<PAGE>
As filed with the Securities and Exchange Commission on November 22, 2000
Registration No. -________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
MARINE SHUTTLE OPERATIONS INC.
(Exact Name of Registrant as Specified in Its Charter)
NEVADA 1389 91-1913992
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
-----------
Luramyrveien 29
N-4391 Sandnes, Norway
47-51-962-300
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
-----------
FRANZ EDER, PRESIDENT
Luramyrveien 29
N-4391 Sandnes, Norway
47-51-962-300
(Name, Address Including Zip Code, and Telephone Number, Including
Area Code, of Agent For Service)
-----------
Copies of all communications, including all communications sent to
the agent for service, should be sent to:
LEONARD J. BRESLOW, ESQ.
Breslow & Walker, LLP
100 Jericho Quadrangle, Suite 230
Jericho, New York 11753
Tel: (516) 822-6505
Fax: (516) 822-6544
-----------
Approximate date of proposed sale to the public: As soon as practicable after
this Registration Statement becomes effective.
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act, check
the following box. |X|
If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the offer. |_|
If this form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If this form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434, check
the following box. |_|
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<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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Proposed
Maximum Proposed
Amount Offering Maximum Amount of
Title of Each Class of Securities to be Price Per Aggregate Registration
to be Registered Registered Security(3) Offering Price Fee
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $0.001 per share(1) 7,000,000 $0.2813 $1,969,100 $520
------------------------------------------------------------------------------------------------------------------------------------
Common Stock, par value $0.001 per share(2) 4,409,571 $0.2813 $1,240,412 $327
------------------------------------------------------------------------------------------------------------------------------------
Total Registration Fee $847
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</TABLE>
(1) Represents shares of common stock which are being offered by us.
(2) Represents shares of common stock which may be sold by selling
stockholders. See "Selling Stockholders".
(3) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(c) under the Securities Act of 1933,
as amended. Represents the average of the high and the low prices of the
common stock as quoted on the OTC Bulletin Board on November 17, 2000.
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), may
determine.
<PAGE>
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THESE
SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES, NOR DOES IT SEEK AN OFFER TO BUY THESE SECURITIES IN
ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED NOVEMBER 22, 2000
MARINE SHUTTLE OPERATIONS INC.
11,409,571 Shares
Common Stock
-----------
We are offering up to an aggregate of 7,000,000 shares of our common
stock. The specific number of shares, the public offering price, and other
specific terms of sale will be set forth in an accompanying prospectus
supplement. We may sell the common stock through underwriters, through dealers,
directly to one or more investors, or through agents. See "Plan of
Distribution."
This prospectus also relates to 4,409,571 shares of common stock which may
be offered and sold, from time to time, by the selling stockholders named in
this prospectus. We will not receive any proceeds from the sale of the shares by
the selling stockholders.
Our common stock currently is quoted on the OTC Bulletin Board under the
symbol "ZSUB." On November __, 2000, the last reported sale price of our common
stock on the OTC Bulletin Board was $_____ per share.
See "Risk Factors" commencing on page 6 to read about the risks you should
consider before buying shares of our common stock.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved or these securities or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is a
criminal offense.
The date of this prospectus is , 2000
<PAGE>
PROSPECTUS SUMMARY
The following summary highlights selected information contained elsewhere
in this prospectus. This summary does not contain all of the information that
you should consider before investing in the common stock. You should read the
entire prospectus carefully, including "Risk Factors" and the financial
statements, before making an investment decision.
Our Company
Through our wholly-owned Norwegian subsidiary, Marine Shuttle Operations
AS, we are seeking to become a leading player in the market for decommissioning,
installing, and transporting offshore oil and gas structures. We are in the
development stage, we have not generated any significant revenues from
operations, and we do not expect to generate any significant revenues from
operations until 2003, at the earliest.
There are now more than 6,500 offshore oil and gas installations worldwide
located on the continental shelf of approximately 53 countries. Many different
types of installations exist, each one being uniquely designed based on the
characteristics of the installation site, including the water depth, the seabed
characteristics, and the reservoir, wave, and current conditions. Of the current
installed base of structures, more than 5,800 are fixed steel installations.
Situated almost exclusively in shallow water depths (i.e., less than 75 meters)
and intermediate water depths (i.e., 75 to 200 meters), fixed steel
installations are comprised of two elements:
o the "topside" which contains the processing, drilling, and
accommodation facilities, and
o the substructure or "jacket" which consists of a lattice-work of
steel tubes and can weigh over 30,000 tons with a base dimension of
up to 120 meters.
The balance of the installed base of structures includes:
o concrete gravity base structures (typically found in shallow and
intermediate water depths),
o various types of floating structures such as tension leg platforms,
deep draft caisson vessels, compliant towers, platforms, spars,
floating production, storage and offloading systems and vessels
(typically situated in deep waters--i.e., more than 200 meters), and
o subsea structures which include the equipment needed to develop
satellite fields and the seabed equipment associated with floating
installations.
We believe that over the next 30 years, most of these structures will have
to be decommissioned at a total estimated cost of $20 billion to $40 billion. We
also believe that over the next 20 years, approximately $35 billion will be
spent on the installation of new structures.
2
<PAGE>
We initially intend to concentrate our efforts on
o decommissioning fixed steel structures, primarily the several
hundred large steel installations situated in intermediate water
depths, and
o installing topsides.
Presently, the decommissioning of fixed steel structures typically is
accomplished by cutting the particular structure into many pieces and utilizing
crane ships and other support vessels to lift the pieces onto barges or, in some
instances, onto the deck of the crane ships themselves. The cutting is
necessitated by the limited lifting capabilities of existing crane ships.
Theoretically, the largest cranes are capable of lifting objects up to 14,000
tons. Crane capacity, however, decreases as the required outreach and/or upreach
of the crane boom increases. Moreover, since the maximum height to which a
structure can be lifted is limited to the length of the crane boom, taller
structures must be cut into smaller pieces in order to clear the barge deck. As
a result, although the cutting and lifting procedure may be adequate for small,
shallow water installations, the extensive cutting and lifting required with
respect to the larger platforms in deeper waters makes decommissioning such
installations using such procedure difficult, dangerous, expensive, and
time-consuming.
Limited crane capacity also affects the topside installation market.
Topsides often are installed by transporting the topside to the site on a barge,
and using cranes to lift it from the barge onto the structure on which it is to
be installed. We believe that many of the topsides we anticipate being installed
over the next 20 years will be too large to be lifted by existing cranes,
precluding them from being assembled onshore and installed in one piece. Rather,
they will have to be fabricated in numerous pieces and assembled at the
installation site. This is not ideal since offshore platform assembly can cost
up to ten times more than onshore assembly. As an alternative, topside
installation can be accomplished by transporting the topside to the site using
two vessels aligned in a catamaran-type fashion, floating over the structure on
which the topside is to be installed, and lowering the topside onto the
structure by flooding the tanks in the transport vessels. The weight of the
topsides that can be installed using this "float over" method is limited,
however, because of the pitching and heaving of the transport vessels during
transport and installation.
We have designed a vessel, the "Offshore Shuttle," which we believe will
be capable of removing and installing 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. We anticipate that construction of the first
Offshore Shuttle will be completed by the first quarter of 2003, at the
earliest. Construction of a second Offshore Shuttle is intended to commence
after completion and successful testing of the first Offshore Shuttle, and
construction of a third Offshore Shuttle is intended to commence one year after
the second is ordered.
Although our initial efforts will be focused on providing decommissioning
and installation services, other potential opportunities for the Offshore
Shuttle include transporting new or used structures, and supporting structures
and vessels during repair or modification work.
3
<PAGE>
We have formed strategic alliances with Thyssen Krupp Stahlunion GmbH, RC
Consultants AS, and Schuller Industrieentsorgung AG to test, develop,
manufacture, and commercialize the Offshore Shuttle concept. See "Strategic
Alliances."
About Us
We were incorporated in Nevada in May 1997 under the name Geoteck
International, Inc. On May 29, 1998, we changed our name to Marine Shuttle
Operations Inc. Our principal executive offices are located at Luramyrveien 29,
N-4391 Sandnes, Norway. Our phone number there is 47-51-962300. We can be
contacted in the United States at 4410 Montrose Boulevard, Houston, Texas 77006.
Our phone number at that location is (713) 529-7498. Our website address is
http://www.msoinc.com. The information in our website is not a part of this
prospectus. Unless indicated otherwise, all references in this prospectus to
"we," "our," and "us" refer to Marine Shuttle Operations Inc. and Marine Shuttle
Operations AS.
The Offering
Common Stock offered by us.................................. 7,000,000 shares
Common Stock offered by the selling stockholders ........... 4,409,571 shares
Common Stock outstanding prior to the offering.............. 43,988,356 shares
Common Stock outstanding after the offering................. 50,988,356 shares
OTC Bulletin Board Symbol................................... ZSUB
Risk Factors
An investment in our common stock involves a high degree of risk. You
should carefully review and consider the risks discussed under "Risk Factors" as
well as the other information set forth in this prospectus before buying our
common stock.
4
<PAGE>
SUMMARY FINANCIAL DATA
In the table below, we provide you with summary historical financial data
of Marine Shuttle Operations Inc. We have prepared this information using our
consolidated financial statements for the periods indicated below. The summary
financial data for the years ended December 31, 1999 and 1998 and for the period
from May 23, 1997 (inception) through December 31, 1997 are derived from our
audited consolidated financial statements. The summary financial data for the
nine month periods ended September 30, 2000 and 1999 and for the period May 23,
1997 (inception) through September 30, 2000 are derived from our unaudited
financial statements. The unaudited financial statements include all
adjustments, consisting of normal recurring accruals, which we consider
necessary for a fair presentation of the financial position and the results of
operations for these periods.
Operating results for the nine months ended September 30, 2000 are not
necessarily indicative of the results that may be expected for the entire year
ending December 31, 2000.
When you read this summary historical financial data, it is important that
you read along with it the historical financial statements and related notes in
our consolidated financial statements included in this prospectus, as well as
the section of this prospectus titled "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
May 23, 1997
(inception) Nine months Nine months
Through ended ended Year ended
September 30, September 30, Year ended September 30, December 31,
2000 2000 December 31, 1999 1999 1998(1)
Consolidated Statements of Operation Data:
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Operating revenues $ 230,048 $ 108,536 $ 105,136 $ 59,804 $ 16,376
Total operating expenses 18,048,567 5,074,777 7,829,051 5,946,503 4,979,806
Net (loss) (17,326,485) (4,755,555) (7,363,850) (5,689,346) (5,042,148)
Net (loss) per share, (basic and diluted) $ (0.11) $ (0.22) $ (0.17) $ (0.20)
Weighted average number of 42,399,799 33,611,545 33,605,996 25,720,000
common shares outstanding
(basic and diluted)
<CAPTION>
September 30, September 30,
Consolidated Balance Sheet Data: 2000 December 31, 1999 1999 December 31, 1998
<S> <C> <C> <C> <C>
Working capital (deficit) $ (5,426,239) $ (2,498,097) $ (5,184,832) $ (3,588,380)
Total assets 38,228,948 39,245,995 39,104,403 37,936,227
Notes payable 4,800,000 2,550,000 4,811,167 3,605,390
Total liabilities 6,190,037 4,118,442 6,352,886 4,810,551
Minority interest -- 228,826 379,164 555,417
Accumulated deficit (17,326,485) (12,570,929) (10,896,425) (5,207,079)
Shareholders' equity 32,038,911 34,898,727 32,372,353 32,570,259
<CAPTION>
May 23, 1997
(inception)
through
December 31,
1997
<S> <C>
Consolidated Statements of Operation Data:
(in thousands, except per share data)
Operating revenues $ --
Total operating expenses 164,931
Net (loss) (164,931)
Net (loss) per share, (basic and diluted) $ (0.01)
Weighted average number of 18,931,982
common shares outstanding
(basic and diluted)
<CAPTION>
December 31,
Consolidated Balance Sheet Data: 1997
<S> <C>
Working capital (deficit) $ (10,931)
Total assets 9,015
Notes payable --
Total liabilities 19,946
Minority interest --
Accumulated deficit (164,931)
Shareholders' equity (10,931)
</TABLE>
(1) In April 1998,we acquired all of the outstanding stock of Marine Shuttle
Operations AS ("MSOAS"). In December 1998, we acquired approximately 68% of the
outstanding stock of Offshore Shuttle AS ("OSAS"). OSAS merged with and into
MSOAS in September 1999, and we acquired the remaining minority interest in
MSOAS in April and June 2000.
5
<PAGE>
RISK FACTORS
An investment in our common stock involves a high degree of risk. You
should carefully review and consider the risks and uncertainties described below
as well as the other information set forth in this prospectus before investing
in our common stock. If any of the following risks actually occur, our business,
financial condition, or operating results could be materially adversely
affected. In such case, the trading price of our common stock could decline and
you may lose all or part of your investment.
We have a limited operating history and no revenues from operations
We were incorporated in May 1997 to serve as a holding company for one or
more unidentified operating subsidiaries. Our limited operating history makes it
difficult to evaluate our performance and prospects, and our proposed operations
are subject to all of the risks inherent in the establishment of a new business
enterprise. To date, we have no significant assets and we have not generated any
revenues from operations. We believe that we will not generate any revenues from
operations until 2003, at the earliest. We cannot assure you that significant
revenues will ever develop. The likelihood of our success must be considered in
light of the problems, expenses, difficulties, complications, and delays
frequently encountered in connection with a new business, particularly one that
is seeking to develop and commercialize a new product and operate in a
competitive environment.
As of September 30, 2000, we had an accumulated deficit of $17,326,485 and
a working capital deficit of $5,426,239. We expect to continue to incur losses
through at least 2002, and we cannot assure you that we will achieve profitable
operations.
Due to our holding company structure, any funds distributed to us from our
subsidiary may be subject to domestic and foreign taxes
We currently own all of the issued and outstanding capital stock of MSOAS.
Based on this ownership structure, any dividends paid to us by MSOAS are subject
to Norwegian withholding taxes and U.S. income taxes (which can be offset to the
extent of the Norwegian withholding taxes). Thus, the amount of funds that may
be distributed by MSOAS to us for working capital, acquisitions, investments, or
other purposes will be reduced to the extent such taxes are payable.
We need additional capital to implement our business strategy
Additional funds are needed to finance our proposed operations. If
additional funds are raised through the issuance of equity or convertible debt
securities, our stockholders may experience dilution and the securities may have
rights, preferences and privileges senior to those of the common stock. If
capital is raised through a debt financing with financial institutions, we would
likely become subject to restrictive covenants relating to its operations and
finances.
6
<PAGE>
In September 1999, the Board of Westdeutsche Landesbank Girozentrale
(WestLB) of Dusseldorf, Germany issued its conditional approval to underwrite a
U.S. $157.5 million loan facility for the first Offshore Shuttle. The West LB
financing is subject to numerous material conditions, none of which have been
satisfied. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations." We cannot assure you that the conditions to the WestLB
Financing will be satisfied or, if satisfied, that the WestLB Financing will be
consummated on reasonable terms or at all.
If we are not able to raise a substantial amount of additional capital, we
may be required to significantly curtail or cease our proposed activities.
We may lose the rights to the offshore shuttle concept
The intellectual property rights to the Offshore Shuttle concept were
transferred to us by Gunnar Foss and Per Bull Haugs0en, the developers of the
Offshore Shuttle concept. We granted Messrs. Foss and Haugs0en a right of first
refusal with respect to the transfer of the intellectual property rights. In
addition, if we cease to actively engage in activities relating to the Offshore
Shuttle concept, then the intellectual property rights will revert back to them.
In such event, we would be unable to obtain any value from the future sale or
exploitation of the rights. Messrs. Foss and Haugs0en have agreed to relinquish
their right of first refusal and their right to have the intellectual property
rights transferred back to them, but only if certain conditions are satisfied.
These conditions include our receipt of a written commitment for the financing
of the first Offshore Shuttle, and our entering into contracts for the design,
construction, and fabrication of the first Offshore Shuttle. We cannot assure
you that these conditions will be met.
A substantial amount of time will lapse until commercial introduction of the
first Offshore Shuttle
We are in the process of evaluating bids received from a number of
construction yards which we believe have the capacity and capability to build an
Offshore Shuttle. We cannot assure you that we will be able to negotiate
acceptable contract manufacturing arrangements. We anticipate that physical
construction of the first Offshore Shuttle will start during the third quarter
of 2001, and will be completed by the first quarter of 2003, at the earliest.
Construction of a second Offshore Shuttle is intended to commence after
completion and successful testing of the first Offshore Shuttle, and
construction on a third Offshore Shuttle is intended to commence one year after
the second is ordered. We cannot assure you as to the time required to complete
construction or that construction will be successfully completed at all.
We anticipate that each Offshore Shuttle will conduct between two and five
commercial operations per year. We do not anticipate generating any revenues
until the year 2003, at the earliest. We cannot assure you that our assumptions
regarding the number of operations to be performed will prove to be accurate, or
that we will ever achieve commercially significant sales. To date, we have not
entered into any contracts for the use of our proposed services, and we cannot
assure you that any such contracts will materialize. See "Business--Business
Strategy."
7
<PAGE>
The Offshore Shuttle may not function as intended
We cannot assure you that construction of the Offshore Shuttle will be
successfully completed or that, if constructed, the Offshore Shuttle will
function properly, will be operationally safe and environmentally friendly, or
will enable us to provide decommissioning, installation, and transportation
services in an effective manner or at all. In addition, we anticipate that the
Offshore Shuttle will be equipped with an adjustable lifting frame, and
specially-prepared docking connections will be utilized during removal
operations. To date, neither the lifting frame nor the docking connections have
been completely engineered, and we cannot assure you that such engineering will
be successfully completed. If we are unable to engineer the lifting frame and/or
the docking connections, it could have a material adverse effect on us. See
"Business--The Offshore Shuttle."
We may face intense competition and our technology may become obsolete
We will face competition from companies that provide decommissioning,
installation, and transport services using cranes and barges. In addition,
several companies have offered or have proposed solutions for lifting large
platforms in one piece. These involve the use of multiple barges, twin-hull
tankers, split-hull tankers, and U-shaped semi-submersibles. Competition also
may arise from vessels, processes, and/or technologies currently in development,
or developed in the future, by other companies. The development by others of new
or improved vessels, processes, or technologies may make the services to be
marketed by us less competitive or obsolete. Many of our current and potential
competitors are likely to have substantially greater financial, managerial, and
technical resources than we do. We cannot assure you that we will be able to
compete successfully in the marketplace, if at all. See "Business--Competition."
Protection of our proprietary rights may be inadequate
We have six Norwegian patents regarding various aspects of the Offshore
Shuttle design and operations, and numerous patent applications are pending in
Norway, the United States, and other countries. We cannot assure you that
patents will issue from any of our patent applications or, if issued, as to the
range or degree of protection the issued patents will afford. In addition, we
cannot assure you that others will not obtain patents claiming aspects similar
to those covered by the patent applications or patents, or that such patents, if
issued, will not be challenged by third parties, invalidated, rendered
unenforceable, or designed around.
Even if patents are issued from the patent applications and a competitor
were to infringe on them, the costs of enforcing the patent rights may be
substantial or even prohibitive. We cannot assure you that we will be successful
in any action for infringement of our technology. In addition, we cannot assure
you that the Offshore Shuttle will not infringe on the patent rights of others,
or that patents do not exist or will not be issued in the future that would have
an adverse effect on our ability to manufacture or operate the Offshore Shuttle.
We are aware of the existence of a Norwegian patent which claims the use of a
U-shaped structure designed for removing and/or installing topsides. Based on
the opinion of our patent counsel, Bryns Patentkontor A/S, we believe that the
Offshore Shuttle will not infringe on this Norwegian patent because, unlike the
structure covered by the Norwegian patent,
8
<PAGE>
the Offshore Shuttle will not utilize movable transverse beams mounted to its
upper beams. We cannot assure you that infringement proceedings will not be
brought against us.
We also may desire or be required to obtain licenses from others in order
to further develop, produce, and market the Offshore Shuttle effectively. We
cannot assure you that licenses will be obtainable on commercially reasonable
terms, if at all, that the patents underlying the licenses will be valid and
enforceable, or that the proprietary nature of the unpatented technology
underlying the licenses will remain proprietary. In addition, we rely on
unpatented proprietary know-how and trade secrets, and employ various methods
including confidentiality agreements with employees, consultants and marketing
partners to protect our trade secrets and know-how. These methods may not afford
complete protection and we cannot assure you that others will not independently
develop trade secrets and know-how or obtain access to them. See "Business--
Proprietary Protection."
We must maintain and establish strategic alliances and other third party
relationships to implement our business strategy
Our strategy for testing, developing, manufacturing, and commercializing
the Offshore Shuttle concept is dependent upon forming strategic alliances and
relationships with joint venture partners, contract manufacturers, or other
third parties, and upon the subsequent success of these parties in performing
their responsibilities. We cannot assure you that our arrangements with Thyssen
Krupp Stahlunion GmbH, RC Consultants AS, and Schuller Industrieentsorgung AG
will be successful. If any of these arrangements are cancelled and/or are
unsuccessful, and if we are unable to secure new alliances in their place, there
would be a material adverse effect on us. See "Business--Strategic Alliances."
In addition, our proposed offshore activities may require the use of large
tug boats, unloading docks, subsea specialists, marine operators, diving support
vessels, and various safety and supply boats. We may seek to form strategic
alliances and relationships with third parties who provide these and other
services. If we are unable to negotiate acceptable arrangements, or if any of
such arrangements are unsuccessful, it could have a material adverse effect on
us.
We have no manufacturing facilities
Physical construction of the first Offshore Shuttle is intended to
commence during the third quarter of 2001. However, we do not have the ability
to manufacture the Offshore Shuttle. We are in the process of evaluating bids
received from a number of construction yards which we believe have the capacity
and capability to build an Offshore Shuttle. We cannot assure you that we will
be able to negotiate acceptable joint venture or contract manufacturing
arrangements, or that any of these arrangements will be successful.
We have limited marketing and sales capabilities
We have limited marketing and sales capabilities. Thyssen Krupp Stahlunion
GmbH has agreed to assist us in our marketing efforts. We cannot assure you that
we will be able to effectively
9
<PAGE>
market or sell our services through sales representatives, through arrangements
with an outside sales force, or through strategic partners. See
"Business--Strategic Alliances--Thyssen Krupp Stahlunion GmbH."
Our services may not be readily accepted by the market
As with any new technology, there is the risk that the market may not
recognize the benefits or the potential applications of the Offshore Shuttle, or
any future products or technologies that may be developed by us. Market
acceptance of our proposed services will depend, in large part, on our ability
to demonstrate to prospective customers the potential advantages of the Offshore
Shuttle over other types of vessels and/or technologies performing similar
functions. We cannot assure you that we will be successful in marketing our
services to the oil and gas industry or other markets, or that the use of the
Offshore Shuttle will be embraced by the oil and gas industry or other markets.
See "Business--Strategic Alliances."
Our business is subject to factors outside our control
Our business may be affected by a variety of factors, many of which are
outside our control. Factors that may affect our business include:
o the success of our marketing campaign;
o competition;
o our ability to attract qualified personnel;
o technical difficulties in building the Offshore Shuttle;
o the amount and timing of operating costs and capital expenditures
necessary to establish our business, operations, and infrastructure;
o governmental regulation; and
o general economic conditions as well as economic conditions specific
to the offshore oil and gas industry.
If we offer our proposed services internationally, we will be exposed to
numerous risks associates with international operations.
We intend to market our services in international markets. International
operations entail various risks, including:
o political instability;
10
<PAGE>
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.
Seasonality, weather conditions, and other factors may affect our business
Offshore decommissioning and installation activity in the North Sea and
the North East Atlantic is highly seasonal, principally as a result of weather
conditions. Historically, the greatest demand for offshore decommissioning and
installation services in such regions has been during the period from May
through September. As a result, we anticipate that a disproportionate amount of
our future revenues, if any, will be generated during the second and third
quarters of each year. In addition, full year results are not likely to be a
direct multiple of any particular quarter or combination of quarters. We may
seek to partially offset the anticipated seasonality of our proposed operations
by pursuing other potential opportunities such as leasing the Offshore Shuttles
to third parties for bridge building, dry docking ships and floating platforms,
and other uses. We cannot assure you that such other opportunities, if
successful, will result in the anticipated offset of the seasonality of our
proposed operations.
Demand for our proposed services also will be affected by the level of
spending by oil and gas companies for decommissioning, installation, and other
similar activities. The expenditures are influenced by the price of oil and gas,
the discovery rates of new oil and gas reserves in offshore areas, local and
international regulations and political and economic conditions, and the oil and
gas industry's access to capital.
Our business is dependent upon Franz Eder, our Chairman and President, and our
ability to attract and retain other key personnel
Our success depends to a significant extent upon the services of Franz
Eder, our President and Chairman of the Board. Mr. Eder has entered into an
employment agreement with us which provides that he shall devote only so much
(but not less than 75%) of his professional and business time, attention, and
energies to his duties and responsibilities as is reasonable to insure our
proper conduct. We do not have, and we have no current plans to obtain, key
person life insurance covering Mr. Eder or any of our other executive officers.
The loss of Mr. Eder's services could have a material adverse effect on us. See
"Business--Employees," and "Management."
11
<PAGE>
We believe that our future success also will depend on our ability to
attract and retain highly-skilled managerial and technical personnel.
Competition for such personnel is intense. We compete for such personnel with
other companies, academic institutions, governmental entities and other
organizations, some of which may have substantially greater capital resources
than us. We cannot assure you that we will be successful in attracting and
retaining such personnel. See "Business--Employees."
Our proposed operations are inherently risky, and we have no insurance to
protect against these risks
Our proposed operations will be subject to all of the inherent risks of
offshore marine activity, including accidents, environmental mishaps, mechanical
failures, and vessels colliding, capsizing, grounding, or sinking. These
occurrences can result in significant personal injury or loss of life, severe
damage to or destruction of property and equipment, pollution or environmental
damage, and suspension of our proposed operations. Moreover, litigation arising
from any such occurrence may result in us being named as a defendant in lawsuits
asserting large claims.
We intend to obtain insurance against some of these types of risks. We
also anticipate that we will be adequately protected by the insurance policies
of the companies that utilize our services, and we intend to further limit our
risk by capping our liability exposure in our service contracts with these
companies. We cannot assure you that the policies of these companies will cover
us or, if they do, that the insurance (or the insurance obtained by us, if any)
will be sufficient or effective under all circumstances or against all hazards
to which we may be subject. In addition, we cannot assure you that any
contractual limits on liability will be enforceable or will adequately and
effectively limit our liability exposure, or that the companies that use our
proposed services will nevertheless seek to be indemnified by us with respect to
the losses or damages they suffer or incur.
Governmental and environmental laws and regulations may restrict our business
Our operations may be subject to and affected by various types of national
and international laws and regulations. The technical requirements of the
various laws and regulations are complex and stringent, and compliance is often
difficult and expensive. We may be required to obtain certain permits, licenses
and certificates with respect to our proposed operations and to comply with
rigorous safety, workplace, and environmental standards. Moreover, certain of
our employees may be covered by laws that operate to make liability limits, if
any, established by state workers' compensation laws inapplicable to these
employees and permit the employees and their representatives to pursue actions
against us for job related injuries with generally no limits on our potential
liability.
Violations of various statutes and regulations that may be applicable to
our proposed operations can result in, among other things,
o civil penalties,
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<PAGE>
o remediation expenses,
o monetary damages,
o injunctions,
o cease and desist orders, and
o criminal penalties.
Some environmental statutes impose strict liability, rendering a person
liable for environmental damage without regard to negligence or fault on the
part of such person. In addition, because such laws and regulations are changed
frequently, it is difficult for us to accurately predict the cost or impact of
such laws and regulations on its planned operations. See
"Business--Regulations."
Our President currently controls approximately 17% of common stock
Franz Eder, our President and Chairman of the Board, presently owns
7,600,000 shares of common stock (approximately 17% of the common stock
currently outstanding). As such, Mr. Eder will have a significant voice in all
matters submitted to stockholders for approval and in our management and
affairs. See "Principal Stockholders."
A substantial number of our shares are reserved for issuance
We have reserved a total of 2,000,000 shares of common stock for issuance
upon the exercise of options that may be granted pursuant to our 1998 Stock
Option Plan. See "Management--Stock Option Plan." The issuance of options
pursuant to the Stock Option Plan may adversely affect our ability to consummate
future equity financings. Further, the holders of such options may exercise them
at a time when we would otherwise be able to obtain additional equity capital on
terms more favorable to us. The exercise and sale of the common stock underlying
the options would have a dilutive effect on our stockholders, and may have a
material adverse effect on the market price of the common stock.
We do not intend to pay dividends
We never have declared or paid dividends, and we do not intend to pay any
dividends in the foreseeable future on the common stock. Our earnings, if any,
are expected to be retained for use in expanding our business. The payment of
dividends is within the discretion of our Board of Directors and will depend
upon our earnings, if any, capital requirements, financial condition, and such
other factors as are considered to be relevant by our Board of Directors from
time to time. See "Dividend Policy."
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<PAGE>
Three of our directors are also officers of our company, and may have conflicts
of interest with us
Our Board of Directors has the responsibility for fixing the compensation
of our employees, including our officers. No independent outside authority
reviews or approves the decision of our Board of Directors concerning
compensation. Currently, three of the five directors are also officers of our
company and, as a result, have a significant voice in setting their own
compensation.
Anti-takeover provisions may discourage takeover attempts
Provisions of the Nevada General Corporation Law could have the effect of
delaying or preventing a change of control of our company. See "Description of
Securities--Statutory Business Combination Provisions."
There is a limited public market for the common stock; our stock is a "penny
stock"
There is a limited public market for our common stock, and we cannot
assure you that a more active public market for the common stock will ever
develop or be sustained after this offering. The development of a more active
public market for our common stock may be impaired because our common stock
currently falls within the definition of a "penny stock." The Securities and
Exchange Commission has adopted regulations which define a "penny stock" to be
any equity security that has a market price of less than $5.00 per share,
subject to certain exceptions, including an exception for securities authorized
for quotation on certain stock exchanges and on the Nasdaq Small Cap Market. For
any transaction involving a penny stock, the rules require the delivery, prior
to the transaction, of a disclosure schedule prepared by the SEC relating to the
penny stock market. Disclosure also must be made about commissions payable to
both the broker-dealer and the registered representative, and about current
quotations for the security. Finally, monthly statements must be sent disclosing
recent price information for the penny stock held in the account and information
on the limited market in penny stocks. As long as our common stock continues to
trade below $5.00 per share, the trading market for our common stock could be
materially adversely affected.
Our stock price may be volatile
From time to time, the stock market has experienced significant price and
volume fluctuations that may be unrelated to the operating performance of
particular companies. In addition, the market price of the common stock, like
the stock prices of many publicly-traded companies, may prove to be highly
volatile. The future market price of our common stock could be significantly
impacted by:
o future sales of our common stock,
o announcements of technological innovations for new commercial
products by our present or potential competitors,
o developments concerning proprietary rights,
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<PAGE>
o adverse litigation,
o unfavorable legislation or regulatory decisions,
o variations in quarterly operating results, and
o other factors outside of our control.
The availability of a substantial number of shares eligible for future sale may
adversely affect our stock price
A substantial number of shares are available for future sale. No
prediction can be made as to the effect, if any, that sales of these shares, or
even the availability of such shares for sale, will have on the market prices
prevailing from time to time. The possibility that substantial amounts of common
stock may be sold in the public market may adversely affect prevailing market
prices for the common stock and could impair our ability to raise capital
through the sale of our equity securities. See "Shares Eligible for Future
Sale."
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<PAGE>
WARNING REGARDING FORWARD LOOKING STATEMENTS
This prospectus contains certain forward-looking statements, including
statements regarding:
o the WestLB financing and our ability to satisfy the conditions
precedent to the West LB financing;
o the dates on which a contractor will be selected and construction of
the Offshore Shuttles will commence and be completed;
o the ability of the Offshore Shuttle to provide cost effective
decommissioning, installation, and transportation services;
o the adequacy of anticipated sources of funds, including the proceeds
from the offering;
o our ability to obtain additional financing and to attract bids by
capable contractors;
o market size and demand for our services;
o strategic alliances; and
o the competitive and regulatory environment.
These forward-looking statements are based on current expectations that
involve numerous risks and uncertainties. Assumptions relating to the foregoing
involve judgments with respect to, among other things, future economic,
competitive, and market conditions and future business decisions, all of which
are difficult or impossible to predict accurately and many of which are beyond
our control. Although we believe that our assumptions underlying the
forward-looking statements are reasonable, any of the assumptions could prove
inaccurate and, therefore, we cannot assure you that the results discussed or
implied in such forward-looking statements will prove to be accurate. In light
of the significant uncertainties inherent in such forward-looking statements,
the inclusion of such statements should not be regarded as a representation by
us or any other person that our objectives and plans will be achieved. 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. We undertake no obligation to
revise any of these forward-looking statements.
DIVIDEND POLICY
We have never declared or paid dividends, and we do not intend to pay any
dividends in the foreseeable future on shares of our common stock. Our earnings,
if any, are expected to be retained for use in expanding our business. The
payment of dividends is within the discretion of our Board of Directors and will
depend upon our earnings, if any, capital requirements, financial condition and
such
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<PAGE>
other factors as are considered to be relevant by our Board of Directors from
time to time.
CAPITALIZATION
The following sets forth our capitalization as of September 30, 2000. You
should read the information provided below together with our consolidated
financial statements and the notes to those statements included elsewhere in
this prospectus.
September 30, 2000
Notes payable (interest rate 7.5%) $ 4,800,000
Long term debt (interest rate 9.4%) 257,595
Stockholder's equity:
Common Stock, par value $.001 per share;
75,000,000 shares authorized; 43,988,356
issued and outstanding at September 30, 2000 43,988
Additional paid-in capital 50,103,423
Accumulated other comprehensive income (loss) (782,015)
Deficit accumulated during the development stage (17,326,485)
------------
Total stockholders' equity $ 32,038,911
------------
Total capitalization $ 37,096,506
------------
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<PAGE>
PRICE RANGE OF COMMON STOCK
Our common stock is traded on the OTC Bulletin Board under the symbol
"ZSUB". The following table sets forth for the periods indicated the high and
low bid quotations for the common stock as reported on the OTC Bulletin Board.
The quotations reflect inter-dealer prices, without retail mark-up, mark-down or
commission, and may not represent actual transactions.
Price Range
High Low
---- ---
Year Ended December 31, 2000
1st Quarter $1.625 $0.62
2nd Quarter $0.9063 $0.5313
3rd Quarter $ $
Year Ended December 31, 1999
1st Quarter $5.0625 $1.625
2nd Quarter $2 $1.0625
3rd Quarter $4.25 $0.875
4th Quarter $1.4375 $0.6875
Year Ended December 31, 1998
1st Quarter $5.75 $3.50
2nd Quarter $7.3125 $5
3rd Quarter $6.5625 $3.50
4th Quarter $6.0625 $4
As of ________, 2000, there were approximately __ holders of record of our
common stock, including record holders which may hold such stock for beneficial
owners and which have not been polled to determine the extent of beneficial
ownership. On __________, 2000, the last sale price reported on the OTC Bulletin
Board for our common stock was $_____ per share.
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<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
In the table below, we provide you with selected consolidated financial
data of Marine Shuttle Operations Inc. We have prepared this information using
our consolidated financial statements for the periods indicated below. The
selected consolidated financial data for the years ended December 31, 1999 and
1998 and for the period from May 23, 1997 (inception) through December 31, 1997
are derived from our audited consolidated financial statements. The selected
consolidated financial data for the nine month periods ended September 30, 2000
and 1999 and for the period May 23, 1997 (inception) through September 30, 2000
are derived from our unaudited financial statements. The unaudited financial
statements include all adjustments, consisting of normal recurring accruals,
which we consider necessary for a fair presentation of the financial position
and the results of operations for these periods.
Operating results for the nine months ended September 30, 2000 are not
necessarily indicative of the results that may be expected for the entire year
ending December 31, 2000.
When you read this selected consolidated financial data, it is important
that you read along with it the historical financial statements and related
notes in our consolidated financial statements included in this prospectus, as
well as the section of this prospectus titled "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
May 23, 1997
(inception) Nine months Nine months
Through ended ended Year ended
September 30, September 30, Year ended September 30, December 31,
2000 2000 December 31, 1999 1999 1998(1)
Consolidated Statements of Operation Data:
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Operating revenues $ 230,048 $ 108,536 $ 105,136 $ 59,804 $ 16,376
Total operating expenses 18,048,567 5,074,777 7,829,051 5,946,503 4,979,806
Net (loss) (17,326,485) (4,755,555) (7,363,850) (5,689,346) (5,042,148)
Net (loss) per share, (basic and diluted) $ (0.11) $ (0.22) $ (0.17) $ (0.20)
Weighted average number of 42,399,799 33,611,545 33,605,996 25,720,000
common shares outstanding
(basic and diluted)
<CAPTION>
September 30, September 30,
Consolidated Balance Sheet Data: 2000 December 31, 1999 1999 December 31, 1998
<S> <C> <C> <C> <C>
Working capital (deficit) $ (5,426,239) $ (2,498,097) $ (5,184,832) $ (3,588,380)
Total assets 38,228,948 39,245,995 39,104,403 37,936,227
Notes payable 4,800,000 2,550,000 4,811,167 3,605,390
Total liabilities 6,190,037 4,118,442 6,352,886 4,810,551
Minority interest -- 228,826 379,164 555,417
Accumulated deficit (17,326,485) (12,570,929) (10,896,425) (5,207,079)
Shareholders' equity 32,038,911 34,898,727 32,372,353 32,570,259
<CAPTION>
May 23, 1997
(inception)
through
December 31,
1997
<S> <C>
Consolidated Statements of Operation Data:
(in thousands, except per share data)
Operating revenues $ --
Total operating expenses 164,931
Net (loss) (164,931)
Net (loss) per share, (basic and diluted) $ (0.01)
Weighted average number of 18,931,982
common shares outstanding
(basic and diluted)
<CAPTION>
December 31,
Consolidated Balance Sheet Data: 1997
<S> <C>
Working capital (deficit) $ (10,931)
Total assets 9,015
Notes payable --
Total liabilities 19,946
Minority interest --
Accumulated deficit (164,931)
Shareholders' equity (10,931)
</TABLE>
(1) In April 1998, we acquired all of the outstanding stock of Marine Shuttle
Operations AS ("MSOAS"). In December 1998, we acquired approximately 68% of the
outstanding stock of Offshore Shuttle AS ("OSAS"). OSAS merged with and into
MSOAS in September 1999, and we acquired the remaining minority interest in
MSOAS in April and June 2000.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
You should read the following discussion and analysis in conjunction with
the financial statements and notes thereto contained elsewhere in this
prospectus. The following information contains forward-looking statements which
are subject to risks and uncertainties. If one or more of these risks and
uncertainties materialize, actual results may differ from those expressed or
implied by the forward-looking statements.
General
Through our wholly-owned Norwegian subsidiary, Marine Shuttle Operations
AS ("MSOAS"), we are seeking to become a leading player in the market for
decommissioning, installing, and transporting offshore oil and gas structures.
We have designed a vessel, the "Offshore Shuttle," which we believe 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. We anticipate that construction of the first Offshore Shuttle
will be completed by the first quarter of 2003, at the earliest. Construction of
a second Offshore Shuttle is intended to commence after completion and
successful testing of the first Offshore Shuttle, and construction of a third
Offshore Shuttle is intended to commence one year after the second is ordered.
We were incorporated in Nevada in May 1997 under the name Geoteck
International, Inc. On May 29, 1998, we changed our name to Marine Shuttle
Operations Inc. In 1998, we acquired all of the outstanding stock of MSOAS in
exchange for 7,600,000 shares of common stock. We also acquired 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. This transaction was accounted for using the
purchase method.
To benefit from a more rational and cost efficient use of the resources in
MSOAS and OSAS, the Board of Directors of the two companies proposed to merge
the two companies. The proposed merger plan was approved by the shareholders of
both companies on May 30, 1999, and the merger became effective in September
1999. The OSAS shareholders received 1.5 MSOAS shares for each of their OSAS
shares. As a result of the merger, we owned approximately 81% of MSOAS, and
MSOAS acquired the licensing and marketing rights to the Offshore Shuttle. The
merger was accounted for in a manner similar to the pooling of interests method.
In April 2000, we acquired an additional 8.4% of the outstanding shares of
MSOAS from two individuals in exchange for an aggregate of 1,030,002 shares of
common stock. In June 2000, we acquired an additional 9.7% of the outstanding
shares of MSOAS in exchange for an aggregate of 1,186,283 shares of our common
stock, and we acquired the remaining 1% of the MSOAS shares
20
<PAGE>
for cash. These acquisitions were accounted for as purchases. We now own all of
the outstanding shares of MSOAS.
Results of Operations
We are in the development stage and have generated revenues to date only
from study work. We acquired MSOAS and OSAS in April 1998 and December 1998,
respectively. Our main operations were conducted through MSOAS and OSAS until
the two companies merged in September 1999. The comparisons of our 1998 and 1999
operating results will be affected by these 1998 acquisitions since the results
of operations of MSOAS and OSAS have been included in our consolidated results
of operations only since their respective acquisition dates.
Nine months ended September 30, 2000 and 1999
Operating revenues. Operating revenues for the nine month period ended
September 30, 2000 were $108,536, an increase of $48,732 compared to $59,804 for
the same period in 1999. The revenues were generated from sporadic study work
reimbursed by clients. The Company is still in the development stage and does
not expect to generate revenues from operation until 2003 at the earliest,
except from some sporadic study work.
Personnel costs. Personnel costs include costs for both employees and
hired personnel and were $1,029,313 for the nine month period ended September
30, 2000, a decrease of $246,165 from the personnel costs of $1,275,478 for the
nine month period ended September 30, 1999. The net decrease in costs was mainly
due to cost savings achieved as a result of the merger between MSOAS and OSAS in
September 1999.
Legal, audit and advisory services. Legal, audit and advisory services for
the nine month period ended September 30, 2000 were approximately $289,818, a
decrease of $78,364 compared to legal, audit and advisory services of $368,182
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 nine month period ended September 30, 2000 were $547,879, a decrease of
$219,129 from the general and administrative expenses of $767,008 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 nine month period ended September
30, 2000 were $142,176, a decrease of $109,337 from the marketing expenses of
$251,513 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 nine month
period ended September 30, 2000 were $29,197, a decrease of $249,302 compared to
$278,499 for same period in 1999. The decrease was due to less technical
development work performed in the current period.
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<PAGE>
Interest income. The interest income for the nine months period ended
September 30, 2000 was $9,253, a decrease of $31,737 from the interest income of
$40,990 for same period in 1999. The decrease was a result of less interest
bearing cash and cash equivalents during the nine months period in 2000.
Currency exchange loss/gain. For the nine months period ended September
30, 2000 the Company had a currency exchange gain of $14,655, compared to a loss
of $ 28,685 for same period in 1999. The difference of $43,340 was a result of
weakening of the Norwegian Kroner against the US Dollar during the period in
2000.
Minority interest. Through September 14, 1999 the minority interest was
approximately 32% of OSAS. After the merger between OSAS and MSOAS in September
1999, the minority interest became approximately 19% of the merged company. This
resulted in a larger minority interest loss, which has been offset by the
elimination of the minority interest as a result of the Company's acquisition of
the remaining minority interest in April and June 2000.
Year Ended December 31, 1999 Compared with Year Ended December 31, 1998
We incurred net losses of $7,363,850 for 1999 compared with $5,042,148 for
1998. We did not have any revenues in 1997 and total operating expenses in 1997
were $164,931.
Operating Revenues. Operating revenues for 1999 were $105,136 compared to
$16,376 in 1998. The increase was due to increased study work performed for
clients.
Personnel costs. Personnel costs includes costs for both employees and
contract personnel and were $1,277,938 for 1999, an increase of $1,092,444 over
personnel costs of $185,494 in 1998. The increase in costs was a result of
increased activities and increased personnel in MSOAS.
Legal, audit and advisory services. Legal, audit and advisory services for
the year ended December 31, 1999 were approximately $472,958, a decrease of
$646,742 compared to legal, audit and advisory services of $1,119,700 in 1998.
The decrease from 1998 to 1999 was mainly due to lower consulting fees as work
was shifted from consultants to Company personnel.
Cost of cancelled financing. The cost of cancelled financing in 1998 was
$606,721, which was incurred in connection with a planned public offering in
1998. The public offering was cancelled and the costs were expensed.
General and administrative expenses. General and administrative expenses
for 1999 were $1,270,413, an increase of $867,667 over the general and
administrative expenses of $402,745 in 1998. The increase was due to increased
activities in MSOAS and MSOAS moving into new offices during 1999.
Marketing. Marketing expenses for 1999 were $300,157, a decrease of
$352,333 from $652,490 for 1998. The decrease was a result of purchasing fewer
marketing materials and services in
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<PAGE>
1999, and higher costs in 1998 related to participation in the Offshore Northern
Sea Exhibition in Norway.
Technical Development. Technical development costs for 1999 were $554,206
compared to no cost in 1998. The majority of these expenses were incurred by
OSAS, which majority-interest was acquired in December 1998.
Amortization of goodwill and intangibles. Amortization of goodwill and
intangibles for 1999 was $3,885,167, an increase of $2,002,963 over the
amortization of goodwill and intangibles of $1,882,204 in 1998. This increase is
due to amortization of goodwill and intangibles acquired in connection with the
acquisition of approximately 68% of the OSAS common stock in 1998. Goodwill of
$32,929,340 and other purchased intangibles of $3,591,615 were acquired in the
acquisition and all being amortized over 10 and 5 to 10 years, respectively.
Interest expense. Interest expense for 1999 was $23,389, which was $69,880
below interest expenses of $93,268 in 1998. The reason for the decrease in
interest expense is that in 1999, a larger portion of the borrowings were
allocated to the construction of the Offshore Shuttle and therefore were
capitalized rather then expensed.
Results of operations for 1999 and 1998 are not indicative of the results
expected in future periods due to increased costs to be incurred in developing,
financing and constructing the first Offshore Shuttle, with no anticipated
revenues from operation of the first Offshore Shuttle until 2003, at the
earliest.
Goodwill and Other Intangibles
Goodwill and other purchased intangibles arising from the acquisitions of
MSOAS and OSAS are being amortized over periods ranging from 5 to 10 years,
their estimated useful lives. Goodwill is being amortized over 10 years which is
the expected future benefit period over which cash flows will be generated to
recover the goodwill. Since we are a development stage company, there can be no
assurance that such cash flows will be generated. As of September 30, 2000,
goodwill represented 70% of total assets and 83.6% of total shareholders'
equity.
Liquidity and Capital Resources
Our ability to continue as a going concern is dependent on our ability to
obtain significant additional financing. As of September 30, 2000, we had cash
and cash equivalents of $288,572, an accumulated deficit of $17,326,485,
shareholders' equity of $32,038,911, and a working capital deficit of
$5,426,239. We are in the development stage with no operating assets presently
generating cash to fund our operating and capital requirements. Accordingly, the
independent auditor's report on our financial statements has an explanatory
paragraph addressing our ability to continue as a going concern.
On March 1, 1999, we entered into a loan agreement with ValorInvest, Ltd,
an investment
23
<PAGE>
company, pursuant to which ValorInvest agreed to lend us 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 we raise, 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 the excess over $2,000,000. As of September 30, 2000,
$2,550,000 had been advanced under the loan agreement.
In August 1999, we 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 us an aggregate of up to NOK
4,000,000 (approximately $467,000) to finance specific tasks within the Offshore
Shuttle project. As of September 30, 2000, NOK 2,358,617 ($257,595) had been
advanced under the loan agreement. The principal is repayable over a five-year
period commencing two years after disbursement, in semi-annual installments,
each in the amount of NOK 400,000.
In February 2000, we entered into a loan agreement with MFC Merchant Bank
S.A 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
September 30, 2000, $900,000 was outstanding under this agreement.
In April 2000 we consummated a private placement of 450,000 shares of
common stock for gross proceeds of $315,000, and in June 2000 we consummated a
private placement of 571,429 shares of common stock for gross proceeds of
$400,000.
In July 2000, we entered into a loan agreement with Mr. Holger Timm
pursuant to which Mr. Timm agreed to lend us 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 Mr. Timm into shares of our 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.
We are seeking to obtain additional capital. In October 1998, we entered
into an engagement letter with MFC Merchant Bank S.A. pursuant to which MFC
shall act, on a best-efforts basis, as our agent 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 we raise 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
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through December 1, 2000 or until an equity raise is completed, 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.
In September 1999, the Board of Westdeutsche Landesbank Girozentrale
(WestLB) of Dusseldorf, Germany issued its conditional approval to underwrite a
U.S. $157.5 million loan facility for the first Offshore Shuttle. Based on such
approval, we have 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, our obtaining European
government guarantees to secure a significant portion of the loan facility, and
our completing of an additional equity financing. We are seeking to fulfill
these conditions.
In February 2000, we 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 Memorandum of
Understanding provides for financial support from the various governmental
entities in the form of equity, debt and government guarantees, 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 us, the arrangement of sufficient
commercial debt financing with a major bank, and the raising of additional
equity capital. In seeking to satisfy these conditions, it has become evident to
us that there is little likelihood of receiving a competitive construction bid
from a capable shipyard. As a result, we have decided to discontinue our efforts
regarding the Italian financing, focusing instead on satisfying the conditions
to the West LB financing.
We cannot assure you that the conditions to the WestLB financing will be
satisfied or, if satisfied, that the WestLB financing will be consummated on
reasonable terms or at all. If it is not completed, we may be required to
significantly curtail or cease our proposed activities. Although we believe that
the proceeds from the WestLB financing, if completed, will enable us to
construct the first Offshore Shuttle, there can be no assurance in that regard.
Moreover, even if the WestLB financing is consummated, our future capital
requirements could vary significantly and will depend on certain factors, many
of which are not within our 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 we are successful in completing the first Offshore Shuttle, we believe
we will be able to fund the construction of additional Offshore Shuttles from
our future operating cash flows and/or short or medium term debt financing. We
cannot assure you, however, that our belief will prove to be accurate.
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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 our financial statements has not been determined, but we currently
do not use derivatives to manage our exposure to foreign exchange and interest
rate risk. We will adopt SFAS 133 as of January 1, 2001.
Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Risk. Our exposure to market risk for changes in interest
rates relates primarily to our notes payable and long-term debt. We believe our
exposure to interest rate risk is not material since our 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 we are successful in obtaining debt
financing to finance the building of the first Offshore Shuttle. In such an
event, we will assess the extent of our interest rate risk and may enter into
hedging transactions to reduce our exposure and to ensure our ability to service
our debt.
Foreign Exchange Risk. Foreign exchange risk may arise if we are required
to use different currencies for various aspects of our operations. Although the
principal currency used in the offshore decommissioning industry is 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. We currently have no foreign
exchange contracts.
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BUSINESS
General
Through our wholly-owned Norwegian subsidiary, Marine Shuttle Operations
AS, we are seeking to become a leading player in the market for decommissioning,
installing, and transporting offshore oil and gas structures.
Offshore oil and gas structures typically are decommissioned or installed
using crane ships and other support vessels. Most structures, however, are too
large to be lifted by existing cranes. As a result, decommissioning is
accomplished by cutting the particular structure into many pieces before being
lifted. For installation, the structure must be fabricated in numerous pieces
and assembled at the installation site. In both cases, the procedure is
difficult, dangerous, expensive, and time consuming.
We have designed a vessel, the "Offshore Shuttle," which we believe will
be capable of lifting and carrying most of the largest installations. We
anticipate that construction of the first Offshore Shuttle will be completed by
the first quarter of 2003, at the earliest. Construction of a second Offshore
Shuttle is intended to commence after completion and successful testing of the
first Offshore Shuttle, and construction of a third Offshore Shuttle is intended
to commence one year after the second is ordered.
We have formed strategic alliances with Thyssen Krupp Stahlunion GmbH, RC
Consultants AS, and Schuller Industrieentsorgung AG to test, develop,
manufacture, and commercialize the Offshore Shuttle concept. See "Strategic
Alliances."
The Market
There are now more than 6,500 offshore oil and gas installations worldwide
located on the continental shelf of approximately 53 countries. Of these, there
are approximately 4,000 structures in the Gulf of Mexico, 950 in Asia, 700 in
the Middle East, 400 in Europe, and the balance are scattered throughout the
rest of the world. Of the European total, more than 300 are in the North Sea and
the North East Atlantic.
Many different types of installations exist, each one being uniquely
designed based on the characteristics of the installation site, including the
water depth, the seabed characteristics, and the reservoir, wave, and current
conditions. Of the current installed base of structures, more than 5,800 are
fixed steel installations. Although most fixed steel installations are situated
in shallow waters (i.e., less than 75 meters), there are three hundred to four
hundred fixed steel installations situated in intermediate water depths (i.e.,
75 to 200 meters). These deeper water structures tend to be much larger than
their shallow water counterparts.
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Fixed steel installations are comprised of two elements: the topside and
the substructure or "jacket." The topside is the above-water portion of the
installation that contains the processing, drilling, and accommodation
facilities. Topsides vary enormously in size and function. Weights range from a
few hundred tons for small topsides in the Gulf of Mexico to over 50,000 tons
for large topsides in the North Sea. Topsides may be built as separate modules,
as an integrated unit, or as a combination of the two (i.e., an integrated deck
containing process facilities topped by individual modules). The choice of
system depends on the facilities required and the method by which the topside is
installed. Topsides typically are transported offshore either on barges or on
the deck of the crane vessels.
A jacket is a lattice-work of steel tubes anchored to the seabed by piles
driven up to 100 meters into the soil. They can weigh over 30,000 tons, have a
wide base (up to 120 meters across), and taper towards the top. The vast
majority of jackets are transported to their offshore site by barge. Small
jackets can be lifted off the barge and placed in the water vertically. Large
jackets, whether barge launched or crane lifted, enter the water horizontally
and are then ballasted by controlled flooding to the vertical position before
being lowered into place. Once the jacket is piled into the seabed, the topside
generally is installed by crane.
In addition to fixed steel structures, the current installed base of
structures includes:
o concrete gravity base structures (typically found in shallow and
intermediate water depths);
o various types of floating structures such as tension leg platforms,
deep draft caisson vessels, compliant towers, spars, and floating
production, storage and offloading vessels (typically situated in
deep waters --i.e., more than 200 meters), and
o subsea structures which include the equipment needed to develop
satellite fields and the seabed equipment associated with floating
installations.
We believe that over the next 20 years, approximately $35 billion will be
spent on the installation of new structures. We also believe that over the next
30 years, most of the installed base of structures will have to be
decommissioned at an estimated cost of $20 billion to $40 billion. It is
anticipated that significant portion of this amount will be spent on the three
hundred to four hundred large, steel, intermediate water depth installations
that are substantially more difficult to remove using existing technology than
their shallow water counterparts. This is most evident in the North Sea and the
North East Atlantic where, due to the harsh environment and the significant
number of large, intermediate depth steel structures, the anticipated
decommissioning costs are considerably greater than in the rest of the world.
Indeed, it is estimated that approximately fifty to sixty percent of worldwide
decommissioning costs will be spent in the North Sea and the North East
Atlantic, even though such regions account for just five percent of the total
number of installations. Our initial decommissioning efforts will focus on these
large, intermediate depth steel structures.
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Decommissioning
Decommissioning is the multi-stage process of removing an offshore oil or
gas installation. The process includes planning and engineering the removal of
the installation, obtaining necessary regulatory approvals, removing the
installation, sealing the wells, and transporting the installation for re-use,
recycling, or disposal. Removal costs can range from $2 million for smaller
platforms in shallow waters to more than $140 million for larger ones in deeper
waters.
A number of different methods may be utilized to remove an offshore
installation. Determining which method is most appropriate for a particular
installation is a function of numerous factors, including:
o the installation's size, weight, construction type, and distance
from shore;
o the water depth, seabed characteristics, reservoir, wave, and
current conditions of the site of installation; and
o safety considerations.
The typical method of removal involves cutting the particular structure
into many pieces. Crane ships and other support vessels are used to lift the
pieces onto barges or, in some instances, onto the deck of the crane ships
themselves. The cutting is necessitated by the limited lifting capabilities of
existing crane ships. Complications often arise, however, in determining the
maximum lift capability during decommissioning operations. The largest cranes
theoretically are capable of lifting objects up to 14,000 tons. During an actual
lift, however, various factors will significantly reduce the theoretical lift
capability including:
o vertical and horizontal clearance;
o the required outreach and/or upreach of the crane boom;
o anchoring requirements;
o proximity to other facilities, subsea wellheads, and pipelines;
o location characteristics, and
o the size and structural integrity of the pieces to be lifted.
This is best illustrated by the removal of the Odin jacket in Norway. Two
cranes, with a combined maximum theoretical lift capacity of 14,000 tons, were
engaged to remove a jacket that weighed approximately 10,000 tons. Despite the
significant disparity between the cranes' maximum theoretical lift capacity and
the weight of the jacket, the jacket had to be cut into four sections, each
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of which was lifted separately.
Several companies have offered and/or have proposed solutions for lifting
large platforms in one piece. These involve the use of multiple barges,
twin-hull tankers, split-hull tankers, and U-shaped semi-submersibles. One such
solution, known as Versatruss, is comprised of two barges and an array of booms,
rigging, and winches. The components are assembled together to produce what is
essentially a giant scissors jack. The barges are symmetrically placed around
the platform, and the booms from each barge are placed in receptacles that have
been welded to the platform deck. The barges are pulled together sideways using
winches. This causes the angle of inclination of the booms to increase, forcing
the deck upwards. We believe that the utility of Versatruss and most of these
other alternative solutions will be limited to the lifting of topsides in calm
waters. Although some of such lifting systems may be capable of lifting jackets,
we believe that the vertical clearance limitations inherent in each of such
systems will inhibit their ability to lift the jackets onshore. Rather, we
believe that such systems only will be capable of towing jackets from one
installation site to another. We cannot assure you that our beliefs will prove
to be accurate. See "Risk Factors--We may face intense competition and our
technology may become obsolete."
Removal of a few of the larger, older jackets that are equipped with
flotation systems may be attempted by re-floating them. During installation, the
flotation systems were used to float the jackets while being towed to the
installation site. At the site, the flotation tanks were ballasted, foundation
piles were then added to fasten these structures to the seabed, and any
temporary buoyancy aids were removed. If the flotation tanks can be deballasted
and the foundation piles can be removed or equipped with temporary buoyancy
aids, then it might be possible to refloat the structure. Given the age of these
structures, however, the condition of the flotation systems is questionable.
Certain countries also permit the decommissioning of offshore oil and gas
structures by partially removing them or by toppling the structures and leaving
them on the seabed. Many countries, however, citing environmental and other
concerns, do not allow these forms of decommissioning in their territorial
waters. See "Regulations."
We believe that the Offshore Shuttle will represent a new, cost-effective
alternative for decommissioning offshore oil and gas platforms, particularly
large, intermediate depth structures.
Installation
Limited crane capacity also affects the topside installation market.
Topsides often are installed by transporting the topside to the site on a barge,
and using cranes to lift it from the barge onto the structure on which it is to
be installed. We believe that many of the topsides we anticipate being installed
over the next 20 years will be too large to be lifted by existing cranes,
precluding them from being assembled onshore and installed in one piece. Rather,
they will have to be fabricated in numerous pieces and assembled at the
installation site. This is not ideal since offshore platform assembly can cost
up to ten times more than onshore assembly. As an alternative, topside
installation can be accomplished by transporting the topside to the site using
two vessels aligned in a
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catamaran-type fashion, floating over the structure on which the topside is to
be installed, and lowering the topside onto the structure by flooding the tanks
in the transport vessels. The weight of the topsides that can be installed using
this "float over" method is limited, however, because of the pitching and
heaving of the transport vessels during transport and installation.
As offshore exploration increases with increased demand for oil and gas,
the cost savings from a "single lift" solution becomes even more prominent. We
believe the Offshore Shuttle will provide such a solution.
The Offshore Shuttle
Operation. The Offshore Shuttle's design is based on the Archimedes
principle: putting water into a floating object will cause it to submerge, and
letting water out will cause it to rise. In essence, the Offshore Shuttle is
designed to be a large buoyancy tank that can be submerged for placement under
or adjacent to an offshore installation and then elevated to lift the
installation.
We envision a typical platform removal operation commencing with the
preparation of the Offshore Shuttle at its home base and the preparation of the
platform for removal. Pre-removal preparations will include:
o conducting a detailed analysis and preparing a comprehensive method
statement of all of the tasks to be performed in the removal
operation,
o adjusting the Offshore Shuttle's lifting frame for the installation
to be removed, and
o equipping the topside support legs or the underside of the topside
deck with specially prepared docking connections.
Upon completion of the pre-removal preparations, the Offshore Shuttle will
be towed--it is not a self-propelled vessel--to the offshore site by several
vessels, one of which will serve as the control center for the removal
operation.
The topside will be removed first. The Offshore Shuttle will be partially
submerged (i.e., ballasted) and guided into position under the topside by the
use of guidance tugs or mooring anchors. The tugs or anchors will keep the
Offshore Shuttle in position while the topside is cut from the jacket.
Alternatively, the Offshore Shuttle can be moved into position after cutting the
topside from the jacket. Once cut, the topside and the jacket will be
temporarily secured to each other by clamps that will be designed specifically
for the installation being removed. The Offshore Shuttle will be deballasted,
causing it to rise in the water until the lifting frame on the Offshore Shuttle
connects with the docking connections on the topside. The temporary clamps then
will be unfastened from the jacket. Once the topside is lifted, it can be
seafastened to the Offshore Shuttle for transport to another offshore site, or
to a land site for dismantling or refurbishment.
The Offshore Shuttle then will be towed to the offshore location to
perform the jacket
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removal. At the site, the Offshore Shuttle will be ballasted at one end so that
it is sitting vertically in the water. It will be maneuvered by tugs or mooring
anchors into position and connected with the jacket. The tugs or anchors will
keep the Offshore Shuttle in place while the connection to the jacket is made.
The top of the jacket will be connected by tension mechanisms to the top of the
Offshore Shuttle and the jacket legs will be cut at the seabed. Alternatively,
the Offshore Shuttle can be moved into position after cutting the jacket legs at
the seabed. The Offshore Shuttle will "scoop up" the jacket by deballasting into
its original horizontal position. The jacket will be seafastened to the Offshore
Shuttle and transported to another offshore site, or to a land site for
dismantling or refurbishment.
We believe the Offshore Shuttle will be able to remove 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 maximum weight of the
structures which can be handled is a matter of design, but we believe that a
19,000 ton Offshore Shuttle will be capable of lifting most of the large
topsides or platforms, up to approximately 22,000 tons, in one piece without the
use of large crane barges.
Once a structure is removed, we believe that the Offshore Shuttle will be
able to be used as a barge for transport. It is anticipated that the removed
structure will lie in project-specific cradles on the Offshore Shuttle to help
prevent damage to the object during transportation. This is particularly
important where reuse of the marine structure is of interest. In addition, we
believe that it may be possible to design the Offshore Shuttle with a cover at
one end so that by ballasting it 180 degrees into a vertical position, a very
large working deck would be created 50 to 60 meters above water level. If so,
the working deck could be positioned above structures (e.g., ships) or beneath
structures (e.g., bridges) for use as a platform from which equipment could be
operated.
The cost of constructing an Offshore Shuttle is estimated to be between
$100 million and $200 million, depending on size. Moreover, we anticipate that
approximately 20 people will be required for a typical Offshore Shuttle
decommissioning operation compared to the typical crane ship operation that
requires up to 200 people. Additional support vessels are needed for both crane
ship or Offshore Shuttle operations.
We believe that the Offshore Shuttle's principal advantage over existing
decommissioning methods will be its ability to remove and carry large structures
in one piece. By eliminating the need to cut installations into many smaller
units, offshore operation time, costs, and risks will be significantly reduced
and reuse of the installation will become a more viable alternative. We believe
the Offshore Shuttle's anticipated versatility will make it a unique alternative
for handling marine objects, both inshore and offshore.
Dimensions. Based on current designs, each Offshore Shuttle will consist
of six longitudinal tubes, four transverse tubes, and twelve vertical tubes.
Although the dimensions of each Offshore Shuttle will vary based on the average
size installation a particular Offshore Shuttle is designed to handle, it is
anticipated that each Offshore Shuttle will be 130 to 200 meters long, 70 to 95
meters wide, and 60 meters high. The diameter of each tube will be approximately
10 meters.
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Each tube will be ring-stiffened in order to resist the hydrostatic pressure
associated with installation or retrieval of marine structures. The longitudinal
tubes may be ballasted by letting water in or deballasted by pumping water out.
There may be a fixed, 4,000 ton ballast in one of the outer transverse
tubes to ensure sufficient stability. In addition, there will be separate
ballasting compartments at one end of the two outer lower longitudinal tubes.
These compartments will enable the Offshore Shuttle to maintain a horizontal
position when the center of gravity of the object being transported or unloaded
is close to the bottom of the Offshore Shuttle.
It is anticipated that the total weight of each Offshore Shuttle will
range from 8,000 tons to 20,000 tons, depending upon the task for which it is
designed. The main dimensions (as described above) may be subject to change
depending on our determination of the number and types of marine objects which
are to be installed or removed in the foreseeable future. It is our intention to
have each Offshore Shuttle built for a dedicated region.
Testing. We believe that the technical risks associated with the Offshore
Shuttle concept have been reduced by extensive model testing and rigorous
calculations.
o Using a 1:50 scale model of an Offshore Shuttle, motions in
different ballast conditions were tested.
o Ballasting/deballasting sequences were tested without any marine
object, with a 1:50 scale model of 7,000 ton jacket, and with a 1:50
scale model of an 8,000 ton topside.
o Hydrodynamics were tested by examining the motions of the Offshore
Shuttle (with and without a marine object) in different positions
and when subjected to wave forces, as well as its towing resistance
in calm water and storm.
In addition, based on engineering documentation, calculations, and model
testing, Det Norske Veritas AS, an internationally-recognized society
responsible for classification and technical inspections of merchant vessels,
issued a Statement of Approval verifying the technical feasibility of the
Offshore Shuttle concept for the transport and removal of certain offshore
platform deck structures and jackets.
Despite the testing, documentation, and approval, there can be no
assurance that construction of the Offshore Shuttle will be successfully
completed or that, if constructed, the Offshore Shuttle will function properly,
will be operationally safe and environmentally friendly, or will enable us to
provide decommissioning, installation, and transportation services in an
effective manner or at all.
Business Strategy
We are in the process of evaluating bids received from a number of
construction yards which we believe have the capacity and capability to build an
Offshore Shuttle. Construction of the first
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Offshore Shuttle is intended to start during the second half of 2001. We
anticipate that the construction of the first Offshore Shuttle will be completed
by the end of 2002, at the earliest. Construction of a second Offshore Shuttle
is intended to commence after completion and successful testing of the first
Offshore Shuttle, and construction of a third Offshore Shuttle is intended to
commence one year after the second is ordered.
Subject to market demand, performance results, and other factors, we
anticipate that the first Offshore Shuttle will conduct two commercial
operations in its first year in service, three operations in its second year,
four operations in its third year, and five operations in each year thereafter.
We anticipate that the second and third Offshore Shuttles will perform two
operations in their first year of service, four in their second year, and five
in each year thereafter. In making the foregoing forecasts, we have assumed that
each commercial operation, including all pre-engineering work, will take up to
one year to complete, with the offshore portion calculated to be four weeks on
average.
We intend to focus our initial efforts on installing jackets in the Gulf
of Mexico and off the cost of West Africa and Brazil, and on decommissioning
large, intermediate depth structures in the North Sea, the North East Atlantic,
and other regions where we anticipate the advantages of using the Offshore
Shuttle will be most prominent. We ultimately intend to provide a full range of
services, including decommissioning, installing, transporting, and
recycling/disposing of various types of structures.
Offshore decommissioning activity in the North Sea and the North East
Atlantic is highly seasonal, principally as a result of weather conditions.
Historically, the greatest demand for offshore decommissioning services in such
regions has been during the period from May through September. We may seek to
partially offset the anticipated seasonality of our proposed operations by
pursuing other potential opportunities such as leasing the Offshore Shuttle to
third parties for bridge building, dry docking ships and floating platforms, and
other uses. We cannot assure you that such other opportunities, if successful,
will result in the anticipated offset of the seasonality of our proposed
operations.
Strategic Alliances
Our business strategy is dependent upon forming strategic alliances and
relationships with joint venture partners, contract manufacturers, or other
third parties, and upon the subsequent success of these parties in performing
their responsibilities. In this regard, we have formed strategic alliances with
Thyssen Krupp Stahlunion GmbH, RC Consultants AS, and Schuller
Industrieentsorgung AG.
o Thyssen Krupp Stahlunion GmbH. Thyssen Krupp Stahlunion GmbH, a
subsidiary of Thyssen Krupp AG, will assist us in our marketing
efforts and will provide us with the material and equipment
procurement services necessary to build the Offshore Shuttle. Jurgen
Ternieden, a director of our company, is an officer and the head of
the Pipes, Offshore, Special Products Department of TKSU.
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o RC Consultants AS. RC Consultants AS, a Norwegian engineering
company with more than 400 skilled offshore engineers, will assist
in our engineering and operational activities.
o Schuller Industrieentsorgung AG. Schuller Industrieentsorgung AG, a
German service company, will provide us with expertise regarding
waste management, onshore dismantling, and oil pollution prevention
and cleanup. Franz Eder, our President and Chairman of the Board,
and Dr. Hubert Besner, a director of our company, are members of the
Supervisory Board of Schuller. Mr. Eder also is a shareholder of
Schuller.
In addition, our proposed offshore activities may require the use of large
tug boats, unloading docks, subsea specialists, marine operators, diving support
vessels, and various safety and supply boats. We may seek to form strategic
alliances and relationships with third parties who provide these and other
services.
We believe that the use of these outside parties will help minimize our
fixed costs and increase our flexibility by gaining access to qualified
personnel when needed. We cannot assure you that such arrangements will be
successful. If any of these arrangements are cancelled and/or are unsuccessful,
and if we are unable to secure new alliances in their place, there would be a
material adverse effect on us.
Proprietary Protection
We have six Norwegian patent applications pending with respect to various
aspects of the Offshore Shuttle design and operation, and numerous patent
applications are pending in Norway, the United States, and other countries. In
addition, we rely on unpatented proprietary know-how and trade secrets, and
employs various methods including confidentiality agreements with employees,
consultants and marketing partners to protect our trade secrets and know-how.
Competition
We will face competition from companies which provide decommissioning,
installation, or transport services using cranes and barges. In addition,
several companies have offered or have proposed solutions for lifting large
platforms in one piece. These involve the use of multiple barges, twin-hull
tankers, split-hull tankers, and U-shaped semi-submersibles. Competition may
also arise from vessels, processes, and/or technologies currently in
development, or developed in the future, by other companies.
We believe that our ability to compete will depend on many factors, both
within and beyond our control, including:
o the reliability and cost-effectiveness of the Offshore Shuttle,
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o the effectiveness of our sales and marketing efforts,
o the quality of our strategic partners, and
o the timing and market acceptance of new or improved vessels,
processes, or technologies developed by us or others.
Regulations
Decommissioning of facilities is governed by national legislation within
the framework of international and regional regulations. Determining the
applicable regulatory framework will depend, in part, on:
o how the Offshore Shuttles are classified--e.g., as "ships,"
"vessels," "installations," etc.,
o whether, and if so, where the Offshore Shuttles are registered or
documented, and
o where our intended operations are performed.
Although details differ, most oil and gas producing countries have adopted
a similar approach to decommissioning. All feasible options for removal and
disposal of offshore installations are assessed on a case-by-case basis. The
offshore platform operator is required to prepare a decommissioning and
abandonment plan which identifies the decommissioning and abandonment options,
evaluates the technical feasibility of each option, assesses impacts on the
environment and on society, and minimizes risks to human health and safety. The
offshore platform operator then recommends to the responsible ministry the
option which best balances the factors involved.
In 1989, the International Maritime Organization, a technical arm of the
United Nations dealing with safety of navigation, issued guidelines dealing with
the removal of offshore platforms. Recognizing the magnitude and complexity of
removal operations, the IMO Guidelines took into account not only the size of
the platforms but also the capabilities of the removal vessels. The IMO
Guidelines provide that installations weighing less than 4,000 tons that are in
less than 75 meters of water must be completely removed, while bigger and deeper
structures need be only partially removed provided the remains are covered by an
unobstructed water column at least 55 meters deep. For structures emplaced on
the seabed on or after January 1, 1998, the water depth threshold increases from
75 meters to 100 meters. In addition, all platforms installed on or after
January 1, 1998 must be designed so that removal is feasible.
In July, 1998, the contracting parties to the Convention for the
Protection of the Marine Environment of the North East Atlantic (also known as
the "OSPAR Convention"), which include the United Kingdom, Ireland, France,
Spain, Portugal, Belgium, Germany, Denmark, Norway,
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Sweden, Finland, Luxembourg, the Netherlands, Iceland, the European Union, and
Switzerland, agreed to restrictions more stringent than those set forth in the
IMO Guidelines. Based on the premise that reuse, recycling, or onshore disposal
generally will be the preferred options for decommissioning offshore platforms,
the OSPAR Convention provides for a ban, effective February, 1999, on the
dumping and the leaving (wholly or partially) in place of disused offshore
installations located in the North Sea, the North East Atlantic, and certain
other regions. Permits may be issued for alternative means of disposal if
significant reasons can be shown as to why such alternative means are preferable
to reuse, recycling, or onshore disposal.
Employees
Marine Shuttle Operations Inc. employs three people, all of whom are
executive officers. Marine Shuttle Operations AS employs five people. Our
employees are not unionized or employed pursuant to any collective bargaining
agreement or any similar agreement. We believe our relationship with our
employees is satisfactory.
Technical Development
Technical development expenses for the year ended December 31, 1999 were
$554,206. We did not incur technical development costs in 1998 or 1997. We
intend to continue to devote resources and capital to technical development so
it can develop and commercialize the Offshore Shuttle.
Properties
MSOAS leases office space in Sandnes, Norway pursuant to a lease agreement
with RC Group ASA. The lease agreement provides for an average annual rent of
NOK 435,852 (approximately $47,600), and expires in 2003. Sverre Hanssen, the
Chairman of Marine Shuttle Operations AS, is the President and the principal
shareholder of RC Group ASA.
Legal Proceedings
We currently are not a party to any material legal proceeding.
37
<PAGE>
MANAGEMENT
The following table sets forth the names, ages and positions of the
executive officers and directors of the Company:
Name Age Position with Company
---- --- ---------------------
Franz Eder................. 40 President and Chairman of the Board
Iqbal Akram................ 56 Vice President, CFO, Treasurer, and a Director
Stephen Adshead............ 51 Vice President, Secretary, and a Director
Jurgen Ternieden(1)........ 58 Director
Hubert Besner(1)........... 37 Director
--------------------------------------
(1) Member of the Audit Committee
Franz Eder has been our President and Chairman of the Board since April
14, 1998, and a director of MSOAS since December, 1997. He has been Chairman of
the Supervisory Board of Schuller Industrieentsorgung AG since May, 1998, and
served as the general manager of Schuller from July, 1997 through May, 1998.
From 1992 to 1997, Mr. Eder was General Manager at CETEM Industrieentsorgung und
Wiederverwertung GmbH, a German company engaged in waste management. From 1990
to 1991, he was a consultant to several companies, and from 1989 to 1990, he was
the head of the trade finance department at AMRO Handelsbank AG in Munich,
Germany. Mr. Eder received a Masters of Business degree from Business University
of Vienna in 1985.
Iqbal Akram has been a director of our company since April 14, 1998. He
has been our Vice President since February 19, 1998 and served as a consultant
to us for a period of approximately two weeks prior thereto. On July 31, 2000,
Mr. Akram became our Chief Financial Officer and Treasurer. Since 1992, he has
been the managing director and a partner in Peregrine Consultants, S.A., a
Luxembourg management consulting firm. He also has been the sole principal of
Peregrine Consultants, United Kingdom since 1998. From February 1996 through
March 1998, he served as a Group Finance and Corporate Director of the House of
Habib, a Pakistani industrial, manufacturing, and financial services group. In
1995, he served as Group Financial Advisor to the Southern Electric Group in the
implementation of a power project in Pakistan. He is currently a Fellow of the
Institute of Directors, the Institute of Cost and Management Accountants, and
the Institutes of Chartered Accountants in England, Canada, and Pakistan. He
also is a director of Lombard Financial Investments S.A., an investment company
located in Luxembourg. He received a Bachelor of Science Honour degree from the
London School of Economics and Political Science in 1965.
Stephen Adshead has been Vice President and a director of our company
since February 8, 2000, has been Secretary of our Company since July 31, 2000,
and has been Managing Director and
38
<PAGE>
a Member of the Board of Marine Shuttle Operations AS since December, 1997.
Since February, 1998, he has been an employee and a director of Mancorp AS, a
consulting company. He has 26 years of experience in the oil, gas and
shipbuilding industry managing large projects. From 1991 to 1998, Mr. Adshead
worked for Phillips Petroleum Company Norway, where he was a member of the
project management team assigned to the Ekofisk II project from 1994 to 1998.
Mr. Adshead received his Honours Degree in Engineering from Edinburgh University
in 1972.
Jurgen Ternieden has been a director of our company since April 14, 1998,
Chairman of the Board of Offshore Shuttle AS from March 1998 until its merger
with Marine Shuttle Operations AS in September 1999, and an officer and the head
of the Pipes, Offshore, Special Products Department of Thyssen Krupp Stahlunion
GmbH since 1991. From 1981 to 1990, he was a senior sales manager and head of
the Pipes Department at TKSU. Mr. Ternieden received his intermediate high
school certificate from Realschule Muelheim in 1959.
Hubert Besner has been a director of our company since May 6, 1998. Since
1994, he has been a partner in the law firm of Besner Kreifels Weber, Munich,
Germany. From 1992 to 1994, he was the head of the legal department of Schneider
AG, a German real estate development company. He currently is the head of the
Supervisory Boards of Cybernet Internet-Dienstleistungen AG and PIPECAD
Integrierte Softwaresysteme AG, a director of Cybernet Internet Services
International, Inc., and a member of the Supervisory Boards of Schuller, Vianet
Telekommunikations AG, Typhoon Networks AG, and IPO Beteiligungen. Dr. Besner
received his First State Exam in Law from Ludwig-Maximilians-Universitat in
1986, and his doctorate magna cum laude from Ludwig-Maximilians-Universitat in
1988.
No family relationship exists between any director or executive officer
and any other director or executive officer.
Employment Agreements
On June 1, 1998, we entered into a two-year employment agreement with
Franz Eder, our President and Chairman of the Board. On April 10, 2000, the
agreement was extended for an additional year. The agreement provides that Mr.
Eder shall devote only so much (but not less than 75%) of his professional and
business time, attention, and energies to his duties and responsibilities as is
reasonable to insure our proper conduct, and shall receive a salary of $100,000
per annum.
Effective April 14, 1998, we entered into a two-year employment agreement
with Iqbal Akram. On April 10, 2000, the agreement was extended to June 30,
2001. The agreement provides that Mr. Akram shall devote at least 50% of his
professional and business time to our company and shall receive a salary of
$60,000 per annum.
Effective February 8, 2000, we entered into a two-year loan out agreement
with Mancorp AS for the services of Stephen Adshead. The agreement provides that
Mancorp AS shall loan out the services of Mr. Adshead to us, and Mr. Adshead
shall devote at least 50% of his professional and business time to our company.
In consideration thereof, Mancorp AS shall receive an annual fee of
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<PAGE>
$60,000.
Executive Compensation
The following table sets forth information with respect to the
compensation paid by us to our Chief Executive Officer and to each of our other
executive officer who received salary and bonus payments in excess of $100,000
during the year ended December 31, 1999.
<TABLE>
<CAPTION>
Summary Compensation Table
Annual Compensation Long Term Compensation
Awards Payouts
Name and Restricted sLTIP
Principal Fiscal Salary Bonus Other Annual Stock Option/SAR Payouts All Other
Position Year ($) ($) Compensation ($) Award(s) ($) (#) ($) Compensation ($)
-------- ---- --- --- ---------------- ------------ ---------- ------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Franz Eder, 1999 100,000 -- -- -- -- -- --
Chairman of the
Board and 1998 58,333 -- -- -- -- -- --
President
1997 - -- -- -- -- -- --
</TABLE>
Stock Option Plan
We have a stock option plan for employees, officers, directors,
consultants, and advisors. Options granted under the stock option plan may be
either incentive stock option or non-qualified stock options. We have reserved
2,000,000 shares of common stock for issuance under the stock option plan.
Options granted under the stock option plan generally are not
transferable, and the exercise price of incentive stock options must be at least
equal to 100% (110% in the case of optionees who own more than 10% of the total
combined voting power of all classes of stock of the company) of the fair market
value of the common stock on the date of grant. As of September 30, 2000,
110,000 options were outstanding under the stock option plan.
The stock option plan is administered by our Board of Directors. Our Board
of Directors has the power to determine the terms of any options granted under
the plan, including the exercise price, the number of shares subject to each
option, and the exercisability of each option. The term of any option granted
under the stock option plan may not exceed ten years. The specific terms of each
option grant shall be approved by our Board of Directors.
Limitation of Liability; Indemnification
Our Articles of Incorporation:
o eliminate the personal liability of our directors to the fullest
extent permitted by the General Corporation Law of the State of
Nevada; and
40
<PAGE>
o provide that we shall indemnify, to the fullest extent permitted by
the General Corporation Law, any and all persons whom we shall have
the power to indemnify under the General Corporation Law from all
expenses, liabilities, or other matters referred to in or covered by
the General Corporation Law.
Our By-Laws provide that we shall have the power to indemnify any person
who was or is a party or is threatened to be made a party to any proceeding
(other than an action by us or in which we have the right to procure a judgment
in our favor) by reason of the fact that such person is or was our agent,
against expenses, judgments, fines, settlements, and other amounts actually and
reasonably incurred in connection with such proceeding to the fullest extent
permitted under the General Corporation Law.
41
<PAGE>
SELLING STOCKHOLDERS
The following table sets forth:
o the name of each selling stockholder;
o the number of shares of common stock beneficially owned by each
selling stockholder prior to the offering;
o the number of shares of common stock that may be offered by each
selling stockholder pursuant to this prospectus; and
o the number of shares of common stock beneficially owned by each
selling stockholder after completion of the offering, assuming all
of the shares covered by this prospectus are sold.
<TABLE>
<CAPTION>
Number of Securities Number of Securities Number of Securities Percentage
Beneficially Owned Offered for Selling Beneficially Owned Owned after
Name of Selling Stockholder Prior to Offering Stockholder's Account After Offering Offering
--------------------------- -------------------- --------------------- -------------------- -----------
<S> <C> <C> <C> <C>
Holger Timm(5) 714,000 714,000 0 0
Lothar Bart 142,857 142,857 0 0
K. Fondene AS 475,000 475,000 0 0
Erik Staumo 158,580 140,000 18,580 *
Niko Dimitrov 150,000 150,000 0 0
Hugo Skree 94,197 94,197 0 0
Sylke Timm(5) 571,429 571,429 0 0
Foss Finans AS 59,820 59,820 0 0
Jens Holtung 47,602 47,602 0 0
Maria Hareide 70,950 44,250 26,700 *
Kjell Markegard 40,750 33,750 7,000 *
Viken Skogeierforening 31,851 31,851 0 0
Johnco 56,500 31,500 25,000 *
Pal Are Saetre 25,320 25,320 0 0
BG Bank International 24,000 24,000 0 0
Bj0rn Stensrud 23,400 23,400 0 0
Tore Bjerkum 22,537 22,537 0 0
Wollebekk Eiendom AS 22,500 22,500 0 0
Horten Hus AS 21,750 21,750 0 0
Trallfa AS 18,750 18,750 0 0
Gunnar Greibrokk 49,000 18,000 31,000 *
Harrco A/S 17,700 17,700 0 0
Jan Qvale 17,400 17,400 0 0
</TABLE>
42
<PAGE>
<TABLE>
<CAPTION>
Number of Securities Number of Securities Number of Securities Percentage
Beneficially Owned Offered for Selling Beneficially Owned Owned after
Name of Selling Stockholder Prior to Offering Stockholder's Account After Offering Offering
--------------------------- -------------------- --------------------- -------------------- -----------
<S> <C> <C> <C> <C>
Intervest AS (5) 16,500 16,500 0 0
Nordlandsbanken ASA 17,250 17,250 0 0
Winfried Baldus 39,925 15,675 24,250 *
Ulf Kl0vstad 15,555 15,555 0 0
Kari Holtung 15,000 15,000 0 0
Cat Invest I 15,000 15,000 0 0
Violina AS 15,000 15,000 0 0
Sigfred Lyng0 101,150 15,000 86,150 *
Lars Irgens 15,000 15,000 0 0
Erik Gl0ersen(3) 15,000 15,000 0 0
Hex A/S 15,000 15,000 0 0
Jan Telle 15,000 15,000 0 0
Trade Invest AS 15,000 15,000 0 0
Norsk Fiskerin?ring 15,000 15,000 0 0
Ashild Reien 15,000 15,000 0 0
T0rres Espeland 14,580 14,580 0 0
Carl Peder Eiendom AS 12,000 12,000 0 0
Rolf Bjerke Paulssen 11,902 11,902 0 0
Kjell Herman Andersen 10,500 10,500 0 0
Asbj0rn Kvinlaug 9,720 9,720 0 0
Credit Suisse SA 9,000 9,000 0 0
Achilles Information Ltd 9,000 9,000 0 0
Birger Holten 79,900 9,000 70,900 *
Achilles Holdings AS 9,000 9,000 0 0
Sverre Olsen 9,000 9,000 0 0
Jon Unander 11,745 7,830 3,915 *
Aasens Trykkerier AS 83,100 7,500 75,600 *
Lars Christian Lindstad 7,500 7,500 0 0
Sindre Koppang 7,500 7,500 0 0
Preben Von Der Lippe 7,500 7,500 0 0
Gnisten Installasjon A/S 7,500 7,500 0 0
Knut Kolle 7,500 7,500 0 0
Gerhard N. Dahl A/S 7,500 7,500 0 0
</TABLE>
43
<PAGE>
<TABLE>
<CAPTION>
Number of Securities Number of Securities Number of Securities Percentage
Beneficially Owned Offered for Selling Beneficially Owned Owned after
Name of Selling Stockholder Prior to Offering Stockholder's Account After Offering Offering
--------------------------- -------------------- --------------------- -------------------- -----------
<S> <C> <C> <C> <C>
Aage Hvinden 7,500 7,500 0 0
Textura AS 7,500 7,500 0 0
Truls Gunnar Moen 7,500 7,500 0 0
Sesserud AS 7,500 7,500 0 0
Bj0rn R0stad 7,500 7,500 0 0
Scotia AS 6,090 6,090 0 0
Speedwash A/S 6,000 6,000 0 0
Gunnar J0rgensen 28,500 6,000 22,500 *
John M. Dahlen 6,000 6,000 0 0
Petter A. Dahl 6,000 6,000 0 0
Ole J0rgen Hallingstad 6,000 6,000 0 0
Fana AS 5,314 5,314 0 0
Sten Stensen 5,070 5,070 0 0
Thor Stang 176,510 5,010 171,500 *
Noreiendom AS 4,860 4,860 0 0
Kenneth Bentsen 4,500 4,500 0 0
Astri Elisabeth Wiik Lohne 4,500 4,500 0 0
Dathoen 4,500 4,500 0 0
Ole Martin Granli 4,500 4,500 0 0
Terje R0sj0 24,025 3,825 20,200 *
Jon Gulowsen 3,750 3,750 0 0
Stein Hjelseth 3,750 3,750 0 0
Thor Tharaldsen 3,750 3,750 0 0
Lisbeth Eriksrud 3,000 3,000 0 0
S0nnik J0rgensen 3,000 3,000 0 0
Knut S. Hauge 3,000 3,000 0 0
Hanne Elise Dahl 3,000 3,000 0 0
Sven Hesstvedt 3,000 3,000 0 0
Kari Sch0yen 3,000 3,000 0 0
Lillehaug Holding AS 3,000 3,000 0 0
Truls Harald Langeland 3,000 3,000 0 0
Aslaug Ness 3,000 3,000 0 0
Ingvill Ness 3,000 3,000 0 0
</TABLE>
44
<PAGE>
<TABLE>
<CAPTION>
Number of Securities Number of Securities Number of Securities Percentage
Beneficially Owned Offered for Selling Beneficially Owned Owned after
Name of Selling Stockholder Prior to Offering Stockholder's Account After Offering Offering
--------------------------- -------------------- --------------------- -------------------- -----------
<S> <C> <C> <C> <C>
Steinar Ness 3,000 3,000 0 0
Jac. Moe AS 3,000 3,000 0 0
Jon Fosse 12,990 2,940 10,050 *
P. Van Eig 2,898 2,898 0 0
Venture Invest AS 2,703 2,703 0 0
G.R. Fuglesang Shipping AS 2,700 2,700 0 0
Tom Dommisse 2,400 2,400 0 0
Union Bank of Norway Int. S.A. 2,400 2,400 0 0
Line Beston 2,400 2,400 0 0
Rolf Arentz-Hansen 2,250 2,250 0 0
Arve Kristoffersen 2,250 2,250 0 0
Tom S0rli 2,250 2,250 0 0
Frank G. Samuels 372,204 2,205 369,999 *
Jochen Schene 179,704 2,205 177,499 *
Juergen Ternieden(1) 334,704 2,205 332,499 *
Mahmoud Elborai 2,205 2,205 0 0
Stephen Adshead(1)(2) 2,205 2,205 0 0
P.M.De Pree-Domisse 2,148 2,148 0 0
Stale Thoen Von Krogh 1,950 1,950 0 0
Alexander Ness 1,710 1,710 0 0
Karin Anema 1,500 1,500 0 0
Cato Saelid 1,500 1,500 0 0
Rolf J0rgensen 1,500 1,500 0 0
Tor B0 1,500 1,500 0 0
Morten Buskop 1,500 1,500 0 0
Magnus Aass 1,500 1,500 0 0
John Magne Hommersand 1,500 1,500 0 0
Jan Krohn-Hansen 47,810 1,500 46,310 *
Lisa Marie Ness Klungland 1,500 1,500 0 0
Viljar Ness Klungland 1,500 1,500 0 0
Rolfe Andre Ness 1,500 1,500 0 0
Bent Konrad Moen 1,500 1,500 0 0
Ingeborg Reinhardt-Muller 1,125 1,125 0 0
</TABLE>
45
<PAGE>
<TABLE>
<CAPTION>
Number of Securities Number of Securities Number of Securities Percentage
Beneficially Owned Offered for Selling Beneficially Owned Owned after
Name of Selling Stockholder Prior to Offering Stockholder's Account After Offering Offering
--------------------------- -------------------- --------------------- -------------------- -----------
<S> <C> <C> <C> <C>
Arnulf Solberg 1,050 1,050 0 0
Kolbein J0rgensen 975 975 0 0
Johan Edvard Grimstad 900 900 0 0
Jens Solberg 900 900 0 0
Firma Thor Stang 772 772 0 0
Katinka Marie Foss 750 750 0 0
Kim Henrietta Foss 750 750 0 0
Sebastian Joop Foss 750 750 0 0
Henriette Helena Pijzel 750 750 0 0
Cita Van Tangeren 750 750 0 0
Geir Sevald Hornseth 750 750 0 0
Atle Bye 750 750 0 0
Egil Stokka(4) 750 750 0 0
Sigurd Stokka 750 750 0 0
Marie-Louis Gundlfinger 750 750 0 0
Gudrun J0rgensen 525 525 0 0
Tom Tidemann-Andersen 450 450 0 0
Jolanda Leeflang 429 429 0 0
0ivind Lorentzen Shipping AS 300 300 0 0
Norsk SMB Invest AS 305,075 75 305,000 0
Per Bull Haugsoen(6) 166,250 166,250 0 0
G. Foss Beheer(6) 453,377 453,377 0 0
ValorInvest. Ltd.(7) 410,375 410,375 0 0
</TABLE>
---------------------------------
* less than 1%
(1) Director
(2) Executive Officer
(3) Former Director of Offshore Shuttle AS
(4) Officer
(5) See "Certain Transactions"
(6) See "Risk Factors - We may lose the rights to the offshore shuttle
concept."
(7) See "Management's Discussion and Analysis of Financial Conditions and
Results of Operations - Liquidity and Capital Resources."
46
<PAGE>
PLAN OF DISTRIBUTION
Common Stock Offered By Us
We are offering up to an aggregate of 7,000,000 shares of our common
stock. We may sell the common stock from time to time
o through underwriters;
o through dealers;
o directly to one or more purchasers; or
o through agents.
A prospectus supplement will set forth the terms of the offering of the
common stock offered thereby, including the name or names of any underwriters,
dealers, purchasers, or agents, the purchase price of such common stock and the
proceeds to us from such sale, any underwriting discounts and other items
constituting underwriters' compensation, any public offering price, any
discounts or concessions allowed or reallowed or paid to dealers, and any
securities exchange on which such common stock may be listed.
If underwriters are used in the sale, the common stock will be acquired by
the underwriters for their own account and may be resold from time to time in
one or more transactions, including negotiated transactions, at a fixed public
offering price or at varying prices determined at the time of sale. The
obligations of the underwriters to purchase the common stock will be subject to
certain conditions precedent, and the underwriters will be obligated to purchase
all the common stock offered by the prospectus supplement if any of the
securities are purchased. Any initial public offering price and any discounts or
concessions allowed or reallowed or paid to dealers may be changed from time to
time.
Common stock may be sold directly by us or through any firm designated by
us from time to time. The prospectus supplement will set forth the name of any
agent involved in the offer or sale of the common stock in respect of which the
prospectus supplement is delivered and any commissions payable by us to such
agent. Unless otherwise indicated in the prospectus supplement, any such agent
is acting on a best efforts basis for the period of its appointment.
Underwriters, dealers, and agents may be entitled to indemnification by us
against certain civil liabilities, including liabilities under the Securities
Act of 1933. Underwriters, dealers, and agents may engage in transactions with
or perform services for us in the ordinary course of business.
Common Stock Offered by Selling Shareholders
This prospectus also covers 4,409,571 shares of common stock that may be
sold by the selling stockholders named herein. From time to time, the selling
stockholders may transfer shares to a donee, pledgee, successor, or other
person, other than for value, and such transfers will not be made pursuant to
this prospectus. Upon being notified by a selling stockholder that such a donee,
pledgee, successor,
47
<PAGE>
or other person intends to sell more than 500 shares, we will file a supplement
to this prospectus. To the extent agreed to by us, this prospectus covers sales
by such transferees.
The selling stockholders will act independently of us in making decisions
with respect to the timing, manner, and size of each sale of shares. The sale of
all or a portion of the shares of common stock offered hereby by the selling
stockholders may be effected from time to time on one or more exchanges or in
the over-the-counter market or otherwise, at prevailing market prices at the
time of such sales, at prices related to such prevailing prices, at fixed prices
that may be changed or at negotiated prices. The selling stockholders may effect
such transactions by selling the shares to or through a broker-dealer. The
shares may be sold by one or more of, or a combination of, the following:
o block trades in which a broker or dealer so engaged will attempt to
sell the shares as agent but may position and resell a portion of
the block as principal to facilitate the transaction;
o purchases by a broker or dealer as principal and resale by such
broker or dealer for its account pursuant to this prospectus;
o an exchange distribution in accordance with the rules of such
exchange;
o ordinary brokerage transactions and transactions in which the broker
solicits purchases; and
o privately negotiated transactions between sellers and purchasers
without a broker or dealer.
In effecting sales, broker-dealers engaged by the selling stockholders may
arrange for other broker-dealers to participate in the resales. In addition,
shares may be transferred in connection with the settlement of call options,
short sales, through the issuance of exchangeable or convertible securities or
similar transactions that may be effected by the selling stockholders. To the
extent required, this prospectus may be amended or supplemented from time to
time to describe a specific plan of distribution.
Dealers or brokers may receive compensation in the form of discounts,
concessions, or commissions from the selling stockholders and/or purchasers of
shares for whom they may act as agent (which compensation may be in excess of
customary commissions). The selling stockholders and any brokers or dealers that
participate in the distribution may, under certain circumstances, be deemed to
be "underwriters" within the meaning of the Securities Act, and any commissions
received by such brokers or dealers and any profits realized on the resale of
shares by them may be deemed to be underwriting discounts and commissions under
the Securities Act.
Under applicable rules and regulations under the Exchange Act, any person
engaged in a distribution of the shares may not simultaneously engage in
market-making activities with respect to such shares, except in accordance with
applicable laws. In addition to, and without limiting the foregoing, each
selling stockholder and any other person participating in a distribution will be
subject to the applicable provisions of the Exchange Act and the rules and
regulations thereunder, including, without limitation, Rule 10b-5 and Regulation
M, which provisions may limit the timing of purchases and sales of any of the
shares by a selling stockholder or any other person. All of the foregoing may
affect the marketability of the shares.
We will make copies of this prospectus available to the selling
stockholders, and we have
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<PAGE>
informed the selling stockholders of the need for delivery of copies of this
prospectus to purchasers at or prior to the time of any sale of the shares.
In order to comply with certain state securities laws, if applicable, the
shares will be sold in such jurisdictions only through registered or licensed
brokers or dealers. In addition, in certain states, the shares may not be sold
unless such shares have been registered or qualified for sale in such state or
an exemption from registration or qualification is available and is complied
with.
We will bear all costs and expenses of the registration of the shares
under the Securities Act and certain state securities laws, other than fees of
counsel for the selling stockholders. The selling stockholders will bear all
commissions, concessions and discounts, if any, related to any sales of the
shares, and may agree to indemnify such brokers or dealers against certain
liabilities, including liabilities arising under the Securities Act. The selling
stockholders are entitled to receive all of the proceeds from the future sale of
their shares.
The selling stockholders are not restricted as to the number of shares
that may be sold at any one time, and it is possible that a significant number
of shares could be sold at the same time. Sale of the shares by the selling
stockholders may have an adverse effect on the market price of the common stock.
USE OF PROCEEDS
Unless otherwise indicated in an applicable prospectus supplement, the net
proceeds from the sale of common stock offered by us will be used for
engineering work for the first Offshore Shuttle, working capital and general
corporate purposes. We may use a portion of the net proceeds to fund the
development of the first Offshore Shuttle.
We will not receive any proceeds from the sale of the shares by the
selling stockholders.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On April 14, 1998, we issued 7,600,000 shares of Common Stock to Franz
Eder, the President and the Chairman of the Board of the Company, in exchange
for the 999,000 shares of MSOAS capital stock (constituting all of MSOAS's
issued and outstanding capital stock) held by Mr. Eder. The stock certificate
evidencing the shares of Common Stock that were issued to Mr. Eder is being held
by a trustee pursuant to the terms of a pooling trust agreement. Such shares may
not be disposed of by Mr. Eder until they are released to him by the trustee.
Mr. Eder received 10% of such shares on July 1, 2000 and will receive an
additional 30% of such shares on July 1st of each of the three years thereafter.
The trustee shall seek instructions from Mr. Eder before taking any action as a
stockholder with respect to any of the shares held in trust. See "Principal
Stockholders" and "Shares Eligible for Future Sale."
We are a party to a cooperation agreement with Schuller
Industrieentsorgung AG pursuant to which Schuller shall provide waste
management, onshore dismantling, and oil pollution prevention and
49
<PAGE>
cleanup services. We paid Schuller approximately $193,309 in 1999 and
approximately $52,269 for the nine months ended September 30, 2000, for
marketing research and other services rendered. Franz Eder and Hubert Besner are
shareholders and members of the supervisory board of Schuller.
For 1999, and for the nine months ended September 30, 2000, we paid
approximately $224,217 and $110,907, respectively, to Thyssen Krupp Stahlunion
GmbH for procurement and marketing services. Jurgen Ternieden, a director of our
company, is an officer and the head of the Pipes, Offshore, Special Products
Department of TKSU.
For 1999, and for the nine months ended September 30, 2000, we paid
approximately $23,313 and $2,174, respectively, to the law firm of Besner
Kreifels Weber for legal services rendered. Dr. Hubert Besner, a director of our
company, is a member of Besner Kreifels Weber.
For 1999, and for the nine months ended September 30, 2000, we paid
approximately $2,093,701 and $500,071, respectively, to RC Consultants AS for
engineering services. Sverre Hanssen served as the Chairman of the Board of RC
Consultants AS until May 1999, and is the Chairman of the Board of Directors of
MSOAS. In addition, MSOAS leases office space in Sandnes, Norway pursuant to a
lease agreement with RC Group ASA. The lease agreement provides for an average
annual rent of NOK 435,852 (approximately $47,600), and expires in 2003. RC
Group ASA was the sole shareholder of RC Consultants AS until July 2000, and
Sverre Hanssen is the Chairman and the principal shareholder of RC Group ASA.
In June 2000, we acquired an aggregate of 1,186,283 shares of common stock
of Marine Shuttle Operations AS in exchange for an aggregate of 1,186,283 shares
of our common stock. As part of that transaction, Jurgen Ternieden, a director
of our company, and Stephen Adshead, an officer and director of our company,
each received 2,205 shares of our common stock in exchange for their shares in
Marine Shuttle Operations AS. In addition, Intervest AS received 16,500 shares
of our common stock in exchange for its shares in Marine Shuttle Operations AS.
Sverre Hansen, the Chairman of the Board of Directors of MSOAS, is a principal
stockholder of Intervest AS.
During January and February 1999, we raised $5,748,750 in gross proceeds
from the sale of approximately 1.15 million shares of common stock. Berliner
Effektenbank AG received a fee of $229,950 (renegotiated from $575,000) for
serving as placement agent in connection with the transaction. In December,
1999, we raised $4,930,300 in gross proceeds from the sale of approximately 7.1
million shares of common stock. Berliner Effektenbank AG received a fee of
$195,000 for serving as co-placement agent in connection with the transaction.
Berliner Effektenbank AG is a 40%-owned subsidiary of Berliner
Effektengesellschatt AG ("BEAG"). BEAG also owns 40% of BEG Berliner
Effektenbeteiligungsgesellschaft AG, one of our principal stockholders.
In June 2000, we sold 571,429 shares to Sylke Timm for gross proceeds of
$400,000. Sylke Timm is the wife of Holger Timm, and Holger Timm is a principal
stockholder and [a director] of BEAG.
In July 2000, we entered into a loan agreement with Mr. Holger Timm
pursuant to which Mr.
50
<PAGE>
Timm agreed to lend us 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 Mr. Timm into shares of our 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.
We believe that the transactions set forth above were made on terms no
less favorable to the company than could have been obtained from unaffiliated
third parties.
For information regarding compensation and consulting fees paid to our
executive officers and directors, please see "Management--Compensation."
DESCRIPTION OF SECURITIES
Our authorized capital stock consists of 75,000,000 shares of common
stock, par value $0.001 per share. As of November __, 2000, 43,988,356 shares
were issued and outstanding.
Common Stock
Each holder of common stock is entitled to one vote for each share held on
all matters properly submitted to the stockholders for their vote. Holders of
shares of outstanding common stock are entitled to those dividends declared by
our Board of Directors out of legally available funds. Holders of shares of
outstanding common stock have no preemptive, conversion, or redemption rights.
All of the issued and outstanding shares of common stock are duly authorized,
validly issued, fully paid and nonassessable.
Statutory Business Combination Provisions
As a Nevada corporation, we are subject to the provisions of the Nevada
General Corporation Law pertaining to business combinations with "interested
stockholders." The statute provides, with certain exceptions, that a Nevada
corporation may not engage in any of a broad range of business combinations with
a person, or an affiliate or an associate of such person, who is an "interested
stockholder" for a period of three years from the date that such person became
an interested stockholder. The prohibition does not apply if the transaction
resulting in a person becoming an interested stockholder, or the business
combination, is approved by the board of directors of the corporation before the
person becomes an interested stockholder.
The statute further provides that a Nevada corporation may not engage in
such a business combination after the expiration of three years from the date
that such person became an interested stockholder unless the business
combination is approved .
51
<PAGE>
o by the board of directors of the corporation before the person
became an interested stockholder, or
o by the affirmative vote of a majority of outstanding votes not
beneficially owned by the interested stockholder at a meeting called
not earlier than three years after the interested stockholder's date
of acquiring shares.
Under the statute, an "interested stockholder" is defined as any person
that is
o the owner of 10% or more of the outstanding voting stock of the
corporation, or
o an affiliate or associate of the corporation and was the owner of
10% or more of the outstanding voting stock of the corporation at
any time within the three year period immediately prior to the date
on which it is sought to be determined whether such person is an
interested stockholder.
At its option, a corporation may exclude itself from the coverage of the
statute by amending its Articles of Incorporation by action of its stockholders,
other than interested stockholders and their affiliates and associates, to
exempt itself from coverage. However, such charter amendment may not become
effective until 18 months after the date it is adopted and does not apply to any
combination of the corporation with an interested stockholder whose date of
acquiring shares is on or before the effective date of the amendment. We have
not adopted such an amendment to our Articles of Incorporation.
Transfer Agent and Registrar
The transfer agent and registrar for the common stock is Continental Stock
Transfer & Trust Company, 2 Broadway, 19th floor, New York, New York 10004.
OTC Bulletin Board Listing
Our common stock currently is quoted on the OTC Bulletin Board under the
symbol "ZSUB."
SHARES ELIGIBLE FOR FUTURE SALE
As of the date of this prospectus, there are 43,988,356 shares of common
stock outstanding, and there are options outstanding to purchase 110,000 shares
of common stock. Of the shares of common stock outstanding:
o 4,750,000 shares are being held by a pooling trustee and will not be
released until August 3, 2001 (see "Principal Stockholders");
o 6,840,000 of the shares owned by Franz Eder, our President, are held
by a trustee
52
<PAGE>
pursuant to a pooling trust agreement and may not be disposed of by
Mr. Eder until they are released to him by the trustee (see
"Proposed Stockholders"); and
o _________ are deemed to be restricted securities as defined in
Rule 144.
The resale of 4,409,571 of the restricted shares is covered by the
registration statement of which this prospectus is a part. These shares may be
resold in the open market at any time, subject to
o the continued effectiveness of the registration statement;
o and our ability to suspend sales under the registration statement in
certain instances.
The balance of the restricted shares may not be resold in a public
distribution except in compliance with the registration requirements of the
Securities Act or pursuant to a valid exemption from registration, including the
safe harbor provided by Rule 144. In general, under Rule 144 of the Securities
Act as currently in effect, any person who has beneficially owned restricted
shares for at least one year is entitled to sell within any three-month period a
limited number of shares of common stock. The limit is the greater of:
o 1% of the then outstanding shares of our common stock; or
o the average weekly trading volume of our common stock during the
four calendar weeks preceding the sale.
Sales under Rule 144 of the Securities Act are subject to restrictions
relating to manner of sale, notice, and the availability of current public
information about us. A person who is not our affiliate at any time during the
90 days preceding a sale, and who has beneficially owned shares for at least two
years, may sell the shares without complying with the volume limitations, manner
of sale provisions or notice or other requirements of Rule 144 of the Securities
Act.
No prediction can be made as to the effect, if any, that sales of such
shares, or even the availability of such shares for sale will have on the market
prices prevailing from time to time. The possibility that substantial amounts of
common stock may be sold in the public market may adversely affect prevailing
market prices for the common stock and could impair our ability to raise capital
through the sale of our equity securities.
53
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth, certain information as of ________, 2000,
regarding beneficial ownership of our common stock by
o each stockholder known by us to be the beneficial owner of more than
five percent (5%) of the outstanding shares of common stock;
o each of our directors;
o our chief executive officer; and
o all of our executive officers an directors as a group.
<TABLE>
<CAPTION>
Number of Shares of
Common Stock Percentage of Class
Name of Beneficial Holder Beneficially Owned Beneficially Owned
------------------------- ------------------- -------------------
<S> <C> <C>
Franz Eder ......................................................... 7,600,000(1) 17.3%
Iqbal Akram ........................................................ 100,000(2) *
Stephen Adshead .................................................... 2,205 *
Jurgen Ternieden ................................................... 334,704 *
Hubert Besner ...................................................... 0 0%
BEG Berliner Effektenbeteiligungsgesellschaft ...................... 3,950,000(3)(4) 9.0%
All officers and directors as a group (5 persons) .................. 8,036,909(5) 18.2%
</TABLE>
-----------------
* Less than 1%
(1) 6,840,000 of such shares are being held by a trustee pursuant to the terms
of a pooling trust agreement. Such shares may not be disposed of by Mr.
Eder until they are released to him by the trustee. Mr. Eder will receive
2,280,000 of such shares on July 1st of each of the three years beginning
in 2001. The trustee shall seek instructions from Mr. Eder before taking
any action as a stockholder with respect to any of the shares held in
trust.
(2) Represents shares underlying currently exercisable stock options.
(3) Based on the Schedule 13G, dated February 11, 1999. Does not include
800,000 shares of common stock owned by Berliner Effektengesellschaft AG
("BEAG"). See "Certain Transactions."
(4) Such shares, as well as the 800,000 shares of common stock owned by BEAG,
are being held by a pooling trustee pursuant to the terms of a pooling
trust agreement and will not be released until August 3, 2001. During such
time, the trustee shall seek instructions from BEG Berliner
Effektenbeteilgungsgesellschaft AG and BEAG, respectively, before taking
any action as a stockholder with respect to any of such shares.
(5) Includes 100,000 shares underlying currently exercisable stock options.
54
<PAGE>
LEGAL MATTERS
The validity of the common stock being offered hereby will be passed upon
for us by Breslow & Walker, LLP, New York, New York.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements at December 31, 1999, for the year ended December 31, 1999,
and for the period from May 23, 1997 (inception) through December 31, 1999, as
set forth in their report. Their report for the period May 23, 1997 (inception)
through December 31, 1999, insofar as it relates to amounts for prior periods
through December 31, 1998, is based solely on the report of other auditors.
Deloitte & Touche, independent auditors, have audited our consolidated financial
statements at December 31, 1998, for the year ended December 31, 1998, and for
the period from May 23, 1997 (inception) to December 31, 1997, as set forth in
their report. We have included our financial statements in the prospectus and
elsewhere in the registration statement in reliance on Ernst & Young LLP's and
Deloitte & Touche's respective reports, given on their authority as experts in
accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have field with the Commission, 450 Fifth Street, N.W., Washington,
D.C., a registration statement on Form S-1 under the Securities Act of 1933,
with respect to the shares to be sold in this offering. This prospectus, which
is part of the registration statement, does not contain all of the information
contained in the registration statement. For further information about us and
the shares of common stock that are offered hereby, we refer you to the
registration statement, including the exhibits thereto, which may be inspected,
without charge at the office of the Securities and Exchange Commission.
Copies of the registration statement may be obtained from the Commission
in Washington, D.C., upon payment of the requisite fees, or from the
Commission's Website at http://www.sec.gov. Statements contained in this
prospectus as to the contents of any contract or other document referred to are
not necessarily complete, and in each instance we refer you to the copy of such
contract or other document filed as an exhibit to the registration statement,
each such statement being qualified in all respects by the more complete
description of the matters involved.
55
<PAGE>
Marine Shuttle Operations, Inc.
Index to Financial Statements
Page
----
Report of Independent Auditors F-2
Report of Independent Auditors F-3
Consolidated Balance Sheets at December 31, 1999 and 1998 F-4
Consolidated Statements of Loss and Comprehensive Loss for
the two years ended December 31, 1999 and 1998, for
the period from May 23, 1997 (inception) to December 31,
1997, and cumulative from May 23, 1997 (inception)
to December 31, 1999 F-5
Consolidated Statements of Cash Flows for the two years
ended December 31, 1999 and 1998, for the period from
May 23, 1997 (inception) to December 31, 1997, and
cumulative from May 23, 1997 (inception) to December 31, 1999 F-6
Consolidated Statements of Changes in Stockholders' Equity
for the years ended December 31, 1999 and 1998,
and from May 23, 1997 (inception) to December 31, 1997 F-7
Notes to Consolidated Financial Statements F-8
Consolidated Balance Sheets (Unaudited)
at September 30, 2000 and December 31, 1999 F-19
Consolidated Statements of Loss and Comprehensive Loss (Unaudited)
for the three-month periods ended September 30, 2000
and 1999, for the nine-month periods ended September 30, 2000
and 1999, and cumulative from May 23, 1997 (inception) to
September 30, 2000 F-20
Consolidated Statements of Cash Flows (Unaudited) for the nine
months ended September 30, 2000 and 1999, and cumulative
from May 23, 1997 (inception) to September 30, 2000 F-21
Notes to Consolidated Financial Statements (Unaudited) F-22
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Board of Directors
Marine Shuttle Operations Inc.
We have audited the accompanying consolidated balance sheet of Marine
Shuttle Operations Inc. (a development stage enterprise) as of December 31,
1999, and the related consolidated statements of loss and comprehensive loss,
shareholders' equity, and cash flows for the year then ended, and for the period
from May 23, 1997 (inception) through December 31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. The financial statements as of December 31, 1998 and 1997, and for
the period May 23, 1997 (inception) through December 31, 1998, were audited by
other auditors whose report dated March 18, 1999 expressed an unqualified
opinion on those statements and included an explanatory paragraph for the going
concern uncertainty discussed in Note 2 to the financial statements. The
financial statements for the period May 23, 1997 (inception) through December
31, 1998 include total revenues and net loss of $16,376 and $5,207,079,
respectively. Our opinion on the consolidated statements of loss and
comprehensive loss, shareholders' equity, and cash flows for the period May 23,
1997 (inception) through December 31, 1999, insofar as it relates to amounts for
prior periods through December 31, 1998, is based solely on the report of other
auditors.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits and the report of other
auditors provide a reasonable basis for our opinion.
In our opinion, based on our audit and the report of other auditors, the
financial statements referred to above present fairly, in all material respects,
the consolidated financial position of Marine Shuttle Operations Inc. at
December 31, 1999, and the consolidated results of its operations and its cash
flows for the year then ended and the period from May 23, 1997 (inception)
through December 31, 1999, in conformity with accounting principles generally
accepted in the United States.
The accompanying financial statements have been prepared assuming that
Marine Shuttle Operations Inc. will continue as a going concern. As more fully
described in Note 2, the Company has incurred recurring operating losses and has
a working capital deficit. These conditions raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans in regard
to these matters are also described in Note 2. The financial statements 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.
[ERNST & YOUNG LLP]
Houston, Texas
March 24, 2000
F-2
<PAGE>
Independent Auditors' Report
To the Board of Directors and Stockholders of
Marine Shuttle Operations Inc.
(a development stage company)
We have audited the accompanying consolidated balance sheets of Marine Shuttle
Operations Inc. and subsidiaries (collectively, the "Company") as at December
31, 1998 and the related consolidated statements of loss and comprehensive loss,
shareholders' equity (deficiency) and cash flows for the year ended December 31,
1998, and the period from May 23, 1997 (inception) to December 31, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing standards
in the United States. Those standards require that we plan and perform an audit
to obtain reasonable assurance whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as of December 31, 1998
and the results of operations and cash flows for the year ended December 31,
1998, and the period from May 23, 1997 (inception) to December 31, 1997 in
conformity with accounting principles generally accepted in the United States.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company's negative working capital and deficit raises
substantial doubt about its ability to continue as a going concern. Management's
plans concerning this matter are also described in Note 2. The financial
statements do not contain any adjustments that might result from the outcome of
this uncertainty.
/s/DELOITTE & TOUCHE
Chartered Accountants
Vancouver, British Columbia, Canada
March 18, 1999
F-3
<PAGE>
MARINE SHUTTLE OPERATIONS INC.
(A development stage company)
CONSOLIDATED BALANCE SHEETS
(U.S.Dollars)
<TABLE>
<CAPTION>
December 31, December 31,
1999 1998
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,119,564 $ 903,805
Restricted cash 54,478 128,535
Accounts receivables 38,619 16,254
Other current receivables 114,305 173,577
------------ ------------
Total Current Assets 1,326,966 1,222,171
------------ ------------
Pension fund -- 8,018
Property, plant and equipment, net 5,980,857 2,067,287
Debt issue cost 1,109,510 --
Goodwill, net 28,096,422 31,389,355
Patents and agreements, net 2,732,240 3,249,396
------------ ------------
TOTAL ASSETS $ 39,245,995 $ 37,936,227
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 933,817 $ 963,908
Notes payable 2,550,000 3,605,390
Other current liabilities 341,246 241,253
------------ ------------
Total current liabilities 3,825,063 4,810,551
------------ ------------
Long Term Debt 293,379 --
Minority interests 228,826 555,417
Contingencies (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 December 31, 1999
and 32,557,607 common shares at December 31, 1998 40,751 32,558
Other paid in capital 47,684,739 37,734,263
Deficit accumulated during the development stage (12,570,929) (5,207,079)
Accumulated other comprehensive income (loss) (255,834) 10,517
------------ ------------
Total shareholders' equity 34,898,727 32,570,259
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 39,245,995 $ 37,936,227
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
MARINE SHUTTLE OPERATIONS INC.
(A development stage company)
CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
(U.S.Dollars)
<TABLE>
<CAPTION>
Cumulative to
December 31, 1999 Period from
from date of Year ended Year ended May 23, 1997 to
inception December 31, December 31, December 31,
May 23, 1997 1999 1998 1997
----------------- ------------ ------------ ---------------
<S> <C> <C> <C> <C>
Operating revenues $ 121,512 $ 105,136 $ 16,376 $ --
------------ ------------ ------------ ------------
OPERATING EXPENSES
Personnel costs 1,503,432 1,277,938 185,494 40,000
Legal, audit and advisory services 1,665,086 472,958 1,119,700 72,428
Cost of cancelled financing 606,721 -- 606,721 --
General and administrative expenses 1,725,661 1,270,413 402,745 52,503
Marketing expenses 952,647 300,157 652,490 --
Technical development 554,206 554,206 -- --
Depreciation 106,684 96,217 10,467 --
Amortization - goodwill and intangibles 5,767,371 3,885,167 1,882,204 --
Loss on investment 90,000 -- 90,000 --
Currency exchange loss (gain) 1,980 (28,005) 29,985 --
------------ ------------ ------------ ------------
Total operating expenses 12,973,788 7,829,051 4,979,806 164,931
------------ ------------ ------------ ------------
Interest expense, net of capitalized 116,657 23,389 93,268
Interest income (71,413) (56,864) (14,549) --
------------ ------------ ------------ ------------
Net loss before minority interest $(12,897,520) $ (7,690,440) $ (5,042,148) $ (164,931)
------------ ------------ ------------ ------------
Minority interest (326,591) (326,591) -- --
------------ ------------ ------------ ------------
Net loss $(12,570,929) $ (7,363,850) $ (5,042,148) $ (164,931)
============ ============ ============ ============
Other comprehensive (loss) income:
Accumulated other comprehensive
Income (loss) (255,834) (266,351) 10,517 --
------------ ------------ ------------ ------------
Comprehensive loss $(12,826,762) $ (7,630,201) $ (5,031,631) $ --
============ ============ ============ ============
Basic and diluted loss per share $ (0.22) $ (0.20) $ (0.01)
============ ============ ============
Basic and diluted weighted average shares outstanding 33,611,545 25,720,000 18,931,982
============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
MARINE SHUTTLE OPERATIONS INC.
(A development stage company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(U.S.Dollars)
<TABLE>
<CAPTION>
Cumulative to
December 31, 1999 Period from
from date of Year ended Year ended May 23, 1997 to
inception December 31, December 31, December 31,
May 23, 1997 1999 1998 1997
----------------- ------------ ------------ ---------------
OPERATING ACTIVITIES
<S> <C> <C> <C> <C>
Net loss $(12,570,929) $ (7,363,850) $ (5,042,148) $ (164,931)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 5,874,056 3,981,385 1,892,671 --
Minority interest (326,591) (326,591) -- --
Loss on investment 90,000 -- 90,000 --
Unrealized loss on foreign currency 39,790 7,698 32,092 --
Changes in working capital:
Accounts receivable (38,620) (22,366) (16,254) --
Other current receivables and restricted cash (168,781) (81,850) (86,931) --
Accounts payable 933,817 (30,092) 947,817 16,092
Other current liabilities 301,456 441,444 (143,842) 3,854
------------ ------------ ------------ ------------
Net cash used in operating activities (5,865,802) (3,394,222) (2,326,595) (144,985)
------------ ------------ ------------ ------------
INVESTING ACTIVITIES
Investments (100,000) -- (100,000) --
Capital expenditures (4,874,332) (4,158,657) (715,675) --
Proceeds on sale of investment 10,260 260 10,000 --
Advance to Marine Shuttle Operations AS (249,986) -- (249,986) --
Acquisition of Marine Shuttle Operations AS 416,635 -- 416,635 --
Advance to Offshore shuttle AS (100,000) -- (100,000) --
Acquisition of Offshore Shuttle AS 482,476 -- 482,476 --
------------ ------------ ------------ ------------
Net cash used in investing activities (4,414,947) (4,158,397) (256,550) --
------------ ------------ ------------ ------------
FINANCING ACTIVITIES
Issuance of capital stock 10,849,050 10,679,050 -- 170,000
Share issue cost (736,381) (720,381) -- (16,000)
Debt issue cost (1,109,510) (1,109,510) -- --
Payment on note payable (5,875,000) (5,875,000) -- --
Borrowing on note payable 8,718,379 5,218,379 3,500,000 --
------------ ------------ ------------ ------------
Net cash provided by financing activities 11,846,537 8,192,537 3,500,000 154,000
------------ ------------ ------------ ------------
Effect of exchange rate change on cash and cash equivalents (446,223) (424,158) (22,065)
Net increase (decrease) in cash and cash equivalents 1,119,564 215,759 894,790 9,015
------------ ------------ ------------ ------------
Cash and cash equivalents at beginning of period -- 903,805 9,015 --
------------ ------------ ------------ ------------
Cash and cash equivalents at end of period $ 1,119,564 $ 1,119,564 $ 903,805 $ 9,015
============ ============ ============ ============
Supplemental disclosure of cash flow
Information:
Cash payments for interest $ 38,562 $ 38,562 $ -- $ --
Cash receipts for interest $ (71,413) $ (56,864) $ (14,549) $ --
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
MARINE SHUTTLE OPERATIONS INC.
(A development stage company)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(U.S.Dollars)
Year ended December 31, 1999 and 1998, and from the date of inception,
May 23, 1997, to December 31, 1997
<TABLE>
<CAPTION>
Accumulated other
Common Shares Comprehensive Total
------------------------ Paid-in income Accumulated Shareholders'
Shares Amount Capital (loss) (Deficit) Equity
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Issued on incorporation 10,000,000 $ 10,000 $ $ $ $ 10,000
Private placement 10,020,000 10,020 133,980 144,000
Net loss (164,931) (164,931)
------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31,1997 20,020,000 20,020 133,980 -- (164,931) (10,931)
------------------------------------------------------------------------------------------------------------------------------------
Issued on acquisition of MSOAS 7,600,000 7,600 22,792,400 22,800,000
Issued on acquisition of OSAS 4,937,607 4,938 14,807,883 14,812,821
Net loss (5,042,148) (5,042,148)
Other comprehensive income -
foreign currency translation
adjustments 10,517 10,517
------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1998 32,557,607 32,558 37,734,263 10,517 (5,207,079) 32,570,259
------------------------------------------------------------------------------------------------------------------------------------
Private placements:
February 1999 1,149,750 1,150 5,517,650 5,518,800
December 1999 7,043,285 7,043 4,432,826 4,439,869
Net loss (7,363,850) (7,363,850)
Other comprehensive (loss) -
foreign currency translation
adjustments (266,351) (266,351)
------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1999 40,750,642 $ 40,751 $ 47,684,739 $ (255,834) $(12,570,929) $ 34,898,727
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE>
MARINE SHUTTLE OPERATIONS INC.
(A development stage company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
1. 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 Company's ownership interest in MSOAS became approximately 81%.
See Note 8. Unless the context otherwise requires, the term "Company"
hereinafter includes Marine Shuttle Operations Inc. and its subsidiaries.
2. 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 December 31, 1999 has
accumulated losses from operations amounting to $12,570,929 and a working
capital deficit of $2,498,097, 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 significantly 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.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These financial statements have been prepared in accordance with generally
accepted accounting principles in the United States and reflect the following
significant accounting principles:
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the
Company and its majority-owned subsidiary, Marine Shuttle Operations AS (MSOAS).
Intercompany transactions and balances have been eliminated.
ESTIMATES AND ASSUMPTIONS
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amount of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
F-8
<PAGE>
MARINE SHUTTLE OPERATIONS INC.
(A development stage company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
MARKETING
All marketing and advertising costs are expensed as incurred.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash on hand, deposits in banks and
highly liquid investments with an original maturity of three months or less.
EQUIPMENT
Equipment is recorded at cost. Depreciation is charged to operations over
the estimated useful lives of the assets as follows:
Computer equipment........................................... 30-35%
Office equipment............................................. 20-30%
The average building period for an Offshore Shuttle is estimated to be 24
months. All direct costs including interest related to the construction of the
Offshore Shuttle are capitalized as incurred, and depreciation will commence
when the Offshore Shuttle is available for operation.
GOODWILL AND OTHER INTANGIBLES
Goodwill arising from acquisitions and other purchased intangibles are
amortized on a straight-line basis over 10 years and 5 years to 10 years,
respectively.
Patents are recorded at cost or fair value at date of acquisition less
accumulated amortization, which is calculated on a straight-line basis over
their estimated lives.
IMPAIRMENT OF LONG-LIVED ASSETS
The carrying value of long-lived assets, principally goodwill and
equipment, is reviewed for potential impairment when events or changes in
circumstances indicate that the carrying amount of such assets may not be
recoverable. For goodwill and equipment, the determination of recoverability is
made based upon the estimated undiscounted future net cash flows of the related
assets.
OPERATING REVENUE RECOGNITION
As discussed in Note 1, the Company is in its development stage and
therefore has no significant operating revenue. However, if and when the
operations for decommissioning offshore oil or gas installations begin, the
Company will recognize revenue based on contractual terms as services are
performed. Operating revenue recognized in 1999 and 1998 pertains to study work
performed on behalf of clients and was recognized as the work was performed.
F-9
<PAGE>
MARINE SHUTTLE OPERATIONS INC.
(A development stage company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
STOCK-BASED COMPENSATION
In accordance with the provisions of the Financial Accounting Standards
Board's ("FASB") Statement of Accounting Standard ("SFAS") No. 123, Accounting
for Stock-Based Compensation, the Company has elected to follow the Accounting
Principles Board's Opinion No. 25, Accounting for Stock Issued to Employees and
the related interpretations (`APB 25") in accounting for its employee
stock-based compensation plans. Under APB 25, if the exercise price of employee
stock options equals or exceeds the fair value of the underlying stock on the
date of grant, no compensation expense is recognized.
FINANCIAL INSTRUMENTS AND RISK CONCENTRATION
The Company estimates that the carrying values of its cash and cash
equivalents, current receivables and, payables, and notes payable approximate
fair value at December 31, 1999 and 1998 due to the short-term maturity of the
balances. Financial instruments which potentially subject the Company to
concentration of credit risk are primarily cash and cash equivalents. It is the
Company's practice to place its cash and cash equivalents in time deposits at
commercial banks with high credit ratings. In foreign locations, local financial
institutions are generally utilized for local currency needs. The Company limits
the amount of exposure to any one institution and does not believe it is exposed
to any significant credit risk.
FOREIGN CURRENCY TRANSLATION
The U.S. dollar is the functional currency of Marine Shuttle Operations
Inc. MSOAS uses Norwegian Kroner ("NOK") as its functional currency.
Accordingly, MSOAS translate assets and liabilities at current rates of exchange
in effect at the balance sheet date. The resulting gains and losses from
translation are deferred and recorded as a separate component of comprehensive
income (loss) and as a component of shareholders' equity. Revenue and expense
for MSOAS is translated using the average exchange rates in effect for the
period. Foreign currency exchange gains and losses are recognized in other
income (expense) as incurred.
Revenues and expenses are translated at the average exchange rate for the
reporting period. Gains and losses arising from translation of financial
statements of subsidiaries not reporting in U.S. dollars are deferred and
recorded as a separate component of comprehensive income (loss). The exchange
rate between the NOK and U.S. dollar at December 31, 1999 was 8.0395 NOK to the
US dollar.
RECLASSIFICATIONS
Certain reclassifications have been made to prior period amounts to
conform with the current year presentation.
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.
F-10
<PAGE>
MARINE SHUTTLE OPERATIONS INC.
(A development stage company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 1999
4. RESTRICTED CASH
Restricted cash includes taxes withheld from employees of the Norwegian
subsidiaries of $33,791 and $72,614, for 1999 and 1998, respectively, and rental
deposits of $20,687 and $55,921, for 1999 and 1998, respectively.
5. ACCOUNTS RECEIVABLE
Accounts receivable are recorded at net realizable value. No allowance for
doubtful account has been provided.
6. OTHER CURRENT RECEIVABLES
December 31, 1999 1998
--------------------------------------------------------------------------------
Prepaid expenses $ 35,519 $ 41,684
VAT receivable 30,162 90,775
Other current receivable 48,624 41,118
-------- --------
Total other current receivable $114,305 $173,577
-------- --------
7. LOSS ON INVESTMENT
On December 31, 1997, the Company entered into a Securities Purchase
Agreement ("Agreement") to acquire 100 shares (constituting a 50% interest) of
Kaizen Food Corporation ("Kaizen"), a Canadian private company. Pursuant to the
Agreement the Company purchased 100 shares of Kaizen for $100,000, and was
required to raise $500,000 on or before January 20, 1998 to fund Kaizen's
research and development activities. Kaizen repurchased the stock during 1998
for $10,000 in full payment of the repurchase price.
8. ACQUISITIONS
On April 14, 1998, the Company acquired 100% of the issued and outstanding
stock of Marine Shuttle Operations AS, a Norwegian company ("MSOAS "), in
exchange for 7,600,000 common shares of the Company. The 7,600,000 shares are
held by a trustee pursuant to the terms of a trust agreement. The shares cannot
be sold prior to the release from the trust. The shares are to be released as to
10% on July 1, 2000, and an additional 30% on each of July 1, 2001, 2002, and
2003. This transaction was accounted for using the purchase method of
accounting. The excess of the purchase price over the fair value of the net
assets acquired was allocated to goodwill and is being amortized on a
straight-line basis over 10 years. The result of operations of MSOAS have been
consolidated from April 14, 1998.
In 1998, the Company acquired 3,291,738 shares of Offshore Shuttle AS
("OSAS"), a Norwegian limited company, representing approximately 68% of the
outstanding OSAS capital stock, in exchange for 4,937,607 shares of the
Company's common stock. The shares of the Company's common stock that were
issued were recorded at a deemed value of $3.00 per share based on the estimated
fair value of the net assets acquired from OSAS. This transaction was accounted
for using the purchase method. The excess of the purchase price over the fair
value of the net assets acquired was allocated to goodwill and identified
intangibles and is being amortized on a straight-line basis over 10 years. The
results of operations of OSAS have been consolidated from December 31, 1998.
In September 1999, OSAS merged into MSOAS. As a result, the Company's
ownership in MSOAS became approximately 81%, and MSOAS became the holder of the
licensing and marketing rights to the Offshore Shuttle. 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.
F-11
<PAGE>
MARINE SHUTTLE OPERATIONS INC.
(A development stage company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 1999
8. ACQUISITIONS (continued)
The selected pro forma consolidated financial information for the Company
set forth below gives effect to the acquisitions of the shares of MSOAS and
OSAS, and presents the results of operations of the Company as if the MSOAS and
OSAS acquisitions were made effective May 23, 1997. The pro forma consolidated
financial statements are not intended to reflect the results of operations or
the financial position of the Company which would have actually resulted had the
acquisitions been made on May 23, 1997. Further, the pro forma financial
information is not necessarily indicative of the results of operations or the
financial position that may be obtained in the future.
<TABLE>
<CAPTION>
Cumulative from date
of inception, Period from
May 23, 1997, to Year ended May 23, 1997 to
December 31, 1999 December 31, 1998 December 31, 1997
----------------- ----------------- -----------------
<S> <C> <C> <C>
Revenue $ 191,709 $ 29,633 $ 56,940
------------ ------------ ------------
Net loss $(18,335,509) $ (6,029,096) $ (4,942,563)
------------ ------------ ------------
Basic and diluted loss per share $ (0.19) $ (0.16)
------------ ------------
</TABLE>
9. EQUIPMENT
December 31, 1999 1998
----------------------------------------------------------- -----------
Computer and office equipment $ 328,562 $ 247,411
Construction in progress 5,758,979 1,830,343
---------- ----------
6,087,541 2,077,754
Accumulated depreciation 106,684 10,467
---------- ----------
$5,980,857 $2,067,287
========== ==========
Capitalized interest on construction in progress was $226,665 and $12,122, for
the years ending December 31, 1999 and 1998, respectively.
10. GOODWILL
December 31, 1999 1998
----------------------------------------------------------- ------------
Total cost $32,929,340 $32,929,340
Accumulated amortization 4,832,918 1,539,985
----------- -----------
$28,096,422 $31,389,355
=========== ===========
11. PATENTS AND AGREEMENTS
December 31, 1999 1998
----------------------------------------------------------- -----------
Total cost $3,666,693 $3,591,615
Accumulated amortization 934,453 342,219
---------- ----------
$2,732,240 $3,249,396
========== ==========
12. OTHER CURRENT LIABILITIES
December 31, 1999 1998
----------------------------------------------------------- ---------
Accrued salary and social security cost $107,180 $ 84,378
Accrued other operating expenses 234,066 156,875
-------- --------
Total other current liabilities $341,246 $241,253
======== ========
F-12
<PAGE>
MARINE SHUTTLE OPERATIONS INC.
(A development stage company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 1999
13. NOTES PAYABLE
In March 1998, the Company entered into a loan agreement with ValorInvest
Ltd, an investment company based in Geneva, Switzerland, pursuant to which
ValorInvest agreed to lend an aggregate of up to $3,500,000 to the Company at
such times as the Company requested, provided that advances were to be made in
increments of $250,000 and were not to exceed $500,000 in any single month.
Pursuant to the loan agreement, the Company borrowed an aggregate of $3,500,000,
which amount was evidenced by three non-negotiable promissory notes bearing
interest at the rate of 7.5% per annum. In February 1999, the Company repaid all
monies due under the notes, including interest, and the loan agreement was
terminated.
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 December 31, 1999, $3,875,000 had been advanced under the loan
agreement, and $2,550,000 was outstanding under the 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 $515,200) to finance specific
tasks within the Offshore Shuttle project. As of December 31, 1999, NOK
2,358,617 (approximately $293,379) 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.
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
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 within the next
few months. The Company has deferred debt issue costs related to the financing.
14. COMMITMENTS
The Company has rental expenses for office lease of $212,167 and $122,092
for 1999 and 1998, respectively.
MSOAS leases 938 square meters of office space in Sandnes, Norway from RC
Group ASA. The lease is for a five-year period at an average annual rent of NOK
1,032,350 (approximately $129,000), and expires in 2003. In addition MSOAS
leases offices in Oslo, Norway pursuant to a 22 month lease at an annual rental
of NOK 234,554 (approximately $29,000). The agreement expires April 2001.
F-13
<PAGE>
MARINE SHUTTLE OPERATIONS INC.
(A development stage company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 1999
15. RELATED PARTY TRANSACTIONS
MSOAS is a party to a personnel services agreement with RC Consultants AS
("RCC"), and leases office space from RC Group ASA. RCC is wholly owned
subsidiary of RC Group ASA. The Chairman of RCC is also the Chairman of MSOAS
and the President and principal shareholder of RC Group ASA. The Company paid
approximately $2,093,701 and $532,200, in 1999 and 1998, respectively, to RCC
for services under the personnel services agreement. Compensation for services
rendered under such agreement is to be based on normal trade terms. The Company
paid a total of approximately $2,336,915 and $587,995 in 1999 and 1998,
respectively, to companies within the RC Group.
MSOAS is a party to a cooperation agreement with Schuller
Industrieentsorgung AG ("Schuller") pursuant to which Schuller shall provide
waste management, onshore dismantling, oil pollution prevention, and cleanup
services. The Company paid approximately $193,309 and $127,217, in 1999 and 1998
respectively, to Schuller for marketing research and other services rendered.
The President and a director of the Company are shareholders and members of the
supervisory board of Schuller.
MSOAS has entered into an agreement with Thyssen Krupp Stahlunion GmbH
("TKSU") with respect to marketing and procurement services. The Company paid
approximately $224,217 and $65,126, in 1999 and 1998, respectively, to TKSU
under such agreement. A director of the Company is an officer and the head of
the Pipes, Offshore, Special Products Department of TKSU.
During the years ended December 31, 1999 and 1998, the Company paid
approximately $23,313 and $103,894, respectively, to a law firm, a member of
which is a director of the Company.
Under a consultancy agreement that expired December 31, 1999, the Company
paid remuneration of approximately $120,350 and $127,265 in 1999 and 1998,
respectively, to a shareholder of the Company and a former Board member of OSAS.
On March 31, 1998, MSOAS entered into an agreement with a former member of
the Board of OSAS and a former Managing Director of OSAS regarding the exclusive
transfer of the intellectual property rights relating to the Offshore Shuttle
concept (the "Rights"). The agreement provides that if MSOAS for any reason
whatsoever should cease to continue in an active manner its activities related
to the concept, the Rights could be transferred back to them against certain
compensation. In the event that MSOAS wishes to transfer the rights to a third
party, the two individuals shall have the right of first refusal with respect to
such transfer.
An addendum to the intellectual property agreement was signed in March,
2000 which provides that, subject to the fulfillment of certain conditions, the
two individuals shall waive and relinquish the right of first refusal and any
and all rights to have the Rights transferred back to them. The conditions are
related to the Company achieving a written confirmation for a financing for the
full and complete design and fabrication of the first Offshore Shuttle, and the
Company entering into such contracts as are required for the design,
construction and complete fabrication of the first Offshore Shuttle. In
consideration of the waiver of the Rights, the Company shall grant to each of
the two individuals warrants to purchase 125,000 shares of common stock of the
Company at value $1 per share. Such warrants shall be granted immediately only
upon satisfaction of the above mentioned conditions.
16. STOCK OPTION PLAN
The Company has established a Stock Option Plan for employees, officers,
directors, consultants, and advisors. Options granted under the Stock Option
Plan may be either incentive stock option or non-qualified stock options. The
Company has reserved 2,000,000 common shares for issuance under the Stock Option
Plan.
F-14
<PAGE>
MARINE SHUTTLE OPERATIONS INC.
(A development stage company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 1999
16. STOCK OPTION PLAN (continued)
Options granted for issuance under the Stock Option Plan generally are not
transferable, and the exercise price of incentive stock options must be at least
equal to 100% (110% in the case of optionees who own more than 10% of the total
combined voting power of all classes of stock of the Company) of the fair market
value of the common shares on the date of grant. As of December 31, 1999, no
options had been granted or were outstanding under the Stock Option Plan. See
note 20.
The Company has established a Stock Option Plan for employees, officers,
directors, consultants, and advisors. Options granted under the Stock Option
Plan may be either incentive stock option or non-qualified stock options. The
Company has reserved 2,000,000 common shares for issuance under the Stock Option
Plan. Options granted for issuance under the Stock Option Plan generally are not
transferable, and the exercise price of incentive stock options must be at least
equal to 100% (110% in the case of optionees who own more than 10% of the total
combined voting power of all classes of stock of the Company) of the fair market
value of the common shares on the date of grant. As of December 31, 1999, no
options had been granted or were outstanding under the Stock Option Plan. See
note 20.
The Stock Option Plan may be administered by the Board of Directors or a
committee of the Board (the "Committee"). The Board of Directors or the
Committee, as the case may be, has the power to determine the terms of any
options granted thereunder, including the exercise price, the number of shares
subject to the option, and the exercisability thereof. The term of any option
granted under the Stock Option Plan may not exceed ten years. The specific terms
of each option grant shall be approved by the Board of Directors or the
Committee.
In 1997, OSAS adopted a stock option plan which provides for the granting
of incentive options to employees and board members to purchase an aggregate of
220,000 shares of OSAS common stock at prices and terms to be decided by the
Board of Directors. Options granted under the stock option plan may be
exercisable for a period of up to three years from the date of grant. All
options granted under this plan have exercise prices equal to the fair market
value of the stock on the date of grant and increasing at a rate of one percent
per month. Upon the merger in 1999 with MSOAS, the OSAS stock option plan was
adopted by MSOAS. Options to purchase 150,000 shares of common stock in MSOAS
have been issued to employees.
The activities in relation to the stock incentive plan are summarized as
follows:
Number of
Shares
---------
Granted in and outstanding at December 31, 1997 135,000
Granted in 1998 45,000
Exercised in 1998 15,000
Canceled in 1998 15,000
-------
Outstanding at December 31, 1999 and 1998 150,000
-------
No stock options were granted or exercised under this plan during 1999.
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.
F-15
<PAGE>
MARINE SHUTTLE OPERATIONS INC.
(A development stage company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 1999
17. PENSION
MSOAS has a defined benefit retirement plan which covers all of their
employees. Plan benefits are based on years of service and final salary levels.
The plan is administrated by an insurance company. Contributions to plan are
made in accordance with Norwegian laws and regulations. Net periodic benefit
costs were $49,693 for the year ended December 31, 1999. There was no cost
recorded in the Company's consolidated financial statements in prior years.
December 31, 1999 1998
--------------------------------------------------------------------------------
Status of pension plans reconciled to balance sheet
Defined benefit plans:
Projected benefit obligation at end of the year $ 43,671 $ 38,553
Fair value of plan assets at end of the year 42,975 46,570
-------- --------
Funded status of the plans at end of year $ (696) $ 8,017
-------- --------
Weighted-average assumptions at end of year
Discount rate 7 % 7 %
Expected return on plan assets 6 % 6 %
Rate of compensation increase 3 % 3 %
18. INCOME TAXES
The Company has no provision for income taxes for the year ended December
31, 1999 because the Company generated a loss for the year which may not be
currently benefited. The Company's net operating loss carry-forwards for U.S.
and Norwegian tax purposes as of December 31, 1999 and 1998 were approximately
as follows:
December 31, 1999 1998
--------------------------------------------------------------------------------
U.S. $2,758,757 $2,021,108
Norway $6,999,678 $4,050,483
---------- ----------
Total $9,758,435 $6,071,591
To the extent not used, the operating loss carryforwards will 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 Company's net deferred tax assets.
F-16
<PAGE>
MARINE SHUTTLE OPERATIONS INC.
(A development stage company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 1999
18. INCOME TAXES (continued)
The difference between the Company's effective tax rate and the U.S.
statutory rate for income taxes was as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED PERIOD FROM MAY 23,
DECEMBER 31, DECEMBER 31, 1997 TO DECEMBER 31,
1999 1998 1997
------------ ------------ --------------------
<S> <C> <C> <C>
Statutory Rate 35.00% 35.00% 35.00%
Amortization of Goodwill -17.68% -13.07% 0.00%
Other Permanent Differences -0.03% -0.20% -0.85%
Foreign Tax Rate Differential -2.74% -1.81% 0.00%
Change in Valuation Allowance -14.55% -19.92% -34.15%
------- ------- -------
Effective Rate 0.00% 0.00% 0.00%
======= ======= =======
</TABLE>
Significant components of the Company's deferred tax assets and
liabilities were approximately as follows:
<TABLE>
<CAPTION>
December 31, 1999 1998 1997
---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Operating Loss Carry-forwards $ 2,934,760 $ 1,832,062 $ 57,726
Valuation Allowance ($2,934,760) ($1,832,062) ($ 57,726)
----------- ----------- -----------
Net Deferred Tax Asset Nil Nil Nil
</TABLE>
19. SEGMENT DISCLOSURES
The Company is currently marketing and making preparations for the
construction of its first Offshore Shuttle. In accordance with SFAS No. 131 the
Company considers its business to consist of one reportable operating segment.
All of the Company's physical assets are located in Norway.
20. SUBSEQUENT EVENTS
In February, 2000, the Company granted incentive stock options to purchase
100,000 shares of common stock, of the Company (the "Common Stock"), at the
price of $1.00 per share (the fair market value of the Common Stock on the date
of grant), to a Vice President and Director of the Company.
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.
F-17
<PAGE>
MARINE SHUTTLE OPERATIONS INC.
(A development stage company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 1999
20. SUBSEQUENT EVENTS (continued)
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.
Effective February 8, 2000, the Company entered into a two-year loan out
agreement with Mancorp AS for the services of Stephen Adshead. The agreement
provides that Mancorp AS shall loan out the services of Mr. Adshead who shall
devote at least 50% of his professional and business time to serve as Vice
President to the Company and shall receive a salary of $60,000 per annum.
21. COMPUTATION OF BASIC AND DILUTED LOSS PER SHARE
<TABLE>
<CAPTION>
PERIOD FROM MAY 23,
YEAR ENDED YEAR ENDED 1997 TO
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1997
------------------------------------------------------------
<S> <C> <C> <C>
Net loss for the period attributable to basic loss per share $ (7,363,850) $ (5,042,148) $ (164,931)
Net loss for the period attributable to diluted
earnings per share $ (7,363,850) $ (5,042,148) $ (164,931)
Weighted average shares outstanding 33,611,545 25,720,000 18,931,982
Dilutive stock options -- -- --
Total shares for basic and fully diluted loss per share 33,611,545 25,720,000 18,931,982
Basic loss per share $ (0.22) $ (0.20) $ (0.01)
Diluted loss per share $ (0.22) $ (0.20) $ (0.01)
</TABLE>
F-18
<PAGE>
MARINE SHUTTLE OPERATIONS INC.
(A development stage company)
CONSOLIDATED BALANCE SHEETS
(U.S.Dollars)
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------ ------------
<S> <C> <C>
ASSETS (unaudited)
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.
F-19
<PAGE>
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.
F-20
<PAGE>
MARINE SHUTTLE OPERATIONS INC.
(A development stage company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(U.S.Dollars)
(unaudited)
<TABLE>
<CAPTION>
Cumulative to Nine Months Ended
September 30, 2000 September 30,
From date of 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.
F-21
<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
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.
F-22
<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 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.
F-23
<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 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.
F-24
<PAGE>
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 was not 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.
F-25
<PAGE>
You should rely only on the information contained in this prospectus. We
have not, and the selling stockholders have not, authorized any person to
provide you with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not, and the selling
stockholders are not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. You should assume that
the information appearing the this prospectus is accurate as of the date on the
front cover of this prospectus only. Our business, financial condition, results
of operations and prospects may have changed since that date.
-----------
Table of Contents
Page
----
Prospectus Summary....................................................
Risk Factors..........................................................
Dividend Policy.......................................................
Capitalization........................................................
Price Range of Common Stock...........................................
Selected Consolidated Financial Data..................................
Management's Discussion and Analysis of Financial Condition
and Results of Operations............................................
Business..............................................................
Management............................................................
Principal Stockholders................................................
Selling Stockholders..................................................
Plan of Distribution..................................................
Use of Proceeds.......................................................
Certain Transactions..................................................
Description of Securities.............................................
Shares Eligible for Future Sale.......................................
Legal Matters.........................................................
Experts...............................................................
Additional Information................................................
Index to Financial Statements......................................... F-1
-----------
Marine Shuttle Operations Inc.
11,409,571 Shares of Common Stock
-----------
PROSPECTUS
__________ , 2000
F-26
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The following table sets forth the costs and expenses, other than
underwriting, discounts and commissions, payable by the Registrant in connection
with its sale of common stock being registered. All amounts are estimates except
the SEC registration fee.
Registration Fee (Securities and Exchange Commission).............. $847
Accounting Fees and Expenses ...................................... $
Legal Fees and Expenses............................................ $
Miscellaneous Expenses ............................................ $
----
Total........................................................ $
Item 14. Indemnification of Directors and Officers.
The Nevada General Corporation Law (the "GCL") authorizes Nevada
corporations to indemnify any person who was or is a party to any proceeding
(other than an action by, or in the right of, the corporation), by reason of the
fact that he or she is or was a director, officer, employee, or agent of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee, or agent of another corporation or other entity,
against liability incurred in connection with such proceeding, including any
appeal thereof, if he or she acted in good faith and in a manner he or she
reasonably believed to be in, or not opposed to, the best interests of the
corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. In the case of an
action by or on behalf of a corporation, indemnification may not be made if the
person seeking indemnification is adjudged liable, unless the court in which
such action was brought determines such person is fairly and reasonably entitled
to indemnification. The indemnification provisions of the GCL require
indemnification if a director or officer has been successful on the merits or
otherwise in defense of any action, suit, or proceeding to which he or she was a
party by reason of the fact that he or she is or was a director or officer of
the corporation. The indemnification authorized under the GCL is not exclusive
and is in addition to any other rights granted to officers and directors under
the Articles of Incorporation or By-Laws of a corporation or any agreement
between officers and directors and the corporation. A corporation may purchase
and maintain insurance or furnish similar protection on behalf of any officer or
director against any liability asserted against the officer or director and
incurred by the officer or director in such capacity, or arising out of the
status of officer or director of the corporation, whether or not the corporation
would have the power to indemnify him or her against such liability under the
GCL.
The Registrant's Articles of Incorporation: (i) eliminates the personal
liability of the directors of the Registrant to the fullest extent permitted by
the GCL and (ii) provides that the Registrant shall indemnify, to the fullest
extent permitted by the GCL, any and all persons whom it shall have the power to
indemnify under the GCL from all expenses, liabilities, or other matters
referred to in or covered by the GCL. The By-Laws of the Registrant provide that
the Registrant shall have the power to indemnify any person who was or is a
party or is threatened to be made a
II-1
<PAGE>
party to any proceeding (other than an action by or in the right of the
Registrant to procure a judgment in its favor) by reason of the fact that such
person is or was an agent of the Registrant, against expenses, judgments, fines,
settlements, and other amounts actually and reasonably incurred in connection
with such proceeding to the fullest extent permitted under the GCL.
Item 15. Recent Sales of Unregistered Securities.
Since its inception, the Registrant has made the following issuances of
securities, none of which were registered under the Securities Act of 1933, as
amended (the "Securities Act").
On or about June 6, 1997, the Registrant's four founders, all of whom are
foreign residents, contributed an aggregate of $10,000 to the Company in
exchange for an aggregate of 10,000,000 shares of common stock pursuant to Rule
504 promulgated under the Securities Act ("Rule 504").
On June 15, 1997, the Registrant sold an aggregate of 10,000,000 shares of
common stock to various foreign investors pursuant to Rule 504. The gross
proceeds from the sale were $100,000.
On August 8, 1997, the Registrant sold an aggregate of 20,000 shares of
common stock to various foreign investors pursuant to Rule 504. The gross
proceeds from the sale were $60,000.
On April 14, 1998, the Registrant issued 7,600,000 shares of common stock
pursuant to Regulation S promulgated under the Securities Act ("Regulation S")
in exchange for all of the issued and outstanding shares of capital stock of
Marine Shuttle Operations AS.
In May, 1998, the Registrant acquired 3,291,738 shares of Offshore Shuttle
AS ("OSAS") in exchange for 4,937,607 shares of common stock pursuant to
Regulation S. All of such shares were held in escrow until December 21, 1998.
In February 1999, the Registrant sold an aggregate of 1,149,750 shares of
common stock to various foreign investors pursuant to Regulation S. The gross
proceeds from the sale were approximately $5.75 million. Berliner Effektenbank
AG, a German investment bank, received a fee of $229,950 for serving as
placement agent.
In December 1999, the Registrant sold 7,043,285 shares of common stock to
various foreign investors pursuant to Regulation S. The gross proceeds from the
sale were approximately $4.93 million. The shares were sold through Berliner
Effektenbank AG and Christiana Markets, who received fees in the aggregate
amount of $490,430.
In April 2000, the Registrant sold 450,000 shares of common stock to a
foreign investor pursuant to Regulation S. The gross proceeds from the sale were
$315,000.
On April 10, 2000, the Registrant issued an aggregate of 1,030,002 shares
of common stock to two foreign investors in exchange for an aggregate of
1,030,002 shares of common stock of Marine Shuttle Operations AS. The shares
were issued pursuant to Regulation S.
II-2
<PAGE>
In June 2000, the Registrant acquired an additional 1,186,283 shares of
Marine Shuttle Operations AS in exchange for the issuance of an aggregate of
1,186,283 shares of common stock pursuant to Regulation S and Rule 802.
In June, 2000, the Registrant consummated a private placement of 571,429
shares of Common Stock for gross proceeds of $400,000. The shares were sold to a
foreign investor pursuant to Regulation S.
In July, 2000, the Registrant issued a promissory note in the principal
amount of $1.5 million to a foreign person in accordance with Regulation S. The
note is due and payable on or before December 31, 2000, but may be converted
into shares of common stock at the option by the holder.
Item 16. Exhibits.
2.1 Stock Purchase Agreement, dated February 19, 1998, between the Registrant
and Franz Eder. Incorporated by reference to Exhibit 2.1 to the
Registrant's Registration on Form S-1, File No. 333-58465.
3.1 Articles of Incorporation of the Registrant, as amended. Incorporated by
reference to Exhibit 3.1 to the Registrants Registration on Form S-1, File
No. 333-58465.
3.2 Amended and Restated By-laws of the Registrant. Incorporated by reference
to Exhibit 3.2 to the Registrant's Registration on Form S-1, File No.
333-58465.
4.1 Form of Common Stock Certificate. Incorporated by reference to Exhibit 4.1
to the Registrant's Registration on Form S-1, File No. 333-58465.
10.1 Head License Agreement between Marine Shuttle Operations AS and Offshore
Shuttle AS dated March 31, 1998, amended as of September 1, 1998 and as of
November 20, 1998. Incorporated by reference to Exhibit 10.1 to the
Registrant's Registration on Form S-1, File No. 333-58465.
10.2 Co-operation Agreement between Marine Shuttle Operations AS and Schuller
Industrieentsorgung AG. Incorporated by reference to Exhibit 10.2 to the
Registrant's Registration on Form S-1, File No. 333-58465.
10.3 Personnel Services Contract between RC Consultants AS and Marine Shuttle
Operations AS dated February 26, 1998. Incorporated by reference to
Exhibit 10.3 the Registrant's Registration on Form S-1, File No.
333-58465.
10.4 Accounting Services Contract between RC Consultants AS and Marine Shuttle
Operations AS dated February 26, 1998. Incorporated by reference to
Exhibit 10.4 to the Registrant's Registration on Form S-1, File No.
333-58465.
II-3
<PAGE>
10.5 Amended and Restated Loan Agreement, dated as of December 31, 1999,
between the Registrant and ValorInvest Ltd. (including promissory note
dated as of December 31, 1999). Incorporated by reference to Exhibit 10.5
of the Registrant's Annual Report on Form 10-K for the year ended December
31, 1999.
10.6 Marketing Agreement between Marine Shuttle Operations AS and Thyssen
Stahlunion GmbH, dated April 14, 1998. Incorporated by reference to
Exhibit 10.6 to the Registrant's Registration on Form S-1, File No.
333-58465.
10.7 The Registrant's 1998 Stock Option Plan. Incorporated by reference to
Exhibit 10.7 to the Registrant's Registration on Form S-1, File No.
333-58465.
10.8 Employment Agreement, dated as of June 1, 1998, between the Registrant and
Franz Eder (incorporated by reference to Exhibit 10.8 to the Registrant's
Registration on Form S-1, File No. 333-58465), amended by letter agreement
dated April 10, 2000 (incorporated by reference to Exhibit 10.1 of the
Registrant's Form 10-Q for the quarter ended March 31, 2000).
10.9 Employment Agreement, dated as of April 14, 1998, between the Registrant
and Iqbal Akram (incorporated by reference to Exhibit 10.9 to the
Registrant's Registration on Form S-1, File No. 333-58465), amended by
letter agreement dated April 10, 2000 (incorporated by reference to
Exhibit 10.2 of the Registrant's Form 10-Q for the quarter ended March 31,
2000).
10.10 Lease, dated October 15, 2000, by and between Marine Shuttle Operations AS
and RC Gruppen ASA. Incorporated by reference to Exhibit 10 to the
Registrant's Form 10-Q for the quarter ended September 30, 2000.
10.11 Loan Agreement, dated May 13, 1998, between the Registrant and Marine
Shuttle Operations AS. Incorporated by reference to Exhibit 10.12 to the
Registrant's Registration on Form S-1, File No. 333-58465.
10.12 Credit Agreement, dated February 17, 2000 between the Registrant and MFC
Merchant Bank, S.A. Incorporated by reference to Exhibit 10.13 to the
Registrant's Annual Report on Form 10-K for the year ended December 31,
1999.
10.13 Agreement, dated as of February 8, 2000, among the Registrant, Mancorp AS,
and Stephen Adshead. Incorporated by reference to Exhibit 10.14 of the
Registrant's Annual Report on Form 10-K for the year ended December 31,
1999.
II-4
<PAGE>
10.14 Addendum No. 1 to Intellectual Property Agreement among Gunnar Foss, Per
Bull Haugsoen, Marine Shuttle Operations AS, and Marine Shuttle Operations
Inc. Incorporated by reference to Exhibit 10.15 of the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1999.
10.15 Frame Agreement for Procurement Services between Marine Shuttle Operations
AS and Thyssen Stahlunion GmbH (incorporated by reference to Exhibit 10.1
of the Registrant's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1999).
10.16 Loan Agreement (including promissory note) between Marine Shuttle
Operations AS and Statens naerings og distriktsutviklingsfond (the
Norwegian Industrial and Regional Development Fund). Incorporated by
reference by Exhibit 10 to the Registrant's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1999.
10.17 Royalty Agreement, dated June 23, 2000 between the Registrant and Mr.
Gunnar Foss. Incorporated by reference to Exhibit 10.1 of the Registrant's
Form 10-Q for the quarter ended June 30, 2000.
10.18 Loan Agreement, dated July 26, 2000 between the Registrant and Mr. Holger
Timm (including promissory note dated July 26, 2000). Incorporated by
reference to Exhibit 10.2 of the Registrant's Form 10-Q for the quarter
ended June 30, 2000.
21. List of the Registrant's Subsidiaries.
23.1 Consent of Ernst & Young LLP
23.2 Consent of Deloitte & Touche
27. Financial Data Schedule
99.1 Statement of Approval from Det Norske Veritas AS regarding the technical
feasibility of the Offshore Shuttle concept. Incorporated by reference to
Exhibit 99.1 to the Registrant's Registration on Form S-1, File No.
333-58465.
99.2 Engagement letter, dated October 26, 1998, between the Registrant and MFC
Merchant Bank S.A. (incorporated by reference to Exhibit 99.2 to the
Registrant's Registration on Form S-1, File No. 333-58465), amended by
letter agreement dated June 7, 2000 (incorporated by reference to Exhibit
99.1 of the Registrant's Form 10-Q for the quarter ended June 30, 2000).
-----------
Item 17. Undertakings.
II-5
<PAGE>
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than payment by the Registrant of expenses incurred or paid
by a director, officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by final adjudication of
such issue.
The undersigned Registrant hereby undertakes that it will:
(1) For determining any liability under the Securities Act, treat
each post-effective amendment that contains a form of Prospectus as a new
registration statement for the securities offered in the registration
statement, and that offering of the securities at that time as the initial
bona fide offering of those securities.
(2) File, during any period in which it offers or sells securities,
a post-effective amendment to this Registration Statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or
together, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more
than a 20 percent change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the
effective registration statement;
(iii) Include any material information with respect to the
plan of distribution not previously discussed in the registration
statement or any material change to such information in the
registration statement.
(3) File a post-effective amendment to remove from registration any
of the securities that remain unsold at the end of the offering.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on November 22, 2000.
MARINE SHUTTLE OPERATIONS INC.
By: /s/ Franz Eder
----------------
Franz Eder, President
(Principal Executive Officer)
By: /s/ Iqbal Akram
----------------
Iqbal Akram, Chief Financial Officer
(Principal Financial and Accounting Officer)
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Franz Eder, as his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and his name, place and stead, in any and all capacities, to sign any
and all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent, full power and authority to do and perform
each and every act and thing requisite and necessary to be done in connection
therewith, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his substitute or substitutes, may lawfully do or cause to be done by
virtue thereof.
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates stated.
Signature Title Date
--------- ----- ----
/s/ Franz Eder Director November 22, 2000
-------------------
Franz Eder
/s/ Iqbal Akram Director November 22, 2000
-------------------
Iqbal Akram
/s/ Jurgen Ternieden Director November 22, 2000
-------------------
Jurgen Ternieden
/s/ Stephen Adshead Director November 22, 2000
-------------------
Stephen Adshead
/s/ Hurbert Besner Director November 22, 2000
-------------------
Hurbert Besner
<PAGE>
INDEX TO EXHIBITS
Exhibit Document Page
------- -------- ----
2.1 Stock Purchase Agreement, dated February 19, 1998, between the
Registrant and Franz Eder. Incorporated by reference to
Exhibit 2.1 to the Registrant's Registration on Form S-1, File
No. 333-58465.
3.1 Articles of Incorporation of the Registrant, as amended.
Incorporated by reference to Exhibit 3.1 to the Registrant's
Registration on Form S-1, File No. 333-58465.
3.2 Amended and Restated By-laws of the Registrant. Incorporated
by reference to Exhibit 3.2 to the Registrant's Registration
on Form S-1, File No. 333-58465.
4.1 Form of Common Stock Certificate. Incorporated by reference to
Exhibit 4.1 to the Registrant's Registration on Form S-1, File
No. 333-58465.
10.1 Head License Agreement between Marine Shuttle Operations AS
and Offshore Shuttle AS dated March 31, 1998, amended as of
September 1, 1998 and as of November 20, 1998. Incorporated by
reference to Exhibit 10.1 to the Registrant's Registration on
Form S-1, File No. 333-58465.
10.2 Co-operation Agreement between Marine Shuttle Operations AS
and Schuller Industrieentsorgung AG. Incorporated by reference
to Exhibit 10.2 to the Registrant's Registration on Form S-1,
File No. 333-58465.
10.3 Personnel Services Contract between RC Consultants AS and
Marine Shuttle Operations AS dated February 26, 1998.
Incorporated by reference to Exhibit 10.3 the Registrant's
Registration on Form S-1, File No. 333-58465.
10.4 Accounting Services Contract between RC Consultants AS and
Marine Shuttle Operations AS dated February 26, 1998.
Incorporated by reference to Exhibit 10.4 to the Registrant's
Registration on Form S-1, File No. 333-58465.
10.5 Amended and Restated Loan Agreement, dated as of December 31,
1999, between the Registrant and ValorInvest Ltd. (including
promissory note dated as of December 31, 1999). Incorporated
by reference to Exhibit 10.5 of the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1999.
10.6 Marketing Agreement between Marine Shuttle Operations AS and
Thyssen Stahlunion GmbH, dated April 14, 1998. Incorporated by
reference to Exhibit 10.6 to the Registrant's Registration on
Form S-1, File No. 333-58465.
10.7 The Registrant's 1998 Stock Option Plan. Incorporated by
reference to Exhibit 10.7 to the Registrant's Registration on
Form S-1, File No. 333-58465.
<PAGE>
10.8 Employment Agreement, dated as of June 1, 1998, between the
Registrant and Franz Eder (incorporated by reference to
Exhibit 10.8 to the Registrant's Registration on Form S-1,
File No. 333-58465), amended by letter agreement dated April
10, 2000 (incorporated by reference to Exhibit 10.1 of the
Registrant's Form 10-Q for the quarter ended March 31, 2000).
10.9 Employment Agreement, dated as of April 14, 1998, between the
Registrant and Iqbal Akram (incorporated by reference to
Exhibit 10.9 to the Registrant's Registration on Form S-1,
File No. 333-58465), amended by letter agreement dated April
10, 2000 (incorporated by reference to Exhibit 10.2 of the
Registrant's Form 10-Q for the quarter ended March 31, 2000).
10.10 Lease, dated October 15, 2000, by and between Marine Shuttle
Operations AS and RC Gruppen ASA. Incorporated by reference to
Exhibit 10 to the Registrant's Form 10-Q for the quarter ended
September 30, 2000.
10.11 Loan Agreement, dated May 13, 1998, between the Registrant and
Marine Shuttle Operations AS. Incorporated by reference to
Exhibit 10.12 to the Registrant's Registration on Form S-1,
File No. 333-58465.
10.12 Credit Agreement, dated February 17, 2000 between the
Registrant and MFC Merchant Bank, S.A. Incorporated by
reference to Exhibit 10.13 to the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1999.
10.13 Agreement, dated as of February 8, 2000, among the Registrant,
Mancorp AS, and Stephen Adshead. Incorporated by reference to
Exhibit 10.14 of the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1999.
10.14 Addendum No. 1 to Intellectual Property Agreement among Gunnar
Foss, Per Bull Haugsoen, Marine Shuttle Operations AS, and
Marine Shuttle Operations Inc. Incorporated by reference to
Exhibit 10.15 of the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1999.
10.15 Frame Agreement for Procurement Services between Marine
Shuttle Operations AS and Thyssen Stahlunion GmbH
(incorporated by reference to Exhibit 10.1 of the Registrant's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1999).
10.16 Loan Agreement (including promissory note) between Marine
Shuttle Operations AS and Statens naerings og
distriktsutviklingsfond (the Norwegian Industrial and Regional
Development Fund). Incorporated by reference by Exhibit 10 to
the Registrant's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1999.
10.17 Royalty Agreement, dated June 23, 2000 between the Registrant
and Mr.
<PAGE>
Gunnar Foss. Incorporated by reference to Exhibit 10.1 of the
Registrant's Form 10-Q for the quarter ended June 30, 2000.
10.18 Loan Agreement, dated July 26, 2000 between the Registrant and
Mr. Holger Timm (including promissory note dated July 26,
2000). Incorporated by reference to Exhibit 10.2 of the
Registrant's Form 10-Q for the quarter ended June 30, 2000.
21. List of the Registrant's Subsidiaries. Incorporated by
reference to Exhibit 21 to the Registrant's Registration on
Form S-1, file No. 333-58465
23.1 Consent of Ernst & Young LLP
23.2 Consent of Deloitte & Touche
27. Financial Data Schedule
99.1 Statement of Approval from Det Norske Veritas AS regarding the
technical feasibility of the Offshore Shuttle concept.
Incorporated by reference to Exhibit 99.1 to the Registrant's
Registration on Form S-1, File No. 333-58465.
99.2 Engagement letter, dated October 26, 1998, between the
Registrant and MFC Merchant Bank S.A. (incorporated by
reference to Exhibit 99.2 to the Registrant's Registration on
Form S-1, File No. 333-58465), amended by letter agreement
dated June 7, 2000 (incorporated by reference to Exhibit 99.1
of the Registrant's Form 10-Q for the quarter ended June 30, 2000).
