10-K 1 icbg10k.txt U.S. SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 --------------------- FORM 10-KSB --------------------- Annual Report Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934 for the Fiscal Year ended June 30, 2001. --------------------- 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.) 16 Forest Road,Suite 300, St. John's, Newfoundland, Canada A1C 2B9 (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, 2001 were $817,070. As of June 30, 2001, the aggregate market value of the voting and non-voting common equity held by non-affiliates was $685,528. As of June 30, 2001, the Company had approximately 8,169,425 shares of Common Stock and 2,895,055 shares of Special Common Stock issued and outstanding. ICEBERG CORPORATION OF AMERICA FORM 10-KSB for the fiscal year ended June 30, 2001 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 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 controlled 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 take over 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 30% of its revenue from bottling spring water and 57% from iceberg water with the balance of 13% from sales of vodka and beer. Iceberg Industries has invested $924,738 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 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 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 wholesale market and, with a 1999 annual growth rate of 14%, is the fastest growing segment of the beverage industry. 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 by volume accounting for only 45% of total industry sales. Industry analysts predict that bottled water sales in the United States will reach $6 billion by the year 2001.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 Litre 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 Litre 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 the brand name "BOREALIS". 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 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 and Provigo, two large Canadian supermarket chains, 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: * iceberg water * iceberg vodka * iceberg beer * 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 savoured. 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. 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 litre and 500ml (12 Pak Box)"President's Choice" Iceberg water products which are being distributed through Loblaws' 450 store supermarket chain and their Provigo supermarket stores in Quebec. 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. 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 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. 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 and debenture investments in U.S. dollars, there has been minimal activity denominated in foreign currency through June 30, 2001. Therefore, there is no material currency risk or exposure to the Company in the period to June 30, 2001. 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 $8,984 to June 30, 2001. 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 support ongoing operating costs, the Company raised $1,526,000 through the issuance of convertible debentures during the year ended June 30 2001. 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 redeveloped products to the marketplace. The Company reports sales of $817,070 and $737,300 for the year ended June 30 2001, and the year ended June 30 2000, respectively. These sales represent minimal revenue from bottling spring water and some iceberg water with initial shipments of beer and vodka. Management continues to focus its energies on product development, market research and market development, which includes the formation of alliances in various geographical areas. Currently the Company is in the final stages of the redevelopment of the Vodka and Water products and should be ready for test marketing by the second quarter. General and administration expenses have decreased in the year ended June 30 2001 to $821,560 as compared with $1,205,936 for the year ended June 30 2000. This decrease is a result of reduced audit fees of $59,579, reduced travel expenses of $34,700 and reduced wages to management and administrative employees and consultants in the amount of $324,300. With some minor increases in other expenses overall costs decreased by 33%. Research and development expenses decreased in the year ended June 30 2001 to $25,579 compared to $200,895 for the year ended June 30 2000. During the first six months of the new production operation, development costs were still being incurred to fine-tune our production and harvesting operations. The most recent year had less need for these types of expenditures and as a result, these expenses were reduced by 79%. Sales and marketing expenses decreased in the year ended June 30 2001 to $660,201 as compared with $779,433 for the year ended June 30 2000. This decrease is a result of reduced advertising expenditures and reduction in our sales presence in the United States while our products were being redesigned. Overall, expenditures were reduced by 15%. Depreciation and Amortization increased in the year ended June 30 2001 to $442,009 compared with $338,413 for the year ended June 30 2000. Interest and bank charges increased in the year ended June 30 2001 to $1,159,443 compared with $71,642 for the year ended June 30 2000. The net increase of $1,087,971, comprised of an increase in short term interest expense of $12,173 and an increase in long-term interest expense of $1,075,618. The increase in long-term interest expense resulted from interest charges on the issuance of convertible debentures in the accumulated amount of $1,526,000. Included in the $1,075,618, an amount of $920,500 has been recorded as interest expense as a requirement of U.S. GAAP rules, resulting from a beneficial conversion feature of the new series of 6% convertible debentures and the charge required as a result of the reduction in the conversion price of some of the 10% convertible debentures. Net loss for the year ending June 30 2001 was $2,911,191 ($.27 per share) compared to $2,469,882($0.26 per share) for the year ending June 30 2000. As mentioned previously, the Company had to record additional non-cash interest charges of $920,500 to comply with U.S. GAAP accounting rules. This amount has been reflected in the current financial statements with the result that the loss has been increased by $920,500 and the loss per share increased from $0.19 per share to $0.27 per share. The Company has incurred significant operating losses since its inception and has an accumulated deficit of $8,841,856 at June 30 2001. The Company expects to incur further development costs to continue its product development and redevelopment, marketing efforts, and the Company's working capital deficiency at June 30, 2001,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. 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 and 2nd quarters of fiscal 2002 to sustain the Company's projected ongoing losses. 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 equity financing and operating revenues to cover its operating costs. The Company is negotiating the issuance of convertible debentures for proceeds of US$50,000 in the first quarter of fiscal 2002. Additional funds will be raised during the 2nd quarter of fiscal 2002. These funds will be used to fund ongoing costs. Capital commitments for the year ended June 30, 2002, are estimated at $50,000 and these additional funds will be sufficient to meet the Company's capital obligations until the various sales initiatives 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 totalling $388,000) 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 deferral with officers and directors ($711,788 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. 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 $80,105, with monthly payments of $664. This property is, in the opinion of management, adequately covered by Insurance on the premises and its contents, under a policy issued by ING Halifax Insurance. 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 Standard Life Assurance Company, with an annual rental rate of $15,000 and floor space of approximately 1450 square feet. This property is also covered by insurance through Ing Halifax Insurance. 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 2,119,226 19.15% 16 Forest Road (affiliate) Suite 300 St. John's, Newfoundland Canada Common Ron Stamp 630,860 5.70% 16 Forest Road (affiliate) Suite 300 St. John's, Newfoundland Canada Common Maurice Murphy 669,140 6.05% 16 Forest Road (affiliate) Suite 300 St. John's, Newfoundland Canada Common Paul Benson 615,958 5.57% 16 Forest Road (affiliate) Suite 300 St. John's, Newfoundland Canada Special James D. Smyth, Trustee 2,895,055 26.17% 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 2,119,226 19.15% 16 Forest Road (affiliate) Suite 300 St. John's, Newfoundland Canada Common Ron Stamp 630,860 5.70% 16 Forest Road (affiliate) Suite 300 St. John's, Newfoundland Canada Common Maurice Murphy 669,140 6.05% 16 Forest Road (affiliate) Suite 300 St. John's, Newfoundland Canada Common Paul Benson 615,958 5.57% 16 Forest Road (affiliate) Suite 300 St. John's, Newfoundland Canada Common Lewis Stoyles 174,018 1.57% 16 Forest Road (affiliate) Suite 300 St. John's, Newfoundland Canada Common All Officers and 4,209,202 38.04% 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 46 President, CEO & Director Ron Stamp 47 Vice President-Marketing & Director Maurice Murphy 50 Vice President-Operations Lewis Stoyles 52 Vice President-Finance & Director John Kleinert 42 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, 46, 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, 47, 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, 50, 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, 52, 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, 42, 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 offences); (3) was subject to any order, judgement 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 judgement 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, 2000 and 2001, the following payments were made: Remuneration (US$) ---------------------------- Name Position 2001 2000 1999 1998 ---------------------------- Paul Benson President & CEO 61,118 51,106 63,102 69,994 Ron Stamp Vice President 8,540 47,080 60,426 55,146 -Marketing Maurice Murphy Vice President 36,175 29,517 45,037 25,263 -Operations Lewis Stoyles Vice President 43,770 45,424 51,340 9,628 -Finance ------ ----- ------ ----- All Executive Officers as a group 149,603 173,127 219,905 159,671 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, are unsecured, bear interest at 5% and 10% and are repayable upon demand. As of June 30, 2001, notes payable to directors totalled $711,788. 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 100,000,000 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, 2001, there were 8,169,425 Common Shares issued and outstanding and 2,895,055 Special Common Shares issued and outstanding, for a total of 11,064,480 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 pre-emptive, 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, 2001, the Company had 375 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 3rd Quarter 3.070 1.812 4th Quarter 2.000 0.625 2001 HIGH LOW ----------- ------ ------ 1st Quarter 0.781 0.240 2nd Quarter 0.390 0.080 (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 $761,000 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. Subsequently, $561,000 of the total debenture was modified to reduce the conversion price to $0.25 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. Subsequently, in May 2001 $561,000 of these convertible debentures were registered under Form SB-2. In November 2000, the Company completed a private placement under Rule 506 of Regulation D whereby it issued convertible debentures for proceeds of $100,000. The 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. In January 2001, the Company completed a private placement under Rule 506 of Regulation D whereby it issued convertible debentures for proceeds of $665,000.The total debenture was prepared based on raising $5,000,000 under various terms and conditions. However, due to changing market conditions, the original debenture was replaced with a new series of convertible debentures to raise this $665,000.This amount will be used to fund working capital needs and the redevelopment of the Company's vodka and water products for introduction into the US marketplace. Subsequently in May 2001, these convertible debentures were registered under Form SB-2. 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, 10,960,814 of the issued and outstanding shares of the Company's Common Stock and Special Common Stock could potentially be eligible for sale as free trading or 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 non-affiliates when they resell restricted securities (those purchased from the issuer or an affiliate of the issuer in non-public transactions). Non-affiliates 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 10,960,814 shares of the 11,064,480 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 wilful 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, judgements, 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 defence 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, 2001 with comparative figures for the year ended June 30 2000, and for the six months ended June 30, 1999 Unaudited Consolidated Financial Statements as of June 30, 1999 ICEBERG CORPORATION OF AMERICA AND SUBSIDIARIES INDEPENDENT AUDITORS' REPORT AND CONSOLIDATED FINANCIAL STATEMENTS INDEPENDENT AUDITORS' REPORT Independent Auditors' Report To the Board of Directors and Shareholders of 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, 2001 and June 30, 2000, and the related consolidated statements of operations, shareholders' (deficiency) equity and cash flows for the years ended June 30, 2001 and June 30, 2000, for the six months ended June 30, 1999 and for the period from July 22, 1996 (inception) to June 30, 2001. 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, 2001 and June 30, 2000, and the results of their operations and their cash flows for the years ended June 30, 2001 and June 30, 2000, for the six months ended June 30, 1999 and for the period from July 22, 1996 (inception) to June 30, 2001, 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, 2001 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 7, 2001 Chartered Accountants Change Format ICEBERG CORPORATION OF AMERICA AND SUBSIDIARIES (a Development Stage Company) CONSOLIDATED BALANCE SHEETS _________ (all amounts in U.S. dollars) June June 30, 2001 30, 2000 ASSETS Current assets Cash and cash equivalents $ 598 $ 30,417 Trade accounts receivable, less allowance for doubtful accounts of $8,500 and $10,500 respectively 204,549 155,135 Inventory 367,571 581,624 Prepaid expenses 50,014 47,587 --------- --------- Total current assets 622,732 814,763 Property, plant and equipment, net 1,209,236 1,567,778 Goodwill 120,196 193,641 --------- --------- Total assets $ 1,952,164 $2,576,182 ========= ========= LIABILITIES Current liabilities Short term borrowings $ 114,969 $ 138,331 Accounts payable 816,460 1,048,088 Accrued liabilities 133,233 62,243 Due to shareholders 711,788 610,847 Current portion of long term debt 1,292,909 96,831 --------- --------- Total current liabilities 3,069,359 1,956,340 Long term debt 798,255 521,840 --------- --------- Total liabilities 3,867,614 2,478,180 --------- --------- Commitments and contingencies SHAREHOLDERS' (DEFICIENCY) EQUITY Common shares, $.0001 par value; 100,000,000 shares authorized, 8,169,425 and 6,444,250 shares issued and outstanding in 2001 and 2000 respectively 817 644 Special common shares, $.0001 par value; 5,000,000 shares authorized, 2,895,055 and 4,454,690 shares issued and outstanding in 2001 and 2000 respectively 290 445 Additional paid-in capital 6,916,315 6,004,870 Deficit accumulated during the development stage (8,841,856) (5,930,665) Accumulated other comprehensive income 8,984 22,708 --------- --------- Total shareholders' (deficiency) equity (1,915,450) 98,002 --------- --------- Total liabilities and shareholders' (deficiency) equity $ 1,952,164 $ 2,576,182 ========= ========= The accompanying notes are an integral part of these consolidated financial statements.

ICEBERG CORPORATION OF AMERICA AND SUBSIDIARIES (a Development Stage Company) CONSOLIDATED STATEMENTS OF OPERATIONS _________ (all amounts in U.S. dollars) From July 22, 1996 Year Year Six Months (Date of Ended Ended Ended Inception) to June June June June 30, 2001 30, 2001 30, 2000 30, 1999 Sales $ 2,011,650 $ 817,070 $ 737,300 $ 209,188 Cost of sales 1,738,430 619,479 610,863 287,470 ----------- ----------- ----------- ----------- Gross profit (loss) 273,220 197,591 126,437 (78,282) ----------- ----------- ----------- ----------- Operating expenses General and administrative 3,779,607 821,560 1,205,936 1,059,010 Research and development 924,738 25,579 200,895 217,058 Sales and marketing 2,031,192 660,201 779,433 236,230 Depreciation and amortization 1,030,764 442,009 338,413 111,259 ----------- ----------- ----------- ----------- 7,766,301 1,949,349 2,524,677 1,623,557 ----------- ----------- ----------- ----------- Operating (loss) (7,493,081) (1,751,758) (2,398,240) (1,701,839) ----------- ----------- ----------- ----------- Other expenses Interest and bank charges 131,991 40,510 28,337 28,135 Interest on long term debt 1,216,784 1,118,923 43,305 13,778 ----------- ----------- ----------- ----------- 1,348,775 1,159,433 71,642 41,913 ----------- ----------- ----------- ----------- (Loss) before taxes (8,841,856) (2,911,191) (2,469,882) (1,743,752) Income taxes - - - - ----------- ----------- ----------- ----------- (Net loss) $(8,841,856) $(2,911,191) $(2,469,882) $(1,743,752) =========== =========== =========== =========== Loss per share - basic and diluted $ (1.74) $ (0.27) $ (0.26) $ (0.27) =========== =========== =========== =========== Weighted average common shares - basic and diluted 5,072,563 10,905,125 9,441,735 6,480,860 =========== =========== =========== =========== The accompanying notes are an integral part of these consolidated financial statements.

ICEBERG CORPORATION OF AMERICA AND SUBSIDIARIES (a Development Stage Company) CONSOLIDATED STATEMENTS OF CASH FLOWS _________ (all amounts in U.S. dollars) From July 22, 1996 Year Year Six Months (Date of Ended Ended Ended Inception) to June June June June 30, 2001 30, 2001 30, 2000 30, 1999 Operating activities Net loss $(8,841,856) $(2,911,191) $(2,469,882) $(1,743,752) Items not affecting cash: Depreciation and amortization 1,030,764 442,009 338,413 111,259 Beneficial conversion feature 920,500 920,500 - - (Gain) loss on sale of property, plant and equipment (29,195) - (6,976) 4,127 Changes in current assets and liabilities (Increase) decrease in accounts receivable (138,257) (53,239) 36,954 (139,132) (Increase) decrease in inventory (190,651) 199,078 (282,535) 3,962 (Increase) decrease in prepaid expenses (21,874) (3,583) 5,213 (34,328) Increase (decrease) in accounts payable 415,155 (206,748) (143,006) 618,587 Increase in accrued liabilities 133,994 71,861 33,146 10,195 Increase (decrease)in deferred government grants (693) - - (46,599) ----------- ----------- ----------- ----------- Cash used by operating activities (6,722,113) (1,541,313) (2,488,673) (1,215,681) ----------- ----------- ----------- ----------- Investing activities Purchase of property, plant and equipment (1,766,714) (17,671) (121,366) (985,794) Proceeds from sale of property, plant and equipment 78,007 - 32,381 5,866 Acquisition of subsidiary (1) - - - ----------- ----------- ----------- ----------- Cash used by investing activities (1,688,708) (17,671) (88,985) (979,928) ----------- ----------- ----------- ----------- Financing activities Proceeds from (payments of) short term borrowings 133,739 (19,895) 138,678 - Advances from third parties 259,870 - - - Repayment of advances from third parties (516,030) - - - Advances from shareholders, net 718,257 107,249 185,034 425,974 Proceeds from issuance of long term debt 2,394,694 1,526,000 33,942 161,033 Repayment of long term debt (572,659) (75,136) (395,609) (55,482) Redemption of Shares (62,500) (62,500) Net proceeds from issuance of shares 6,059,422 53,463 2,374,111 1,878,149 ----------- ----------- ----------- ----------- Cash provided by financing activities 8,414,793 1,529,181 2,336,156 2,409,674 ----------- ----------- ----------- ----------- Effect of exchange rate changes on cash (3,374) (16) (2,068) (429) ----------- ----------- ----------- ----------- Increase (decrease) in cash and cash equivalents during the period 598 (29,819) (243,570) 213,636 Cash and cash equivalents, beginning of period - 30,417 273,987 60,351 ----------- ----------- ----------- ----------- Cash and cash equivalents, end of period $ 598 $ 598 $ 30,417 $ 273,987 =========== =========== =========== =========== Supplemental disclosures of cash flow information: Cash paid for interest $ 349,070 $ 159,728 $ 71,642 $ 41,913 =========== =========== =========== =========== Cash paid for income taxes $ - $ - $ - $ - =========== =========== =========== =========== The accompanying notes are an integral part of these consolidated financial statements.

ICEBERG CORPORATION OF AMERICA AND SUBSIDIARIES (a Development Stage Company) CONSOLIDATED STATEMENT OF SHAREHOLDERS' (DEFICIENCY) EQUITY __________ (all amounts in U. S. dollars) 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 Components of comprehensive income (loss) Net loss - - - (2,911,191) - (2,911,191) Beneficial conversion Feature - - 920,500 - - 920,500 Foreign currency translation adjustment - - - - (13,724) (13,724) ---------- Total comprehensive income (loss) (2,004,415) Redemption of Shares (10) (62,490) (62,500) ---------- Issuance of shares 165,540 28 53,435 - - 53,463 ------- ------- ---------- ----------- -------- ---------- Balance at June 30, 2001 11,064,480 $ 1,107 $6,916,315 $(8,841,856) $ 8,984 $(1,915,450) The accompanying notes are an integral part of these consolidated financial statements.

Change Format ICEBERG CORPORATION OF AMERICA AND SUBSIDIARIES Notes to the 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 Company"), a dormant public shell company, acquired Iceberg Industries effective June 25, 1999. The acquisition by the Company resulted in the former shareholders of Iceberg Industries acquiring control of the Company 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 Company'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 Company has only generated minimal revenue from bottling spring water and some iceberg water, beer and vodka. The Company 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 Company has incurred significant operating losses since inception and has an accumulated deficit of $8,841,856 at June 30, 2001. The Company expects to incur further development costs to continue its product development and marketing initiatives. The Company's working capital deficiency at June 30, 2001 and limited revenue will not be sufficient to meet its development requirements. Management recognizes that the Company 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 assurance can be given that the Company will be successful in raising sufficient additional capital or entering into business alliances that will enable it to achieve profitability or positive cash flow. 2. Significant accounting policies Basis of consolidation These consolidated financial statements include the accounts of the Company 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 Company 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 Company reports its consolidated financial statements in U.S. dollars. The functional currency of the Company'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 Company'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. 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, 2001 2000 --------- --------- Raw materials $ 199,232 $ 255,154 Finished goods 168,339 326,470 --------- --------- $ 367,571 $ 581,624 ========= ========= Government grants The Company 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. 2. Significant accounting policies (Continued) 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 benefited. Impairment of long-lived assets The Company 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 Company 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. 2. Significant accounting policies (Continued) 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. Recent accounting pronouncements In July 2001, the Financial Accounting Standards Board issued SFAS No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 requires that all business combinations initiated after June 30, 2001 be accounted for under the purchase method and addresses the initial recognition and measurement of goodwill and other intangible assets acquired in a business combination. In the event the Company acquires goodwill subsequent to June 30, 2001 it will not be amortized. SFAS No. 142 addresses the initial recognition and measurement of intangible assets and the accounting for goodwill and other intangible assets subsequent to their acquisition. SFAS No. 142 provides that intangible assets with finite useful lives be amortized and that goodwill and intangible assets with indefinite lives will not be amortized, but will rather be tested at least annually for impairment. Under the provisions of SFAS No. 142, any impairment loss identified upon adoption of this standard is recognized as a cumulative effect of a change in accounting principle which is charged directly to retained earnings. Any impairment loss incurred subsequent to initial adoption of SFAS No. 142 is recorded as a charge to current period earnings. The Company will adopt SFAS No. 142 on July 1, 2001 and, at that time, will cease amortizing goodwill that resulted from business combinations completed prior to the adoption of SFAS No. 141. Goodwill is currently being amortized at approximately $73,000 annually and will have an expected net carrying value of approximately $120,000 at the date of adoption of this standard. Financial Accounting Standards Board also issued SFAS No. 143, "Accounting for Asset Retirement Obligations." The Company has not yet determined the effect, if any, of this new standard on its financial statements. 3. Acquisitions Effective June 25, 1999, the Company 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 Company for each share of Iceberg Industries. At the date of combination, the Company 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 Company. 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, they are the economic equivalent of the common shares. 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, the financial statements prior to the acquisition are those of Iceberg Industries. Historical shareholder's equity of the Company has also been retroactively restated for the equivalent number of shares received in the reverse takeover transaction. Format Change 4. Property, plant and equipment Property, plant and equipment is comprised of the following: 2001 2000 --------------------------------------- ----------------------------- Accumulated Net Book Accumulated Net Book Cost Depreciation Value Cost Depreciation Value ---- ------------ -------- ---- ------------ -------- Plant $ 440,773 $ (40,638) $ 400,135 $ 451,876 $ (24,563) $ 427,313 Land 45,752 - 45,752 46,837 - 46,837 Tank farm 211,555 (38,601) 172,954 216,884 (19,915) 196,969 Furniture and equipment 1,232,897 (653,733) 579,164 1,219,089 (339,269) 879,820 Vehicles 40,865 (29,634) 11,231 41,894 (25,055) 16,839 ------------ ---------- -------- ---------- ---------- ---------- $ 1,971,842 $(762,606) $1,209,236 $1,976,580 $(408,802) $1,567,778

Format Change 5. Short term borrowings The Company has a credit facility arrangement with its commercial Bankers with an operating line of credit of $100,000, 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 are unsecured. 7. Long term debt 2001 2000 ------ ------- Subordinated convertible debentures, bearing interest at U.S. bank prime plus 1.5%, interest payable on the principal sum outstanding on a semi-annual basis, maturing June 2002 to October, 2005. The debentures are convertible at $0.25 to $0.50 for one common share and one common share warrant which is exercisable at $0.625 within 18 months of the conversion date. $761,000 $ - Convertible debentures, bearing interest at 6%, interest payable at maturity, maturing April, 2002. The debentures are convertible at $0.05822 for one common share. 665,000 - Atlantic Canada Opportunities Agency, non-interest bearing, unsecured debt, repayable in monthly installments commencing December 2000 and maturing 2006 308,058 338,570 Subordinated convertible debenture, bearing interest at 6%, interest payable on the principal sum outstanding on a semi-annual basis maturing November, 2005. The debenture is convertible at $0.50 for one common share and one common share warrant which is exercisable at $0.625 within 18 months of the conversion date. 100,000 - 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 99,869 126,080 Trepassey Community Development Fund, term loan bearing interest at 5%, repayable in blended monthly installments, maturing 2015, secured by certain assets of the Corporation 80,105 83,168 John Deere Credit, capital lease bearing interest at 10.2%, repayable in blended monthly instalments, maturing 2004, secured by equipment 40,793 55,526 Caterpillar Financial Services, capital lease bearing interest at 8.1%, repayable in blended monthly instalments, maturing 2006, secured by equipment 36,339 - Bank of Nova Scotia, term loan repair during the year - 13,830 Other - 1,497 ------------ ----------- 2,091,164 618,671 Current portion 1,292,909 96,831 ------------ ----------- $ 798,255 $ 521,840 ============ =========== During the year the Company re-priced the conversion option on previously issued subordinate convertible debentures from an exercise price of $0.50 to $0.25 on 2,044,000 shares. The trading value of common stock on that date was $0.375. The Company recorded $255,500 as a charge to interest expense and as a credit to additional paid in capital with respect to the $761,000 convertible debenture. The Company also recorded a beneficial conversion feature of $665,000 as a charge to interest expense and as a credit to additional paid-in capital with respect to the $665,000 convertible debenture. Principal repayments over the next five years as of June 30, 2001 are as follows: Fiscal Year Amount ----------- -------- 2002 $ 782,000 2003 121,000 2004 122,900 2005 954,200 2006 54,900 Thereafter 56,164 --------- Total $2,091,164 As noted above, the Company received governmental assistance in the form of non-interest bearing notes. In addition, the Company'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 $2,040,000 and $550,000 at June 30, 2001 and June 30, 2000, respectively. 8. Share capital During the year, authorized common stock was increased from 25,000,000 to 100,000,000 shares. 9. Income taxes The Company has reported its income tax expense in the statement of operations to include the following components: Year Year Six Months Ended Ended Ended June June June 30, 2001 30, 2000 30, 1999 ----------- ---------- ---------- Current tax expense $ - $ - $ - Deferred tax benefit 477,048 729,159 649,497 Valuation allowance (477,048) (729,159) (649,497) ----------- ---------- ---------- $ - $ - $ - =========== ========== ========== Deferred tax assets are summarized as follows: June 30, June 30, 2001 2000 ----------- ---------- Non-capital losses $2,206,159 $1,840,944 Share issue costs 24,634 38,869 Property, plant and equipment 140,342 128,362 Eligible capital expenditures 257,856 143,768 ----------- ---------- 2,628,991 2,151,943 Valuation allowance (2,628,991) (2,151,943) ----------- ---------- $ - $ - =========== ========== The Company 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 Company's ability to generate taxable income in Canada within the loss carryforward periods. For Canadian federal and Newfoundland provincial tax purposes, the Company's net operating loss carryforwards are subject to certain limitations on utilization in the event of changes in ownership. At June 30, 2001, the Company had accumulated income tax losses of $5,813,100 available in Canada for carryforward to reduce taxable income of future years. The loss carryforwards expire as follows: Fiscal Year Amount ----------- ----------------- 2002 $ 293,700 2003 474,900 2004 160,500 2005 963,800 2006 1,084,800 2007 1,730,400 2008 1,105,000 ----------------- Total $ 5,813,100 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: Year Year Six Months Ended Ended Ended June 30, June 30, June 30, 2001 2000 1999 ----------- -------- ---------- Canadian statutory rate 37.0% 37.0% 37.0% Amounts not deductible for tax purposes (1.7)% (1.4)% (7.9)% Eligible capital expenditures (0.0)% (0.0)% (7.3)% Depreciation (8.8)% (4.3)% (1.4)% Operating losses not benefitted (26.5)% (31.3)% (20.4)% ----------- -------- --------- - - - =========== ========= ========= 10. Commitments and contingencies As of June 30, 2001, the future minimum lease payments under non-cancelable operating leases with initial terms of one or more years are as follows: Amount ---------------- 2002 $ 15,100 2003 5,400 2004 1,300 2005 900 2006 900 ---------------- Total $ 23,600 Rental expense on office space operating leases was $27,000, $32,000 and $15,900 during the years ended June 30, 2001 and June 30, 2000 and for the six months ended June 30, 1999 respectively. Pursuant to a joint venture agreement to harvest glacial water in Greenland, the Company agreed to fund the construction of docking facilities in an amount not to exceed $2 million. The Company is involved in various routine legal proceedings incidental to the ordinary course of its business. The Company 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. 11. 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 has been retroactively restated for the equivalent number of shares of common stock of the Company. 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. 12. Stock options Employee stock options The Company has a Stock Option Plan (the "Plan"), under which options to purchase common shares of the Company 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 Company is authorized to issue 2,390,000 shares under the Plan. A summary of the activity under the Plan is set forth below: (2001) Weighted Average Number Exercise of Shares Price ---------- ---------- Outstanding at beginning of year (2001) 600,000 $ 0.625 Granted 1,690,000 $ 0.114 Exercised (80,000) $ 0.240 ---------- ---------- Outstanding at end of year 2,210,000 $ 0.290 (2000) Weighted Average Number Exercise of Shares Price ---------- ---------- Outstanding at the beginning of year (2000) - - Granted 850,000 $ 0.625 Exercised (250,000) $ 0.625 ---------- ---------- Balance, June 30, 2000 600,000 $ 0.625 As of June 30, 2001 there were 940,000 options exercisable at exercise prices ranging from $0.625 to $0.080, or $0.290 on average. The 2,210,000 options have a weighted average remaining contractual life of 9.7 years. Share purchase warrants In June 2000, the Company completed a private placement of 1,000,000 restricted shares of the Company'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 Company's common stock from May 1, 2001 to April 30, 2002, at a price 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 September 2000, the Company raised $761,000 as part of a $5,000,000 subordinated convertible debenture private placement. These debentures are convertible at $0.25 to $0.50, or $0.299 on average, for one common share and one share purchase warrant convertible into one share of the Company's common stock, which is exercisable at $0.625. If fully converted, this agreement would result in the issuance of 2,544,000 shares and 2,544,000 share purchase warrants. Share purchase warrants (Continued) In December 2000 the Company raised $100,000 through a subordinated convertible debenture private placement. These debentures are convertible at $0.50 for one common share and one share purchase warrant convertible into one share of the Company's common stock, which is exercisable at $0.625. If fully converted, this agreement would result in the issuance of 200,000 shares and 200,000 share purchase warrants. In February 2001, the Company raised $665,000 through a convertible debenture private placement. These debentures are convertible at $0.05822 into 11,249,737 common shares at the option of the holder to April, 2002 13. Subsequent event In August, 2001, the Company raised $100,000 from a shareholder as an unsecured demand note. This loan has no maturity date and carries an interest rate of 10%. As part of the arrangement, the shareholder received 650,000 share purchase warrants. Each warrant is convertible into an equivalent number of shares of the Company's common stock at $0.15 per share to June 30, 2002. Unaudited Consolidated Financial Statements as of June 30, 1999 ICEBERG CORPORATION OF AMERICA AND SUBSIDIARIES (a Development Stage Company) CONSOLIDATED STATEMENTS OF OPERATIONS UNAUDITED _________ (all amounts in U.S. dollars) 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 ===========

ICEBERG CORPORATION OF AMERICA AND SUBSIDIARIES (a Development Stage Company) CONSOLIDATED STATEMENTS OF CASH FLOWS UNAUDITED _________ (all amounts in U.S. dollars) 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 $ - ============

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. 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: September 27, 2001 By: /s/ Paul Benson Paul Benson, President & Director Date: September 27, 2001 By: /s/ Ron Stamp Ron Stamp, Vice President & Director Date: September 27, 2001 By: /s/ Lewis Stoyles Lewis Stoyles, Vice President & Director

ICEBERG CORP OF AMERICA 10-K