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 March 31, 2000.
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)
(709) 739-5731
(Issuer's telephone number)
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 March 31, 2000: 5,085,085 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>
March March
31, 2000 31, 1998
ASSETS
Current assets
Cash and cash equivalents $ 12,762 $ 147,869
Trade accounts receivable, less allowance
for doubtful accounts of $5,995, and $3,025,
respectively 205,895 102,278
Inventory 569,637 325,533
Prepaid expenses 65,508 31,308
--------- ---------
Total current assets 853,802 606,988
Property, plant and equipment, net 1,649,213 1,259,103
Goodwill 215,226 275,707
--------- ---------
Total assets $ 2,718,241 $2,141,798
========= =========
LIABILITIES
Current liabilities
Short term borrowings $ 114,126 $ -
Accounts payable 1,172,979 1,013,431
Accrued liabilities 40,000 19,885
Due to shareholders 368,414 419,036
Current portion of long term debt 45,593 44,608
--------- ---------
Total current liabilities 1,741,112 1,496,960
Long term debt 882,528 861,214
--------- ---------
Total liabilities 2,623,640 2,358,174
--------- ---------
SHAREHOLDERS' EQUITY
Common shares, $.0001 par value; 25,000,000 shares
authorized, 5,085,085 and 2,438,339 shares issued
and outstanding in 2000 and 1999 respectively 508 244
Special common shares, $.0001 par value; 5,000,000
shares authorized, 4,506,106 and 2,556,134 shares
issued and outstanding in 2000 and 1999 respectively 451 256
Additional paid-in capital 5,255,889 2,062,865
Deficit accumulated during the development stage (5,214,904) (2,293,980)
Accumulated other comprehensive income 52,657 14,239
--------- ---------
Total shareholders' equity 94,601 (216,376)
--------- ---------
Total liabilities and shareholders' equity $ 2,718,241 $ 2,141,798
========= =========
</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 Nine Months Three Months
(Date of Ended Ended
Inception) to March March
March 31, 2000 31, 2000 31, 2000
Sales $ 975,607 $ 518,327 $ 132,940
Cost of sales 854,214 346,126 89,758
----------- ----------- -----------
Gross (loss) profit 121,393 172,201 43,182
----------- ----------- -----------
Operating expenses
General and administrative 2,693,684 941,573 339,607
Research and development 837,650 139,386 44,980
Sales and marketing 1,142,038 550,480 190,862
Depreciation and amortization 499,701 249,359 82,942
----------- ----------- -----------
5,173,073 1,880,798 658,391
----------- ----------- -----------
Operating loss (5,051,680) (1,708,597) (615,209)
----------- ----------- -----------
Other expenses
Interest and bank charges 79,621 16,477 8,136
Interest on long term debt 83,603 29,047 2,272
----------- ----------- -----------
163,224 45,524 13,408
----------- ----------- -----------
Loss before taxes (5,214,904) (1,754,121) (628,617)
Income taxes - - -
----------- ----------- -----------
Net loss $(5,214,904) $(1,754,121) $ (628,617)
=========== =========== ===========
Loss per share - basic
and diluted $ (1.50) $ (0.19) $ (0.07)
=========== =========== ===========
Weighted average common shares -
basic and diluted 3,469,201 9,210,899 9,391,191
=========== =========== ===========
</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 Nine Months Three Months
(Date of Ended Ended
Inception) to March March
March 31, 2000 31, 1999 31, 1999
Sales $ 975,607 $ 250,482 $ 60,271
Cost of sales 854,214 255,643 77,901
----------- ----------- -----------
Gross (loss) profit 121,393 (5,161) (17,630)
----------- ----------- -----------
Operating expenses
General and administrative 2,693,684 591,069 304,786
Research and development 837,650 333,786 124,467
Sales and marketing 1,142,038 213,551 84,743
Depreciation and amortization 499,701 125,699 34,136
----------- ----------- -----------
5,173,073 1,264,105 548,132
----------- ----------- -----------
Operating loss (5,051,680) (1,269,266) (565,762)
----------- ----------- -----------
Other expenses
Interest and bank charges 79,621 11,495 2,833
Interest on long term debt 83,603 27,401 8,353
----------- ----------- -----------
163,224 38,896 11,186
----------- ----------- -----------
Loss before taxes (5,214,904) (1,308,162) (576,948)
Income taxes - - -
----------- ----------- -----------
Net loss $(5,214,904) $(1,308,162) $ (576,948)
=========== =========== ===========
Loss per share - basic
and diluted $ (1.50) $ (0.30) $ (0.12)
=========== =========== ===========
Weighted average common shares -
basic and diluted 3,469,201 4,369,890 4,619,723
=========== =========== ===========
</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 Nine Months Nine Months
(Date of Ended Ended
Inception) to March March
March 31, 2000 31, 2000 31, 1999
Operating activities
Net loss $(5,214,904) $(1,754,121) $(1,308,162)
Items not requiring cash:
Depreciation and amortization 499,701 249,359 125,699
Gain on sale of property,
plant and equipment (22,219) - -
----------- ----------- -----------
(4,737,422) (1,504,762) (1,182,463)
Changes in current assets
and liabilities
Decrease (increase) in
accounts receivable (131,850) (9,878) 35,553
Decrease (increase) in
inventory (367,488) (260,294) (86,913)
Decrease in prepaid expenses (35,060) (11,556) (16,763)
Increase (decrease) in
accounts payable 725,637 (39,272) 503,223
Increase in accrued liabilities 39,751 10,764 8,294
Increase in deferred
government grants (693) - (4,609)
----------- ----------- -----------
Cash used by operating activities (4,507,125) (1,814,998) (743,678)
----------- ----------- -----------
Investing activities
Purchase of property, plant
and equipment (1,765,638) (137,961) (608,797)
Proceeds from sale of property,
plant and equipment 45,626 - -
Acquisition of subsidiary (1) - -
----------- ----------- -----------
(1,720,013) (137,961) (608,797)
----------- ----------- -----------
Financing activities
Proceeds from short term
borrowings 127,582 112,626 -
Advances from third parties 259,870 - -
Repayment of advances from
third parties (516,030) - -
Advances from shareholders 979,208 553,234 -
Repayment of advances from
shareholders (589,301) (589,301) 390,866
Proceeds from issuance of
long term debt 871,171 36,419 508,477
Repayment of long term debt (144,538) (42,624) (28,669)
Net proceeds from issuance
of shares 5,256,848 1,625,000 626,372
----------- ----------- -----------
Cash provided by financing
activities 6,244,810 1,695,354 1,497,046
----------- ----------- -----------
Effect of exchange rate
changes on cash (4,910) (3,620) 1,316
----------- ----------- -----------
Increase (decrease) in cash and cash
equivalents during the period 12,762 (261,225) 145,887
Cash and cash equivalents,
beginning of period - 273,987 1,982
----------- ----------- -----------
Cash and cash equivalents,
end of period $ 12,762 $ 12,762 $ 147,869
=========== =========== ===========
Supplemental disclosures of
cash flow information:
Cash paid for interest $ 163,224 $ 45,524 $ 13,408
=========== =========== ===========
Cash paid for income taxes $ - $ - $ -
=========== =========== ===========
</TABLE>
<PAGE>
<PAGE>
NOTES TO THE INTERIM FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying interim financial statements have been
prepared by the Company in accordance with the rules and
regulations of the Securities and Exchange Commission for
interim reporting. Accounting policies utilized in the
preparation of financial information herein presented are
the same as set forth in the Company's annual financial
statements. Certain disclosures and information normally
included in financial statements have been condensed or
omitted. In the opinion of the management of the Company,
these financial statements contain all adjustments
(consisting only of normal recurring adjustments) necessary
for a fair presentation of the interim financial statements.
Interim results of operations are not necessarily indicative
of the results of operations for the full year.
2. Inventories
Inventories consist of the following:
March March
31, 2000 31, 1999
Raw materials $ 265,100 $ 146,416
Work in progress 17,110 -
Finished goods 299,230 187,463
--------- ---------
581,440 333,879
Less reserve (11,803) (8,346)
--------- ---------
$ 569,637 $ 325,533
========= =========
3. Property, Plant and Equipment
Property, plant and equipment consist of the following:
March March
31, 2000 31, 1999
Plant $ 458,045 $ 399,912
Land 47,720 -
Tank farm 220,971 10,164
Furniture and equipment 1,258,342 938,564
Vehicles 26,287 31,371
----------- -----------
2,011,365 1,380,011
Less accumulated depreciation (362,152) (120,908)
----------- -----------
$ 1,649,213 $ 1,259,103
4. Share Issuance
During the period a shareholder and director of the Company
advanced $300,000 in return for a demand note of $300,000
and 200,000 shares. The shares have been recorded in the
accounts at fair market value of $125,000 and the resulting
compensation has been expensed in the period.
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 nine months ended March 31, 2000, the Company
continued its development strategy by investing in plant,
property and equipment in Trepassey, Newfoundland. The total
investment in plant, property and equipment to date is
$2,011,365.
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 borrowed an additional
$300,000 from a shareholder and director of the Company during
the three months ended March 31, 2000, in return for a demand
note of $300,000 and 200,000 shares. The shares have been
recorded in the accounts at fair market value of $125,000 and the
resulting compensation has been expensed in the period. 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.
Subsequent to March 31, 2000 the company raised an additional
$500,000 of equity financing.
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 $518,327 and $250,482 for
the nine months ended March 31, 2000, and the nine months ended
March 31, 1999, respectively. These sales represent minimal
revenue from bottling spring water, some iceberg water in
addition to beer and vodka sales in the United States and Canada.
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
nine months ended March 31, 2000 to $941,573 as compared with
$591,069 for the nine months ended March 31, 1999. 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 nine
months ended March 31, 2000 to $139,386 compared to $333,786 for
the nine months ended March 31, 1999. 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.
Sales and marketing expenses increased in the nine months
ended March 31, 2000 to $550,480 as compared with $213,551 for
the nine months ended March 31, 1999. This increase is a result
of the 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 nine months.
Depreciation and Amortization increased in the nine months
ended March 31, 2000 to $249,359 compared with $125,699 for the
nine months ended March 31, 1999. 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 and tank storage farm which became
operational in July 1998 and additional depreciation has been
reflected in these nine month statements.
Interest and bank charges increased in the nine months ended
March 31, 2000 to $45,524 compared with $38,896 for the nine
months ended March 31, 1999. The net increase of $6,628
comprised of a increase in short term interest expense of $4,982
and an increase in long term interest expense of $1,646.
Net loss for the nine months ending March 31, 2000 was
$1,754,121 ($0.19 per share) compared to $1,308,162 ($0.30 per
share) for the nine months ending March 31, 1999. The Company
has incurred significant operating losses since its inception and
has an accumulated deficit of $5,214,904 at March 31, 2000.
In May 1999, on the advice of our marketing consultant, all
of our product labels were redesigned to provide consistency
across the product categories. This design and regulatory
process took several months longer than anticipated and as a
result our product launch was delayed to the point where our
first full year of sales will not commence until the beginning of
our new fiscal year in July 2000. The Company expects to incur
further development costs to continue its product development and
marketing efforts, and the Company's working capital deficiency
at March 31, 2000, 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
initiatives to address this problem.
In addition to the anticipation of increasing sales in the
fourth quarter and subsequent quarters, 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 fourth quarter of fiscal year 2000 to
sustain the Company's projected ongoing losses. The Company
intends to enter into distribution agreements for its products in
the United States, the European Economic Community, Australia and
Asia shifting marketing costs to the distributors, and thereby
increasing its delivery of product through existing channels
without commensurate increases in overhead. 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 $433,623) or because it is payable to Company "insiders"
who are likely to defer collection if shortages occur ($346,289
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
coves where harvesting can take place
Sub-Contractor Performance.
The Company relies upon sub-contracted vessels to assist in
harvesting its ice supply. The company also relies on two co-pak
arrangements with Manufacturers who produce our beer in New
Brunswick and our vodka in Ontario. 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 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
In March, 2000, the Company borrowed an additional $300,000
from a shareholder and director of the Company in order to
finance additional investment in plant and equipment, increase in
inventory, and to support ongoing start-up and research and
development. The loan was made in return for a demand note of
$300,000 and 200,000 shares of the Company's common stock. The
200,000 shares were issued pursuant to Rule 4(2) of the
Securities Act of 1933 and are restricted against resale for a
period of at least one year.
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: May 18, 2000 By: /s/ Paul Benson
Paul Benson,
President & Director
Date: May 18, 2000 By: /s/ Ron Stamp
Ron Stamp,
Vice President & Director
Date: May 18, 2000 By: /s/ Lewis Stoyles
Lewis Stoyles,
Vice President & Director
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-END> MAR-31-2000
<CASH> 12762
<SECURITIES> 0
<RECEIVABLES> 205895
<ALLOWANCES> 0
<INVENTORY> 569637
<CURRENT-ASSETS> 853802
<PP&E> 1649213
<DEPRECIATION> 249359
<TOTAL-ASSETS> 2718241
<CURRENT-LIABILITIES> 1741112
<BONDS> 0
0
451
<COMMON> 508
<OTHER-SE> 5255889
<TOTAL-LIABILITY-AND-EQUITY> 2718241
<SALES> 518327
<TOTAL-REVENUES> 518327
<CGS> 346126
<TOTAL-COSTS> 346126
<OTHER-EXPENSES> 1880798
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (45524)
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<NET-INCOME> (1754121)
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</TABLE>
