<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------------
FORM 10-Q
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2000
------------------------------------------------
OR
|_| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
----------------- ----------------------
Commission File Number 0-29796
MARINE SHUTTLE OPERATIONS INC.
------------------------------
(Exact name of Registrant as Specified in Its Charter)
Nevada 91-1913992
- ---------------------------------------- -----------------------------------
(State or Other Jurisdiction of I.R.S. Employer Identification No.)
Incorporation or Organization)
4410 Montrose Boulevard, Houston, Texas 77006
- ---------------------------------------- -----------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (713) 529-7498
--------------
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO _
Number of outstanding shares of the issuer's common stock at May 11, 2000:
42,230,644
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SECURITIES AND EXCHANGE COMMISSION
FORM 10-Q
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
PART I. FINANCIAL INFORMATION.................................................................... 3
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)......................................................... 3
CONSOLIDATED BALANCE SHEETS............................................................................... 3
CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS.................................................... 4
CONSOLIDATED STATEMENTS OF CASH FLOWS..................................................................... 5
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS............................................................ 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.... 10
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK............................... 13
PART II. OTHER INFORMATION........................................................................ 14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K......................................................... 14
SIGNATURES................................................................................................ 15
INDEX OF EXHIBITS......................................................................................... 16
</TABLE>
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<PAGE>
PART I.
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MARINE SHUTTLE OPERATIONS INC.
(A development stage company)
CONSOLIDATED BALANCE SHEETS
(U.S.Dollars)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
------------ -------------
(unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 112,946 $ 1,119,564
Restricted cash 35,070 54,478
Accounts receivables - 38,619
Other current receivables 168,432 114,305
------------ -----------
Total Current Assets 316,448 1,326,966
Property, plant and equipment, net 6,406,572 5,980,857
Debt issue cost 1,286,325 1,109,510
Goodwill, net 27,273,189 28,096,422
Patents and agreements, net 2,593,496 2,732,240
------------ -----------
TOTAL ASSETS $ 37,876,030 $39,245,995
============ ===========
LIABILITIES AND SHAREHOLDERS` EQUITY
Current Liabilities
Accounts payable $ 652,587 $ 933,817
Notes payable 3,050,000 2,550,000
Other current liabilities 600,105 341,246
------------ -----------
Total Current Liabilities 4,302,692 3,825,063
Long Term Debt 279,227 293,379
Minority Interest 47,201 228,826
Contingency (Note 2)
Shareholders' Equity
Authorized 75,000,000 common shares with a par value
of $0.001. Issued and outstanding 40,750,642 common
shares with a par value of $0.001 at March 31, 2000
and December 31, 1999 40,751 40,751
Other paid in capital 47,684,739 47,684,739
Deficit accumulated during the development stage (14,148,144) (12,570,929)
Accumulated other comprehensive loss (330,436) (255,834)
------------ -----------
Total Shareholders' Equity 33,246,910 34,898,727
------------ -----------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $ 37,876,030 $39,245,995
============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
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MARINE SHUTTLE OPERATIONS INC.
(A development stage company)
CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
(U.S.Dollars)
(unaudited)
<TABLE>
<CAPTION>
Cumulative to Three Months Ended
March 31, 2000 March 31,
from date of inception -----------------------------------
May 23, 1997 2000 1999
------------------------ --------------------- ------------
<S> <C> <C> <C>
Operating revenues $ 121,512 $ - $ -
------------ ----------- -----------
OPERATING EXPENSES
Personnel costs 1,819,242 315,810 410,630
Legal, audit and advisory services 1,780,392 115,306 180,833
Cost of cancelled financing 606,721 - -
General and administrative 1,974,673 249,012 260,570
Marketing 1,007,802 55,156 104,646
Technical development 583,403 29,197 196,589
Depreciation 130,187 23,503 24,486
Amortization - goodwill and intangibles 6,739,942 972,571 999,124
Loss on investment 90,000 - -
Currency exchange loss (gain) (2,649) (4,629) 15,386
------------ ----------- -----------
Total operating expenses $ 14,729,713 $ 1,755,926 $ 2,192,264
------------ ----------- -----------
Interest expense, net of capitalized 124,003 7,346 17,252
Interest income (75,844) (4,431) (21,722)
Net loss before minority interest $(14,656,360) (1,758,841) (2,187,793)
------------ ----------- -----------
Minority interest (508,216) (181,626) (58,568)
------------ ----------- -----------
Net loss $(14,148,144) $(1,577,215) $(2,129,225)
============ =========== ===========
Other comprehensive loss:
Accumulated other comprehensive loss (330,436) (74,602) (53,158)
------------ ----------- -----------
Comprehensive loss $(14,478,580) (1,651,817) (2,182,383)
------------ ----------- -----------
Basic and diluted loss per share $ $0.04) $ (0.06)
=========== ===========
Basic and diluted weighted average shares outstanding 40,750,642 33,403,274
=========== ============
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE>
MARINE SHUTTLE OPERATIONS INC.
(A development stage company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(U.S.Dollars)
(unaudited)
<TABLE>
<CAPTION>
Cumulative to Three Months Ended
March 31, 1999 March 31,
from date of inception -------------------------------------
May 23, 1997 2000 1999
------------ ------------ ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net Loss $(14,148,144) $ (1,577,215) $ (2,129,225)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 6,870,130 996,074 1,023,610
Minority interest (508,216) (181,626) (58,568)
Loss on investment 90,000 -- --
Unrealized loss on foreign currency 36,359 (3,431) 42,110
Changes in working capital:
Accounts receivable -- 38,619 16,254
Other current receivables and restricted cash (203,500) (34,718) (101,936)
Accounts payable 652,587 (281,230) (354,239)
Other current liabilities 563,744 262,288 494,561
------------ ------------ ------------
Net cash used in operating activities $ (6,647,040) $ (781,239) $ (1,067,433)
------------ ------------ ------------
INVESTING ACTIVITIES
Investments (100,000) -- --
Capital expenditures (5,340,910) (466,578) (1,478,110)
Proceeds on sale of investment 10,260 -- --
Advance to Marine Shuttle Operations AS (249,986) -- --
Acquisition of Marine Shuttle Operations AS 416,635 -- --
Advance to Offshore shuttle AS (100,000) -- --
Acquisition of Offshore Shuttle AS 482,476 -- --
------------ ------------ ------------
Net cash used in investing activities $ (4,881,525) $ (466,578) $ (1,478,110)
------------ ------------ ------------
FINANCING ACTIVITIES
Issuance of capital stock 10,849,050 -- 5,748,750
Share issue cost (736,381) -- (229,950)
Debt issue cost (1,286,325) (176,815)
Payment on Note payable (5,875,000) -- (3,500,000)
Borrowing on Note payable 9,218,378 500,000 1,000,000
------------ ------------ ------------
Net cash provided by financing activities $ 12,169,722 $ 323,185 $ 3,018,800
------------ ------------ ------------
Effect of exchange rate change in cash and
cash equivalents (528,211) (81,986) (53,154)
Net increase (decrease) in cash and cash
equivalents $ 112,946 $ (1,006,618) $ 420,103
------------ ------------ ------------
Cash and cash equivalents at beginning of period -- 1,119,564 903,805
------------ ------------ ------------
Cash and cash equivalents at end of period $ 112,946 $ 112,946 $ 1,323,908
============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE>
MARINE SHUTTLE OPERATIONS INC.
(A development stage company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. BASIS OF PRESENTATION
The accompanying consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States
for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by accounting principles generally accepted
in the United States for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
three month period ended March 31, 2000 are not necessarily indicative of the
results that may be expected for the year ended December 31, 2000. In connection
with the preparation of these financial statements, management was required to
make estimates and assumptions that affect the reported amount of assets,
liabilities, revenues, expenses and disclosure of contingent liabilities. Actual
results could differ from such estimates. These financial statements should be
read in conjunction with the financial statements and footnotes thereto included
in the Companys Annual Report on Form 10-K for the year ended December 31, 1999.
Unless the context otherwise requires, the term Company hereinafter includes
Marine Shuttle Operations Inc. and its subsidiary.
2. NATURE OF OPERATIONS
Marine Shuttle Operations Inc. (the "Company"), through its majority-
owned Norwegian subsidiary, Marine Shuttle Operations AS ("MSOAS"), is seeking
to become a leading player in the market for decommissioning, installing and
transporting of offshore oil and gas structures. The Company, being in the
development stage, has not generated any significant revenues from operations
and does not expect to generate any significant revenues from operations until
the year 2002, at the earliest. There can be no assurance, however, that the
Company will ever achieve commercially significant sales. To date, the Company
has not entered into any contracts for the use of its proposed services, and no
assurance can be given that any such contracts will materialize.
In 1998, the Company acquired 100% of MSOAS, and approximately 68% of
the outstanding capital stock of Offshore Shuttle AS (OSAS). At the time, OSAS
held the licensing and marketing rights to the Offshore Shuttle, a vessel being
developed to lift and carry large installations without extensive cutting or
dismantling. In September 1999, OSAS merged into MSOAS, and as a result, MSOAS
is the holder of the licensing and marketing rights to the Offshore Shuttle, and
the Companys ownership interest in MSOAS became approximately 81%. The merger
was accounted for in a manner similar to the pooling of interests method. Prior
results were not restated because the impact on the consolidated financial
statements from inception through September 1999 was not material.
In April 2000, the Company acquired an additional 8.41% of the
outstanding shares of MSOAS in exchange for an aggregate of 1,030,002 shares of
Common Stock, resulting in ownership of approximately 89.5% of the outstanding
shares of MSOAS.
Also in May 2000, the Company sent out an offer to the rest of the minority
shareholders of MSOAS, giving them the opportunity to exchange their MSOAS
shares for shares of the Company. The offer will be subject to the condition
that minority shareholders representing more than 90% of the outstanding
minority shares of MSOAS accept the offer. The offer period ends in June 2000,
but may be withdrawn or cancelled without notice.
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<PAGE>
MARINE SHUTTLE OPERATIONS INC.
(A development stage company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
3. GOING CONCERN
The Company's ability to continue as a going concern is dependent on its
ability to obtain significant additional financing. As shown in the financial
statements, the Company is in the development stage and at March 31, 2000 has
accumulated losses from operations amounting to $14,148,144 and a working
capital deficit of $3,986,244, with no operating assets presently generating
cash to fund its operating and capital requirements. These conditions raise
substantial doubt about the Company's ability to continue as a going concern.
The Company is seeking to raise additional capital. There can be no assurance
that the Company will be able to raise additional capital on reasonable terms,
if at all, or that any financing transaction will not be dilutive to current
shareholders. If the Company is not able to raise additional capital, it may be
required to significally curtail or cease its operating activities. The
financial statements have been prepared assuming that the Company will continue
as a going concern, and do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts
and classification of liabilities that may result from the outcome of this
uncertainty.
4. EXTERNAL FINANCING
On March 1, 1999, the Company entered into a loan agreement with
ValorInvest Ltd., an investment company, pursuant to which ValorInvest agreed to
lend the Company an aggregate of up to $6,000,000. The loan agreement was
amended and restated as of December 31, 1999. The loan agreement provides that
advances shall be made in increments of $250,000 and shall not exceed $500,000
in any single month unless agreed to by ValorInvest. Any monies advanced under
the loan agreement shall bear interest at the rate of 7.5% per annum and shall
be due and payable on December 31, 2000; except that if the Company raises, in
the aggregate, in excess of $2,000,000 from equity or long term debt financings
after January 1, 2000, then the loan shall be due to the extent of 25% of such
excess. As of March 31, 2000, $3,875,000 had been advanced under the loan
agreement, and $2,550,000 was outstanding.
In August 1999, the Company entered into a loan agreement with Statens
naerings og distriktsutviklingsfond (the Norwegian Industrial and Regional
Development Fund, "SND"), pursuant to which SND agreed to lend the Company an
aggregate of up to NOK 4,000,000, (approximately $472,400) to finance specific
tasks within the Offshore Shuttle project. As of March 31, 2000, NOK 2,358,617
(approximately $278,566) had been advanced under the loan agreement. The
principal is repayable two years after disbursement, over five years in
semi-annually installments, each in the amount of NOK 400,000.
In October 1998, the Company entered into an engagement letter with MFC
Merchant Bank S.A. pursuant to which MFC shall act, on a best-efforts basis, as
agent for the Company in raising additional capital. As consideration for its
services, MFC shall receive a success fee equal to five percent of the capital
raised plus DM 100,000 (approximately $54,000) per month until the completion or
termination of the MFC financing. In addition, all of MFC's out-of-pocket
expenses shall be reimbursed, and if the Company raises the necessary funds
through another source, MFC shall receive a break-up fee equal to the greater of
$1,200,000 or 350,000 shares of common stock.
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<PAGE>
MARINE SHUTTLE OPERATIONS INC.
(A development stage company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
4. EXTERNAL FINANCING (continued).
In September 1999, the Board of Westdeutsche Landesbank Girozentrale
(WestLB) of Dsseldorf issued its conditional approval to underwrite a $157.5
million loan facility for the first Offshore Shuttle. Based on such approval,
the Company has mandated WestLB to act as sole arranger and underwriter for the
financing. WestLB's commitment is subject to several material conditions,
including satisfactorily completing its due diligence, the Companys obtaining
European government guarantees to secure a significant portion of the loan
facility, and its completing of an additional equity financing. The Company is
seeking to fulfill these conditions within the next few months. The Company has
deferred debt issue costs related to the financing.
In February 2000, the Company signed a Memorandum of Understanding with
the Italian Ministry of Industry and various other Italian governmental entities
with respect to the financing of the first Offshore Shuttle. The financial
support from the various governmental entities would be in the form of equity,
debt and government guarantee, and is subject to numerous material conditions,
including the satisfactory completion of due diligence, the submission by an
Italian shipyard of a competitive construction bid with terms and conditions
acceptable to the Company, the arrangement of sufficient commercial debt
financing with a major bank, and the raising of additional equity capital.
In February 2000, the Company entered into a loan agreement with MFC
Merchant Bank S.A, pursuant to which MFC agreed to lend the Company an aggregate
of up to $2,000,000, provided that advances shall not exceed $350,000 in any
single month. Any monies advanced under this loan agreement shall bear interest
at the rate of LIBOR plus 3.5% per annum and shall be due and payable in full on
February 25, 2001. As of March 31, 2000, $500,000 had been advanced under the
loan agreement.
5. INCOME TAXES
The Company has not provided for an income tax liability due to the
availability of operating loss carry-forwards. The Company has net operating
losses which may give rise to future tax benefits of approximately $3,150,000 as
of March 31, 2000. To the extent not used, net operating loss carry-forwards
expire in varying amounts beginning in the year 2007. Based on available
evidence, including the Company's history of operating losses, the uncertainty
of future profitability and the impact of tax laws which may limit the Company's
ability to utilize such loss carry-forwards, management has recorded a full
valuation allowance against the realization of the net deferred tax assets.
6. STOCK OPTIONS
In February, 2000, a Vice President and Director of the Company, and
three employees of the Company's subsidiary were each granted incentive stock
options to purchase 100,000 shares of common stock at the price of $1.00 per
share (the fair market value of the common stock on the date of grant). As of
March 31, 2000, options to purchase 400,000 shares were outstanding under the
Stock Option Plan.
The Company applies APB 25 in accounting for its stock option plans.
Accordingly, because the option price is equal to the fair market price at the
date of grant, no compensation expense has been recognized for its stock option
plans.
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<PAGE>
MARINE SHUTTLE OPERATIONS INC.
(A development stage company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
7. RECENT PRONOUNCEMENT
In June 1998, the Financial Accounting Standards Board issued Statement
No. 133 (SFAS 133), Accounting for Derivative Instruments and Hedging
Activities, which standardizes the accounting for derivative instruments. SFAS
133, as amended, is effective for fiscal years beginning after June 15, 2000.
The impact on the Company's financial statements has not been determined, but
the Company currently does not use derivatives to manage its exposure to foreign
exchange and interest rate risk. The Company will adopt SFAS 133 as of January
1, 2001.
8. SUBSEQUENT EVENTS
In April 2000, the Company consummated a private placement of 450,000
shares of common stock for gross proceeds of $315,000. The net proceeds will be
used to fund operating expenses.
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULT OF OPERATIONS
The following discussion and analysis of the Company's financial
condition and result of operations should be read in conjunction with the
financial statements and the notes thereto which appear elsewhere in this
quarterly report and the Company's Annual Report on Form 10-K for the year ended
December 31, 1999.
General
The Company, through its majority-owned Norwegian subsidiary, Marine
Shuttle Operations AS ("MSOAS"), is seeking to become a leading player in the
market for decommissioning, installing, and transporting offshore oil and gas
structures.
The Company has designed a vessel, the "Offshore Shuttle," which it
believes will be capable of lifting most of the largest topsides in one piece
and also will be capable of diving partly below the water surface to remove a
complete jacket in one operation. The Company anticipates that construction of
the first Offshore Shuttle will be completed by the second half of 2002, at the
earliest. Construction of a second Offshore Shuttle is intended to commence two
years after ordering the first Offshore Shuttle, and construction of a third
Offshore Shuttle is intended to commence one year after the second.
The Company was incorporated in Nevada in May 1997 under the name
Geoteck International, Inc. On May 29, 1998, it changed its name to Marine
Shuttle Operations Inc. In 1998, the Company acquired
o all of the outstanding stock of MSOAS in exchange for 7,600,000
shares of Common Stock; and
o approximately 68% of the outstanding stock of Offshore Shuttle AS
("OSAS"), the holder of the licensing and marketing rights to the
Offshore Shuttle design, in exchange for 4,937,607 shares of
Common Stock.
In September 1999, OSAS merged into MSOAS, and as a result, MSOAS is
the holder of the licensing and marketing rights to the Offshore Shuttle, and
the Company's ownership interest in MSOAS became approximately 81%.
In April 2000, the Company acquired an additional 8.41% of the
outstanding shares of MSOAS in exchange for an aggregate of 1,030,002 shares of
Common Stock, resulting in ownership of approximately 89.5% of the outstanding
shares of MSOAS.
Also in May 2000, the Company sent out an offer to the rest of the
minority shareholders of MSOAS, giving them the opportunity to exchange their
MSOAS shares for shares of the Company. The offer will be subject to the
condition that minority shareholders representing more than 90% of the
outstanding minority shares of MSOAS accept the offer. The offer period ends in
June 2000, but may be withdrawn or cancelled without notice.
Results of Operations
The Company is in the development stage and has generated revenues to
date only from study work. Since the merger of OSAS into MSOAS, the Companys
main operations have been conducted through MSOAS.
Three months ended March 31, 2000 and 1999:
Personnel costs. Personnel costs include costs for both employees and
hired personnel and were $315,810 for the three month period ended March 31,
2000, a decrease of $94,820 from the personnel costs of $410,630 for the three
month period ended March 31, 1999. The decrease in costs was mainly due to cost
savings achieved due to a more cost efficient organization following the merger
between MSOAS and OSAS in September 1999.
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<PAGE>
Legal, audit and advisory services. Legal, audit and advisory services
for the three month period ended March 31, 2000 were approximately $115,306, a
decrease of $65,527 compared to legal, audit and advisory services of $180,833
for the same period in 1999. The decrease was mainly due to lower consulting
fees as work was shifted from consultants to our personnel.
General and administrative expenses. General and administrative expenses
for the three month period ended March 31, 2000 were $249,012, a decrease of
$11,558 from the general and administrative expenses of $260,570 for the same
period in 1999. The decrease in costs was mainly due to cost savings achieved as
a result of the merger between MSOAS and OSAS in September 1999.
Marketing. Marketing expenses for the three month period ended March 31,
2000 were $55,156, a decrease of $49,490 from the marketing expenses of $104,646
for same period in 1999. The decrease was a result of purchasing fewer marketing
materials and services in the current period.
Technical Development. Technical development costs for the three month
period ended March 31, 2000 were $29,197, a decrease of $167,392 compared to
$196,589 for same period in 1999. The decrease was due to less technical
development work performed in current period.
Amortization of goodwill and intangibles. Amortization of goodwill and
intangibles for the three month period ended March 31, 2000 was $972,571, a
decrease of $26,553 from the amortization of goodwill and intangibles of
$999,124 for the same period in 1999. The difference was due to an adjustment to
first quarter 1999 amortization recorded in the second quarter 1999.
Interest expense. Interest expense for the three month period ended
March 31, 2000 were $7,346 which was $9,906 below interest expense of $17,252
for the same period in 1999. The reason for the decrease is that the Company has
had less interest bearing debt in the current quarter compared to the same
period in 1999.
Liquidity and Capital Resources
The Company's ability to continue as a going concern is dependent on its
ability to obtain significant additional financing. As of March 31, 2000, the
Company had cash and cash equivalents of $112,946, deficit accumulated during
the development stage of $14,148,144, shareholders' equity of $33,246,910, and a
working capital deficit of $3,986,244. The Company is in the development stage
with no operating assets presently generating cash to fund its operating and
capital requirements.
In February 2000, the Company entered into a loan agreement with MFC
Merchant Bank S.A, an investment company, pursuant to which MFC agreed to lend
an aggregate of up to $2,000,000, provided that advances shall not exceed
$350,000 in any single month. Any monies advanced under this loan agreement
shall bear interest at the rate of LIBOR plus 3.5% per annum and shall be due
and payable in full on February 25, 2001. As of March 31, 2000, $500,000 was
outstanding under this agreement.
In April 2000, the Company consummated a private placement of 450,000
shares of common stock for gross proceeds of $315,000. The net proceeds will be
used to fund operating expenses.
The Company is seeking to obtain additional capital. In October 1998,
the Company entered into an engagement letter with MFC Merchant Bank S.A.
pursuant to which MFC shall act, on a best-efforts basis, as agent for the
Company in raising additional capital. As consideration for its services, MFC
shall receive a success fee equal to five percent of the capital raised plus DM
100,000 (approximately $54,000) per month until the completion or termination of
the MFC financing. In addition, all of MFC's out-of-pocket expenses shall be
reimbursed, and if the Company raises the necessary funds through another
source, MFC shall receive a break-up fee equal to the greater of $1,200,000 or
350,000 shares of common stock.
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<PAGE>
In September 1999, the Board of Westdeutsche Landesbank Girozentrale
(WestLB) of Dusseldorf issued its conditional approval to underwrite a U.S.
$157.5 million loan facility for the first Offshore Shuttle. Based on such
approval, the Company has mandated WestLB to act as sole arranger and
underwriter for the financing. WestLB's commitment is subject to several
material conditions, including satisfactorily completing its due diligence, the
Companys obtaining European government guarantees to secure a significant
portion of the loan facility, and its completing of an additional equity
financing. The Company is seeking to fulfill these conditions within the next
few months.
In February 2000, the Company signed a Memorandum of Understanding with
the Italian Ministry of Industry and various other Italian governmental entities
with respect to the financing of the first Offshore Shuttle, (the "Italian
Financing"). The financial support from the various governmental entities would
be in the form of equity, debt and government guarantees, and is subject to
numerous material conditions, including the satisfactory completion of due
diligence, the submission by an Italian shipyard of a competitive construction
bid with terms and conditions acceptable to the Company, the arrangement of
sufficient commercial debt financing with a major bank and the raising of
additional equity capital.
There can be no assurance that the conditions to the WestLB or the
Italian Financing will be satisfied or, if satisfied, that the WestLB or the
Italian Financing will be consummated on reasonable terms or at all. If it is
not completed, the Company may be required to significantly curtail or cease our
proposed activities. Although the Company believes that the proceeds from the
WestLB or the Italian Financing, if completed, will enable the Company to
construct the first Offshore Shuttle, there can be no assurance in that regard.
Moreover, even if the WestLB or the Italian Financing is consummated, the
Company's future capital requirements could vary significantly and will depend
on certain factors, many of which are not within the Company's control. Such
factors include
o the need for cash to fund the construction of additional Offshore
Shuttles;
o greater than anticipated expenses; and
o longer engineering, development, and construction times than now
contemplated.
If the Company is successful in completing the first Offshore Shuttle,
it believes it will be able to fund the construction of additional Offshore
Shuttles from its future operating cash flows and/or short or medium term debt
financing. There can be no assurance, however, that the Companys beliefs will
prove to be accurate.
International Operations
The Company intends to market its services in international markets.
International operations entail various risks, including
o political instability;
o economic instability and recessions;
o exposure to currency fluctuations;
o difficulties of administering foreign operations generally;
o reduced protection for intellectual property rights;
o potentially adverse tax consequences; and
o obligations to comply with a wide variety of foreign laws and
other regulatory requirements.
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<PAGE>
Forward-looking Statements
The information set forth herein includes certain forward-looking
statements made in reliance upon the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. These forward-looking statements,
including statements regarding the capabilities of the Offshore Shuttle, the
dates on which construction of the Offshore Shuttles will commence and be
completed, the number of Offshore Shuttles to be constructed, the WestLB loan
facility and the Italian financing and the Company's ability to satisfy the
conditions precedent to either of them, and the Company's ability to fund the
construction of additional Offshore Shuttles, are based on current expectations
that involve numerous risks and uncertainties. Actual results could differ
materially from those anticipated in such forward-looking statements as result
of various known and unknown factors including, without limitation, future
economic, competitive, regulatory and market conditions, future business
decisions, the receipt of financing, construction delays, demand for the
Company's services and those risks discussed herein, in the Company's
Registration Statement on Form S-1 declared effective by the Securities and
Exchange Commission on December 21, 1998, and in the Company's Annual Report on
Form 10-K for the year ended December 31, 1999. Words such as "believes,"
"anticipates," "expects," "intends," "may," and similar expressions are intended
to identify forward-looking statements but are not the exclusive means of
identifying such statements. Readers are cautioned not to put undue reliance on
these forward-looking statements. The Company undertakes no obligation to revise
any of these forward-looking statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk
The Company's exposure to market risk for changes in interest rates
relates primarily to the Company's notes payable and long-term debt. The Company
believes its exposure to interest rate risk is not material since its current
notes payable consist of fixed rate indebtedness, and the long-term variable
rate debt obligation is not material. The fair value of the fixed rate notes
payable approximates its carrying value due to its short-term maturity.
Interest rate risk may arise if the Company is successful in obtaining
debt financing to finance the building of the first Offshore Shuttle. In such an
event, the Company will assess the extent of its interest rate risk and may
enter into hedging transactions to reduce its exposure and to ensure its ability
to service its debt.
Foreign Exchange Risk
Foreign exchange risk may arise if the Company is required to use
different currencies for various aspects of its operations. Although the
principal currency used in the offshore decommissioning industry in the U.S.
Dollar, the local expenditures of MSOAS (e.g., rent, telephone, payroll, etc.)
are likely to be paid in Norwegian Kroner, and it is possible that the contract
for construction of the first Offshore Shuttle will be denominated in a currency
other than the U.S. Dollar or the Norwegian Kroner. The Company currently has no
foreign exchange contracts.
- 13 -
<PAGE>
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following exhibits are filed herewith:
10.1 Addendum to employment agreement with Franz Eder
10.2 Addendum to employment agreement with Iqbal Akram
27. Financial Data Schedule
(b) Report on Form 8-K
We did not file any reports on Form 8-K during the three month period
ended March 31, 2000.
- 14 -
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act
of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
Date: May 11, 2000 MARINE SHUTTLE OPERATIONS INC.
By: /s/ G.W. Norman Wareham
--------------------------------------------
G.W. Norman Wareham, Chief Financial Officer
(principal financial and accounting officer)
- 15 -
<PAGE>
INDEX TO EXHIBITS
Exhibit # Document Page
10.1 Addendum to employment agreement with Franz Eder
10.2 Addendum to employment agreement with Iqbal Akram
27. Financial Data Schedule
- 16 -
<PAGE>
ADDENDUM
to Employment Agreement
The validity of the employment agreement between Marine Shuttle Operations Inc.
(the "Corporation") and Mr. Franz Eder (the "Employee") signed on 1/6/98 will be
extended up to 30/6/01 on the existing terms and conditions.
10/4/2000
- ----------------------------------- -----------------------------------
Marine Shuttle Operations Inc. Franz Eder
<PAGE>
ADDENDUM
to Employment Agreement
The validity of the employment agreement between Marine Shuttle Operations Inc.
(the "Corporation"), formerly named Geoteck International Inc., and Mr. Iqbal
Akram (the "Employee") signed on 14/4/98 will be extended up to 30/6/01 on the
existing terms and conditions.
10/4/2000
- ----------------------------------- ------------------------------------
Marine Shuttle Operations Inc. Iqbal Akram
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
unaudited consolidated balance sheet as of March 31, 2000 and the unaudited
Statement of Loss and comprehensive loss for the three months ended March 31,
2000, and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-2000 DEC-31-2000
<PERIOD-START> MAY-23-1997 JAN-01-2000
<PERIOD-END> MAR-31-2000 MAR-31-2000
<CASH> 112,946 112,946
<SECURITIES> 0 0
<RECEIVABLES> 168,432 168,432
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 316,448 316,448
<PP&E> 6,536,759 6,536,759
<DEPRECIATION> 130,187 130,187
<TOTAL-ASSETS> 37,876,030 37,876,030
<CURRENT-LIABILITIES> 4,302,692 4,302,692
<BONDS> 0 0
0 0
0 0
<COMMON> 40,751 40,751
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 37,876,030 37,876,030
<SALES> 121,512 0
<TOTAL-REVENUES> 121,512 0
<CGS> 0 0
<TOTAL-COSTS> 14,709,713 1,735,925
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 124,003 7,346
<INCOME-PRETAX> (14,148,144) (1,577,215)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (14,148,144) (1,577,215)
<EPS-BASIC> 0 (0.04)
<EPS-DILUTED> 0 (0.04)
</TABLE>
