UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Amendment No. 1 to
FORM 10-QSB/A
[ x ] Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the Period ended September 30, 1995.
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the transition period from ----- to -----.
Commission File Number 0-18239
SEAHAWK DEEP OCEAN TECHNOLOGY, INC.
---------------------------------------------------------------
(Exact Name of Small Business Issuer as Specified in its Charter)
Colorado 84-1087879
- ------------------------------- -------------------
(State or other jurisdiction of (IRS Employer Iden-
incorporation or organization) tification No.)
5102 South Westshore Boulevard, Tampa, Florida 33611
---------------------------------------------------------
(Address of Principal Executive Offices Including Zip code)
(813) 832-4040
----------------------------------------------
(Issuer's Telephone Number, Including Area Code)
Not Applicable
---------------------------------------------------
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report.)
Check whether the Issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the Registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
[ X ] Yes [ ] No
There were 21,375,168 shares of the Registrant's no par value Common Stock
outstanding as of September 30, 1995.
<PAGE>
SEAHAWK DEEP OCEAN TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
ASSETS (Unaudited)
September 30 December 31
1995 1994
----------- -----------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 6,467 $ 4,175
Marketable securities 9,184 135,297
Accounts receivable
Trade 127,231
Other 10,350 15,630
Merchandise inventory 8,016 8,016
Prepaid expenses 35,330 16,754
----------- -----------
Total current assets 69,348 307,103
----------- -----------
PROPERTY AND EQUIPMENT
Net of accumulated depreciation
of $1,214,062 and $1,053,031 1,949,233 2,082,387
----------- -----------
OTHER ASSETS
Artifacts 307,259 310,520
Accounts and Notes Receivable
- affiliates less losses in
excess of investment in
affiliates of $1,696,212 and
$1,671,292 456,238 402,670
Deposits 12,038 10,170
----------- -----------
Total other assets 775,535 723,359
----------- -----------
TOTAL ASSETS $ 2,794,115 $ 3,112,850
----------- -----------
----------- -----------
</TABLE>
<PAGE>
SEAHAWK DEEP OCEAN TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY (Unaudited)
September 30 December 31
1995 1994
----------- -----------
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 338,162 $ 450,204
Accrued expenses
Salaries 208,926 69,282
Interest due related parties 66,618 48,851
Interest due to others 145,499 76,120
other 11,199 7,988
Preferred ships' mortgage 250,000 970,590
Due to related parties 371,756 504,456
Notes payable - others 384,033 294,500
----------- -----------
Total current liabilities 1,776,193 2,421,991
----------- -----------
LONG TERM LIABILITIES
Notes payable - related 65,000 -
Preferred ships' mortgage 775,000 -
----------- -----------
TOTAL LIABILITIES 2,616,193 2,421,991
----------- -----------
STOCKHOLDERS' EQUITY
Preferred stock - no par value
60,000,000 shares authorized;
200,000 and 200,000 shares
issued and outstanding 50,000 50,000
Common stock - no par value;
30,000,000 shares authorized;
21,400,168 and 19,598,115
shares issued and outstanding 11,968,682 11,668,663
Paid in capital-stock options 5,191 5,191
Accumulated (deficit) (11,845,951) (11,032,995)
----------- -----------
Total Stockholders' equity 177,922 690,859
----------- -----------
TOTAL LIABILITY AND STOCKHOLDERS' EQUITY $ 2,794,115 $ 3,112,850
----------- -----------
----------- -----------
</TABLE>
<PAGE>
SEAHAWK DEEP OCEAN TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30th Ended September 30th
1995 1994 1995 1994
--------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
REVENUES
Income from Affiliates $ 47,830 $ 4,035 $ 55,240 $ 42,263
Income from Others 150,393 2,437 382,249 4,937
---------- ---------- ---------- -----------
Total Revenues 198,223 6,472 437,489 47,200
OPERATING EXPENSES
Vessel Operations 120,172 112,857 211,860 233,873
Vessel Operations
- Affiliates 18,000 18,000 54,000 54,000
Conservation 12,457 8,523 29,462 25,919
Depreciation 55,266 59,363 161,031 245,121
Rent 20,768 20,768 62,303 61,803
---------- ---------- ---------- -----------
Total Operating Expenses 226,662 219,511 518,656 620,715
GENERAL AND ADMINISTRATIVE
EXPENSES 322,550 128,801 563,804 374,984
---------- ---------- ---------- -----------
Total Expenses 549,212 348,312 1,082,460 995,699
---------- ---------- ---------- -----------
(LOSS) FROM OPERATIONS (350,990) (341,840) (644,971) (948,499)
---------- ---------- ---------- -----------
OTHER INCOME (EXPENSE)
Interest income-
affiliate 7,562 - 22,438 -
Interest income-others 3 1,151 3 1,151
Interest expense (65,463) (45,939) (184,140) (113,608)
Other income 8,034 11,059 8,034 11,168
Gain on sale of market-
able securities 4,875 - 19,900 -
Loss on disposal of
equipment - (2,155) - (2,155)
Loss on investment in
less than 50%
owned entities (9,951) (16,887) (34,220) (55,258)
---------- ---------- ---------- -----------
Total other income (expense) (54,940) (52,772) (167,984) (158,703)
NET (LOSS) $ (405,930) $ (394,611) $ (812,955) $(1,107,201)
---------- ---------- ---------- -----------
---------- ---------- ---------- -----------
NET (LOSS) PER SHARE $ (0.02) $ (0.03) $ (0.04) $ (0.07)
---------- ---------- ---------- -----------
Weighted average number of
common shares and common
shares equivalents
outstanding. 20,488,249 15,307,307 20,488,249 15,307,307
---------- ---------- ---------- -----------
</TABLE>
<PAGE>
SEAHAWK DEEP OCEAN TECHNOLOGY, INC. AND SUBSIDIARIES
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION> Sources and (use) of Cash
Nine Months Ended September 30th
1995 1994
----------- -----------
<S> <C> <C>
Cash Flows from Operating Activities
Net ( Loss) $ (812,955) $(1,107,201)
Adjustments to reconcile net loss to net
cash used by operating activities :
Depreciation 161,030 245,121
Provision for bad debt 174,310 -
Loss on disposal of equipment - 2,155
Profit on sale of marketable securities (19,900) -
Loss on Investment in less than 50%
owned entities 34,220 55,258
Services Acquired through issuance
of common stock 6,250 28,443
Decrease(increase) in trade accounts
receivable (46,389) (416)
Decrease(increase) in trade accounts
receivable - affiliates (56,740) (35,613)
Decrease(increase) in other receivables (4,720) 45,531
Decrease(increase) in other receivables
- affiliates (12,438) -
Decrease(increase) in inventory 3,261 9
Decrease(increase) in prepaid expense 18,576 (31,489)
Decrease(increase) in deposits (1,868) 3,101
(Decrease) increase in accounts payable (107,433) 28,746
(Decrease)increase in accrued expenses 279,984 209,289
--------- ---------
Total Adjustments 390,991 550,135
--------- ---------
Net Cash generated (used) by
operating activities $(421,964) $(557,066)
--------- ---------
Cash Flows from Investing Activities
Purchase of equipment $ (27,877) $ (12,802)
Purchase of artifacts - -
Increase in other investments - -
Issuance of notes receivable from
affiliates - -
Proceeds from disposal of equipment - 655,000
Proceeds from the sale of marketable
securities 146,013 -
Payments received on notes receivable - -
Decrease in investment in affiliate - -
--------- ---------
Net Cash provided (used) by
investing activities (118,136) 642,198
--------- ---------
Cash Flows from Financing Activities
Proceeds from issuance of common stock 174,709 245,850
Proceeds from issuance of warrants - -
Advances from related parties - -
Issuance of notes payable - other 162,011 208,000
Issuance of notes payable - related 15,000 7,000
Repayment of notes - (21,000)
Repayment of notes - related (45,600) -
Payments on capital lease payable - (500,000)
--------- ---------
Net Cash provided (used) by
financing activities 306,120 (60,150)
--------- ---------
NET (DECREASE) INCREASE IN CASH
AND CASH EQUIVALENT 2,292 24,983
CASH AND CASH EQUIVALENT
BEGINNING OF QUARTER 4,175 2,705
--------- ---------
CASH AND CASH EQUIVALENT
END OF QUARTER $ 6,467 $ 27,688
--------- ---------
--------- ---------
</TABLE>
<PAGE>
SEAHAWK DEEP OCEAN TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
Summary of Significant Non-Cash Transactions
During 1994 several debt holders, through the exercise of warrants and
options, converted their debt to stock. A summary of the debt converted to
stock is as follows:
[CAPTION]
Common Preferred
Amount Shares Amount Shares
--------- ---------- ---------- -----------
[S] [C] [C] [C] [C]
Accounts payable $ 25,477 78,074
Accounts payable - related 59,347 395,943
Accrued interest 77,064 314,208
Notes payable - related 139,498 619,407
Notes payable - other 740,000 2,950,032 $50,000 200,000
Debentures 30,000 120,000
--------- ---------- ---------- -----------
$1,071,386 4,477,664 $50,000 200,000
During 1994 the Company issued 46,875 shares of common stock for a $15,000
receivable.
During 1994 the Company issued 800,000 shares of common stock in exchange for
66,667 shares of Valley Forge Scientific, Inc, common stock in an exchange
valued at $200,000.
During 1994 the Company issued 100,000 shares of common stock valued at
$30,000 for a 34 foot workboat.
During 1995 several debt holders, through the exercise of warrants and
options, converted their debt to stock. A summary of the debt converted to
stock is as follows:
[CAPTION]
Common
Amount Shares
----------- -----------
[S] [C] [C]
Accounts payable $ 13,859 68,926
Accrued interest 5,023 19,055
Accrued salary 83,702 264,774
Notes payable - related 5,947 19,823
Notes payable - other 7,478 29,912
----------- -----------
$ 116,009 402,490
During 1995 the Company issued 60,000 shares for services valued at $9,300.
<PAGE>
SEAHAWK DEEP OCEAN TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES CONSOLIDATED ON FINANCIAL STATEMENTS
SEPTEMBER 30, 1995 (Unaudited)
NOTE 1 BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Seahawk Deep
Ocean Technology, Inc. and subsidiaries (Company) have been prepared in
accordance with the rules and regulations of the Securities and Exchange
Commission and the instructions to Form 10-QSB and, therefore, do not include
all information and footnotes normally included in financial statements
prepared in accordance with generally accepted accounting principles. These
interim consolidated financial statements should be read in conjunction with
the consolidated financial statements and notes included in the Company's
Form 10-KSB for the year ended December 31,1994.
In the opinion of management, these financial statements reflect all
adjustments (including normal recurring adjustments) necessary for a fair
presentation of the financial position as of September 30, 1995, results of
operations, and cash flows for the interim periods presented. Operating
results for the nine months ended September 30, 1995, are not necessarily
indicative of the results that may be expected for the year ended
December 31, 1995.
NOTE 2 AFFILIATES FINANCIAL INFORMATION
The Company is the General Partner and a less than 50% interest owner in
Seahawk I, Ltd., Seahawk II, Ltd. and Eagle Partners, Ltd., all Florida
limited partnerships. These partnerships are accounted for on the equity
method. Summarized financial statement information is shown on page 10.
NOTE 3 MARKETABLE SECURITIES
At September 30, 1995, marketable securities consist of 3,867 shares of common
stock of Valley Forge Scientific, Inc., a stock traded in the over-the-counter
market and included in the NASDAQ Systems - Small Cap issues under the symbol
VLFS. These shares had an original cost of $11,601 and a fair market value of
$14,018 at September 30, 1995. The Company has adopted SFAS No. 115 which
requires investments in equity securities to be reported at fair value.
Accordingly, an unrealized loss of $35,603 was recorded in the financial
statements for the period ending December 31, 1994.
NOTE 4 INCOME TAXES
Effective January 1, 1993, the Company changed its method of accounting for
income taxes from the deferred method to the liability method required by FASB
Statement No. 109, "Accounting for Income Taxes". Prior to January 1, 1993,
there was no deferred taxation liability due to net operating loss carry
forwards of approximately $6,000,000. Therefore there is no cumulative effect
on the Financial Statements of adopting Statement 109.
NOTE 5 COMMERCIAL UNION PREFERRED SHIP MORTGAGE
On February 9, 1994 and as amended on April 1, 1994 , the Company and
Commercial Union Capital Limited entered into a joint stipulation agreement
to delay sale of the Seahawk Retriever. The settlement provided for the
Company to pay Commercial Union $500,000 in cash and sign a $1,000,000 note
payable one year from closing secured by a first preferred ship mortgage on
the Seahawk Retriever, her engines, tackle, equipment and apparel. The note
was non-interest bearing through its due date, April 15, 1995. In March 1995,
Commercial Union agreed to extend the expiration date of the note to June 1,
1995 and have since agreed that the mortgage will be extended for two years
until June 2, 1997. Under the terms of the agreement, the new principal
balance will be $1,025,000, and will be paid in eight quarterly installments,
with interest charged at 5% per annum over the Citybank New York prime rate
in effect on June 2, 1995, and adjusted thereafter biannually on the first
day of December and June each year. The first seven quarterly installments
will comprise the interest accrued and due on the date of the installment
plus $50,000 of the principal. The eighth and final installment will comprise
all the remaining amount due under the note. The current portion of the
principal under this note is $250,000 at September 30, 1995. Due to the
inability to collect payments due from chartering the vessel, the Company
was unable to make the payment of principal and interest due to Commercial
Union on September 2, 1995, and is currently seeking a new charter for the
vessel M/V Seahawk Retriever that will enable it to make the past due and
future payments to Commercial Union.
NOTE 6 CONTINGENCIES
During February, 1994 the Company agreed with Carl Anderson, a principal
shareholder, to convert two notes ( "the Notes"), one for $44,448 and the
other for $80,936 which, together with accrued interest thereon, totaled
$141,804, into 567,212 shares of Common Stock in the Company. The Notes were
in the name of Gregory P. Stemm, a former officer and director of the Company
who had sold them to Anderson. On April 27, 1995, Stemm filed a lawsuit
against the Company alleging that (a) the Company must pay him the principal
and interest due on the Notes plus attorneys' fees and such other relief as
the Court sees just and proper, and (b) Stemm is entitled to immediate
possession of the Notes, and (c) the Company and Anderson conspired to deprive
Stemm of his right to the Notes and as a result Stemm is entitled to damages
due to this action.
The Company defended this action on the basis that it was verbally informed
by both Anderson and Stemm that the Notes had been transferred to Anderson
and that the Company relied on their representations and converted the Notes
in good faith. The Company settled this matter with Anderson in November 1995
by Anderson paying the purchase price for the stock issued upon conversion of
the Notes. The Company settled the matter with Stemm by issuing a $90,000
promissory note for two years at 12% per annum and issuing to Stemm 360,000
shares of common stock and 360,000 warrants to purchase shares of common stock
at $0.32 per share. The Company had a cost of legal expense and settling this
matter of $15,305.
NOTE 7 SUBSEQUENT EVENTS
During November 1995, the Company acquired 100% of the outstanding common
stock of Seahawk, Inc., an Alabama corporation that owns the research vessel
R/V Seahawk in a transaction where the Company issued 2,400,000 shares of its
Common Stock to the shareholders of Seahawk, Inc. The R/V Seahawk is an 84
foot, 150 gross tons monohull ship that is fully equipped to carry out deep
sub-sea survey work, including side scan sonar, magnetometry and bathymetric
surveys as well as remotely operated vehicle operations. The Company will
account for this acquisition as the purchase of an asset. The basis for the
valuation will be the fair value of the vessel received.
NOTE 8 COMMON STOCK TRANSACTIONS WITH RELATED PARTIES
During January 1995, the Company issued 264,774 shares of Common Stock to the
following two employees and officers of the Company as payment for accrued and
unpaid remuneration for the year ended December 31, 1994:
[CAPTION]
Number Unpaid
of Shares Remuneration
----------- -----------
[S] [C] [C]
John Lawrence 132,387 $41,850.87
John Balch 132,387 $41,850.87
During January 1995, the Company issued 90,938 shares of its Common Stock to
Carl Anderson and 46,875 shares of its Common Stock to A. F. Budge, two
accredited investors. These investors originally invested in a private
offering during June 1994, and according to the terms of the 1994 private
offering, if the Company did not register the original shares by the end of
1994, the Company was required to issue additional shares in an amount equal
to 30% of the shares originally purchased.
During May 1995, the Company issued 240,000 shares of its Common Stock to Carl
Anderson, a principal shareholder. Mr. Anderson originally invested in a
private offering during November 1994, and according to the terms of the 1994
private offering, if the Company did not register the original shares by March
10, 1995, the Company was required to issue additional shares in an amount
equal to 30% of the shares originally purchased.
During July 1995, the Company issued 25,000 shares to Daniel Derfus, a
Director, who agreed to convert part of an existing loan and accured interest
into Common Stock. Mr. Derfus exercised existing warrants at $.30 per share.
During September 1995, the Company issued 24,000 shares of its Common Stock to
John C. Morris, a shareholder and former officer and director, upon payment to
the Company of $6,000. These shares were sold because Mr. Morris exercised
anti-dilution rights he held under previously issued warrants.
During October 1995, the Company issued 16,000 shares of its Common Stock to
John C. Morris, a shareholder and former officer and director, upon payment to
the Company of $4,000. These shares were sold because Mr. Morris exercised
anti-dilution rights he held under previously issued warrants.
During October 1995, the Company issued 360,000 shares of its Common Stock to
Gregory Stemm, a shareholder and former officer and director, pursuant to a
settlement agreement which resolved a lawsuit filed by Mr. Stemm against the
Company.
During November 1995 the Company issued 2,400,000 shares of its Common Stock
to the six owners of Seahawk, Inc. the corporation which owned the vessel R/V
Seahawk in exchange for 100% of the outstanding stock of Seahawk, Inc.
The Board of Directors was of the opinion that the terms of the above
transactions were at least as favorable as those which could be obtained from
independent third parties.
NOTE 9 COMMON STOCK TRANSACTIONS WITH OTHERS
During January 1995, the Company issued 100,000 shares of its Common Stock to
Buckeye Communications, Inc. in accordance with an amendment to the terms of a
December 1994 agreement. During December 1994, the Company issued 800,000
shares of its Common Stock and 200,000 shares of the Company's Series 1
Convertible Preferred Stock to Buckeye as payment for a $250,000 loan.
During January 1995, the Company issued 162,750 shares of its Common Stock to
three accredited investors. The three investors originally invested in a
private offering during June 1994, and according to the terms of the 1994
private offering, if the Company did not register the original shares by the
end of 1994, the Company was required to issue additional shares in an amount
equal to 30% of the shares originally purchased.
During March 1995, the Company issued 31,926 shares of its Common Stock to an
individual for $4,609 of services rendered.
During May 1995 the Company issued 40,000 shares of its Common Stock to one
person in payment for a right to 10% of any cargo recovered from a shipwreck
in the Atlantic, code named Golden Eagle.
During June 1995 the Company issued 40,000 shares to a shareholder who agreed
to convert part of an existing loan and accrued interest into Common Stock by
exercising existing warrants at $.25 per share.
During July 1995, the Company issued 40,790 shares of its Common Stock to a
corporation in connection with services performed by the corporation.
During August 1995, the Company issued 20,000 shares of its Common Stock to
one individual in accordance with an amendment to an agreement for the
individuals right to 10% of any cargo recovered from a shipwreck in the
Atlantic, code named Golden Eagle.
During October 1995, the Company issued 50,000 shares of its Common Stock to
an individual pursuant to a loan aggreement entered into during September
1995 which provided that if a $10,000 loan was not repaid by the October 1995
due date, the loan would be converted into Common Stock at $.20 per share.
During October 1995, the Company issued 105,269 shares of its Common Stock to
a shareholder which exercised an outstanding option to purchase 105,269 shares
at a price of $.15 per share.
During October 1995, the Company issued 80,000 shares of its Common Stock to
two individuals who agreed to convert a loan and interest amounting to
$20,000 to stock.
During November 1995, the Company issued 1,259,136 shares of its Common Stock
to 20 accredited investors who invested a total of $314,784 in cash in a
private placement. These stock purchases were entered to the Company's books
from August through December, coincident with receipt of payment for the
shares.
<PAGE>
SEAHAWK DEEP OCEAN TECHNOLOGY, INC. AND SUBSIDIARIES
BALANCE SHEETS - AFFILIATES
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1995
Seahawk I, Seahawk II, Eagle Part-
Ltd. Ltd. ners, Ltd.
----------- ----------- -----------
<S> <C> <C> <C>
Current Assets
Cash $ 845 $ 52 $ 0
Accounts receivable 421 - -
Inventory - other 1,805 - -
----------- ----------- -----------
Total Current Assets 3,071 52 0
----------- ----------- -----------
Other Assets
Artifact inventory 784,567 - -
----------- ----------- -----------
Total Assets 787,638 52 0
----------- ----------- -----------
Current Liabilities
Accounts payable-trade 4,087 2,217 3,525
Accounts payable-general partner 761,983 14,928 1,027,519
Accrued liabilities 35,654 - -
Notes payable - general partner 300,000 - -
Notes payable - limited partners 32,886 - -
----------- ----------- -----------
Total Current Liabilities 1,134,610 17,145 1,031,044
----------- ----------- -----------
Partners' Capital
Capital contributed 2,511,041 1,371,251 150,100
Accumulated loss (2,858,013) (1,388,344) (1,181,144)
----------- ----------- -----------
Net Capital (346,972) (17,093) (1,031,044)
----------- ----------- -----------
Total Liabilities
and Capital $ 787,638 $ 52 $ 0
----------- ----------- -----------
</TABLE>
STATEMENTS OF OPERATION - AFFILIATES
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1995
Seahawk I, Seahawk II, Eagle Part-
Ltd. Ltd. ners, Ltd.
----------- ----------- -----------
<S> <C> <C> <C>
Revenues $ 141 $ 0 $ 0
Expenses
Operating expenses 225 0 0
General and Administrative 11,090 1,890 9,980
----------- ----------- -----------
Total Expenses 11,315 1,890 9,980
----------- ----------- -----------
Other Income (Expenses) (27,241) 0 0
----------- ----------- -----------
Net (Loss) $ (38,556) $ (1,890) $ (9,980)
----------- ----------- -----------
</TABLE>
Item 2 Management Discussion and Analysis of Financial Conditions and Results
of Operations.
Results of Operations
Three Months Ended September 30, 1995 Compared to Three Months Ended
September 30, 1994
The net loss for the three months to September 30, 1995 was $405,930 compared
to a loss of $394,611 in the corresponding quarter of 1994.
Total revenues in the 1995 quarter at $198,223 were up by $191,751 from the
1994 quarter largely as a result of revenue being earned on the charter of the
vessel M/V Seahawk Retriever ($150,318), and from marine operations conducted
by the R/V Seahawk ($45,250). The increase in revenue was offset by total
expenses of $542,962 incurred in the third quarter of 1995, compared to
$348,311 in the equivalent period in 1994, which resulted in the third quarter
loss from operations being slightly higher at $344,740 in 1995 compared to
$341,840 in 1994.
The Company's costs of vessel operations of $113,922 increased by $1,065 for
the quarter ending September 30, 1995, as compared to the third quarter in
1994 when vessel operations costs were $112,857. Additional expenses were
incurred during the current quarter to mobilize the vessel R/V Seahawk and
perform survey services for Eagle Miners, Ltd., an affiliated client, while
the vessel M/V Seahawk Retriever was chartered to International Diving and
Consulting Services, Inc. resulting in an offsetting decrease in associated
expenses during the current quarter for that vessel. Insurance costs were
down by $2,359 and dockage fees were down an additional $7,029 for the third
quarter of 1995 compared to the equivalent period in 1994. The cost of
supplies and consumables were down by $564 with the cost for the quarter
ending September 30, 1995 being $3,484 compared to $4,048 in the same quarter
last year. Crew costs of $54,024 during the current quarter were down $2,505
compared to the same quarter in 1994. The costs of fuel (up $3,170),
consumables (up $1,934), and rented ship's equipment (up $12,607) all
increased during the quarter ending September 30, 1995 as compared to the
same quarter during 1994. Vessel rental of $18,000 was unchanged for the
three months to September 30, 1995 compared to the three months ended
September 30, 1994.
The cost of conservation and archaeology increased by $3,933 in the 3rd
quarter of 1995 as compared to the same quarter in 1994. During the 1995
quarter these costs were $12,457 while such costs were $8,523 during the 1994
quarter. The increase was primarily due to increased payroll during the
current quarter as compared to the same quarter during 1994.
Depreciation was $55,266 for the quarter ending September 30, 1995, $4,097
less than the charge for depreciation in the equivalent period in 1994. This
was due to equipment reaching the end of it's depreciable life at the 1994
year end. The Company expects that adoption of SFAS No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of, which will become effective for fiscal years beginning after
December 15, 1995, would have no effect on the Financial Statements as
of September 30, 1995.
The cost of office rent remained unchanged from the equivalent period in 1994
at $20,768.
Administration costs increased by $193,749 to $322,550 in the quarter ending
September 30, 1995 from $128,801 during the same period in 1994. This was
primarily due to the Company providing for the possible uncollectability of
an account receivable of $173,620 due by International Diving & Consulting
Services, Inc. from the charter of the M/V Seahawk Retriever. Commission
expense related to sales of a private placement increased by $14,400 during
the current quarter as there was no such expense during the same quarter in
1994. The costs of accounting increased by $3,255 while Payroll and
Consultancy increased by $10,500 during the quarter ending September 30, 1995
as compared to September 30, 1994. Telephone and Communication expense
decreased during the current quarter of 1995 to $4,693 from $10,650 during
the same quarter in 1994 when such costs were higher because the Company was
actively engaged in seeking a survey permit in South America.
Interest expense was higher at $65,463 for the quarter ending September 30,
1995 compared to $45,939 in the third quarter of 1994. The increase was
primarily due to interest expense charged by Commercial Union in extending
the note payable on the preferred ships' mortgage.
The loss on investment in less than 50% owned entities was $9,951 in the 1995
quarter, down from $16,887 in the third quarter of 1994. These losses
represent the company's share of losses of Seahawk I, Ltd., Seahawk II, Ltd.,
and Eagle Partners, Ltd., partnerships in which the company is the managing
general partner. Seahawk I, Ltd. produced a loss of $6,761 primarily
resulting from efforts to develop a market for the artifacts recovered from
the Tortugas Shipwreck Site and from the cost of quarterly accounting
requirements. Seahawk II, Ltd. did not produce any losses during the period.
Eagle Partners, Ltd. incurred administrative and operating costs of $3,190
which resulted in a net loss of that amount for the quarter.
Results of Operations
Nine Months Ended September 30, 1995 Compared to Nine Months Ended
September 30, 1994
The net loss for the three quarters to September 30, 1995 was $812,955 as
compared to a loss of $1,107,201 in the corresponding period of 1994.
The reduced loss for the nine months ending September 30, 1995 compared to
the nine months ending September 30, 1994 resulted from an increase in
revenues of $390,289 while operating expenses (down by $102,059 to $518,656)
decreased and administrative expenses (up by $188,820 to $563,804) increased.
The most significant revenues and costs reductions resulted primarily from the
charter of the M/V Seahawk Retriever which provided an increase in revenue of
$381,667 during the 1995 period while there was no such revenue during the
same nine months in 1994. There also was a reduction of $28,263 in marine
operations expense to $205,610 for the nine months ending September 30, 1995
compared to $233,873 for the equivalent period during 1994. The major saving
in the cost of vessel operations were achieved by decreases in the costs of
insurance (down $9,478), dockage (down $14,927), supplies and consumables
(down $2,286), and repairs (down by $3,005).
A reduction of $84,089 in depreciation expense during the nine months ending
September 30, 1995 as compared to the equivalent nine months of 1994,
resulted mainly from the sale of the ROV Merlin and associated equipment
during 1994 and the expiration of useful life of certain computer equipment.
An increase in interest expense of $69,795 during the nine months ending
September 30, 1995 as compared to the equivalent nine months of 1994, was
offset by a decrease in the loss on partnership operations of $30,338, an
increase in interest income from affiliates of $22,438 and a gain on the
sale of marketable securities of $19,900.
Administrative expense totaled $563,804 for the nine months ending
September 30, 1995, as compared to $374,984 for the same period in 1994.
Major components of the administrative expense for the nine months ending
September 30, 1995, were accounting expense ($32,712), provision for bad debt
($174,310), legal costs ($73,421) personnel costs ($244,476), and telephone
and communications ($15,188). The provision for bad debt related to an amount
due by International Diving & Consulting Services, Inc. for the charter of the
vessel M/V Seahawk Retriever.
Liquidity and Capital Resources
At December 31, 1994, the Company had negative working capital of
$(2,114,888). During the nine months ended September 30, 1995 the Company's
working capital increased to a negative $(1,706,845).
The increase in working capital of $408,043 in the period was mostly the
result of restructuring $825,000 of the preferred ships' mortgage with
Commercial Union Capital Limited to long term debt from current liability.
Net operating losses before depreciation were financed by the proceeds from
the sale of marketable securities and the issuance of common stock.
In September, 1994 and November, 1994 the Company issued 1,001,875 and
800,000 shares of common stock respectively in two private placements. Under
the terms of the private placements, if the stock issued was not registered
by December 31, 1994, and March 10, 1995, a bonus of 30% of the original
issue became due. The shares were not registered within the time limit,
consequently 300,562 shares of common stock were issued on January 1, 1995
and 240,000 were issued in May 1995. On January 1, 1995, $83,702 of accrued
expense was converted into 264,774 shares of common stock and on March 1,
1995 an account payable of $4,609 was converted to 31,926 shares of common
stock. On June 30, 1995 a debt holder exercised warrants for 40,000 shares
of common stock in exchange for $10,000 of debt owed by the Company. During
August and September 1995 the Company issued 698,836 shares of common stock
for $174,709 cash raised in a private placement stock offering. After
September the Private Placement was closed out. The total amount raised was
$314,784 by the placement of 1,259,136 shares.
In October 1993 the Company signed a marketing agreement with Buckeye
Communications, Inc. The agreement sets out the terms under which the
Company's artifacts, products derived from the artifacts and products derived
from the Company's archive material will be marketed by Buckeye on a
worldwide exclusive basis. Any sales resulting from this marketing effort
will result in royalty payments to the Company. Similar agreements were
signed between Buckeye and Seahawk I, Ltd., Seahawk II, Ltd. and Eagle
Partners, Ltd.. The agreements require a minimum revenue to the Company and
its Affiliates of $350,000 in the first two years in order for the agreements
to continue in force. The development of products under the marketing
agreement has earned little revenue and the agreement expired in October 1995.
During 1994 Buckeye did provide a licensing agreement with a third party to
develop a CD ROM game which is expected to enter the market in the first
quarter of 1996 and provide royalty income to the Company from that time. In
October 1993 Buckeye also agreed to provide Seahawk I, Ltd. with a loan of
$250,000 at 10% per annum interest for two years. The loan was secured by
certain of the pearls owned by Seahawk I, Ltd. and guaranteed by the Company.
Under the terms of the note, interest was payable quarterly, but none of the
interest due was paid. On December 1, 1994, an agreement was reached between
the Company, Seahawk I, Ltd., and Buckeye under which the Company assumed the
Buckeye loan and interest due in return for a note from Seahawk I, Ltd. The
principal of the loan was converted into 1,000,000 shares of common stock in
the Company and 200,000 shares of convertible, redeemable preferred stock in
the Company. The outstanding interest of $54,156 is scheduled to be repaid at
the rate of $5,000 per month.
The original loan enabled Seahawk I, Ltd. to pay some of its liabilities to
the Company. Until it can obtain additional financing or begin earning
revenue from its artifacts, either by direct sale or royalty on reproductions,
it will not be able to pay the balance of the liabilities. It is not likely
that the Partnership will be able to raise further financing except through
the sale of artifacts. The Partnership had planned to sell its artifacts
through the Seahawk Shipwreck and Treasure Museum, but the inability to
finance the museum had forced the Company to put the museum plans on hold
until appropriate financing could be arranged.
During August 1994 the Company entered into a Vessel Bareboat Charter and
Purchase Agreement with International Diving and Consulting Services, Inc.
("International Diving"), a Lafayette, Louisiana based underwater services
company. Pursuant to this agreement, International Diving agreed to charter
the SEAHAWK RETRIEVER for the five year period commencing September 1, 1994,
and to purchase the vessel at the end of the five year period for a net
purchase price of approximately $1,350,000 plus interest at a rate equal to
3% per annum over the Citibank New York prime rate.
On November 23, 1994, International Diving filed a voluntary petition in the
United States Bankruptcy Court under Chapter 11 of the Bankruptcy Code. Due
to this Chapter 11 filing, International Diving was not able to make the
lease payment in the amount of approximately $100,000 which was due to the
Company on December 10, 1994.
On March 7, 1995 , the U.S. Bankruptcy Court Western District of Louisiana,
Lafayette - Opelousas Division ordered International Diving to pay (a)
$130,836 on or before March 17, 1995; (b) $56,935 on or before April 7, 1995 ;
(c) $56,935 on or before May 7, 1995; and (d) all future payments under the
Agreement as they come due, and ordered that the Agreement be amended to
grant International Diving the option to purchase the Retriever for the sum of
$1,450,000 payable in cash on or before June 1, 1995. International Diving
has declined the option to purchase the Retriever and has made the payments
under (a), (b), and (c) above.
International Diving was unable to make the payment of $136,703.50 due on
June 10, 1995 and on July 11, 1995 (as modified on July 25, 1995) the same
U.S. Bankruptcy Court ordered International Diving to make payments of
$45,568.00 on July 11th and July 25th 1995, and to make payments of $53,179
on August 8th, August 24th, and September 5th, 1995. The payments due on
July 11, 1995 and July 25, 1995 have been made. No further payments have
been made by International Diving and on September 12, 1995 the vessel M/V
Seahawk Retriever was repossessed by the Company. An account receivable
from International Diving of $173,620 owing at September 30, 1995 was
provided for as bad debt due to the possibility that International Diving
may be forced into a Chapter 7 Bankruptcy Liquidation. The Company is,
however, pursuing International Diving for the outstanding payments through
the same Bankruptcy Court. The Company is currently offering the M/V Seahawk
Retriever for charter in the Gulf of Mexico.
Seahawk II, Ltd. is out of funds and the partners have decided they are not
willing to invest additional funds to continue further excavation of the wreck
site. The General Partner is unable to identify additional working capital to
work on the Partnership's wreck off St. Augustine, and has asked the partners
to vote on terminating the Partnership. The results of that vote is expected
to be known during November 1995.
Eagle Partners, Ltd. is also out of cash but has continued its search for a
shipwreck believed to have sunk off the east coast of the United States.
The Company has provided survey services to Eagle Partners, Ltd. on credit
but has in effect provided in full against the account receivable by assuming
losses on investments sufficient to create a negative balance on investment
in the Partnership that is equal to the account receivable. It is anticipated
that Eagle Partners Ltd. will attempt to raise additional funds for the
project in return for a share of any successful recovery of the shipwreck.
On July 18, 1995 the Company announced that it had entered into a joint
venture agreement with Sea Miners, Inc. a Baltimore, MD company, to resume
the search for this shipwreck. The joint venture incorporates research by both
parties concerning this wreck and a pooling of resources to continue the
search operations. Under the agreement, the Company will continue to be
the offshore contractor to the joint venture for all marine operations. The
Company earned revenues of $45,250 during the quarter ended September 30,
1995 from this partnership and expects to earn additional revenue during the
fourth quarter of 1995 from this partnership.
The Company is reviewing other potential shipwreck projects and it is
anticipated that if the Company were to proceed with any of these projects,
it would help to form limited partnerships for the purpose of funding the
projects. There is no assurance that any of the partnerships would be
successful in raising the necessary amount of funding.
In order for the Company to remain in business during the next 12 months it
is necessary for the Company to pursue charter and contract work, generate
new sources of revenue or raise additional financing. The Company's current
and future efforts to obtain additional financing will concentrate on offering
additional equity to investors until such time as the Company's operational
cash flow is self supporting. As indicated above, the Company, acting in its
capacity as general partner of Seahawk I, Ltd., is attempting to arrange
for a sale of the artifacts owned by Seahawk I, Ltd.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings - None.
Item 2. Changes in Securities - None.
Item 3. Defaults Upon Senior Securities - None.
Item 4. Submission of Matters to a Vote of Security Holders - None.
Item 5. Other Information - None.
Item 6. Exhibits and Reports on Form 8-K - None.
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this Report to be signed on its behalf by the undersigned thereunto
duly authorized.
[S] [C]
SEAHAWK DEEP OCEAN TECHNOLOGY, INC.
BY /s/ John T. Lawrence
John T. Lawrence, President
February 7, 1996
EXHIBIT INDEX
[CAPTION]
EXHIBIT METHOD OF FILING
[S] [C] [C]
27. Financial Data Schedule Filed herewith electronically
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet and consolidated statement of operations contained
in Amendment No. 1 to the Company's Form 10-QSB/A for the year to date, and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1995
<CASH> 6,467
<SECURITIES> 9,184
<RECEIVABLES> 18,366
<ALLOWANCES> 0
<INVENTORY> 8,016
<CURRENT-ASSETS> 69,348
<PP&E> 3,163,295
<DEPRECIATION> 1,214,062
<TOTAL-ASSETS> 2,794,115
<CURRENT-LIABILITIES> 1,776,193
<BONDS> 0
<COMMON> 11,968,682
0
50,000
<OTHER-SE> (11,840,760)
<TOTAL-LIABILITY-AND-EQUITY> 2,794,115
<SALES> 0
<TOTAL-REVENUES> 437,489
<CGS> 0
<TOTAL-COSTS> 518,656
<OTHER-EXPENSES> 563,804
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (184,140)
<INCOME-PRETAX> (812,955)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (812,955)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> 0
</TABLE>
