U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES AND EXCHANGE ACT OF 1934 for the Quarterly
period ended September 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 for the transition
period from _______ to _______.
Commission File No. 000-28051
ICEBERG CORPORATION OF AMERICA
-------------------------------------------------------------------
(Name of Small Business Issuer in its Charter)
Nevada, U.S.A. 95-4763671
(State or other Jurisdiction (IRS Employer
of Incorporation or Organization) Identification No.)
P.O. Box 8251, St. John's, Newfoundland, Canada A1B 3N4
(Address of principal executive offices) (Zip code)
Issuer's telephone number: (709) 739-5731
Check whether the registrant (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 [ ]
As of September 30, 1999: 4,685,085 shares of Common Stock and
4,506,106 shares of Special Common Stock were issued and outstanding.
<PAGE>
TABLE OF CONTENTS AND INFORMATION REQUIRED IN REPORT
Part I. Financial Information
- -------
Item 1. Financial Statements (unaudited)
Item 2. Managements Discussion and Analysis or Plan of Operation
Part II. Other Information
- --------
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of Security holders
Item 5. Other Information
Item 6. Exhibits and reports on form 8-K
SIGNATURES
<PAGE>
PART I
ITEM 1. FINANCIAL STATEMENTS
ICEBERG CORPORATION OF AMERICA AND SUBSIDIARIES
(a Development Stage Company)
CONSOLIDATED BALANCE SHEETS
(unaudited)
_________
(all amounts in U.S. dollars)
<TABLE>
<S> <C> <C>
September September
30, 1999 30, 1998
ASSETS
Current assets
Cash and cash equivalents $ 100,808 $ 17,844
Trade accounts receivable, less allowance
for doubtful accounts of $5,734, and $17,067,
respectively 233,298 127,904
Inventory 662,482 203,839
Prepaid expenses 43,583 4,163
--------- ---------
Total current assets 1,040,171 353,750
Property, plant and equipment, net 1,762,641 763,129
Goodwill 248,033 305,613
--------- ---------
Total assets $ 3,050,845 $1,422,492
========= =========
LIABILITIES
Current liabilities
Accounts payable $ 953,306 $ 490,666
Accrued liabilities 151,860 12,593
Deferred government grant - 81,635
Due to shareholders 452,002 89,234
Current portion of long term debt 45,037 42,721
--------- ---------
Total current liabilities 1,602,205 716,849
Long term debt 854,060 384,447
--------- ---------
Total liabilities 2,456,265 1,101,296
--------- ---------
SHAREHOLDERS' EQUITY
Common shares, $.0001 par value; 25,000,000 shares
authorized, 4,685,085 and 2,031,098 shares issued
and outstanding in 1999 and 1998 respectively 468 203
Special common shares, $.0001 par value; 5,000,000
shares authorized, 4,506,106 and 2,151,162 shares
issued and outstanding in 1999 and 1998 respectively 451 215
Additional paid-in capital 4,630,929 1,704,281
Deficit accumulated during the development stage (4,074,223) (1,428,149)
Accumulated other comprehensive income 36,955 44,646
--------- ---------
Total shareholders' equity 594,580 321,196
--------- ---------
Total liabilities and shareholders' equity $ 3,050,845 $ 1,422,492
========= =========
</TABLE>
<PAGE>
ICEBERG CORPORATION OF AMERICA AND SUBSIDIARIES
(a Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
_________
(all amounts in U.S. dollars)
<TABLE>
<S> <C> <C> <C>
From
July 22, 1996 Three Months Three Months
(Date of Ended Ended
Inception) to September September
September 30, 1999 30, 1999 30, 1998
Sales $ 651,838 $ 194,558 $ 127,175
Cost of sales 627,307 119,219 79,749
----------- ----------- -----------
Gross profit 24,531 75,339 47,426
----------- ----------- -----------
Operating expenses
General and administrative 2,105,874 353,763 234,277
Research and development 746,689 48,425 95,675
Sales and marketing 777,619 186,061 81,606
Depreciation and amortization 333,374 83,032 38,318
----------- ----------- -----------
3,963,556 671,281 449,876
----------- ----------- -----------
Operating loss (3,939,025) (595,942) (402,450)
----------- ----------- -----------
Other expenses
Interest and bank charges 67,727 4,583 9,498
Interest on long term debt 67,471 12,915 5,487
----------- ----------- -----------
135,198 17,498 14,985
----------- ----------- -----------
Loss before income taxes (4,074,223) (613,440) (417,435)
Income taxes - - -
----------- ----------- -----------
Net loss $(4,074,223) $ (613,440) $ (417,435)
=========== =========== ===========
Loss per share - basic
and diluted $ (1.74) $ (0.07) $ (0.18)
=========== =========== ===========
Weighted average common shares -
basic and diluted 2,548,581 8,921,625 2,341,690
=========== =========== ===========
</TABLE>
<PAGE>
ICEBERG CORPORATION OF AMERICA AND SUBSIDIARIES
(a Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
_________
(all amounts in U.S. dollars)
<TABLE>
<S> <C> <C> <C>
From
July 22, 1996 Three Months Three Months
(Date of Ended Ended
Inception) to September September
September 30, 1999 30, 1999 30, 1998
Operating activities
Net loss $(4,074,223) $ (613,440) $ (417,435)
Items not requiring cash:
Depreciation and amortization 333,374 83,032 38,318
(Gain) loss on sale of property,
plant and equipment (22,219) - -
----------- ----------- -----------
(3,763,068) (530,408) (379,117)
Changes in current assets
and liabilities
Decrease (increase) in
accounts receivable (143,446) (21,474) 8,319
Decrease (increase) in
inventory (463,377) (356,183) 30,786
Decrease in prepaid expenses (14,081) 9,423 10,118
Increase (decrease) in
accounts payable 698,318 (66,591) (66,003)
Increase in accrued liabilities 150,636 121,649 1,263
Increase in deferred
government grants (693) - 77,867
----------- ----------- -----------
Cash used by operating activities (3,535,711) (843,584) (316,767)
----------- ----------- -----------
Investing activities
Purchase of property, plant
and equipment (1,767,265) (139,588) (75,695)
Proceeds from sale of property,
plant and equipment 45,626 - -
Acquisition of subsidiary (1) - -
----------- ----------- -----------
(1,721,640) (139,588) (75,695)
----------- ----------- -----------
Financing activities
Proceeds from (payments of)
short term borrowings 167,306 152,350 58,580
Advances from third parties 259,870 - -
Repayment of advances from
third parties (516,030) - -
Advances from shareholders 425,974 - 65,818
Repayment of advances from
shareholders (314,464) (314,464) -
Proceeds from issuance of
long term debt 834,752 - 17,430
Repayment of long term debt (125,528) (23,614) (5,408)
Net proceeds from issuance
of shares 4,631,848 1,000,000 275,386
----------- ----------- -----------
Cash provided by financing
activities 5,363,728 814,272 411,806
----------- ----------- -----------
Effect of exchange rate
changes on cash (5,569) (4,279) (3,482)
----------- ----------- -----------
Increase (decrease) in cash and cash
equivalents during the period 100,808 (173,179) 15,862
Cash and cash equivalents,
beginning of period - 273,987 1,982
----------- ----------- -----------
Cash and cash equivalents,
end of period $ 100,808 $ 100,808 $ 17,844
=========== =========== ===========
Supplemental disclosures of
cash flow information:
Cash paid for interest $ 135,198 $ 17,498 $ 14,985
=========== =========== ===========
Cash paid for income taxes $ - $ - $ -
=========== =========== ===========
</TABLE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Forward Looking Information.
This report contains certain forward-looking statements and
information. The cautionary statements made in this report should be
read as being applicable to all related forward-looking statements
wherever they appear. Forward-looking statements, by their very
nature, include risks and uncertainties. Accordingly, the Company's
actual results could differ materially from those discussed herein. A
wide variety of factors could cause or contribute to such differences
and could adversely impact revenues, profitability, cash flows and
capital needs. Such factors, many of which are beyond the Company's
control, include the following: our success in obtaining new
customers; the volume and type of orders that are received from such
customers; levels of, and ability to, collect accounts receivable;
availability of trained personnel and utilization of the Company's
capacity to complete work; competition and competitive pressures on
pricing; availability, cost and terms of debt or equity financing; and
economic conditions in the United States and in the regions served.
During the three month period ended September 30,1999, the
Company continued its development strategy by investing $139,588 in
plant, property and equipment. This brings its total investment in
plant, property and equipment to $1,998,541. In the last month of the
quarter, the Company began production of its iceberg water, iceberg
beer and iceberg vodka using newly designed labels. This resulted in
an increase in inventories on hand to $662,482 as compared to $203,839
in the quarter ending September 30, 1998.
In order to finance the additional investment in plant and
equipment, increase in inventory, and to support ongoing start-up and
research and development, the Company raised $1,000,000 through the
issuance of equity shares during the three month period ended
September 30,1999. Subsequent to September 30, 1999, the company has
raised an additional $500,000 through the issuance of equity shares.
The Company is continuing its strategy of funding development through
additional equity financing. These funds will be used to manage
working capital requirements and to fund ongoing development costs.
Management believes that this strategy will enable the Company to
finance its start-up and development and move it to commercial
production by the fourth quarter of fiscal year 2000.
While the Company is still in its development stage, management
has presented the statements of operations in the traditional format.
The Company reports sales of $194,558 and $127,175 for the three
months ended September 30, 1999, and the three months ended September
30, 1998, respectively. These sales represent minimal revenue from
bottling spring water and some iceberg water. During the last month
of the quarter, the company received approval to use its newly
designed product labels for all of its iceberg products. This
resulted in a marginal increase in sales with managements anticipation
that the next quarter will see increased sales volumes for each of
these products. Management continues to focus its energies on product
development, market research and market development, which includes
the formation of alliances in various geographical areas.
General and administration expenses have increased in the three
month period ended September 30, 1999 to $353,763, as compared with
$234,277 for the three-month period ended September 30, 1998. Some of
this increase results from expenses incurred to complete documentation
as a result of the reverse take over of Iceberg Corporation of
America.
Marketing expenses increased in the three month period ended
September 30, 1999 to $186,061 as compared with $81,606 for the three
month period ended September 30, 1998. This increase is a result of
our redesign of all of our labels to better position our products for
the international marketplace. Additional efforts were also made to
introduce the Company's products to prospective customers in various
jurisdictions.
Net loss for the three months ending September 30, 1999 was
$613,440 ($0.07 per share) compared to $417,435 ($0.18 per share) for
the three months ending September 30, 1998. The Company has incurred
significant operating losses since its inception and has an
accumulated deficit of $4,074,223 at September 30, 1999. The Company
expects to incur further development costs to continue its product
development and marketing efforts, and the Company's working capital
deficiency at September 30, 1999, and limited revenue will not be
sufficient to meet its development requirements. The Company's
management recognizes this "going concern" issue and the need to
generate additional revenues and/or resources, and has implemented
several solutions to address this problem.
In addition to the anticipation of increasing sales in the second
quarter, management's plans for solvency in the coming year is the
sale of additional equity in the Company. Additional common stock and
or convertible debt will be marketed in the 2nd quarter of fiscal year
2000 to sustain the Company's projected ongoing losses. The Company
also intends to enter into distribution agreements for its products in
the United States, shifting marketing costs to the distributors, and
thereby increasing its delivery of product through existing channels
without commensurate increases in overhead. The Company believes it
can be operationally profitable by the fourth quarter of fisical year
2000, and should only experience further losses if it opts to increase
advertising in an attempt to rapidly increase market penetration.
Notwithstanding the foregoing, there is substantial doubt regarding
the Company's ability to continue as a going concern, and as such, the
Company is substantially dependent upon its ability to generate
sufficient revenues to cover its operating costs.
The Company believes that its long-term debt is manageable due to
the fact that it is owed primarily to government lenders interested in
the viability of the Company (Atlantic Canada Opportunities Agency and
the Trepassey Community Development Fund totalling $393,411) or
because it is payable to Company "insiders" who are likely to defer
collection if shortages occur ($331,701 due to directors and
officers).
RISK FACTORS
Market Risk.
There has already been significant and substantial interest in
the Iceberg product line, however, as with any market and/or product,
there are uncertainties, including:
New Product Risk.
There is a risk that consumer acceptance or ongoing interest may
not be as widespread as expected.
Price Resistance Risk.
These products are premium products that demand a high price.
There is a danger of price resistance in the consumer marketplace.
Harvesting Risk.
The data available to the Company indicates that the availability
of ice from icebergs will not be a problem. However, the data does
not indicate the proximity of icebergs to the shore, which is a
cost-sensitive condition for the Company. To safely and
cost-effectively harvest icebergs, they must be close to shore, in
areas offering some protection from the open sea. The reported length
of the season can also be misleading. Icebergs may be present but
they must also be in a suitable location and in the process of
breaking up in order to be harvested. The data currently available
does not provide such detailed information.
Sub-Contractor Performance.
The Company relies upon sub-contracted vessels to assist in
harvesting its ice supply. There is a risk of default or
non-performance by these sub-contractors.
Processing Risk.
The extent of raw material handling before final production poses
an element of risk. The Company's Quality Assurance/Quality Control
(QA/QC) manager has developed and monitors procedures and ensures
adherence to raw material and finished product specifications.
Regular lab analysis is conducted at all stages of the process. The
Company is moving to implement a Hazard Analysis of Critical Control
Points ("HACCP") system and is pursuing ISO 9000 certification. As a
member of the International Bottled Water Association, the Company
also has access to technical resources and is subject to an annual
independent review of the Company's manufacturing processes.
Financial Risk.
If the Company needs to raise additional funds in order to fund
expansion, develop new or enhanced products, respond to competitive
pressures or acquire complementary products, businesses or
technologies, additional funds raised through the issuance of equity
or convertible debt securities may dilute the percentage ownership of
the present stockholders of the Company, and, in addition, such
securities may have rights, preferences or privileges senior to those
of the Company's Common Stock. The Company does not currently have
any contractual restrictions on its ability to incur debt and,
accordingly, the Company could incur significant amounts of
indebtedness to finance its operations. Any such indebtedness could
contain covenants which could restrict the Company's operations.
There can be no assurance that additional financing will be available
on terms favorable to the Company, or at all. If adequate funds are
not available or are not available on acceptable terms, the Company
may not be able to continue in business, or to a lesser extent, not be
able to take advantage of acquisition opportunities, develop or
enhance its products or respond to competitive pressures.
YEAR 2000 DISCLOSURE
The Year 2000 issue is the potential for system and processing
failures of date-related data and the result of computer-controlled
systems using two digits rather than four to define the applicable
year. For example, computer programs that have time-sensitive
software may recognize a date using "00" as the year 1900 rather than
the year 2000. This could result in system failure or miscalculations
causing disruptions of operations, including, among other things, a
temporary inability to process transactions. The Company may be
affected by Year 2000 issues related to non-compliant information
technology ("IT") systems or non-IT systems operated by the Company or
by third parties.
Based upon a recent assessment, the Company has determined that
any hardware, software or equipment presently in use or intended to be
utilized by the Company in connection with its intended business
operations is believed by management to be Year 2000 compliant. Most
of the Company's equipment is not date-sensitive and thus not
susceptible to Year 2000 issues. Any equipment that may be
date-sensitive is new, and the architecture and design of its software
was taken into account in all equipment purchases. Purchases have
been and will be limited to equipment from well-known and reputable
hardware manufacturers.
In an effort to evaluate and reduce its exposure in this area,
the Company is making an inquiry of vendors and other business
partners about their progress in identifying and addressing problems
that their computer systems may face in correctly processing date
information related to the Year 2000. In particular, the Company is
obtaining statements from a substantial majority of its vendors that
they are Year 2000 compliant or are unaffected by "date sensitive"
information. The Company estimates that this process, including
analysis of responses and follow-up interviews will be complete on or
before November 30, 1999.
The Company has not yet completed its assessment of external
(third-party) IT systems and non-IT systems, and can give no assurance
that third parties with whom it intends to do business (e.g., banks,
financial institutions, businesses and utilities) will ensure Year
2000 compliance in a timely manner or that, if they do not, their
computer systems will not have an adverse effect on the Company. At
this point, the Company is not aware of any Year 2000 problems
relating to systems operated by the Company or by third parties that
would have a material effect on the Company's business, results of
operations or financial condition. However, based on its assessment
to date, the Company does not anticipate that costs associated with
remediating the Company's non-compliant IT systems or non-IT systems,
if any, would be material, although there can be no assurance to such
effect. Such a failure could prevent the Company from operating its
business.
The Company has no reason to believe that its exposure to the
risks of lack of supplier and/or customer Year 2000 readiness is any
greater than the exposure to such risks that affects its competitors
generally. However, if a significant number of the Company's key
vendors, customers and other business partners experience business
disruptions as a result of their lack of Year 2000 readiness, their
problems could have a material adverse effect on the Company's
financial position and operations. In addition, if all Year 2000
issues within the Company's business are not properly identified there
can be no assurance that the Year 2000 issue will not have a material
adverse effect on the Company's results of operations or financial
position. To date, the Company has not incurred, and does not expect
to incur, any material costs in remediating any potential Year 2000
problems.
The Company believes that the primary business risks, in the
event of such failure, would include, but not be limited to, loss of
potential revenues, increased operating costs, loss of customers, or
other business interruptions of a material nature, as well as claims
of mismanagement, misrepresentation, or breach of contract, any of
which could have a material adverse effect on the Company's business,
results of operations and financial condition.
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
NONE
ITEM 2. CHANGES IN SECURITIES
NONE
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NONE
ITEM 5. OTHER INFORMATION
NONE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
NONE
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the Registrant has caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized.
ICEBERG CORPORATION OF AMERICA
Date: November 19, 1999 By: /s/ Paul Benson
Paul Benson,
President & Director
Date: November 19, 1999 By: /s/ Ron Stamp
Ron Stamp,
Vice President & Director
Date: November 19, 1999 By: /s/ Lewis Stoyles
Lewis Stoyles,
Vice President & Director
Date: November 19, 1999 By: /s/ John Kleinert
John Kleinert,
Director
Date: November 19, 1999 By: /s/ David Carbonaro
David Carbonaro,
Director
<TABLE> <S> <C>
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<S> <C>
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