U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q


x  
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended March 31, 2008
 
OR
 
o
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 #00-30440
 
RIVER HAWK AVIATION, INC.
(FORMERLY VIVA INTERNATIONAL, INC.)
(Exact name of small business issuer as specified in its charter)
 
   
NEVADA
22-3537927
(State or other jurisdiction of
(IRS Employer Identification No.)
incorporation or organization)
 
 
954 Business Park Drive
Suite #4
Traverse City, MI. 49686
(Address of Principal Executive Offices)
 
(231) 946-4343
(Issuer’s telephone number)
 
Check whether the Issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 o .
 
Indicate by check mark whether the Issuer is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes o No x .
 
Indicate the number of shares outstanding of each of the Issuer’s classes of common stock as of the latest practicable date: 3,337,514  shares of common stock, $0.001 par value, as of  May 12, 2008.  
 
 

 

 
RIVER HAWK AVIATION, INC.
(FORMERLY VIVA INTERNATIONAL, INC.)
 
FORM 10-Q
 
FOR THE QUARTER ENDED MARCH 31, 2008
 
TABLE OF CONTENTS
 

PART I.
FINANCIAL INFORMATION
 
     
Item 1.
Financial Statements
PAGE
     
 
Condensed Consolidated Financial Statements
 
     
 
Condensed Consolidated Balance Sheets- March 31, 2008 and December 31, 2007
4
     
 
Condensed Consolidated Statements of Operations
5
 
Three months ended March 31, 2008 and 2007
 
     
 
Condensed Consolidated Statements of Cash Flows
6
 
Three months ended March 31, 2008 and 2007
 
     
 
Notes to Condensed Consolidated Financial Statements
7-11
     
Item 2.
Management’s Discussion and Analysis or Plan of Operation
13-16
     
Item 3.
Controls and Procedures
16
     
PART II.
OTHER INFORMATION
 
     
 Item 1.
Legal Proceedings
16-17
     
 Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
18
     
 Item 3.
Defaults upon Senior Securities
18
     
 Item 4.
Submission of Matters to a Vote of Security Holders
18
     
 Item 5.
Other Information
18
     
 Item 6.
Exhibits
18
     
Signatures
   
 
 
 
2
 

 
PART I
 
FINANCIAL INFORMATION
 
 
 
 
ITEM 1.       FINANCIAL STATEMENTS
 
 
 
 
 
 
 
3
 
RIVER HAWK AVIATION, INC.
 
(FORMERLY VIVA INTERNATIONAL, INC.)
 
CONSOLIDATED BALANCE SHEETS
 
(Unaudited)
 
             
   
March 31,
   
December 31,
 
   
2008
   
2007
 
             
Current Assets
           
     Cash
 
$
191,736
   
$
484,622
 
     Accounts receivable
   
521,337
     
512,770
 
     Inventories
   
724,384
     
724,503
 
     Prepaid expenses
   
66,317
     
78,876
 
          Total Current Assets
   
1,503,774
     
1,800,771
 
                 
Property, Plant & Equipment-net
   
18,908,520
     
19,370,501
 
                 
Other Assets-Intangible assets
   
414,900
     
-
 
                 
          Total Assets
 
$
20,827,194
   
$
21,171,272
 
 
               
Current Liabilities
               
     Accounts payable and accrued expenses
 
$
3,621,094
   
$
3,827,562
 
   Aviation maintenance and engine reserves
   
1,202,473
     
1,235,311
 
    Taxes payable
   
36,726
     
26,603
 
     Notes payable-shareholders and related parties
   
1,199,370
     
538,379
 
     Current maturities of long term debt
   
5,713,247
     
5,691,774
 
     Cumulative dividends payable-preferred stock
   
189,297
     
109,297
 
    8% Preferred stock-Series B
   
2,500,000
     
2,500,000
 
          Total Current Liabilities
   
14,462,207
     
13,928,926
 
                 
Long term debt, net of current maturities
   
4,449,678
     
4,423,814
 
8% Preferred stock-Series B
   
1,500,000
     
1,500,000
 
          Total Liabilities
   
20,411,885
     
19,852,740
 
                 
Commitments and contingencies
               
                 
Stockholders' Equity
               
  Preferred stock 25,000,000 shares authorized at $.001 par value
               
  Series A. 10,500,000 shares authorized, 7,000,000 shares outstanding at December 31, 2007
               
    with 3,500,000 shares to be issued, 10,500,000 shares outstanding at March 31, 2008
   
10,500
     
10,500
 
  Common stock, 500,000,000 shares authorized at $.001par value, issued and outstanding
               
   of 3,237,514 at March 31, 2008 and 197,512 at December 31, 2007
   
3,238
     
198
 
Additional paid-in capital
   
33,148,018
     
25,341,810
 
Accumulated deficit
   
(32,746,447
)
   
(24,033,976
)
          Stockholders' Equity
   
415,309
     
1,318,532
 
          Total Liabilities and Stockholders’ Equity
   $
20,827,194
   
$
21,171,272
 
                 
 
See Notes to Consolidated Financial Statements
 
 
 
4
 
RIVER HAWK AVIATION, INC.
 
(FORMERLY VIVA INTERNATIONAL, INC.)
 
CONSOLIDATED STATEMENTS OF OPERATIONS
 
(Unaudited)
 
             
             
   
For the Three Months Ended
 
   
March 31,
 
   
2008
   
2007
 
             
             
Sales revenues
 
$
2,326,934
   
$
-
 
                 
Cost of sales
   
2,016,033
     
-
 
Gross profit (loss)
   
310,901
     
-
 
                 
General and administrative expenses
   
695,366
     
222,620
 
Compensation & services paid for in stock
   
7,593,837
     
-
 
Depreciation
   
488,918
     
-
 
Interest expense
   
167,229
     
29,964
 
     
8,945,350
     
252,584
 
     
(8,634,449
)
   
(252,584
)
Other income
               
    Interest income
   
238
     
-
 
   Miscellaneous income
   
1,740
     
-
 
                 
          (Loss from continuing operations before income taxes
   
(8,632,471
)
   
(252,584
)
                 
          Provision for income taxes
   
-
     
-
 
                 
        Loss from continuing operations
   
(8,632,471
)
   
(252,584
)
        (Losses) from discontinued operations-net of tax
   
-
     
(24,358
)
        (Loss) before preferred dividends recorded as interest expense
   
(8,632,471
)
   
(276,942
)
                 
8% cumulative preferred dividend recorded as interest expense
   
80,000
     
-
 
           Net (loss)
   
(8,712,471
)
   
(276,942
)
                 
Basic and fully diluted (loss) per share-continuing operations
 
$
(11.91
) 
 
$
(4.09
)
(Loss) per share from discontinued operations
 
$
-
   
$
(0.40
)
          Net  (loss) per share
 
$
(11.91
) 
 
$
(4.49
)
                 
          Weighted average shares outstanding
   
731,761
     
61,712
 
                 
 
See Notes to Consolidated Financial Statements.
 
 
 
5
 
RIVER HAWK AVIATION, INC.
 
(FORMERLY VIVA INTERNATIONAL, INC.)
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
(Unaudited)
 
   
For the Three Months Ended
 
   
March 31,
 
   
2008
   
2007
 
   
 
   
 
 
Operating Activities
           
   Net loss
  $ (8,712,471 )   $ (276,942 )
   Adjustments to reconcile net loss to net cash
               
      used by operating activities:
               
   Depreciation
    488,918       337  
   Common stock issued for services
    7,593,837       -  
   Cumulative preferred dividends recorded as interest expense
    80,000       -  
   Changes in operating assets and liabilities:
               
     Receivables
    18,933       -  
     Inventories
    119       -  
     Prepaid expenses and other assets
    12,559       -  
     Accounts payable and accrued expenses
    (257,347 )     250,994  
     Taxes payable
    2,083       -  
   Net cash (used) by operating activities
    (773,369 )     (25,611 )
                 
                 
Investing Activities
               
   Acquired cash position through merger and acquisition
    8,681       -  
   Acquisition of fixed assets
    (26,937 )     -  
   Acquisitions
    (425,000 )     -  
   Net cash provided (used) by investing activities
    (443,256 )     -  
                 
Financing Activities
               
   Loans from related parties,shareholders & others
    660,991       28,200  
   Loans from financial institutions
    117,887       -  
   Capital contributions/recoveries from limited liability companies
    215,411       -  
   Repayment of installment debt obligations
    (70,550 )     -  
   Net cash provided by financing activities
    923,739       28,200  
                 
                 
    Increase (Decrease) in cash
    (292,886 )     2,589  
   Cash at beginning of period
    484,622       1,726  
   Cash at end of period
  $ 191,736     $ 4,315  
                 
Supplemental Disclosures of Cash Flow Information:
               
  Cash paid during year for:
               
     Interest
  $ 142,154     $ -  
     Income taxes (benefits)
  $ -     $ -  
                 
 
See Notes to Consolidated Financial Statements.
 
 
6
 
RIVER HAWK AVIATION, INC.
(FORMERLY VIVA INTERNATIONAL, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2008
 
Note 1-Financial Presentation, Company Organization and Structure
 
The accompanying unaudited Condensed Consolidated Financial Statements include the accounts of River Hawk Aviation and subsidiaries (collectively, the “Company”).  All material intercompany balances and transactions have been eliminated.  The interim financial statements reflect all adjustments, consisting only of normal recurring adjustments that, in the opinion of management, are necessary for a fair presentation of the results for the periods shown.  The results of operations for such periods are not necessarily indicative of the results expected for the full fiscal year.  The Condensed Consolidated Balance Sheet as of March 31, 2008 has been derived from the unaudited financial statements at that date.  However, it does not include all of the information and notes required by accounting principles generally accepted in the United States for complete financial statements.  The accompanying financial statements should be read in conjunction with the audited Consolidated Financial Statements for the fiscal year ended December 31, 2007, included in our Annual Report on Form10KSB filed with Securities and Exchange Commission.
 
At March 31, 2008, the Company’s operating subsidiaries are Profile Aviation Services, Inc., Profile Aviation Center, Inc. and Carolina Air Charter, Inc. In addition, the Company controls the assets and activities of variable interest entities known as King Air 27CS, LLC, Commonwealth Aviation, LLC and Eagle Aviation, LLC and accordingly, the assets, liabilities and operations of these entities are included in the Company’s consolidated financial statements.
 
The Company is also comprised of the following inactive subsidiaries: Hardyston Distributors, Inc., CT Industries, Inc. and Universal Filtration Industries.  All assets and liabilities of the inactive subsidiaries have been included in the Company’s consolidated financial statements.
 
The Company previously held equity interests in Viva Airlines, Inc., Viva Air Dominicana S.A. and Eastern Caribbean Airlines, Inc.  Each of these equity interests was sold and/or assigned to the Southland Holdings Group, Inc. (“Southland”) during May of 2007.  Due to a legal complication the Company’s equity interest in Viva Air Dominicana S.A. (a Dominican Republic Corporation) could not be transferred or assigned to Southland as was contemplated and could not be adjusted or corrected by the Company without incurring costs that it determined to be in excess of any realizable benefit.  The Southland agreement provided for the sale or assignments of its equitable interests to be in consideration for the assumption of debt.  The Company continues to carry the respective debts and liabilities of Viva Airlines, Inc, Viva Air Dominican S.A. and Eastern Caribbean Airlines, Inc. on its books and will remove these obligations only after receiving documentation of payment or settlement as provided by Southland and or the creditor.  The Company had discontinued the operations of Viva Airlines, Inc., Viva Air Dominicana S.A. and Eastern Caribbean Airlines, Inc. as of December 31, 2006.
 
On August 28, 2007 River Hawk Aviation, Inc. completed a merger and acquisition of Profile Aviation Services, Inc. and Profile Aviation Center, Inc.
 
On August 29, 2007 River Hawk Aviation, Inc. completed an asset acquisition of aviation parts and accessories from a company privately owned by the Company’s Chief Executive Officer.  The aviation parts and accessories acquired under the agreement have been transferred to and are under the control and management of Profile Aviation Center, Inc.
 
On March 18, 2008, River Hawk Aviation, Inc. acquired all of the equitable shareholder interests in Carolina Air Charter, Inc. for $425,000.  The consolidated financial statements include the assets and liabilities of Carolina Air Charter, Inc. as of March 31, 2008 and include the operating results for the period of March 18 th through March 31 st , 2008.
 
 
 
7
 
RIVER HAWK AVIATION, INC.
(FORMERLY VIVA INTERNATIONAL, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2008
 
Note 2-Going Concern      

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company incurred net losses of $32,746,447 for the period from April 18, 1995 to March 31, 2008 and had limited operating revenues during the period of January 8, 2003 through December 31, 2006.  Concurrent with the acquisitions of privately held River Hawk Aviation, Inc., Profile Aviation Services, Inc. and Profile Aviation Center, Inc. in August of 2007, the Company realized in excess of $5.3 million in operating revenues in 2007 and in excess of $2.3 million for the period ended March 31, 2008..  However, the Company has not yet been able to achieve reportable operating income from its operations.  Pursuant to the 2007 acquisitions noted above the Company issued additional debt and equity instruments.  In addition, the Company was aware that certain existing indebtedness of its acquired companies would have to be reworked or refinanced due to a change in ownership or a scheduled expiration of maturation of the loans.   These factors indicate that the Company’s continuation as a going concern is likely to be dependent upon its ability to obtain adequate financing.
 
The Company will require substantial additional funds to sustain its existing subsidiary operations as well as to meet its obligations resulting from the issuance of an 8% preferred security containing call features with the first calls of approximately $2.5 million due to occur within the next 12 months.  The call feature guarantees the holder a strike price of $1 per share.  The preferred holder has the option of converting the preferred into shares of common stock..  The Company plans to make other acquisitions of aviation “niche” companies and to expand its existing subsidiary operating base and to perhaps, add additional aviation assets.  The execution of these plans will require ongoing and long term financing and accordingly the Company will continue on an ongoing basis to engage it various financing efforts.
b
 
Note 3-Summary of Significant Accounting Policies

The significant accounting policies used in the preparation of our audited Consolidated Financial Statements are disclosed in our Annual Report on Form 10-KSB for the year ended December 31, 2007, as filed with the Securities and Exchange Commission.
 
Note 4-Business Acquisitions and Combinations
 
On March 18, 2008, River Hawk Aviation, Inc. entered into a stock purchase agreement for one hundred percent of the issued outstanding common stock of Carolina Air Charter, Inc.   Under the agreement, consideration in the amount of $425,000 was to be paid to the beneficial shareholders of Carolina Air Charter, Inc.  Of this amount, $350,000 was paid at closing and $75,000 was paid subsequent to March 31, 2008.   Funds necessary to complete this transaction were provided to the Company from Aerologistics Investment Partners, LLC whose members are Calvin Humphrey (River Hawk’s Chief Executive Officer), Richard Girouard (a River Hawk Director) and David Otto (River Hawk’s primary legal counsel).  Msrrs, Humphrey, Girouard and Otto are each major (greater than 10%) shareholders in River Hawk Aviation, Inc.
 
Pursuant to the merger and acquisition of Profile Aviation Services, Inc. and Profile Aviation Center, Inc.(Profile) the Company issued 1,500,000 shares of Preferred Series A and 4,000,000 Preferred Series B.  Preferred Series A has voting rights equivalent to 10 votes for each share as compared to common shares which have voting rights of one vote for each share owned.  Preferred Series A shares are also convertible into common shares on a one share to one share basis.  Preferred Series B have an 8% cumulative coupon rate and are convertible into common shares on a one for one basis.  However, the Series B also contain a call feature that allows the holder to upon 30 days prior notice call the Company for purchase of its shareholdings at a designated purchase price of $1.00 per share.  Under the merger and acquisition agreement with Profile, 1,500,000 shares is convertible at any time, 1 million shares is convertible at any time following twelve months from the effective of the agreement, 1,000,000 shares is convertible at any time following twenty four months from the effective date of the agreement and 500,000 shares is convertible at any time following thirty six months from the effective date of the agreement.  For financial reporting purposes, the Preferred Series B stock is disclosed as a liability with the portion of the liability callable within twelve months of the date of the financial statement or September 30, 2007 being classified as a current liability.  In exchange for the value of net assets received in merger and acquisition of Profile of $11,873,232 , 1,500,000 shares of Preferred Series A shares and 4,000,000  Preferred Series B shares   were issued.  Preferred Series B shares have been valued at the call provision of $1.00 per share or $4,000,000 and accordingly, $7,873,232 of value has been assigned to the Preferred Series A shares.
 
 
 
8
 
 
RIVER HAWK AVIATION, INC.
(FORMERLY VIVA INTERNATIONAL, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2008
 
Pursuant to the asset acquisition of aviation parts and accessories inventories from a company privately owned by the Company’s Chief Executive Officer, the Company issued 5,500,000 shares of Preferred Series A. In exchange for the cost of net assets received in the asset acquisition agreement of $205,337, 5,500,000  Preferred Series A shares were issued. The estimated market value of the shares issued based upon existing common share market value at date of exchange was $825,000.  Related party rules require that the underlying assets that were transferred to the Company are recorded at cost.  Management expects to realize at least $825,000 in value upon the sale of the inventories.    
 
Proforma financial information
 
The following financial information is provided to illustrate the prospective consolidated financial results from operations that would have resulted had Carolina Air Charter, Inc. been a member of the consolidated group for the entire period ended March 31, 2008 and had Carolina Air Charter, Inc., Profile Aviation Services, Inc. and Profile Aviation Center, Inc. been members of the consolidated group for the entire period ended March 31, 2007.
 
   
Three months ended March 31,
 
   
2008
   
2007
 
             
Sales revenues
 
$
2,437,658
   
$
2,376,404
 
                 
Loss from continuing operations
 
$
8,777,518
   
$
194,919
 
                 
Losses from discontinued operations-net of tax
 
$
-
   
$
24,358
 
                 
Net losses
 
$
8,777,518
   
$
219,277
 
                 
Basic and fully diluted loss per share-continuing oper.
 
$
12.00
   
$
3.15
 
                 
Loss per share from discontinued operations
 
$
-
   
$
.40
 
                 
Total loss per share
 
$
12.00
   
$
3.55
 
 
 
 
9
 
RIVER HAWK AVIATION, INC.
(FORMERLY VIVA INTERNATIONAL, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2008

 
Note  5-Loss per share
 
Basic loss per share is computed by dividing net loss attributable to common stockholders by the weighted average number of common stock shares outstanding during the period.  Diluted loss per share, which would include the effect of the conversion of convertible Preferred Stock, is not separately computed because the inclusion of such conversion is antidilutive.  In these cases, basis and diluted loss per share is the same.
Basic and diluted weighted average common shares outstanding, and the potentially dilutive securities excluded from loss per share computations because they are antidilutive, are as follows, for the three month periods ended March 31,
 
                                                                                                                                             
 
2008
   
2007
 
Basic and diluted weighted average common stock shares outstanding                  
    731,761       61,712  
                 
Potentially dilutive securities excluded from loss per share computations
               
Convertible Preferred Stock (Series A & Series B)                                                   
    14,500,000          
 
Note 6-Inventories  
 
Inventories are priced at the lower of cost or market as determined on a first in, first out basis.
 
At March 31, 2008, inventory was comprised of the following:
 
 Aviation parts and accessories   $ 579,410  
 Jet fuel and oil      93,798  
 Work in process     51,176  
         
 Total         $ 724,384  
 
Note 7-Related Party Transactions
 
Aerologistics Investments Partners, LLC
 
Aerologistics Investments Partners, LLC (“Aerologistics”) is a limited liability company whose members are Calvin Humphrey (River Hawk Aviation’s Chief Executive Officer), Richard Girouard (a River Hawk Aviation Board member) and David Otto (River Hawk’s primary legal counsel).  During the three month period ended March 31, 2008, Aerologistics provided loans to the Company to settle a court judgment in the amount of $226,635 and in the amount of  $375,000 for the acquisition of Carolina Air Charter, Inc. and working capital.  Prior to March 31, 2008, Aerologistics has arranged for working lines of credit the Company of $300,000 and has provided corporate and personal  guarantees for payment.
 
Calvin Humphrey
 
Calvin Humphrey, Chief Executive Officer of River Hawk Aviation, Inc and a member of Aerologistics Investment Partners, LLC, arranged and paid $15,225 of corporate expenses  from his personal resources during the three months ended March 31, 2008.  As of  March 31, 2008, the Company   has borrowed or received the benefit of various payments made by Mr. Humphrey aggregating $67,829 all of which remains unpaid.
 
In addition, Mr. Humphrey has consigned certain inventories to the Company under an agreement that provides for 80% of the proceeds from sales of the consignments to be paid to him with the remaining 20% retained by the Company.  As of March 31, 2008, the Company has sold $42,610 of consignment inventories and accordingly,  Mr. Humphrey is owed  $34,088 pursuant to the underlying agreement.  
 
10
       
RIVER HAWK AVIATION, INC.
(FORMERLY VIVA INTERNATIONAL, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2008
 
Richard Girouard
 
Richard Girouard is a member of the River Hawk Aviation, Inc. Board of Directors and a member of Aerologistics Investments Partners, LLC.   During the quarter ended March 31, 2008, the Company awarded Mr. Girouard 1,500,000 shares of common stock pursuant to an S-8 registration statement.   The shares awarded and issued are to secure the professional services of Mr. Girouard for strategic and financial management  services as well as continuing financial guarantees and commitments.  The value of the shares issued based upon the S-8  registration statement is $3,750,000.
 
David Otto/The Otto Law Group, PLLC
 
David Otto is the managing director and principal owner of The Otto Law Group, PLLC (‘Otto Law”).  Otto Law is the primary legal counsel for the Company.  During the quarter ended March 31, 2008, the Company awarded Mr. Otto 1,500,000 of common stock pursuant to an S-8 registration.  The shares awarded are to secure certain needed legal services as well as to obtain strategic and financial management services as well as continuing financial guarantees and commitments.  The value of the shares issued based upon the S-8 registration statement is $3,750,000.
 
For the quarter ended March 31, 2008, the Company recorded professional billings from Otto Law of $80,165.  At March 31, 2008, the Company has a net liability to Otto Law of $162,050.
 
Note 8-Changes in Common Stock
 
On March 5, 2008, the Company authorized the issuance of 3,334 shares of common stock  as payment for certain financial services valued at $5,501..
 
On March 16, 2008, the Company authorized the issuance of 3,030,000 shares of common stock as payment for certain strategic and financial management services. 1,500,000 shares were issued to Richard Girouard and 1,500,000 shares were issued to David Otto each of who are related parties to the Company.  The remaining 30,000 shares were issued to unrelated third parties.  The value of these services was $7,575,000.
 
On March 25, 2008, the Company authorized the issuance of 6,668 shares of common stock as payment for certain financial services valued at $13,336.
 
Changes in Preferred Stock
 
At December 31, 2007, certain of the preferred stock authorizations had not been issued.  The Company took the appropriate actions to effectuate the issuance of any preferred stock authorized and as of March 31, 2008 all required issuances had taken place.
 
 
 
11
 
RIVER HAWK AVIATION, INC.
(FORMERLY VIVA INTERNATIONAL, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2008
 
 
Note 9-Additional Material Matters and Disclosures, Subsequent Events
     
On February 6, 2007, the Company changed its name from Viva International, Inc. to River Hawk Aviation, Inc. The name change was designed to indicate a new direction for the Company that concentrated on the purchase of aviation niche companies that were operating, profitable and possessing positive cash flows.  As a result the Company discontinued its previous operations in Puerto Rico and the Dominican Republic and subsequently agreed to sell them to Southland Holdings Group, Inc. in a transaction that resulted in the disposition of these companies for the assumption of certain debts and obligations.   At December 31, 2007, management accounted for this event as a loss from discontinued operations. Included within the losses is an estimated reserve of $150,000 for costs and expenses associated with the closure of the existing offices.  As of March 31, 2008 and the quarter then ended, $69,916 of payments have been made thus reducing the reserve to $80,679.  Management believes amounts currently reserved for potential costs and expenses is adequate.
 
Syed (Oscar) Hasan
 
Mr. Hasan previously served the Company as an officer an director.  Upon his termination in 2006, he had made certain claims for compensation against the Company which were disputed and consequently remained unresolved.  Mr. Hasan commenced civil action against the Company and due to the Company’s inability to retain proper counsel was able to obtain a judgment in 2007 against the Company for in excess of $200,000.  In February of 2008, the Company satisfied the judgment by payment in full of $226,635.  The funds necessary to satisfy this judgment were provided by Aerologistics Investment Partners, LLC.  Calvin Humphrey, River Hawk’s Chief Executive Officer, Ric Girouard, a director for River Hawk, and David Otto, River Hawk’s primary counsel make up the ownership of Aerologistics  Investment Partners, LLC.
 
Carolina Air Charter, Inc.
 
The Company has made an additional payment of $75,000 since March 31, 2008 thus completing the financial terms of its acquisition of Carolina Air Charter, Inc.  The funds necessary to make the payment to the former shareholders of Carolina Air Charter, Inc. were provided to the Company by Aerologistics Investments Partners, LLC.
 
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Item 2. Management’s Discussion and Analysis or Plan of Operation
 
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and related notes thereto contained elsewhere in this Form 10-Q.
 
Forward-Looking Statements
 
This report contains certain forward-looking statements and information relating to the Company that are based on the beliefs and assumptions made by the Company’s management as well as information currently available to the management. When used in this document, the words “anticipate”, “believe”, “estimate”, and “expect” and similar expressions, are intended to identify forward-looking statements. Such statements reflect the current views of the Company with respect to future events and are subject to certain risks, uncertainties and assumptions. Factors that could cause differences include, but are not limited to, continued reliance on external sources on financing, expected market demand for the River Hawk Aviation, Inc. (formerly Viva International, Inc.) and subsidiaries products and services, fluctuations in pricing for the products and services and competition, as well as general conditions of the aviation marketplace. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated or expected. The Company does not intend to update these forward-looking statements.
 
Introduction
 
River Hawk Aviation, Inc. (formerly Viva International, Inc). is a holding company. 
 
On August 28, 2007 the Company completed its merger and acquisition of Profile Aviation Services, Inc. and Profile Aviation Center, Inc. of Hickory, North Carolina ( Profile)
  
On August 29, 2007 the Company completed an agreement (subsequently amended with the most recent amendment being as of November 16, 2007) to acquire privately held River Hawk Aviation, Inc. of San Antonio and has relocated the assets (including consigned assets) and business operations to Hickory, North Carolina.
 
On March 18, 2008, the Company entered into a stock purchase agreement to acquire 100% of the issued and outstanding common stock interests in Carolina Air Charter, Inc.
 
The holding company also consists of the following inactive subsidiaries: CT Industries, Inc., Hardyston Distributors, Inc. (doing business as The Mechanics Depot), and Universal Filtration Industries, Inc. At present, no plans exist to return any of the inactive subsidiaries to operations.
 
Results of Operations for the Three Months Ended March 31, 2008 and 2007.
 
Sales
 
Sales were $2,326,934 for the three months ended March 31, 2008 as compared to sales of $0 for the three months ended March 31, 2007.
 
The increase in sales for the three month period ended March 31, 2008 is attributable to the completion of its merger and acquisition of Profile Aviation Services, Inc. and Profile Aviation Center, Inc. on August 28, 2007.  In addition on August 29, 2007, the Company was also able to complete an asset acquisition with privately held Riverhawk Aviation, Inc. of San Antonio and on March 18, 2008 entered into a stock purchase agreement with Carolina Air Charter, Inc.  At March 31, 2007, the Company was without operations and was in the process of reorganizing the organization to enable it to make acquisitions.
 
 
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Cost of Good Sold
 
Cost of goods sold were $2,016,033 for the three months ended March 31, 2008 as compared to cost of goods sold of $0 for the three months ended March 31, 2007.
 
The increase in cost of good sold is the direct result of the operating activity of Profile Aviation Services, Inc. and Profile Aviation Center, Inc. which were merged and acquired on August 28, 2007 as well as the August 29, 2007 asset acquisition agreement of privately held Riverhawk Aviation, Inc. of San Antoinio and the acquisition of Carolina Air Charter, Inc in March of 2008..
 
Gross Profit
 
Gross profits were $310,901 for the three months ended March 31, 2008 as compared to gross profit of $0 for the three months ended March 31, 2007
 
The increase in gross profits is attributable to the Company’s August 28, 2007 completion of a merger and asset acquisition agreement with Profile Aviation Services, Inc. and Profile Aviation Center, Inc and the August 29, 2007 completion of the asset acquisition agreement of privately held Riverhawk Aviation, Inc. of San Antonio and the acquisition of Carolina Air Charter, Inc. in March of 2008.
 
General and administrative expenses
 
General and administrative expenses were $8,772,620 for the three months March 31, 2008 as compared to  $222,620 for the three months ended March 31, 2007.  The increase is due to the completion of the mergers and acquisition including Profile Aviation Services, Inc., Profile Aviation Center, Inc. and Carolina Air Charter, Inc. as well as the asset acquisition of aviation parts and accessories from Riverhawk Aviation, Inc of San Antoinio.  Included in the general and administrative expenses for the three months ended March 31, 2008 are $7,593,837 of payments for services which were made in stock.   $7,575,000 of these stock payments were made pursuant to an S-8 registration and $7,500,000 of them were considered vital to the Company’s future as it secured certain needed strategic, management and financial services as well as providing for certain financial guarantees and commitments necessary for the Company to execute its business plan and provide assurances that its ongoing operations and future growth can be funded.
 
Interest expenses
 
Interest expenses were $167,229 for the three months ended March 31, 2008 as compared to $29,964 for the three months ended March 31, 2007.  This increase is primarily attributable to the completion of the merger and acquisition of Profile Aviation Services, Inc. and Profile Aviation Center, Inc. and the servicing of existing debt associated with those entities.
 
Losses from discontinued operations and sale of subsidiaries
 
The Company discontinued the subsidiary operations of Eastern Caribbean Airlines Corporation. and Viva Air Dominicana S.A. during the 4th quarter of 2006.  On May 10, 2007, the Company sold its equity interest in Eastern Caribbean Airlines, Inc. and Viva Air Dominicana S.A. to Southland Holdings Corp
 
Losses from discontinued operations were $0 for the three months ended March 31, 2008 as compared to $24,358 for the three months ended March 31, 2007
 
Net Losses
 
Net losses were $8,712,471 for the three months ended March 31, 2008 as compared to a loss of $276,942 for the three months ended March 31, 2007.  The increase in losses is primarily due to expenses resulting from the issuance of common stock for services of $7,593,837 combined with operational losses of $1,118,634.  The Company’s operating subsidiaries have historically been seasonal with the quarter ending in March typically being associated with the bottom of the Company’s business cycles.
 
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Additional information
 
As previously mentioned, the Company has evolved its reorganization into the first phase of its business plan via the completion of a merger and acquisition of Profile Aviation Services, Inc. and Profile Aviation Center, Inc, the purchased and consigned inventory of aviation parts and accessories previously operated under the privately held River Hawk Aviation, Inc. of San Antonio, Texas and the March 18, 2008 acquisition of Carolina Air Charter, Inc.
 
Management has revised its business plan and strategy to concentrate its effort on creating opportunities and strategic relationships with existing operating aviation related companies.
 
Liquidity and Capital Resources
 
At March 31, 2008, the Company had $191,736 in cash. Since inception the Company has accumulated a deficit of approximately $32,750,000.
 
For the period of January 1 through March 31, 2008 the Company was able to meet its working capital and acquisitions  needs through operations as well as approximately $645,000 of financial loans obtained from Aerologistics Investmens Partners, LLC $15,000 provided by the Company’s Chief Executive Officer and new bank loans of approximately $118,000.
 
As of March 31, 2008, $1,199,370 of loans that have been provided for working capital purposes from shareholders and officers are outstanding and a liability of the Company.   For the quarter ended March 31, 2008, loans from shareholders, officer and related parties increased by approximately $661,000.  Management expects to continue to rely on the shareholders, officer and related parties for financial support but hopes to be able to soon refinance its existing loans to enable a improved cash management structure and to be able to retire the shareholder, officer and related party loans by payment in cash.  However, certain loans made for periods prior to December 31, 2007 may be required to be settled by a Company issuance of common shares.
 
The Company is seeking to obtain approximately $6 to $7 million in financing that will be used to fund acquisitions of “niche” aviation companies as well as to provide needed working capital. The Company is seeking to bridge its financing requirements by obtaining a $1-2 million loan that will be used partially for acquisitions and partially for working capital. Additional requests for financing will be tendered on the basis of specific targeted acquisitions, joint ventures and equipment that are by design intended to facilitate the growth of the Company’s holdings and operations.
 
The Company does not currently have the funds necessary for working capital, acquisitions, joint ventures, or equipment acquisitions. The Company will only be able to provide the needed capital by raising additional funds. In the past, the Company has been able to obtain support from some of its shareholder and related parties and it is likely to continue to rely on this  source of support. Principally, the Company expects to continue to rely on the resources and guarantees of Aerologistics Investment Partners, LLC and its members. .
 
However, should we continue to be unable to raise adequate funds it could result in the failure to complete needed acquisitions of certain aviation acquisitions, joint ventures, equipment as well as to provide the necessary working capital needed to continue our efforts in developing the Company’s holdings and operations.
 
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Off-Balance Sheet Arrangements
 
The Company has consolidated King Air 27CS, LLC, Eagle Aviation LLC and Commonwealth Aviation, LLC which are variable interest entities and which have been formed to hold and to finance aircraft that have been and continue to be utilized in the operations of the Company.
 
We do not have any other off balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, revenues, results of operations, liquidity or capital expenditures.
 
Item 3. Controls and Procedures
 
The Company’s Principal Executive Officer and Principal Financial Officer have reviewed the Company’s disclosure controls and procedures as of the end of the period covered by this report. Based upon this review, each such officer believes that the Company’s disclosure controls and procedures are effective in timely alerting him to material information required to be included in this report. There have been no significant changes in internal control over financial reporting that occurred during the fiscal quarter covered by this report that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
 
PART II - OTHER INFORMATION
 
Item 1.         Legal Proceedings .
 
(1) Trans National Communications vs. Auxer Telecom Inc. dba Auxer Group-Superior Court of New Jersey Law Division, Passaic County - Docket No. L793-02. On April 17, 2002, a judgment in the amount of $339,381.84 was obtained against the defendants. The plaintiff, Trans National Communications attached Auxer’s bank account even though the responsible party was Auxer Telecom. Auxer’s litigation counsel successfully separated the defendants in this case and the judgment is only against Auxer Telecom Inc., Auxer’s inactive subsidiary.   Auxer does not intend to contest the judgment against Auxer Telecom Inc. since it was dissolved on March 18, 2002.
 
(2) International Access dba Access International, Inc. v. CT Industries, Inc. -Los Angeles Superior Court, Central District - Case No. BC 282393, filed on September 30, 2002. International Access (“IA”) claims that CT Industries, Inc., Auxer’s subsidiary, entered into an agreement (Switch Port Lease and Service Agreement) with IA whereby IA would provide one year of telecommunications services to CT Industries. IA claims it provided the services and was not paid because checks from CT Industries were returned for insufficient funds. IA is requesting payment of $76,095.34 plus 10% interest per annum from March 13, 2002. Auxer does not intend to respond to this lawsuit and will allow a judgment to be entered against CT Industries, its inactive subsidiary.
  
(3) Mahure, LLC vs. Auxer Group, Inc. - Superior Court of New Jersey, Law Division, Passaic County; Docket No. L-4245-02. Filed August 14, 2002. Mahure, LLC, was Auxer’s landlord for the premises known as 12 Andrews Drive, West Patterson, New Jersey, Auxer’s former business address. It is suing Auxer for failure to pay base rent of $7,083.33 from October 2001 through August 2002, plus 50% of real estate taxes, insurance premiums and other fixed charges contained in Auxer’s lease. Mahure, LLC is requesting $58,465.49 attorney’s fees, cost of suit and interest. The Company did not contest this matter and accordingly, a judgment has been entered against it for approximately $98,000.
 
(4) Colbie Pacific Capital- On April 24, 2002, Auxer entered into a Modification and Restructuring Agreement with Colbie Pacific Capital. The agreement required Auxer to make a $350,000 payment to Colbie by September 28, 2002. Auxer failed to make such payment and the sum of $450,000 plus accrued interest is now due to Colbie. On October 8, 2002, Auxer received a settlement offer from Colbie’s attorney whereby Colbie agreed to allow Auxer to sell certain assets and make the required payment. Auxer is trying to sell such assets, specifically telecommunications switching equipment. However, the assets have limited value and application and the last efforts made by the Company were unable to locate the whereabouts of the assets so there appears to be no ability to resolve this debt (claim) through a sale of assets.  Accordingly, the Company hopes to negotiate a settlement for significantly less than the recorded amount of the liability.
 
 
16
 
(5) Abel Estrada vs. CT Industries, Inc. - Labor Commissioner, State of California - State Case Number 06-67045 JAH - Hearing Date: November 20, 2002 in Los Angeles, California. Abel Estrada, a former employee of Auxer’s subsidiary, CT Industries, Inc., filed a claim against CT in the amount of $10,376.08 with the Labor Commissioner, State of California, for the following claims: unpaid wages - $1,068; unpaid commissions - $8,000; unpaid vacation time - $861.33; unpaid expenses $43.75; and unauthorized deduction from wages - $403.00. CT Industries does not intend to appear at the hearing and contest this matter.  Ct Industries has been inactive since 2003.
 
(6) Paul R. Lydiate - Labor Claim in California against Auxer Telecom Inc. for $20,192. Auxer did not appear at the hearing on May 6, 2002. Auxer Telecom Inc. was dissolved on March 18, 2002.
  
(7) Ty Hiither vs. Viva International, Inc.-Small claims action against the Company for unpaid services related to Web Site Development. A court judgment has been entered against the Company for $3,073 as of July 12, 2004. Since the judgment has been entered the plaintiff has refused an offer to settle the claim by issuance of Company stock and has intentionally and maliciously sought to damage the Company through the development of a web site portal and by various links to the Company’s web site. Pursuant to the Plaintiff’s efforts, she has made various posts and made various references to the Company’s plans, it’s employees, consultants and managers that were damaging or potentially damaging and were made without her attempts to verify or perform other due diligence to determine the accuracy and reliability of the information that she intentionally posted. The Company believes that the plaintiff may have acted criminally and accordingly, may seek relief or other sanctions and may assess damages at amounts far in excess of the plaintiff’s claim.
 
(8) Ronald Greene vs. Viva Airlines, Inc.- Mr. Greene previously was engaged as the chief pilot for Viva Airlines, Inc. Mr. Greene has claimed that he is owed approximately $25,000 plus certain expenses for his services during the time he was involved with the Company. Although a formal action has not yet occurred, Mr. Greene has threatened suit as well as indicating he had filed various labor and wage claims with regulatory agencies. Mr. Greene has also indicated that he has filed various complaints with aviation regulatory authorities. The Company has been unable to reach a mutually satisfying resolution of this matter.
 
 (9) Ivan Figueroa vs. Eastern Caribbean Airlines Corporation. and Viva International, Inc.- Mr. Figueroa filed a claim against the Company and its former subsidiary, Eastern Caribbean Airlines, Inc., alleging that he has suffered $5 million in damages as a result of an alleged breach of an agreement between Eastern Caribbean Airlines, Inc. and Viva International, Inc, pursuant to a the Company’s termination of it’s acquisition of Cool Tours, Inc.   A status conference was held on November 30, 2006 and the court allowed a request for discovery to be extended.  Prior to the commencement of discovery, legal counsel for Eastern Caribbean Airlines and Viva International, Inc. withdrew their representation of the Company due to lack of payment of outstanding professional services.  Subsequently, the Court ordered Eastern/Viva to appear before them with new legal representation.  The Company has agreed to engage new counsel and a pleading is expected to be filed within the imposed time frame as mandated by the Courts.  Mr. Figueroa was previously the owner of Cool Tours, Inc. d/b/a San Juan Aviation. At issue is amounts allegedly owed to Mr. Figueroa and other unpaid obligations as well as the ownership of the Cool Tours, Inc name. The Company had invested substantially into it’s the Cool Tours, Inc., Puerto Rico based operations through Eastern Caribbean Airlines, Inc., and believes that the  claimed are untenable and inflated.   The Company has recently responded to plaintiff interrogatories and will now look for new counsel to effectively allow it to request dismissal of this litigation.  The change in counsel is necessary to avoid any conflict of interest that would be present under previous counsel.
 
(10 ) Syed Hasan vs. Viva International, Inc. and Eastern Caribbean Airlines Corporation—Mr. Hasan, formerly the Company’s CEO and President as well as having served in other capacities during his tenure, filed a complaint in the State of Georgia seeking compensation for past unpaid services and for various incurred business expenses. In October 2007, the court entered default judgment in favor of Hassan in the amount of $219,076.66, which River Hawk subsequently satisfied in February of 2008.  The aggregate cost of satisfying the judgment and accompanying costs was $226,635.38.
 
 (11) Francisco J. Sepulveda vs. Viva International, Inc.—Mr. Sepulveda has filed a charge of discrimination against Viva before the Equal Employment Opportunity Commission (EEOC) for discrimination on the basis of national origin and relation, in violation of Title VII of the Civil Rights Act. The Company denies this complaint in its entirety. No determination has made in this matter.  River Hawk intends to demand an indemnification benefit that received from a third party as to this litigation, pursuant to a May 10, 2007 stock purchase agreement with Southland Holding Corp., under which the Company sold its equitable interest in Eastern Caribbean Airlines Corporation and Viva Air Dominicana S.A. to Southland.
 
12) Richard Amador Martinez vs. Eastern Caribbean Airlines Corporation----Mr. Amador Martinez has filed a claim with the Labor Department against Eastern Caribbean Airlines. The Labor Department has ruled in favor of Mr. Amador Martinez and accordingly, the Company is alleged to be obligated under this claim for an amount less than $5,000. However, a mediation of conflicts conference has been scheduled to be held on May 31, 2007. The Company has recorded a liability on its books in anticipation of being required to make a payment subject to this claim.  This claim is expected to be satisfied pursuant to a May 10, 2007 stock purchase agreement with Southland Holding Corp.
 
(13) Zandra G. Fox-Gascott vs. Viva International, Inc.---Ms. Fox-Gascott has filed a charge of discrimination against Viva before the Equal Employment Opportunity Commission (EEOC) for discrimination on the basis of national origin and sex, in violation of Title VII of the Civil Rights Act. The Company has provided certain information to the EEOC in the matter and has denied all claims that have been made. The EEOC has informed the Company that attempts to conciliate this matter will not be continued by the Commission but they have referred this matter to the attorneys to determine if any civil proceeding is warranted.
 
Other than as stated above, we are not currently aware of any other pending, past or present litigation that would be considered to have a material effect on the Company or its subsidiaries. There are no known bankruptcy or receivership issues outstanding and we have no known proceedings in which certain corporate insiders or affiliates of us are in a position that is adverse to us.
 
 
 
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Item 2.      Unregistered Sale of Equity Securities and Use of Proceeds.
 
 
On March 5, 2008, the Company authorized the issuance of  3,334 restricted common shares as consideration for $5,501 of financial services, consulting and management advisory services.
 
On March 16, 2008, the Company authorized the issuance of 3,030,000 shares of common stock pursuant to an S-8 registration.  1,500,000 shares were issued to Richard Girouard and 1,500,000 shares were issued to David Otto in exchange for professional services including strategic planning, management oversight and financial management and guarantees.  The registration value of the stock issued is $3,750,000 to Mr. Girouard and $3,750,000 to Mr. Otto.
 
The remaining 30,000 shares were issued to unrelated service providers engaged to deliver various financial products and services and is valued at $75,000.
 
On March 25, 2008, the Company authorized the issuance of 6,668 restricted shares as consideration for $13,336 of financial and management services.
 
On April 4, 2008, the Company authorized the issuance of 100,000 restricted shares as consideration for financial services.
 
All of such securities were issued in reliance upon the exemption from registration pursuant to Section 4(2) of the Securities Act of 1933, as amended.
 
Item 3.      Defaults Upon Senior Securities.
 
Not Applicable
 
Item 4.      Submission of Matters to a Vote of Security Holders.
 
None 
 
Item 5.      Other Information.
 
None 
 
Item 6.      Exhibits.
 
31.1
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rules 13a-14 and 15d-14 of the Exchange Act)
31.2
Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rules 13a-14 and 15d-14 of the Exchange Act)
32.1
Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)
32.2 Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)
 
 
 
SIGNATURES
 
In accordance with the requirements of the Exchange Act, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
 
 
RIVER HAWK AVIATION, INC.
   
Date: May 12, 2008
By: /s/ Calvin Humphrey
 
Calvin Humphrey
 
Chief Executive Officer, Principal Executive Officer, Director
     
 
By: /s/ Robert J. Scott
 
Robert J. Scott
 
Chief Financial Officer
 
Principal Financial Officer, Director
 
 
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