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 December 31, 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 December 31, 1999: 4,885,085 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
<PAGE>
<TABLE>
ICEBERG CORPORATION OF AMERICA AND SUBSIDIARIES
(a Development Stage Company)
CONSOLIDATED BALANCE SHEETS
(unaudited)
_________
(all amounts in U.S. dollars)
<S> <C> <C>
December December
31, 1999 31, 1998
ASSETS
Current assets
Cash and cash equivalents $ 45,784 $ 60,351
Trade accounts receivable, less allowance
for doubtful accounts of $5,625, and $3,296,
respectively 276,457 49,566
Inventory 565,067 290,780
Prepaid expenses 64,895 17,414
--------- ---------
Total current assets 952,203 418,111
Property, plant and equipment, net 1,727,375 737,324
Goodwill 234,161 286,388
--------- ---------
Total assets $ 2,913,739 $1,441,823
========= =========
LIABILITIES
Current liabilities
Accounts payable $ 1,177,282 $ 542,083
Accrued liabilities 50,000 18,792
Deferred government grant - 44,935
Due to shareholders 454,249 -
Current portion of long term debt 45,789 43,610
--------- ---------
Total current liabilities 1,727,320 649,420
Long term debt 555,934 732,276
--------- ---------
Total liabilities 2,283,254 1,381,696
--------- ---------
SHAREHOLDERS' EQUITY
Common shares, $.0001 par value; 25,000,000 shares
authorized, 4,885,085 and 2,069,125 shares issued
and outstanding in 1999 and 1998 respectively 488 207
Special common shares, $.0001 par value; 5,000,000
shares authorized, 4,506,106 and 2,175,848 shares
issued and outstanding in 1999 and 1998 respectively 451 217
Additional paid-in capital 5,130,909 1,753,275
Deficit accumulated during the development stage (4,586,287) (1,717,031)
Accumulated other comprehensive income 84,924 23,459
--------- ---------
Total shareholders' equity 630,485 60,127
--------- ---------
Total liabilities and shareholders' equity $ 2,913,739 $ 1,441,823
========= =========
</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 Six Months Three Months
(Date of Ended Ended
Inception) to December December
December 31, 1999 31, 1999 31, 1999
Sales $ 842,667 $ 385,387 $ 190,829
Cost of sales 764,456 256,368 137,149
----------- ----------- -----------
Gross (loss) profit 78,211 129,019 53,680
----------- ----------- -----------
Operating expenses
General and administrative 2,354,077 601,966 248,203
Research and development 792,670 94,406 45,981
Sales and marketing 951,176 359,618 173,557
Depreciation and amortization 416,759 166,417 83,385
----------- ----------- -----------
4,514,682 1,222,407 551,126
----------- ----------- -----------
Operating loss (4,436,471) (1,093,388) (497,446)
----------- ----------- -----------
Other expenses
Interest and bank charges 71,485 8,341 3,758
Interest on long term debt 78,331 23,775 10,860
----------- ----------- -----------
149,816 32,116 14,618
----------- ----------- -----------
Loss before taxes (4,586,287) (1,125,504) (512,064)
Income taxes - - -
----------- ----------- -----------
Net loss $(4,586,287) $(1,125,504) $ (512,064)
=========== =========== ===========
Loss per share - basic
and diluted $ (1.74) $ (0.12) $ (0.05)
=========== =========== ===========
Weighted average common shares -
basic and diluted 3,044,855 9,156,408 9,323,800
=========== =========== ===========
</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 Six Months Three Months
(Date of Ended Ended
Inception) to December December
December 31, 1999 31, 1998 31, 1998
Sales $ 842,667 $ 190,211 $ 63,036
Cost of sales 764,456 177,742 97,993
----------- ----------- -----------
Gross (loss) profit 78,211 12,469 (34,957)
----------- ----------- -----------
Operating expenses
General and administrative 2,354,077 286,283 52,006
Research and development 792,670 209,319 113,644
Sales and marketing 951,176 128,808 47,202
Depreciation and amortization 416,759 91,563 53,245
----------- ----------- -----------
4,514,682 715,973 266,097
----------- ----------- -----------
Operating loss (4,436,471) (703,504) (301,054)
----------- ----------- -----------
Other expenses
Interest and bank charges 71,485 8,662 (836)
Interest on long term debt 78,331 19,048 13,561
----------- ----------- -----------
149,816 27,710 12,725
----------- ----------- -----------
Loss before income taxes (4,586,287) (731,214) (313,779)
Income taxes - - -
----------- ----------- -----------
Net loss $(4,586,287) $ (731,214) $ (313,779)
=========== =========== ===========
Loss per share - basic
and diluted $ (1.74) $ (0.17) $ (0.07)
=========== =========== ===========
Weighted average common shares -
basic and diluted 3,044,855 4,244,973 4,244,973
=========== =========== ===========
</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 Six Months Six Months
(Date of Ended Ended
Inception) to December December
December 31, 1999 31, 1999 31, 1998
Operating activities
Net loss $(4,586,287) $(1,125,504) $ (731,214)
Items not requiring cash:
Depreciation and amortization 416,759 166,417 91,563
Gain on sale of property,
plant and equipment (22,219) - -
----------- ----------- -----------
(4,191,747) (959,087) (639,651)
Changes in current assets
and liabilities
Decrease (increase) in
accounts receivable (182,164) (60,192) 87,358
Decrease (increase) in
inventory (359,145) (251,951) (59,561)
Decrease in prepaid expenses (34,122) (10,618) (3,421)
Increase (decrease) in
accounts payable 724,988 (39,921) 48,983
Increase in accrued liabilities 49,920 20,933 7,700
Increase in deferred
government grants (693) - 41,258
----------- ----------- -----------
Cash used by operating activities (3,992,963) (1,300,836) (517,334)
----------- ----------- -----------
Investing activities
Purchase of property, plant
and equipment (1,770,277) (142,600) (91,556)
Proceeds from sale of property,
plant and equipment 45,626 - -
Acquisition of subsidiary (1) - -
----------- ----------- -----------
(1,724,652) (142,600) (91,556)
----------- ----------- -----------
Financing activities
Proceeds from short term
borrowings 14,956 - -
Advances from third parties 259,870 - -
Repayment of advances from
third parties (516,030) - -
Advances from shareholders 431,515 5,541 -
Repayment of advances from
shareholders (289,301) (289,301) (24,435)
Proceeds from issuance of
long term debt 871,171 36,419 371,707
Repayment of long term debt (135,038) (33,124) -
Net proceeds from issuance
of shares 5,131,848 1,500,000 321,347
----------- ----------- -----------
Cash provided by financing
activities 5,768,991 1,219,535 668,619
----------- ----------- -----------
Effect of exchange rate
changes on cash (5,592) (4,302) (1,360)
----------- ----------- -----------
Increase (decrease) in cash and cash
equivalents during the period 45,784 (228,203) 58,369
Cash and cash equivalents,
beginning of period - 273,987 1,982
----------- ----------- -----------
Cash and cash equivalents,
end of period $ 45,784 $ 45,784 $ 60,351
=========== =========== ===========
Supplemental disclosures of
cash flow information:
Cash paid for interest $ 149,816 $ 32,116 $ 14,618
=========== =========== ===========
Cash paid for income taxes $ - $ - $ -
=========== =========== ===========
</TABLE>
<PAGE>
<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 six month period ended December 31, 1999, the Company
continued its development strategy by investing $142,600 in plant,
property and equipment. This brings its total investment in plant,
property and equipment to $2,141,141.
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 $1,500,000 through the
issuance of equity shares during the six month period ended December
31, 1999. 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
operational costs with a particular emphasis on marketing expenditures
as the Company introduces its products to the European Economic
Community.
Management believes that this strategy will enable the Company to
finance its start-up, development and marketing initiatives and move
it to commercial production by the fourth quarter of fiscal year 2000.
While the Company is still in its early stage, management has
presented the statements of operations in the traditional format. The
Company reports sales of $385,387 and $190,211 for the six months
ended December 31, 1999, and the six months ended December 31, 1998,
respectively. These sales represent minimal revenue from bottling
spring water and some iceberg water. Sales have doubled over the same
period last year with management's 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 six
month period ended December 31, 1999 to $601,966 as compared with
$286,283 for the six month period ended December 31, 1998. The major
portion of the increase can be attributed to legal costs and
additional accounting and auditing costs which were incurred in the
process of preparing Iceberg Industries Corporation for the reverse
takeover of Iceberg Corporation of America.
Research and development expenses decreased in the six month
period ended December 31, 1999 to $94,406 compared to $209,319 for the
six month period ended December 31, 1998. Our production facility
became operational during the period and the ice harvesting
methodology was determined with the result that less additional
expenditures are being incurred on these activities. Research and
development expenses in the second quarter ended December 31, 1999
were reduced when iceberg water which was harvested in the research
and development activity of the first quarter was transferred to
finished product inventory.
Sales and marketing expenses increased in the six month period
ended December 31, 1999 to $359,618 as compared with $128,808 for the
six month period ended December 31, 1998. This increase is a result
of our redesign of all of our labels to better position our products
for the international marketplace. Additional costs were incurred in
shipping and warehousing as the Company started to ship products into
the United States market. Product giveaways and expenditures to
support the brand also increased as product sales doubled during the
six month period.
Depreciation and Amortization increased in the six month period
ended December 31, 1999 to $166,417 compared with $91,563 for the six
months ended December 31, 1998. This increase results from the
amortization of the costs of an extension to our production facility
at Trepassey which was completed in July 1998. We also installed a
new bottling line which became operational in July 1998 and additional
depreciation has been reflected in these six month statements.
Interest and bank charges increased in the six month period ended
December 31, 1999 to $32,116 compared with $27,710 for the six month
period ended December 31, 1998. The net increase of $4,406 comprised
of a decrease in short term interest expense of $321 and an increase
in long term interest expense of $4,727. The increase in long term
interest expense resulted from interest charges on recent loans from
shareholders.
Net loss for the six months ending December 31, 1999 was
$1,125,504 ($0.12 per share) compared to $731,214 ($0.17 per share)
for the six months ending December 31, 1998. The Company has incurred
significant operating losses since its inception and has an
accumulated deficit of $4,586,287 at December 31, 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 December 31, 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 third
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 third 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 and the European Economic Community,
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 fiscal 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 funds
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 totaling $425,601) or because
it is payable to Company "insiders" who are likely to defer collection
if shortages occur ($396,748 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 to the
point where the icebergs are actually aground or touching the bottom
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, but we do know that over
the last three years, there were approximately 1800 bergs per year
which floated down from Northern Labrador and Greenland. Of this
number approximately 30-40% would migrate into the sheltered bays and
cover where harvesting can take place
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 need 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 has not in
any way been 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.
As of the date of this filing, this risk has been a non-issue and
neither the registrant nor any of its hardware or software suppliers
has experienced any system failures or disruptions caused by the Year
2000 issue. To date, the Company has not incurred, and does not
expect to incur, any material costs in remediating any potential Year
2000 problems. 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 continue to be limited to equipment from well-known
and reputable hardware manufacturers.
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: February 18, 2000 By: /s/ Lewis Stoyles
Lewis Stoyles,
Vice President & Director
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> DEC-31-1999
<CASH> 45784
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<RECEIVABLES> 276457
<ALLOWANCES> 0
<INVENTORY> 565067
<CURRENT-ASSETS> 952203
<PP&E> 1893792
<DEPRECIATION> 166417
<TOTAL-ASSETS> 2913739
<CURRENT-LIABILITIES> 1727320
<BONDS> 0
0
451
<COMMON> 488
<OTHER-SE> 5215833
<TOTAL-LIABILITY-AND-EQUITY> 2913739
<SALES> 385387
<TOTAL-REVENUES> 385387
<CGS> 256368
<TOTAL-COSTS> 256368
<OTHER-EXPENSES> 1222407
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (32116)
<INCOME-PRETAX> (1125504)
<INCOME-TAX> 0
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<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1125504)
<EPS-BASIC> (0.12)
<EPS-DILUTED> (0.12)
</TABLE>
