UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended March 31, 2002
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE EXCHANGE ACT
For the transition period from ___________ to ___________
Commission file number: 000-32711
UNIVERSAL ICE BLAST, INC.
(Exact name of small business issuer as specified in its charter)
Nevada 88-0360067
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
533 6th Street South, Kirkland, WA 98033
(Address of principal executive offices)
(425) 893-8424
(Issuer's telephone number)
(Former name, former address and former fiscal year, if changed since last
report)
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section l2, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes [_] No [_]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 34,166,654 at April 30, 2002.
<page>
UNIVERSAL ICE BLAST, INC.
FORM 10-QSB
TABLE OF CONTENTS
Part I - Financial Information
Item 1. Consolidated Financial Statements (Unaudited) 3
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 12
Item 3. Quantitative and Qualitative Disclosure about Market Risk 15
Part II - Other Information
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 15
Item 3. Defaults Upon Senior Securities (a)
Item 4. Submission of Matters to a Vote of Security Holders (a)
Item 5. Other Information (a)
Item 6. Exhibits and Reports on Form 8-K 15
Signatures Page 16
(a) There are no issues requiring disclosure for these items and they have
therefore been omitted
<page>
UNIVERSAL ICE BLAST, INC.
FORM 10-QSB
For the period ended March 31, 2002
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
UNIVERSAL ICE BLAST, INC.
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
2002 2001
(Unaudited)
-------------- --------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 25,768 $ 54,455
Accounts receivable - trade 263,409 347,147
Interest receivable on shareholder notes 18,746 -
Inventory 383,900 322,090
Prepaid expenses and other 12,227 -
-------------- --------------
Total current assets 704,050 723,692
EQUIPMENT, net 204,185 230,166
OTHER ASSETS 10,525 10,525
-------------- --------------
Total assets $ 918,760 $ 964,383
============== ==============
<page>
UNIVERSAL ICE BLAST, INC.
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
2002 2001
(Unaudited)
-------------- --------------
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable $ 378,263 $ 467,982
Notes payable 217,810 123,000
Accrued liabilities 28,570 40,087
Customer deposits 25,000 -
Advances from officers 32,847 62,087
Deferred revenue 420,852 341,327
Current portion of capital lease
obligations and long-term debt 101,666 108,335
-------------- --------------
Total current liabilities 1,205,008 1,142,818
-------------- --------------
LONG-TERM LIABILITIES
Capital lease obligations,
net of current portion 44,685 57,109
Long-term debt, net of current portion 129,557 141,964
Deferred gains from sale/leasebacks 25,712 28,895
Deferred officers' compensation 116,262 116,262
-------------- --------------
Total long-term liabilities 316,216 344,230
-------------- --------------
STOCKHOLDERS' DEFICIT
Preferred stock, $0.001 par value, 5,000,000
shares authorized, none issued - -
Common stock, $0.001 par value, 100,000,000
shares authorized, 34,166,654 and
33,109,654 shares issued and outstanding
in 2002 and 2001, respectively 34,166 33,109
Additional paid-in capital 4,227,925 4,085,370
Shareholder notes receivable (1,169,650) (1,169,650)
Stock options and warrants 103,654 84,738
Accumulated deficit (3,798,559) (3,556,232)
-------------- --------------
Total stockholders' deficit (602,464) (522,665)
-------------- --------------
Total liabilities and stockholders' deficit $ 918,760 $ 964,383
============== ==============
The accompanying notes are an integral part of these consolidated financial
statements.
<page>
UNIVERSAL ICE BLAST, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended March 31,
------------------------------
2002 2001
-------------- --------------
REVENUE
Sales of machines and accessories $ 3,594 $ 3,183
Service and rental income 42,906 65,464
-------------- --------------
Total Revenue 46,500 68,647
-------------- --------------
COST OF REVENUE
Machines and accessories 625 -
Service and rental 36,087 35,719
-------------- --------------
Total Cost of Revenue 36,712 35,719
-------------- --------------
Gross Profit 9,788 32,928
-------------- --------------
OPERATING EXPENSES
General and administrative 184,590 124,931
Research and development 42,416 46,174
Selling and marketing 20,795 13,455
-------------- --------------
Total Operating Expenses 247,801 184,560
-------------- --------------
OPERATING LOSS (238,013) (151,632)
INTEREST INCOME 19,098 -
INTEREST EXPENSE (23,412) (9,753)
-------------- --------------
NET LOSS $ (242,327) $ (161,385)
============== ==============
BASIC AND DILUTED NET LOSS PER SHARE $ (0.01) $ (0.01)
============== ==============
WEIGHTED AVERAGE SHARES OUTSTANDING USED IN
BASIC AND DILUTED PER-SHARE CALCULATION 33,207,432 20,919,560
============== ==============
The accompanying notes are an integral part of these consolidated financial
statements
<page>
UNIVERSAL ICE BLAST, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
THREE MONTHS ENDED MARCH 31, 2002
(UNAUDITED)
<table>
Common Stock Additional Shareholder Stock
-------------------------- Paid-in Notes Options Accumulated
Shares Amount Capital Receivable and Warrants Deficit Total
------------ ------------ ------------ ------------ ------------ ------------ ------------
<s> <c> <c> <c> <c> <c> <c> <c>
BALANCE,
Dec.31, 2001 33,109,654 $ 33,109 $ 4,085,370 $(1,169,650) $ 84,738 $(3,556,232) $ (522,665)
Common stock
issued for cash 780,000 780 116,182 - - - 116,962
Shares and
warrants issued
to consultants
providing
services to
the Company 277,000 277 26,373 - 15,916 - 42,566
Stock options
issued as
compensation - - - - 3,000 - 3,000
Net loss - - - - - (242,327) (242,327)
------------ ------------ ------------ ------------ ------------ ------------ ------------
BALANCE,
March 31, 2002 34,166,654 $ 34,166 $ 4,227,925 $(1,169,650) $ 103,654 $(3,798,559) $ (602,464)
============ ============ ============ ============ ============ ============ ============
</table>
The accompanying notes are an integral part of these consolidated financial
statements
<page>
UNIVERSAL ICE BLAST, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended March 31,
------------------------------
2002 2001
-------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (242,327) $ (161,385)
Adjustments to reconcile net loss to net
cash from operating activities
Depreciation and amortization 26,569 21,339
Common stock and warrants issued for
goods and services 42,566 -
Stock options issued as compensation 3,000 -
Amortization of deferred stock-based
compensation - 1,500
Amortization of deferred gain on
sale/leaseback transactions (3,183) (3,183)
Changes in operating assets and liabilities
Accounts receivable - trade 83,738 (3,835)
Accounts receivable - related parties - (4,131)
Interest receivable on shareholder notes (18,746) -
Inventory (61,810) (4,210)
Prepaid expenses and other (12,227) (29,940)
Accounts payable (18,169) (1,517)
Accrued liabilities (11,517) (16,891)
Due to related parties - (50)
Deferred revenue 79,525 -
Deferred officers' compensation - 24,221
Customer deposits 25,000 -
-------------- --------------
Net cash used in operating activities (107,581) (178,082)
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of equipment (588) -
-------------- --------------
Net cash used in investing activities (588) -
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on capital lease bligations (18,063) (14,596)
Proceeds from borrowings on notes payable 56,260 -
Proceeds from issuance of common stock 116,962 168,649
Payments on advances from officers (29,240) (27,984)
Payments on long-term debt (13,437) (5,927)
Payments of notes payable (33,000) -
-------------- --------------
Net cash provided by financing activities 79,482 120,142
-------------- --------------
DECREASE IN CASH AND CASH EQUIVALENTS (28,687) (57,940)
CASH AND CASH EQUIVALENTS
Beginning of period 54,455 66,413
-------------- --------------
End of period $ 25,768 $ 8,473
============== ==============
The accompanying notes are an integral part of these consolidated financial
statements.
UNIVERSAL ICE BLAST, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(UNAUDITED)
Three Months Ended March 31,
------------------------------
2002 2001
-------------- --------------
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid $ 15,609 $ 7,514
============== ==============
Income taxes paid $ - $ -
============== ==============
NON-CASH INVESTING AND FINANCING TRANSACTIONS
Conversion of accounts payable to note payable $ 71,550 $ -
Stock options issued as compensation $ 3,000 $ -
Common stock and warrants issued for
goods and services $ 42,566 $ -
The accompanying notes are an integral part of these consolidated financial
statements
<page>
UNIVERSAL ICE BLAST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2002
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION OF UNAUDITED INTERIM FINANCIAL INFORMATION
The accompanying unaudited financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of
America for interim financial statements and with instructions to Form 10-QSB
pursuant to the rules and regulations of the Securities and Exchange Commission.
Accordingly, they do not include all of the information required by accounting
principles generally accepted in the United States of America for complete
financial statements. The accompanying financial statements should be read in
conjunction with the audited consolidated financial statements of the Company
included in the Company's December 31, 2001 Annual Report on Form 10-KSB.
In the opinion of management, all adjustments, consisting only of normal
recurring accruals considered necessary for a fair presentation, have been
included. The results of operations for the three-month period ended March 31,
2002 are not necessarily representative of operating results to be expected for
the entire fiscal year.
NOTE 2 - USE OF ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. Actual results could differ
from those estimates.
NOTE 3 - FINANCIAL CONDITION, LIQUIDITY AND GOING CONCERN
The Company's consolidated financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and settlement of
liabilities and commitments in the normal course of business for the foreseeable
future. Since inception in 1995, the Company has accumulated losses aggregating
$3,798,000, including a loss of $242,000 for the three-month period ended March
31, 2002.
The Company had a working capital deficit of $500,000 and a stockholders'
deficit of $602,000 at March 31, 2002. Management's plans for continued
existence include a focus towards rental and sale of ice blast machines and away
from services. The Company is actively pursuing marketing arrangements for their
products in the precision, environmental and industrial cleaning markets. These
efforts include the arrangement with Ford Motor Company as more fully described
in Note 5. The Company's future success is dependent upon its ability to
achieve profitable operations and generate cash from operating activities, and
upon obtaining additional financing. There is no assurance that the Company
will be able to generate sufficient cash from operations or through the sale of
additional shares of common stock or from additional borrowings.
As further described in Note 9, during the three months ended March 31, 2002,
the Company converted approximately $72,000 in trade accounts payable to one
supplier to a short-term note payable bearing interest at an annual rate of 18%.
The Company's ability to obtain additional cash could have a material adverse
effect on its financial position, results of operations and its ability to
continue in existence. The consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
<page>
UNIVERSAL ICE BLAST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2002
(UNAUDITED)
NOTE 4 - COMMON STOCK
During the three months ended March 31, 2002, the Company issued 780,000 shares
of common stock through private placements under Section 4(2) of the Securities
Act in the aggregate amount of $116,962 to four investors, all of whom were
accredited investors and/or existing shareholders of the Company. During the
same period, under Section 4(2) of the Securities Act the Company issued 277,000
shares of common stock and 100,000 warrants to four investors for goods and
services having a fair market value of $42,566. All common shares issued above
are restricted subject to Rule 144.
NOTE 5 - STOCK OPTIONS AND WARRANTS
The Company has a stock option plan under which employees, consultants and
others may be awarded incentive or non-statutory stock options. The plan
authorizes the grant of options for the purchase of up to 6 million shares of
common stock. At December 31, 2001 options outstanding, all of which were
non-statutory, totaled 1,021,175. New options to purchase 650,000 shares of
stock were granted to employees at prices from $0.20 to $0.25 during the quarter
ended March 31, 2002. Of the options granted, 350,000 vested immediately, with
the balance vesting over four years. Based on the intrinsic value method,
150,000 of the vesting options included a compensation element in the amount of
$3,000.
NOTE 6 - CONTRACT WITH THE FORD MOTOR COMPANY
During 2001 the Company designed, assembled, and installed a precision gear
cleaning ice blast system under the terms of a purchase order from Ford Motor
Company. The purchase order is for a price of approximately $341,000 with
commitments for an additional three similar systems. Ford's commitments will be
automatically triggered upon Ford's acceptance of the first system, which is
required within 90 days of installation. The gear cleaning system became fully
operational in March 2002 after several factory-induced delays. The system is
required to undergo three months of testing as part of the Six Sigma
Implementation Ready process.
The Company has recognized no revenue from the Ford system during the quarter
ended March 31, 2002. Likewise, during the year ended December 31, 2001, the
Company recognized no revenue with the exception of approximately $55,000 of
engineering design fees that are in addition to the price of the system. The
remaining $341,000 has been deferred and will be recognized as sales upon
acceptance of the Ice Blast precision cleaning system by the customer.
NOTE 7 - FOREIGN OPERATIONS
During the three month period ended March 31, 2002, the Company reached an
agreement in principle to acquire certain assets of its Dutch distributor. The
Company is in the process of forming a Dutch subsidiary in order to consummate
the transaction. Terms are still being negotiated and no definitive agreements
have been signed. The Company expects to finalize the formation of its Dutch
subsidiary and the acquisition of these assets during the second quarter of
fiscal 2002.
<page>
UNIVERSAL ICE BLAST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2002
(UNAUDITED)
NOTE 8 - COMMITMENTS AND CONTINGENCIES
Certain vendors of the Company have threatened to bring legal action for
payment of overdue amounts. One suit has been filed. The Company is working to
resolve these issues. In addition, a former sales representative is attempting
to collect disputed commissions. All reasonable amounts relating to these past
due and disputed liabilities have been accrued in the accompanying financial
statements.
NOTE 9 - SUBSEQUENT EVENTS
Subsequent to March 31, 2002, The Company received payments on accounts
receivable from Ford of approximately $77,000. Approximately $32,000 of these
proceeds were used to repay a note payable as further described below.
Subsequent to March 31, 2002, the Company repaid a note payable in the amount
of approximately $32,000 and subsequently borrowed an additional $32,000 from
the same lender. The new note is collateralized by accounts receivable from
Ford and bears interest at an annual rate of 12%. The note is to be repaid upon
the receipt of accounts receivable payments from Ford. The Company also issued
a note payable to another lender subsequent to March 31, 2002 in the amount of
$25,000. The note is also collateralized by accounts receivable from Ford and
bears interest at an annual rate of 12%. This note is to be repaid upon the
receipt of accounts receivable payments from Ford. The terms of the note
include conversion rights allowing the note holder to convert any or all of the
note balance to common stock in the Company at a value of $0.15 per share.
Subsequent to March 31, 2002 the Company extended the term of the short term
note payable to a supplier described in Note 3. The new note payable is in the
amount of approximately $72,000 and bears interest at an annual rate of 18%.
One half of the principal balance is due on August 1, 2002 with the remaining
balance due on November 1, 2002. The note is secured by personal guarantees of
the two founders of Universal Ice Blast, Inc.
<page>
UNIVERSAL ICE BLAST, INC.
FORM 10-QSB
For the period ended March 31, 2002
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
Company's interim consolidated financial statements included elsewhere in this
Quarterly Report on Form 10-QSB (the "Quarterly Report") and with the Company's
consolidated annual financial statements and management's discussion and
analysis included in the Company's December 31, 2001 Annual report on Form
10-KSB (the "Annual Report").
Certain forward-looking statements contained herein regarding the Company's
business and prospects are based upon numerous assumptions about future
conditions, which may ultimately prove to be inaccurate and actual results may
materially differ from anticipated results described in such statements. The
Company's ability to achieve such results is subject to certain risks and
uncertainties, such as the impact of competition and pricing, changing market
conditions, general economic conditions, the Company's history of losses and
need for additional capital and other risks. Forward-looking statements are
identified by words such as "believe", "anticipate", "expect", "intend", "plan",
"will", "may", "confident" and other similar expressions. Any forward-looking
statements contained herein represent the Company's judgment as of the date
hereof. The Company disclaims, however, any intent or obligation to update such
forward-looking statements. As a result, the reader is cautioned not to place
undue reliance on any forward-looking statements contained herein.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2002 COMPARED TO THREE MONTHS ENDED MARCH 31, 2001
During the three months ended March 31, 2002, revenues decreased by 28% to
$46,000 as compared to the three months ended March 31, 2001. First quarter 2002
sales of machines and accessories increased to $4,000 from $3,000 during the
comparable three month period of 2001, while service and rental income decreased
52% to $43,000 during the three months ended March 31, 2001 from $65,000 during
the comparable period of 2001. The Company sold no machines during the first
three months of both 2002 and 2001. However, orders were received and assembly
initiated on three machines for customers other than Ford. The Company has
invoiced customers for approximately $80,000 on these orders but all revenue has
been deferred until the machines are complete, shipped and accepted by the
customers. Machine revenue represents the amortization of deferred gains on
sale/leaseback transactions originating in 1999. The decrease in service and
rental income is attributable to a fewer service jobs performed during 2002 as
well as the Company's focus on installation and support of the Ford system
during 2002 at the expense of potential rental opportunities.
Gross profit decreased to $10,000 during the three months ended March 31,
2002 as compared to $33,000 during the comparable period of the prior year. As a
percent of sales, gross profit decreased to 21% during the three months ended
March 31, 2002 as compared to 48% during the comparable period of 2001. Gross
profits from sales of machines and accessories remained unchanged at $3,000
during the first three months of 2002 compared to the comparable 2001 period due
primarily to the fact that no machine were sold during either period. Gross
profits from services and rental income decreased to $7,000 during the three
months ended March 31, 2002 as compared to $30,000 for the comparable period of
2001. The $23,000 decrease in service and rental gross profit is the result
lower rental and service rates obtained on 2002 work and an increase in
depreciation expense on new equipment.
<page>
UNIVERSAL ICE BLAST, INC.
FORM 10-QSB
For the period ended March 31, 2002
For the three months ended March 31, 2002, general and administrative
expense increased 47% to $184,000 from $125,000 during the comparable period of
2001. The $59,000 increase is the result of increased payroll costs, which
include the appointment of a Chief Engineer, as well as increased fees paid to
financing and public relations consultants.
Research and development expenses decreased 9% to $42,000 during the three
months ended March 31, 2002 as compared to $46,000 during the comparable period
of 2001. The $4,000 decrease in research and development expenses is the result
of lower patent expenses in 2002. The Company expects to incur additional R&D
costs in connection with the Ford project throughout the manufacturing process,
as new engineering and operational issues arise. The actual amount of such
costs, while expected to be significant, cannot be determined at this time. All
costs of engineering consulting and prototype development related to the Ford
project are being expensed as research and development costs.
Selling and marketing expenses increased $8,000 to $21,000 during the three
months ended March 31, 2002 as compared to $13,000 for the comparable prior year
period. The increase in selling and marketing expenses is attributable to the
hiring of a Vice President of Sales & Marketing in early 2002.
The Company's operating losses increased by $86,000 to $238,000 for the
three months ended March 31, 2002 from $152,000 for the comparable 2001 period.
The $23,000 decrease in gross profit on service and rental sales combined with
the $59,000 increase in general and administrative expenses accounted for the
increase in operating losses. Management anticipates incurring additional
future operating losses through the remainder of 2002.
During the quarter ended March 31, 2002, the Company recorded interest
income in the amount of $19,000 in connection with Shareholder notes receivable
in the aggregate amount of approximately $1,170,000. The Shareholder notes
receivable resulted from the Company's issuance of common stock to a officers
and employees during the year ended December 31, 2001. The Company reported no
interest income during the three month period ended March 31, 2001.
Interest expense increased by $13,000 to $23,000 during the three months
ended March 31, 2002 as compared to $10,000 for the comparable three months of
the prior year. This increase is the result of interest on new long-term debt
and notes payable which the company incurred in late 2001 and early 2002. As a
result of the Company's working capital deficit of $500,000, interim financing
necessary to settle operating liabilities arising from the assembly and
installation of the Ford gear cleaning system as well as to cover other
operating expenses is anticipated to be expensive if adequate equity capital
cannot be raised. Should the Company be required to finance anticipated future
operations with debt as opposed to equity, future interest expense can be
expected to increase significantly.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2002, the Company had cash and cash equivalents of $26,000.
During the quarter ended March 31, 2001, operating activities used cash of
$108,000 as compared to $178,000 during 2001. Cash used by operating activities
resulted primarily from the Company's net loss reduced by depreciation and
amortization and other non-cash charges. The Company used cash of $600 for
capital expenditures during the three months ended March 31, 2002 as compared to
zero for 2001. The Company has no significant commitments for future purchases
of capital assets.
<page>
UNIVERSAL ICE BLAST, INC.
FORM 10-QSB
For the period ended March 31, 2002
Financing activities provided cash of $79,000 during the quarter ended March
31, 2001 as compared to $120,000 during 2001. Cash has been provided primarily
from sale of Company Common Stock, which provided $117,000 and $169,000 during
2002 and 2001, respectively. Payments on capital lease obligations used cash of
$18,000 and $15,000 during 2002 and 2001. Proceeds from notes payable provided
cash of $56,000 in 2002 while repayments of notes payable used cash of $33,000.
No notes payable activity occurred in the three months ended March 31, 2001.
Long-term debt repayments were $13,000 in 2002 as compared to $6,000 in 2001.
The Company borrows and repays, on a revolving basis, cash advances from its two
Founders and Officers. Repayment of such advances totaled $29,000 and $28,000 in
2002 and 2001, respectively.
The Company had a working capital deficit of $500,000 and a stockholders'
deficit of $602,000 at March 31, 2002. Management's plans for continued
existence include a focus towards rental and sale of ice blast machines and away
from services. The Company is actively pursuing marketing arrangements for their
products in the precision, environmental and industrial cleaning markets. These
efforts include the arrangement with Ford Motor Company as more fully described
in Note 6. The Company's future success is dependent upon its ability to
achieve profitable operations and generate cash from operating activities, and
upon obtaining additional financing. There is no assurance that the Company
will be able to generate sufficient cash from operations or through the sale of
additional shares of common stock or additional borrowings.
The current expansion of the Company's business demands that significant
financial resources be raised to fund capital expenditures, working capital
needs, debt service and the cash flow deficits expected to be generated over the
next three to six months by operating losses. Current cash balances and the
realization of accounts receivable will not be sufficient to fund the Company's
current business plan beyond the next two months. Consequently, the Company is
currently seeking convertible debt and/or additional equity financing as well as
the placement of a credit facility, in the aggregate amount of at least
$250,000, to fund the Company's immediate liquidity needs. Management is
currently negotiating with existing shareholders as well as other individuals
and organizations in order to obtain the working capital necessary to meet both
current and future obligations and commitments. To further supplement these
activities, the Company has engaged two investment-banking firms to assist in
securing funding, with an objective of raising at least $2 million. Management
is confident that these efforts will produce financing to further the growth of
the Company. Nevertheless, there can be no assurance that the Company will be
able to raise additional capital on satisfactory terms or at all. In the event
that the Company is unable to obtain such additional capital or to obtain it on
acceptable terms or in sufficient amounts, the impact thereof would have a
material adverse effect on the Company's business, operating results and
financial condition as well as its ability to service debt requirements. The
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
As disclosed in an explanatory paragraph in the Report of Independent
Accountants on the Company's December 31, 2001 consolidated financial
statements, the foregoing liquidity and financial conditions raise substantial
doubt about the Company's ability to continue as a going concern.
<page>
UNIVERSAL ICE BLAST, INC.
FORM 10-QSB
For the period ended March 31, 2002
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company believes that it does not have any material exposure to interest
or commodity risks. The Company does not own any derivative instruments and does
not engage in any hedging transactions.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Certain vendors of the Company have threatened to bring legal action for
payment of overdue amounts. One suit has been filed. The Company is working to
resolve these issues. In addition, a former sales representative is attempting
to collect disputed commissions. All reasonable amounts relating to these past
due and disputed liabilities have been accrued in the accompanying financial
statements.
ITEM 2. CHANGES IN SECURITIES
During the three months ended March 31, 2002, the Company issued 780,000
shares of common stock through private placements under Section 4(2) of the
Securities Act in the aggregate amount of $116,962 to four investors, all of
whom were accredited investors and/or existing shareholders of the Company.
During the same period, under Section 4(2) of the Securities Act the Company
issued 277,000 shares of common stock and 100,000 warrants to four investors for
goods and services having a fair market value of $42,566. All common shares
issued above are restricted subject to Rule 144.
ITEM 6. EXHIBITS AND REPORTS ON FROM 8K.
(a) Exhibits - None.
(b) Reports on Form 8K. No reports on Form 8-K were filed by the Company
during the quarter ended March 31, 2002.
On April 8, 2002 the Company filed a report on Form 8-K disclosing that Moss
Adams, LLP had declined to stand for re-appointment as the Company's independent
accountants. This report also disclosed the fact that the Company had appointed
Williams & Webster, P.S. as its independent accountants.
<page>
UNIVERSAL ICE BLAST, INC.
FORM 10-QSB
For the period ended March 31, 2002
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Universal Ice Blast, Inc.
By: /s/ David A. Saporta
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DAVID A. SAPORTA, CHIEF FINANCIAL OFFICER
Date: May 17, 2002