U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM 10-KSB
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Annual Report Pursuant to Section 13 or 15(d) of the
Securities and Exchange Act of 1934
for the Fiscal Year ended June 30, 2000.
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Commission File No. 000-28051
ICEBERG CORPORATION OF AMERICA
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(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)
Securities registered under Section 12(b) of the Act:
NONE
Securities registered under Section 12(g) of the Act:
$0.0001 PAR VALUE COMMON STOCK
(Title of Class)
$0.0001 PAR VALUE SPECIAL COMMON STOCK
(Title of Class)
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 [ ]
Check here if the disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained in this form, and no
disclosure will be contained, to the best of the registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this 10-KSB or any
amendment to this Form 10-KSB. [ ]
Revenues for the year ending June 30, 2000 were $737,300.
As of June 30, 2000, the aggregate market value of the voting and
non-voting common equity held by non-affiliates was $15,333,160.
As of June 30, 2000, the Company had approximately 6,444,250
shares of Common Stock and 4,454,690 shares of Special Common
Stock were issued and outstanding.
<PAGE>
ICEBERG CORPORATION OF AMERICA
FORM 10-KSB
for the fiscal year ended June 30, 2000
TABLE OF CONTENTS
PART I
Item 1. Description of Business
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Item 3. Description of Property
Item 4. Security Ownership of Certain Beneficial Owners and
Management
Item 5. Directors, Executive Officers, Promoters and Control
Persons
Item 6. Executive Compensation
Item 7. Certain Relationships and Related Transactions
Item 8. Description of Securities
PART II
Item 1. Market for Common Equities and Related Stockholder
Matters
Item 2. Legal Proceedings
Item 3. Changes in and Disagreements with Accountants
Item 4. Recent Sales of Unregistered Securities
Item 5. Indemnification of Directors and Officers
PART F/S
Financial Statements
PART III
Index to Exhibits
Signatures
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
a) Company Background.
Iceberg Corporation of America (the "Company") was organized
under the laws of the State of Nevada on July 3rd, 1989, under
the name "D.V. Holdings, Inc." Until June of 1999, the Company
conducted no business. On June 25, 1999, the Company consummated
a reverse merger whereby it acquired 100% of the issued and
outstanding common shares of Iceberg Industries Corporation
("Iceberg Industries") for total consideration of $3,631,848,
based upon a share for share exchange at a ratio of 1.7 shares of
the Company for each share of Iceberg Industries. As a result of
the merger, the Company filed a Certificate of Amendment with the
Secretary of State of the State of Nevada changing its name to
"Iceberg Corporation of America".
At the date of combination, the Company was a dormant public
shell company with no identifiable assets. As such, the reverse
takeover transaction was considered a capital transaction rather
than a business combination. The purchase price for the Iceberg
Industries shares was satisfied by the issuance of 1,251,762
Common Shares and 4,506,106 Special Common Shares of the Company.
The Special Common Shares are held by Icecap Equity, Inc., an
entity incorporated under the laws of the Province of
Newfoundland, through its trustee James D. Smyth, to allow for
the postponement of potential tax implications to Canadian
resident shareholders of Iceberg Industries resulting from the
reverse takeover transaction. The Special Common Shares have
voting rights equal to the Company's Common Shares and may be
exchanged at any time for a Common Share of the Company on an
equivalent basis. Accordingly, the Special Common Shares are the
economic equivalent of the Common Shares, and, in effect, give
the Company full ownership and control of Iceberg Industries.
As a result of these transactions, the former shareholders
of Iceberg Industries effectively control the Company through
their share ownership. Under these circumstances, U.S. GAAP
requires that Iceberg Industries be identified as the accounting
acquirer. Accordingly, this annual report and the accompanying
financial statements reflect, both prior and subsequent to the
acquisition, the business of the acquired entity, Iceberg
Industries. Historical shareholders' equity of Iceberg
Industries has also been retroactively restated for the
equivalent number of shares received in the reverse takeover
transaction.
Iceberg Industries, a development stage company, was
incorporated under the laws of the province of Newfoundland,
Canada on July 22, 1996. As a result of its acquisition of
Iceberg Industries, the Company's principal activity is intended
to be the commercial supply of premium beverage products,
including iceberg water, beer and vodka, which utilize only water
obtained from icebergs as the core ingredient. To date, Iceberg
Industries has generated 29% of its revenue from bottling spring
water and 54% from iceberg water with the balance of 17% from
sales of vodka and beer. Iceberg Industries has invested
$899,159 in the development of technology for the harvesting of
icebergs and the production of premium water from icebergs.
Iceberg Industries acquired a spring water bottling company on
March 31, 1998, which gave it access to an existing water
bottling line as well as trained staff who could be used to
bottle the iceberg water product. It has subsequently developed
substantial new production facilities and has recently focused
its energies on product development, packaging, market research
and market development. Management continues to commit
significant efforts to these development activities, financial
planning and raising the required capital to support the ongoing
research and development and marketing efforts.
The acquired company, Iceberg Industries, had previously
received a Grant from the Canadian government for up to $400,000
in recognition of the company's attempt to increase employment in
the St. John's, Newfoundland area; had secured an improvement
loan from Hong Kong Bank in the amount of $165,000 to retrofit a
ship for the company's business venture; and had secured a permit
from the United States Food and Drug Administration (the "FDA")
to "test market" Borealis Iceberg Water in the U.S. marketplace.
This permit, attached hereto as Exhibit 10.4, was obtained when
Iceberg Industries applied to the FDA for permission to sell
Iceberg water in the United States. The permit allows Iceberg
Industries to sell 150,000 cases of Iceberg water over a period
of 15 months commencing with the first shipment of Iceberg water
products. Subsequently, Iceberg Industries has applied for
permission to sell Iceberg water products in all states and
territories of the United States. As a result of this process,
and in combination with jurisdictions that don't require permits
to sell water, the Company is now permitted to sell water in
forty-eight states and one territory. The Company expects to
receive permission from the remaining two states and one
territory over the next few months. The Company has also
submitted a citizens' petition to the FDA asking that Iceberg
Water be included in the FDA's standards of identities. If this
addition is granted we will no longer have to apply to have our
temporary permit renewed on an annual basis.
The Company operates a processing plant in Trepassey,
Newfoundland, and has long-term leases on the property upon which
the facility is located and for purposes of office space at 16
Forest Road, St. Johns, Newfoundland.
b) Description of Business.
General Information on Icebergs.
Almost the entire extent of Greenland is covered by a huge
glacial blanket over 700,000 square miles in area and more than
9,000 feet in maximum thickness. Icebergs are created where the
glaciers meet the sea. Icebergs spend nearly three years at sea
in the freezing Arctic waters of the North Atlantic before they
arrive off the coast of Newfoundland and Labrador. This annual
migration of thousands of icebergs to the rugged coastline of
Newfoundland can pose a serious threat to ships. Countless ships
and lives have been lost to these "phantoms of the north". Every
year thousands of tourists flock to the rugged shores of
Newfoundland and Labrador to witness one of nature's truly
magnificent marvels, the migration of ancient icebergs. These
massive white giants evoke powerful images and are unique to this
geographic region. The continuing interest in the Titanic has
helped reinforce consumer awareness and respect for these
floating fresh water sanctuaries. Icebergs start their
three-year journey to the coastline of Newfoundland from
Greenland. Extensive records exist on iceberg prevalence
throughout the season, dating back many years. These are
compiled by the International Ice Patrol, an organization formed
shortly after the sinking of the Titanic in 1912. The data
provides a level of comfort that icebergs will be available. The
International Ice Patrol reports the number of observed icebergs
that drift south of the 48th parallel North, a point that crosses
the northernmost tip of the Avalon Peninsula on the Northeast
coast of Newfoundland. From 1983 to 1994 an average of 312
icebergs were sighted annually. For the period 1990-1995,
iceberg conditions were much more severe, with an average of 876
spotted per year. In some years more than 1,500 have been
observed. A single iceberg can weigh millions of metric tones.
The Company's targeted harvest represents a very small portion of
this amount.
The purity and quality of the iceberg water has been
verified by independent laboratory analysis. Iceberg Industries
selected water samples from several large volume producers of
water products and engaged an independent lab, CANTEST, to
compare various components of each water product. The results of
this test indicated that Iceberg water was an excellent product
and exceeded all of the tested products in 27 out of 28 elements
that were measured. In the particular category, "Total Dissolved
Solids", which is used by certain companies to promote their
products, Iceberg water did not register on the measurement scale
whereas a Canadian market leader measured 209 mg/L and a French
market leader measured 301 mg/L.
Harvesting Icebergs.
Iceberg Industries was the first holder of a permit to
harvest icebergs under the Government of Newfoundland and
Labrador's water use policy. The technology for harvesting
icebergs is unique to Iceberg Industries. Large icebergs
fracture or "calve" into smaller pieces. Once the bergs have
calved to a manageable size, the Iceberg Industries' harvesting
process can begin. With the use of an ocean-going tug, an ice
harvesting vessel fully equipped for harvesting and processing is
carefully positioned alongside a suitable iceberg. Using a crane
and hydraulic grapple, ice is retrieved, crushed, and deposited
into a sterile melting tank. When full, the harvesting vessel is
towed to the production facility in Trepassey, Newfoundland and
the water is transferred into a land storage system.
Bottling of "Iceberg Water" is conducted at the Company's
plant in Trepassey. A 1999 expansion and renovation added an
additional 6,400 square feet. In addition, a new bottling line
was installed which gives Iceberg Industries the capacity to
produce 1,800,000 cases of water on an annual basis. With the
addition of a second labeler and extending the work week to seven
days this production number can be increased to approximately
2,500,000 cases. Trepassey, Newfoundland is located on the ocean
approximately two hours away from St. John's. St. John's is
located on the shipping lanes to Europe and as such provides
Iceberg Industries with an economical containerized shipping
service to major markets. In addition, Newfoundland, which is
located on the extreme East Coast of Canada, receives large
quantities of goods by transport truck. There is not enough
local export business to utilize all of these transport trucks on
their return trips and as a result local exporters can receive
favorable freight rates for the movement of goods. This provides
some assistance to Iceberg Industries in making their products
competitive in various markets outside of Newfoundland.
Iceberg Industries bottles its own Spring water and Iceberg
water products at its Trepassey plant. Vodka production has been
sub-contracted to a highly regarded manufacturing company in
Ontario, Canada. A packaging arrangement has been negotiated for
the production and bottling of Vodka with Commercial Alcohols Inc
("Commercial Alcohols")at their Brampton, Ontario facility.
Beer production has been sub-contracted to Moosehead
Breweries Ltd ("Moosehead")located in Saint John, New Brunswick,
Canada. No formal contracts have yet been signed with these
companies.
Industry Information.
The bottled water industry has experienced tremendous growth
over the last decade due to two major trends: rising concern
about the safety of tap water and a general shift in the beverage
market toward healthier, low calorie, non-alcoholic products.
This trend continues. The North American bottled water market is
currently a $5 billion market and, with a 1999 annual growth rate
of 14%, is the fastest growing segment of the beverage industry.
Latest numbers, according to Beverage Marketing Corporation of
New York, show bottled water growth in the fourth quarter of 1999
at 35.5%. Management believes that the market in North America is
still far from saturated, as domestic per capita consumption of
bottled water is only a fraction of European consumption. The
industry is also extremely fragmented, with the top 10 brands
accounting for only 45% of total industry sales. Industry
analysts predict that bottled water sales in the United States
will reach $5 billion by the year 2000. The United Kingdom and
other European Union countries are also major consumers of
bottled water, with per capita consumption in such countries as
Germany, France and Italy being five to six times higher than
that in Canada. Further market opportunities exist in Japan and
other Asian countries. At the same time, the bottled water
industry is highly competitive. There are hundreds of water
bottlers, many of which operate on a regional basis due to
relatively high transport costs. For a major portion of the
market, competition on price is important. However, there are
products positioned at the high end of the market that
successfully receive a price premium. "Iceberg Water" is
positioned here, as an ultra premium product, capitalizing on its
ability to provide the unique experience of drinking pure water
from icebergs hundreds of thousands of years old. It is promoted
as an affordable treat.
Iceberg Industries' research and development efforts have
positioned it as the world's first commercial supplier of a
family of products, which utilize water, obtained from icebergs
as the core ingredient. These "bergs", up to one hundred and
fifty thousand years in age, yield a pristine source of natural
drinking water. Protected from man and our polluted planet,
these icebergs represent a unique category of drinking water.
This is what separates Iceberg products from the pack:
pre-civilization, pre-pollution, quality water. All Iceberg
products are positioned in niche markets at the premium end of
the price and quality spectrum. Marketing programs rely upon the
powerful, pristine and emotive images of icebergs.
Iceberg water is considered a premium water product and as
such the Company generally compares its retail price with Evian,
a world leader in bottled water. The suggested retail price for
1 Liter of Iceberg water in the local market is US$1.15, although
the retailer is at liberty to charge whatever price is
appropriate. The price for 1 Liter of Evian water, a world
leader, is priced at the same price in this marketplace.
Branding.
Iceberg Industries is committed to building brand equity.
The product family will initially carry two brand names -
"BOREALIS"and "WHITEBERG". This helps support the cold, northern
image and mystique surrounding the Company's products.
Application has been made to have the name "Borealis" registered
as a trademark in the United States. In Europe, due to prior
registrations of the name "Borealis", Iceberg Industries has made
application to register the name "White Berg" for all products to
be sold in that territory. In Canada,"Borealis"will be used for
water products only. The word "ICEBERG" will play prominently in
the name used as a descriptive term for all products. Private
label production is also possible for selected customers, with a
further opportunity to build brand equity. To date, water has
been produced for Canadian Pacific Hotels with the "BOREALIS"
trade name retained. Product has also been produced for Loblaw's,
a large Canadian supermarket chain, and, although this was done
under the President's Choice banner, it has helped create
awareness of the availability of iceberg water. Iceberg
Industries' initial family of products is:
* bottled iceberg water
* iceberg vodka
* iceberg beer
* crushed iceberg ice, and
* bottled natural spring water
New and exciting additions to the product line are currently
in the planning process, including "ice tea" and other products
that use water as a foundation.
Borealis Iceberg Water is a unique experience to be enjoyed
and savored. Taste tests conducted by prospective distributors
have determined that iceberg water has the softest, most natural
taste of any bottled water on the market.
Borealis Iceberg Vodka is an ultra-smooth, four-column
distilled spirit. Iceberg water is used in both the distillation
and blending processes.
Borealis Iceberg Beer is craft brewed in small batches for
superior quality and consistency at a highly regarded Atlantic
Canada brewery.
Borealis Iceberg Ice has a number of unique features that
create exceptional promotional opportunities. When added to
beverages, it fizzles and crackles, releasing ancient, pure air
from tiny air pockets trapped under pressure in the ice.
Market Positioning.
Iceberg Industries has created a new sector in the beverage
industry. All products will be positioned at the premium end of
the price and quality spectrums. Management believes that the
Company's products, being unique and authentic, have many
marketing advantages. Management believes it is critical to
adopt this "premium" positioning strategy given the incremental
harvesting, transport and processing costs relative to more
conventional beverage producers.
Target Markets and Distribution.
The initial marketing thrust has been in Canada and the
United States, with the United Kingdom as an additional key
market. Thus far, marketing efforts have utilized established
beverage marketing companies within these regions. The intention
of the Company is to utilize these companies' expertise as well
as take advantage of existing shelf space made available through
these companies. Negotiations have been completed with the
following key distributors:
Central Dairies ("Central"): Iceberg Industries has
negotiated an arrangement with Central to represent our
water products, both Spring water and Iceberg water, in
Newfoundland, Nova Scotia, New Brunswick and Prince Edward
Island commonly referred to as the Atlantic Provinces of
Canada. Central is a division of Farmers Dairy Co-operative
Society in Nova Scotia and is the largest dairy producer and
distributor in Newfoundland. Our water products are a
complimentary addition to their product line. No formal
contract has been entered into for this arrangement.
Loblaw Companies Limited ("Loblaws"): Iceberg Industries
has negotiated an arrangement with Loblaws for private label
1 liter and 500ml (12 Pak Box)"President's Choice" Iceberg
water products which are being distributed through Loblaws'
450 store supermarket chain . Future plans are to expand
distribution to an additional approximately 1,000
supermarket and franchised stores. No formal contract has
been entered into for this arrangement.
Better Beverage Importers Co. ("BBI"): Iceberg Industries
has negotiated a contract with BBI to be our importer of
record to distribute Iceberg vodka in the United States.
Transtrade International Inc. ("Transtrade"): Iceberg
Industries has negotiated a contract with Transtrade to
represent all Iceberg products in various countries around
the world. The term of the contract is for 18 months and
shall be renewed automatically subject to certain sales
objectives on subsequent annual periods for four years.
St. Killian Importing Co. Inc. ("St. Killian"): Iceberg
Industries has negotiated a contract with St. Killian to
represent Iceberg beer in the United States. The term of
the contract is for a period of three years with a one-year
renewal at that time.
Promotion.
The Company has focused on public relations as a major
contributor to the awareness of Iceberg products. Press coverage
on the Company and its activities has been favorable. It is the
intention of the Company to take advantage of this situation as
much as possible in order to capitalize on the editorial pieces
and free press made available to the Company. This will be
supplemented by expenditures on promotional materials as well as
participation with distributors in joint promotional activities.
Management believes that such activities as being the "official
water" of the 1998 Canadian Commonwealth Games Team have
tremendous ongoing promotional value.
Raw Material Transport.
Water will be primarily transported to the plant using an
ice-harvesting vessel. Some road transport using tanker trucks is
also anticipated during the harvesting season and for
transportation to producers of beer and vodka. To date, the
Company has used a combination of its own tanker and a leased
tanker. Raw material for ice production will be transported and
stored in insulated containers with plastic liners. These
containers each hold approximately 0.5 metric tones. The Company
will have to purchase its own containers in order to maintain
product integrity and to ensure an adequate supply. When
offloaded from the barge or vessel at other than the processing
location, these containers can be loaded into transport trailers
for transportation to the processing facility.
To date, the Company has used the services of independent
local carriers and national carriers to deliver water to its
processing facility. No formal contracts have been negotiated
but there are adequate for-hire truckers located in the area to
meet any raw material transportation requirements.
Production.
It is not desirable for the Company to make the significant
investment required to have all the required production
capabilities in-house. The basic philosophy will be to make a
series of strategic contractor arrangements for its products,
other than water production. The Company's Trepassey plant has
been bottling natural spring water since 1992. Trepassey is
located 140 km south of the capital city of St. John's,
Newfoundland. The plant is also used to bottle Iceberg Water. A
1999 expansion added an additional 6,400 square feet, more than
doubling the size of the plant. This is required to meet the
demand for Iceberg Water and to accommodate the growing local
demand for spring water. Within the limited confines of the
existing plant processing area some equipment enhancements were
initiated in the Spring of 1998. Additional enhancements were
added with the plant expansion in order to meet growth in sales
volume, enhance efficiencies, adhere to the rigid quality
standards of the International Bottled Water Association and to
reduce product costs.
Iceberg Vodka - A packaging arrangement has been negotiated
for the production of vodka with Commercial Alcohols at their
Brampton, Ontario facility. The Company will transport iceberg
water to the distiller for blending with spirits and bottling
under the Company's label. No formal contract has been
negotiated with Commercial Alcohols at this time. Iceberg
Industries supplies all of the water and packaging and the final
product is then produced on a per unit fee basis.
Iceberg Beer - Excess capacity exists in the brewing
industry. Arrangements have been made with Moosehead in Saint
John, New Brunswick to produce an iceberg beer product. The
Company will deliver iceberg water to Moosehead for the brewing
and bottling of beer for national and international markets. No
formal contract has been negotiated with Moosehead at this time.
Iceberg Industries supplies all of the water and packaging and
the final product is then produced on a per unit fee basis.
Iceberg Ice - There are many dormant and under-utilized
seafood processing facilities on the coast of Newfoundland.
These contain a variety of receiving, weighing, conveying,
sorting, processing and packaging equipment and cold storage
areas. With minimal modification these are well suited to the
requirements for processing ice. Because of this, Iceberg
Industries has not made any provision to process bagged crushed
ice at its facility in Trepassey. The front end of the
production set-up is similar to that required for melting. The
ice is dumped into a hopper and fed to an ice crusher. From
there the crushed ice is automatically "screened" to remove small
pieces unsuitable for an ice product. These smaller particles
are retrieved for melting. The pieces suitable for an ice
product fall onto a flat grading conveyor. Any large or
otherwise unsuitable pieces are removed. The balance continues
to the end of the belt to an automatic packaging machine. After
being filled, the container is appropriately sealed and placed
into cold storage.
Preliminary discussions have taken place with a company
located on the North East Coast of Newfoundland, near iceberg
alley, with a view to utilizing their cold storage facility to
process the Company's requirements for bagged crushed ice. It is
not anticipated that the Company will have to spend significant
dollars to accommodate this production activity.
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.
The Company's functional currency is the Canadian dollar as
all Company operations have been conducted in Canada and are
denominated in the Canadian dollar. Except for share investments
in U.S. dollars, there has been minimal activity denominated in
foreign currency through June 30, 2000. Therefore, there is no
material currency risk or exposure to the Company in the period
to June 30, 2000.
The Company's financial statements are translated into U.S.
dollars using the current exchange rate as required by FAS 52.
The accumulated currency translation adjustment is reported as
other comprehensive income in the statement of shareholders'
equity and was $22,708 to June 30, 2000. Subsequently, in the
first quarter of fiscal 2001, the Company issued convertible
debentures for proceeds of US$750,000. In the future, the
Company intends to conduct operations in the U.S. and Europe.
Currency risks and functional currency will be evaluated as
future plans are formulated.
While the Company is still in its development stage,
management has presented the statements of operations in the
traditional format.
During the year ended June 30 2000, the Company continued
its development strategy by investing $121,366 in plant, property
and equipment. This brings its total investment in plant,
property and equipment to $1,976,580.
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 $2,374,111
through the issuance of equity shares during the year ended June
30 2000. The Company is continuing its strategy of funding
development through additional debt and 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 marketplace.
The Company reports sales of $737,300 and $399,399 for the
year ended June 30 2000, and the year ended June 30 1999,
respectively. These sales represent minimal revenue from
bottling spring water and some iceberg water with initial
shipments of beer and vodka. 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 decreased in the
year ended June 30 2000 to $1,205,936 as compared with $1,345,293
for the year ended June 30 1999. The company was more active
during the recent fiscal year but the high legal and auditing
costs incurred for the 1999 reverse takeover were not repeated.
As a result overall costs decreased by 10%.
Research and development expenses decreased in the year
ended June 30 2000 to $200,895 compared to $426,377 for the year
ended June 30 1999. Our production facility became operational
during the year 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 year ended June 30 2000 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 year ended
June 30 2000 to $779,433 as compared with $365,038 for the year
ended June 30 1999. 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 year.
Depreciation and Amortization increased in the year ended
June 30 2000 to $338,413 compared with $202,822 for the year
ended June 30 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, which became operational in July 1998 and
additional depreciation has been reflected in these statements.
Interest and bank charges increased in the year ended June
30 2000 to $71,642 compared with $69,623 for the year ended June
30 1999. The net increase of $2,019,comprised of a decrease in
short term interest expense of $8,460 and an increase in
long-term interest expense of $10,479. The increase in long-term
interest expense resulted from interest charges on recent loans
from shareholders.
Net loss for the year ending June 30 2000 was $2,469,882
($0.26 per share) compared to $2,474,966 ($0.46 per share) for
the year ending June 30 1999.
The Company has incurred significant operating losses since
its inception and has an accumulated deficit of $5,930,665 at
June 30 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 June 30, 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 solutions
to address this problem.
During the six month period ended June 30,1999, the Company
continued its development strategy by investing $985,794 in
plant, property and equipment. This brings its total investment
in plant, property and equipment to $1,858,953. This current
period investment expanded the Company's production facility and
also resulted in the installation of a new bottling line for
production of its water-based products. In addition, the Company
acquired land adjacent to its facility and installed storage
capacity to hold bulk products for subsequent processing.
In order to finance the acquisition of the plant and
equipment, and to support ongoing start-up and research and
development, the Company raised $1,878,149 through the issuance
of additional equity shares during the six month period ended
June 30, 1999. This significant financing activity was
supplemented by shareholder advances of $425,974, an increase in
trade payables of $618,587 and additional long-term debt
financing of $161,033. 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 developments costs. Subsequent to the June 30, 1999
year-end, the Company has raised $1,500,000 from the issuance of
an additional 600,000 common shares. 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.
For the six months ended June 30, 1999 and 1998, the Company
reported sales of $209,188 and $113,640, respectively. These
sales represent minimal revenue from bottling spring water and
some iceberg water. Management recognizes that its cost of sales
for the six months ended June 30, 1999 exceeds sales by $78,282.
This is as a result of the Company being in its development stage
and volume of sales for the above period were insufficient to
absorb the new production costs associated with the Company's
expanded facility. Management expects that this will be
corrected as new markets create demand for the Company's
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.
Cost of sales for the six months ended June 30, 1999 was
$287,470 as compared to $45,013 for the six months ended June 30,
1998. In addition to the effect of increased sales, the cost of
sales increase was partly the result of a write-down of vodka
inventory in the amount of $94,849. This write-down was
necessary to reflect the fact that previously made sales
arrangements with distributors did not come to maturation. Since
this was the Company's first production run of this product,
packaging and label designs were not acceptable to other
potential distributors. The inventory turnover ratio for the six
months ended June 30, 1999 was 4.8 times per year. This ratio
was not materially different from the inventory turn-over ratio
of the previous year.
General and administration expenses increased in the six
month period ended June 30, 1999 to $1,059,010, as compared with
$267,543 for the six month period ended June 30, 1998. These
expenses include substantial costs which were incurred in the
acquisition of Iceberg Corporation of America. These particular
costs represent amounts paid to lawyers, accountants and other
advisors in the amount of $568,095. This acquisition represents
a significant event in the planned positioning of the Company
into the international market place for both sales and financing.
General and administration expenses include other costs,
such as wages of $114,169 and legal and accounting fees of
$63,819, incurred to enable the Company to organize itself and
create the infrastructure to become an international provider of
premium beverage products.
Research and development expenses increased in the six
months ended June 30, 1999 to $217,058 as compared with $169,335
for the six months ended June 30, 1998. These expenses represent
a continuation of expenses incurred in operating and maintaining
the ice harvesting vessel and finalizing the production and
storage system at the plant in Trepassey.
Sales and Marketing expenses incurred in the six months
ended June 30, 1999 increased to $236,230 as compared with
$74,354 for the six month period ended June 30, 1998. The
increase represents additional costs incurred for wages, travel,
sales retainers and advertising supplies and design work to
prepare the Iceberg water products for introduction into the
United States markets.
Depreciation and Amortization expenses increased in the six
months ended June 30, 1999 to $111,259 as compared with $47,855
for the six months ended June 30, 1998. This increase resulted
from the acquisition of the ice harvesting vessel in late 1997
and the extra depreciation resulting from the purchase of
Enterprise Atlantic Limited in March 1998.
Interest and bank charges increased in the six months ended
June 30, 1999 to $41,913 as compared with $33,866 for the six
months ended June 30, 1998. The increase results mainly from
interest charges incurred on recent loans from shareholders.
Primary to 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 1st
quarter of fiscal 2001 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 Europe,
shifting marketing costs to the distributors, and thereby
increasing its delivery of product through existing channels
without commensurate increases in overhead. The Company believes
that it can be operationally profitable by the second quarter of
fiscal 2001, and should only experience further losses if it opts
to increase advertising in an attempt to rapidly increase market
penetration. Not withstanding 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 has issued convertible debentures for proceeds
of US$750,000 in the first quarter of fiscal 2001. The total
debenture has been prepared based on raising $5,000,000. Ongoing
discussions are in progress and it is anticipated that the
balance of the funds to be raised will be completed by the second
quarter of fiscal 2001. These funds will be used to fund ongoing
costs incurred to produce and bring the Company's products to
market. Capital commitments for the year ended June 30, 2001,
are estimated at $545,000 and these additional funds will be
sufficient to meet the Company's obligations until the various
sales initiations described herein are able to create significant
cash flow. No additional facilities are needed to enable the
Company to produce on a commercial basis.
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 $421,738) or because it is payable to Company
"insiders". If the Company experiences shortages, it may be
possible to renegotiate terms of repayment with the Government
agencies and a complete deferral with officers and
directors($588,536 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 bergs 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 and generally 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. However, it is known that
over the last three years, there were approximately 1,800
icebergs 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. There can be no guarantee, however, as to how many of
these icebergs actually reach close enough to shore and in
sheltered locations where they can be safely and economically
harvested.
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
would 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 report, this risk has been a
non-issue and neither the Company 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 in the future 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.
ITEM 3. DESCRIPTION OF PROPERTY
Iceberg Industries, a wholly-owned subsidiary of the
Company, has an 11,200 square foot manufacturing facility at
Trepassey, Newfoundland where its water products are processed
and bottled. This facility is located on approximately 40 acres
of Company-owned land, and the Company owns all of the equipment.
Embedded within the 40-acre site is a small piece of real estate
owned by the Town of Trepassey, which is specifically the size of
and constitutes the site for the bottling plant. This parcel has
been leased to the Company for a term of 99 years, with an annual
rental or lease rate of $1.00. The Town is surrendering fee
title on this parcel to the Company after the next batch of
bottle labels are modified to show Trepassey as the source of the
spring water. As of the date of this filing, the transfer has
not occurred. The 40-acre parcel is encumbered by a first
mortgage to Trepassey Community Development Fund in the amount of
$83,168, with monthly payments of $664.00, and a second mortgage
to Bank of Nova Scotia, securing an obligation of $13,830, which
has amortizing payments of $1117.00 per month.
This property is, in the opinion of management, adequately
covered by Insurance on the premises and its contents, under a
policy issued by AXA Insurance Company.
The Company also has long-term water rights leases in place
with Basil James, an unrelated third-party landowner, for
extraction of mineral water from a site directly adjacent to the
Trepassey facility. The Company has these water rights for $67
per month for a period of 25 years, commencing January of 1992.
The Company maintains an office at 16 Forest Road, St.
John's, Newfoundland, Canada, which it utilizes as its main
corporate business office. This lease is from Commerce Atlantic
Limited, and is for a term of three (3) years, commencing on
December 1, 1998, with an annual rental rate of $32,000. The
space is approximately 4200 square feet, comprising the second
floor of the premises. This property is also covered by
insurance through AXA Insurance Company.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners.
The following table sets forth the security and beneficial
ownership interest for each class of equity securities known by
the Company to have more than five (5%) percent of the voting
securities.
Title of Name and address Amount and nature Percentage
class of beneficial of beneficial of class
Owner ownership (1)
Common John Kleinert 1,969,226 18.07%
16 Forest Road (affiliate)
Suite 200
St. John's, Newfoundland
Canada
Common Ron Stamp 670,860 6.16%
16 Forest Road (affiliate)
Suite 200
St. John's, Newfoundland
Canada
Common Maurice Murphy 669,140 6.14%
16 Forest Road (affiliate)
Suite 200
St. John's, Newfoundland
Canada
Common Paul Benson 580,958 5.33%
16 Forest Road (affiliate)
Suite 200
St. John's, Newfoundland
Canada
Special James D. Smyth, Trustee 4,454,690 40.87%
Common (2) 16 Forest Road (affiliate)
Suite 100
St. John's, Newfoundland
Canada
(1) Unless otherwise indicated, the Company believes that all
persons named in the above table have sole voting and
investment power with respect to all shares of common stock
beneficially owned by them.
(2) James D. Smyth is functioning as trustee for the
Canadian-resident investors and shareholders that acquired
their stock by way of an investment in Icecap Equity, Inc.,
an intermediary company formed to enable the Iceberg
Industries acquisition, on a tax-deferred basis for Canadian
shareholders. (See "Purchase Offer for Securities of
Iceberg Industries" at Exhibit 10.6, which details the terms
of the acquisition and the rights of holders of the
Company's Special Common Stock; and "Notice of Change in
Purchase Offer for Securities of Iceberg Industries" at
Exhibit 10.7)
(b) Security Ownership of Management.
The following table sets forth the beneficial ownership for each
class of equity securities of the Company beneficially owned by all
directors and officers of the Company.
Title of Name and address Amount and nature Percentage
class of beneficial of beneficial of class
Owner ownership (1)
Common John Kleinert 1,969,226 18.07%
16 Forest Road (affiliate)
Suite 200
St. John's, Newfoundland
Canada
Common Ron Stamp 670,860 6.16%
16 Forest Road (affiliate)
Suite 200
St. John's, Newfoundland
Canada
Common Maurice Murphy 669,140 6.14%
16 Forest Road (affiliate)
Suite 200
St. John's, Newfoundland
Canada
Common Paul Benson 580,958 5.33%
16 Forest Road (affiliate)
Suite 200
St. John's, Newfoundland
Canada
Common Lewis Stoyles 194,018 1.78%
16 Forest Road (affiliate)
Suite 200
St. John's, Newfoundland
Canada
Common All Officers and 4,084,202 37.47%
Directors as a
Group
(1) Unless otherwise indicated, the Company believes that all
persons named in the above table have sole voting and
investment power with respect to all shares of common stock
beneficially owned by them.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS
The directors and officers of the Company are as follows:
Name Age Position
----------------- --- ---------------
Paul Benson 45 President, CEO & Director
Ron Stamp 46 Vice President-Marketing & Director
Maurice Murphy 49 Vice President-Operations
Lewis Stoyles 51 Vice President-Finance & Director
John Kleinert 41 Director
The above listed officers and directors will serve until the
next annual meeting of the shareholders or until their death,
resignation, retirement, removal, or disqualification, or until
their successors have been duly elected and qualified. Vacancies
in the existing Board of Directors are filled by majority vote of
the remaining Directors. Officers of the Company serve at the
will of the Board of Directors. There is no family relationship
between any executive officer and director of the Company.
PAUL BENSON, 45, President, C.E.O. & Director
Mr. Benson has served in senior management positions with
national and local multi-unit organizations. He founded
Newfoundland's first independent retail gasoline operation and
co-founded a Newfoundland based advertising and marketing firm.
Mr. Benson is a co-founder of the Company, and a founder of
Newfoundland's first and largest bottled water operation,
Enterprise Atlantic Limited, since amalgamated with the Company.
Mr. Benson founded Enterprise Atlantic Limited in 1991, and was
President of the company until its merger with Iceberg Industries
in 1998. Mr. Benson is a graduate of Memorial University in St.
John's and has served as an officer in the Canadian Navy.
RONALD STAMP, 46, Vice President - Marketing and Sales & Director
Mr. Stamp is a co-founder of the Company, and has overall
responsibility for sales and marketing. From 1994 until his
co-founding of the Company in 1996, Mr. Stamp was Managing
Director at Canadian Iceberg Vodka Corporation. He has over 20
years of experience in sales, marketing and public relations in
the food and beverage industry in Canada, the United States and
the Caribbean.
MAURICE MURPHY, 49, P. Eng., Vice President - Operations
Mr. Murphy is a registered professional engineer and
possesses a Third Class Power Certificate of Competency, issued
by the Government of Canada. Mr. Murphy has had over 20 years
experience in the food and beverage industry in Newfoundland in
senior management positions. These positions all involved
responsibility for capital and operational budgets for these
facilities, as well as overall responsibility for maintenance and
engineering departments. Mr. Murphy assumes similar
responsibilities in both plant and harvesting operations at
Iceberg Industries. Prior to his employment with the Company,
Mr. Murphy was President of M.J. Murphy and Associates, Ltd., a
designer, supplier and installer of general mechanical and
refrigeration systems. Mr. Murphy received his Bachelor of
Engineering degree from Memorial University in St. John's,
Newfoundland.
LEWIS STOYLES, 51, FCA, CMC, Vice President, C.F.O. & Director
Mr. Stoyles is a member of the Canadian Institute of
Chartered Accountants and a fellow of the Newfoundland Institute
of Chartered Accountants. In addition, Mr. Stoyles is a
certified management consultant. He brings over 30 years
experience in accounting, auditing and financial management to
his position. Mr. Stoyles has worked for 20 years in various
industries including manufacturing and distribution of food
products, trucking and aviation transport operations. Prior to
his position at Iceberg Industries, Mr. Stoyles was managing
partner of the Coopers and Lybrand, St. John's office for 6
years. Mr. Stoyles is responsible for all financial affairs of
the Company.
JOHN KLEINERT, 41, Director
Mr. Kleinert has over 18 years experience in the financial
industry. As a General Partner at Goldman Sachs & Co. in New
York, Mr. Kleinert worked in the municipal bond department
wherein he managed the firm's Risk Portfolio. Since 1995, Mr.
Kleinert has been the Chief Financial Officer of a high
technology firm specializing in thermal management. Mr. Kleinert
received his Bachelor of Science degree in Chemical Engineering
from Princeton University.
During the past five years, no present or former director,
executive officer or person nominated to become a director or an
executive officer of the Company:
(1) was a general partner or executive officer of any
business against which any bankruptcy petition was filed, either
at the time of the bankruptcy or two years prior to that time;
(2) was convicted in a criminal proceeding or named subject
to a pending criminal proceeding (excluding traffic violations
and other minor offenses);
(3) was subject to any order, judgment or decree, not
subsequently reversed, suspended or vacated, of any court of
competent jurisdiction, permanently or temporarily enjoining,
barring, suspending or otherwise limiting his involvement in any
type of business, securities or banking activities; or
(4) was found by a court of competent jurisdiction (in a
civil action), the Securities and Exchange Commission or the
Commodity Futures Trading Commission to have violated a federal
or state securities or commodities law, and the judgment has not
been reversed, suspended or vacated.
ITEM 6. EXECUTIVE COMPENSATION.
The following table sets forth the cash compensation, which
was paid by the Company for services, rendered to the Company.
During fiscal years ended 1998, 1999 and 2000, the following
payments were made:
Remuneration (US$)
----------------------------
Name Position 2000 1999 1998
----------------------------
Paul Benson President & CEO 51,106 63,102 69,994
Ron Stamp Vice President 47,080 60,426 55,146
-Marketing
Maurice Murphy Vice President 29,517 45,037 25,263
-Operations
Lewis Stoyles Vice President 45,424 51,340 9,628
-Finance
All Executive
Officers as
a group 173,127 219,905 159,671
No compensation is payable to Directors of the Company in
connection with attendance at board meetings, except as to such
Directors who also serve as Officers of the Company in capacities
other than Directors. At this time, no other compensation has
been scheduled for any other member of the Board of Directors or
Officer of the Company.
Future compensation of Officers will be determined by the
Board of Directors based upon the financial condition and
performance of the Company, the financial requirements of the
Company, and upon the individual performance of each Officer.
The Board of Directors intends to ensure that the salaries paid
to the Company's Officers and employees are reasonable and
prudent and are based upon both the financial condition and
performance of the Company and upon the performance of individual
Officers and employees.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Company and Icecap Equity Inc. purchased all of the
issued and outstanding common shares of Iceberg Industries on the
basis of one and seven-tenths Preferred Exchangeable Shares of
Icecap Equity Inc. for each one Iceberg Industries Share or, at
the option of a holder who was a non-resident of Canada, one and
seven-tenths Common Shares of the Company for each Iceberg
Industries Share. This purchase was completed on June 25, 1999.
Icecap Equity Inc. was incorporated on May 3rd, 1999, to
allow for the postponement of a deemed disposition of shares of
Iceberg Industries and consequential tax implications for
Canadian resident security holders of Iceberg Industries, until
such time as the investor disposes of the Company's shares
exchanged for shares of Icecap Equity Inc. Other than for the
purposes stated herein, Icecap Equity Inc. has no other business
activities, and shares of Icecap Equity Inc. have no value other
than the right to be exchanged for shares of the Company. (See
"Purchase Offer for Securities of Iceberg Industries" at Exhibit
10.6, which details the terms of the acquisition and the rights
of holders of the Company's Special Common Stock; and "Notice of
Change in Purchase Offer for Securities of Iceberg Industries" at
Exhibit 10.7)
In addition, the Company has outstanding notes payable due
to shareholders and to directors. Notes payable to shareholders,
bearing interest rates, which range between 6% and 8.75%, matured
in June 1999. At June 30, 2000, $22,311.34 of the principal and
accrued interest related to the notes was in arrears and
outstanding. In July 2000,the remaining balance noted above was
repaid. The balance of Notes payable to directors, included in
Due to shareholders, are unsecured, bear interest at 5% and 10%
and are repayable upon demand. As of June 30, 2000, notes
payable to directors totaled $588,536.
Except as herein above set forth, there have been no related
party transactions, or any other transactions or relationships
required to be disclosed pursuant to Item 404 of Regulation S-B.
ITEM 8. DESCRIPTION OF SECURITIES.
The Company's authorized capital stock consists of
25,000,000 shares of Common Stock, par value $.0001 per share,
and 5,000,000 shares of Special Common Stock, par value $.0001
per share. At June 30, 2000, there were 6,444,250 Common Shares
issued and outstanding and 4,454,690 Special Common Shares issued
and outstanding, for a total of 10,898,940 issued and outstanding
shares of the Company.
All shares of the Company's Common Stock and Special Common
Stock have equal voting rights and, when validly issued and
outstanding, are entitled to one vote per share in all matters to
be voted upon by shareholders.
The shares of Common Stock have no preemptive, subscription,
conversion or redemption rights and may be issued only as fully
paid and non-assessable shares. Cumulative voting in the
election of directors is not permitted, which means that the
holders of a majority of the issued and outstanding shares of
Common Stock represented at any meeting at which a quorum is
present will be able to elect the entire Board of Directors if
they so choose and, in such event, the holders of the remaining
shares of Common Stock will not be able to elect any directors.
In the event of liquidation of the Company, each shareholder is
entitled to receive a proportionate share of the Company's assets
available for distribution to shareholders after the payment of
liabilities and after distribution in full of preferential
amounts, if any. All shares of the Company's Common Stock issued
and outstanding are fully paid and non-assessable. Holders of
the Common Stock are entitled to share pro rata in dividends and
distributions with respect to the Common Stock, as may be
declared by the Board of Directors out of funds legally available
therefor.
The Special Common Stock shares of the Company are
convertible, at the option of the respective holders of the
shares thereof, at any time, and into fully paid, non-assessable
Common Stock shares of the Company, at the rate of one Common
Stock share for each one Special Common Stock share so
surrendered for conversion. The Special Common Stock shares of
the Company carry the following additional rights:
Dividend rights: any dividends paid will be equivalent to
dividends paid on the common shares of the COmpany.
Direct Voting Rights: One vote per Special Common Stock
Share.
Retraction/Redemption Rights: The Special Common Stock
Shares are redeemable at the option of Icecap Equity Inc. and
retractable at the option of the holder upon delivery of one
Share of the Company.
Liquidation Entitlement: Special Common Stock Share holders
are entitled to be paid, upon any liquidation of the assets of
Icecap Equity Inc. , an amount of money equivalent to the amount
that would be received per Company Share on a liquidation of the
Company.
Anti-dilution: The Special Common Stock Shares contain
anti-dilution provisions to keep such shares pari passu with any
changes involving the Company Shares, such as reorganizations or
stock splits.
In addition to the foregoing, the Special Common Stock
Shares are subject to certain collateral contractual arrangements
as follows:
Voting Rights in the Company: The Company will issue special
voting shares to a trustee (the "Iceberg Corporation of America
Trust Shares"). The terms of the trust shall be contained in a
trust indenture which will provide as follows: (i) the number of
Iceberg Corporation of America Trust Shares shall be equal to the
number of Special Common Stock Shares; (ii) the voting rights of
the Iceberg Corporation of America Trust Shares shall be equal
and equivalent to the voting rights attached to the Iceberg
Corporation of America Shares; (iii) the trustee shall vote the
Iceberg Corporation of America Trust Shares as directed by the
holders of the Special Common Stock Shares; and (iv) as each
Special Common Stock Share is exchanged for a Company Share, the
corresponding equivalent Iceberg Corporation of America Trust
Share shall be cancelled.
Put Rights: The holders of Special Common Stock Shares may
require those shares to be acquired by the Company in exchange
for an equal number of Company Shares.
The Company shall at all times reserve and keep available
out of its authorized but non-issued common shares the full
number of Common Shares deliverable upon the conversion of all of
the then outstanding Special Common Shares, and shall take all
action and obtain all permits or orders that may be necessary to
enable the Company lawfully to issue common shares upon the
conversion of the Special Common Shares.
PART II
ITEM 1. MARKET PRICE FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
(a) Market Price.
The Company's Common Stock is presently quoted on the
National Association of Securities Dealers' Over-The-Counter
Bulletin Board.
As of June 30, 2000, the Company had 220 shareholders of
record of its common stock and one shareholder of record for the
special common stock. See Item 7, Certain Relationships and
Related Transactions. The Company has not paid cash dividends on
its common stock. The Company anticipates that for the
foreseeable future any earnings will be retained for use in its
business, and no cash dividends will be paid on the common stock.
Declaration of common stock dividends will remain within the
discretion of the Company's Board of Directors and will depend
upon the Company's growth, profitability, financial condition and
other relevant factors.
The table below reflects the high and low "bid" and "ask"
quotations for the Company's Common Stock for each of the
calendar years covered by this report. The prices reflect
inter-dealer prices, without retail mark-up, mark-down or
commission and do not necessarily represent actual transactions.
1998 HIGH LOW
----------- ------ ------
1st Quarter
2nd Quarter N/A
3rd Quarter
4th Quarter
1999 HIGH LOW
----------- ------ ------
1st Quarter
2nd Quarter N/A
3rd Quarter 3.750 1.000
4th Quarter 2.875 1.250
2000 HIGH LOW
----------- ------ ------
1st Quarter 3.250 0.750
2nd Quarter 3.625 0.625
(b) Other.
The securities of the Company will be considered low-priced
or "designated" securities under rules promulgated under the
Securities and Exchange Act of 1934. Penny Stock Regulation and
Broker-Dealer practices in connection with transactions in "Penny
Stocks" are regulated by certain rules adopted by the Securities
and Exchange Commission. Rule 15g-9 under the Exchange Act
establishes the definition of a "penny stock," for purposes
relevant to the Company, as any equity security that has a market
price of less than $5.00 per share or with an exercise price of
less than $5.00 per share, subject to certain exceptions. For
any transaction involving a penny stock, unless exempt, the rules
require: (i) that a broker or dealer approve a person's account
for transactions in penny stocks; and (ii) the broker or dealer
receive from the investor a written agreement to the transaction,
setting forth the identity and quantity of the penny stock to be
purchased. In order to approve a person's account for
transactions in penny stocks, the broker or dealer must (i)
obtain financial information and investment experience and
objectives of the person; and (ii) make a reasonable
determination that the transactions in penny stocks are suitable
for that person and that person has sufficient knowledge and
experience in financial matters to be capable of evaluating the
risks of transactions in penny stocks. The broker or dealer must
also deliver, prior to any transaction in a penny stock, a
disclosure schedule prepared by the Commission relating to the
penny stock market, which, in highlight form, (i) sets forth the
basis on which the broker or dealer made the suitability
determination; and (ii) that the broker or dealer received a
signed, written agreement from the investor prior to the
transaction. Disclosure also has to be made about the risks of
investing in penny stock in both public offering and in secondary
trading, and about commissions payable to both the broker-dealer
and the registered representative, current quotations for the
securities and the rights and remedies available to an investor
in cases of fraud in penny stock transactions. Finally, monthly
statements have to be sent disclosing recent price information
for the penny stock held in the account and information on the
limited market in penny stocks. Therefore, the Company's stock
will become subject to the penny stock rules and investors may
find it more difficult to sell their securities, should they
desire to do so.
(c) Dividends.
The payment of dividends is within the discretion of the
Board of Directors of the Company. The Company currently intends
to retain all earnings, if any, in the foreseeable future for use
in the development of the Company's business. The Company has
not paid dividends since inception. It is not anticipated that
any dividends will be paid in the foreseeable future and there
can be no assurance that dividends can or will ever be paid. The
payment of dividends is contingent upon future earnings, if any,
the Company's financial condition and capital requirements,
general business conditions and other factors.
(d) Transfer Agent.
The Transfer Agent for the Company's Common Stock is Pacific
Stock Transfer Company, 5844 S. Pecos Road, Suite D, Las Vegas,
Nevada 89120.
ITEM 2. LEGAL PROCEEDINGS.
There are no legal proceedings threatened or pending, except
such ordinary routine matters which may be incidental to the
business currently being conducted by the Company.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
During June 1999, and closing on June 25, 1999, the Company
consummated a reverse merger transaction whereby it acquired 100%
of the issued and outstanding stock of Iceberg Industries for
total consideration of $3,631,848, which was satisfied by the
issuance of 5,757,859 shares of the Company's stock, consisting
of 1,251,753 Common Shares and 4,506,106 Special Common Shares.
This transaction was completed pursuant to Section 4(2) of the
Securities Act of 1933, as amended, and Internal Revenue Code
section 368. As a result of these transactions, the former
shareholders of Iceberg Industries effectively control the
Company through their share ownership.
In September 1999, the Company completed a private placement
under Rule 506 of Regulation D whereby it issued an aggregate of
600,000 restricted shares of the Company's Common Stock in
exchange for $1,500,000, or $2.50 per share, which proceeds were
intended to fund the Company's immediate working capital needs.
As part of the offering price, the accredited investor also
received 1,200,000 Share Purchase Warrants convertible into an
equivalent number of shares of the Company's Common Stock at
$2.50 per share. The first 600,000 Warrants expire on December
15, 2000; the next 600,000 Warrants expire on March 15, 2002. In
addition, the investor received 150,000 stock options under the
Company's employee stock option plan, which expire on December
31, 2009. The Term Sheet for the Private Placement is included
herewith as Exhibit 10.11. Subsequently, the 1,200,000
outstanding Warrants were cancelled.
In June 2000, the Company completed a private placement
under Rule 506 of Regulation D whereby it issued an aggregate of
1,000,000 restricted shares of the Company's Common Stock in
exchange for $500,000, or $0.50 per share, which proceeds were
intended to fund the Company's immediate working capital needs.
As part of the offering price, the accredited investors also
received 1,000,000 Share Purchase Warrants convertible into an
equivalent number of shares of the Company's Common Stock from
the date of the private placement Agreement to April 30, 2001, an
amount of money per share equal to 125% of the closing bid for
the Company's stock on the last trading day preceding the date of
execution of the Agreement; and, from May 1, 2001 to April 30,
2002, an amount of money per share equal to 140% of the closing
bid for the Company's stock on the last trading day preceding the
date of execution of the Agreement.
In August 2000, the Company completed a private placement
under Rule 506 of Regulation D whereby it issued convertible
debentures in exchange for $750,000 which proceeds were intended
to fund the Company's immediate working capital needs. As part
of the offering price, the accredited investors will be entitled
to convert their debenture into an equivalent number of shares of
the Company's Common Stock at $0.50 per share. As part of the
offering price, the accredited investors who convert will receive
share purchase warrants convertible into an equivalent number of
shares of the Company's Common Shares at $0.625 per share. These
warrants expire eighteen months after the conversion date of the
convertible debenture to equity. A commission of 4% was paid in
connection with the issuance of the convertible debenture.
Except as noted herein, no compensation or commissions were
paid to any person in connection with the issuance of the shares,
and no underwriter, broker or dealer participated in such a sale.
Each issuee in the transactions described above made a written
representation to the Company that he was acquiring the Company's
stock for investment purposes and not with a view to the resale
or redistribution thereof. Each stock certificate issued
contains a restrictive legend. Each of the above transactions
was deemed by the Company to be exempt from registration under
Section 4(2) of the Securities Act of 1933, and Rule 145 (17 CFR
Section 230.145) as a transaction not involving any public
offering.
As of the date of this report, 9,041,200 of the issued and
outstanding shares of the Company's Common Stock and Special
Common Stock could potentially be eligible for sale under Rule
144 promulgated under the Securities Act of 1933, as amended,
subject to certain limitations included in the Rule:
In summary, Rule 144 applies to affiliates (that is, control
persons) and nonaffiliates when they resell restricted securities
(those purchased from the issuer or an affiliate of the issuer in
non-public transactions). Nonaffiliates reselling restricted
securities, as well as affiliates selling restricted or
non-restricted securities, are not considered to be engaged in a
distribution and, therefore, are not deemed to be underwriters as
defined in Section 2(a)(11), if six conditions are met:
(1) Current public information must be available about the
issuer unless sales are limited to those made by non-affiliates
after two years.
(2) When restricted securities are sold, generally there
must be a one-year holding period.
(3) When either restricted or non restricted securities are
sold by an affiliate after one year, there are limitations on the
amount of securities that may be sold (144(e)); when restricted
securities are sold by non-affiliates between the first and
second years, there are identical limitations; after two years,
there are no volume limitations for resales by non-affiliates
(144(k)).
(4) Except for sales of restricted securities made by
non-affiliates after two years, all sales must be made in
brokers' transactions as defined in Section 4(4) of the
Securities Act of 1933, as amended, or a transaction directly
with a "market maker" as that term is defined in Section 3(a)(38)
of the 1934 Act.
(5) Except for sales of restricted securities made by
non-affiliates after two years, a notice of proposed sale must be
filed for all sales in excess of 500 shares or with an aggregate
sales price in excess of $10,000.
(6) There must be a bona fide intention to sell within a
reasonable time after the filing of the notice referred to in (5)
above.
Furthermore, Rule 145, which applies when a merger, share
exchange or similar reorganization of a company takes place,
would limit the ability of holders of restricted securities to
sell their shares through the public market. All securities
received as a result of a transaction subject to Rule 145 would
be restricted for a minimum of one year from the date on which
the consideration for these shares was exchanged, which would be
June 25, 1999 for a large majority of the shareholders of the
Company. Once the one-year period has elapsed, the holders are
subject to the normal restrictions and exemptions set forth in
Rule 144.
Based upon the Company's knowledge of the dates of
acquisition of the various securities of the Company, there are
currently 9,041,200 shares of the 10,898,940 potentially tradable
restricted shares, which could be immediately sold, after all
Icecap Equity Inc. shares are converted to shares of the company,
under Rule 144 of the Securities Act.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Except for acts or omissions which involve intentional
misconduct, fraud or known violation of law or for the payment of
dividends in violation of Nevada Revised Statutes, there shall be
no personal liability of a director or officer to the Company, or
its stockholders for damages for breach of fiduciary duty as a
director or officer. The Company may indemnify any person for
expenses incurred, including attorneys fees, in connection with
their good faith acts if they reasonably believe such acts are in
and not opposed to the best interests of the Company and for acts
for which the person had no reason to believe his or her conduct
was unlawful. The Company may indemnify the officers and
directors for expenses incurred in defending a civil or criminal
action, suit or proceeding as they are incurred in advance of the
final disposition of the action, suit or proceeding, upon receipt
of an undertaking by or on behalf of the director or officer to
repay the amount of such expenses if it is ultimately determined
by a court of competent jurisdiction in which the action or suit
is brought determined that such person is fairly and reasonably
entitled to indemnification for such expenses which the court
deems proper.
Indemnification of Directors, Officers, Employees and Agents
So far as permitted by the Nevada Business Corporation Act,
the Company may indemnify its directors and officers against
expenses and liabilities they incur to defend, settle or satisfy
any civil or criminal action brought against them on account of
their being or having been Company directors or officers unless,
in any such action, they are adjudged to have acted with gross
negligence or to have engaged in willful misconduct.
Section 78.751(1) of the Nevada Revised Statutes (NRS) authorizes
a Nevada corporation to indemnify any director, officer,
employee, or corporate agent who was or is a party or is
threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, except an action by or in the
right of the corporation due to his or her corporate role.
Section 78.751(1) extends this protection against expenses,
including attorney's fees, judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection
with the action, suit or proceeding if he acted in good faith and
in a manner which he reasonably believed to be in or not opposed
to the best interests of the corporation, and, with respect to
any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful.
Section 78.751(2) of the NRS also authorizes indemnification
of the reasonable defense or settlement expenses of a corporate
director, officer, employee or agent who is sued, or is
threatened with a suit, by or in the right of the corporation.
The party must have been acting in good faith and with the
reasonable belief that his of her actions were not opposed to the
corporation's best interests. Unless the court rules that the
party is reasonably entitled to indemnification, the party
seeking indemnification must not have been found liable to the
corporation.
To the extent that a corporate director, officer, employee,
or agent is successful on the merits or otherwise in defending
any action or proceeding referred to in Section 78.751(1) or
78.751(2), Section 78.751(3) of the NRS requires that he or she
be indemnified against expenses, including attorneys fees,
actually and reasonably incurred by him in connection with the
defense.
Section 78.751(4) of the NRS limits indemnification under
Section 78.751(1) and 78.751(2) to situations in which either (i)
the stockholders; (ii) the majority of a disinterested quorum of
directors; or (iii) independent legal counsel determine that
indemnification is proper under the circumstances.
Pursuant to Section 78.175(5) of the NRS, the corporation
may advance an officer's or director's expenses incurred in
defending any action or proceeding upon receipt of an
undertaking. Section 78.751(6)(a) provides that the rights to
indemnification and advancement of expenses shall not be deemed
exclusive of any other rights under any bylaw, agreement,
stockholder vote or vote of disinterested directors. Section
78.751(6)(b) extends the rights to indemnification and
advancement of expenses to former directors, officers, employees
and agents, as well as their heirs, executors, and
administrators.
Regardless of whether a director, officer, employee or agent
has the right to indemnity, Section 78.752 allows the corporation
to purchase and maintain insurance on his or her behalf against
liability resulting from his or her corporate role.
Insofar as indemnification for liabilities arising under the
1933 Act may be permitted to officers, directors or persons
controlling the Company pursuant to the foregoing, the Company
has been informed that in the opinion of the U.S. Securities and
Exchange Commission such indemnification is against public policy
as expressed in the Securities Act of 1933 and is therefore
unenforceable.
PART F/S
Financial Statements.
The following financial statements are attached to this
report and filed as a part hereof.
Audited Consolidated Financial Statements as of June 30,
2000 with comparative figures for the six months ended June
30 1999, and for the year ended December 31, 1998
Unaudited Consolidated Financial Statements as of
June 30, 1999
Unaudited Consolidated Financial Statements as of
June 30, 1998
<PAGE>
ICEBERG CORPORATION OF AMERICA AND SUBSIDIARIES
INDEPENDENT AUDITORS' REPORT AND
CONSOLIDATED FINANCIAL STATEMENTS
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders,
Iceberg Corporation of America
We have audited the accompanying consolidated balance sheets of
Iceberg Corporation of America (a development stage company) and
subsidiaries as of June 30, 2000 and June 30, 1999, and the
related consolidated statements of operations, shareholders'
equity and cash flows for the year ended June 30, 2000, for the
six months ended June 30, 1999 and the year ended December 31,
1998, and for the period from July 22, 1996 (inception) to June
30, 2000. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted
auditing standards in the United States of America. Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the consolidated financial statements present
fairly, in all material respects, the consolidated financial
position of Iceberg Corporation of America and subsidiaries as of
June 30, 2000 and June 30, 1999, and the results of their
operations and their cash flows for the year ended June 30, 2000,
for the six months ended June 30, 1999, for the year ended
December 31, 1998, and for the period from July 22, 1996
(inception) to June 30, 2000, in conformity with generally
accepted accounting principles in the United States of America.
The accompanying consolidated financial statements have been
prepared assuming the Company will continue as a going concern.
Iceberg Corporation of America is a development stage company
engaged in the development, production and commercial marketing
of premium beverage products, which utilize iceberg water as a
core ingredient. As discussed in Note 1 to the consolidated
financial statements, the deficiency in working capital at June
30, 2000 and the operating losses since inception raise
substantial doubt about its ability to continue as a going
concern. Management's plans in regards to these matters are also
described in Note 1. The consolidated financial statements do
not include any adjustments that might result from the outcome of
this uncertainty.
St. John's, Newfoundland, Canada Deloitte & Touche LLP
September 8, 2000. Chartered Accountants
<PAGE>
<PAGE>
<TABLE>
ICEBERG CORPORATION OF AMERICA AND SUBSIDIARIES
(a Development Stage Company)
CONSOLIDATED BALANCE SHEETS
_________
(all amounts in U.S. dollars)
<S> <C> <C>
June June
30, 2000 30, 1999
ASSETS
Current assets
Cash and cash equivalents $ 30,417 $ 273,987
Trade accounts receivable, less allowance
for doubtful accounts of $10,500, and $5,374,
respectively 155,135 193,936
Inventory 581,624 302,901
Prepaid expenses 47,587 53,322
--------- ---------
Total current assets 814,763 824,146
Property, plant and equipment, net 1,567,778 1,693,831
Goodwill 193,641 266,733
--------- ---------
Total assets $ 2,576,182 $2,784,710
========= =========
LIABILITIES
Current liabilities
Short term borrowings $ 138,331 $ -
Accounts payable 1,048,088 1,202,633
Accrued liabilities 62,243 29,412
Due to shareholders 610,847 425,974
Current portion of long term debt 96,831 44,058
--------- ---------
Total current liabilities 1,956,340 1,702,077
Long term debt 521,840 882,369
--------- ---------
Total liabilities 2,478,180 2,584,446
--------- ---------
Commitments and contingencies
SHAREHOLDERS' EQUITY
Common shares, $.0001 par value; 25,000,000 shares
authorized, 6,444,250 and 4,285,085 shares issued
and outstanding in 2000 and 1999 respectively 644 428
Special common shares, $.0001 par value; 5,000,000
shares authorized, 4,454,690 and 4,506,106 shares
issued and outstanding in 2000 and 1999 respectively 445 451
Additional paid-in capital 6,004,870 3,630,969
Deficit accumulated during the development stage (5,930,665) (3,460,783)
Accumulated other comprehensive income 22,708 29,199
--------- ---------
Total shareholders' equity 98,002 200,264
--------- ---------
Total liabilities and shareholders' equity $ 2,576,182 $ 2,784,710
========= =========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>
ICEBERG CORPORATION OF AMERICA AND SUBSIDIARIES
(a Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
_________
(all amounts in U.S. dollars)
<TABLE>
<S> <C> <C> <C> <C>
From
July 22, 1996 Year Six Months Year
(Date of Ended Ended Ended
Inception) to June June December
June 30, 2000 30, 2000 30, 1999 31, 1998
Sales $ 1,194,580 $ 737,300 $ 209,188 $ 248,092
Cost of sales 1,118,951 610,863 287,470 220,618
----------- ----------- ----------- -----------
Gross (loss) profit 75,629 126,437 (78,282) 27,474
----------- ----------- ----------- -----------
Operating expenses
General and administrative 2,958,047 1,205,936 1,059,010 507,167
Research and development 899,159 200,895 217,058 361,850
Sales and marketing 1,370,991 779,433 236,230 198,250
Depreciation and amortization 588,755 338,413 111,259 130,881
----------- ----------- ----------- -----------
5,816,952 2,524,677 1,623,557 1,198,148
----------- ----------- ----------- -----------
Operating loss (5,741,323) (2,398,240) (1,701,839) (1,170,674)
----------- ----------- ----------- -----------
Other expenses
Interest and bank charges 91,481 28,337 28,135 22,858
Interest on long term debt 97,861 43,305 13,778 37,110
----------- ----------- ----------- -----------
189,342 71,642 41,913 59,968
----------- ----------- ----------- -----------
Loss before taxes (5,930,665) (2,469,882) (1,743,752) (1,230,642)
Income taxes - - - -
----------- ----------- ----------- -----------
Net loss $(5,930,665) $(2,469,882) $(1,743,752) $(1,230,642)
=========== =========== =========== ===========
Loss per share
- basic and diluted $ (1.65) $ (0.26) $ (0.27) $ (0.52)
=========== =========== =========== ===========
Weighted average common shares
- basic and diluted 3,591,084 9,441,735 6,480,860 2,364,155
=========== =========== =========== ===========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>
ICEBERG CORPORATION OF AMERICA AND SUBSIDIARIES
(a Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
_________
(all amounts in U.S. dollars)
<TABLE>
<S> <C> <C> <C> <C>
From
July 22, 1996 Year Six Months Year
(Date of Ended Ended Ended
Inception) to June June December
June 30, 2000 30, 2000 30, 1999 31, 1998
Operating activities
Net loss $(5,930,665) $(2,496,882) $(1,743,752) $(1,230,642)
Items not affecting cash:
Depreciation and amortization 588,755 338,413 111,259 130,881
Gain on sale of property,
plant and equipment (29,195) (6,976) 4,127 (26,346)
----------- ----------- ----------- -----------
(5,371,105) (2,138,445) (1,628,366) (1,126,107)
Changes in current assets
and liabilities
(Increase) decrease in
accounts receivable (85,018) 36,954 (139,132) (11,875)
(Increase) decrease in
inventory (389,729) (282,535) 3,962 88,721
(Increase) decrease in
prepaid expenses (18,291) 5,213 (34,328) 10,824
Increase (decrease) in
accounts payable 621,903 (143,006) 618,587 (85,683)
Increase in accrued liabilities 62,133 33,146 10,195 2,132
Increase (decrease)in deferred
government grants (693) - (46,599) 45,905
----------- ----------- ----------- -----------
Cash used by operating activities (5,180,800) (2,488,673) (1,215,681) (1,076,083)
----------- ----------- ----------- -----------
Investing activities
Purchase of property, plant
and equipment (1,749,043) (121,366) (985,794) (413,712)
Proceeds from sale of property,
plant and equipment 78,007 32,381 5,866 39,760
Acquisition of subsidiary (1) - - (1)
----------- ----------- ----------- -----------
Cash used by investing activities (1,671,037) (88,985) (979,928) (373,953)
----------- ----------- ----------- -----------
Financing activities
Proceeds from (payments of)
short term borrowings 153,634 138,678 - (152,985)
Advances from third parties 259,870 - - -
Repayment of advances from
third parties (516,030) - - (506,716)
Advances from shareholders, net 611,008 185,034 425,974 -
Proceeds from issuance of
long term debt 868,694 33,942 161,033 659,064
Repayment of long term debt (497,523) (395,609) (55,482) (43,188)
Net proceeds from issuance
of shares 6,005,959 2,374,111 1,878,149 1,554,984
----------- ----------- ----------- -----------
Cash provided by financing
activities 6,885,612 2,336,156 2,409,674 1,511,159
----------- ----------- ----------- -----------
Effect of exchange rate
changes on cash (3,358) (2,068) (429) (847)
----------- ----------- ----------- -----------
Increase (decrease) in cash and cash
equivalents during the period 30,417 (243,570) 213,636 60,276
Cash and cash equivalents,
beginning of period - 273,987 60,351 75
----------- ----------- ----------- -----------
Cash and cash equivalents,
end of period $ 30,417 $ 30,417 $ 273,987 $ 60,351
=========== =========== =========== ===========
Supplemental disclosures of
cash flow information:
Cash paid for interest $ 189,342 $ 71,642 $ 41,913 $ 59,968
=========== =========== =========== ===========
Cash paid for income taxes $ - $ - $ - $ -
=========== =========== =========== ===========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
ICEBERG CORPORATION OF AMERICA AND SUBSIDIARIES
(a Development Stage Company)
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
__________
(all amounts in U. S. dollars)
<S> <C> <C> <C> <C> <C> <C>
Common and Deficit
Special Common Accumulated Accumulated Total
Shares Additional During the Other Share-
Par Value Paid in Development Comprehensive holders'
Number Amount Capital Stage Income Equity
Balance at July 22, 1996
(Inception) $ - $ - $ - $ - $ -
Components of comprehensive
income (loss)
Net loss - - - (52,892) - (52,892)
Foreign currency
translation adjustment - - - - 270 270
----------
Total comprehensive
income (loss) (52,622)
----------
Issuance of shares 10,000 1 72 73
------- ------- -------- ---------- --------- ----------
Balance at December 31,
1996 10,000 1 72 (52,892) 270 (52,549)
Components of
comprehensive
income (loss)
Net loss - - - (433,497) - (433,497)
Foreign currency
translation adjustment - - - - 16,210 16,210
----------
Total comprehensive
income (loss) (417,287)
----------
Issuance of shares 481,006 48 198,594 - - 198,642
------- ------- -------- ---------- --------- ----------
Balance at December 31,
1997 491,006 49 198,666 (486,389) 16,480 (271,194)
Components of
comprehensive
income (loss)
Net loss - - - (1,230,642) - (1,230,642)
Foreign currency
translation adjustment - - - - 6,979 6,979
----------
Total comprehensive
income (loss) (1,223,663)
----------
Issuance of shares 3,753,967 375 1,554,609 1,554,984
------- ------- -------- ---------- --------- ----------
Balance at December 31,
1998 4,244,973 424 1,753,275 (1,717,031) 23,459 60,127
Components of
comprehensive
income (loss)
Net loss - - - (1,743,752) - (1,743,752)
Foreign currency
translation adjustment - - - - 5,740 5,740
----------
Total comprehensive
income (loss) (1,738,012)
----------
Issuance of shares 4,546,218 455 1,877,694 - - 1,878,149
------- ------- -------- ---------- --------- ----------
Balance at June 30,
1999 8,791,191 $ 879 $3,630,969 $(3,460,783) $ 29,199 $ 200,264
Components of
comprehensive
income (loss)
Net loss - - - (2,469,882) - (2,469,882)
Foreign currency
translation adjustment - - - - (6,491) (6,491)
----------
Total comprehensive
income (loss) (2,476,373)
----------
Issuance of shares 2,107,749 210 2,373,901 - - 2,374,111
------- ------- ---------- ----------- -------- ----------
Balance at June 30,
2000 10,898,940 $ 1,089 $6,004,870 $(5,930,665) $ 22,708 $ 98,002
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>
<PAGE>
ICEBERG CORPORATION OF AMERICA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
_________
(all amounts in U.S. dollars)
1. Description of business and basis of presentation
Description of business
Iceberg Industries Corporation ("Iceberg Industries"), a
development stage company, was incorporated under the laws
of the province of Newfoundland, Canada on July 22, 1996. As
more fully described in Note 3(a), Iceberg Corporation of
America ("the Corporation"), a dormant public shell company,
acquired Iceberg Industries effective June 25, 1999. The
acquisition by the Corporation resulted in the former
shareholders of Iceberg Industries acquiring control of the
Corporation and, accordingly, this transaction has been
treated as a reverse takeover and is deemed in substance a
capital transaction, rather than a business combination.
Under this basis of accounting in accordance with generally
accepted accounting principles in the United States of
America ("U.S. GAAP"), Iceberg Industries has been
identified as the accounting acquirer. The financial
statements prior to the aforementioned acquisition are those
of Iceberg Industries since, under a reverse takeover
transaction, comparative figures become those of the
accounting acquirer.
The Corporation's principal activity is intended to be the
commercial supply of premium beverage products, including
iceberg water, beer and vodka, which primarily utilize water
obtained from icebergs as the core ingredient. To date,
however, the Corporation has only generated minimal revenue
from bottling spring water and some iceberg water, beer and
vodka. The Corporation has invested heavily in the
development of technology for the harvesting of icebergs and
the production of premium water from icebergs. It has
developed substantial production facilities and has recently
focused its energies on product development, packaging,
market research and market development. Management continues
to commit significant efforts to these development
activities, financial planning and raising the required
capital to support the ongoing research and development.
Basis of presentation
These consolidated financial statements have been prepared
on a going concern basis, which contemplates the realization
of assets and the settlement of liabilities and commitments
in the normal course of business. The Corporation has
incurred significant operating losses since inception and
has an accumulated deficit of $5,930,665 at June 30, 2000.
The Corporation expects to incur further development costs
to continue its product development and marketing
initiatives. The Corporations' working capital deficiency
at June 30, 2000 and limited revenue will not be sufficient
to meet its development requirements. Management recognizes
that the Corporation must generate additional resources.
Management's plans include the sale of additional debt and
equity securities, the pursuit of business alliances for the
production and marketing of product and the ongoing
development of markets for its products.
No assurances can be given that the Corporation will be
successful in raising sufficient additional capital or
entering into business alliances, which will enable it to
achieve profitability or positive cash flow.
<PAGE>
ICEBERG CORPORATION OF AMERICA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
_________
(all amounts in U.S. dollars)
2. Significant accounting policies
Basis of consolidation
These consolidated financial statements include the accounts
of the Corporation and its subsidiaries. All significant
intercompany balances and transactions have been eliminated
upon consolidation. Such consolidated financial statements
include, as appropriate, the financial position and results
of operations of acquired businesses since the date of such
respective acquisitions.
Change in fiscal year
The Corporation changed its financial reporting year end
from December 31 to June 30 effective January 1, 1999 to
more closely align its fiscal reporting to its business
cycle.
Reporting currency and foreign currency translation
The Corporation reports its consolidated financial
statements in U.S. dollars. The functional currency of the
Corporation's major operations to date conducted by Iceberg
Industries is the Canadian dollar. Canadian dollar
denominated amounts have been translated into U.S. dollars
using the exchange rate at each balance sheet date for
assets and liabilities and the weighted average exchange
rate for each period for revenues, expenses and gains and
losses. Translation adjustments are recorded as a separate
component of other comprehensive income. Gains and losses
resulting from foreign currency transactions are included in
the results of operations.
Use of estimates
The preparation of the Corporation's consolidated financial
statements in conformity with U.S. GAAP requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results
could differ from those estimates.
Cash and cash equivalents
Cash and cash equivalents include highly liquid investments
with original maturities of three months or less when
purchased.
<PAGE>
ICEBERG CORPORATION OF AMERICA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
_________
(all amounts in U.S. dollars)
2. Significant accounting policies (Continued)
Inventory
Inventory is valued at the lower of cost or market. Cost is
determined on a first-in, first-out basis. Inventory
balances include the following:
June 30, June 30,
2000 1999
--------- ---------
Raw materials $ 255,154 $ 243,230
Finished goods 326,470 59,671
--------- ---------
$ 581,624 $ 302,901
========= =========
Government grants
The Corporation applies government grants received related
to the purchase of property, plant and equipment to the cost
of those assets. Grants received in advance of the
acquisition of the related property, plant and equipment are
deferred until the asset has been acquired.
Property, plant and equipment
Property, plant and equipment are recorded at historical
cost less government grants received.
Property, plant and equipment are depreciated over their
useful lives using the declining balance method at the
following annual rates:
Plant 4%
Tank farm 10%
Furniture and equipment 20% - 30%
Vehicles 30%
Repairs and maintenance are expensed as incurred.
Expenditures that result in the enhancement of the value of
the facilities involved are treated as additions to
property, plant and equipment. Cost of property, plant and
equipment disposed of and the related accumulated
depreciation are removed from the related accounts, and a
gain or loss, if any, is recognized.
Goodwill
Goodwill is the excess of the purchase price over the fair
value of the identifiable net assets acquired in business
combinations accounted for as purchases. Goodwill is
amortized on a straight-line basis over the periods
benefitted.
<PAGE>
ICEBERG CORPORATION OF AMERICA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
_________
(all amounts in U.S. dollars)
2. Significant accounting policies (Continued)
Impairment of long-lived assets
The Corporation evaluates its long-lived assets, including
goodwill, for impairment whenever events or changes in
circumstances indicate that the carrying amount of such
assets may not be recoverable. Recoverability of assets to
be held and used is measured by a comparison of the carrying
amount of any asset to future net cash flows expected to be
generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the
amount by which the carrying amount of the assets exceeds
the fair value of the assets.
Fair value of financial instruments
The Corporation has evaluated fair values of its financial
instruments based on the current interest rate environment,
related market values and current pricing of financial
instruments with comparable terms. The carrying values of
financial instruments are considered to approximate fair
value, except as otherwise indicated in Note 7.
Revenue recognition
Revenue associated with the sale of goods has been
recognized upon shipment at which time the benefits of
ownership and the risk of loss passes to the customer.
Income taxes
Income taxes are accounted for under the asset and liability
method. Deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases and
operating loss and tax credit carryforwards. Deferred tax
assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities
of a change in tax rates is recognized in income in the
period that includes the enactment date. Valuation
allowances are established when it is more likely than not
that some or all of the deferred tax assets will not be
realized.
Research and development
Research and development costs are expensed as incurred.
<PAGE>
ICEBERG CORPORATION OF AMERICA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
_________
(all amounts in U.S. dollars)
2. Significant accounting policies (Continued)
Recent accounting pronouncements
In June 1998, the Financial Accounting Standards Board
issued SFAS 133: Accounting for Derivative Instruments and
Hedging Activities. SFAS 133 establishes accounting and
reporting standards for derivative financial instruments and
hedging activities related to those instruments, as well as
other hedging activities. Because the Corporation does not
currently hold any derivative instruments and does not
engage in hedging activities, the Corporation expects that
the adoption of SFAS 133 will not have a material impact on
its financial position, results of operations or cash flows.
The Corporation will be required to adopt SFAS 133 in fiscal
2001.
During the year ended June 30, 2000, the Corporation adopted
Staff Accounting Bulletin ("SAB") No. 101, Revenue
Recognition in Financial Statements. The SAB provides
guidance on the recognition, presentation and disclosure of
revenue in financial statements filed with the SEC.
Although SAB No. 101 does not change any of the accounting
profession's existing rules on revenue recognition, it draws
upon existing rules and explains how the SEC staff applies
those rules, by analogy, to other transactions that existing
rules do not specifically address. The adoption of SAB 101
did not have a material effect on the Corporation's
financial position, results of operations or cash flows.
In March 2000, the Financial Accounting Standards Board
("FASB") issued FASB Interpretation No. 44, Accounting for
Certain Transactions Involving Stock Compensation (an
interpretation of the Accounting Principles Board Opinion
No. 25) (the "interpretation"). Among other issues, this
interpretation clarifies (a) the definition of employee for
purposes of applying Opinion 25, (b) the criteria for
determining whether a plan qualifies as a non-compensatory
plan, (c) the accounting consequence of various
modifications to the terms of a previously fixed stock
option or reward, and (d) the accounting for an exchange of
stock compensation awards in a business compensation. This
interpretation became effective July 1, 2000, but certain
conclusions in the Interpretation cover specific events that
occur after either December 15, 1998, or January 12, 2000.
To the extent that this Interpretation covers events
occurring during the period after December 15, 1998, or
January 12, 2000, but before the effective date of July 1,
2000, the effects of applying this interpretation are
recognized on a prospective basis from July 1, 2000. The
Corporation is in the process of evaluating the effects of
this new statement.
<PAGE>
ICEBERG CORPORATION OF AMERICA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
_________
(all amounts in U.S. dollars)
3. Acquisitions
(a) Business Combination of Iceberg Corporation of America
with Iceberg Industries Corporation
Effective June 25, 1999, the Corporation acquired 100%
of Iceberg Industries for total consideration of
$3,631,848 based upon a share for share exchange at a
ratio of 1.7 shares of the Corporation for each share
of Iceberg Industries. At the date of combination, the
Corporation was a dormant public shell company with no
identifiable assets other than cash. As such, the
reverse takeover transaction was considered a capital
transaction rather than a business combination. The
purchase price for the Iceberg Industries' shares was
satisfied by the issuance of 1,251,753 common shares
and 4,506,106 special common shares of the Corporation.
The special common shares have voting rights equal to
the Corporation's common shares and may be exchanged at
any time for a common share of the Corporation on an
equivalent basis. Accordingly, they are the economic
equivalent of the common shares.
As a result of these transactions, the former
shareholders of Iceberg Industries effectively control
the Corporation through their share ownership. Under
these circumstances, U.S. GAAP requires that Iceberg
Industries be identified as the accounting acquirer.
Accordingly, the financial statements prior to the
acquisition are those of Iceberg Industries.
Historical shareholder's equity of the Corporation has
also been retroactively restated for the equivalent
number of shares received in the reverse takeover
transaction.
(b) Business Combination of Iceberg Industries Corporation
and Enterprise Atlantic Limited
Iceberg Industries acquired a 100% interest in
Enterprise Atlantic Limited ("Enterprise") on March 31,
1998 for $1 and has accounted for the acquisition using
the purchase method of accounting. Accordingly, the
results of operations of Enterprise subsequent to March
31, 1998 are included in the accompanying consolidated
financial statements.
<PAGE>
ICEBERG CORPORATION OF AMERICA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
_________
(all amounts in U.S. dollars)
3. Acquisitions (Continued)
(b) Business Combination of Iceberg Industries Corporation
and Enterprise Atlantic Limited (continued)
The following summarizes the net assets acquired:
Property, plant and equipment $238,340
Goodwill 355,646
---------
593,986
Less: Liabilities assumed (593,985)
---------
Net assets acquired for cash $ 1
=========
The goodwill is being amortized on a straight-line
basis over five years.
The following unaudited pro forma information presents
the results of operations of the Corporation as if the
acquisition of Enterprise had occurred on January 1:
1998
-------------
Sales $ 320,285
Net loss $ (1,313,804)
Basic and diluted loss per share $ (0.56)
The unaudited pro forma amounts include certain
adjustments, such as additional amortization expense as
a result of goodwill. They do not purport to be
indicative of the results of operations which actually
would have resulted had the acquisition occurred on the
dates indicated, or which may result in the future.
<PAGE>
ICEBERG CORPORATION OF AMERICA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
_________
(all amounts in U.S. dollars)
4. Property, plant and equipment
Property, plant and equipment is comprised of the following:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
2000 1999
--------------------------------------- -----------------------------
Accumulated Net Book Accumulated Net Book
Cost Depreciation Value Cost Depreciation Value
---- ------------ -------- ---- ------------ --------
Plant $ 451,876 $ (24,563) $ 427,313 $ 437,374 $ (7,224) $ 430,150
Land 46,837 - 46,837 43,984 - 43,984
Tank farm 216,884 (19,915) 196,969 183,246 - 183,246
Furniture
and
equipment 1,219,089 (339,269) 879,820 1,152,031 (139,881) 1,012,150
Vehicles 41,894 (25,055) 16,839 42,318 (18,017) 24,301
------------ ---------- -------- ---------- ---------- ----------
$1,976,580 $(408,802) $1,567,778 $1,858,953 $(165,122) $1,693,831
The tank farm was not depreciated during the six months ended June 30, 1999 as it was
placed in operation at the end of the fiscal period.
5. Short term borrowings
The Corporation has a credit facility arrangement with its
commercial bankers with an operating line of credit of
$102,000, bearing interest at the Bank's prime rate plus 2%.
Prior approval is obtained from the commercial banker when
this credit facility is exceeded. Short term borrowings are
secured by a general assignment of book debts and a charge
over inventory.
6. Due to shareholders
Demand notes payable to shareholders have no set terms of
repayment and bear interest at rates which range between 5%
and 10%. A $300,000 demand loan from one of the
shareholders is secured by an assignment of equipment. The
balance of the notes is unsecured.
<PAGE>
ICEBERG CORPORATION OF AMERICA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
_________
(all amounts in U.S. dollars)
7. Long term debt 2000 1999
------ -------
Notes payable to directors,
$156,000 was used to purchase
shares under the Corporation's
Stock Option Plan, with the
remaining being reclassified
as due to shareholders $ - $ 346,150
Atlantic Canada Opportunities
Agency, non-interest bearing,
unsecured debt, repayable in
monthly installments
commencing December 2000 and
maturing 2005 338,570 307,800
Hongkong Bank of Canada, term loan
bearing interest at prime plus
3%, repayable in blended monthly
installments, maturing 2004,
secured by certain assets of the
Corporation, and limited
guarantees of certain
shareholders 126,080 149,813
Trepassey Community Development
Fund, term loan bearing interest
at 5%, repayable in blended
monthly installments, maturing
2015, secured by certain assets
of the Corporation 83,168 88,021
Bank of Nova Scotia, term loan
bearing interest at prime
plus 2%, repayable in monthly
installments plus interest,
maturing 2001, secured by certain
assets of the Corporation 13,830 27,461
John Deere Credit, capital lease
bearing interest at 10.2%,
repayable in blended monthly
instalments of $2,124, maturing
2004, secured by equipment 55,526 -
Other 1,497 7,182
------------ -----------
618,671 926,427
Current portion 96,831 44,058
------------ -----------
$ 521,840 $ 882,369
============ ===========
<PAGE>
ICEBERG CORPORATION OF AMERICA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
_________
(all amounts in U.S. dollars)
7. Long term debt (Continued)
Principal repayments over the next five years as of June 30,
2000 are as follows:
Fiscal Year Amount
----------- --------
2001 $ 96,800
2002 113,100
2003 117,100
2004 118,500
2005 87,300
---------
Total $ 532,800
As noted above, the Corporation received governmental
assistance in the form of non-interest bearing notes. In
addition, the Corporation's long term debt is not subject to
any significant restrictive debt covenants.
The fair value of long term debt has been estimated to be
$551,800 and $794,800 at June 30, 2000 and June 30, 1999,
respectively.
8. Income taxes
The Corporation has reported its income tax expense in the
statement of operations to include the following components:
Year Six Months Year
Ended Ended Ended
June June December
30, 2000 30,1999 31, 1998
----------- ---------- ----------
Current tax expense $ - $ - $ -
Deferred tax benefit 729,159 649,497 599,421
Valuation allowance (729,159) (649,497) (599,421)
----------- ---------- ----------
$ - $ - $ -
=========== ========== ==========
<PAGE>
ICEBERG CORPORATION OF AMERICA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
_________
(all amounts in U.S. dollars)
8. Income taxes (Continued)
Deferred tax assets are summarized as follows:
June 30, June 30,
2000 1999
----------- ----------
Non-capital losses $1,840,944 $1,195,594
Share issue costs 38,869 53,034
Property, plant and
equipment 128,362 28,931
Eligible capital
expenditures 143,768 145,225
----------- ----------
2,151,943 1,422,784
Valuation allowance (2,151,943) (1,422,784)
----------- ----------
$ - $ -
=========== ==========
The Corporation has recorded a full valuation allowance
against its deferred tax assets because it believes it is
more likely than not that sufficient taxable income will not
be realized during the carry forward period to utilize the
deferred tax assets. Realization of the future tax benefits
related to the deferred tax assets is dependent upon many
factors, including the Corporation's ability to generate
taxable income in Canada within the loss carryforward
periods.
For Canadian federal and Newfoundland provincial tax
purposes, the Corporation's net operating loss carryforwards
are subject to certain limitations on utilization in the
event of changes in ownership.
At June 30, 2000, the Corporation had accumulated income tax
losses of $4,974,200 available in Canada for carryforward to
reduce taxable income of future years. The loss
carryforwards expire as follows:
Fiscal Year Amount
----------- -----------------
2001 $ 143,800
2002 301,300
2003 487,300
2004 164,700
2005 988,800
2006 1,113,000
2007 1,775,300
-----------------
Total $ 4,974,200
<PAGE>
ICEBERG CORPORATION OF AMERICA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
_________
(all amounts in U.S. dollars)
8. Income taxes (Continued)
The principal items accounting for the difference between
income taxes computed at the Canadian statutory rate and the
provision for income taxes are as follows:
June 30, June 30,
2000 1999
----------- ----------
Canadian statutory rate 37.0% 37.0%
Amounts not deductible for
tax purposes (1.4)% (7.9)%
Eligible capital
expenditures (0.0)% (7.3)%
Depreciation (4.3)% (1.4)%
Operating losses not
benefitted (31.3)% (20.4)%
----------- ----------
- -
=========== ==========
9. Commitments and contingencies
As of June 30, 2000, the future minimum lease payments under
non-cancelable operating leases with initial terms of one or
more years are as follows:
Amount
----------------
2001 $ 48,100
2002 23,300
2003 5,500
2004 1,400
2005 1,000
----------------
Total $ 79,300
Rental expense on office space operating leases was $32,000,
$15,900 and $18,550 during the year ended June 30, 2000, for
the six months ended June 30, 1999 and the year ended
December 31, 1998 respectively.
The Corporation is involved in various routine legal
proceedings incidental to the ordinary course of its
business. The Corporation believes the outcome of all
pending legal proceedings in the aggregate will not have a
material adverse effect on its financial condition, results
of operations, or cash flows.
<PAGE>
ICEBERG CORPORATION OF AMERICA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
_________
(all amounts in U.S. dollars)
10. Loss per share
Basic loss per share is computed by dividing net loss by the
weighted-average number of shares outstanding during each
period. The weighted-average number of shares prior to the
June 25, 1999 reverse takeover transaction disclosed in Note
3(a) has been retroactively restated for the equivalent
number of shares of common stock of the Corporation. The
special common shares are included in the calculation as
common shares as they are the economic equivalent of common
shares. Diluted loss per share is equivalent to basic loss
per share as the inclusion of outstanding options and
warrants would be anti-dilutive.
11. Stock options
Employee stock options
On April 26, 2000, the Corporation introduced its Stock
Option Plan (the "Plan"), underwhich options to purchase
common shares of the Corporation may be granted to key
employees, including officers and directors. Options
granted are exercisable within the times determined by the
Board of Directors as specified in each option agreement.
The Corporation is authorized to issue 930,000 shares under
the Plan. A summary of the activity under the Plan is set
forth below:
Weighed
Average
Number Exercise
of Shares Price
---------- ----------
Balance June 30, 1999
Granted 850,000 $ 0.625
Exercised 250,000 $ 0.625
---------- ----------
Balance, June 30, 2000 600,000 $ 0.625
As of June 30, 2000 there were 300,000 options exercisable
at the exercise price of $0.625. The 600,000 options have a
remaining contractual life of 9.75 years.
Share purchase warrants
In June 2000, the Corporation completed a private placement
of 1,000,000 restricted shares of the Corporation's common
stock in exchange for $500,000. As part of the offering,
the investors received 1,000,000 share purchase warrants
convertible into an equivalent number of shares of the
Corporation's common stock from the date of the private
placement agreement to April 30, 2001, an amount of money
per share equal to 125% of the closing bid for the
Corporation's stock on the last trading day preceding the
date of execution of the agreement; and, from May 1, 2001 to
April 30, 2002, an amount of money per share equal to 140%
of the closing bid for the Corporation's stock on the last
trading day preceding the date of execution of the
agreement.
12. Subsequent events
In August, 2000, the Corporation entered into a joint
venture agreement to harvest glacial water in Greenland. As
part of the agreement, the Corporation agreed to fund the
construction of docking facilities in an amount not to
exceed $2 million.
The Corporation has raised $750,000 since year end as part
of a $5,000,000 Subordinated Convertible Debenture private
placement. The Corporation is continuing its efforts to
raise the remainder of the $5,000,000. These debentures
will mature on October 15, 2005, carry an interest rate of
U.S. bank prime plus 1.5% and are convertible at $0.50 for
one common share and one share warrant which is exercisable
at $0.625.
<PAGE>
Unaudited Consolidated Financial Statements
as of June 30, 1999
<PAGE>
</TABLE>
<TABLE>
ICEBERG CORPORATION OF AMERICA AND SUBSIDIARIES
(a Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED
_________
(all amounts in U.S. dollars)
<S> <C>
Year
Ended
June
30, 1999
-----------
Sales $ 399,399
Cost of sales 465,212
-----------
Gross (loss) profit (65,813)
-----------
Operating expenses
General and administrative 1,345,293
Research and development 426,377
Sales and marketing 365,038
Depreciation and amortization 202,822
-----------
2,339,530
-----------
Operating loss (2,405,343)
-----------
Other expenses
Interest and bank charges 36,797
Interest on long term debt 32,826
-----------
69,623
-----------
Loss before taxes (2,474,966)
Income taxes -
-----------
Net loss $(2,474,966)
===========
Loss per share - basic
and diluted $ (0.46)
===========
Weighted average common shares -
basic and diluted 5,378,414
===========
</TABLE>
<PAGE>
<TABLE>
ICEBERG CORPORATION OF AMERICA AND SUBSIDIARIES
(a Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
_________
(all amounts in U.S. dollars)
<S> <C>
Year
Ended
June
30, 1999
------------
Operating activities
Net loss $ (2,474,966)
Items not requiring cash:
Depreciation and amortization 202,822
Gain on sale of property, plant
and equipment 4,127
------------
(2,268,017)
Changes in current assets and liabilities
Increase in accounts receivable (51,774)
Increase in inventory (55,599)
Increase in prepaid expenses (37,749)
Increase in accounts payable 729,277
Increase in accrued liabilities 17,895
Decrease in deferred government grants (5,341)
------------
Cash used by operating activities (1,671,308)
------------
Investing activities
Purchase of property, plant
and equipment (1,077,350)
Proceeds from sale of property,
plant and equipment 5,866
------------
(1,071,484)
------------
Financing activities
Advances from shareholders 425,974
Repayment of advances from shareholders (24,435)
Proceeds from issuance of long term debt 532,740
Repayment of long term debt (55,482)
Net proceeds from issuance of shares 2,137,789
------------
Cash provided by financing activities 3,016,586
------------
Effect of exchange rate changes on cash (1,789)
------------
Increase (decrease) in cash and cash
equivalents during the period 272,005
Cash and cash equivalents,
beginning of period 1,982
------------
Cash and cash equivalents,
end of period $ 273,987
============
Supplemental disclosures of cash flow information:
Cash paid for interest $ 56,531
============
Cash paid for income taxes $ -
============
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying financial statements presented for
comparative purposes have been prepared by the Corporation
in accordance with the rules and regulations of the
Securities and Exchange Commission. Accounting policies
utilized in the preparation of financial information herein
presented are the same as set forth in the Corporation'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 Corporation, these financial statements contain all
adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of the
financial statements.
<PAGE>
Unaudited Consolidated Financial Statements
as of June 30, 1998
<PAGE>
<TABLE>
ICEBERG CORPORATION OF AMERICA AND SUBSIDIARIES
(a Development Stage Company)
CONSOLIDATED BALANCE SHEETS
(unaudited)
_________
(all amounts in U.S. dollars)
<S> <C>
June
30, 1998
--------
ASSETS
Current assets
Cash and cash equivalents $ 1,982
Trade accounts receivable, less allowance
for doubtful accounts of $3,300 142,015
Inventory 244,422
Prepaid expenses 14,787
---------
Total current assets 403,206
Property, plant and equipment, net 739,785
Goodwill 336,526
---------
Total assets $ 1,479,517
=========
LIABILITIES
Current liabilities
Accounts payable $ 519,522
Accrued liabilities 11,833
Deferred government grant 4,783
Due to shareholders 25,147
Current portion of long term debt 53,525
---------
Total current liabilities 614,810
Long term debt 379,685
---------
Total liabilities 994,495
---------
SHAREHOLDERS' EQUITY
Common shares, $.0001 par value; 25,000,000 shares
authorized, 1,762,785 shares issued and outstanding 176
Special common shares, $.0001 par value; 5,000,000
shares authorized, 1,853,708 shares issued and outstanding 185
Additional paid-in capital 1,493,698
Deficit accumulated during the development stage (1,010,714)
Accumulated other comprehensive income 1,677
---------
Total shareholders' equity 485,022
---------
Total liabilities and shareholders' equity $ 1,479,517
=========
</TABLE>
<PAGE>
<TABLE>
ICEBERG CORPORATION OF AMERICA AND SUBSIDIARIES
(a Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
_________
(all amounts in U.S. dollars)
<S> <C>
Six Months
Ended
June 30, 1998
-------------
Sales $ 113,640
Cost of sales 45,013
-----------
Gross profit 68,627
-----------
Operating expenses
General and administrative 267,543
Research and development 169,335
Sales and marketing 74,354
Depreciation and amortization 47,855
-----------
559,087
-----------
Operating loss (490,460)
-----------
Other expenses
Interest and bank charges 14,904
Interest on long term debt 18,962
-----------
33,866
-----------
Loss before income taxes (524,326)
Income taxes -
-----------
Net loss $ (524,326)
===========
Loss per share - basic and diluted $ (0.73)
===========
Weighted average common shares -
basic and diluted 715,397
===========
</TABLE>
<PAGE>
<TABLE>
ICEBERG CORPORATION OF AMERICA AND SUBSIDIARIES
(a Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
_________
(all amounts in U.S. dollars)
<S> <C>
Six Months
Ended
June 30, 1998
-------------
Operating activities
Net loss $ (524,326)
Items not requiring cash:
Depreciation and amortization 47,855
Gain on sale of property,
plant and equipment (26,346)
-----------
(502,817)
Changes in current assets and liabilities
Increase in accounts receivable (82,872)
Decrease in inventory 148,282
Decrease in prepaid expenses 14,245
Decrease in accounts payable (134,666)
Decrease in accrued liabilities (5,568)
Increase in deferred government grants 4,647
-----------
Cash used by operating activities (558,749)
-----------
Investing activities
Purchase of property, plant
and equipment (322,156)
Proceeds from sale of property,
plant and equipment 39,760
Acquisition of subsidiary (1)
-----------
(282,397)
-----------
Financing activities
Proceeds from (payments of)
short term borrowings (152,985)
Advances from third parties -
Repayment of advances from
third parties (506,716)
Advances from shareholders -
Repayment of advances from shareholders 24,435
Proceeds from issuance of
long term debt 287,357
Repayment of long term debt (43,188)
Net proceeds from issuance of shares 1,233,637
-----------
Cash provided by financing
activities 842,540
-----------
Effect of exchange rate
changes on cash 513
-----------
Increase (decrease) in cash and cash
equivalents during the period 1,907
Cash and cash equivalents,
beginning of period 75
-----------
Cash and cash equivalents,
end of period $ 1,982
===========
Supplemental disclosures of
cash flow information:
Cash paid for interest $ 33,866
===========
Cash paid for income taxes $ -
===========
</TABLE>
<PAGE>
NOTES TO THE INTERIM FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying interim financial statements presented for
comparative purposes 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:
June
30, 1998
----------
Raw materials $ 135,905
Finished goods 111,923
---------
247,828
Less reserve (3,406)
---------
$ 244,422
=========
3. Property, Plant and Equipment
Property, plant and equipment consist of the following:
June
30, 1998
----------
Plant $ 140,298
Furniture and equipment 599,694
Vehicles 32,246
----------
772,238
Less accumulated depreciation (32,453)
----------
$ 739,785
==========
<PAGE>
PART III
Exhibit Index
The following documents were filed as part of the Company's
Form 10 filing, as amended, and are incorporated herein by
reference.
3.1 Articles of Incorporation, filed July 3, 1989
3.2 Amendment to Articles of Incorporation, filed
November 9, 1998
3.3 Amendment to Articles of Incorporation, filed
June 24, 1999
3.4 Bylaws
10.1 Land Lease for Company Facility at Trepassey,
commencing July 16, 1992 and extending for 99 years
10.2 Business Development Agreement between Company and
ATLANTIC CANADA OPPORTUNITY AGENCY, dated
April 9, 1998
10.3 Grant for $600,000 from Human Resources Development
of Canada, dated June 23, 1998
10.4 US Food and Drug Administration Permit to test
market product in United States, issued
November 6, 1998
10.5 Office Lease for facilities at 16 Forest Road, St.
Johns, Newfoundland, commencing December 1, 1998
10.6 Purchase Offer for Securities of Iceberg Industries,
initiated May 3, 1999
10.7 Notice of Change in Purchase Offer for Securities of
Iceberg Industries, dated May 28, 1999
10.8 Hong Kong Bank Loan Agreement for $249,900, dated
May 8, 1998, with guarantees
10.9 Permit to Harvest Icebergs, granted by government of
Newfoundland and Labrador, effective June 17, 1999
10.10 Distribution Agreement with Transtrade
International, effective August 16, 1999
10.11 Private Placement Contract under Rule 144A for
$1,500,000, executed July 9, 1999
27 Financial Data Schedule
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: October 13, 2000 By: /s/ Paul Benson
Paul Benson,
President & Director
Date: October 13, 2000 By: /s/ Ron Stamp
Ron Stamp,
Vice President & Director
Date: October 13, 2000 By: /s/ Lewis Stoyles
Lewis Stoyles,
Vice President & Director
