SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
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CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) December 16, 2004
SEA SUN CAPITAL CORPORATION
---------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-32307 59-3518707
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(State of Incorporation) (Commission (IRS Employer
File Number) Identification No.)
424 Brookmill Road
Oakville, Ontario L6J 5K5, Canada
---------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code (905) 884-3680
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(Former Name or Former Address if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions.
[_] Written communications pursuant to Rule 425 under the Securities Act (17
CFR240.14d-2(b))
[_] Soliciting material pursuant to Rule 14a-12 under Exchange Act (17
CFR240.14a-12)
[_] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR240.14d-2(b))
[_] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR240.13e-4(c))
Item 2.01. Completion of Acquisition or Disposition of Assets.
- ---------------------------------------------------------------
In July 2004, Sea Sun Capital Corporation, a Delaware Corporation (the
"Company") entered into an exchange Agreement (the "Acquisition Agreement") with
all of the stockholders (the "Stockholders") of Sea Sun Capital Corporation, a
Canadian corporation (Sea Sun). On December 16, 2004, (the "Closing Date"),
pursuant to the terms of the Acquisition Agreement, the Company acquired all of
the issued and outstanding capital stock of Sea Sun from the Sea Sun
stockholders in exchange for an aggregate of 8,607,228 newly issued shares of
the Company's Common Stock (the "Acquisition").
Sea Sun Capital Corporation is a leading company which distributes the
environmentally friendly Sea Vu glass-bottom personal watercraft to the world's
largest industry, the tourism market.
The new 2004 "Sea Spy" will be ready for introduction in the first quarter of
2005, and will appeal to additional markets not previously served.
The Company's revenue will be derived from three separate and distinctive
marketing approaches. Under the first approach, the Company has selected
corporate locations which will be managed and owned by the Company. Under the
second approach, the Company will sell master Licenses for geographic
territories to individuals and corporations, under the third approach, the
Company will retail the product through dealer networks and other means, such as
the Internet, trade shows and magazines. The latter approach will provide the
Company with broader brand recognition at a faster rate than the other sources
of revenue.
The company currently has 34 revenue-sharing contracts in effect with existing
Sea Vu watercraft owners throughout the Caribbean and Mexico. These Sea Vu
owners will be offered the first opportunities to purchase Master Licenses or
replace their existing watercraft with the new "Sea Spy" model. The Company has
established a training program that covers product knowledge, safety, marketing
and service.
The need for an exciting water sport alternative has been confirmed. As
environmental concerns and personal safety issues with jet skis become issues of
increasing concern significant opportunities have opened up for Sea Sun.
The Company will initially focus its efforts on the Caribbean, Mexican and Thai
markets. As the Company develops, it will expand into the Mediterranean, Hawaii
and Australia.
The Company currently offers only a one-person Sea Vu personal watercraft.
However, the new "Sea Spy" product line will also offer a two-person unit.
Significant enhancements to the older model will further open the underwater
world to divers and non-divers. The new "Sea Spy" will also target the water
search-and-rescue market. The Sea Vu and "Sea Spy" can be used on all waterways
and the design ensures stability on the water.
Environmentally unimposing, the Company's watercraft glides slowly over the reef
structures as the underwater world comes into view. The products allow large
numbers of interested visitors to view coral reefs up close without the risk of
damage to the delicate corals.
Perhaps the single most important aspect of the Sea Vu and Sea Spy is a patented
viewing window at the bow water line which offers an unparalleled view of the
beauty of the underwater world. The lens is optically correct and disperses
bubbles and turbulence for clear viewing while moving. Glass-bottom boats
currently in existence have to be stopped in order to allow a clear,
unobstructed underwater view. The lens' design results in a reduction in hull
noise that eliminates any noise that may alarm marine life. Water clarity is the
only limiting factor affecting viewing distance, allowing the user to see up to
100 feet or more. Marine life and forms, however, are not confined to deep
water. The Sea Vu's and 2004 Sea Spy's exclusive design also allows the crafts
to operate in only 12 inches of water. This feature allows the user to discover
an undersea world that is rich in beauty and teeming with magnificent marine
life.
The new Sea Spy will be powered by a high-performance, digitally controlled
Mercury motor with 50 lbs. of thrust that maximizes the unit's maneuverability.
Mercury Marine, the worlds' largest motor manufacturer, strongly supports the
product. All Company advertising will include "powered by Mercury." Two 12-volt
batteries that provide power to the motor are the latest in marine technology.
The dimensions of the single-person Sea Spy are 117" long by 45" wide with a
depth of 22". The craft weighs approximately 190 lbs. The two-person Sea Spy is
117" long by 90" wide with a depth of 24". The weight of the craft is
approximately 340 lbs.
The Sea Spy single-person and two-person watercraft come in a variety of
attractive colors and all are UV protected. From research and development to
quality of materials, to features, to craftsmanship, to reliable power, the new
Sea Spy watercraft is built durable.
The Sea Vu and Sea Spy lend themselves to the independent travelers and to
Ecotours for small groups. The Company will promote the use of local resources
and labor. The Company will continually remain mindful of conservation
objectives.
Item 4.01. Changes in Registrant's Certifying Accountant.
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On September 17, 2004, Sea Sun Capital Corporation (the "Company") engaged
Child, Sullivan and Company as its independent public accountants, to review the
Company's interim financial statements beginning with fiscal quarter ended
September 30, 2004, and to audit the Company's financial statements beginning
with fiscal year ending December 31, 2004. The appointment of Child, Sullivan
and Company as its independent public accountants was approved by the Company's
Board of directors. Effective with the appointment of Child, Sullivan and
company, the company amicably concluded its relationship with its prior
accountants, Livingston, Wachtel and Co. ("Livingston").
Prior to the appointment of Child, Sullivan and Company, the Company did not
consult with Child, Sullivan and Company on any matter of accounting principles
or practices, financial statement disclosure or auditing scope or procedure.
There were no disagreements with Livingston on any matter of accounting
principles or practices, financial statement disclosure or auditing scope or
procedure that would have caused Livingston to make references in any report to
such disagreements, and, in fact, issued no reports on the Company's financial
statements and performed no review or audit of statements for the Company.
Livingston's reports on the company's financial statements contained no adverse
opinion or disclaimer and were not modified as to audit scope or accounting
principles.
We have provided Livingston with a copy of this disclosure and requested that it
furnish a letter addressed to the Securities and Exchange Commission (the
"Commission") stating whether it agrees with the above statements. (A copy of
the letter addressed to the Commission is filed as Exhibit 16 to this report on
Form 8-K.)
Item 9.01. Financial Statements and Exhibits
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(a) Financial Statements of Sea Sun Capital Corporation
(c) Exhibits
Exhibit 2 Stock Purchase Agreement between the Issuer, Sea Sun Capital
Corporation (Canada) and Sea Sun Corporation (Canada)
Shareholders.
Exhibit 16 Letter from Livingston Wachtel and Co., CPAs dated December 15,
2004, regarding 8-K disclosure.
SIGNATURES
- ----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Sea Sun Capital Corporation
Date: December 28, 2004
By: /s/ Graham Millington
------------------------------
Graham Millington, President
SEA SUN CAPITAL CORPORATION
(A Development Stage Company)
FINANCIAL STATEMENTS
--------------------
For the Nine Months Ended September 30, 2004
and
From Inception, February 19, 2003, through December 31, 2003
F-1
SEA SUN CAPITAL CORPORATION
---------------------------
Financial Statements
--------------------
September 30, 2004
Contents
--------
Report of Independent Registered Public Accounting Firm
Financial Statements
Balance Sheets Statements of Operations and Comprehensive Loss
Statements of Shareholders' Equity
Statements of Cash Flows
Notes to Financial Statements
F-2
C h i l d , S u l l i v a n & C o m p a n y
-------------------------------------------------
Professional Corporation of CERTIFIED PUBLIC ACCOUNTANTS
PRINCIPALS: PROFESSIONALS
Douglas W. Child, CPA Cami Carlson
Scott L. Farnes Kristina Chamberlain
Brian Sullivan, CPA Rich Egan, CPA
Marty van Wagoner, CPA Keri Griffone
Nathan Johansen
John Larsen
Shelley McNamara
Natalie Murphy
Report of Independent Registered Public Accounting Firm
-------------------------------------------------------
Board of Directors and Shareholders
Sea Sun Capital Corporation
We have audited the balance sheets of Sea Sun Capital Corporation as of
September 30, 2004 and December 31, 2003, and the related statements of
operations and comprehensive loss, shareholders' equity and cash flows for the
nine months ended September 30, 2004 and the period of February 19, 2003 (date
of inception) through December 31, 2003. These 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
as established by the AICPA's Auditing Standards Board and in accordance with
the Standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audits 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 financial statements referred to above present fairly, in
all material respects, the financial position of Sea Sun Capital Corporation as
of September 30, 2004 and December 31, 2003, and the results of its operations
and its cash flows for the nine months ended September 30, 2004 and the period
of February 19, 2003 (date of inception) through December 31, 2003, in
conformity with accounting principles generally accepted in the United States of
America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 7 to the
financial statements, the Company has incurred significant net losses since
inception. This raises substantial doubt about the Company's ability to meet its
obligations and to continue as a going concern. Management's plans in regard to
this matter are described in Note 7. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Child, Sullivan & Company
Kaysville, Utah
November 24, 2004
1284 W. Flint meadow Drive, Suite D 4764 S. 900 E., Suite 3
Kaysville, Utah 84037 Salt Lake City, Utah 84117
Phone (801) 927-1337 Phone (801) 927-1337
Fax (801) 927-1344 www.cpaone.net Fax (801) 927-1344
Member of the AICPA Private Companies Practice Section
Registered with the Public Companies Accounting Oversight Board
Members of AHMA and NAHRO
F-3
SEA SUN CAPITAL CORPORRATION
(A Development Stage Company)
(Alberta, Canada)
BALANCE SHEETS
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September 30, December 31,
2004 2003
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ASSETS
Current assets:
Cash in bank $ 173 $ 34,905
Accounts receivable - related party (note 6) 2,317 -
Prepaid design work 3,163 -
---------------- ----------------
Total current assets 5,653 34,905
---------------- ----------------
Fixed assets:
Boats and accessories 208,563 152,047
Office equipment 1,600 1,302
---------------- ----------------
Total fixed assets 210,163 153,349
Less accumulated depreciation (25,029) -
---------------- ----------------
Net fixed assets 185,134 153,349
Other assets:
Intangible asset (note 5) 121,371 118,788
---------------- ----------------
Total assets $ 312,158 $ 307,042
================ ================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,560 $ -
Accounts payable - related party (note 6) 123,903 59,307
---------------- ----------------
Total current liabilities 126,463 59,307
Shareholders' equity:
Preferred stock; $.001 CDN par value, unlimited shares authorized,
no shares issued and outstanding (note 4) - -
Common stock; $.001 CDN par value, unlimited shares authorized,
8,607,228 and 7,715,228 shares issued and outstanding at
September 30, 2004 and December 31, 2003, respectively (note 4) 6,805 5,970
Capital in excess of par value 1,466,480 1,206,852
Accumulated other comprehensive loss (102,320) (66,741)
Deficit accumulated during the development stage (1,185,270) (898,346)
---------------- ----------------
Total shareholders' equity 185,695 247,735
---------------- ----------------
Total liabilities and shareholders' equity $ 312,158 $ 307,042
================ ================
See accompanying notes to the financial statements.
F-4
SEA SUN CAPITAL CORPORRATION
(A Development Stage Company)
(Alberta, Canada)
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
-----------------------------------------------
Cumulative
From Inception, from Inception,
For the Nine Months February 19, 2003, February 19, 2003,
Ended September 30, to December 31, to September 30,
2004 2003 2004
---------------- ---------------- ----------------
Revenue $ - $ - $ -
Expenses:
Consulting 143,763 810,338 954,101
Research and development 23,029 18,584 41,613
Legal fees 13,180 10,841 24,021
Vehicles 3,576 6,432 10,008
Contract labor 16,928 19,808 36,736
Depreciation 23,817 - 23,817
Travel, meals, and entertainment 31,464 23,549 55,013
Telephone 4,212 2,303 6,515
Advertising - 267 267
Other general and administrative 5,363 6,238 11,601
---------------- ---------------- ----------------
Total expenses 265,332 898,360 1,163,692
---------------- ---------------- ----------------
Net loss from operations (265,332) (898,360) (1,163,692)
Other income (expense)
Fixed asset write-off (21,593) - (21,593)
Interest income 1 14 15
---------------- ---------------- ----------------
Total other income (expense) (21,592) 14 (21,578)
---------------- ---------------- ----------------
Net loss before income taxes (286,924) (898,346) (1,185,270)
Provision for income taxes - - -
---------------- ---------------- ----------------
Net loss (286,924) (898,346) (1,185,270)
Foreign currency translation adjustments (35,579) (66,741) (102,320)
---------------- ---------------- ----------------
Total Comprehensive Loss $ (322,503) $ (965,087) $ (1,287,590)
================ ================ ================
Net loss per common share $ (0.04) $ (0.24)
================ ================
Weighted average outstanding shares 7,923,561 4,060,561
================ ================
See accompanying notes to the financial statements.
F-5
SEA SUN CAPITAL CORPORATION
(A Development Stage Company)
(Alberta, Canada)
STATEMENTS OF SHAREHOLDERS' EQUITY
----------------------------------
FROM INCEPTION, FEBRAURY 19, 2003, TO SEPTEMBER 30,2004
-------------------------------------------------------
Deficit
Accumulated Accumulated
Common stock Additional Other During the Total
------------ Paid-in Comprehensive Development Shareholders'
Shares Amount Capital Loss Stage Equity
------------ ------------ ------------ -------------- ------------ -------------
Balance, February 19, 2003 (inception) - $ - $ - $ - $ $ -
Shares issued at $0.064 USD ($.0833 CND)
per share cash 30,000 23 1,911 1,934
Shares issued at $0.193 USD ($.25 CND)
per share for cash 1,500,000 1,161 289,020 290,181
Shares issued at $0.271 USD ($.35 CND)
per share cash 185,228 143 50,023 50,166
Shares issued as founding shares 1,500,000 1,161 (1,161) -
Shares issued for services 4,500,000 3,482 867,059 870,541
Foreign currency translation (66,741) (66,741)
Net loss (898,346) (898,346)
-----------------------------------------------------------------------------------------
Balance, December 31, 2003 7,715,228 5,970 1,206,852 (66,741) (898,346) 247,735
Shares issued at $0..395 USD ($.50 CND)
per share cash 30,000 24 11,836 11,860
Shares issued at $0..237 USD ($.30 CND)
per share for fixed assets 300,000 237 70,921 71,158
Shares issued for services 562,000 444 150,631 151,075
Foreign currency translation 130 26,240 (35,579) (9,209)
Net loss (286,924) (286,924)
-----------------------------------------------------------------------------------------
Balance, September 30, 2004 8,607,228 $ 6,805 $ 1,466,480 $ (102,320) $(1,185,270) $ 185,695
=========================================================================================
See accompanying notes to the financial statements
F-6
SEA SUN CAPITAL CORPORATION
(A Development Stage Company)
(Alberta, Canada)
STATEMENTS OF CASH FLOWS
------------------------
Cumulative
From Inception, from Inception,
For the Nine Months February 19, 2003, February 19, 2003,
Ended September 30, to December 31, to September 30,
2004 2003 2004
---------------- ---------------- ----------------
Cash flows from operating activities
Net loss $ (286,924) $ (898,346) $ (1,185,270)
Adjustments to reconcile net loss to cash
provided by (used in) operating activities:
Depreciation 23,817 - 23,817
Shares issued for services 151,075 870,541 1,021,616
Write off of fixed assets 21,593 - 21,593
Changes in operating assets and liabilities:
Increase in accounts receivable -
related party (2,317) - (2,317)
Increase in prepaid design work (3,163) - (3,163)
Increase in accounts payable 2,560 - 2,560
Increase in accounts payable -
related party 64,596 59,307 123,903
---------------- ---------------- ----------------
Cash provided by (used in) operating
activities (28,763) 31,502 2,739
Cash flows from investing activities
Purchase of intangible assets - (118,788) (118,788)
Purchase of fixed assets (11,680) (153,349) (165,029)
---------------- ---------------- ----------------
Cash used in operating activities (11,680) (272,137) (283,817)
Cash flows from financing activities
Sale of common stock 11,860 342,281 354,141
---------------- ---------------- ----------------
Cash provided by financing activities 11,860 342,281 354,141
Net change in cash (28,583) 101,646 73,063
Foreign currency translation (6,149) (66,741) (72,890)
Cash at the beginning of the period 34,905 - -
---------------- ---------------- ----------------
Cash at the end of the period $ 173 $ 34,905 $ 173
================ ================ ================
Supplemental Information:
Common stock issued for fixed assets $ 71,158 $ - $ 71,158
================ ================ ================
See accompanying notes to the financial statements.
F-7
SEA SUN CAPITAL CORPORATION
(A Development Stage Company)
(Alberta, Canada)
Notes to Financial Statements
-----------------------------
Note 1 - Organization
- ---------------------
Sea Sun Capital Corporation (The Company) was organized under the laws
of Alberta, Canada on February 19, 2003. The Company is in business to
supply water leisure crafts and accessories to the international
market. The Company will generate revenues through rentals, royalties,
and sales of the watercrafts. The Company is considered a development
stage company as defined in SFAS No. 7. The Company has at the present
time, not paid any dividends and any dividends that may be paid in the
future will depend upon the financial requirements of the Company and
other relevant factors.
Note 2 - Basis of Presentation
- ------------------------------
The accompanying financial statements are prepared in accordance with
accounting principles generally accepted in the United States of
America (US GAAP). This basis differs from that used in the statutory
accounts of the Company, which were prepared in accordance with the
accounting principles and relevant financial regulations applicable to
enterprises in Canada. All necessary adjustments have been made to
present the financial statements in accordance with US GAAP.
Note 3 - Summary of Significant Accounting Policies
- ---------------------------------------------------
Net Earnings Per Share - The computation of net income (loss) per
share of common stock is based on the weighted average number of
shares outstanding during the periods presented.
Income Taxes - Due to losses at September 30, 2004 and since
inception, no provisions for income taxes has been made. There are no
deferred income taxes resulting from income and expense items being
reported for financial accounting and tax reporting purposes in
different periods. Deferred income tax assets arising from net
operating losses have been fully offset by valuation allowances, in
accordance with SFAS #109 "Accounting for Income Taxes," due to the
uncertainty of their realization.
The change in valuation allowance of $100,400 results from offsets
against deferred tax assets arising from net operating loss
carryforwards, which totaled $314,400 at December 31, 2003 and expire
in 2023.
A reconciliation of income tax expense (benefit) to the amount
computed by applying the federal statutory tax rate to pretax income
(loss):
9/30/04 12/31/03
--------- ----------
Net loss at federal statutory rate of 35% $ (100,400) $ (314,400)
Valuation allowance 100,400 314,400
------------ ------------
Net income expense (benefit) $ 0 $ 0
============ ============
Cash and Cash Equivalents - For purposes of the statement of cash
flows, the Company considers all highly liquid debt instruments
purchased with a maturity of three months or less to be cash
equivalents. During the nine months ending September 30, 2004 and
since inception, February 19, 2003, the Company did not have non-cash
investing activities other than as disclosed on the statements of cash
flows.
Use of Estimates - The preparation of financial statements in
conformity with accounting principles generally accepted in the United
States of America requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure 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.
F-8
SEA SUN CAPITAL CORPORATION
(A Development Stage Company)
(Alberta, Canada)
Notes to Financial Statements
-----------------------------
Note 3 - Summary of Significant Accounting Policies (continued)
- ---------------------------------------------------------------
Fixed Assets - Fixed assets are stated at cost less accumulated
depreciation, which is computed using the straight line method based
on estimated useful lives ranging from three (3) to five (5) years.
Long-term assets of the Company are reviewed annually to assess
whether the carrying value has become impaired, according to the
guidelines established in Statement of Accounting Standards (SFAS) No.
144, "Accounting for the Impairment or Disposal of Long-Lived Assets."
The Company also evaluates the periods of amortization to determine
whether subsequent events and circumstances warrant revised estimates
of useful lives. No impairment of assets was recorded in the periods
reported.
Revenue Recognition - The Company recognizes revenue at the time a
watercraft is rented or sold, or when other services are rendered. The
Company has not recognized any revenue from business operations since
inception, February 19, 2003.
Interim Financial Reporting - The Company's fiscal year end is
December 31. The Company's management have determined that the
accounting policies used for the interim period ended September 31,
2004 are in accordance with accounting principles generally accepted
in the United States of America applied on a consistent basis.
Advertising Costs - The Company generally expenses advertising costs
as incurred. The Company incurred $0 and $267 in advertising costs
during the nine months ended September 30, 2004 and for the period of
February 19, 2003 (inception) through December 31, 2003, respectively.
Foreign Currency and Comprehensive Income - Although the Company's
functional currency is the Canadian dollar (CND), the accompanying
financial statements have been presented in United States dollars
(USD). The exchange rates used for the balance sheets dated September
30, 2004 and December 31, 2003 were $.790639 USD per $1 CND, and
$.773814 USD per $1 CND, respectively. The weighted average exchange
rates used for the nine months ended September 30, 2004 and year ended
December 31, 2003 were $.752370 USD per $1 CND, and $.720300 USD per
$1 CND, respectively. Foreign currency translation gains or losses as
a result of fluctuations in the exchange rates are reflected in the
Statement of Other Comprehensive Income or Loss.
Note 4 - Common Stock Transactions
- ----------------------------------
The Company is authorized to issue an unlimited amount of its common
and preferred stock, both with a $.001 CND par value. The Company has
not issued any preferred stock, and has 8,607,228 and 7,715,228 shares
of common stock issued and outstanding at September 30, 2004 and
December 31, 2003, respectively. The common stock was issued as
follows:
Upon incorporation on February 19, 2003, the Company issued 1,500,000
founding shares of its par value common stock to one of its directors.
In March 2003, the Company issued 30,000 shares of its common stock at
$.064 USD for total cash of $1,934 USD.
During March and April 2003, the Company issued 1,500,000 shares of its
common stock at $.193 USD for total cash of $290,181 USD.
In May and July 2003, the Company issued 185,228 shares of its common
stock at $.271 USD for total cash of $50,166 USD.
In September, November, and December 2003, the Company issued
4,500,000 shares of its common stock in exchange for consulting
services. The shares were valued at an estimated $.193 USD for total
expense of $870,541.
In April 2004, the Company issued 30,000 shares of its common stock at
$.395 USD for total cash of $11,860 USD.
F-9
SEA SUN CAPITAL CORPORATION
(A Development Stage Company)
(Alberta, Canada)
Notes to Financial Statements
-----------------------------
Note 4 - Common Stock Transactions (continued)
- ----------------------------------------------
In May 2004, the Company issued 300,000 shares of its common stock at
$.237 USD in exchange for fixed assets with a total value of $71,158
USD.
In May and July 2004, the Company issued 562,000 shares of its common
stock in exchange for consulting services. The shares were valued at
an estimated $.269 USD for total expense of $151,075.
Note 5 - Intangible Asset
- -------------------------
In December 2003, the Company acquired watercrafts and accessories
with a fair market value of $196,490 CND from an entity with which the
Company's director is affiliated. The Company paid the entity $350,000
CND, which resulted in an intangible asset of $153,510 CND. The
intangible asset consists of marketing and other efforts made by the
entity to establish brand recognition of the Company's product. Using
the exchange rates at September 30, 2004 and December 31, 2003, the
intangible asset had a value of $121,371 USD and $118,788 USD,
respectively. Minimal (if any) impairment in accordance with SFAS
#142, `Goodwill and Other Intangible Assets,' was noted, and
therefore, not recorded.
Note 6 - Related Party Transactions
- -----------------------------------
The majority of the Company's expenses are paid by an entity
affiliated with one of the Company's directors. As the Company has not
yet established profitable operations and is considered to be a
development stage company, the Company has accumulated debt owed to
the entity of $123,903 USD and $59,307 USD at September 30, 2004 and
December 31, 2003, respectively. In 2004, the Company advanced $2,317
to another entity with which one of the Company's directors is
affiliated that is still owed to the Company at September 30, 2004.
Note 7 - Development Stage Company and Going Concern
- ----------------------------------------------------
The Company is in the development stage as defined in Financial
Accounting Standards Board Statement No. 7 and has incurred
significant cumulative net losses. The Company plans to merge with a
United States company that is publicly traded in attempts to raise
additional capital to facilitate profitable operations from its
planned business purpose. However, there can be no assurance that the
funds raised will be sufficient or that the Company will be able to
obtain additional funding or generate profitable operations, or that
other funding, if obtained in adequate amounts, will be on terms
favorable to the Company to execute its business plan.
F-10