U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES AND EXCHANGE ACT OF 1934 for the Quarterly
period ended September 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 for the transition
period from _______ to _______.
Commission File No. 000-28051
ICEBERG CORPORATION OF AMERICA
--------------------------------------------------
(Name of Small Business Issuer in its Charter)
Nevada, U.S.A. 95-4763671
(State or other Jurisdiction (IRS Employer
of Incorporation or Organization) Identification No.)
P.O. Box 8251, St. John's, Newfoundland, Canada A1B 3N4
(Address of principal executive offices)
(709) 739-5731
(Issuer's telephone number)
Check whether the registrant (1) filed all reports required to be
filed by Section 13 or 15 (d) of the Exchange Act during the past
12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES [X] NO [ ]
As of September 30, 2000: 6,574,316 shares of Common Stock and
4,324,624 shares of Special Common Stock were issued and
outstanding.
<PAGE>
TABLE OF CONTENTS AND INFORMATION REQUIRED IN REPORT
Part I. Financial Information
-------
Item 1. Financial Statements (unaudited)
Item 2. Managements Discussion and Analysis or Plan of
Operation
Part II. Other Information
--------
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of Security holders
Item 5. Other Information
Item 6. Exhibits and reports on form 8-K
SIGNATURES
<PAGE>
PART I
ITEM 1. FINANCIAL STATEMENTS
<PAGE>
<TABLE>
ICEBERG CORPORATION OF AMERICA AND SUBSIDIARIES
(a Development Stage Company)
CONSOLIDATED BALANCE SHEETS
(unaudited)
_________
(all amounts in U.S. dollars)
<S> <C> <C>
September September
30, 2000 30, 1999
ASSETS
Current assets
Cash and cash equivalents $ 1,001 $ 100,808
Trade accounts receivable, less allowance
for doubtful accounts of $8,400, and $5,734,
respectively 311,977 233,298
Inventory 638,955 662,482
Prepaid expenses 36,605 43,583
--------- ---------
Total current assets 988,538 1,040,171
Property, plant and equipment, net 1,505,009 1,762,741
Deferred financing costs 30,000 -
Goodwill 180,661 248,033
--------- ---------
Total assets $ 2,704,208 $3,050,845
========= =========
LIABILITIES
Current liabilities
Short term borrowings $ 104,217 $ -
Accounts payable 926,934 953,306
Accrued liabilities 47,896 151,860
Due to shareholders 595,716 452,002
Current portion of long term debt 61,446 45,037
--------- ---------
Total current liabilities 1,736,209 1,602,205
Long term debt 1,282,678 854,060
--------- ---------
Total liabilities 3,018,887 2,456,265
--------- ---------
SHAREHOLDERS' (DEFICIT) EQUITY
Common shares, $.0001 par value; 25,000,000 shares
authorized, 6,574,316 and 4,685,085 shares issued
and outstanding in 2000 and 1999 respectively 657 468
Special common shares, $.0001 par value; 5,000,000
shares authorized, 4,324,624 and 4,506,106 shares
issued and outstanding in 2000 and 1999 respectively 432 451
Additional paid-in capital 5,985,026 4,630,929
Deficit accumulated during the development stage (6,317,115) (4,074,223)
Accumulated other comprehensive income 16,321 36,955
--------- ---------
Total shareholders' (deficit) equity (314,679) 594,580
--------- ---------
Total liabilities and shareholders' (deficit) equity $ 2,704,208 $ 3,050,845
========= =========
</TABLE>
<PAGE>
ICEBERG CORPORATION OF AMERICA AND SUBSIDIARIES
(a Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
_________
(all amounts in U.S. dollars)
<TABLE>
<S> <C> <C> <C>
From
July 22, 1996 Three Months Three Months
(Date of Ended Ended
Inception) to September September
September 30, 2000 30, 2000 30, 1999
Sales $ 1,495,968 $ 301,388 $ 194,558
Cost of sales 1,326,468 207,517 119,219
----------- ----------- -----------
Gross profit 169,500 93,871 75,339
----------- ----------- -----------
Operating expenses
General and administrative 3,135,441 177,394 353,763
Research and development 919,927 20,768 48,425
Sales and marketing 1,533,148 162,157 186,061
Depreciation and amortization 654,300 65,545 83,032
----------- ----------- -----------
6,242,816 425,864 671,281
----------- ----------- -----------
Operating loss (6,073,316) (331,993) (595,942)
----------- ----------- -----------
Other expenses
Interest and bank charges 96,757 5,276 4,583
Interest on long term debt 147,042 49,181 12,915
----------- ----------- -----------
243,799 54,457 17,498
----------- ----------- -----------
Loss before taxes (6,317,115) (386,450) (613,440)
Income taxes - - -
----------- ----------- -----------
Net loss $(6,317,115) $ (386,450) $ (613,440)
=========== =========== ===========
Loss per share - basic
and diluted $ (1.47) $ (0.04) $ (0.07)
=========== =========== ===========
Weighted average common shares -
basic and diluted 4,295,156 10,898,940 8,921,625
=========== =========== ===========
</TABLE>
<PAGE>
ICEBERG CORPORATION OF AMERICA AND SUBSIDIARIES
(a Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
_________
(all amounts in U.S. dollars)
<TABLE>
<S> <C> <C> <C>
From
July 22, 1996 Three Months Three Months
(Date of Ended Ended
Inception) to September September
September 30, 2000 30, 2000 30, 1999
Operating activities
Net loss $(6,317,115) $ (386,450) $ (613,440)
Items not requiring cash:
Depreciation and amortization 654,300 65,545 83,032
Gain on sale of property,
plant and equipment (29,195) - -
----------- ----------- -----------
(5,692,010) (320,905) (530,408)
Changes in current assets
and liabilities
Increase in accounts receivable (232,559) (147,541) (21,474)
Increase in inventory (458,506) (68,777) (356,183)
Decrease (increase) in
prepaid expenses (8,009) 10,282 9,423
Increase (decrease) in
accounts payable 516,369 (105,534) (66,591)
Increase (decrease) in
accrued liabilities 48,625 (13,508) 121,649
Increase (decrease) in
deferred government grants (693) - -
----------- ----------- -----------
Cash used by operating activities (5,826,783) (645,983) (843,584)
----------- ----------- -----------
Investing activities
Purchase of property, plant
and equipment (1,769,754) (20,711) (139,588)
Proceeds from sale of property,
plant and equipment 78,007 - -
Acquisition of subsidiary (1) - -
----------- ----------- -----------
(1,691,748) (20,711) (139,588)
----------- ----------- -----------
Financing activities
Proceeds from (repayments of)
short term borrowings 121,524 (32,110) 152,350
Advances from third parties 259,870 - -
Repayment of advances from
third parties (518,219) (2,189) -
Advances from shareholders, net 596,090 (14,918) (314,464)
Proceeds from issuance of
long term debt 1,618,694 750,000 -
Repayment of long term debt (511,182) (13,659) (23,614)
Deferred financing charges (30,000) (30,000) -
Net proceeds from issuance
of shares 5,986,115 (19,844) 1,000,000
----------- ----------- -----------
Cash provided by financing
activities 7,522,892 637,280 814,272
----------- ----------- -----------
Effect of exchange rate
changes on cash (3,360) (2) (4,279)
----------- ----------- -----------
Increase (decrease) in cash and cash
equivalents during the period 1,001 (29,416) (173,179)
Cash and cash equivalents,
beginning of period - 30,417 273,987
----------- ----------- -----------
Cash and cash equivalents,
end of period $ 1,001 $ 1,001 $ 100,808
=========== =========== ===========
Supplemental disclosures of
cash flow information:
Cash paid for interest $ 243,799 $ 54,457 $ 17,498
=========== =========== ===========
Cash paid for income taxes $ - $ - $ -
=========== =========== ===========
</TABLE>
<PAGE>
<PAGE>
NOTES TO THE INTERIM FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying interim financial statements have been
prepared by the Company in accordance with the rules and
regulations of the Securities and Exchange Commission for
interim reporting. Accounting policies utilized in the
preparation of financial information herein presented are
the same as set forth in the Company's annual financial
statements. Certain disclosures and information normally
included in financial statements have been condensed or
omitted. In the opinion of the management of the Company,
these financial statements contain all adjustments
(consisting only of normal recurring adjustments) necessary
for a fair presentation of the interim financial statements.
Interim results of operations are not necessarily indicative
of the results of operations for the full year.
2. Inventories
Inventories consist of the following:
September September
30, 2000 30, 1999
Raw materials $ 314,508 $ 319,322
Work in progress - -
Finished goods 344,071 355,808
--------- ---------
658,579 675,130
Less reserve (19,624) (12,648)
--------- ---------
$ 638,955 $ 662,482
========= =========
3. Property, Plant and Equipment
Property, plant and equipment consist of the following:
September September
30, 2000 30, 1999
Land $ 46,064 $ 47,137
Plant 443,775 450,735
Tank farm 212,996 218,273
Furniture and equipment 1,217,569 1,251,366
Vehicles 41,143 25,966
----------- -----------
1,961,547 1,993,477
Less accumulated depreciation (456,538) (230,836)
----------- -----------
$ 1,505,009 $ 1,762,641
4. Long term debt
During the period the Corporation raised $750,000 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. Provided the Corporation is not in default under
the terms of the Debenture, the principal sum may be
prepaid, without penalty, in whole or in part at any time
after July 15, 2003.
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 other regions
served.
During the three-month period the Company continued its
efforts to penetrate various markets in the United States of
America and elsewhere in the world. This process has taken much
longer than originally anticipated and with limited cash flow
from sales the company will have difficulty meeting its original
sales and earnings projections. However, our sales
representatives have made numerous presentations to various
distribution channels in the beverage industry markets and
management feels optimistic, subject to further negotiations on
price and logistics, that the Company's sales will increase over
the balance of our fiscal year.
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 September 30, 2000. Therefore, there is
no material currency risk or exposure to the Company in the
period to September 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 $16,321 to September 30, 2000. During 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.
In order to finance the investment in accounts receivable,
increase in inventory, and to support ongoing marketing and
research and development, the Company raised $750,00 through the
issuance of convertible debentures during the three month period
ended September 30,2000. Subsequent to September 30, 2000, the
company has raised an additional $100,000 through the issuance of
convertible debentures. The Company is continuing its strategy of
funding development through additional equity financing. These
funds will be used to manage working capital requirements and to
fund ongoing development and marketing costs.
The Company reports sales of $301,388 and $194,558 for the
three months ended September 30, 2000, and the three months ended
September 30, 1999, respectively. These sales represent revenue
from bottling spring water and iceberg water and minimal revenue
from beer sales. Sales have increased by 55% 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
three month period ended September 30, 2000 to $177,394, as
compared with $353,763 for the three-month period ended September
30, 1999. The company was more active during the recent
three-month period but the high legal and auditing costs incurred
for the 1999 reverse takeover were not repeated. As a result
overall costs decreased by 50%.
Research and development expenses decreased in the
three-month period ended September 30, 2000 to $20,768 compared
to $48,425 for the three-month period ended September 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.
Sales and Marketing expenses decreased in the three month
period ended September 30, 2000 to $162,157 as compared with
$186,061 for the three month period ended September 30, 1999.
This decrease is a result less work being done on label design
and related development expenses.
Depreciation and Amortization decreased in the three-month
period ended September 30, 2000 to $65,545 compared with $83,032
for the three-month period ended September 30, 1999. This
decrease results from the reduced fixed asset additions.
Interest and bank charges increased in the three-month
period ended September 30, 2000 to $54,457 compared with $17,498
for the three-month period ended September 30, 1999. The net
increase of $36,959 comprised of an increase in short-term
interest expense of $693 and an increase in long-term interest
expense of $36,260. The increase in long-term interest expense
resulted from interest charges on the issuance of convertible
debentures in the amount of $750,000.
Net loss for the three months ending September 30, 2000 was
$386,450($0.04 per share) compared to $613,440 ($0.07 per share)
for the three months ending September 30, 1999. The Company has
incurred significant operating losses since its inception and has
an accumulated deficit of $6,317,115 at September 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 September 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.
In addition to the anticipation of increasing sales in the
second quarter, management's plans for solvency in the coming
year is the sale of additional equity in the Company. Additional
common stock and or convertible debt will be marketed in the 2nd
quarter of fiscal year 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,
shifting marketing costs to the distributors, and thereby
increasing its delivery of product through existing channels
without commensurate increases in overhead. The Company believes
it can be operationally profitable by the third quarter of fiscal
year 2001, and should only experience further losses if it opts
to increase advertising in an attempt to rapidly increase market
penetration. Notwithstanding the foregoing, there is substantial
doubt regarding the Company's ability to continue as a going
concern, and as such, the Company is substantially dependent upon
its ability to generate sufficient funds to cover its operating
costs.
The Company has issued convertible debentures for proceeds
of $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 third
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 $413,913) 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
($595,716 due to directors and officers).
RISK FACTORS
Market Risk.
There has already been significant and substantial interest
in the Iceberg product line, however, as with any market and/or
product, there are uncertainties, including:
New Product Risk.
There is a risk that consumer acceptance or ongoing interest
may not be as widespread as expected.
Price Resistance Risk.
These products are premium products that demand a high
price. There is a danger of price resistance in the consumer
marketplace.
Harvesting Risk.
The data available to the Company indicates that the
availability of ice from icebergs will not be a problem.
However, the data does not indicate the proximity of icebergs to
the shore, which is a cost-sensitive condition for the Company.
To safely and cost-effectively harvest icebergs, they must be
close to shore, in areas offering some protection from the open
sea. The reported length of the season can also be misleading.
Icebergs may be present but they must also be in a suitable
location and in the process of breaking up in order to be
harvested. The data currently available does not provide such
detailed information.
Sub-Contractor Performance.
The Company relies upon sub-contracted vessels to assist in
harvesting its ice supply. There is a risk of default or non-
performance by these sub-contractors.
Processing Risk.
The extent of raw material handling before final production
poses an element of risk. The Company's Quality
Assurance/Quality Control (QA/QC) manager has developed and
monitors procedures and ensures adherence to raw material and
finished product specifications. Regular lab analysis is
conducted at all stages of the process. The Company is moving to
implement a Hazard Analysis of Critical Control Points ("HACCP")
system and is pursuing ISO 9000 certification. As a member of
the International Bottled Water Association, the Company also has
access to technical resources and is subject to an annual
independent review of the Company's manufacturing processes.
Financial Risk.
If the Company needs to raise additional funds in order to
fund expansion, develop new or enhanced products, respond to
competitive pressures or acquire complementary products,
businesses or technologies, additional funds raised through the
issuance of equity or convertible debt securities may dilute the
percentage ownership of the present stockholders of the Company,
and, in addition, such securities may have rights, preferences or
privileges senior to those of the Company's Common Stock. The
Company does not currently have any contractual restrictions on
its ability to incur debt and, accordingly, the Company could
incur significant amounts of indebtedness to finance its
operations. Any such indebtedness could contain covenants which
could restrict the Company's operations. There can be no
assurance that additional financing will be available on terms
favorable to the Company, or at all. If adequate funds are not
available or are not available on acceptable terms, the Company
may not be able to continue in business, or to a lesser extent,
not be able to take advantage of acquisition opportunities,
develop or enhance its products or respond to competitive
pressures.
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
NONE
ITEM 2. CHANGES IN SECURITIES
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.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NONE
ITEM 5. OTHER INFORMATION
NONE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
NONE
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of
1934, the Registrant has caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly
authorized.
ICEBERG CORPORATION OF AMERICA
Date: November 19, 1999 By: /s/ Paul Benson
Paul Benson,
President & Director
Date: November 19, 1999 By: /s/ Lewis Stoyles
Lewis Stoyles,
Vice President & Director
Date: November 19, 1999 By: /s/ John Kleinert
John Kleinert,
Director