In The News

Nov 22, 2010

Form 10-K for SEA 2 SKY CORP


The following discussion of the plan of operations, financial condition, results of operations, cash flows and changes in financial position of our Company.
General

Annual Report


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our unaudited financial statements and notes thereto included herein. In connection with, and because we desire to take advantage of, the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, we caution readers regarding certain forward looking statements in the following discussion and elsewhere in this report and in any other statement made by, or on our behalf, whether or not in future filings with the Securities and Exchange Commission. Forward-looking statements are statements not based on historical information and which relate to future operations, strategies, financial results, or other developments. Forward-looking statements are necessarily based upon estimates and assumptions that are inherently subject to significant business, economic, and competitive, uncertainties and contingencies, many of which are beyond our control and many of which, with respect to future business decisions, are subject to change. These uncertainties and contingencies can affect actual results and could cause actual results to differ materially from those expressed in any forward-looking statements made by, or on our behalf. We disclaim any obligation to update forward-looking statements.

 


The following discussion of the plan of operations, financial condition, results of operations, cash flows and changes in financial position of our Company should be read in conjunction with our most recent financial statements and notes appearing elsewhere in this Form 10-K, in our previously filed Forms 10-Q, and in our prior year's Form 10-K filed on December 8, 2009.

COMPANY HISTORY

Our Company

Sea 2 Sky Corporation (or "Sea 2 Sky", the "Company") is a development-stage company which intends to obtain sources of biomass supply streams and convert them into "green or alternative fuel energy" products in order to create sustainable and environmentally responsible alternative energy products from underutilized resources.

Company History

Sea 2 Sky was incorporated in Nevada on November 16, 2005. The Company was initially established to provide travel related services to tourists in Canada and other countries; however, due to an economic downturn, the Company abandoned its travel-related services during the first half of fiscal year 2009. As a result, assets and expenses related to the travel business have been reclassified from continuing operations to discontinued operations for proper financial presentation.

Effective March 1, 2009 ("Inception"), the Company transitioned from its initial business focus to that of a world-wide renewable energy provider, and entered an emerging opportunity in the alternative fuel, biomass sector of the forest industry. The Company is currently seeking acquisition rights to biomass supplies around the world so that we may begin the manufacturing and global distribution of environmentally-friendly alternative fuel sources.

Sea 2 Sky is a development-stage renewable bio-energy company headquartered in Seattle, Washington. The Company's primary focus is to deliver alternative energy solutions to Fortune 1000 companies, government agencies and countries around the globe. Sea 2 Sky is developing manufacturing and fulfillment processes to achieve this goal. The Company is continually seeking to secure the rights to large concentrations of biomass material (presently in North America), and is working to develop partnership relationships with creators of the most recent technologies in areas related to the torrefaction/carbonization process involved in the manufacturing of "Green Coal" and related energy products.

After obtaining one or more new technologies, Sea 2 Sky intends to convert surplus decaying biomass into environmentally-sustainable products such as activated carbon, densified high-energy char (bio-char), and electricity. This process allows for environmental benefits including the reduction of carbon emissions and the related "greenhouse effect", depleting the decaying timber which is known to be a forest fire hazard.

Over the past eighteen (18) months (since Inception), the Company has further developed its working relationships with strategic resources related to biomass fiber procurement, torrefaction and carbonization technologies, and potential commercial end-users and distributors. On February 11, 2010, the Company accepted the resignations of David J. Siebenga, CEO and director; Doug Robertson, COO and director; and Henry James, Chairman. These individuals determined that it was in the best interest of the Company and the Company's shareholders to voluntary vacate these positions so that new directors and key leaders could be hired to carry out the Company's business plan. Prior to resignation, each individual returned 8 million restricted shares common stock and allowed the Company to extinguish any and all accrued compensation due, without consideration. Immediately subsequent to these resignations, the Board appointed Erik Odeen, CFO, to assume the open position of CEO of the Company. See Current Report on Form 8-K filed with the Securities and Exchange Commission on February 15, 2010.

New Plan of Operations

On November 9, 2010, Sea 2 Sky Corporation (the "Company" or "Sea 2 Sky") entered into a Plan of Merger and Reorganization Agreement ("Merger Agreement"), whereby it has acquired 100% of outstanding equity interests of ecoTECH Energy Group (Canada), Inc. through the issuance of 110,606,239 shares of the Company's common stock. Upon completion of the merger on November 12, 2010, ecoTECH became a wholly-owned subsidiary of the Company; however, due to the exchange of common stock shares, ecoTECH assumed control of the Company.
The Company's fiscal year end is August 31st; however, we changed our year end to December 31 upon the completion of the acquisition of EEGI.
Sea 2 Sky is targeting multiple biomass supply streams in Canada, the USA, and other countries rich in fiber supply. Sea 2 Sky's policy to cooperate with indigenous peoples, communities, and other owners of biomass has generated interest by most of those we approach.

We anticipate that these expressions of interest can be turned into binding purchase agreements for our entire production capacity. We are now negotiating with Canadian First Nation Bands for significant sustainable quantities of woody biomass (i.e., 1,000,000 tons or more per year for 20 years). We are also researching pilot-tested technology that can be best suited to the selected biomass supply streams and aligned to our final customer needs that can be incorporated into the processing plant design.

Currently, our development stage operations have been funded through the sale of our stock in private equity transactions. We plan to raise additional funds through joint venture partnerships, Federal or State grants or loan guarantees, project debt financings or through future sales of our common stock, until such time as our revenues are sufficient to meet our cost structure, and ultimately achieve profitable operations. There is no assurance that we will be successful in raising additional capital or achieving profitable operations. Our financial statements do not include any adjustments that might result from the outcome of these uncertainties. We will need financing within 12 months to execute our business plan.

 


Our business will encompass development activities culminating in the construction and long-term operation of biomass energy production plants. As such, we are currently in the stage of finding suitable locations, securing proper financing for building plants, and deploying project opportunities for converting woody biomass feedstock into torrefied bio-energy products such as electricity via gasification process, activated carbon, and "green coal" via pelletization process. As we build these plants, we intend to increase our number of employees appropriately.

RESULTS OF OPERATIONS

We have not generated revenues from our renewable energy operations since Inception and have incurred $1,704,127 in related expenses through August 31, 2010.

Discontinued Operations

The Company's decision to discontinue the operations of its travel business resulted in all financial data pertaining directly to the operations relative to that business to be collapsed with the net amount reported separately from the continuing operations. This collapsing effect was used to restate the financials for all periods presented. For the year ended August 31, 2009, losses from discontinued operations were $180. There were no such losses for the year ended August 31, 2010 or for the period from Inception to August 31, 2010. Loss from discontinued operations per weighted average share for the years ended August 31, 2010 and August 31, 2009 were $(0.01) and $(0.00), respectively.

Operating and General & Administrative Expenses

Operating expenses consisting of professional fees of $234,624; salaries expense of $184,827; stock compensation expense of $78,000; office and administrative expenses of $26,781; and loss on extinguishment of debt of $359,216 for the year ended August 31, 2010. Total general and administrative expenses for fiscal 2010 were $883,448.

Operating expenses consisting of stock-compensation expenses of $396,977 for external consultants; consulting expenses of $155,857; payroll and directors' consulting fees totaling $205,007; travel expenses of $30,318; professional fees of $32,693; and other general administrative expenses totaling $857,212 for the year ended August 31, 2009.

Although the total general and administrative costs were similar for the two fiscal years, the expenses making up those amounts are different. In fiscal 2010, the Company incurred a loss of $359,216 for the termination of a liability and commitment as disclosed in Note 5 and 7 to the accompanying financial statements. Such cost was unique to fiscal 2010. Likewise, in fiscal 2010, stock-based compensation was significantly less ($318,977) compared to fiscal 2009, due to the amount of shares issued to consultants and employees for services and the stock price during the time of issuance. Salaries expense was down in fiscal 2010 from fiscal 2009 due to the resignation of officers.

Net Losses

Net losses from continuing operations were $883,448 for the year ended August 31, 2010, compared to $857,212 for the year ended August 31, 2009. Loss from continuing operations per common share was $0.01 and $0.00 for the years ended August 31, 2010 and 2009, respectively.

Income Taxes

The Company does not anticipate having to pay income taxes in the upcoming years due to our absence of net profits.

 

CAPITAL AND LIQUIDITY

The following table provides selected financial data about our Company for the
years ended August 31, 2010 and 2009, respectively.

Balance Sheet Data August 31, 2010 August 31, 2009

Cash $ 5,538 $ 12,687

Total Current Assets 5,538 12,745

Total Assets 5,538 13,550

Total Liabilities 141,230 281,968

Stockholders' Deficit (135,692) (268,418)

 


As of August 31, 2010 and 2009, we had total current assets of $5,538 and $12,745, respectively, and total current liabilities of $141,230 and $281,968, respectively.

During the years ended August 31, 2010 and 2009, the Company received $129,000 and $159,349, respectively in net cash from the sale of its common stock. These proceeds are being used for operating and general and administrative expenses to sustain the Company through its development stage until it establishes profitable operations or receives cash from the issuance of additional common stock.

We had cash on hand of $5,538 and $12,687 as of August 31, 2010 and 2009, respectively.

To the extent we are unable to meet our operating expenses, we may borrow funds from our current management or other affiliates, or we may attempt to raise capital from private individuals or institutional investment equity funds. Future sales, if any, that exceed operating expenses and debt repayments will be used to expand operations.

We have developed a plan of operations reflecting our objectives and anticipated growth for the next 12 months and beyond. In our plan, we identify our cash requirements, our anticipated operating and product development projections, and our required staffing and additional funding requirements to fulfill our business objectives.

Net cash used in operating activities of $136,149 and $179,101 for the years ended August 31, 2010 and 2009, represents wages paid to employees, fees paid for accounting and legal related services, and fees paid to consultants for services rendered and travel expense reimbursement.

Net cash used in operating activities was zero and $998 for the years ended August 31, 2010 and 2009, respectively.

Net cash provided by financing activities of $129,000 and $159,349 during the years ended August 31, 2010 and 2009, represents cash raised through the sales of common stock subscription agreements during the year, net of commissions paid to a consulting firm for raising these funds of $10,500 and $11,384, respectively.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Use of Estimates

Our discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. By their nature, these estimates and judgments are subject to an inherent degree of uncertainty.

We review our estimates on an on-going basis, including those related to project development, income taxes, and stock-based compensation. We base our estimates on our historical experience, knowledge of current conditions and our beliefs of what could occur in the future considering available information. Actual results may differ from these estimates, and material effects on our operating results and financial position may result.

We believe the following critical accounting policies involve our more significant judgments and estimates used in the preparation of our financial statements.

Project Development

Project development costs are either expensed or capitalized. The costs of materials and equipment that will be acquired or constructed for project development activities, and that have alternative future uses, both in project development, marketing or sales, will be classified as property and equipment and depreciated over their estimated useful lives. To date, project development costs include the general and administrative expenses related to securing fiber agreements, technology, and our future production facilities. During the twelve months ended August 31, 2010 and 2009, we expensed all such development-stage costs which were minimal.

Accounting for Employee and Director Stock-Based Compensation

The Company accounts for stock options issued to employees and directors under Accounting Codification Standards ("ASC") 718 - Compensation - Stock Compensation ("ASC 718"). Under ASC 718 share-based compensation cost to employees is measured at the grant date, based on the estimated fair value of the award, and is recognized as expense over the employee's requisite vesting period. We consider our assumptions to be an important aspect of properly recording compensation. No compensation, once recorded, is reversed.

Accounting for Non-Employee Stock-Based Compensation

We measure compensation expense for its non-employee stock-based compensation under ASC 505 - Equity ("ASC 505"). The fair value of the option issued or expected to be issued is used to measure the transaction, as this is more reliable than the fair value of the services received. The fair value is measured at the value of our common stock on the date that the commitment for performance by the counterparty has been reached or the counterparty's performance is complete. In the case of the issuance of stock options, we determine the fair value using the Black-Scholes option pricing model. The fair value of the equity instrument is charged directly to stock-based compensation expense and credited to additional paid-in capital. We consider our assumptions to be an important aspect of properly recording compensation. No compensation, once recorded, is reversed.

 


Revenue Recognition - Traditional Electricity Supply and Demand

Although no revenues have been recognized by our continuing operations, we expect to recognize revenues in the future from wholesale electricity sales and electricity transmission and distribution delivery services. At that point, we will recognize the revenues upon delivery of the energy to the customer and include unbilled as well as billed amounts.

OFF-BALANCE SHEET ARRANGEMENTS

Since inception, we have not engaged in any off-balance sheet financing activities.

KEY INVESTMENT CONSIDERATIONS

? Contracts for long term supply of Torrified biomass allow Sea 2 Sky to provide market security and standards to various markets. Markets in Europe seek supply security, which we can provide. With the advent of global warming awareness the Company can also access carbon credits and has the ability to market and present new biomass products into the US market to assist Americans in obtaining energy independence.

? Our management team brings technical and operational experience to create financial strength and enables us to deliver an environmentally-sound Torrefied biomass solution in a cost effective and secure manner.

GOVERNANCE

Our Board of Directors reviews all aspects of our governance policies and practices, including our Corporate Code of Conduct and Code of Ethics for Senior Management, at least annually in light of best practices and makes whatever changes are necessary to further our longstanding commitment to the highest standards of corporate governance. The Codes are available in the Corporate Governance section of our Web site.

Our Web site is located at www.sea2skyenergy.com. Detailed information about our company can be found on our Web site. In addition, we make our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to such reports available, free of charge, through the Investor Relations page of our Web site, as soon as reasonably practicable after they are filed with or furnished to the SEC. The information on our Web site, however, is not incorporated by reference in, and does not form part of, this Annual Report on Form 10-K. Except as otherwise specified, any reference to a year indicates our fiscal year ended August 31st of the year referenced.