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SLNR > SEC Filings for SLNR > Form 10-Q on 21-Apr-2014All Recent SEC Filings




Quarterly Report

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

Cautionary Notice Regarding Forward Looking Statements

The information contained in Item 2 contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. Actual results may materially differ from those projected in the forward-looking statements as a result of certain risks and uncertainties set forth in this report. Although management believes that the assumptions made and expectations reflected in the forward-looking statements are reasonable, there is no assurance that the underlying assumptions will, in fact, prove to be correct or that actual results will not be different from expectations expressed in this report.

This filing contains a number of forward-looking statements which reflect management's current views and expectations with respect to our business, strategies, products, future results and events, and financial performance. All statements made in this filing other than statements of historical fact, including statements addressing operating performance, events, or developments which management expects or anticipates will or may occur in the future, including statements related to distributor channels, volume growth, revenues, profitability, new products, adequacy of funds from operations, statements expressing general optimism about future operating results, and non-historical information, are forward looking statements. In particular, the words "believe," "expect," "intend," "anticipate," "estimate," "may," variations of such words, and similar expressions identify forward-looking statements, but are not the exclusive means of identifying such statements, and their absence does not mean that the statement is not forward-looking. These forward-looking statements are subject to certain risks and uncertainties, including those discussed below. Our actual results, performance or achievements could differ materially from historical results as well as those expressed in, anticipated, or implied by these forward-looking statements. We do not undertake any obligation to revise these forward-looking statements to reflect any future events or circumstances.

Readers should not place undue reliance on these forward-looking statements, which are based on management's current expectations and projections about future events, are not guarantees of future performance, are subject to risks, uncertainties and assumptions (including those described below), and apply only as of the date of this filing. Our actual results, performance or achievements could differ materially from the results expressed in, or implied by, these forward-looking statements. Factors which could cause or contribute to such differences include, but are not limited to, the risks to be discussed in our Annual Report on Form 10-K and in the press releases and other communications to shareholders issued by us from time to time which attempt to advise interested parties of the risks and factors which may affect our business. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.


Sealand Natural Resources Inc. (the "Company", "We", or "Us") is a research and new product development company that manufactures, markets and sells "new age functional beverages", organic nutriceuticals, health supplements, organic raw materials and health food worldwide with the goal of delivering beneficial health effects to those who enjoy our 100% natural and organic products. Our mission is to become a leader in this category and we see the future as a growing market segment which fits our mission.

The Company's initial focus is the "alternative" beverage category, which combines non-carbonated ready-to-drink iced teas, lemonades, juice cocktails, single-serve juices and fruit beverages, ready-to-drink dairy and coffee drinks, energy drinks, sports drinks, and single-serve still water (flavored, unflavored and enhanced) with "new age" beverages, including sodas that are considered natural, sparkling juices and flavored sparkling beverages. Additionally, the Company has other products in development to add to the Company's product sales pipeline. We believe that one of the keys to success in the beverage industry is differentiation, making our brands research proven and visually distinctive from other beverages on the shelves of retailers.

Plan of Operations

We expect that working capital requirements will continue to be funded through a combination of our existing funds and further issuances of securities. Our working capital requirements are expected to increase in line with the growth of our business.

Existing working capital, further advances and debt instruments, and anticipated cash flow are expected to be adequate to fund our operations over the next six months. We have no lines of credit or other bank financing arrangements. Generally, we have financed operations to date through the proceeds of the private placement of equity and debt instruments. In connection with our business plan, management anticipates additional increases in operating expenses and capital expenditures relating to: (i) acquisition of inventory; (ii) developmental expenses associated with a start-up business; and (iii) marketing expenses. We intend to finance these expenses with further issuances of securities, and debt issuances. Thereafter, we expect we will need to raise additional capital and generate revenues to meet long-term operating requirements. Additional issuances of equity or convertible debt securities will result in dilution to our current shareholders. Further, such securities might have rights, preferences or privileges senior to our common stock. Additional financing may not be available upon acceptable terms, or at all. If adequate funds are not available or are not available on acceptable terms, we may not be able to take advantage of prospective new business endeavors or opportunities, which could significantly and materially restrict our business operations.

Over the next 12 months, our aim to drive sales growth of our flagship product, BIRK, focuses on three targets: 1) ongoing brand awareness via tradeshows, in store promotion, and other marketing campaigns; 2) additional consumer education on health information and the differentiation of our product vs. traditional soda and sports juices, and; 3) increasing our distribution network - being available in more retail outlets and increasing our presence online. It may be necessary to obtain additional working capital, via additional private placement proceeds or debt instruments in order to accomplish those goals, if working cash flow is not sufficient to sustain the efforts. However, we cannot make any assurance that we will be successful in obtaining additional financing or if the financing terms will be favorable to the Company.

Results of Operations

Comparison for the three and nine months ended February 28, 2014 and 2013


For the three months ended February 28, 2014, we generated revenues of $156,234, as compared to $244,765 for the same period in 2013. For the nine months ended February 28, 2014, we generated revenues of $419,669, as compared to $245,317 for the same period in 2013. The decrease in revenue for the quarter was attributable to the timing of orders. Some customers that placed orders in the 2013 comparison quarter did not, due to cyclical nature of the business, reorder in the current fiscal quarter. The increase in revenue for the nine months was attributable to establishing new sales contracts with new vendors, both domestic and international.

Operating Expenses

Operating costs for the three months ended February 28, 2014 were $1,745,179, as compared to $129,022 for the same period in 2013. Operating costs for the nine months ended February 28, 2014 were $2,751,698, as compared to $292,461 for the same period in 2013. These costs are connected to general and administrative expenses, which are comprised of wages and salaries, advertising, professional fees, and other related expenses. Expenses increased primarily due to: a) increased scale and scope of business operations; b) greater emphasis on marketing and advertising efforts, and: c) professional and related consulting fees.

In the current quarter, as in prior quarters, we used common stock as a method of payment for certain services as incentive to its key employees. We expect to continue these arrangements.

Net Loss

Our net loss for the three months ended February 28, 2014 was ($1,823,156) as compared to ($16,867) for the same period in 2013. Our net loss for the nine months ended February 28, 2014 was ($2,793,161) as compared to ($188,771) for the same period in 2013. The increase in the losses was mainly attributable to the expenses associated with issuing stock at a discount for capital investments and increased outside consulting services.

Liquidity and Capital Resources

As of February 28, 2014, our current assets were $1,143,267 and our total liabilities were $320,623. As of February 28, 2014, current assets were comprised of $582,695 in cash, $441,470 of receivables, $112,602 of inventory, and $6,500 in prepaid items. As of February 28, 2014, total liabilities were comprised of $104,623 in accounts payable, and $216,000 of notes payable.

As of February 28, 2014, our total assets were $1,557,330 comprised of current assets, furniture/equipment of $132,795, $142,435 of deposits, and $138,833 of prepaid rent. Stockholders' deficit decreased from $702,027 as of February 28, 2014 to $1,236,707 as of February 28, 2014.

Cash Flows From Operating Activities

We have not generated positive cash flows from operating activities. For the nine months ended February 28, 2014, net cash flows used in operating activities was $3,126,585. Net cash flows used in operating activities was $563,131 for the nine months ended February 28, 2013.

Cash Flows From Financing Activities

We have financed our operations primarily from either advancements or the issuance of equity and debt instruments. For the nine month period ended February 28, 2014, net cash provided by financing activities was $3,751,183. For the nine month period ended February 28, 2013, net cash provided by financing activities was $563,163.

Going Concern

The financial statements for the period ended February 28, 2014 contain an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern. The financial statements have been prepared "assuming that we will continue as a going concern," which contemplates that we will realize our assets and satisfy our liabilities and commitments in the ordinary course of business.

Recent Accounting Pronouncements

Except for rules and interpretive releases of the SEC under authority of federal securities laws and a limited number of grandfathered standards, the FASB Accounting Standards Codification™ ("ASC") is the sole source of authoritative GAAP literature recognized by the FASB and applicable to the Company. Management has reviewed the aforementioned rules and releases and believes any effect will not have a material impact on the Company's present or future consolidated financial statements.

Critical Accounting Policies

Our significant accounting policies are presented in our notes to financial statements for the period ended February 28, 2014 contained in this Quarterly Report on Form 10-Q, and fiscal year ended May 31, 2013, which are contained in the Company's 2013 Annual Report on Form 10-K. The significant accounting policies that are most critical and aid in fully understanding and evaluating the reported financial results include the following:

The Company prepares its financial statements in conformity with GAAP. These principles require 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. Management believes that these estimates are reasonable and have been discussed with our board of directors; however, actual results could differ from those estimates.

We issue restricted stock to consultants for various services. Cost for these transactions are measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The value of the common stock is measured at the earlier of (i) the date at which a firm commitment for performance by the counterparty to earn the equity instruments is reached or (ii) the date at which the counterparty's performance is complete.

The Company evaluates the recoverability of long-lived assets and the related estimated remaining lives at each balance sheet date. The Company records an impairment or change in useful life whenever events or changes in circumstances indicate that the carrying amount may not be recoverable or the useful life has changed.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

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