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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------------
FORM 10-Q/A
Amendment No. 1
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the quarterly period ended September 30, 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
Incorporation or Organization) No.)
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 November 9,
2000: 43,988,356
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PART I.
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MARINE SHUTTLE OPERATIONS INC.
(A development stage company)
CONSOLIDATED BALANCE SHEETS
(U.S.Dollars)
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
-------------- --------------
(unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 288,572 $ 1,119,564
Restricted cash 31,696 54,478
Accounts receivables 85,162 38,619
Other current receivables 100,162 114,305
------------ ------------
Total Current Assets 505,592 1,326,966
Property, plant and equipment, net 6,439,964 5,980,857
Debt issue cost 1,641,265 1,109,510
Goodwill, net 26,778,751 28,096,422
Patents and agreements, net 2,863,376 2,732,240
------------ ------------
TOTAL ASSETS $ 38,228,948 $ 39,245,995
============ ============
LIABILITIES AND SHAREHOLDERS` EQUITY
Current Liability
Accounts payable $ 578,839 $ 933,817
Notes payable 4,800,000 2,550,000
Other current liabilities 552,992 341,246
------------ ------------
Total current liabilities 5,931,831 3,825,063
Long Term Debt 258,206 293,379
Minority interest -- 228,826
Contingency (Note 3)
SHAREHOLDERS' EQUITY
Authorized 75,000,000 common shares with a par value
of $0.001. Issued and outstanding 43,988,356, and
40,750,642 common shares with a par value of $0.001
at September 30, 2000 and December 31, 1999 respectively 43,988 40,751
Other paid in capital 50,103,423 47,684,739
Deficit accumulated during the development stage (17,326,485) (12,570,929)
Accumulated other comprehensive loss (782,015) (255,834)
------------ ------------
Total shareholders' equity 32,038,911 34,898,727
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $ 38,228,948 $ 39,245,995
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
2
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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
September 30,
2000 Three Months Ended Nine Months Ended
from date of September 30, September 30,
inception ------------------------------ -------------------------------
May 23, 1997 2000 1999 2000 1999
--------------- --------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Operating revenues $ 230,048 $ 108,536 $ 36,072 $ 108,536 $ 59,804
------------ ------------ ------------ ------------ ------------
OPERATING EXPENSES
Personnel costs 2,532,745 492,338 409,664 1,029,313 1,275,478
Legal, audit and advisory services 1,954,906 59,201 68,267 289,818 368,182
Cost of cancelled financing 606,721 -- -- -- --
General and administrative 2,273,539 170,023 188,804 547,879 767,008
Marketing 1,094,822 37,624 76,719 142,176 251,513
Technical development 583,403 -- 9,445 29,197 278,499
Depreciation 171,895 27,982 23,076 65,211 72,491
Amortization - goodwill and intangibles 8,753,209 1,016,899 968,215 2,985,838 2,904,646
Loss on investment 90,000 -- -- -- --
Currency exchange loss (gain) (12,673) (8,082) (76,051) (14,655) 28,685
------------ ------------ ------------ ------------ ------------
Total operating expenses $ 18,048,567 $ 1,795,985 $ 1,668,139 $ 5,074,777 $ 5,946,503
------------ ------------ ------------ ------------ ------------
Interest expense, net of capitalized 141,151 15,996 8,612 24,494 19,890
Interest income (80,667) (1,390) (5,058) (9,253) (40,990)
Net loss before minority interest $(17,879,003) $ (1,702,055) $ (1,635,621) $ (4,981,482) $ (5,865,599)
------------ ------------ ------------ ------------ ------------
Minority interest (552,518) -- (28,956) (225,927) (176,253)
------------ ------------ ------------ ------------ ------------
Net loss $(17,326,485) $ (1,702,055) $ (1,606,665) $ (4,755,555) $ (5,689,346)
============ ============ ============ ============ ============
Other comprehensive loss:
Accumulated other comprehensive loss-
foreign currency translation
adjustments (782,015) (371,718) (32,773) (627,553) (27,360)
------------ ------------ ------------ ------------ ------------
Comprehensive loss $(18,108,500) $ (2,073,773) $ (1,639,438) $ (5,383,108) $ (5,716,706)
============ ============ ============ ============ ============
Basic and diluted loss per share $ (0.04) $ (0.05) $ (0.11) $ (0.17)
============ ============ ============ ============
Basic and diluted weighted average shares outstanding 43,988,356 33,707,357 42,399,799 33,605,996
============ ============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
3
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MARINE SHUTTLE OPERATIONS INC.
(A development stage company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(U.S.Dollars)
(unaudited)
<TABLE>
<CAPTION>
Cumulative to
September 30, 2000 Nine Months Ended
From date of September 30,
inception ------------------------------------
May 23, 1997 2000 1999
---------------------- --------------- --------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net Loss $(17,326,485) $ (4,755,555) $ (5,689,346)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 8,925,106 3,051,050 2,977,137
Minority interest (552,518) (225,927) (176,253)
Loss on investment 90,000 -- --
Unrealized gain on foreign currency 34,780 (5,010) 62,657
Changes in working capital:
Accounts receivable (85,162) (46,543) (19,735)
Other current receivables and restricted cash (131,857) 36,925 47,734
Accounts payable 578,840 (354,977) 163,014
Other current liabilities 518,212 216,756 (19,513)
------------ ------------ ------------
Net cash used in operating activities $ (7,949,084) $ (2,083,281) $ (2,654,305)
------------ ------------ ------------
INVESTING ACTIVITIES
Investments (100,000) -- --
Capital expenditures (5,417,558) (543,226) (3,586,968)
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 $ (4,958,173) $ (543,226) $ (3,586,968)
------------ ------------ ------------
FINANCING ACTIVITIES
Issuance of capital stock 11,564,050 715,000 5,748,750
Share issue cost (746,881) (10,500) (229,950)
Debt issue cost (1,641,265) (531,755) (854,200)
Payment on Note payable (5,875,000) -- (3,500,000)
Borrowing on Note payable 10,968,378 2,250,000 4,941,567
------------ ------------ ------------
Net cash provided by financing activities $ 14,269,282 $ 2,422,745 $ 6,106,167
------------ ------------ ------------
Effect of exchange rate change in cash and
cash equivalents (1,073,453) (627,230) (132,579)
Net increase (decrease) in cash and cash equiv. $ 288,572 $ (830,992) $ (267,685)
------------ ------------ ------------
Cash and cash equivalents at beginning of period -- 1,119,564 903,805
------------ ------------ ------------
Cash and cash equivalents at end of period $ 288,572 $ 288,572 $ 636,120
============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
4
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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
nine month period ended September 30, 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 Company's 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. Certain
reclassifications having no effect on income have been made to the 1999
financial statements to conform to the current period presentation.
2. NATURE OF OPERATIONS
Marine Shuttle Operations Inc. (the "Company"), through its
wholly-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 2003 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. As a result, MSOAS
became the holder of the licensing and marketing rights to the Offshore Shuttle,
and the Company's ownership interest in MSOAS was reduced to 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. In June 2000, the Company acquired an additional 9.69% of the
outstanding shares of MSOAS in exchange for an aggregate of 1,186,283 shares of
common stock, and acquired the remaining MSOAS shares (approximately 0.77%) for
cash. These acquisitions were accounted for as a purchase. As a result, the
Company now owns 100% of the outstanding shares of MSOAS.
5
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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 September
30, 2000 had accumulated losses from operations amounting to $17,326,485 and a
working capital deficit of $5,426,239, 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 repayable to the extent of 25% of
such excess. As of September 30, 2000, $2,550,000 had been advanced under this
loan agreement.
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 $436,857) to finance specific
tasks within the Offshore Shuttle project. As of September 30, 2000, NOK
2,358,617 (approximately $257,595) had been advanced under the loan agreement.
The principal is repayable over five years commencing two years after
disbursement, 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. In June 2000, MFC agreed to defer
the monthly fee obligation from May 1, 2000 through December 1, 2000 or until
additional equity is raised, whichever comes first. In return for granting this
deferral, the deferred fees will be increased by 10%. This 10% premium may be
paid with shares of common stock.
6
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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 Dusseldorf 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 Company's 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. The Company has deferred debt issue costs
related to the financing.
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 the 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 September 30, 2000, $900,000 had been advanced under
the loan agreement.
In April 2000, the Company consummated a private placement of 450,000
shares of common stock for gross proceeds of $315,000.
In June 2000, the Company consummated a private placement of 571,429
shares of common stock for gross proceeds of $400,000.
In July 2000, the Company entered into a loan agreement with Mr. Holger
Timm, a foreign individual, pursuant to which Mr. Timm agreed to lend the
Company an aggregate of up to $1,500,000, provided that advances shall not
exceed $500,000 in any single month. Any monies advanced under the loan
agreement shall bear interest at the rate of 7.5% per annum and shall be due and
payable in full on December 31, 2000. The advances may be converted at the
option of the lender into the Company's common stock at 80% of the five day
average trading price of the common stock prior to conversion, but not less than
a floor price as calculated pursuant to the loan agreement. As of September 30,
2000, $1,350,000 had been advanced under the loan agreement. Because of the
floor price, there is no beneficial conversion feature with respect to the
advance as of September 30, 2000.
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 $3,817,000 as
of September 30, 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.
7
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MARINE SHUTTLE OPERATIONS INC.
(A development stage company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
6. STOCK OPTIONS
As of September 30, 2000, options to purchase 110,000 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.
7. RECENT PRONOUNCEMENTS
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.
In March 2000, the Financial Accounting Standards Board issued
Interpretation No. 44, Accounting for Certain Transactions Involving Stock
Compensation. This interpretation modifies the current practice of accounting
for certain stock award agreements and is generally effective beginning July 1,
2000. The initial impact of this interpretation on the Company's results of
operations and financial position will not be material.
8. GOODWILL
September 30, December 31,
2000 1999
---------------------------------------------------- ---------------
Total cost $ 34,127,918 $ 32,929,340
Accumulated amortization 7,349,167 4,832,918
-------------- ---------------
$ 26,778,751 $28,096,422
============== ===============
9. SUBSEQUENT EVENT
On October 18, 2000, MSOAS entered into a new lease agreement with
RC Group ASA for office space in Sandnes, Norway. The annual lease is for
NOK435,852 ($47,600) with adjustments for increases in the consumer price index.
The agreement expires in October 2003. Sverre Hanssen, the Chairman of the Board
of Directors of MSOAS, is the principal shareholder and the President of RC
Group ASA.
8
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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: November 27, 2000 MARINE SHUTTLE OPERATIONS INC.
By: /s/ Iqbal Akram
---------------
Iqbal Akram, Chief Financial Officer
(Principal Financial and Accounting Officer)
9
