SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[x] Quarterly Report Pursuant to Section 13 or 15(d)
Securities Exchange Act of 1934
for Quarterly Period Ended September 30, 1999
-OR-
[ ] Transition Report Pursuant to Section 13 or 15(d)
of the Securities And Exchange Act of 1934
for the transaction period from _________ to________
Commission File Number 33-55254-10
Seair Group, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Nevada 87-0438825
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
6831 Edgewater Commerce Parkway, Suite 1110, Orlando, FL 32810
- --------------------------------------------------------------------------------
(Address of principal executive offices, Zip Code)
(407) 445-1035
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Check whether the issuer (1) filed all reports
required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during
the preceding 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 [ ] No [ X ]
The number of outstanding shares of the
registrant's common stock, par value $.001
as of September 30, 1999 is 9,961,242.
<PAGE>
PART I -- FINANCIAL INFORMATION
ITEM 1 -- FINANCIAL STATEMENTS
SEAIR GROUP, INC.
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
(NOTE 1) (NOTE 1)
(Unaudited) (Audited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 32,002 $ 21,081
Notes receivable from stockholder, net -- 12,500
Accounts receivable 2,555 6,066
Inventory, net 15,000 85,127
Prepaid expenses -- 30,619
----------- -----------
Total current assets 49,557 155,393
----------- -----------
Property and equipment, net 6,533 9,288
Other assets:
Goodwill, net 441,090 458,812
Deposits 5,140 5,140
----------- -----------
Total other assets 446,230 463,952
----------- -----------
$ 502,320 $ 628,633
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 42,809 $ 6,020
Accrued liabilities 132,571 36,194
Customer deposits 60,061 47,500
----------- -----------
Total liabilities 235,441 89,714
----------- -----------
Stockholders' equity:
Common stock, par value $.001, 25,000,000 shares authorized,
9,961,242 and 10,257,575 shares issued 1999 9,961 10,257
Additional paid-in capital 1,276,246 973,319
Deficit accumulated during the development stage (1,019,328) (444,657)
----------- -----------
Total stockholders' equity 266,879 538,919
----------- -----------
$ 502,320 $ 628,633
=========== ===========
</TABLE>
Unaudited -- See accompanying notes to condensed financial statements.
2
<PAGE>
SEAIR GROUP, INC.
CONDENSED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
7/9/86
THREE MONTHS ENDED NINE MONTHS ENDED (Date of
SEPTEMBER 30, SEPTEMBER 30, Inception
1999 1998 1999 1998 to 9/30/99)
---- ---- ---- ---- ----------
REVENUES: $ 56,346 $ 0 $ 259,548$ 0 $ 327,645
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
COSTS AND EXPENSES:
Cost of sales 145,358 45,421 402,180 62,921 538,462
Selling, general & administrative 89,663 79,724 463,541 84,986 840,015
----------- ----------- ----------- ----------- -----------
235,021 125,145 865,721 147,907 1,378,477
----------- ----------- ----------- ----------- -----------
OPERATING LOSS (178,675) (125,145) (606,173) (147,907) (1,050,828)
----------- ----------- ----------- ----------- -----------
OTHER INCOME -- -- 31,500 -- 31,500
----------- ----------- ----------- ----------- -----------
NET LOSS $ (178,675) $ (125,145) $ (574,673) $ (147,907) $(1,019,328)
=========== =========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 9,536,982 9,957,647 8,209,971 6,230,609
NET INCOME (LOSS) PER SHARE $ (.02) $ (.01) $ (.07) $ (.02)
=========== =========== =========== ===========
</TABLE>
Unaudited -- See accompanying notes to condensed financial statements.
3
<PAGE>
SEAIR GROUP, INC.
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
7/9/86
Nine Months Ended (Date of
September 30, Inception)
1999 1998 to 9/30/99
---- ---- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (574,673) $ (147,907) $(1,019,328)
Adjustments to reconcile net loss to
net cash flows used in operating activities:
Depreciation and amortization 22,897 -- 38,914
Bad debt expense -- -- 25,000
Obsolete inventory write-downs -- -- 23,144
Issuance of stock for services 79,300 -- 79,300
Decrease (increase) in accounts receivable 3,511 -- (2,555)
Decrease (increase) in inventory 70,127 (138,441) (38,144)
Decrease in prepaid expenses 30,619 -- --
Increase in customer deposits 12,561 -- 60,061
Increase in accounts payable 36,789 -- 42,809
Increase in accrued expenses 96,377 -- 100,000
----------- ----------- -----------
Net cash flows used in operating activities (222,492) (286,348) (690,799)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase (decrease) in notes receivable 12,500 (50,500) (25,000)
Purchase of property and equipment (2,420) (10,278) (13,893)
Increase in deposits -- (400) (5,140)
Purchase of organization costs -- -- (50)
----------- ----------- -----------
Net cash provided by (used for) investing activities 10,080 (61,178) (44,083)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock, net of costs 223,333 598,550 900,884
Repayment of long-term debt -- (134,000) (134,000)
----------- ----------- -----------
Net cash flows from financing activities 223,333 464,550 766,884
----------- ----------- -----------
NET CHANGE IN CASH AND CASH EQUIVALENTS 10,921 117,024 32,002
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 21,081 -- --
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 32,002 $ 117,024 $ 32,002
=========== =========== ===========
SUPPLEMENTAL INFORMATION:
Non-cash acquisition of World Seair Corporation $ -- $ 472,596 $ 472,596
=========== =========== ===========
Non-cash conversion of debt to common stock $ -- $ 300,000 $ 300,000
=========== =========== ===========
</TABLE>
Unaudited-See accompanying notes to condensed financial statements.
4
<PAGE>
SEAIR GROUP, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
NOTE 1-BASIS OF PRESENTATION:
The accompanying consolidated financial statements have been prepared in
accordance with the instructions to Form 10-QSB and do not include all of the
information and footnotes required by generally accepted accounting principles
for complete statements. Management believes that all adjustments, consisting
only of normal recurring adjustments, necessary for a fair presentation of such
financial statements, have been included. The preparation of financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities as of
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. If such differences prove significant and material, Seair Group, Inc.
(the "Company") will file an amendment to this report on Form 10-QSB.
NOTE 2 - DEVELOPMENT STAGE COMPANY
The Company was incorporated under the laws of the State of Nevada on July 9,
1986 and has been in the development stage since inception. On May 28, 1998, the
Company acquired World Seair Corporation ("WSC") as a wholly owned subsidiary
and changed its name from Vicuna, Inc. to Seair Group, Inc. WSC has designed and
developed the Seair Ultralite Flying Inflatable Boat.
NOTE 3 - STOCKHOLDERS' EQUITY:
On January 7, 1999, the Company's two majority stockholders retired 3,500,000
shares of common stock.
During the nine months ended September 30, 1999, the Company issued 437,000
shares of its common stock to certain of its officers and employees in lieu of
compensation. The value of these shares of common stock was determined to range
from $.15 to $.20 per share, based on the date of issue. This resulted in a
charge to earnings for compensation in the amount of $79,300.
During the nine months ended September 30, 1999, the Company also converted
$124,900 of notes payable to 2,100,000 shares of common stock.
NOTE 4 - SUBSEQUENT EVENTS
On August 31, 1999, the Company entered into a memorandum of understanding with
SeaGliders, LLC. SeaGliders has agreed to purchase the Company's product line,
assets, and limited liabilities, subject to shareholder approval and the signing
of a definitive agreement.
On November 4, 1999, the Company completed a one for seven reverse stock split
with respect to its common stock.
5
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS
OVERALL FINANCIAL CONDITION
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplate that Seair Group,
Inc. (the "Company") will continue as a going concern. For the first nine months
of 1999 and 1998, the Company incurred losses of $575,000 and $148,000,
respectively. Losses increased in the first nine months of 1999 over 1998 due to
a full nine months of operations, compared to only four month of operations in
1998. The Company experienced negative cash flows from operations of $222,000
and $286,000 for the first nine months of 1999 and 1998, respectively.
RESULTS OF OPERATIONS
The Company had revenue from operations of $260,000 during the first nine months
of 1999, compared to $0 in the first nine months of 1998. Revenue for the three
months ended September 30, 1999 was $56,000, compared to $0 in the three months
ended September 30, 1998. The decrease in revenue from the previous quarter
resulted from a reduction in the number of boats sold by the Company.
Cost of sales for the nine months ended September 30, 1999 were $402,000,
compared to $63,000 in the first nine months of 1998. Cost of sales for the
three months ended September 30, 1999 were $145,000 compared to $45,000 for the
three months ended September 30, 1998. Selling, general and administrative costs
for the nine months ended September 30, 1999 were $464,000 as compared to
$85,000 for the comparable period in 1998. Selling, general and administrative
costs for the three months ended September 30, 1999 were $90,000 as compared to
$80,000 for the comparable period in 1998.
PLAN OF OPERATION
The Company continues to experience negative cash flows from operating
activities. Due to the continued negative cash flow, the Company has continued
to raise funds through private placements.
Management's plans to improve the financial position of the Company, with the
goal of sustaining the Company's operations for the current year and beyond
include: (1) increasing sales through wholesale channels using select
distributors and retail channels using direct marketing; and (2) increasing
operating efficiencies as the Company progresses further in its development
stage.
The Company is currently negotiating the sale of its product line, assets, and
limited liabilities to SeaGliders, LLC, and has entered into a memorandum of
understanding with respect to such sale. In addition, the Company is continuing
to seek other candidates for an acquisition or merger.
6
<PAGE>
Part II
ITEM 1 - LEGAL PROCEEDINGS
Not applicable.
ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS
During the nine months ended September 30, 1999, the Company
issued 200,000, 100,000, 50,000, 50,000, 25,000, 8,000 and
4,000 shares of its common stock to Steven Weismann, Steven
Kerr, Patrick Walsh, Darren Clark, Jeff Lampe, Scott Bolton,
and Thomas Keith, respectively, as compensation in connection
with their employment with the Company. The value of these
shares of common stock was determined to range from $.15 to
$.20 per share, based on the date of issue. This resulted in a
charge to earnings for compensation in the amount of $79,300.
During the nine months ended September 30, 1999, the Company
also converted $124,900 of notes payable to 2,100,000 shares
of common stock, and issued 666,667 shares for cash of
$98,432.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5 - OTHER INFORMATION
On August 31, 1999, the Company entered into a memorandum of
understanding with SeaGliders, LLC. SeaGliders has agreed to
purchase the Company's product line, assets, and limited
liabilities, subject to shareholder approval and the signing
of a definitive agreement.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibit is filed herewith:
Exhibit 16(i) Change of Certifying Accountants
Exhibit 27.1 Financial Data Schedule
7
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned thereunto duly
authorized.
SEAIR GROUP, INC.
Dated: December 30, 1999 By: /s/ Steven H. Kerr
--------------------------
Steven H. Kerr
Chairman of the Board of
Directors and President
(duly authorized
officer of the registrant and
principal financial officer
of the registrant)
8
Smith
&
Company
A Professional Corporation of Certified Public Accountants
December 29, 1999
Securities And Exchange Commission
Washington, D.C. 20549
Ladies and Gentlemen:
We were previously principal accountants for Seair Group, Inc.
(formerly Vicuna, Inc.) and on January 31, 1998, we issued our auditor's report
on the financial statements of Seair Group, Inc. as of and for the two years
ended December 31, 1997 and 1996. On December 29, 1999, we were notified by the
company that we have been replaced as principal accountants for Seair Group,
Inc. There have been no disagreements with Seair Group, Inc. on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure or any reportable events.
Very truly yours,
/s/ Smith & Company
-------------------
Smith & Company
CERTIFIED PUBLIC ACCOUNTANTS
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 32,002
<SECURITIES> 0
<RECEIVABLES> 2,555
<ALLOWANCES> 0
<INVENTORY> 15,000
<CURRENT-ASSETS> 49,557
<PP&E> 13,893
<DEPRECIATION> 7,360
<TOTAL-ASSETS> 502,320
<CURRENT-LIABILITIES> 235,441
<BONDS> 0
0
0
<COMMON> 9,961
<OTHER-SE> 1,276,246
<TOTAL-LIABILITY-AND-EQUITY> 502,320
<SALES> 259,548
<TOTAL-REVENUES> 291,048
<CGS> 402,180
<TOTAL-COSTS> 865,721
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (574,673)
<INCOME-TAX> 0
<INCOME-CONTINUING> (574,673)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (574,673)
<EPS-BASIC> (0.07)
<EPS-DILUTED> (0.07)
</TABLE>
