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Seaena Inc. – ‘10-Q’ for 9/30/04

On: Friday, 11/12/04, at 9:48am ET · For: 9/30/04 · Accession #: 949353-4-577 · File #: 0-29781

  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

11/12/04  Seaena Inc.                       10-Q        9/30/04    3:72K                                    Dill Dill Carr St… PC/FA

Quarterly Report — Form 10-Q
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q        Form 10-Qsb                                           21    119K 
 2: EX-31       Exh 31-1 Certification                                 4     14K 
 3: EX-32       Exh 32-1 Certification                                 1      6K

10-Q — Form 10-Qsb
Document Table of Contents

Page	(sequential)	\|	(alphabetic)	Top
			Alternative Formats (Word, et al.) Controls and Procedures Defaults Upon Senior Securities Exhibits Financial Statements Forward-Looking Statements Legal Proceedings Management's Discussion and Analysis or Plan of Operations Other Information Submission of Matters to a Vote of Security Holders Unregistered Sales of Equity Securities and Use of Proceeds
1	1st Page - Filing Submission
3	Item 1. Financial Statements
11	Item 2. Management's Discussion and Analysis or Plan of Operations
17	Forward-Looking Statements
"	Item 3. Controls and Procedures
18	Item 1. Legal Proceedings
"	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
"	Item 3. Defaults Upon Senior Securities
"	Item 4. Submission of Matters to a Vote of Security Holders
"	Item 5. Other Information
"	Item 6. Exhibits

10-Q 1st Page of 21 TOC ↑Top Previous Next ↓Bottom Just 1st
 
 UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

 FORM 10-QSB
(Mark One)                                                                      

[X]  QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE      
ACT OF 1934                                                           

 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2004

[ ]  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT            

For the transition period from ________________ to _______________

 0-29781
(Commission file number)

 CRYSTALIX GROUP INTERNATIONAL, INC.
 (Exact name of small business issuer as specified in its charter)

 NEVADA                               65-0142472
(State or other jurisdiction                   (IRS Employer          
of incorporation or organization)              Identification No.)        

 5275 SOUTH ARVILLE STREET, SUITE B-116, LAS VEGAS, NEVADA 89118
(Address of principal executive offices)

(702) 740-4616
 (Issuer's telephone number)

 N/A
 (Former name, former address and former fiscal year, if changed
since last report)

 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 [ ]

State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date:
As of November 12, 2004 - 37,632,192 shares of common stock 

 Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]

10-Q 2nd Page of 21 TOC 1st Previous Next ↓Bottom Just 2nd
 CRYSTALIX GROUP INTERNATIONAL, INC.
 INDEX

                                                        [Enlarge/Download Table]

                                                                                 PAGE 
                                                                                NUMBER
                                                                                      
PART I.    FINANCIAL INFORMATION                                                   2  

Item 1.    Financial Statements                                                    2  

           Consolidated Balance Sheet as of September 30, 2004 (unaudited)         2  

           Consolidated Statements of Operations for the                              
           three and nine months ended September 30, 2004 and 2003 (unaudited)     3  

           Consolidated Statements of Cash Flows for the                              
           nine months ended September 30, 2004 and 2003 (unaudited)               4  
           Notes to Consolidated Financial Statements (unaudited)                  5  

Item 2.    Management's Discussion and Analysis or Plan of Operations             10  

Item 3.    Controls and Procedures                                                16  

PART II.   OTHER INFORMATION                                                      17  

Item 1.    Legal Proceedings                                                      17  

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds            17  

Item 3.    Defaults Upon Senior Securities                                        17  

Item 4.    Submission of Matters to a Vote of Security Holders                    17  

Item 5.    Other Information                                                      17  

Item 6.    Exhibits                                                               17  

SIGNATURES                                                                        20  

1 

10-Q 3rd Page of 21 TOC 1st Previous Next ↓Bottom Just 3rd
PART I.    FINANCIAL INFORMATION                                                

ITEM 1.    FINANCIAL STATEMENTS                                                 

CRYSTALIX GROUP INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET

                                                               SEPTEMBER
                                                              30, 2004
                                                               -----------
                                                               (unaudited)

ASSETS

CURRENT ASSETS                                                                  
Cash and cash equivalents                                     $  1,980,511
Accounts receivable, net of allowance of $312,000                  320,032
Inventory                                                          679,485
Other current assets                                                96,306
                                                               -----------
TOTAL CURRENT ASSETS                                                3,076,334   
                                                               -----------

PROPERTY AND EQUIPMENT, net (including equipment                                
acquired from related party of $2,300,000 in 2002)               1,855,315

INTANGIBLE ASSETS                                                               
Licenses and related costs, net of accumulated                            
  amortization of $431,965                                       1,457,936
Capitalized software costs, net of accumulated                            
  amortization of $183,230                                         143,260
Website development costs, net of accumulated                             
  amortization of $83,425                                           66,908
Customer lists and relationships, net of accumulated                      
  amortization of $39,375                                           73,125
Artwork library, net of accumulated amortization of                       
  $522,664                                                         373,331
Tradename and trademark, net of accumulated                               
  amortization of $5,502                                            10,217
                                                               -----------
                                                                 2,124,777
                                                               -----------

OTHER ASSETS                                                            6,368   

                                                               -----------
TOTAL ASSETS                                                     $  7,062,794   
                                                               ===========

 LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES                                                             
Accounts payable and accrued expenses                         $  1,150,338
Customer deposits                                                   23,666
Notes payable (including $2,089,593 to related parties),                  
  net of discounts of $905,463                                   2,700,709
Current portion of deferred revenue                              1,140,688

                                                               -----------
TOTAL CURRENT LIABILITIES                                           5,015,401   
                                                               -----------

NOTES PAYABLE, net of current portion (including $3,078,647 to                  
related parties),                                                               
net of discounts of $2,093,235                                   4,467,531
DEFERRED REVENUE, less current portion                              1,361,591   

                                                               -----------
TOTAL LIABILITIES                                                  10,844,523   
                                                               -----------

COMMITMENTS AND CONTINGENCIES                                             -     

STOCKHOLDERS' DEFICIT                                                           
Preferred stock - Class A, $0.001 par value;                              
10,000,000 shares authorized; 3,920,000 Class A                       
  shares issued and outstanding                                      3,920
Common stock; $0.001 par value; 300,000,000 shares                        
  authorized; 37,132,192 shares issued and outstanding              37,132
Additional paid-in capital                                      10,705,413
 Other comprehensive loss - foreign currency translation            (39,625)
 Accumulated deficit                                            (14,488,569)

                                                               -----------
TOTAL STOCKHOLDERS' DEFICIT                                        (3,781,729)  
                                                               -----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT                      $  7,062,794   
                                                               ===========

                                                                     -

                                                                     -

                                                                     -

The accompanying notes are an integral part of these consolidated 
financial statements. 

2 

10-Q 4th Page of 21 TOC 1st Previous Next ↓Bottom Just 4th
CRYSTALIX GROUP INTERNATIONAL, INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF OPERATIONS

                                                        [Enlarge/Download Table]

                                                THREE MONTHS ENDED              NINE MONTHS ENDED      
                                           -----------------------------  -----------------------------
                                             SEPTEMBER      SEPTEMBER       SEPTEMBER       SEPTEMBER  
                                             30, 2004        30, 2003        30, 2004       30, 2003   
                                           -------------  --------------  --------------  -------------
                                            (unaudited)    (unaudited)     (unaudited)     (unaudited) 
                                                                                                       
REVENUE                                                                                                
    Product sales                          $    831,453   $     826,470   $   2,436,359   $  3,431,309 
    Lease revenue                               271,309         342,082         852,801      1,128,063 
    Royalty revenue                              41,234         141,589          93,561        305,228 
                                           -------------  --------------  --------------  -------------
TOTAL REVENUE                                 1,143,996       1,310,141       3,382,721      4,864,600 
                                           -------------  --------------  --------------  -------------

COST OF REVENUE                                                                                        
    Product sales                               482,780         304,497       1,223,162      1,650,473 
    Lease revenue                                49,301          78,584         315,010        458,383 
    Royalty revenue                              20,000          38,777          54,157        144,881 
                                           -------------  --------------  --------------  -------------
TOTAL COST OF REVENUE                           552,081         421,858       1,592,329      2,253,737 
                                           -------------  --------------  --------------  -------------

                                           -------------  --------------  --------------  -------------
GROSS PROFIT                                    591,915         888,283       1,790,392      2,610,863 
                                           -------------  --------------  --------------  -------------

OPERATING EXPENSES                                                                                     
    Research and development                        -           165,536             -          216,554 
    Payroll and related benefits                485,895         564,699       1,407,327      1,829,790 
    General and administrative                1,685,957         950,454       3,427,429      5,047,470 
    Impairment expense                              -               -                              -   
                                           -------------  --------------  --------------  -------------
TOTAL OPERATING EXPENSES                      2,171,852       1,680,689       4,834,756      7,093,814 
                                           -------------  --------------  --------------  -------------

LOSS FROM OPERATIONS                         (1,579,937)       (792,406)     (3,044,364)    (4,482,951)
                                           -------------  --------------  --------------  -------------

OTHER INCOME (EXPENSES):                                                                               
    Interest income                                 -               -               -              -   
    Other expense, net                              -               338          24,472       (501,200)
    Interest expense                         (3,384,461)       (100,959)     (3,779,193)      (746,562)
                                           -------------  --------------  --------------  -------------
TOTAL OTHER INCOME (EXPENSE)                 (3,384,461)       (100,621)     (3,754,721)    (1,247,762)
                                           -------------  --------------  --------------  -------------

LOSS BEFORE PROVISION FOR INCOME TAXES       (4,964,398)       (893,027)     (6,799,085)    (5,730,713)

PROVISION FOR INCOME TAXES                                                                             
    Current                                         -               -               -         (550,000)
    Deferred                                        -               -               -          550,000 
                                           -------------  --------------  --------------  -------------

NET LOSS                                   $ (4,964,398)  $    (893,027)  $  (6,799,085)  $ (5,730,713)
                                           =============  ==============  ==============  =============

NET LOSS PER SHARE - BASIC AND DILUTED     $      (0.14)  $       (0.02)  $       (0.19)  $      (0.14)
                                           =============  ==============  ==============  =============

WEIGHTED AVERAGE COMMON EQUIVALENT                                                                     
    SHARES OUSTANDING - BASIC AND DILUTED    36,377,442      38,989,192      34,873,451     39,943,478 
                                           =============  ==============  ==============  =============

The accompanying notes are an integral part of these consolidated 
financial statements. 

3 

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CRYSTALIX GROUP INTERNATIONAL, INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                        [Enlarge/Download Table]

                                                                    NINE MONTHS ENDED       
                                                                --------------------------  
                                                                  SEPTEMBER      SEPTEMBER  
                                                                  30, 2004       30, 2003   
                                                                ------------   ------------ 
                                                                 (unaudited)    (unaudited) 
                                                                                            

CASH FLOW FROM OPERATING ACTIVITIES:                                                        
  Net loss                                                      $ (6,799,085)  $ (5,730,713)

  Adjustment to reconcile net loss to net cash                                              
    used in operating activities                                                            
     Depreciation and amortization                                   832,145        976,354 
     Provision for doubtful accounts                                     -          159,000 
     Common stock and reallocation of Series A preferred stock                              
       issued for financing costs                                  2,747,011        528,000 
     Common stock and reallocation of Series A preferred stock                              
       issued for services                                           462,775      1,170,000 
     Amortization of debt discounts                                  188,814            -   
     Foreign currency translation adjustment                           2,686        (15,959)
     (Gain) loss on disposal of fixed assets                          (1,973)       123,652 
     Write off of deferred offering costs                                -          212,797 
     Write off of advances to Vitro Laser, Gmbh                          -          500,000 
  Changes in operating assets and liabilities:                                              
  (Increase) decrease in:                                                                   
    Accounts receivable                                              184,021        218,479 
    Inventory                                                         72,528        419,338 
    Other current assets                                             (72,192)       143,595 
    Deposits                                                           3,905        (12,743)
  Increase (decrease) in:                                                                   
    Accounts payable and accrued expenses                            683,280        510,030 
    Customer deposits                                                (57,022)       (67,057)
    Deferred revenue                                                (700,899)       455,605 
                                                                -------------  -------------
Net cash used in operating activities                             (2,454,006)      (409,622)
                                                                -------------  -------------

CASH FLOW FROM INVESTING ACTIVITIES:                                                        
  Advances to acquire Vitro Laser, Gmbh                                  -         (300,000)
  Payment to repurchase laser                                        (39,006)           -   
  Payments to acquire property and equipment                         (21,053)    (1,309,944)
                                                                -------------  -------------
Net cash used in investing activities                                (60,059)    (1,609,944)
                                                                -------------  -------------

CASH FLOW FROM FINANCING ACTIVITIES:                                                        
  Net advances from related party                                  2,442,825        833,922 
  Proceeds from issuance of notes payable                          2,000,000            -   
  Payments on notes payable                                           (3,600)       (11,015)
  Payments on notes payable - related parties                         (3,530)           -   
  Payments for deferred offering costs                                   -         (136,797)
  Proceeds from sale on common stock, including stock                                       
   subscription receivable                                               -          748,000 
                                                                -------------  -------------
Net cash provided by financing activities                          4,435,695      1,434,110 
                                                                -------------  -------------

NET INCREASE (DECREASE) IN CASH AND                                                         
  CASH EQUIVALENTS                                                 1,921,630       (585,456)

CASH AND CASH EQUIVALENTS, Beginning of period                        58,881        641,325 
                                                                -------------  -------------

CASH AND CASH EQUIVALENTS, End of period                        $  1,980,511   $     55,869 
                                                                =============  =============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:                                           
  Interest Paid                                                 $        -     $    136,045 
                                                                =============  =============
  Income taxes paid                                             $        -     $        -   
                                                                =============  =============

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND                                           
  FINANCING ACTIVITIES                                                                      
  Purchase of property and equipment for note payable           $        -     $    237,826 
                                                                =============  =============

The accompanying notes are an integral part of these consolidated 
financial statements. 

4 

10-Q 6th Page of 21 TOC 1st Previous Next ↓Bottom Just 6th
CRYSTALIX GROUP INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)

NOTE 1 - BASIS OF PRESENTATION                                                  

The unaudited  consolidated financial statements have been prepared by Crystalix
Group International, Inc. (the "Company"), pursuant to the rules and regulations
of the Securities and Exchange  Commission.  The  information  furnished  herein
reflects  all  adjustments   (consisting  of  normal   recurring   accruals  and
adjustments)  which are,  in the  opinion  of  management,  necessary  to fairly
present the operating results for the respective  periods.  Certain  information
and  footnote  disclosures  normally  present in annual  consolidated  financial
statements prepared in accordance with accounting  principles generally accepted
in the United  States of America  have been  omitted  pursuant to such rules and
regulations.   These  consolidated   financial  statements  should  be  read  in
conjunction with the audited consolidated financial statements and footnotes for
the year ended December 31, 2003 included in the Company's Annual Report on Form
10-KSB.  The  results  of the  nine  months  ended  September  30,  2004 are not
necessarily  indicative  of the results to be expected  for the full year ending
December 31, 2004.                                                              

The  accompanying  consolidated  financial  statements  have  been  prepared  in
conformity with accounting principles generally accepted in the United States of
America,  which contemplate  continuation of the Company as a going concern. The
Company  incurred a net loss for the nine  months  ended  September  30, 2004 of
$6,799,085, used cash for operating activities of $2,454,006 for the nine months
ended September 30, 2004 and at September 30, 2004 had an accumulated deficit of
$14,542,069 and a working capital deficit of $1,939,067.  These conditions raise
substantial  doubt as to the Company's  ability to continue as a going  concern.
These  consolidated  financial  statements do not include any  adjustments  that
might result from the outcome of this uncertainty.  These consolidated 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 be necessary should the Company be unable to continue as
a going concern.                                                                

The  Company  plans  to  take  the  following  steps  that it  believes  will be
sufficient to provide the Company with the ability to continue in existence. The
Company has recently  re-negotiated  the repayment terms of certain debt and has
issued a convertible promissory note in the amount of $2,000,000 to an unrelated
third  party.  In July 2004,  the Company has changed its senior  management  by
naming Mr. Kevin Ryan as Chief  Executive  Officer and Mr.  Robert  McDermott as
Chief  Financial  Officer and believes that the new management team will be able
to achieve profitable operations, but there can be no assurance that the Company
will be able to raise sufficient  capital and generate  positive cash flows from
operations sufficient to sustain operations.                                    

STOCK OPTIONS                                                                   

The  Company  did not grant any new options  and no options  were  cancelled  or
exercised  during the nine months ended  September 30, 2004. As of September 30,
2003, only 3,000,000 options were outstanding,  which were granted in the fourth
quarter of 2002 and were fully vested  immediately.  Subsequent to September 30,
2003, all of the 3,000,000  outstanding options were relinquished as a result of
a settlement of a legal matter or canceled.                                     

The pro forma information regarding the effect on operations that is required by
SFAS 123 and SFAS 148 has not been presented since there is no pro forma expense
to be shown for the nine months ended September 30, 2004 and 2003.              

5 

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CRYSTALIX GROUP INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)

NOTE 2 - LOSS PER SHARE                                                         

The Company  reports loss per share in accordance  with SFAS No. 128,  "Earnings
per  Share."  Basic loss per share is computed by  dividing  loss  available  to
common  shareholders by the weighted average number of common shares  available.
Diluted  loss per share is computed  similar to basic loss per share except that
the  denominator is increased to include the number of additional  common shares
that would have been  outstanding if the potential common shares had been issued
and if the additional  common shares were  dilutive.  Diluted loss per share has
not been  presented  since the effect of the  assumed  exercise  of options  and
warrants to purchase  common shares would have an  anti-dilutive  effect.  There
were 0 and 3,000,000 common equivalent shares  outstanding at September 30, 2004
and 2003, respectively.                                                         

NOTE 3 - INVENTORY                                                              

Inventory at September 30, 2004, consist of the following:                      

         Glass blocks, premade images and related products       $       351,717
         Electronic parts and accessories                                327,768
                                                                 ---------------
                                                                 $       679,485
                                                                 ===============

NOTE 4 - PROPERTY AND EQUIPMENT                                                 

Property and equipment at September 30, 2004, consist of the following:         

         Equipment under operating leases as lessor              $     1,850,003
         Computers and equipment                                         582,964
         Vehicles                                                          4,000
         Furniture and fixtures                                          173,444
         Leasehold improvements                                           32,188
                                                                 ---------------
                                                                       2,642,599
         Less accumulated depreciation and amortization                  787,284
                                                                 ---------------

                                                                 $     1,855,315
                                                                 ===============

6 

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CRYSTALIX GROUP INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)

NOTE 6 - NOTES PAYABLE (INCLUDING RELATED PARTY NOTES)                          

Notes payable at September 30, 2004 consist of the following:                   

John Woodward. (a)                         $     1,824,000    
Kevin Ryan (b)                                   5,396,764    
Ryan Capital Management, Inc. (c)                  452,137    
McCary & Rood, Inc. (d)                            280,000    
McCary & Rood, Inc. (e)                            214,037    
CMKXTREME.COM (f)                                2,000,000    
                                        ----------------
                                            10,166,938
Less debt discounts                             (2,998,698)   
                                        ----------------
Net amount of notes payable                      7,168,240    
Less current portion                            (2,700,709)   
                                        ----------------
Long-term portion                          $     4,467,531    
                                        ================

    a.   On July 21, 2004, the Company issued a convertible  promissory  note to
         Mr. John Woodward,  the Company's  former  President,  in the amount of
         $1,824,000,  which represents principal due on a previously issued note
         payable in the amount of $1,343,722 plus accrued interest in the amount
         of  $480,279.  This note bears  interest at 10% per annum and calls for
         monthly  interest  payments  from  August 1, 2004 to  December 1, 2004.
         Beginning  on January 1, 2005,  this note  requires  monthly  principal
         payments of $50,405 plus accrued interest with any unpaid principal and
         interest  due on July 1,  2007.  The  monthly  principal  and  interest
         payments can be paid with shares of the  Company's  common stock at the
         option of the holder. The conversion price is the lesser of the average
         closing  price  of  the  Company's  common  stock  five  business  days
         immediately  prior to the conversion  notice or $0.08.  The Company has
         agreed to register the shares  issuable  upon  conversion of this note.
         The  Company  has  determined  that  there  is  a  beneficial   feature
         associated  with  this  convertible  promissory  note in the  amount of
         $615,600.  This amount will be amortized  as  financing  costs over the
term of the note.                                             

    b.   On July 21, 2004, the Company issued a convertible  promissory  note to
         Mr. Kevin Ryan, the Company's Chief Executive Officer, in the amount of
         $5,396,764,  which  represents  (a) principal  due on a two  previously
         issued  notes  payable in the amounts of $852,680 and  $1,010,000,  (b)
         principal  due under a  revolving  credit  agreement  in the  amount of
         $1,766,500,  (c) principal due under an additional  note payable in the
         amount of  $1,500,000  and (d) accrued  interest  on the above  mention
         obligations in the amount of $267,584.  This note bears interest at 10%
         per annum and calls for monthly principal  payments from August 1, 2004
         to December 1, 2004 of $45,000.  On the last day of the month beginning
         on August 31, 2004 through November 30, 2004, the accrued interest will
         be added to the principal  amount.  Beginning on January 1, 2005,  this
         note requires  monthly  principal  payments of $174,584 with any unpaid
         principal and interest due on July 1, 2007.  The monthly  principal and
         interest payments can be paid with shares of the Company's common stock
         at the option of the holder.  The conversion price is the lesser of the
         average closing price of the Company's  common stock five business days
         immediately prior to the conversion  notice or $0.08. In addition,  the
         Company granted to Mr. Ryan a warrant to purchase  1,875,000  shares of
         the Company's common stock. The exercise price is lesser of the average
         closing  price  of  the  Company's  common  stock  five  business  days
         immediately  prior to the notice of exercise or $0.08.  The Company has
         agreed to register the shares issuable upon conversion of this note and
         exercise of the warrant.  In  accordance  with EITF 00-27,  the Company
         first  determined  the  value of the  note  and the  fair  value of the
detachable  warrants                                          

7 

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CRYSTALIX GROUP INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)

         issued  in  connection  with  this  note.  The  estimated  value of the
         warrants of $200,625  was  determined  using the  Black-Scholes  option
         pricing model and the following  assumptions:  term of 7 years,  a risk
         free  interest rate of 3.5%, a dividend  yield of 0% and  volatility of
         371%.   The  face  amount  of  the  note  payable  of  $5,396,764   was
         proportionately  allocated  to the note and the warrants in the amounts
         of  $5,203,330  and $193,434,  respectively.  The value of the note was
         then  allocated  between  the  note  and  the  preferential  conversion
         feature, which amounted to $3,188,488 and $2,014,842, respectively. The
         combined total discount is $2,208,276,  and is being amortized over the
term of the note.                                             

    c.   On July 21, 2004, the Company issued a promissory  note to Ryan Capital
         Management,  Inc.  (this  company is  controlled  by Kevin Ryan) in the
         amount of  $452,137,  which  represents  principal  due on a previously
         issued note payable in the amount of $400,000 plus accrued  interest in
         the amount of  $52,137.  This note bears  interest at 10% per annum and
         calls for monthly interest  payments from August 1, 2004 to December 1,
         2004.  Beginning  on  January  1,  2005,  this  note  requires  monthly
         principal  payments of $37,902  plus accrued  interest  with any unpaid
principal and interest due on December 1, 2005.               

    d.   On August 1, 2004,  the Company  issued a  promissory  note to McCary &
         Rood  (this  company  is  controlled  by Kevin  Ryan) in the  amount of
         $280,000,  which represents past due consulting fees under a consulting
         agreement  dated May 28,  2003.  This note calls for  monthly  payments
         beginning  August 1, 2004 of $30,000 with any unpaid  principal  due on
May 1, 2005.                                                  

    e.   On August 1, 2004,  the Company  issued a  promissory  note to McCary &
         Rood in the amount of $214,037,  which represents past due reimbursable
         expenses  under a consulting  agreement  dated May 28, 2003.  This note
         calls for monthly payments beginning August 1, 2004 of $30,000 with any
unpaid principal due on March 1, 2005.                        

    f.   On September 23, 204, the Company issued a convertible  promissory note
         to CMKXTREME.COM in the amount of $2,000,000.  This note bears interest
         at 10% per annum and calls for  monthly  principal  payments of $55,556
         plus  accrued  interest  beginning  November  1, 2004  with any  unpaid
         principal  and interest due on October 1, 2007.  The monthly  principal
         and interest  payments can be paid with shares of the Company's  common
         stock at the option of the holder.  The conversion  price is the lesser
         of the  average  closing  price  of the  Company's  common  stock  five
         business days immediately  prior to the conversion  notice or $0.08. In
         addition,  the Company  granted to  CMKXTREME.COM a warrant to purchase
         2,500,000  shares of the Company's  common stock. The exercise price is
         lesser of the average closing price of the Company's  common stock five
         business days immediately prior to the notice of exercise or $0.08. The
         Company has agreed to register the shares  issuable upon  conversion of
         this note and exercise of the warrant.  In accordance  with EITF 00-27,
         the Company first  determined  the value of the note and the fair value
         of the  detachable  warrants  issued in connection  with this note. The
         estimated  value of the warrants of $200,000 was  determined  using the
         Black-Scholes option pricing model and the following assumptions:  term
         of 7 years,  a risk free interest rate of 3.5%, a dividend  yield of 0%
         and volatility of 371%. The face amount of the  convertible  promissory
         note of $2,000,000  was  proportionately  allocated to the note and the
         warrants in the amounts of $1,818,182 and $181,818,  respectively.  The
         value  of the  note  was  then  allocated  between  the  note  and  the
         preferential  conversion  feature,  which  amounted to  $1,636,364  and
         $181,818, respectively. The combined total discount is $363,636, and is
being amortized over the term of the note.                    

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CRYSTALIX GROUP INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)

NOTE 7 - EQUITY                                                                 

During the nine months  ended  September  30, 2003,  the Company sold  1,120,000
shares of its  restricted  common stock for gross  proceeds of  $260,000.  Also,
during the nine months ended  September  30, 2003,  the Company  issued  660,000
shares of its common stock as  consideration  for the holder of the $1.5 million
loan payable extending the repayment terms that were valued at $528,000, and the
Company issued 2,340,000  shares of its common stock for services  rendered that
were valued at $1,170,000.                                                      

On July 21, 2004,  the Company issued  3,019,000  common shares of the Company's
common  stock  to  Kevin  Ryan as  additional  consideration  for the  financing
provided  to the  Company.  Also,  certain  holders  of the  Company's  Series A
preferred stock  reallocated  2,647,900 of their shares to certain investors and
senior  members of the Company's  management  team. The Company took a charge to
financing   costs  and   compensation   expense  of  $2,747,011   and  $409,275,
respectively,  related to the issuance of common shares and  reallocation of the
Series A preferred shares.                                                      

In addition,  in July 2004, the Company also issued a total of 500,000 shares of
common stock to two consultants valued at $53,500.                              

NOTE 8 - RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS                              

In December 2003, the  Securities and Exchange  Commission  ("SEC") issued Staff
Accounting  Bulletin ("SAB") No. 104, "Revenue  Recognition." SAB 104 supersedes
SAB 101,  "Revenue  Recognition  in  Financial  Statements."  SAB 104's  primary
purpose  is to  rescind  accounting  guidance  contained  in SAB 101  related to
multiple element revenue arrangements, superseded as a result of the issuance of
EITF 00-21,  "Accounting for Revenue  Arrangements with Multiple  Deliverables."
Additionally,  SAB 104  rescinds  the SEC's  Revenue  Recognition  in  Financial
Statements  Frequently  Asked  Questions and Answers ("the FAQ") issued with SAB
101 that had been  codified  in SEC  Topic  13,  Revenue  Recognition.  Selected
portions of the FAQ have been  incorporated  into SAB 104.  While the wording of
SAB  104 has  changed  to  reflect  the  issuance  of EITF  00-21,  the  revenue
recognition  principles of SAB 101 remain  largely  unchanged by the issuance of
SAB 104,  which was  effective  upon  issuance.  The adoption of SAB 104 did not
impact the consolidated financial statements.                                   

NOTE 9 - COMMITMENTS AND CONTINGENCIES                                          

The Company may be named as a defendant in legal actions arising from its normal
operations,  and from  time-to-time is presented with claims for damages arising
out of its actions.  The management of the Company  anticipates that any damages
or expenses it may incur in  connection  with these  actions,  individually  and
collectively,  will not have a material  adverse effect on the Company.  For the
three  months  ended  September  30,  2004,  there  has  been no  change  in the
litigation pending against the Company.                                         

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ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS             

GENERAL                                                                         

The following discussion and analysis should be read in conjunction with the our
consolidated  financial  statements  and  related  footnotes  for the year ended
December 31, 2003 included in our Annual Report on Form 10-KSB.  The  discussion
of results,  causes and trends  should not be construed to imply any  conclusion
that such results or trends will necessarily continue in the future.            

OVERVIEW                                                                        

Effective  October 4, 2002, an  arrangement  was completed  between the company,
then known as  Americabilia.com,  Inc. and Crystalix  USA Group,  Inc., a Nevada
corporation,  whereby the  shareholders  of Crystalix USA exchanged all of their
common shares for 23,300,000  shares of  Americabilia  common stock. At the same
time, we issued  7,000,000  shares of  Americabilia  Class A preferred  stock to
acquire a technology license from Crystalix Technology, Inc.                    

Immediately following the acquisition,  the former shareholders of Crystalix USA
held approximately  77.6% of Americabilia's  total issued and outstanding common
shares.  Crystalix  USA was  thereby  deemed to be the  acquiror  and  surviving
company for accounting purposes. Accordingly, the transaction has been accounted
for as a reverse  acquisition  using the purchase  method whereby the assets and
liabilities of  Americabilia  have been recorded at their fair market values and
operating results have been included in the company's financial  statements from
the effective date of purchase.  The net assets of Crystalix USA are included in
the balance sheet at their  historical book values and its results of operations
have been presented for the comparative prior period.                           

On December 23, 2002, we acquired  Lazer-Tek for 1,250,000  shares of our common
stock valued at  $1,125,000  and an  acquisition  consulting  fee  obligation of
$400,000. This acquisition has been accounted for using the purchase method. The
purchase  price was allocated to the assets  purchased and  liabilities  assumed
based upon  their  estimated  fair  values as  determined  by  management,  upon
reliance on an independent  valuation report, on the date of acquisition,  which
approximated  $2.7 million.  The excess of fair value of the acquired net assets
over the cost has been  allocated  as a pro rata  reduction  of all the acquired
assets,  excluding financial assets,  assets to be disposed of by sale, deferred
tax  assets,  pension  or other  post-retirement  benefit  plans,  and any other
current assets.                                                                 

PLAN OF OPERATION                                                               

         We believe that we have positioned  Crystalix to become a leader in the
sub-surfaced  glass  etching  industry.  Our  management  has  developed  a 2004
roll-out plan of the following:                                                 

      o    new corporate owned and operated locations in the United States
and Europe                                          
o    new marketing partners in the United States and Europe   
     o    agreements with strong infinity groups (i.e. NASCAR, NBA, MLB)
o    completion of an office and production facility          
        o    further development and enhancement of our equipment and software

         Since we operate in the gift industry,  our business is seasonal,  with
the first and second  quarters  being  significantly  slower  than the third and
fourth  quarters.  We are trying to develop more corporate  sales, to offset the
effects of this seasonality.                                                    

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GOING CONCERN                                                                   

The  accompanying  consolidated  financial  statements  have  been  prepared  in
conformity with accounting principles generally accepted in the United States of
America, which contemplate  continuation of us as a going concern. We incurred a
net loss for the nine months ended  September 30, 2004 of $6,799,085,  used cash
for operating  activities of $2,454,006 for the nine months ended  September 30,
2004 and at September 30, 2004 had an accumulated  deficit of $14,542,069  and a
working capital deficit of $1,939,067.  These conditions raise substantial doubt
as to our ability to continue as a going concern.  These consolidated  financial
statements do not include any adjustments  that might result from the outcome of
this uncertainty.  These  consolidated  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 be necessary
should the Company be unable to continue as a going concern.                    

We plan to take the  following  steps  that we  believe  will be  sufficient  to
provide  us with  the  ability  to  continue  in  existence.  We  have  recently
re-negotiated  the  repayment  term of certain debt and have issued a $2,000,000
convertible  promissory  note to an  unrelated  third  party.  In July 2004,  we
changed  our  senior  management  by naming Mr.  Kevin  Ryan as Chief  Executive
Officer and Mr. Robert McDermott as Chief Financial Officer and believe that the
new management team will be able to achieve profitable operations, but there can
be no assurance  that we will be able to raise  sufficient  capital and generate
positive cash flows from operations sufficient to sustain operations.           

CRITICAL ACCOUNTING POLICIES AND ESTIMATES                                      

Our discussion and analysis of our financial condition and results of operations
are based upon our condensed consolidated financial statements,  which have been
prepared in accordance  with  accounting  principles  generally  accepted in the
United  States of  America.  The  preparation  of these  consolidated  financial
statements  requires us to make estimates and judgments that affect the reported
amounts of assets,  liabilities,  revenues and expenses, and related disclosures
of  contingent  assets and  liabilities.  On an ongoing  basis,  we evaluate our
estimates,  including  those related to impairment  of  long-lived  assets,  any
potential losses from pending litigation and deferred tax asset or liability. We
base our estimates on  historical  experience  and on various other  assumptions
that we believe to be reasonable under the  circumstances,  the results of which
form the basis for  making  judgments  about the  carrying  value of assets  and
liabilities that are not readily apparent from other sources. Actual results may
differ from these estimates under different assumptions or conditions;  however,
we believe that our estimates,  including those for the  above-described  items,
are reasonable.                                                                 

LEASE REVENUE.  We enter into licensing  agreements to lease our laser equipment
and our licensed laser inscription  technology to individuals and businesses who
open retail  establishments to sell laser inscribed crystal blocks. The terms of
these licensing  agreements are typically for five years. The lease payments are
generally  paid in one or two  installments  upon signing the  agreement  and we
recognize lease revenue ratably over the term of the contract.                  

PRODUCT SALES.  Revenue from the sale of laser inscribed  products is recognized
when title to the products is  transferred  to the  customer,  which is point of
sale at retail locations or customer acceptance for  custom-designed  crystals),
and only when no further  contingencies or material performance  obligations are
warranted. Revenue from the sale of glass cube products is recognized when title
to the products is transferred to the  customer-lessee,  which is upon shipment,
and only when no further  contingencies or material performance  obligations are
warranted.                                                                      

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ROYALTY REVENUE. We recognize royalty revenue from licensing our technology only
when earned with no further contingences or material performance obligations are
warranted.                                                                      

DEFERRED REVENUE. Deferred revenue represents amounts received as non-refundable
payments  upon the signing of the  contract  and  delivery of the  LaserMark  II
equipment,   for  which  revenue  will  be  recognized  over  the  term  of  the
license/lease period.  Deposits received from potential  customers/lessees,  who
have not yet received the  LaserMark II  equipment,  are accounted as refundable
customer-lessee deposits on the balance sheet.                                  

STOCK-  BASED  TRANSACTIONS.  Shares of our common  stock  issued for  services,
compensation  or  financing  costs are valued at the market  value of our common
stock at the date of issuance.                                                  

RESULTS OF OPERATIONS                                                           

THREE MONTHS ENDED SEPTEMBER 30, 2004 COMPARED TO SEPTEMBER 30, 2003.           

         Our net revenues are derived from product  sales,  lease  revenue,  and
royalty  revenue.  We generate  product sales through the sale of engraved glass
products to customers in our retail kiosks, to corporate customers,  and through
the sale of glass blanks,  display bases,  and related products to our marketing
partners.  We receive  lease  revenues and royalty  revenues  from our marketing
partners under the terms of master equipment  leases and software  licenses they
have executed with us. Our revenue for the three months ended September 30, 2004
decreased  by  $166,145  or 12.7% from  $1,310,141  for the three  months  ended
September 30, 2003 to $1,143,996 for the three months ended  September 30, 2004.
The decrease is  principally  due a reduction in the glass  products we sell our
licensees and a reduction in our lease revenue due to licensees  canceling their
contracts  in late  2003 and early  2004.  We expect  that  there  will be other
contracts  canceled  in the  future,  but we expect to begin  selling  new laser
machines to new licensees in the near term.                                     

         The cost of revenue with regard to product  consists of the cost of the
glass blanks,  bases,  and other items that we purchase from our suppliers.  The
lease cost of revenue  consists  primarily of the  amortization  of property and
equipment,  including  the  direct  personnel  costs and  direct  product  costs
associated  with the assembly of our leased  equipment.  Royalty cost of revenue
consists of the royalty payments we make to Laser Design International. Our cost
of revenue for the three months ended  September 30, 2004  increased by $130,223
or 30.9% from $421,858 for the three months ended September 30, 2003 to $552,081
for the three months ended  September 30, 2004. The increase is principally  due
to higher cost of product  sales.  Our gross  margin for the three  months ended
September 30, 2004 was 52% compared to 68% for the three months ended  September
30, 2003.                                                                       

         Research and  development for the three months ended September 30, 2004
decreased  by  $165,536  or 100.0%  from  $165,536  for the three  months  ended
September  30, 2003 to $0 for the three months  ended  September  30, 2004.  The
decrease is principally due to a decrease in product  development due to lack of
funds to finance such activities.                                               

         Payroll and related  benefits for the three months ended  September 30,
2004  decreased  by $78,804 or 14.0% from  $564,699  for the three  months ended
September  30, 2003 to $485,895 for the three months ended  September  30, 2004.
The decrease is a result of a reduction in personnel due to corporate downsizing
in light of the reduction on revenue.                                           

         General  and  administrative   expenses  for  the  three  months  ended
September  30, 2004  increased by $735,503 or 77.4% from  $950,454 for the three
months  ended  September  30,  2003 to  $1,685,957  for the three  months  ended
September  30,  2004.  The  increase is  primarily a result of a charge taken to
earnings                                                                        

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for  the  value  of  certain  Series  A preferred  shares of $409,275  that were
reallocated to certain members of the Company's senior management team.         

         Interest  expense  for  the  three  months  ended  September  30,  2004
increased  by  $3,283,502  or 3,252% from  $100,959  for the three  months ended
September 30, 2003 to $3,384,461 for the three months ended  September 30, 2004.
The  significant  increase is due to the increase in debt, the  amortization  of
debt issue costs of $188,814 and a charge to interest  expense of $2,747,001 for
the issuance of common stock and the  reallocation of certain Series A preferred
shares to related party  investors as additional  consideration  for funding the
company.                                                                        

NINE MONTHS ENDED SEPTEMBER 30, 2004 COMPARED TO SEPTEMBER 30, 2003.            

         Our revenue for the nine months ended  September 30, 2004  decreased by
$1,481,879 or 30.5% from $4,864,600 for the nine months ended September 30, 2003
to  $3,382,721  for the nine months ended  September  30, 2004.  The decrease is
principally  due the  disposition  of our retail stores in Las Vegas,  Nevada in
April  2003,  a reduction  in the glass  products  we sell our  licensees  and a
reduction in our lease  revenue due to licensees  canceling  their  contracts in
late 2003 and early 2004.                                                       

         Our cost of  revenue  for the nine  months  ended  September  30,  2004
decreased  by  $661,408  or 29.4%  from  $2,253,737  for the nine  months  ended
September 30, 2003 to $1,592,329  for the nine months ended  September 30, 2004.
The decrease is principally due to the decrease in revenue. Our gross margin for
the nine months  ended  September  30, 2004 was 53% compared to 54% for the nine
months ended September 30, 2003.                                                

         Research and  development  for the nine months ended September 30, 2004
decreased  by  $216,554  or  100.0%  from  $216,554  for the nine  months  ended
September  30, 2003 to $0 for the nine months  ended  September  30,  2004.  The
decrease is principally due to a decrease in product  development due to lack of
funds to finance such activities.                                               

         Payroll and related  benefits for the nine months ended  September  30,
2004  decreased by $422,463 or 23.1% from  $1,829,790  for the nine months ended
September 30, 2003 to $1,407,327  for the nine months ended  September 30, 2004.
The decrease is a result of a reduction in personnel due to corporate downsizing
in light of the  reduction on revenue and a reduction in personnel in our retail
sales  staff as a result of the sale of our retail  stores in Las Vegas in April
2003.                                                                           

         General and administrative expenses for the nine months ended September
30, 2004  decreased by $1,620,041 or 32.1% from  $5,047,470  for the nine months
ended  September 30, 2003 to $3,427,429 for the nine months ended  September 30,
2004.  The decrease is principally  due to a reduction in legal fees  associated
with litigation with certain of our former officers in 2003, consulting fees and
a reduction  in general  overhead due to  corporate  downsizing  in light of the
reduction in revenue.  Included in general and  administrative  expenses for the
nine months ended  September 30, 2003 is $1,170,000,  which is the valuation for
2,340,000  shares of our common stock issued for consulting  services  rendered.
Also,  for the nine months  ended  September  30, 2004 we took a charge taken to
earnings  for the value of certain  Series A preferred  shares of $409,275  that
were reallocated to certain members of the Company's senior management team.    

         Other  expense,  net for the  nine  months  ended  September  30,  2004
decreased by $525,672  from other  expense of $501,200 for the nine months ended
September  30,  2003 to  other  income  of  $24,472  for the nine  months  ended
September 30, 2004. The significant  decrease in other expense, net is the write
off of our  investment in Vitro Laser Gmbh of $500,000 in the second  quarter of
2003.                                                                           

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         Interest expense for the nine months ended September 30, 2004 increased
by $3,032,631 or 406% from $746,562 for the nine months ended September 30, 2003
to  $3,779,193  for the nine months ended  September 30, 2004.  The  significant
increase is due to the increase in debt, the amortization of debt issue costs of
$188,814  and a charge to interest  expense of  $2,747,001  for the  issuance of
common  stock and the  reallocation  of  certain  Series A  preferred  shares to
related  party  investors as additional  consideration  for funding the company.
Included in interest  expense for the nine months  ended  September  30, 2003 is
$528,000  which is the valuation of 660,000 shares of our common stock issued as
consideration to the lender for extending the repayment terms of a loan to us of
$1,500,000.                                                                     

LIQUIDITY AND CAPITAL RESOURCES                                                 

         At September 30, 2004, we had a working  capital deficit of $1,939,067,
as compared to $6,311,497 at December 31, 2003. We had cash and cash equivalents
of $1,980,511 at September 30, 2004 as compared to cash and cash  equivalents of
$58,881 at December 31, 2003.  The decrease in the working  capital  deficit and
the  increase  in  cash  and  cash   equivalents  is  principally   due  to  the
restructuring of related party debt and the issuance of a $2,000,000 convertible
promissory note to an unrelated third party.  Our current cash on hand plus cash
expected to be generated from  operations  will not be sufficient to sustain our
current  operations and service our outstanding debt for the next twelve months.
We will need to issue debt or equity  securities  in order to  service  existing
debt requirements and to sustain operations until such time that we can generate
positive cash flow from our operations.                                         

         During  the  nine  months  ended  September  30,  2004,  our  financing
activities  provided  cash of  $4,435,695,  while our  operating  and  investing
activities used cash of $2,454,006 and $60,059,  respectively.  The cash used in
operating  activities was principally a result of the net loss we incurred.  Our
negative  cash  flow  from  operations  was  principally   funded  by  borrowing
additional  amounts  from a  related  party  and the  issuance  of a  $2,000,000
convertible promissory note to an unrelated third party.                        

         During the nine months ended September 30, 2004, we obtained $2,442,825
from  advances  from a  related  party and  $2,000,000  from the  issuance  of a
convertible promissory note to an unrelated third party.                        

    We recently restructured all of our related party debt as follows:

    o    On July 21, 2004, we issued a convertible  promissory  note to Mr. John
         Woodward,  our former  President,  in the amount of  $1,824,000,  which
         represents  principal  due on a  previously  issued note payable in the
         amount of $1,343,722  plus accrued  interest in the amount of $480,279.
         This note  bears  interest  at 10% per  annum  and  calls  for  monthly
         interest payments from August 1, 2004 to December 1, 2004. Beginning on
         January 1, 2005,  this note  requires  monthly  principal  payments  of
         $50,405 plus accrued  interest  with any unpaid  principal and interest
         due on July 1, 2007. The monthly principal and interest payments can be
         paid with shares of our common  stock at the option of the holder.  The
         conversion  price is the  lesser of the  average  closing  price of our
         common stock five business  days  immediately  prior to the  conversion
         notice or $0.08.  We have agreed to register the shares  issuable  upon
         conversion of this note. We have  determined that there is a beneficial
         feature associated with this convertible  promissory note in the amount
         of $615,600.  This amount will be amortized as financing costs over the
term of the note.                                             

    o    On July 21, 2004, we issued a convertible  promissory note to Mr. Kevin
         Ryan, our Chief Executive Officer,  in the amount of $5,396,764,  which
         represents (a) principal due on two previously  issued notes payable in
 the amounts of  $852,680  and  $1,010,000,  (b)  principal  due

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         under a revolving  credit  agreement in the amount of  $1,766,500,  (c)
         principal  due  under an  additional  note  payable  in the  amount  of
         $1,500,000 and (d) accrued interest on the above mention obligations in
         the amount of $267,584.  This note bears  interest at 10% per annum and
         calls for monthly principal payments from August 1, 2004 to December 1,
         2004 of $45,000.  On the last day of the month  beginning on August 31,
         2004 through  November 30, 2004, the accrued  interest will be added to
         the principal amount.  Beginning on January 1, 2005, this note requires
         monthly  principal  payments of $174,584 with any unpaid  principal and
         interest  due on July 1,  2007.  The  monthly  principal  and  interest
         payments  can be paid with shares of our common  stock at the option of
         the holder.  The conversion  price is the lesser of the average closing
         price of our common stock five business days  immediately  prior to the
         conversion  notice or $0.08.  In  addition,  we granted  to Mr.  Ryan a
         warrant to purchase  1,875,000 shares of our common stock. The exercise
         price is lesser of the average  closing  price of our common stock five
         business days immediately  prior to the notice of exercise or $0.08. We
         have agreed to register the shares  issuable  upon  conversion  of this
         note and exercise of the warrant.  In  accordance  with EITF 00-27,  we
         first  determined  the  value of the  note  and the  fair  value of the
         detachable  warrants issued in connection with this note. The estimated
         value  of  the   warrants  of  $200,625   was   determined   using  the
         Black-Scholes option pricing model and the following assumptions:  term
         of 7 years,  a risk free interest rate of 3.5%, a dividend  yield of 0%
         and  volatility  of  371%.  The face  amount  of the  note  payable  of
         $5,396,764 was  proportionately  allocated to the note and the warrants
         in the amounts of $5,203,330 and $193,434,  respectively.  The value of
         the note  was  then  allocated  between  the note and the  preferential
         conversion  feature,  which  amounted  to  $3,188,488  and  $2,014,842,
         respectively.  The combined total discount is $2,208,276,  and is being
amortized over the term of the note.                          

    o    On July  21,  2004,  we  issued  a  promissory  note  to  Ryan  Capital
         Management,  Inc.  (this  company is  controlled  by Kevin Ryan) in the
         amount of  $452,137,  which  represents  principal  due on a previously
         issued note payable in the amount of $400,000 plus accrued  interest in
         the amount of  $52,137.  This note bears  interest at 10% per annum and
         calls for monthly interest  payments from August 1, 2004 to December 1,
         2004.  Beginning  on  January  1,  2005,  this  note  requires  monthly
         principal  payments of $37,902  plus accrued  interest  with any unpaid
principal and interest due on December 1, 2005.               

    o    On August 1, 2004,  we issued a promissory  note to McCary & Rood (this
         company is controlled  by Kevin Ryan) in the amount of $280,000,  which
         represents past due consulting fees under a consulting  agreement dated
         May 28, 2003. This note calls for monthly payments  beginning August 1,
2004 of $30,000 with any unpaid principal due on May 1, 2005. 

    o    On August 1, 2004, we issued a promissory  note to McCary & Rood in the
         amount of $214,037,  which  represents past due  reimbursable  expenses
         under a consulting  agreement  dated May 28, 2003.  This note calls for
         monthly  payments  beginning  August 1, 2004 of $30,000 with any unpaid
principal due on March 1, 2005.                               

         On  September  23,  204,  we issued a  convertible  promissory  note to
CMKXTREME.COM  in the amount of $2,000,000.  This note bears interest at 10% per
annum and calls for monthly principal  payments of $55,556 plus accrued interest
beginning November 1, 2004 with any unpaid principal and interest due on October
1, 2007. The monthly  principal and interest payments can be paid with shares of
our common stock at the option of the holder. The conversion price is the lesser
of the average closing price of our common stock five business days  immediately
prior  to  the  conversion   notice  or  $0.08.  In  addition,   we  granted  to
CMKXTREME.COM a warrant to purchase  2,500,000  shares of our common stock.  The
exercise  price is lesser of the average  closing price of our common stock five
business  days  immediately  prior to the notice of exercise  or $0.08.  We have
agreed to register the shares issuable upon                                     

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conversion  of this note and exercise of the warrant.  In  accordance  with EITF
00-27,  we first  determined  the  value  of the note and the fair  value of the
detachable  warrants issued in connection with this note. The estimated value of
the warrants of $200,000 was determined using the  Black-Scholes  option pricing
model and the following assumptions:  term of 7 years, a risk free interest rate
of 3.5%, a dividend  yield of 0% and  volatility of 371%. The face amount of the
convertible  promissory note of $2,000,000 was proportionately  allocated to the
note and the warrants in the amounts of $1,818,182  and $181,818,  respectively.
The value of the note was then allocated  between the note and the  preferential
conversion feature, which amounted to $1,636,364 and $181,818, respectively. The
combined total discount is $363,636, and is being amortized over the term of the
note.                                                                           

         In addition, on July 21, 2004, we issued 3,019,000 shares of our common
stock to Kevin Ryan as additional  consideration  for the financing  provided to
us. Also, certain holders of our Series A preferred stock reallocated  2,647,900
of their shares to certain  investors and senior members of our management team.
We will take a charge to financing costs and compensation  expense of $2,747,011
and $409,275,  respectively,  related to the issuance and  reallocation of these
common and preferred shares.                                                    

FORWARD-LOOKING STATEMENTS                                                      

         Certain  statements in this Quarterly Report on Form 10-QSB, as well as
statements made by the company in periodic press releases,  oral statements made
by the  company's  officials  to  analysts  and  shareholders  in the  course of
presentations about the company, constitute "forward-looking  statements" within
the  meaning of the  Private  Securities  Litigation  Reform  Act of 1995.  Such
forward-looking statements involve known and unknown risks,  uncertainties,  and
other factors that may cause the actual results,  performance or achievements of
the company to be materially  different from any future results,  performance or
achievements  expressed  or  implied by the  forward  looking  statements.  Such
factors include,  among other things,  (1) risks pertaining to implementation of
our proposed expansion of our distribution network; (2) competitive pressures in
the  giftware   industry;   (3)  disputes  or  claims  regarding  the  company's
proprietary rights to its software and intellectual  property; (4) acceptance of
our products by corporate  customers;  (5) costs of desirable retail  locations;
(6)  availability  of suitable  optic glass;  (7) general  economic and business
conditions;  (8) ability to successfully integrate acquired operations;  and (9)
other factors over which we have little or no control.                          

ITEM 3.    CONTROLS AND PROCEDURES                                              

         As required by SEC rules,  we have evaluated the  effectiveness  of the
design and operation of our disclosure controls and procedures at the end of the
period  covered  by this  report.  This  evaluation  was  carried  out under the
supervision  and  with  the  participation  of  our  management,  including  our
principal  executive  officer and  principal  financial  officer.  Based on this
evaluation,  these  officers have concluded that the design and operation of our
disclosure  controls and procedures are effective.  There were no changes in our
internal  control  over  financial  reporting  or in  other  factors  that  have
materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.                                               

         Disclosure   controls  and   procedures  are  our  controls  and  other
procedures that are designed to ensure that information required to be disclosed
by us in the reports  that we file or submit under the Exchange Act is recorded,
processed,  summarized  and reported,  within the time periods  specified in the
SEC's rules and forms.  Disclosure  controls  and  procedures  include,  without
limitation, controls and procedures designed to ensure that information required
to be  disclosed  by us in the reports  that we file under the  Exchange  Act is
accumulated and communicated to our management,  including  principal  executive
officer  and  principal  financial  officer,  as  appropriate,  to allow  timely
decisions regarding required disclosure.                                        

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PART II.   OTHER INFORMATION                                                    

ITEM 1.    LEGAL PROCEEDINGS                                                    

No change in legal proceedings from prior report.                               

ITEM 2.    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS          

On July 21, 2004, we issued  3,019,000  shares of our common stock to Kevin Ryan
as additional  consideration for the financing provided to the Company.  We also
granted  Mr. Ryan a warrant to purchase  1,875,000  shares of our common  stock,
exercisable  through  July 21, 2011 at an exercise  price equal to the lesser of
the average closing price of our common stock five business days prior to notice
of  exercise or $0.08.  These  shares and the  warrant  were issued  pursuant to
Section  4(2) of the  Securities  Act of  1933,  as Mr.  Ryan was  deemed  to be
sophisticated  with  respect  to the  investment  in the  securities  due to his
financial  condition and involvement in our business.  A restrictive  legend was
placed on the stock certificate and warrant  evidencing the securities issued in
this transaction.                                                               

On September 23, 2004, we granted  CMKXTREME.COM a warrant to purchase 2,500,000
shares  of our  common  stock,  exercisable  through  September  23,  2011 at an
exercise  price equal to the lesser of the average  closing  price of our common
stock five business days prior to notice of exercise or $0.08.  This warrant was
issued pursuant to Section 4(2) of the Securities Act of 1933, as  CMKXTREME.COM
was deemed to be sophisticated  with respect to the investment in the securities
due to its financial  condition and  involvement in our business.  A restrictive
legend  was  placed on the  warrant  evidencing  the  securities  issued in this
transaction.                                                                    

On July 21, 2004, we issued  250,000  shares each to Jerzy  Speckman and Mathias
Nowicki as consideration for services provided to the Company. These shares were
valued at $53,500 and issued  pursuant to Regulation S of the  Securities Act of
1933.  The shares  were issued to non-U.S.  Persons  located  outside the United
States and no directed selling efforts were made in the United States.          

No underwriters  were used in connection with any of the transactions  described
above.                                                                          

ITEM 3.    DEFAULTS UPON SENIOR SECURITIES                                      

None.                                                                           

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                  

Not applicable                                                                  

ITEM 5.    OTHER INFORMATION                                                    

Not applicable                                                                  

ITEM 6.    EXHIBITS                                                             

(a)      Exhibits                                                               

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--------------------------------------------------------------------------------
REGULATION                                                                      
S-B NUMBER                           EXHIBIT                                    
--------------------------------------------------------------------------------
2.1        Stock Purchase Agreement, dated October 4, 2002, between       
    Americabilia.com, Inc. and Crystalix USA Group, Inc. (1)
--------------------------------------------------------------------------------
2.2        Plan and Agreement of Merger dated November 12, 2002 between   
           Crystalix Group International, Inc., a Florida corporation, and
         Crystalix Group International, Inc., a Nevada corporation (2)
--------------------------------------------------------------------------------
2.3        Common Stock Purchase Agreement, dated December 23, 2002, among
         Crystalix Group International, Inc., Lazer-Tek Designs, Inc.,
Lazer-Tek Designs, Ltd. and Lena Walther (3)        
--------------------------------------------------------------------------------
 3.1        Articles of Incorporation of Crystalix Group International, Inc.
(4)                                                 
--------------------------------------------------------------------------------
3.2        Bylaws of Americabilia.com, Inc. (5)                           
--------------------------------------------------------------------------------
 10.1        Form of Master Equipment Lease and Software License Agreement (4)
--------------------------------------------------------------------------------
10.2        Patent Sub-License Agreement, dated January 1, 2002, between    
                   Laser Design International, LLC and Crystalix USA Group (4)
--------------------------------------------------------------------------------
10.3        Patent Sub-License Agreement, dated February 17, 1999, between  
    Janesville Group Limited and Lazer-Tek Designs, Ltd. (4)
--------------------------------------------------------------------------------
10.4        Sub-Lease Agreement,  dated December 13, 2001, among Arville &  
          Russell,  LLC, Western Window & Door Company and Crystalix USA
Group, and amendment thereto (4)                    
--------------------------------------------------------------------------------
 10.5        Lease Agreement, dated April 5, 2001 between South Tech Hacienda,
LLC and Lazer-Tek Designs, Ltd. (4)                 
--------------------------------------------------------------------------------
10.6        Promissory note to Kevin T. Ryan dated December 20, 2002 (4)    
--------------------------------------------------------------------------------
10.7        Promissory note to Kevin Ryan dated December 23, 2002 (4)       
--------------------------------------------------------------------------------
10.8        Bridge Loan Agreement dated October 21, 2003 (6)                
--------------------------------------------------------------------------------
  10.9        Revolving Credit Agreement dated as of December 1, 2003 with Kevin
Ryan (7)                                            
--------------------------------------------------------------------------------
10.10       Secured Promissory Note dated December 1, 2003 to Kevin Ryan (7)
--------------------------------------------------------------------------------
10.11       Consulting Agreement made as of May 28, 2003 with McCary & Rood 
(7)                                                 
--------------------------------------------------------------------------------
  10.12       Irrevocable Proxy Coupled with an Interest granted to Ryan Capital
Management, Inc. dated November 26, 2003 (7)        
--------------------------------------------------------------------------------
10.13       Settlement Agreement and Release between Crystalix Group        
            International, Inc. and John S. Woodward dated July 21, 2004 (8)
--------------------------------------------------------------------------------
10.14       Amended and Restated Convertible Promissory Note to John S.     
Woodward dated July 21, 2004 (8)                    
--------------------------------------------------------------------------------
10.15       Settlement Agreement and Release among Crystalix Group          
           International, Inc. Kevin T Ryan, Ryan Capital Management, Inc.
and McCary & Rood dated July 21, 2004. (8)          
--------------------------------------------------------------------------------
 10.16       Amended and Restated Convertible Promissory Note to Kevin T. Ryan
dated July 21, 2004 (8)                             
--------------------------------------------------------------------------------
10.17       Promissory Note to Ryan Capital Management, Inc. dated July 21, 
2004 (8)                                            
--------------------------------------------------------------------------------

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--------------------------------------------------------------------------------
REGULATION                                                                      
S-B NUMBER                             EXHIBIT                                  
--------------------------------------------------------------------------------
  10.18       Promissory Note for $280,000 to McCary & Rood dated August 1, 2004
(8)                                                 
--------------------------------------------------------------------------------
  10.19       Promissory Note for $214,037 to McCary & Rood dated August 1, 2004
(8)                                                 
--------------------------------------------------------------------------------
  10.20       Warrant to Purchase Common Stock of Crystalix Group International,
Inc. issued to Kevin T. Ryan (8)                    
--------------------------------------------------------------------------------
10.21       Registration Rights Agreement (8)                               
--------------------------------------------------------------------------------
10.22       Convertible Promissory Note to CMKXTREME.COM dated September 23,
2004 (9)                                            
--------------------------------------------------------------------------------
10.23       Warrant to Purchase Common Stock issued to CMKXTREME.COM (9)    
--------------------------------------------------------------------------------
21.1        Subsidiaries of Crystalix Group International, Inc. (4)         
--------------------------------------------------------------------------------
31.1        Rule 13a-14(a) Certification                                    
--------------------------------------------------------------------------------
32.1        Certification Pursuant to 18 U.S.C. Section 1350, as Adopted    
     Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
--------------------------------------------------------------------------------

---------------------                                                           

(1) Incorporated by reference to the exhibits to the registrant's current report
on Form 8-K,  filed  October 9,  2002.                                  
(2) Incorporated by reference to the exhibits to the registrant's current report
on Form 8-K, filed December 4, 2002.                                    
(3) Incorporated by reference to the exhibits to the registrant's current report
on Form 8-K,  filed  December 30,  2002.                                
(4) Incorporated by reference to the exhibits to the registrant's annual  report
on Form 10-KSB for the fiscal year ended December 31, 2002.             
(5) Incorporated by reference to the exhibits to the  registrant's  registration
statement on Form 10-SB,  filed March 3, 2000.                          
(6) Incorporated by reference to  the  exhibits  to  the  registrant's quarterly
report on Form 10-QSB for the quarter ended September 30, 2003.         
(7) Incorporated by reference to the exhibits to the registrant's  annual report
on Form  10-KSB  for the year ended  December  31,  2003.               
(8) Incorporated  by  reference  to the  exhibits to the registrant's  quarterly
report on Form 10-QSB/A for the quarter ended June 30, 2004.            
(9) Incorporated by reference to the exhibits to the registrant's current report
on Form 8-K, filed September 29, 2004.                                  

19

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SIGNATURES

In accordance with the  requirements of the Exchange Act, the registrant  caused
this  report to be  signed on its  behalf  by the  undersigned,  thereunto  duly
authorized.                                                                     

                             CRYSTALIX GROUP INTERNATIONAL, INC.

November 12, 2004                    By:      /S/ KEVIN T. RYAN                 
                                        ----------------------------------------
                 Kevin T. Ryan
                           Chief Executive Officer

November 12, 2004                    By:      /S/ ROBERT J. MCDERMOTT           
                                        ----------------------------------------
                       Robert J. McDermott
                           Chief Financial Officer

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Dates Referenced Herein and Documents Incorporated by Reference

		Referenced-On Page
This ‘10-Q’ Filing	Date	First	Last	Other Filings

	9/23/11	18
	7/21/11	18
	10/1/07	9	16
	7/1/07	8	16
	12/1/05	9	16	8-K
	5/1/05	9	16
	3/1/05	9	16
	1/1/05	8	16
	12/31/04	6		10KSB, NT 10-K
	12/1/04	8	16
	11/30/04	8	16
Filed on:	11/12/04	1	21
	11/1/04	9	16
For Period End:	9/30/04	1	15
	9/29/04	20		8-K
	9/23/04	18	20	10QSB/A, 3, 4, 8-K
	8/31/04	8	16
	8/1/04	8	20
	7/21/04	8	19	4, 4/A
	6/30/04	20		10QSB, 10QSB/A
	12/31/03	6	20	10KSB, 5, 5/A, NT 10-K
	12/1/03	19
	11/26/03	19		10QSB
	10/21/03	19
	9/30/03	2	20	10QSB, NT 10-Q
	5/28/03	9	19
	12/31/02	20		10KSB, NT 10-K
	12/30/02	20		8-K/A, NT 10-K
	12/23/02	11	19	8-K, 8-K/A
	12/20/02	19
	12/4/02	20		8-K, DEF 14C, PRE 14C
	11/12/02	19
	10/9/02	20		8-K
	10/4/02	11	19	3, 8-K, 8-K/A
	1/1/02	19
	12/13/01	19
	4/5/01	19
	3/3/00	20		10-12G
	2/17/99	19
				List all Filings

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Seaena Inc. – ‘10-Q’ for 9/30/04

On: Friday, 11/12/04, at 9:48am ET · For: 9/30/04 · Accession #: 949353-4-577 · File #: 0-29781

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Dates Referenced Herein and Documents Incorporated by Reference

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