UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended August
31, 2014
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: 000-55172
SEALAND NATURAL RESOURCES INC.
(Exact name of registrant as specified in
its charter)
Nevada |
|
45-2416474 |
(State or other jurisdiction of
incorporation or organization) |
|
(I.R.S. Employer Identification No.) |
50 W. Liberty Street #880
Reno, Nevada |
|
89501 |
(Address of principal executive offices) |
|
(Zip Code) |
(702) 530-8665
(Registrant’s telephone number, including
area code)
N/A
(Former name, former address and former
fiscal year, if changed since last report)
Indicate by check mark whether the registrant
(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 registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes
x No
¨
Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes
x No
¨
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the
definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in
Rule 12b-2 of the Exchange Act.
Large accelerated filer ¨ |
Accelerated filer ¨ |
|
|
Non-accelerated filer ¨ (do not check if smaller reporting company) |
Smaller reporting company x |
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No
x
As of October 20, 2014, the registrant had 2,773,375 shares
of common stock issued and outstanding.
SEALAND NATURAL RESOURCES INC.
TABLE OF CONTENTS
FORM 10-Q REPORT
August 31, 2014
PART I - FINANCIAL
INFORMATION
Item 1.
Financial Statements.
SEALAND NATURAL RESOURCES, INC.
FORMERLY VITAS GROUP,
INC.
(A Development
Stage Enterprise)
Table of Contents
SEALAND NATURAL RESOURCES, INC.
FORMERLY VITAS GROUP,
INC.
(A Development
Stage Enterprise)
Balance Sheets
| |
August 31, | | |
May 31, | |
| |
2014 | | |
2014 | |
| |
Unaudited | | |
Audited | |
ASSETS | |
| | | |
| | |
Current assets: | |
| | | |
| | |
Cash | |
$ | 439,388 | | |
$ | 810,433 | |
Accounts receivable, net of allowance | |
| 212,990 | | |
| 530,637 | |
Inventory | |
| 125,047 | | |
| 109,628 | |
Prepaids | |
| 56,703 | | |
| 48,086 | |
Total current assets | |
| 834,128 | | |
| 1,498,784 | |
| |
| | | |
| | |
Fixed assets | |
| | | |
| | |
Furniture and Equipment, net | |
| 85,308 | | |
| 85,579 | |
| |
| | | |
| | |
Other assets | |
| | | |
| | |
Security deposits on land useage | |
| 150,000 | | |
| 150,000 | |
| |
| | | |
| | |
Total assets | |
$ | 1,069,436 | | |
$ | 1,734,363 | |
| |
| | | |
| | |
LIABILITIES | |
| | | |
| | |
Current liabilities: | |
| | | |
| | |
Accounts payable and accrued taxes | |
$ | 132,275 | | |
$ | 49,198 | |
Related party loans | |
| - | | |
| - | |
Notes Payable | |
| 113,751 | | |
| 108,000 | |
Accounts recievable holdback liability | |
| - | | |
| 250,000 | |
| |
| | | |
| | |
Total current liabilities | |
| 246,026 | | |
| 407,198 | |
| |
| | | |
| | |
Total liabilities | |
| 246,026 | | |
| 407,198 | |
| |
| | | |
| | |
STOCKHOLDERS' DEFICIT | |
| | | |
| | |
Common stock, $0.001 par value, 75,000,000
authorized, 2,717,029 and 2,678,515 shares issued and outstanding | |
| 2,717 | | |
| 2,679 | |
Capital in excess of par value | |
| 4,237,415 | | |
| 3,898,776 | |
Stock subscription | |
| 1,230,280 | | |
| 1,003,575 | |
Deficit accumulated during the development stage | |
| (4,647,002 | ) | |
| (3,577,865 | ) |
Total stockholders' deficit | |
| 823,410 | | |
| 1,327,165 | |
Total liabilities and stockholders' deficit | |
$ | 1,069,436 | | |
$ | 1,734,363 | |
The accompanying notes are an integral part of these statements.
SEALAND NATURAL RESOURCES, INC.
FORMERLY VITAS GROUP,
INC.
(A Development
Stage Enterprise)
Statement of Operations
Unaudited
| |
Three months | | |
Three months | |
| |
August 31, | | |
August 31, | |
| |
2014 | | |
2013 | |
| |
| | |
| |
Sales | |
$ | 125,203 | | |
$ | 42,067 | |
| |
| | | |
| | |
Cost of Sales | |
| 132,766 | | |
| 48,605 | |
| |
| | | |
| | |
Gross Profit | |
| (7,563 | ) | |
| (6,538 | ) |
| |
| | | |
| | |
General and administrative expenses: | |
| | | |
| | |
Wages and salaries | |
| 181,054 | | |
| 113,324 | |
Advertising and marketing | |
| 82,693 | | |
| 12,023 | |
Legal and professional | |
| 92,103 | | |
| 41,223 | |
Bad debts | |
| 225,000 | | |
| | |
Stock based professional fees | |
| 284,458 | | |
| | |
Computer and internet | |
| 5,984 | | |
| 2,761 | |
Travel and entertainment | |
| 54,718 | | |
| 22,103 | |
Product development costs | |
| 3,258 | | |
| 3,766 | |
Bank charges | |
| 1,678 | | |
| 2,122 | |
Rent | |
| 38,787 | | |
| 19,085 | |
Depreciation and amortization | |
| 2,943 | | |
| 1,527 | |
Other office and miscellaneous | |
| 41,918 | | |
| 18,520 | |
Total operating expenses | |
| 1,014,594 | | |
| 236,454 | |
(Loss) from operations | |
| (1,022,157 | ) | |
| (242,992 | ) |
| |
| | | |
| | |
Other income (expense): | |
| | | |
| | |
Interest (expense) | |
| (46,980 | ) | |
| (4,700 | ) |
Income/(Loss) before taxes | |
| (1,069,137 | ) | |
| (247,692 | ) |
| |
| | | |
| | |
Provision/(credit) for taxes on income | |
| - | | |
| - | |
Net Income/(loss) | |
$ | (1,069,137 | ) | |
$ | (247,692 | ) |
| |
| | | |
| | |
Basic earnings/(loss) per common share | |
$ | (0.40 | ) | |
$ | (0.12 | ) |
| |
| | | |
| | |
Weighted average number of shares outstanding | |
| 2,705,431 | | |
| 2,135,000 | |
The accompanying notes are an integral part of these statements.
SEALAND NATURAL RESOURCES, INC.
FORMERLY VITAS GROUP,
INC.
(A Development
Stage Enterprise)
Statement of Cash
Flows
Audited
| |
Three months | | |
Three months | |
| |
August 31, | | |
August 31, | |
| |
2014 | | |
2013 | |
| |
| | |
| |
Cash flows from operating activities: | |
| | | |
| | |
Net income (loss) | |
$ | (1,069,137 | ) | |
$ | (247,692 | ) |
| |
| | | |
| | |
Adjustments to reconcile net (loss) to cash | |
| | | |
| | |
provided (used) by developmental stage activities: | |
| | | |
| | |
Common stock issued for services | |
| 258,858 | | |
| | |
Depreciation and amortization | |
| 2,943 | | |
| 1,527 | |
Amortization of note discount | |
| 30,816 | | |
| | |
Stock option plan | |
| 25,600 | | |
| | |
Change in current assets and liabilities: | |
| | | |
| | |
Accounts receivable | |
| 92,647 | | |
| 104,801 | |
Inventory | |
| (15,419 | ) | |
| (14,431 | ) |
Prepaids | |
| (8,617 | ) | |
| | |
Accounts receivable holdback liability | |
| | | |
| | |
Allowance for doubtful accounts | |
| 225,000 | | |
| | |
Accounts payable and accrued expenses | |
| 88,936 | | |
| (277,291 | ) |
Net cash flows from operating activities | |
| (368,373 | ) | |
| (433,086 | ) |
| |
| | | |
| | |
Cash flows from investing activities: | |
| | | |
| | |
Purchase of fixed assets | |
| (2,672 | ) | |
| | |
| |
| | | |
| - | |
Net cash flows from investing activities | |
| (2,672 | ) | |
| - | |
| |
| | | |
| | |
Cash flows from financing activities: | |
| | | |
| | |
Proceeds from sale of common stock | |
| | | |
| 590,000 | |
Deposits paid | |
| | | |
| (15,214 | ) |
Notes Payable | |
| | | |
| | |
Stock subscription receivable | |
| | | |
| (44,687 | ) |
Net cash flows from financing activities | |
| - | | |
| 530,099 | |
Net cash flows | |
| (371,045 | ) | |
| 97,013 | |
| |
| | | |
| | |
Cash and equivalents, beginning of period | |
| 810,433 | | |
| 34,297 | |
Cash and equivalents, end of period | |
$ | 439,388 | | |
$ | 131,310 | |
The accompanying notes are an integral part of these statements.
SEALAND NATURAL RESOURCES INC.
(A DEVELOPMENT
STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
August 31, 2014
Note 1 - Summary of Significant Accounting Policies
General Organization and Business
Sealand Natural Resources Inc. (“Sealand”
or the “Company”) is a Nevada corporation in the development stage. The Company was incorporated under the laws of
the State of Nevada on May 23, 2011. The Company engages in the manufacture, distribution, sales and marketing of all natural
functional beverages, nutriceuticals, health supplements and the harvesting of organic raw materials. The Company integrates critical
scientific, environmental and medical competencies in three core areas: exploration/discovery, characterization of health benefits,
and the ability to scale up new and natural consumer products for commercial use. The principal markets for the natural function
beverages are primarily Europe and Southeast Asia. The product is primarily sold to wholesale and retail distributors worldwide.
The Company’s operations are based
in the United States. We have an individual that works in Denmark who oversees the Birch Sap production and sales as well as an
additional support staff person in Denmark who assists in these tasks.
The Company’s activities are subject
to significant risks and uncertainties, including failing to secure additional funding to operationalize the Company’s market
penetration before another company develops a similar product.
The Company is in the development stage as defined under Statement
on Financial Accounting Standards Accounting Standards Codification FASB ASC 915-205 "Development-Stage Entities.”
The Company has adopted the new provision of FASB ASC 915-275 and is not reporting inception to date activities as previously
required.
Basis of presentation
The accompanying financial statements
have been prepared in accordance with generally accepted accounting principles in the United States of America, and pursuant to
the rules and regulations of the Securities and Exchange Commission (the “SEC”) and reflect all adjustments, consisting
of normal recurring adjustments, which management believes are necessary to fairly present the financial position, results of
operations and cash flows of the Company for the period ended August 31, 2014 and May 31, 2014 and for the three months ended
August 31, 2014 and 2013.
Use of estimates
The preparation of financial statements
in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those
estimates.
Cash and cash equivalents
The Company maintains a cash balance in
an interest and non-interest-bearing accounts. At times, cash balances may be in excess of the FDIC Insurance limit. For the purpose
of the statements of cash flows, all highly liquid investments with an original maturity of three months or less are considered
to be cash equivalents. There were no cash equivalents as of August 31, 2014 and May 31, 2014.
Property and Equipment
The Company values its investment in property
and equipment at cost less accumulated depreciation. Depreciation is computed primarily by the straight line method over the estimated
useful lives of the assets ranging from three to five years. As of August 31, 2014 and 2013 the company had recognized total depreciation
expense of $2,943 and $1,527, respectively.
Inventory
Inventory is recorded at lower of cost or market; cost is computed
on a first-in first-out basis. The inventory consists of imported flavoring , bottle caps, and labels used to produce the Company’s
all natural, organic birch tree beverage.
SEALAND NATURAL RESOURCES INC.
(A DEVELOPMENT
STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
August 31, 2014
Accounts receivable
Trade receivables are carried at original
invoice amount. Management has determined that an allowance for uncollectible accounts is necessary. The allowance for doubtful
accounts is based on management estimates of accounts that will not be collected in the future. Receivables past due for more
than 90 days are considered delinquent. Management determines uncollectible accounts by regularly evaluating individual customer
receivables and considering a customer’s financial condition, credit history, and current economic conditions and by using
historical experience applied to an aging of accounts. Recoveries of trade receivables previously written off are recorded when
received. Any account over 90 days past due is now analyzed and any risk of collection is added to allowance for doubtful accounts.
On February 20, 2014, the Company entered
into a factoring agreement and received $250,000 for certain accounts listed on their accounts receivable. The Company has an
obligation to repurchase these shares if the receivable is never collected. Due to this obligation the Company has recorded an
accounts receivable holdback liability. In August 2014, the Company and the factoring agent determined to eliminate this agreement.
The Company is issuing shares of stock for the monies received by the factoring agent. As of August 31, 2014, the Company has
recorded $250,000 as a stock subscription.
Revenue Recognition Policy
Revenue from the sale of goods is recognized when the following
conditions are satisfied:
| - | The Company has transferred to the buyer the significant risks
and rewards of ownership of the goods; |
| - | The Company retains neither continuing managerial involvement
to the degree usually associated with ownership nor effective control over the goods
sold; |
| - | The amount of revenue can be measured reliably; |
| - | It is probable that the economic benefits associated with the
transaction will flow to the entity; and |
| - | The costs incurred or to be incurred in respect to the transaction
can be measured reliably |
The time that all of the conditions listed above are satisfied
varies with each vendor depending on the specific terms to which the Company and each vendor agree. The range of terms varies
from pre-paid sales to 120 day payment.
Federal income taxes
Deferred income taxes
are reported for timing differences between items of income or expense reported in the financial statements and those reported
for income tax purposes in accordance with Accounting Standards Codification regarding Accounting for Income Taxes, which requires
the use of the asset/liability method of accounting for income taxes. Deferred income taxes and tax benefits are recognized for
the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases, and for tax loss and credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected
to be recovered or settled. Deferred taxes are provided for the estimated future tax effects attributable to temporary differences
and carryforwards when realization is more likely than not.
Net Income Per Share of Common Stock
We have adopted Accounting Standards Codification
regarding Earnings per Share, which requires presentation of basic and diluted EPS on the face of the income statement for all
entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation
to the numerator and denominator of the diluted EPS computation. In the accompanying financial statements, basic earnings per
share of common stock is computed by dividing net income by the weighted average number of shares of common stock outstanding
during the period. We do not have a complex capital structure requiring the computation of diluted earnings per share.
SEALAND NATURAL RESOURCES INC.
(A DEVELOPMENT
STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
August 31, 2014
Convertible Debentures:
Beneficial Conversion Features –
If the conversion features of conventional convertible debt provides for a rate of conversion that is below market value,
this feature is characterized as a beneficial conversion feature (“BCF”). A BCF is recorded as a debt discount pursuant
to FASB ASC Topic 470-20 “Debt with Conversion and Other Options.” In those circumstances, the convertible debt is
recorded net of the discount related to the BCF and the Company amortizes the discount to interest expense over the life of the
debt using the effective interest method.
Debt Discount – The Company
determines of the convertible debenture should be accounted for as liability or equity under FASB ASC 480, Liabilities –
Distinguishing Liabilities from Equity. FASB ASC 480, applies to certain contract involving a company’s own equity, and
requires that issuers classify the following freestanding financial instruments as liabilities. Mandatorily redeemable financial
instruments, Obligations that require or may require repurchase of the issuer’s equity shares by transferring assets (e.g.,
written put options and forward purchase contracts), and Certain obligations where at inception the monetary value of the obligation
is based solely or predominantly on:
| - | A fixed monetary amount known at
inception, for example, a payable settleable with a variable number of the issuer’s
equity shares with an issuance date fair value equal to a fixed dollar amount. |
| - | Variations in something other than
the fair value of the issuer’s equity shares for example, a financial instrument
indexed to the S&P 500 and settleable with a variable number of the issuer’s
equity shares, or |
| - | Variations inversely related to
changes in fair value of the issuer’s equity shares, for example, a written put
that could be net share settled. |
Fair value of financial instruments
and derivative financial instruments
We have adopted Accounting Standards Codification
regarding Disclosure About Derivative Financial Instruments and Fair Value of Financial Instruments. The carrying amounts of cash,
accounts payable, accrued expenses, and other current liabilities approximate fair value because of the short maturity of these
items. These fair value estimates are subjective in nature and involve uncertainties and matters of significant judgment, and,
therefore, cannot be determined with precision. Changes in assumptions could significantly affect these estimates. We do not hold
or issue financial instruments for trading purposes, nor do we utilize derivative instruments in the management of foreign exchange,
commodity price or interest rate market risks.
The Company does not use derivative financial
instruments to hedge exposures to cash-flow, market or foreign-currency risks. However, the Company has issued financial instruments
including senior convertible notes payable and freestanding stock purchase warrants with features that are either (i) not afforded
equity classification, (ii) embody risks not clearly and closely related to host contracts, or (iii) may be net-cash settled by
the counterparty. As required by FASB ASC 815, in certain circumstances, these instruments are required to be carried as derivative
liabilities, at fair value, in our financial statements.
Determination of
fair value:
The Company’s financial instruments
consist of convertible notes payable. The Company believes all of the financial instruments’ recorded values approximate
their fair values because of their nature and respective durations.
The Company complies with the provisions
of FASB ASC 820-10, “Fair Values Measurements and Disclosures.” FASB ASC 820-10 relates to financial assets and financial
liabilities. FASB ASC 820-10 defines fair value, establishes a framework for measuring fair value in accounting principles generally
accepted in the Unites States of America (GAAP), and expands disclosures about fair value measurements. The provisions of this
standard apply to other accounting pronouncements that require or permit fair value measurements and are to be applied prospectively
with limited exceptions.
FASB ASC 820-10 defines fair value as
the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants
at the measurement date. FASB ASC 820-10 establishes a fair value hierarchy that distinguishes between (1) market participant
assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own
assumptions, about market participant assumptions, that are developed based on the best information available in the circumstances
(unobservable inputs). The fair value hierarchy consist of three broad levels, which gives the highest priority to unadjusted
quoted prices in active markets for identical assets or liabilities (Level 1 and Level 2) and the lowest priority to unobservable
inputs (Level 3).
SEALAND NATURAL RESOURCES INC.
(A DEVELOPMENT
STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
August 31, 2014
Internal Website Development Costs
Under ASC350-50, Website Development
Costs, costs and expenses incurred during the planning and operating stages of the Company's website are expensed as incurred. Under
ASC 350-50, costs incurred in the website application and infrastructure development stages are capitalized by the Company and
amortized to expense over the website's estimated useful life or period of benefit.
Impairment of Long-Lived Assets
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.
Deferred Offering and Acquisition Costs
The Company defers as other assets the
direct incremental costs of raising capital until such time as the offering is completed. At the time of the completion
of the offering, the costs are charged against the capital raised. Should the offering be terminated, deferred offering
costs are charged to operations during the period in which the offering is terminated.
Common Stock Registration Expenses
The Company considers incremental costs
and expenses related to the registration of equity securities with the SEC, whether by contractual arrangement as of a certain
date or by demand, to be unrelated to original issuance transactions. As such, subsequent registration costs and expenses
are reflected in the accompanying financial statements as general and administrative expenses, and are expensed as incurred.
Development Stage Enterprise
The Company’s financial statements
are prepared as defined under Statement on Financial Accounting Standards Accounting Standards Codification FASB ASC 915-205 "Development-Stage
Entities”pursuant to the provisions of Topic 26, “Accounting for Development Stage Enterprises,” as it devotes
substantially all of its efforts to acquiring and developing functional beverages that will eventually provide sufficient net
profits to sustain the Company’s existence. Until such interests are engaged in major commercial production, the Company
will continue to prepare its financial statements and related disclosures in accordance with entities in the development stage.
Stock Based Compensation
The Company recognizes stock-based compensation
in accordance with ASC Topic 718 “Stock Compensation”, which requires the measurement and recognition of compensation
expense for all share-based payment awards made to employees and directors including employee stock options and employee stock
purchases related to an Employee Stock Purchase Plan based on the estimated fair values.
For non-employee stock-based compensation,
we have adopted ASC Topic 505 “Equity-Based Payments to Non-Employees”, which requires stock-based compensation related
to non-employees to be accounted for based on the fair value of the related stock or options or the fair value of the services
on the grant date, whichever is more readily determinable in accordance with ASC Topic 718.
Concentration of Credit Risk
and Significant Vendor
The Company has no significant off-balance
sheet risks related to foreign exchange contracts, options contracts or other foreign hedging arrangements. The Company does maintain
its supplier relationship with one vendor. The Company, by policy, routinely assesses the financial strength of this vendor.
SEALAND NATURAL RESOURCES INC.
(A DEVELOPMENT
STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
August 31, 2014
Recently Issued Accounting
Pronouncements
As of August 31, 2014 and May 31, 2014,
the Company does not expect any of the recently issued accounting pronouncements to have a material impact on its financial condition
or results of operations.
Note 2 - Uncertainty, going concern:
The Company’s financial statements
are prepared using generally accepted accounting principles in the United States of America applicable to a going concern which
contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet
established an ongoing source of revenues sufficient to cover its operating costs to allow it to continue as a going concern. As
of August 31, 2014, the Company had an accumulated deficit of$4,647,002. The ability of the Company to continue as a going concern
is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is
unable to obtain adequate capital, it could be forced to cease operations.
In order to continue as a going concern,
the Company will need, among other things, additional capital resources. The Company is contemplating conducting an offering of
its debt or equity securities to obtain additional operating capital. The Company is dependent upon its ability, and will continue
to attempt, to secure equity and/or debt financing. There are no assurances that the Company will be successful and without sufficient
financing it would be unlikely for the Company to continue as a going concern.
The ability of the Company to continue
as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and
eventually secure other sources of financing and attain profitable operations. These financial statements do not include any adjustments
relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that
might result from this uncertainty.
Note 3 – Restatement:
Quarter Ended August 31, 2013 Restatement:
The financial statements have been revised to correct an error
in accounting for the Company’s cash, accounts receivable, inventory, accounts payable and accrued expenses, sales, cost
of sales, general and administrative expenses and earnings per share. In accordance with applicable Generally Accepted Accounting
Principles (GAAP), the Company calculated and recognized adjustments accordingly.
On October 15, 2013, the Company filed with the SEC its reviewed
financial statements for the quarter ended August 31, 2013. Following the discovery of various material errors the
Company informed the SEC on January 10, 2014, that these financial statements could not be relied upon, and on January 21, 2014
filed its restated unaudited financial statements for the above mentioned period.
SEALAND NATURAL RESOURCES INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
August 31, 2014
The following table represents the effects of the restated
statements as of August 31, 2013.
| |
Restated | | |
Original | |
| |
8/31/2013 | | |
8/31/2013 | |
Cash | |
$ | 131,310 | | |
$ | 104,481 | |
| |
| | | |
| | |
Accounts receivable | |
$ | 142,016 | | |
$ | 219,027 | |
| |
| | | |
| | |
Inventory | |
$ | 127,776 | | |
$ | 137,237 | |
| |
| | | |
| | |
Deposits | |
$ | 55,214 | | |
$ | 57,189 | |
| |
| | | |
| | |
Accounts payable and accrued expenses | |
$ | 118,668 | | |
$ | 135,302 | |
| |
| | | |
| | |
Sales | |
$ | 42,067 | | |
$ | 12,753 | |
| |
| | | |
| | |
Cost of Sales | |
$ | 48,605 | | |
$ | 30,431 | |
| |
| | | |
| | |
General and Administrative expenses | |
$ | 236,454 | | |
$ | 180,330 | |
| |
| | | |
| | |
Accumulated deficit | |
$ | (1,185,172 | ) | |
$ | (1,140,188 | ) |
| |
| | | |
| | |
Earnings per share | |
$ | (0.12 | ) | |
$ | (0.09 | ) |
Quarter Ended February 28, 2014 Restatements:
The financial statements have been revised to correct an error
for incorrect accounting on discounted stock issuances, prepaid rent contract, fixed asset reporting error, an omitted foreign
bank account and related transactions, and the inclusion of expenses related to a stock option grant and subsequent vesting. The
effects of these errors are listed throughout the footnotes to the financial statements and reflected in total below. In accordance
with applicable Generally Accepted Accounting Principles (GAAP), the Company calculated and recognized adjustments accordingly.
On April 21, 2014, the Company filed with the SEC its reviewed
financial statements for the quarter ended February 28, 2014. Following the discovery of various material errors the Company informed
the SEC on July 14, 2014, that these financial statements could not be relied upon, and on July 16, 2014 filed its restated unaudited
financial statements for the above mentioned period.
Following the discovery of various material errors the Company
informed the SEC on August 11, 2014, that the financial statements for the quarter ended February 28, 2014, as restated, could
not be relied upon, and the Company filed, on September 17, 2014 its second restated unaudited financial statements for the above
mentioned period.
SEALAND NATURAL RESOURCES INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
August 31, 2014
The following table represents the effects of the first and
second restated statements for the three months ended February 28, 2014.
| |
Second Restatement | | |
First Restatement | | |
Original Filing | |
| |
Period | | |
Year to date | | |
Period | | |
Year to date | | |
Period | | |
Year to date | |
Cash | |
$ | 739,143 | | |
| | | |
$ | 582,695 | | |
| | | |
$ | 582,695 | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Fixed Assets | |
$ | 74,794 | | |
| | | |
$ | 132,795 | | |
| | | |
$ | 132,795 | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Deposits | |
$ | 292,435 | | |
| | | |
$ | 142,435 | | |
| | | |
$ | 142,435 | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Prepaid Rent | |
$ | - | | |
| | | |
$ | 138,833 | | |
| | | |
$ | 138,833 | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Accounts Payable | |
$ | 103,686 | | |
| | | |
$ | 104,623 | | |
| | | |
$ | 104,623 | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Accounts Receivable Holdback Liability | |
$ | 250,000 | | |
| | | |
$ | - | | |
| | | |
$ | - | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Additional Paid in Capital | |
$ | 3,311,606 | | |
| | | |
$ | 4,110,627 | | |
| | | |
$ | 4,110,627 | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Stock Subscription | |
$ | 521,635 | | |
| | | |
$ | 854,131 | | |
| | | |
$ | 854,131 | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Retained Deficit | |
$ | (2,738,573 | ) | |
| | | |
$ | (3,730,641 | ) | |
| | | |
$ | (3,730,641 | ) | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Total Assets | |
$ | 1,666,944 | | |
| | | |
$ | 1,557,330 | | |
| | | |
$ | 1,557,330 | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Total Liabilities | |
$ | 569,686 | | |
| | | |
$ | 320,623 | | |
| | | |
$ | 320,623 | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Total Equity | |
$ | 1,097,258 | | |
| | | |
$ | 1,236,707 | | |
| | | |
$ | 1,236,707 | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Cost of Sales | |
$ | 158,442 | | |
$ | 353,415 | | |
$ | 153,643 | | |
$ | 348,616 | | |
$ | 153,643 | | |
$ | 348,616 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
General and Administrative | |
$ | 1,155,437 | | |
$ | 1,754,831 | | |
$ | 2,152,304 | | |
$ | 2,751,698 | | |
$ | 1,745,179 | | |
$ | 2,751,698 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net Loss | |
$ | (1,238,213 | ) | |
$ | (1,801,093 | ) | |
$ | (2,230,281 | ) | |
$ | (2,793,161 | ) | |
$ | (1,823,156 | ) | |
$ | (2,793,161 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Earnings per share | |
$ | (0.53 | ) | |
$ | (0.77 | ) | |
$ | (0.95 | ) | |
$ | (1.19 | ) | |
$ | (0.78 | ) | |
$ | (1.19 | ) |
Note 4 – Service Agreements
On June 1, 2011, the Company entered into
a Service Agreement with Greg May. The agreement requires the Company to pay Mr. May a sum of $9,800 monthly fee plus de-minimus
fringe benefits. The agreement is cancellable by either party with written notice of termination. In May of 2013, the Company
modified this Service Agreement to include the issuance of 1,500 shares of the Company’s common stock paid out quarterly
basis (on an annual basis). The modified agreement was effective January 1, 2013 and the 1,500 shares to be issued on March 31,
2013, June 30, 2013, September 30, 2013, December 31, 2013, March 31, 2014 and June 30, 2014 have not been issued but have been
accounted for as a stock subscription payable.
On June 1, 2011, the Company entered into
a Service Agreement with Lars Poulsen. The agreement requires the Company to pay Mr. Poulsen a sum of $7,500 monthly fee plus
de-minimus fringe benefits. The agreement is cancellable by either party with written notice of termination. In May of 2013, the
Company modified this Service Agreement to include the issuance of 1,500 shares of the Company’s common stock paid out quarterly
basis (on an annual basis). The modified agreement was effective January 1, 2013 and the 1,500 shares to be issued on March 31,
2013, June 30, 2013, September 30, 2013, December 31, 2013, March 31, 2014 and June 30, 2014 have not been issued but have been
accounted for as a stock subscription payable.
SEALAND NATURAL RESOURCES INC.
(A DEVELOPMENT
STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
August 31, 2014
On January 1, 2013, the Company entered
into a Service Agreement with Steven Matteson. The agreement requires the Company to pay Mr. Matteson a sum of $2,500 monthly fee
plus de-minimus fringe benefits. The agreement is cancellable by either party with written notice of termination. Additionally,
the contract requires 1,500 shares of common stock paid out quarterly (on an annual basis). The 1,500 shares to be issued on March
31, 2013, June 30, 2013 and September 30, 2013 were issued in October 2013. On October 1, 2013, the Company modified this contract.
The modified contract now requires the issuance of 3,000 shares of stock a quarter (on an annual basis) and the Company will pay
all related taxes on these shares through a payroll deduction. Additionally, this officer can earn an additional 10,000 shares
when the Company achieves $2.0 million in net sales, an additional 10,000 shares with the Company achieves $3.0 million in net
sales and an additional 10,000 shares when the Company achieves $5.0 million in net sales. On December 31, 2013, the Company issued
1,500 shares of the 3,000 shares to be issued. The remaining 1,500 shares have been accounted for as a stock subscription payable.
Additionally, the 3,000 shares to be issued on March 31, 2014 and June 30, 2014 have not been issued and have been added to the
stock subscription payable. On July 18, 2014, the Company terminated the current agreement with Mr. Matteson and entered a new
Service Agreement. The Company terminated these shares and offset the stock subscription to the related expense. The new agreement
grants 1,500 shares per quarter starting on September 30, 2014 and a monthly payment of $6,000.
On July 2, 2013, the Company entered into
a Service Agreement with Peter Kuhn. The agreement is cancellable by either party with written notice of termination. The contract
requires 1,500 shares of common stock paid out quarterly (on an annual basis). Additionally, this officer can earn an additional
5,000 shares when the Company achieves $2.0 million in net sales and an additional 5,000 shares with the Company achieves $3.0
million in net sales. The shares earned on September 30, 2013 were issued in October 2013, the 1,500 shares were issued on December
31, 2013, the 1,500 for the quarter ending March 31, 2014 were issued on April 2, 2014 and the June 30, 2014 shares were issued
on July 1, 2014.
On March 1, 2014, the Company restructured
these service agreements. The Company eliminated the restricted nature of the shares earned and converted those to fully tradable
shares.
Note 5 – Security Deposit on Land Usage
On February 12, 2014, The Company entered into an agreement
with Tuomo Forest for the sole right to all raw organic birch sap to be harvested in the 42 hectares land owned by Tuomo Forest.
This exclusive agreement is valid for (10) ten years unless canceled in writing with a (4) four month notice. The Company has
a minimum order of 100,000 liters of birch sap per year. The agreement called for a deposit for usage of $150,000.
Note 6 – Cumulative sale of Common Stock
In 2011, the Company authorized the issuance
of 7,048 founder shares at par value. The Company formally issued these shares in 2012.
In 2012, the Company issued 704,796 shares
of founder shares at par value. The Company has also recorded a stock subscription receivable of $63,698 for the remaining outstanding
balance.
In 2012, the Company issued 466,357 shares at an average value
of $0.314 per share.
On February 13, 2013, the Company consummated
a revised merger agreement with Vitas Group, Inc. The majority shareholders purchased 2,500,000 shares of Vitas Group Inc. (a
Shell Company), which equates to 83.19% of its outstanding shares. These owners agreed to cancel 1,300,000 shares rather than
the original 800,000 of the Vitas Group shares. The shareholders of Sealand Natural Resources received 1 share of Vitas for every
50.00 shares of Sealand stock rather than 28.377 shares based on a cancellation of 800,000 shares per the original agreement.
The shareholders of Sealand received 1,200,000 shares of Vitas Group Inc. and the total outstanding shares were 2,105,000.
During the year ended May 31, 2013, the
Company received $350,000 for 87,500 shares of common stock. These shares were issued during the 1st fiscal quarter.
The Company has recorded a stock subscription
payable on March 31, 2013 for 4,500 shares that are required to be issued per the service agreements listed above. The amount
of this subscription is $28,800.
During the period March 1, 2013 through
May 31, 2013, the Company issued 60,000 shares for cash at a price of $4.00 per share. The Company received $240,000.
On June 3, 2013, the Company issued 52,625
shares to Northstar to settle an open accounts payable. The value of these shares is $210,500.
During the month of June 2013, the Company
issued 87,500 shares of common stock for $350,000 cash.
During the month of July 2013, the Company
issued 12,500 shares of common stock for $50,000 cash.
During the month of August 2013, the Company
issued 47,500 shares of common stock for $190,000 cash.
SEALAND NATURAL RESOURCES INC.
(A DEVELOPMENT
STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
August 31, 2014
During the month of September 2013, the
Company issued 130,000 shares of common stock for $520,000.
During September 2013, the Company issued
1,500 shares are part of their consulting agreement and recognized stock based compensation expense of $13,875.
During October 2013, the Company issued
4,500 shares are part of their consulting agreement and recognized stock based compensation expense of $34,380.
As of November 30, 2013, the Company has
not issued the shares applicable to the Service Agreements for two individuals. The Company has recorded a stock subscription
of $68,760 for the 9,000 shares that have not been issued.
On December 1, 2013 the Company issued
51,000 shares of stock to Michael Larkin for consultancy services and recognized $538,949 in expense.
During the month of December 2013, the
Company issued 94,500 shares of common stock for $567,000 cash.
During the month of January 2014, the
Company issued 3,000 shares are part of their consulting agreement and recognized stock based compensation expense of $35,250.
The Company received $550,000 in cash
but has not issued the shares of stock. This amount has been recorded as a stock subscription as of February 28, 2014. These 83,340
shares were issued in May 2014.
On March 31, 2014, the Company recorded
stock based compensation expense for three key individuals. The Company recorded an expense of $71,940 but did not issue the 6,000
shares. The Company has recorded these shares as a stock subscription payable.
During the month of April 2014, the Company
received cash of $810,000 for shares of common stock. These shares have not been issued and the amounts have been recorded as
a stock subscription payable.
On April 1, 2014, the Company issued 1,500
shares of common stock as part of their service agreement with one key individual. The Company recognized $17,985 in stock based
compensation expense.
On April 12, 2014, the Company issued
3,250 shares of common stock for professional services rendered. The Company recorded an expense of $39,975.
During the month of April 2014, the Company
issued 800 shares of common stock that was purchased in February 2012 but never issued.
During the month of June 2014, the Company
issued 17,600 shares of stock. The Company issued 8,300 shares and recorded an expense of $96,858 for stock based professional
fees and issued 9,300 shares of common stock that was purchased in February 2012 but never issued.
During the month of July 2014, the Company issued 20,914 shares
of common stock. The Company issued 1,500 shares as part of their consultancy agreement and recorded an expense of $15,150. The
Company also issued 18,000 shares of stock for professional services and recorded an expense of $162,000. Additionally, the Company
issued 1,414 shares that were purchased in February 2012 but never issued.
Note 7 – Convertible Notes Payable
Larkin Family Trust
In July 2012, the Company received a convertible
notes payable in the amount of $10,000. The note carries an 8% rate of interest and can be converted into common stock at a strike
price of $10.00 per share (adjusted for post-merger value).
In September 2012, the Company received
a convertible notes payable in the amount of $125,000. The note carries an 8% rate of interest and can be converted into common
stock at a strike price of $10.00 per share (adjusted for post-merger value).
SEALAND NATURAL RESOURCES INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
August 31, 2014
On November 22, 2013, the Company paid
off $25,000 of these notes payable and paid an additional $3,500 of accrued interest.
In December 2012, the Company received
a convertible notes payable in the amount of $100,000. The note carries an 8% rate of interest and can be converted into common
stock at a strike price of $12.50 per share (adjusted for post-merger value). On December 1, 2013, the Company re-negotiated this
convertible note. The Company renewed the note at $108,000, which includes accrued interest of $8,000. There is also a conversion
factor that allows the holder to convert these shares at $3 per share. The Company has recorded a beneficial conversion feature
of $258,840. The balance of this beneficial conversion feature at August 31, 2014 was $5,751.
Note 8 – Consulting Agreement
The Company has entered into an agreement with DASH Advisors,
LLC (“DASH”) to provide strategic direction and marketing strategy. The Company will pay a monthly retainer of $3,000
per month and grant 51,532 stock options to DASH, exercisable at $6.00 per share until January 1, 2024. The options vest over
time at the rate of 4,294 per month, until fully vested.
Note 9 – Joint Venture
On March 1, 2014, the Company entered
into a joint venture with KeeSan Family Co, Ltd. The purpose of the joint venture is the development and growth of Birk brand
in Asia. The joint venture is called Sealand Natural Resources Korea Co, Ltd. It calls for the investment of $22,500 for an ownership
of 45%. As of May 31, 2014, the Company has not funded this joint venture and there is no activity.
Note 10 – Return of Capital
During the period ending May 31, 2014, the Company reimbursed
two investors for monies that were given for stock purchases in 2011 and 2012 that was never issued.
On March 18, 2014, the Company refunded $8,600 and on March
21, 2014, the Company also refunded an additional $18,500. For a total of $27,100.
The Company recorded these transactions as a prior period adjustment.
Note 11 – Service Condition Stock Options
The Company has initiated a stock option agreement with one
of its vendors (See Note 8). Compensation costs are recognized on a graded basis.
SEALAND NATURAL RESOURCES INC.
(A DEVELOPMENT
STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
August 31, 2014
The fair market value of the stock options is estimated using
the Black-Scholes-Merton valuation model and the Company uses the following methods to determine its underlying assumptions: expected
volatilities are based on implied volatilities of the monthly closing price of the Company’s common stock; the expected
term of options granted is based on the SAB 107 simplified method of using the mid-point between the vesting term and the original
contractual term; the risk-free interest rate is based on the U.S. Treasury bonds issued with similar life terms to the expected
life of the grant; and the expected dividend yield is based on dividend trends. Forfeitures are estimated at the time of the grant
and adjusted, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The forfeiture rate is based
on historical experience.
The following key assumptions were used in the valuation model
to value stock option grants for the respective period.
| |
Period Ended | |
| |
August 31, | |
| |
2014 | |
| |
| |
Expected volatility | |
| 91.83 | % |
Weighted-average volatility | |
| 81.83 | % |
Expected dividends | |
| - | |
Expected term (in years) | |
| 10.00 | |
Weighted-average risk-free interest rate | |
| 2.35 | % |
Expected Forfeiture rate | |
| - | |
Stock option transactions under the Company’s plans for
the period ending August 31, 2014 are summarized as follows:
| |
| | |
| | |
Weighted- | |
| |
| | |
Weighted- | | |
Average | |
| |
| | |
Average | | |
Remaining | |
| |
| | |
Exercise | | |
Contractual | |
Options | |
Shares | | |
Price | | |
Term (years) | |
Balance, beginning of period | |
| - | | |
$ | - | | |
| | |
Granted | |
| 51,532 | | |
| 6.00 | | |
| 9.33 | |
Exercised | |
| - | | |
| | | |
| | |
Forfeited | |
| - | | |
| | | |
| | |
Outstanding at August 31, 2014 | |
| 51,532 | | |
| 6.00 | | |
| 9.33 | |
Exercisable at August 31, 2014 | |
| 34,352 | | |
$ | 6.00 | | |
| 9.33 | |
During the period ending August 31, 2014, the Company recorded
stock based professional fees of $25,600.
Note 12 – Subsequent Events
Management has reviewed events between August 31, 2014
and the date the financials were issued, October 20, 2014, and there were no significant events identified for disclosure.
On September 10, 2014, the Company issued 3,346 shares of common
stock.
On October 1, 2014, the Company issued 3,000 shares of common
stock as part of the service agreements they have with key employees.
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.
Overview
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 principal markets for the
natural function beverages are primarily Europe and Southeast Asia. The product is primarily sold to wholesale and retail distributors
worldwide.
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 months ended
August 31, 2014 and 2013
Revenues
For the three months ended August 31,
2014 and 2013 we generated revenues of $125,203 and $42,067, respectively. Revenue increase was attributable to establishing
new sales contracts with new vendors, both domestic and international, and repeat orders from existing customers.
Operating Expenses
Operating costs for the three months
ended August 31, 2014 and 2013 were $1,014,594 and $236,454, respectively. 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; c) increased use of professional and related consulting services, and d) an allowance for
bad debts.
Specifically, our legal and
professional expenses, both cash and stock, for the three months ended August 31, 2014 were $376,561, as compared to $41,223
for the three months ended August 31, 2013. The reasons for the increase were: 1) increased compliance and regulatory expense
of being a public company; and 2) increased distribution presence and the hiring of professionals in the beverage industry as
well as other consultants.
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 operating results have recognized losses
in the amount of $1,069,137 and $247,692 for the three months ended August 31, 2014 and 2013, respectively. The increase
in the losses was attributable to additional expenditures in salaries, greater emphasis on marketing/advertising and associated
travel expenses, and growth of the operations through expansion of the production/distribution channels.
Liquidity and Capital Resources
As of August 31, 2014, our current
assets were $834,128 and our total liabilities were $246,026. As of August 31, 2014, current assets were comprised of
$439,388 in cash, $212,990 of receivables, $125,047 of inventory, and $56,703 in prepaids. As of August 31, 2014, total
liabilities were comprised of $132,275 in accounts payable and accrued taxes, and $113,751 of notes payable.
As of August 31, 2014, our total assets
were $1,069,436 comprised of current assets, furniture/equipment of $85,308, and $150,000 of deposits. Stockholders’
deficit decreased from $1,327,165 as of August 31, 2013 to $823,410 as of August 31, 2014.
Cash Flows From Operating Activities
We have not generated positive cash flows
from operating activities. For the quarter ended August 31, 2014, net cash flows used in operating activities was ($368,373). Net
cash flows used in operating activities was ($433,086) for the quarter ended August 31, 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 quarter ended August 31, 2014 net
cash provided by financing activities was $0. Net cash provided by financing activities for the quarter ended August 31, 2013
was $530,099.
Going Concern
The financial statements for the period
ended August 31, 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
As of August 31, 2014 and May 31, 2014,
the Company does not expect any of the recently issued accounting pronouncements to have a material impact on its financial condition
or results of operations.
Critical Accounting Policies
Our significant accounting policies are
presented in our notes to financial statements for the: a) period ended August 31, 2014 contained in this Form 10-Q; b) 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.
Item 3. Quantitative and Qualitative Disclosures About
Market Risk.
We are a smaller reporting company as defined
by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
Item 4. Controls and Procedures.
Disclosure of Controls and Procedures
We maintain disclosure controls and procedures
that are designed to ensure that information required to be disclosed in our reports, filed under the Securities Exchange Act of
1934, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and
that such information is accumulated and communicated to our management, including our chief executive officer and chief financial
officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls
and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only
reasonable and not absolute assurance of achieving the desired control objectives. In reaching a reasonable level of assurance,
management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and
procedures. In addition, the design of any system of controls also is based in part upon certain assumptions about the likelihood
of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential
future conditions. Over time, a control may become inadequate because of changes in conditions or the degree of compliance with
policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due
to error or fraud may occur and not be detected.
As required by the SEC Rule 13a-15(b),
we carried out an evaluation under the supervision and with the participation of our management, including our principal executive
officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures
as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, the Company's principal executive
officer and principal financial officer concluded that due to the material weakness discussed below, the Company's disclosure controls
and procedures were not effective, as of the end of the quarter ended August 31, 2014, to provide reasonable assurance that information
required to be disclosed in the Company’s reports filed or submitted under the Exchange Act is recorded, processed, summarized
and reported within the time periods specified in the Commission’s rules and forms.
A material weakness is a deficiency, or
a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a
material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis.
In its assessment of the effectiveness of internal control our financial reporting as of August 31, 2014, the Company
determined that the following items constituted material weaknesses:
|
• |
The Company does not have policies and procedures in place to ensure the timely review, disclosure and accurate financial reporting for significant agreements and transactions. |
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The Company does not have an independent audit committee in place, which would provide oversight of the Company’s officers, operations and financial reporting function. |
Changes in Internal Controls Over Financial
Reporting
There has been no change in our internal
control over financial reporting that occurred during the fiscal quarter covered by this Quarterly Report on Form 10-Q that has
materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
We are not currently involved in any litigation
that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit,
proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body
pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting
our company, our common stock, any of our subsidiaries or of our companies or our subsidiaries’ officers or directors in
their capacities as such, in which an adverse decision could have a material adverse effect.
Item 1A. Risk Factors.
We are a smaller reporting company as defined
by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
Item 2. Unregistered Sales of Equity Securities
and Use of Proceeds.
During the quarter ended August 31, 2014,
the Company issued 38,514 shares of common stock. The Company issued 26,300 shares for stock based professional fees, 10,714 shares
that were purchased in February 2012 but never issued, and 1,500 shares as part of a consultancy agreement.
These shares were issued in reliance on
the exemption under Section 4(2) of the Securities Act. These shares of our common stock qualified for exemption under Section
4(2) since the issuance shares by us did not involve a public offering. The offering was not a “public offering” as
defined in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering
and number of shares offered. We did not undertake an offering in which we sold a high number of shares to a high number of investors.
In addition, the investors had the necessary investment intent as required by Section 4(2) since they agreed to and received share
certificates bearing a legend stating that such shares are restricted pursuant to Rule 144 of the Act. This restriction ensures
that these shares would not be immediately redistributed into the market and therefore not be part of a “public offering.”
Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities
Act for this transaction.
Item 3. Defaults Upon Senior Securities.
None
Item 4. Mine Safety Disclosures.
Not applicable
Item 5. Other Information.
On July 18, 2014, the Company terminated the current Service Agreement with Steve Matteson, our Chief
Financial Officer, and entered into a new Service Agreement. The new Service Agreement grants 1,500 shares of common stock per
quarter to Mr. Matteson starting on September 30, 2014 and a monthly payment of $6,000. The foregoing description of the terms
of the Service Agreement is qualified in its entirety by reference to the provisions of the Employment Services Agreement, filed
as Exhibit 10.7 to this Quarterly Report on Form 10-Q, which is incorporated by reference herein.
Item 6. Exhibits
Exhibit
Number |
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Exhibit Title |
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10.7 |
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Service Agreement with Steve Matteson, dated July 18, 2014. |
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31.1 |
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Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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31.2 |
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Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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32.1 |
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Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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32.2 |
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Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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101.INS * |
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XBRL Instance Document |
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101.SCH * |
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XBRL Taxonomy Schema |
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101.CAL * |
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XBRL Taxonomy Calculation Linkbase |
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101.DEF * |
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XBRL Taxonomy Definition Linkbase |
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101.LAB * |
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XBRL Taxonomy Label Linkbase |
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101.PRE * |
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XBRL Taxonomy Presentation Linkbase |
In accordance with SEC Release 33-8238,
Exhibits 32.1 and 32.2 are being furnished and not filed.
* Furnished herewith. XBRL (Extensible
Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes
of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities
Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
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, thereunto duly
authorized.
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Sealand Natural Resources Inc. |
Date: October 20, 2014 |
By: |
/s/ Lars Poulsen |
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Lars Poulsen |
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President and Chief Executive Officer |
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(Principal Executive Officer) |
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Date: October 20, 2014 |
By: |
/s/ Steve Matteson |
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Steve Matteson |
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Chief Financial Officer |
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(Principal Financial and Accounting Officer) |
Exhibit 10.7
Sealand Natural Resources Inc
EMPLOYMENT AGREEMENT
THIS AGREEMENT, entered
into as of July 18, 2014, (this "Agreement"), is between Sealand Natural Resources Inc, a NEVADA corporation (hereinafter
called the "Company"), and Steven D. Matteson (hereinafter called the "Chief Financial Officer CFO").
WHEREAS, the Company
and the CFO desire to enter into this Agreement pursuant to which the CFO will provide certain services to the Company.
NOW THEREFORE, for
the premises and conditions set forth herein and for consideration the receipt and sufficiency of which are hereby acknowledged,
the Company and the CFO hereby agree as follows:
1.
Services.
(a)
Subject to and upon the terms and conditions set forth in this Agreement (including Section 2 hereof), the Company hereby
agrees to emply the CFO, and the CFO hereby agrees to provide to the Company, such services as set forth on Exhibit A attached
hereto, as may be amended by mutual agreement between the CFO and the Company from time to time.
(b)
During the term of this Agreement, the CFO agrees to devote up to 40 hours per week to the performance of services hereunder.
(c)
The CFO shall provide his services hereunder at such times and places as are mutually agreed upon by the CFO and the Company.
2.
Reporting. The CFO shall report on the services performed hereunder periodically during the term of this Agreement.
The CFO represents, warrants and covenants to the Company that each report of his activities will be true, accurate and correct
in all respects.
3.
Compensation.
(a)
So long as the CFO is providing services to the Company under this Agreement during the Term of this Agreement, the Company
agrees to grant CFO unrestricted stock in the amount of 1,500 net shares, with the company to cover applicable taxes (“grossed
up”), at the end of each calendar quarter - 3/31, 6/30, 9/30, 12/31 - (the “Stock”). In consideration for the
7,500 shares of Stock that have been deferred and are currently due to CFO, the CFO will waive his rights to those shares, and
instead be paid a net (grossed up) $8/share by the company at the effective date of this contract.
Sealand Natural Resources Inc. | CONFIDENTIAL | Page 1 of 8 |
(b)
So long as the CFO is providing services to the Company under this Agreement during the Term of this Agreement, the Company
agrees to pay the CFO a cumulative salary of $ 6,000 on the first day of each month period (the draw).
(c)
In the event 10% of more of the Company is sold, CFO will be paid a bonus of 50,000 shares of Stock, with immediate vesting
and sale rights to the Company, with CFO’s purchase price being $3 a share and the sale price to the Company equal to the
price paid by the acquiring individual/company.
(d)
The Company will withhold tax and Social Security payments due, if any, from the CFO to any governmental taxing authority,
in accordance with (a) and (b) above. The Company hereby agrees that it will timely pay all taxes and fees upon the income and
other compensation earned from the Company, and will indemnify and hold the Company harmless against the claims of any governmental
taxing authority made in connection with the revenue and other compensation derived by the CFO under this Agreement.
(e)
The CFO will be eligible for a bonus commensurate with industry standards for a CFO. The bonus structure is based on reaching certain sales and other corporate
milestones per Exhibit B (Bonus Schedule).
(f)
Except for the compensation and Stock provided for in this Section 3 [and the expense reimbursement fringe benefit provided pursuant
to Section 4 and the Termination provision in Section 7d below], the Company shall have no obligation to provide any compensation
or other benefits to the CFO with respect to any services rendered by the CFO to the Company hereunder.
4.
Expenses. The Company shall reimburse the CFO for any actual expenses incurred by the CFO while rendering services
under this Agreement so long as such expenses are reasonable, necessary, and appropriately documented.
5.
Representations of CFO. The CFO hereby represents and warrants to the Company that he is free to enter into this
Agreement, and he will not disclose to the Company, or use for the Company's benefit, any trade secrets or confidential information
which is the property of any other person. Without limiting the generality of the foregoing, the CFO shall not disclose to the
Company, and shall not use for the Company's benefit, any information relating to or arising out of his utilizing the funds, personnel,
facilities, materials or other resources of any other person (if any), until such information is publicly disclosed.
6.
Term. This Agreement shall take effect as of the date of this Agreement (the "Effective Date") and shall
continue thereafter in full force and effect until the effective date of termination of the CFO's services hereunder pursuant to
the provisions of Section 7 below. For purposes of this Agreement, the period of time during which this Agreement is in full force
and effect shall be hereinafter referred to as the "Term".
Sealand Natural Resources Inc. | CONFIDENTIAL | Page 2 of 8 |
7.
Termination.
(a)
This Agreement and the services provided by the CFO hereunder shall terminate immediately upon the CFO's death.
(b)
This Agreement and the services provided by the CFO hereunder may be terminated at any time by the CFO for any reason or
no reason by giving at least thirty (30) days prior written notice of termination to the Company.
(c)
This Agreement and the services provided by the CFO hereunder may be terminated at any time by the Company by giving written
notice of termination to the CFO.
(d)
Upon termination pursuant to this Section 7, the CFO shall be entitled to that portion of the Fee and Stock which has been
earned but remains unpaid. Except in the event of just cause, the CFO shall also be entitled to severance commensurate with industry
standards for an individual with the title of Chief Financial Officer, including but not limited to 15,000 shares of Sealand Natural
Resources common stock, per year of service accumulated from the CFO’s original hire date of January 1, 2013, on a prorated
basis. The CFO’s purchase price of the shares will be $3 per share.
8.
Confidential Information.
(a)
For purposes of this Agreement, the term "Confidential Information" shall mean (i) confidential
information, knowledge or data of the Company, (ii) trade secrets of the Company and (iii) any other information of the Company
disclosed to the CFO (whether prior to or after the signing of this Agreement) or which the CFO is given after the date of this
Agreement and prior to the termination of his services to the Company. Without limiting the generality of the foregoing, the term
"Confidential Information" shall include (A) all inventions, improvements, developments, ideas, processes,
prototypes, plans, drawings, designs, models, formulations, specifications, methods, techniques, shop-practices, discoveries, innovations,
creations, technologies, formulas, algorithms, data, computer databases, reports, laboratory notebooks, papers, writings, photographs,
source and object codes, software programs, other works of authorship, know-how, patents, trademarks and copyrights (including
all records pertaining to any of the foregoing), whether or not reduced to writing, that are owned by the Company, or that are
required to be assigned to the Company by any person, including, without limitation, any employee or CFO of the Company, or that
are licensed to the Company by any person, (B) information regarding the Company's plans for research and development or for new
products, (C) engineering or manufacturing information pertaining to the Company or any of its operations or products, (D) information
regarding regulatory matters pertaining to the Company, (E) information regarding any acquisition or strategic alliance effected
by the Company or any proposed acquisition or strategic alliance being considered by the Company, (F) information regarding the
status or outcome of any negotiations engaged in by the Company, (G) information regarding the existence or terms of any contract
entered into by the Company, (H) information regarding any aspect of the Company's intellectual property position, (I) information
regarding prices or costs of the Company, (J) information regarding any aspect of the Company's business strategy, including, without
limitation, the Company's marketing, selling and distribution strategies, (K) information regarding customers or suppliers of the
Company, (L) information regarding the skills, compensation and other terms of employment or engagement of the Company's employees
and CFOs, (M) business plans, budgets and unpublished financial statements and unpublished financial data of the Company, (N) information
regarding marketing and sales of any actual or proposed product or services of the Company and (O) any other information that the
Company may designate as confidential.
Sealand Natural Resources Inc. | CONFIDENTIAL | Page 3 of 8 |
(b)
The CFO acknowledges that, except to the extent otherwise provided below in this Section 8(b) or in Section 8(d) hereof,
all Confidential Information disclosed to or acquired by the CFO is a valuable, special, and unique asset of the Company and is
to be held in trust by the CFO for the Company's sole benefit. Except as otherwise provided below in this Section 8(b) or in Section
8(d) hereof, the CFO shall not, at any time during or for 180 days after the Term, use for himself or others, or disclose or communicate
to any person for any reason, any Confidential Information without the prior written consent of the Company. Notwithstanding anything
in this Section 8(b) to the contrary, it is understood that, except to the extent otherwise expressly prohibited by the Company,
(A) the CFO may use Confidential Information in connection with providing services to the Company and (B) the CFO may disclose
Confidential Information to any employee, CFO or advisor to or of the Company who has a need to know such Confidential Information
in order to perform or provide any services to the Company in the ordinary course and within the scope of such employee's, CFO's
or advisor's engagement by the Company.
(c)
The CFO acknowledges and agrees that the Company has received, and may receive in the future, confidential or proprietary
information from third parties ("Third Party Confidential Information") subject to a duty
on the Company's part to maintain the confidentiality of such Third Party Confidential Information and to use it only for certain
limited purposes. During the Term and thereafter, the CFO shall hold Third Party Confidential Information in the strictest confidence
and will not use or disclose to anyone any Third Party Confidential Information, unless expressly authorized in writing by the
Company or unless otherwise provided below in this Section 8(c) or in Section 8(d) below. Notwithstanding anything in this Section
8(c) to the contrary, it is understood that, except to the extent otherwise expressly prohibited by the Company, (A) the CFO may
use Third Party Confidential Information in connection with providing services to the Company and (B) the CFO may disclose Third
Party Confidential Information to any employee, CFO or advisor to or of the Company who has a need to know such Third Party Confidential
Information in order to perform or provide any services to the Company in the ordinary course and within the scope of such employee's,
CFO's or advisor's engagement by the Company.
(d)
The CFO's obligations under Section 8(b) and/or Section 8(c) hereof not to use, disclose or communicate Confidential Information
or Third Party Confidential Information to any person without the prior written consent of the Company shall not apply to any Confidential
Information or Third Party Confidential Information which (i) is or becomes publicly known under circumstances involving no breach
by the CFO of this Agreement, (ii) was known by the CFO prior to the date hereof, (iii) is independently developed by the CFO other
than in the course of performing consulting services for the Company pursuant to this Agreement, (iv) was or is disclosed to the
CFO by a third party who is not under any obligation of confidentiality to the Company or the owner of any Third Party Confidential
Information, (v) is disclosed by the CFO pursuant to a request or order of any court or governmental agency, provided that
the CFO shall have promptly notified the Company of any such request or order and provided reasonable cooperation (at the Company's
expense) in the Company's efforts, if any, to contest or limit the scope of such request or order, and/or (vi) was or is approved
for release by written authorization of an authorized representative of the Company.
Sealand Natural Resources Inc. | CONFIDENTIAL | Page 4 of 8 |
(e)
The obligations of the CFO under this Section 8 are without prejudice, and are in addition to, any other obligations or
duties of confidentiality, whether express or implied or imposed by applicable law, that are owed to the Company or any other person
to whom the Company owes an obligation of confidentiality.
9.
Return of Documents. All originals, copies and summaries of manuals, memoranda, notes, notebooks, records,
reports, plans, drawings, specifications, devices, formulas, storage media (including software, documents and computer printouts)
and other documents or items of any kind containing, disclosing, concerning or relating to Inventions, Confidential Information
or Third Party Confidential Information shall, to the extent that they are in the actual or constructive possession or control
of the CFO, be delivered to the Company by the CFO immediately upon termination of this Agreement.
10.
Miscellaneous.
10.1. Entire
Agreement. This Agreement represents the entire Agreement of the parties with respect to the arrangements contemplated hereby.
No prior agreement, whether written or oral, shall be construed to change, amend, alter, repeal or invalidate this Agreement. This
Agreement may be amended only by a written instrument executed in one or more counterparts by the parties.
10.2. Waiver.
No consent to or waiver of any breach or default in the performance of any obligations hereunder shall be deemed or construed to
be a consent to or waiver of any other breach or default in the performance of any of the same or any other obligations hereunder.
Failure on the part of either party to complain of any act or failure to act of the other party or to declare the other party in
default, irrespective of the duration of such failure, shall not constitute a waiver of rights hereunder and no waiver hereunder
shall be effective unless it is in writing, executed by the party waiving the breach or default hereunder.
10.3. Assignment.
This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted
assigns. This Agreement may be assigned by the Company to any affiliate of the Company and to a successor of its business to which
this Agreement relates (whether by purchase or otherwise). "Affiliate of the Company" means any person which, directly
or indirectly, controls or is controlled by or is under common control with the Company and, for the purposes of this definition,
"control" (including the terms "controlled by" and "under common control with") shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of the management and policies of another whether through
the ownership of voting securities or holding of office in another, by contract or otherwise. The CFO may not assign or transfer
any or all of his rights or obligations under this Agreement.
Sealand Natural Resources Inc. | CONFIDENTIAL | Page 5 of 8 |
10.4. Disputes
and Costs. In case of any dispute hereunder, the parties will submit to the exclusive jurisdiction and venue of any
court of competent jurisdiction sitting in Reno, NV and will comply with all requirements necessary to give such court jurisdiction
over the parties and the controversy. EACH PARTY WAIVES ANY RIGHT TO A JURY TRIAL AND TO CLAIM OR RECOVER PUNITIVE DAMAGES.
10.5. Severability.
All headings and subdivisions of this Agreement are for reference only and shall not affect its interpretation. In the event that
any provision of this Agreement should be held unenforceable by a court of competent jurisdiction, such court is hereby authorized
to amend such provision so as to be enforceable to the fullest extent permitted by law, and all remaining provisions shall continue
in full force without being impaired or invalidated in any way.
10.6. Governing
Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Nevada.
10.7. Survival.
The provisions of this Section 10.7 and Sections 8, 9, and 10 shall survive the expiration of the Term and the termination of this
Agreement.
Sealand Natural Resources Inc. | CONFIDENTIAL | Page 6 of 8 |
IN WITNESS WHEREOF,
the parties have signed this Agreement as of the date written above as a sealed instrument.
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Sealand Natural Resources Inc. |
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By: |
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Name: |
Greg May |
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Title: |
Vice President and Chief Operations Officer |
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By: |
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Name: |
Lars Aaurp Poulsen |
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Title: |
President and Chief Executive Officer |
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By: |
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Name: |
Steven D. Matteson |
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Title: |
Chief Financial Officer |
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Sealand Natural Resources Inc. | CONFIDENTIAL | Page 7 of 8 |
Exhibit A
Description of Services
The CFO shall perform the following services
for the Company:
| (i) | Serve as an employee of Sealand Natural Resources Inc., and act as Chief
Financial Officer and receive a salary and stock bonus plan as an employee of SLNR for services rendered and milestone targets
are met. |
Exhibit B
CFO will receive a Stock Option Bonus for company
milestones as follows:
10,000 share stock option grant upon the company
surpassing sales milestone of $2 million in total gross annual sales. Option grant price to be set as the closing stock price at
the end of the fiscal quarter the milestone is met.
then an additional
10,000 share stock option grant upon the company
surpassing sales milestone of $3.5 million in total gross annual sales. Option grant price to be set as the closing stock price
at the end of the fiscal quarter the milestone is met.
then an additional
10,000 share stock option grant upon the company
surpassing sales milestone of $5 million in total gross annual sales. Option grant price to be set as the closing stock price at
the end of the fiscal quarter the milestone is met.
Sealand Natural Resources Inc. | CONFIDENTIAL | Page 8 of 8 |
Exhibit 31.1
CERTIFICATION
OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
I, Lars Poulsen, certify that:
1. |
I have reviewed this Quarterly Report on Form 10-Q of Sealand Natural Resources Inc.; |
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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 report; |
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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 present in this report; |
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4. |
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13-a-15(f) and 15d-15(f)) for the registrant and have: |
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(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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; |
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(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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(c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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(d) |
Disclosed in this report any change in the registrant’s internal control over financing reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
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5. |
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
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(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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(b) |
Any fraud, whether or not material, that involved management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Dated: October 20, 2014 |
/s/ Lars Poulsen |
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President and |
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Chief Executive Officer |
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(Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION
OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
I, Steve Matteson, certify that:
1. |
I have reviewed this Quarterly Report on Form 10-Q of Sealand Natural Resources Inc.; |
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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 report; |
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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 present in this report; |
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4. |
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13-a-15(f) and 15d-15(f)) for the registrant and have: |
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(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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; |
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(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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(c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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(d) |
Disclosed in this report any change in the registrant’s internal control over financing reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
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5. |
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
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(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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(b) |
Any fraud, whether or not material, that involved management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Dated: October 20, 2014 |
/s/ Steve Matteson |
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Chief Financial Officer |
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(Principal Financial Officer) |
Exhibit 32.1
CERTIFICATION OF
PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT
OF 2002
In connection with this Quarterly Report
of Sealand Natural Resources Inc. (the “Company”) on Form 10-Q for the period ended August 31, 2014, as filed
with the Securities and Exchange Commission on the date hereof, I, Lars Poulsen, Chief Executive Officer of the Company, certifies
to the best of his knowledge, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002,
that:
1. Such Quarterly Report on Form 10-Q for
the period ended August 31, 2014, fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange
Act of 1934; and
2. The information contained in such Quarterly
Report on Form 10-Q for the period ended August 31, 2014, fairly presents, in all material respects, the financial condition
and results of operations of Sealand Natural Resources Inc.
Dated: October 20, 2014 |
/s/ Lars Poulsen |
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President and Chief Executive Officer |
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(Principal Executive Officer) |
Exhibit 32.2
CERTIFICATION OF
PRINCIPAL FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT
OF 2002
In connection with this Quarterly Report
of Sealand Natural Resources Inc. (the “Company”) on Form 10-Q for the period ended August 31, 2014, as filed
with the Securities and Exchange Commission on the date hereof, I, Steve Matteson, Chief Financial Officer of the Company, certifies
to the best of his knowledge, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002,
that:
1. Such Quarterly Report on Form 10-Q for
the period ended August 31, 2014, fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange
Act of 1934; and
2. The information contained in such Quarterly
Report on Form 10-Q for the period ended August 31, 2014, fairly presents, in all material respects, the financial condition
and results of operations of Sealand Natural Resources Inc.
Dated: October 20, 2014 |
/s/ Steve Matteson |
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Chief Financial Officer |
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(Principal Financial Officer) |