57,085.
Management attributes the relatively small decrease in Cost of Sales for the
three months ended May 31, 2000, and the six months ended May 31, 2000, as a
percentage of Cost of Sales for the same periods ended May 31, 1999, to
management's ability to bring the cost of sales in line with industry standards,
especially with respect to the cost of food and ice cream sold by the Company,
and to the overall reduction of revenues. The Cost of Sales experienced by the
Company from its operations is primarily for product sales of which 55% was for
the six months ended May 31, 2000, and 32% was for the three months ended May
31, 2000. Management's goal is to keep the cost of sales below 35%. The cost
of selling a franchise in Florida during the quarter ending May 31, 2000
generated administrative expenses, which is also included in the Cost of Sales.
The remaining revenue derived during this period were from the sales of Twistee
Treat cone-shaped buildings which were sold to a Canadian licensee at the
Company's cost in an effort to establish business in that region to further
general revenues.
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GROSS PROFIT.
-------------
The Company generated a Gross Profit of $52,967 for the three months ended May
31, 2000, down from $118,105 (or 55.2%) from the same period ended May 31,
1999. The Gross Profit generated for the six-month period ended May 31, 2000
was $69,131, down from $147,389 (or 53.09%) for the same period ended May 31,
1999. As a percentage of Net Sales, the Gross Profit for the three-month period
ended May 31, 2000, and the six-month period ended May 31, 2000, was
approximately 69.73% and 68.25%, respectively. The decrease in the Gross Profit
generated by the Company during such periods as a percentage as a total of Net
Sales of the Company is attributed to an increase in the Company's inventory and
the high cost of sales during the first quarter of this year.
OPERATING EXPENSES.
-------------------
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Operating expenses for the three-month period ended May 31, 2000 equaled
$284,256 an increase of approximately 131.9% compared to the same period ended
May 31, 1999, and for the six-month period ended May 31, 2000, equaled $389,426,
an increase of approximately 72.2% compared to the six months ended May 31,
1999. The substantial increase in operating expenses is primarily due to the
heavy expenditure of the Company on legal and professional fees, attributable
primarily to (1) the legal and auditing costs associated with the acquisition by
the Company of a publicly-reporting corporation in April, 2000, and the
associated expenses of being a publicly-reporting Company since that date; (2)
the increased focus of the Company on the sale of franchises, regional
development rights, license rights and other heavily negotiated contracts as
well as compliance with the regulatory requirements imposed upon franchising
entities in the United States; and (3) the legal costs associated with the
filing of a lawsuit against Fibertek Corporation to rescind a purchase of that
company. In addition to the increased legal and accounting fees, the Company
has experienced expenses paid to franchising consultants in the amount of
$12,600 and $16,200 for the three- and six-month periods ended May 31, 2000.
Prior to such periods the Company had paid no consulting expenses. Payroll and
other compensation equaled $31,149 for the three months ended May 31, 2000, and
$72,665 for the six-month period ended May 31, 2000, compared to $33,597 and
$73,297, respectively for the same periods ended May 31, 1999. Depreciation and
amortization expense which equaled $20,852 for the three months ended May 31,
2000 increased approximately 90% over the same period ended May 31, 1999, and
for the six-month period ended May 31, 2000 depreciation and amortization
expense equaled $38,921, representing an increase of approximately 74% over the
same period ended May 31, 1999. Management
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attributes the substantial increase in depreciation and amortization expenses to
additional asset purchases. Other general and administrative expenses incurred
by the Company for the three-month period ended May 31, 2000 equaled $76,561,
and included payments for interest, wages, rent and other normal expenses for
the day to day operations of the business. For the six-month period May 31,
2000, such amount equaled $118,546. These amounts represented increases of
approximately 21.2% and 21.3%, respectively, over the prior periods. As a
result of its operating expenses, the Company experienced a total loss from
operations of ($231,289) and ($320,295) for the three- and six-month periods
ended May 31, 2000, compared to ($4,469) and ($78,707), (or 5075.4% and 306.9%,
respectively). The largest single factor attributable to the increase in loss
from operations is the increase in legal and accounting fees described above.
The Company generated $774 in interest income, reducing the Company's loss from
operations to a net loss of ($242,515) for the three months ended May 31, 2000.
The Company earned no interest or other miscellaneous income for the same period
ended May 31, 1999. For the six-month period ended May 31, 2000, the Company
generated miscellaneous income of $794, and interest income of $1,250, which was
offset by interest expense of ($19,350) during that same period, resulting in a
total net loss for the six months ended May 31, 2000 of ($337,601). The Company
experienced no miscellaneous income, interest income or interest expense during
the six-month period ended May 31, 1999.
NET LOSS PER SHARE.
---------------------
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The Company's Net Loss per common share and equivalence--basic and diluted for
the three-month period ended May 31, 2000 was ($0.02), and for the six-month
period ended May 31, 2000, the net loss per common share and equivalence-basic
and diluted equaled ($0.04). This represented an increase of $0.01 and $0.03,
respectively, over the comparable net loss per common share and
equivalence-basic and diluted for the same periods ended May 31, 1999.
LIQUIDITY AND CAPITAL RESOURCES.
----------------------------------
As of May 31, 2000, the Company had $76,515 in cash, a decrease of $8,406 from
November 30, 1999. The decrease in cash is attributable to recent acquisitions
of cone-shaped buildings and ice cream equipment. Net cash used for operations
in the second quarter of 2000 was approximately $543,892, an increase of 127.1%
over the amount of net cash used for operations during the same period in 1999.
Uses of the Company's cash during the second quarter of 2000 was predominantly
for general and/or administrative purposes, increase in inventory and debt
reduction.
Inventories increased from $116,650 at November 30, 1999 to $259,920 at May 31,
2000 (an increase of approximately 123%). This increase reflects the
acquisition of nine buildings as well as additional ice cream equipment in
preparation for sales resulting from the Company's ongoing franchise campaign.
The Company anticipates that its capital expenditures for the remainder of
fiscal year 2000 will be approximately $250,000, most of which is expected to be
used for general working capital purposes, legal and accounting fees, and
advertising and promotions activities related to the ongoing franchise campaign.
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The Company's debt structure includes total current liabilities of $452,260 at
May 31, 2000, a decrease from $634,639 at November 30, 1999. Long-term debt at
May 31, 2000 equaled $29,292, compared to $34,792 at November 30, 1999. Total
liabilities at May 31, 2000 were $481,552, a decrease from $669,431 for the
period ended November 30, 1999. This decrease of approximately 28% in total
liabilities was attributable primarily to debt reduction.
Cash flows from financing activities by the Company totaled $608,813 at May 31,
2000, primarily consisting of proceeds from the sale of stock.
The Company has no credit line or other bank debt, and has generated its cash
for operations from internally-generated revenues and the sale of its common
stock, $.0001 par value. At May 31, 2000 the Company had total stockholders'
equity of $694,940, an increase of approximately 151.5% from the $276,291 of
stockholders' equity existing at November 30, 1999. The stockholders' equity
was primarily raised from the sale of capital stock during the first six months
of fiscal year 2000. During the three months ended May 31, 2000, the Company
issued 8,810,000 shares of common stock for proceeds of $750,000. In addition,
on June 13, 2000, Stephen Wells, the Company's President and CEO, purchased
2,500,000 shares of common stock from the Company for proceeds of $50,000. The
Company believes that its liquid resources and internally-generated cash are
sufficient to meet its short-term and long-term operating requirements at
present levels of operation. However, to expand the Company's business and to
take advantage of certain expansion capabilities which the Company believes
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exist in its market today, the Company will require additional outside equity
and/or debt financing. To the extent that the Company cannot obtain such
financing on terms that it would consider favorable or at all, it could have a
materially adverse impact on the Company's ability to grow its business and take
advantage of the opportunities in which it desires to engage during the
remainder of fiscal year 2000 and beyond. There can be no assurance that the
Company will be able successfully to raise the cash it requires to implement its
business plan as currently anticipated.
IMPACT OF YEAR 2000.
-----------------------
The Company experienced no significant disruptions in its information technology
and non-information technology systems, and believes that those systems
successfully responded to the Year 2000 date change. The Company is not aware
of any material problems resulting from Year 2000 issues, either with its
products, its internal systems, or the products and services of third parties
which the Company utilizes in its operations or business. The Company will
continue to monitor its mission critical computer applications and those of its
suppliers and vendors throughout the Year 2000 to ensure that any latent Year
2000 matters that may arise can be addressed promptly.
RISK FACTORS.
--------------
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Dependence on Independent Franchisees and Licensors. The Company a significant
amount of its total revenues from the sale of franchise, license and regional
development rights to independent persons who desire to operate Twistee Treat
franchises in the United States and in Canada. The ability of the Company to
continue to generate revenue from these activities, and to grow its franchising
and licensing business in the future, is dependent upon the willingness of
independent persons to become franchisees and licensees of the Company. The
decision whether or not to become a franchisee or licensee of the Company can be
effected by a number of variables, many of which are outside of the Company's
control. Some of these variables include general market conditions, regulatory
burdens, the cost of raw supplies and materials, and the receptiveness of the
general public to the Company's particular products and proprietary buildings
and retail units. If the Company were unable successfully to market and sell
its franchise and license rights to persons who would independently own and
operate Twistee Treat franchises, the ability of the Company to continue would
be severely impacted. While the Company does own and operate certain retail
sales outlets of its own, the majority of its business is accounted for through
the sale of franchise, regional development and license rights to independent
third parties.
Competition. The frozen desert market is highly competitive, and distinctions
between categories of frozen deserts (particularly with respect to the premium
or quality nature of various frozen desert products) are becoming much less
marked than in the past. The success of the Company depends upon its ability to
continue to create and market innovative products, flavors, distribution
channels and retail units through which it can sell its product directly or
through the independent franchisees and licensees who operate Twistee Treat
locations. If the Company is unable to compete effectively against other ice
cream and frozen desert manufacturers, as well as other food specialty shops
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which compete for space at malls and other venues, it will be unable to continue
marketing its franchises and license rights, or to maintain its own corporate
locations, for the sale of Twistee Treat products. The inability to sell its
products effectively would have a materially adverse effect upon the business
and operations of the Company.
Volatility in the Cost of Raw Materials. The Company has experienced the
general trend of volatility in dairy ingredient commodity costs, and believes
that such volatility may continue in the near to medium term. While dairy
commodity costs for the first quarter of fiscal 2000 were lower than in fiscal
1999, it is possible that at some future date both gross margins and earnings
may not be adequately protected by pricing adjustments, cost control programs
and productivity gains. To the extent that the Company is unable to effectively
predict, and take actions to protect against, significant increases in the raw
materials it uses to produce its frozen desert products, it could have a
materially adverse impact on its ability to sell such products to its
franchisees and licensees, or to recognize sufficient margins from sales to make
the business economically viable.
Dependence Upon External Financing. The Company has been building its business
through revenues generated from operations, supplemented by the sale of its
capital common stock. The ability of the Company to continue to grow and expand
its business is highly dependent upon the ability of the Company to continue to
raise external financing, from the sale of equity and/or the incurrence of debt.
If the Company were unable to obtain debt and/or equity financing upon terms
that were sufficiently favorable to the Company, or at all, it would have a
materially adverse impact upon the ability of the Company to continue to expand
its business and operations, or to implement its business plan as now
contemplated by the Company.
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Reliance on Key Management. The success of the Company is highly dependent upon
the continued services of Steven Wells, its President and CEO, who has been the
primary person responsible for building the Company's renewed franchise,
regional development and licensing business. If Mr. Wells were to leave the
Company, it could have a materially adverse effect upon the business and
operations of the Company.
SIGNATURE
TWISTEE TREAT CORPORATION
Date: July 21, 2000
/s/ Stephen Wells /s/ Stephen Wells
----------------------------- -----------------------
Stephen Wells Stephen Wells
President Chief Financial Officer
PART II: OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibit is filed herewith:
Exhibit No. Description
----------- -----------
27.1 Financial Data Schedule
(b) The Company filed a Notice of Current Report on Form 8-K pertaining to
the acquisition of Perfection Plus, Inc. on April 6, 2000, which was
subsequently amended on April 7, April 17, May 24, and June 16, 2000.
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TWISTEE TREAT CORPORATION
CONSOLIDATED FINANCIAL STATEMENTS
AS OF MAY 31, 2000
<PAGE>
TWISTEE TREAT CORPORATION
CONTENTS
--------
PAGE 1 CONSOLIDATED BALANCE SHEETS AS OF MAY 31, 2000
(UNAUDITED) AND NOVEMBER 30, 1999
PAGE 2 CONSOLIDATED STATEMENTS OF OPERATIONS FOR
THE THREE MONTHS AND SIX MONTHS ENDED MAY 31,
2000 AND 1999 (UNAUDITED)
PAGE 3 CONSOLIDATED STATEMENTS OF CASH FLOWS FOR
THE SIX MONTHS ENDED MAY 31, 2000 AND 1999
(UNAUDITED)
PAGES 4 - 5 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
<TABLE>
<CAPTION>
TWISTEE TREAT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
-----------
ASSETS
------
May 31, 2000
(Unaudited) November 30, 1999
-------------- -----------------
<S> <C> <C>
CURRENT ASSETS
Cash $ 76,515 $ 84,921
Advances 10,000 10,000
Notes receivable - trade 96,000 90,000
Notes receivable other - current 80,670 80,670
Inventory 259,920 116,650
-------------- -----------------
Total Current Assets 523,105 382,241
-------------- -----------------
PROPERTY AND EQUIPMENT, NET 362,837 328,431
-------------- -----------------
OTHER ASSETS
Notes receivable - trade 20,000 20,000
Notes receivable other 74,000 74,000
Other receivable 105,500 50,000
Deposits 1,150 1,150
Intangible assets 89,900 89,900
-------------- -----------------
Total Other Assets 290,550 235,050
-------------- -----------------
TOTAL ASSETS $ 1,176,492 $ 945,722
------------ ============== =================
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 101,105 $ 147,797
Notes and loans payable - current 170,415 306,102
Capital lease - current 507 507
Deferred revenue 180,233 180,233
-------------- -----------------
Total Current Liabilities 452,260 634,639
NOTES PAYABLE 29,292 34,792
-------------- -----------------
TOTAL LIABILITIES 481,552 669,431
-------------- -----------------
STOCKHOLDERS' EQUITY
Preferred stock, $.0001 par value, 10,000,000 shares authorized, none issued - -
and outstanding
Common stock, $.0001 par value, 50,000,000 shares authorized, 15,769,950 1,576 676
and 6,769,950 shares issued and outstanding, respectively
Common stock to be issued, $.0001 par value, 50,000 shares and 212,500, 5 21
respectively
Additional paid in capital 3,047,115 1,929,249
Accumulated deficit (1,991,256) (1,653,655)
Less subscriptions receivable (362,500) -
-------------- -----------------
Total Stockholders' Equity 694,940 276,291
-------------- -----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,176,492 $ 945,722
------------------------------------------ ============== =================
</TABLE>
See accompanying notes to consolidated financial statements
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<TABLE>
<CAPTION>
TWISTEE TREAT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
-----------
For the Three For the Three For the Six For the Six
Months Ended Months Ended Months Ended Months Ended
May 31, 2000 May 31, 1999 May 31, 2000 May 31, 1999
--------------- --------------- -------------- --------------
<S> <C> <C> <C> <C>
NET SALES $ 75,953 $ 155,230 $ 101,294 $ 204,474
COST OF SALES 22,986 37,125 32,163 57,085
--------------- --------------- -------------- --------------
GROSS PROFIT (LOSS) 52,967 118,105 69,131 147,389
--------------- --------------- -------------- --------------
OPERATING EXPENSES
Payroll and contractual 31,149 33,597 72,665 73,297
compensation
Depreciation and amortization 20,852 11,000 38,921 22,000
expense
Consulting expense 12,600 - 16,200 -
Legal and professional fees 155,094 14,795 155,094 33,069
Other general administrative
expenses 64,561 63,182 106,546 97,730
--------------- --------------- -------------- --------------
Total Operating Expenses 284,256 122,574 389,426 226,096
--------------- --------------- -------------- --------------
LOSS FROM OPERATIONS (231,289) (4,469) (320,295) (78,707)
--------------- --------------- -------------- --------------
OTHER INCOME (EXPENSE)
Miscellaneous income - - 794 -
Interest income 774 - 1,250 -
Interest expense (12,000) - (19,350) -
Total Other (Expense) (11,226) - (17,306) -
NET LOSS $ (242,515) $ (4,469) $ (337,601) $ (78,707)
-------- =============== =============== ============== ==============
Net loss per common share and $ (.02) $ (.01) $ (.04) $ (.01)
equivalents - basic and diluted =============== =============== ============== ==============
Weighted average number of shares
outstanding during period - basic 9,747,728 6,337,750 8,313,839 6,337,750
and diluted =============== =============== ============== ==============
</TABLE>
See accompanying notes to consolidated financial statements
2
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<TABLE>
<CAPTION>
TWISTEE TREAT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
-----------
For the Six For the Six
Months Ended Months Ended
May 31, 2000 May 31, 1999
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (337,601) $ (78,707)
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:
Depreciation and amortization 38,921 22,000
Stock issued to consultants 6,250 -
Changes in assets and liabilities
(Increase) decrease in:
Accounts receivable (6,000) -
Notes receivable - trade - (85,500)
Other receivables (55,500) -
Inventory (143,270) (8,000)
Increase (decrease) in:
Accounts payable and accrued expenses (46,692) (57,239)
Deferred Revenue - (32,000)
-------------- --------------
Net Cash Used In Operating Activities (543,892) (239,446)
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (73,327) 6,538
Increase in intangible assets - 50,800
-------------- --------------
Net Cash Used In Investing Activities (73,327) 57,338
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in notes payable (141,187) 103,202
Proceeds from stock sale 750,000 36,522
-------------- --------------
Net Cash Provided By Financing Activities 608,813 139,724
-------------- --------------
INCREASE IN CASH AND CASH EQUIVALENTS (8,406) (42,384)
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 84,921 49,647
-------------- --------------
CASH AND CASH EQUIVALENTS - END OF YEAR $ 76,515 $ 7,263
--------------------------------------- ============== ==============
Cash paid during the year for:
Interest $ 7,350 $ -
============== ==============
Income taxes $ - $ -
============== ==============
</TABLE>
See accompanying notes to consolidated financial statements.
3
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TWISTEE TREAT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2000
------------
NOTE 1 - BASIS OF PRESENTATION
-----------------------------------
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles and the rules and
regulations of the Securities and Exchange Commission for interim financial
information. Accordingly, they do not include all the information necessary for
a comprehensive presentation of financial position and results of operations.
It is management's opinion, however that all material adjustments (consisting of
normal recurring adjustments) have been made which are necessary for a fair
financial statements presentation. The results for the interim period are not
necessarily indicative of the results to be expected for the year.
For further information, refer to the financial statements and footnotes for the
year ended November 30, 1999 included in the Company's Form 8-K/A filed April 6,
2000.
NOTE 2 - INVENTORIES
-----------------------
Inventories consist of ice cream machines and cone-shaped buildings.
Inventories are stated at the lower of cost or market value, as determined using
the first in, first out method.
NOTE 3 - STOCK ISSUANCES
----------------------------
During April 2000, the Company issued 200,000 shares of common stock with 50,000
shares of common stock still to be issued as of May 31, 2000 to acquire 100% of
an inactive shell company (see Note 5).
During the three months ended May 31, 2000, the Company issued 8,810,000 shares
of common stock for proceeds of $750,000.
During the three months ended May 31, 2000, 50,000 common shares were issued for
services to a consultant. The shares were valued at $6,250, based upon a recent
issuance of Twistee Treat Corporation common stock sold pursuant to a private
placement.
NOTE 4 - STOCK EXCHANGE AGREEMENT AND TERMINATION
--------------------------------------------------------
In March 2000, the Company entered into an Agreement of Purchase and Sale of
Stock (the "Agreement") as amended, to acquire 20,000,000 common shares of a
publicly held reporting company (the "party") in exchange for 20,000,000 shares
of the Company's common stock. Closing of the Agreement was to take place on
the later of (i) July 5, 2000 or (ii) the date the Company receives funds from a
source arranged by the party. If financing did not occur by August 5, 2000,
then the Company could terminate the Agreement or seek other financing. The
shares of both parties were issued into escrow.
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The Agreement was subject to the Board of Directors approval and on June 9,
2000, the Board of Directors passed a resolution not approving the Agreement and
notified the party that it was terminating the Agreement.
NOTE 5 - ACQUISITION
-----------------------
Effective April 6, 2000, the Company acquired 100% of an inactive shell company
reporting to the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended. The Company paid $120,000 as a consulting
expense and 250,000 shares of its common stock. The transaction was treated as
a recapitalization for financial accounting purposes and the common stock
issuance was recorded at par value with a charge to additional paid-in capital.
NOTE 6 - SUBSEQUENT EVENTS
------------------------------
(A) ISSUANCE OF COMMON STOCK
--------------------------------
In June 2000, the Company issued 2,500,000 shares of common for proceeds of
$50,000.
In June 2000, the Company issued 300,000 common shares to a consultant for
services. The shares were valued at $6,000, the quoted trading price on
the agreement date.
(B) PENDING ACQUISITION
-------------------------
The Company has entered into a letter of intent to acquire certain assets
and a building from an unrelated company. As of the date of this
filing, the acquisition agreements have not been finalized.
5
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