U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED MARCH 31, 2003
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
______________ TO ______________
COMMISSION FILE NUMBER: 000-26051
BEAR AEROSPACE, INC.
(Exact name of registrant as specified in its charter)
Nevada 88-0424430
(State of incorporation) (I.R.S. Employer
Identification No.)
23401 Park Sorrento, Suite 18, Calabasas, California 91302
(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (818) 225-0077
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common
Stock, $0.001 Par Value
Indicate by check mark whether the Company (1) has 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 Company was required to file such reports),
and (2) been subject to such filing requirements for the past 90
days. Yes No X
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of Company's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-KSB or any amendment to this Form 10-KSB [ ].
State the aggregate market value of the voting stock held by non-
affiliates computed by reference to the price at which the stock was
sold, or the average bid and asked prices of such stock, as of a
specified date within the past 60 days. There is no established
public trading market for the issuer's common stock, and the issuer
is unaware of any transactions in its common stock within the past 60 days.
The total number of issued and outstanding shares of the issuer's
common stock, par value $0.001, as of April 1, 2003, was 27,499,667.
Table of Contents
Page
Part I - Financial Information
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheet
March 31, 2003 and December 31, 2002
Condensed Consolidated Statements of Losses:
three months ended March 31, 2003 and 2002
and for the period October 27, 1998 (date of inception)
through March 31, 2003
Condensed Consolidated Statement of deficiency in
Stockholders' Equity
for the period October 27, 1998 (date of inception)
through March 31, 2003
Condensed Consolidated Statement of Cash Flows:
three months ended March 31, 2003 and 2002
for the period October 27, 1998 (date of inception)
through March 31, 2003.
Notes to Unaudited Condensed Consolidated Financial
Information:
March 31, 2003
Item 2. Management's Discussion And
Analysis Of Financial Condition
And Results Of Operations
Part II - Other Information
Item 1. Legal Proceedings
Item 2. Changes In Securities And Use Of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Submission Of Matters To A Vote Of Security Holders
Item 5. Other Information
Item 6. Exhibits And Reports On Form 8-K
Signature
PART I - FINANCIAL INFORMATION
ITEM 1.FINANCIAL STATEMENTS
BEAR AEROSPACE, INC.
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED CONDENSED CONSOLIDATED
BALANCE SHEET
March 31 December 31
2003 2002
(unaudited)
ASSETS
Current Assets:
Cash $ 1,074 $ 11,317
Total Current Assets 1,074 11,317
Other Assets:
Other Assets, net 533,014 556,188
Total Other Assets 533,014 556,188
Total Assets 534,088 567,505
LIABILITIES AND DEFICEINCY IN STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable 15,812 -
Due to Shareholders and Related Parties 1,107,527 1,086,027
Total Current Liabilities 1,123,339 1,086,027
Commitments and Contingencies -
Deficiency in Stockholders' Equity:
Preferred stock, 10,000,000 shares
authorized, at $0.001 par value per share;
none issued and outstanding at March 31, 2003 -
Common Stock, 190,000,000 shares
authorized, at $0.001 par value per share;
27,444,668 shares issued and outstanding
at March 31, 2003 27,445 27,450
Additional Paid-In-Capital 460,985 465,980
Accumulated Deficit (1,077,681) (1,011,952)
Total Deficiency in Stockholders' Equity (589,251) (518,522)
Total Liabilities & Equity 534,088 567,505
See accompanying notes to the unaudited condensed consolidated
financial information
BEAR AEROSPACE, INC.
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED CONDENSED
CONSOLIDATED STATEMENT OF LOSSES
For the three For the three For the period from
months ended months ended October 27, 1998
March 31 March 31 (date of inception)
2003 2002 through
March 31 2003
Costs and Expenses:
Selling, general and administrative $ 42,555 $ 46,015 $ 827,302
Amortization and depreciation 23,175 9,000 393,963
Total Operating Expenses 65,729 55,015 1,221,264
Loss from Operations (65,729) (55,015) (1,221,264)
Other income - 143,344
Income (taxes) benefit - 239
Net Loss (65,729) (55,015) (1,077,681)
Net Loss (65,729) (55,015)
Net Loss per share(basic and
assuming dilution) (0.00) (0.00)
Weighted Average Common Shares
Outstanding 27,444,667 27,416,667
See accompanying notes to the unaudited condensed consolidated
financial information
BEAR AEROSPACE, INC.
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN DEFICIENCY IN
STOCKHOLDERS' EQUITY
FOR THE PERIOD OCTOBER 27, 1998 (DATE OF INCEPTION) THROUGH MARCH 31, 2003
Preferred Preferred Common Common Add'l Deficit
Stock Stock Stock Stock Paid in Accumulated
Shares Amount Shares Amount Capital During
Dev
Stage Total
Shares issued
in October
27, 1998 for
cash at $ 50
per share, net - $ - $ 750 $ 2,278 $ 35,168 $ - $ 37,446
Net (Loss) for the
period - - - - - (11,872) (11,872)
Balance at December 31,
1998 - - 750 2,278 35,168 (11,872) 25,174
Net Income for the period - - - - - 3,112 3,112
Balance at December 31,
1999 - - 750 2,278 35,168 (8,760) 28,686
Capital contributed by
Shareholders - - - - 12,011 - 12,011
Net (Loss) for the period - - - - - (86,001) (86,011)
Balance at December 31,
2000 - - 750 2,278 47,179 (94,761) (45,304)
Shares issued on April 1,
2001 in connection with
acquisition of Bear
Aviation LLC - - 750 - 400,515 - 400,515
Common shares issued in
connection with merger of
Bear Aerospace, Inc. and
Theinternetcorp.net, in
April 2001 , as restated - - 24,126,667 24,127 (24,127) - -
Common shares issued in
April 2001 in connection
with acquisition of
Theinternetcorp.net ,
Inc., as restated; valued
at $.001 per share - - 3,290,000 3,290 - - 3,290
Retirement of Bear
Aerospace, Inc. shares in
connection with merger
with The
Internetcorp.net, Inc - - (1,500) (2,278) 2,278 - -
Net (Loss) for the
Period - - - - - (402,367) (402,367)
Balance at December 31,
2001, as restated - - 27,416,667 27,417 425,845 (497,128) (43,865)
Shares issued in April
2002 in exchange for
previously incurred debt
at $ 1 per share - - 5,000 5 4,995 - 5,000
Shares issued in August
2002 in exchange for
services rendered valued
at approximately $ 1 per
share - - 28,000 28 27,940 - 27,968
Operating expenses
incurred by principal
shareholder (Notes E & I )
- - - - 7,200 - 7,200
Net (loss) for the period
- - - - - (514,824) (514,824)
Balance at December 31,
2002 - - 27,449,667 27,450 465,980 (1,011,952) (518,522)
Cancel shares issued
- - (5,000) (5) (4,995) - (5,000)
Net (Loss) for the period
- - - - - (65,729) (65,729)
Balance at March 31, 2003
- - 27,444,667 27,445 460,985 (1,077,681) (589,251)
See accompanying notes to the unaudited condensed consolidated
financial information
BEAR AEROSPACE, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CASH FLOWS
For the three For the three For the period from
months ended months ended October 27, 1998
March 31 March 31 (date of inception)
2003 2002 through
March 31 2003
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $ (65,729) $ (55,015) $ (1,077,681)
Adjustments to reconcile net income
(loss) to cash provided by operating
activities:
Common stock issued in exchange for services (5,000) 22,968
Common stock issued in exchange for previously
incurred debt 5,000
Expenses paid by principal shareholder 7,200
Loss on sale of other assets 25,000
Depreciation and amortization 23,175 9,000 393,963
Write-off of accounts receivable 213,477
Increase in accounts receivable (213,447)
Increase in accounts payable 15,812 48,000 15,812
Net cash used in operating activities (31,743) 1,985 (607,739)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of other assets - - (986,976)
Disposals of other assets - - 35,000
Net cash (used in) investing activities - - (951,976)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from advances from related parties, net 21,500 - 1,107,527
Proceeds from sale of common stock, net - 453,262
Net cash provided by financing activities 21,500 - 1,560,789
Net increase (decrease) in cash (10,243) 1,985 1,074
Cash, beginning of period 11,317 168 -
Cash, ending of period 1,074 2,153 1,074
Supplemental Disclosures:
Cash paid for interest
Cash paid for taxes
Non-Cash Disclosures:
Common stock issued for services (5,000) 22,968
Common stock issued for debt 5,000 5,000
Operating expenses incurred by principal
shareholder 7,200 7,200
See accompanying notes to the unaudited condensed consolidated
financial information
BEAR AEROSPACE, INC.
( A DEVELOPMENT STAGE COMPANY )
NOTES TO FINANCIAL STATEMENTS
( UNAUDITED )
NOTE -SUMMARY OF ACCOUNTING POLICIES
General
The accompanying unaudited consolidated financial statements have
been prepared in accordance with the instructions to Rule 310 (b) of
Regulation S-B, and therefore, do not include all the information
necessary for a fair presentation of financial position, results of
operations and cash flows in conformity with generally accepted
accounting principles. In the opinion of management, all adjustments
( consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the
three month period ended March 31, 2003 are not necessarily
indicative of the results that may be expected for the year ended
December 31, 2003. The unaudited condensed consolidated financial
statements should be read in conjunction with the consolidated
financial statements and footnotes thereto included in the Company's
SEC Form 10-KSB.
Business and Basis of Presentation
Bear Aerospace, Inc. (the "Company") is in the development stage and
its efforts have been principally devoted to developing an ultra-long
range business jet. To date the Company has generated no sales
revenues, has incurred expenses, and has sustained losses.
Consequently, its operations are subject to all risks inherent in the
establishment of a new business enterprise. For the period from
October 27, 1998 (date of inception) through March 31, 2003, the
Company has accumulated losses of $1,077,681.
The consolidated financial statements include the accounts of the
Company and its Wholly-owned subsidiary, Bearaerospace Poland, sp.
Zoo. Significant inter-company transactions have been eliminated in
consolidation.
New Accounting Pronouncements
In December 2002, the FASB issued Statement No. 148, "Accounting for
Stock-Based Compensation-Transition and Disclosure", which amends
FASB Statement No. 123, Accounting for Stock-Based Compensation, to
provide alternative methods of transition for a voluntary change to
the fair value based method of accounting for stock-based employee
compensation. In addition, this Statement amends the disclosure
requirements of Statement 123 to require prominent disclosures in
both annual and interim financial statements about the method of
accounting for stock-based employee compensation and the effect of
the method used on reported results. The transition guidance and
annual disclosure provisions of Statement 148 are effective for
fiscal years ending after December 15, 2002, with earlier application
permitted in certain circumstances. The interim disclosure provisions
are effective for financial reports containing financial statements
for interim periods beginning after December 15, 2002. The adoption
of this statement did not have a material impact on the Company's
financial position or results of operations as the Company has not
elected to change to the fair value based method of accounting for
stock-based employee compensation.
In January 2003, the FASB issued Interpretation No. 46,
"Consolidation of Variable Interest Entities." Interpretation 46
changes the criteria by which one company includes another entity in
its consolidated financial statements. Previously, the criteria were
based on control through voting interest. Interpretation 46 requires
a variable interest entity to be consolidated by a company if that
company is subject to a majority of the risk of loss from the
variable interest entity's activities or entitled to receive a
majority of the entity's residual returns or both. A company that
consolidates a variable interest entity is called the primary
beneficiary of that entity. The consolidation requirements of
Interpretation 46 apply immediately to variable interest entities
created after January 31, 2003. The consolidation requirements apply
to older entities in the first fiscal year or interim period
beginning after June 15, 2003. Certain of the disclosure requirements
apply in all financial statements issued after January 31, 2003,
regardless of when the variable interest entity was established. The
Company does not expect the adoption to have a material impact to the
Company's financial position or results of operations.
In April 2003, the FASB issued Statement No.149, " Amendment of
Statement of 133 on Derivative Instruments and Hedging Activities ",
which amends Statement 133, Accounting for Derivative Instruments and
Hedging Activities. The adoption of this statement did not have a
material impact on the Company's financial position.
In May 2003, the FASB issued Statement No. 150, "Accounting for
Certain Financial Instruments with Characteristics of both
Liabilities and Equity. The adoption of this statement did not have a
material impact on the Company's financial position.
ITEM II. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
When used in this Form 10-QSB and in our future filings with the
Securities and Exchange Commission, the words or phrases will likely
result, management expects, or we expect, will continue, is
anticipated, estimated or similar expressions are intended to
identify forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Readers are cautioned not
to place undue reliance on any such forward-looking statements, each
of which speak only as of the date made. These statements are
subject to risks and uncertainties, some of which are described
below. Actual results may differ materially from historical earnings
and those presently anticipated or projected. We have no obligation
to publicly release the result of any revisions that may be made to
any forward-looking statements to reflect anticipated events or
circumstances occurring after the date of such statements.
Product Research and Development
The following Twelve Month Plan of Operation should be read in
conjunction with the financial statements and accompanying notes
included in this Form 10-QSB.
(a) Twelve Month Plan of Operation.
In the year 2003, the Company will focus its attention on
acquiring the funds necessary to implement its business plan by
further developing its products lines, marketing development and
deployment of its airplanes. The Company may focus on
infrastructure, as well as possibly seeking strategic partners.
The Company further intends to focus on the following:
(1) The Company is in the development stages, and is expected to
roll out its product this year. Although minor delays have occurred,
the Company is ready to move forward. The Company intends to
position itself for a full-scale product launch. Further development
and testing of the production model will be ongoing.
(2) With the proper funding, the Company has already identified
key personnel to enhance the Company and ensure the continued
evolution and success of current products and to design and develop
new technology.
(3) The Company will seek out as to whether there is patent
applications in its products or mechanical applications.
(4) Where permissible, the Company intends to demonstrate its
products to media and shareholders of the Company throughout the
course of the year.
(5) Continue to build Company and product exposure through newly
formed alliances with Investor/public relations firm, industry
experts, media and other key professionals.
(6) The Company will attempt to secure additional funding
through a SB-2.
(7) The Company will seek alliances with original equipment
manufacturers; retrofit market and related enterprises for its
existing and future technology.
(8) The Company may need to relocate its offices to a more
spacious center that is able to house existing employees and
anticipated expansion if the Company grows larger than its current
operations.
Acquisition or Disposition of Plant and Equipment
We do not anticipate the sale of any significant property, plant or
equipment during the next twelve months. We do not anticipate the
acquisition of any significant property, plant or equipment during
the next 12 months.
Number of Employees
From inception through the period ended March 31, 2003, we have
relied on the services of outside consultants for services and as of
March 31, 2003, the Company has two employees that would consider
themselves full-time. In order for us to attract and retain quality
personnel, we anticipate we will have to offer competitive salaries
to future employees. We do not anticipate our employment base will
significantly change during the next 12 months. As we continue to
expand, we will incur additional cost for personnel. This projected
increase in personnel is dependent upon our generating revenues and
obtaining sources of financing. There is no guarantee that we will be
successful in raising the funds required or generating revenues
sufficient to fund the projected increase in the number of employees.
The independent auditor's report issued in connection with the
audited financial statements of Bear Aerospace for the period ended
December 31, 2002, expresses "substantial doubt about its ability to
continue as a going concern," due to the Company's status as a
development stage company and its lack of significant operations.
Forward Looking Statements.
The foregoing Managements Discussion and Analysis of Financial
Condition and Results of Operations "forward looking statements"
within the meaning of Rule 175 under the Securities Act of 1933, as
amended, and Rule 3b-6 under the Securities Act of 1934, as amended,
including statements regarding, among other items, the Company's
business strategies, continued growth in the Company's markets,
projections, and anticipated trends in the Company's business and the
industry in which it operates. The words "believe," "expect,"
"anticipate," "intends," "forecast," "project," and similar
expressions identify forward-looking statements. These forward-
looking statements are based largely on the Company's expectations
and are subject to a number of risks and uncertainties, including but
not limited to, those risks associated with economic conditions
generally and the economy in those areas where the Company has or
expects to have assets and operations; competitive and other factors
affecting the Company's operations, markets, products and services;
those risks associated with the Company's ability to successfully
negotiate with certain customers, risks relating to estimated
contract costs, estimated losses on uncompleted contracts and
estimates regarding the percentage of completion of contracts,
associated costs arising out of the Company's activities and the
matters discussed in this report; risks relating to changes in
interest rates and in the availability, cost and terms of financing;
risks related to the performance of financial markets; risks related
to changes in domestic laws, regulations and taxes; risks related to
changes in business strategy or development plans; risks associated
with future profitability; and other factors discussed elsewhere in
this report and in documents filed by the Company with the Securities
and Exchange Commission. Many of these factors are beyond the
Company's control. Actual results could differ materially from these
forward-looking statements. In light of these risks and
uncertainties, there can be no assurance that the forward-looking
information contained in this Form 10-QSB will, in fact, occur. The
Company does not undertake any obligation to revise these forward-
looking statements to reflect future events or circumstances and
other factors discussed elsewhere in this report and the documents
filed or to be filed by the Company with the Securities and Exchange
Commission.
Inflation
In the opinion of management, inflation has not had a material effect
on the operations of the Company.
Cautionary Factors that may Affect Future Results
We provide the following cautionary discussion of risks,
uncertainties and possible inaccurate assumptions relevant to our
business and our products. These are factors that we think could
cause our actual results to differ materially from expected results.
Other factors besides those listed here could adversely affect us.
Trends, Risks and Uncertainties
The Company has sought to identify what it believes to be the most
significant risks to its business as discussed in "Risk Factors"
above, but cannot predict whether or to what extent any of such risks
may be realized nor can there be any assurances that the Company has
identified all possible risks that might arise. Investors should
carefully consider all of such risk factors before making an
investment decision with respect to the Company's stock.
Limited operating history; anticipated losses; uncertainly of future
results
The Company has only a limited operating history upon which an
evaluation of the Company and its prospects can be based. The
Company's prospects must be evaluated with a view to the risks
encountered by a company in an early stage of development,
particularly in light of the uncertainties relating to the business
model that the Company intends to market and the potential acceptance
of the Company's business model. The Company will be incurring costs
to develop, introduce and enhance its products, to establish
marketing relationships, to acquire and develop products that will
complement each other, and to build an administrative organization.
To the extent that such expenses are not subsequently followed by
commensurate revenues, the Company's business, results of operations
and financial condition will be materially adversely affected. There
can be no assurance that the Company will be able to generate
sufficient revenues from the sale of its products and services. The
Company expects that negative cash flow from operations may exist for
the next 12 months as it continues to develop and market its products
and services. If cash generated by operations is insufficient to
satisfy the Company's liquidity requirements, the Company may be
required to sell additional equity or debt securities. The sale of
additional equity or convertible debt securities would result in
additional dilution to the Company's shareholders.
Potential fluctuations in quarterly operating results may fluctuate
significantly in the future as a result of a variety of factors, most
of which are outside the Company's control, including: the demand
for the Company's products and services; seasonal trends in demand
and pricing of products and services; the amount and timing of
capital expenditures and other costs relating to the expansion of the
Company's operations; the introduction of new services and products
by the Company or its competitors; price competition or pricing
changes in the industry; political risks and uncertainties involving
the world's markets; technical difficulties and general economic
conditions. The Company's quarterly results may also be
significantly affected by the impact of the accounting treatment of
acquisitions, financing transactions or other matters. Due to the
foregoing factors, among others, it is possible that the Company's
operating results may fall below the expectations of the Company
and/or investors in some future quarter.
Management of Growth
The Company expects to experience growth in the number of employees
relative to its current levels of employment and the scope of its
operations. In particular, the Company may need to hire scientists,
as well as sales, marketing and administrative personnel.
Additionally, acquisitions could result in an increase in employee
headcount and business activity. Such activities could result in
increased responsibilities for management. The Company believes that
its ability to attract, train, and retain qualified technical, sales,
marketing, and management personnel, will be a critical factor to its
future success. During strong business cycles, the Company may
experience difficulty in filling its needs for qualified personnel.
The Company's future success will be highly dependent upon its
ability to successfully manage the expansion of its operations. The
Company's ability to manage and support its growth effectively will
be substantially dependent on its ability to implement adequate
financial and management controls, reporting systems, and other
procedures and hire sufficient numbers of financial, accounting,
administrative, and management personnel. The Company is in the
process of establishing and upgrading its financial accounting and
procedures. There can be no assurance that the Company will be able
to identify, attract, and retain experienced accounting and financial
personnel. The Company's future operating results will depend on the
ability of its management and other key employees to implement and
improve its systems for operations, financial control, and
information management, and to recruit, train, and manage its
employee base. There can be no assurance that the Company will be
able to achieve or manage any such growth successfully or to
implement and maintain adequate financial and management controls and
procedures, and any inability to do so would have a material adverse
effect on the Company's business, results of operations, and
financial condition.
The Company's future success depends upon its ability to address
potential market opportunities while managing its expenses to match
its ability to finance its operations. This need to manage its
expenses will place a significant strain on the Company's management
and operational resources. If the Company is unable to manage its
expenses effectively, the Company's business, results of operations,
and financial condition may be materially adversely affected.
Risks associated with acquisitions
As a major component of its business strategy, the Company expects to
acquire assets and businesses relating to or complementary to its
operations. Any acquisitions by the Company would involve risks
commonly encountered in acquisitions of companies. These risks would
include, among other things, the following: the Company could be
exposed to unknown liabilities of the acquired companies; the Company
could incur acquisition costs and expenses higher than it
anticipated; fluctuations in the Company's quarterly and annual
operating results could occur due to the costs and expenses of
acquiring and integrating new businesses or technologies; the Company
could experience difficulties and expenses in assimilating the
operations and personnel of the acquired businesses; the Company's
ongoing business could be disrupted and its management's time and
attention diverted; the Company could be unable to integrate
successfully.
Liquidity and Working Capital Risks; Need for Additional Capital to
Finance Growth and Capital Requirements
We have had limited working capital and we are relying upon notes
(borrowed funds) to operate. We may seek to raise capital from public
or private equity or debt sources to provide working capital to meet
our general and administrative costs until net revenues make the
business self-sustaining. We cannot guarantee that we will be able
to raise any such capital on terms acceptable to us or at all. Such
financing may be upon terms that are dilutive or potentially dilutive
to our stockholders. If alternative sources of financing are
required, but are insufficient or unavailable, we will be required to
modify our growth and operating plans in accordance with the extent
of available funding.
New Business
We are a new business and you should consider factors which could
adversely affect our ability to generate revenues, which include, but
are not limited to, maintenance of positive cash flow, which depends
on our ability both to raise capital and to obtain additional
financing as required, as well as the level of sales revenues.
Potential fluctuations in quarterly operating results
Our quarterly operating results may fluctuate significantly in the
future as a result of a variety of factors, most of which are outside
our control, including: the demand for our products; seasonal trends
in purchasing, the amount and timing of capital expenditures and
other costs relating to the development of our products; price
competition or pricing changes in the industry; technical
difficulties or system downtime; general economic conditions, and
economic conditions specific to the healthcare industry. Our
quarterly results may also be significantly impacted by the impact of
the accounting treatment of acquisitions, financing transactions or
other matters. Particularly at our early stage of development, such
accounting treatment can have a material impact on the results for
any quarter. Due to the foregoing factors, among others, it is likely
that our operating results will fall below our expectations or those
of investors in some future quarter.
Lack of Independent Directors
We cannot guarantee that our Board of Directors will have a majority
of independent directors in the future. In the absence of a majority
of independent directors, our executive officers, who are also
principal stockholders and directors, could establish policies and
enter into transactions without independent review and approval
thereof. This could present the potential for a conflict of interest
between the Company and its stockholders generally and the
controlling officers, stockholders or directors.
Limitation of Liability and Indemnification of Officers and Directors
Our officers and directors are required to exercise good faith and
high integrity in our Management affairs. Our Articles of
Incorporation provide, however, that our officers and directors shall
have no liability to our shareholders for losses sustained or
liabilities incurred which arise from any transaction in their
respective managerial capacities unless they violated their duty of
loyalty, did not act in good faith, engaged in intentional misconduct
or knowingly violated the law, approved an improper dividend or stock
repurchase, or derived an improper benefit from the transaction. Our
Articles and By-Laws also provide for the indemnification by us of
the officers and directors against any losses or liabilities they may
incur as a result of the manner in which they operate our business or
conduct the internal affairs, provided that in connection with these
activities they act in good faith and in a manner that they
reasonably believe to be in, or not opposed to, the best interests of
the Company, and their conduct does not constitute gross negligence,
misconduct or breach of fiduciary obligations. To further implement
the permitted indemnification, we have entered into Indemnity
Agreements with our officers and directors.
Continued Control by Current Officers and Directors
The present officers and directors own approximately 89% of the
outstanding shares of Common Stock, and therefore are in a position
to elect all of our Directors and otherwise control the Company,
including, without limitation, authorizing the sale of equity or debt
securities of the Company, the appointment of officers, and the
determination of officers' salaries. Shareholders have no cumulative
voting rights.
The independent auditor's report issued in connection with the
audited financial statements of Bear Aerospace for the period ended
December 31, 2002, expresses "substantial doubt about its ability to
continue as a going concern," due to the Company's status as a
development stage company and its lack of significant operations. If
the Company is unable to develop its operations, the Company may have
to cease to exist, which would be detrimental to the value of the
Company's common stock. The Company can make no assurances that its
business operations will develop and provide the Company with
significant cash to continue operations.
Delays in the Introduction of Our Products
The Company may be subject to regulation by numerous governmental
authorities. Failure to obtain regulatory approvals or delays in
obtaining regulatory approvals by the Company, its collaborators or
licensees would adversely affect the marketing of products developed
by the Company, as well as hinder the Company's ability to generate
product revenues. Further, there can be no assurance that the
Company, its collaborators or licensees will be able to obtain the
necessary regulatory approvals. Although the Company does not
anticipate problems satisfying any of the regulations involved, the
Company cannot foresee the possibility of new regulations that could
adversely affect the business of the Company.
Dependence on Independent Parties to Produce our Products
The Company may be dependent upon current and future collaborations
with and among independent parties to research, develop, test,
manufacture, sell or distribute our products. The Company intends
to continue to rely on such collaborative arrangements. Some of the
risks and uncertainties related to the reliance on such
collaborations include, but are not limited to 1) the ability to
negotiate acceptable collaborative arrangements, 2) the fact that
future or existing collaborative arrangements may not be successful
or may not result in products that are marketed or sold, 3) such
collaborative relationships may actually act to limit or restrict the
Company, 4) collaborative partners are free to pursue alternative
technologies or products either on their own or with others,
including the Company's competitors, and 5) the Company's partners
may terminate a collaborative relationship and such termination may
require the Company to seek other partners, or expend substantial
additional resources to pursue these activities independently. These
efforts may not be successful and may interfere with the Company's
ability to manage, interact and coordinate its timelines and
objectives with its strategic partners.
Government Regulation and Legal Uncertainties
The Company is not currently subject to many direct government
regulation, other than the securities laws and the regulations
thereunder applicable to all publicly owned companies, the laws and
regulations applicable to businesses generally. It is possible that
certain laws and regulations may be adopted at the local, state,
national and international level that could effect the Company's
operations. Changes to such laws could create uncertainty in the
marketplace which could reduce demand for the Company's products or
increase the cost of doing business as a result of costs of
litigation or a variety of other such costs, or could in some other
manner have a material adverse effect on the Company's business,
financial condition, results of operations and prospects. If any such
law or regulation is adopted it could limit the Company's ability to
operate and could force the business operations to cease, which would
have a significantly negative effect on the shareholder's investment.
The integrated disclosure system for small business issuers adopted
by the Securities and Exchange Commission in Release No. 34-30968 and
effective as of August 13, 1992, substantially modified the
information and financial requirements of a "Small Business Issuer,"
defined to be an issuer that has revenues of less than $25,000,000;
is a U.S. or Canadian issuer; is not an investment company; and if a
majority-owned subsidiary, the parent is also a small business
issuer; provided, however, an entity is not a small business issuer
if it has a public float (the aggregate market value of the issuer's
outstanding securities held by non-affiliates) of $25,000,000 or
more. The Company is deemed to be a "small business issuer." The
Securities and Exchange Commission, state securities commissions and
the North American Securities Administrators Association, Inc.
("NASAA") have expressed an interest in adopting policies that will
streamline the registration process and make it easier for a small
business issuer to have access to the public capital markets. The
Company can make no assurances that any of these agencies will adopt
any such policies. Also, an agency could adopt such policy that may
have a detrimental effect to the Company's operations and it could
have a significantly negative effect on the value of the Company's
equity.
Limited Market Due To Penny Stock
The Company's stock differs from many stocks, in that it is a "penny
stock." The Securities and Exchange Commission has adopted a number
of rules to regulate "penny stocks." These rules include, but are not
limited to, Rules 3a5l-l, 15g-1, 15g-2, 15g-3, 15g-4, 15g-5, 15g-6
and 15g-7 under the Securities and Exchange Act of 1934, as amended.
Because our securities probably constitute "penny stock" within the
meaning of the rules, the rules would apply to us and our securities.
The rules may further affect the ability of owners of our stock to
sell their securities in any market that may develop for them. There
may be a limited market for penny stocks, due to the regulatory
burdens on broker-dealers. The market among dealers may not be
active. Investors in penny stock often are unable to sell stock back
to the dealer that sold them the stock. The mark-ups or commissions
charged by the broker-dealers may be greater than any profit a seller
may make. Because of large dealer spreads, investors may be unable to
sell the stock immediately back to the dealer at the same price the
dealer sold the stock to the investor. In some cases, the stock may
fall quickly in value. Investors may be unable to reap any profit
from any sale of the stock, if they can sell it at all. Stockholders
should be aware that, according to the Securities and Exchange
Commission Release No. 34- 29093, the market for penny stocks has
suffered in recent years from patterns of fraud and abuse. These
patterns include: - Control of the market for the security by one or
a few broker-dealers that are often related to the promoter or
issuer; - Manipulation of prices through prearranged matching of
purchases and sales and false and misleading press releases; -
"Boiler room" practices involving high pressure sales tactics and
unrealistic price projections by inexperienced sales persons; -
Excessive and undisclosed bid-ask differentials and markups by
selling broker-dealers; and - The wholesale dumping of the same
securities by promoters and broker- dealers after prices have been
manipulated to a desired level, along with the inevitable collapse of
those prices with consequent investor losses. Furthermore, the "penny
stock" designation may adversely affect the development of any public
market for the Company's shares of common stock or, if such a market
develops, its continuation. Broker-dealers are required to personally
determine whether an investment in "penny stock" is suitable for
customers. Penny stocks are securities (i) with a price of less than
five dollars per share; (ii) that are not traded on a "recognized"
national exchange; (iii) whose prices are not quoted on the NASDAQ
automated quotation system (NASDAQ-listed stocks must still meet
requirement (i) above); or (iv) of an issuer with net tangible assets
less than $2,000,000 (if the issuer has been in continuous operation
for at least three years) or $5,000,000 (if in continuous operation
for less than three years), or with average annual revenues of less
than $6,000,000 for the last three years. Section 15(g) of the
Exchange Act, and Rule 15g-2 of the Commission require broker-dealers
dealing in penny stocks to provide potential investors with a
document disclosing the risks of penny stocks and to obtain a
manually signed and dated written receipt of the document before
effecting any transaction in a penny stock for the investor's
account. Potential investors in the Company's common stock are urged
to obtain and read such disclosure carefully before purchasing any
shares that are deemed to be "penny stock." Rule 15g-9 of the
Commission requires broker-dealers in penny stocks to approve the
account of any investor for transactions in such stocks before
selling any penny stock to that investor. This procedure requires the
broker-dealer to (i) obtain from the investor information concerning
his or her financial situation, investment experience and investment
objectives; (ii) reasonably determine, based on that information,
that transactions in penny stocks are suitable for the investor and
that the investor has sufficient knowledge and experience as to be
reasonably capable of evaluating the risks of penny stock
transactions; (iii) provide the investor with a written statement
setting forth the basis on which the broker-dealer made the
determination in (ii) above; and (iv) receive a signed and dated copy
of such statement from the investor, confirming that it accurately
reflects the investor's financial situation, investment experience
and investment objectives. Compliance with these requirements may
make it more difficult for the Company's stockholders to resell their
shares to third parties or to otherwise dispose of them.
Potential Inability of Officers to Devote Sufficient Time to the
Operations of the Business
Although we have two (2) employees who consider themselves full time
employees, none have been paid salaries from the inception of the
Company. They continue to pursue other sources of income and may not
be able to devote sufficient time to the operations of the business.
PART II.
ITEM 1. LEGAL PROCEEDINGS.
Other than as set forth below, the Registrant is not a party to any
material pending legal proceedings and, to the best of its knowledge,
no such action by or against the Registrant has been threatened.
The Company is subject to other legal proceedings and claims that
arise in the ordinary course of its business. Although occasional
adverse decisions or settlements may occur, the Company believes that
the final disposition of such matters will not have material adverse
effect on its financial position, results of operations or liquidity.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
Sales of Unregistered Securities.
The Registrant had no sales of unregistered securities during the
three-month period ending March 31, 2003 other than disclosed herein.
Use of Proceeds.
Not Applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were not any matters submitted requiring a vote of security
holders during the three-month period ending March 31 2003 other than
as disclosed herein.
ITEM 5. OTHER INFORMATION.
Not Applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Reports on Form 8-K. No reports on Form 8-K were filed during
the three-month period covered in this Form 10-QSB other than
disclosed below.
(b) Exhibits. Exhibits included or incorporated by reference
herein: See Exhibit Index.
EXHIBIT INDEX
Exhibit Description
2 Exchange Agreement and Plan of Reorganization (incorporated
by reference to in the Form 8-K filed on July 13, 2001).*
3.1 Articles of Incorporation (incorporated by reference to Exhibit
3.1 to the Registration Statement on Form 10-SB/A filed on May
28, 1999).*
3.2 Amendment to the Articles of Incorporation for
Theinternetcorp.net, Inc. (incorporated by reference to in the
Form 8-K filed on July 13, 2001).*
3.3 Amendment to the Articles of Incorporation for
Theinternetcorp.net, Inc. (incorporated by reference to in the
Form 8-K filed on July 13, 2001).*
99.1 Certification pursuant of President to 18 U.S.C. Section 1350,
as adopted to Section 906 of the Sarbanes Oxley Act of 2002.
99.2 Certification pursuant of Chief Financial Officer to 18 U.S.C.
Section 1350, as adopted to Section 906 of the Sarbanes
Oxley Act of 2002.
*Documents previously filed with the SEC
CERTIFICATION
I, Skip Holm, certify that:
1. I have reviewed this report on Form 10-QSB of Bear Aerospace;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements and other
financial information included in this report, fairly present in all
material respects the financial condition, results of operations, and
cash flows of the registrant as of, and for the periods presented in
this report;
4. The registrant's other certifying officers and I are responsible
for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-14 and 15d-14 for the
registrant and have:
a) designed such disclosure controls and procedures to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this report is being prepared;
b) evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date within 90 days prior
to the filing date of this report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions
about the effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and
the audit committee of the registrant's board of directors (or
persons performing the equivalent functions);
a) all significant deficiencies in the design or operation
of internal controls which could adversely affect the
registrant's ability to record, process, summarize, and report
financial data and have identified for the registrant's auditors
any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have
indicated in this report whether or not there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of
our most recent evaluation, including any corrective actions,
with regard to significant deficiencies and material weaknesses.
Date: October 16, 2003
/s/ Skip Holm
Skip Holm, President and CEO
CERTIFICATION
I, David Fawcett, certify that:
1. I have reviewed this report on Form 10-QSB of Bear Aerospace;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements and other
financial information included in this report, fairly present in all
material respects the financial condition, results of operations, and
cash flows of the registrant as of, and for the periods presented in
this report;
4. The registrant's other certifying officers and I are responsible
for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-14 and 15d-14 for the
registrant and have:
a) designed such disclosure controls and procedures to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this report is being prepared;
b) evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date within 90 days prior
to the filing date of this report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions
about the effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and
the audit committee of the registrant's board of directors (or
persons performing the equivalent functions);
a) all significant deficiencies in the design or operation
of internal controls which could adversely affect the
registrant's ability to record, process, summarize, and report
financial data and have identified for the registrant's auditors
any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have
indicated in this report whether or not there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of
our most recent evaluation, including any corrective actions,
with regard to significant deficiencies and material weaknesses.
Date: October 16, 2003
/s/ David Fawcett
David Fawcett, Treasurer
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Bear Aerospace, Inc.
Dated: October 16, 2003 By: /s/ Skip Holm
Skip Holm, President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf
of the Company and in the capacities and on the date indicated:
Signature Title Date
/s/ Skip Holm President/CEO/Director October 16, 2003
Skip Holm
/s/ David Fawcett Secretary/Treasurer/Director October 16, 2003
David Fawcett