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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
Commission File Number: 0-18239
SEAHAWK DEEP OCEAN TECHNOLOGY, INC.
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(Exact name of small business issuer as specified in its charter)
Colorado 84-1087879
- ------------------------------- ---------------------------------
(State of other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
5102 SOUTH WESTSHORE BLVD.
TAMPA, FLORIDA 33611
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(Address of principal executive offices including zip code)
(813) 831-4040
--------------------------
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the preceding 12 months (or for such
shorter period that the Registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No___
As of January 22, 1999, the Registrant had 28,157,614 shares of common stock,
no par value per share, outstanding.
Transitional Small Business Disclosure Format (check one): Yes__ No X
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SEAHAWK DEEP OCEAN TECHNOLOGY, INC.
FORM 10-QSB
INDEX
Part I: Financial Information ................................Page No.
Item 1. Financial Information:
Consolidated Balance Sheets - March 31, 1997 and
December 31, 1996................................ 3 - 4
Consolidated Statements of Operations - Three
Months Ended March 31, 1997 and 1996............. 5
Consolidated Statements of Cash Flows
for the Three Months Ended March 31, 1997
and 1996......................................... 6
Notes to Consolidated Financial Statements....... 8 - 10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.... 11 - 15
Part II: Other Information................................ 16
Item 1. Legal Proceedings................... 16
Item 2. Change in Securities................ 16
Item 3. Defaults Upon Senior Securities..... 16
Item 4. Submission of Matters to a Vote
of Security Holders................. 16
Item 5. Other Information................... 16
Item 6. Exhibits and Reports on Form 8-K.... 16
Signatures... .............................................. 17
2
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SEAHAWK DEEP OCEAN TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
ASSETS (Unaudited)
March 31 December 31
1997 1996
------------ ------------
CURRENT ASSETS
Cash and cash equivalents $ ( 3,570) $ 536
Accounts receivable Other 10,574 13,850
Merchandise inventory 2,917 3,687
Prepaid expenses 30,792 41,813
------------ ------------
Total current assets 40,713 59,886
------------ ------------
PROPERTY AND EQUIPMENT
Net of accumulated depreciation
of $735,482 and $702,739 701,048 729,291
------------ ------------
OTHER ASSETS
Artifacts 303,073 303,073
Accounts and Notes Receivable
affiliates less losses in excess
of investment in affiliates
of $1,852,019 and $1,841,651 283,580 269,401
Deposits 11,686 11,686
Purchased shipwreck research,
net of $18,056 amortization 4,444 6,319
------------ ------------
Total other assets 602,783 590,479
------------ ------------
TOTAL ASSETS $ 1,344,544 $ 1,379,656
============ ============
3
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SEAHAWK DEEP OCEAN TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(CONTINUED)
LIABILITIES AND STOCKHOLDERS' EQUITY (Unaudited)
March 31 December 31
1997 1996
------------ ------------
CURRENT LIABILITIES
Accounts payable $ 535,494 $ 535,259
Accrued expenses
Salaries 253,234 205,305
Interest due related parties 4,818 -
Interest due to others 149,141 125,869
Other 92,710 132,085
Due to related parties 183,667 126,589
Notes payable - others 551,683 550,683
------------ ------------
Total current liabilities 1,770,747 1,675,790
------------ ------------
STOCKHOLDERS' EQUITY
Preferred stock - no par value
60,000,000 shares authorized;
200,000 shares and 20,000
issued and outstanding 50,000 50,000
Common stock - no par value;
30,000,000 shares authorized;
26,273,699 and 26,134,366 shares
issued and outstanding 13,328,997 13,281,497
Paid in capital-stock options 5,191 5,191
Accumulated (deficit) (13,810,391) (13,632,822)
------------ ------------
Total Stockholders' equity (426,203) (296,134)
------------ ------------
TOTAL LIABILITY AND STOCKHOLDERS' EQUITY $ 1,344,544 $ 1,379,656
============ ============
4
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SEAHAWK DEEP OCEAN TECHNOLOGY, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
Three Months Ended March 31st
1997 1996
------------ ------------
REVENUES
Income from Affiliates $ 10,000 $ (5,790)
Income from Others 5,698 57,500
------------ ------------
Total Revenues 15,698 51,710
OPERATING EXPENSES
Vessel Operations 11,150 85,288
Conservation 12,546 13,002
Depreciation 34,619 69,730
Rent 25,025 22,068
------------ ------------
Total Operating Expenses 83,340 190,088
GENERAL AND ADMINISTRATIVE EXPENSES 87,975 157,602
------------ ------------
Total Expenses 171,315 347,690
------------ ------------
(LOSS) FROM OPERATIONS (155,617) (295,980)
------------ ------------
OTHER INCOME (EXPENSE)
Interest income - affiliate 14,548 16,123
Interest income - others - 5
Interest expense (28,135) (19,991)
Other income 1,605 -
Loss on sale of marketable securities - ( 483)
Gain on disposal of equipment 400 -
Loss on investment in less than
50% owned entities (10,369) (19,431)
------------ ------------
Total other income (expense) (21,951) (23,777)
NET (LOSS) $ (177,568) $ (319,757)
============ ============
NET (LOSS) PER SHARE $ (0.01) $ (0.01)
============ ============
Weighted average number of common
shares and common shares equivalents
outstanding. 26,273,699 25,351,480
============ ============
5
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SEAHAWK DEEP OCEAN TECHNOLOGY, INC. AND SUBSIDIARIES
STATEMENT OF CASH FLOWS
Source (use) of Cash
Three Months Ended March 31st
1997 1996
------------ ------------
Cash Flows from Operating Activities
Net (Loss) $ (177,568) $ (319,757)
Adjustments to reconcile net loss to net
cash used by operating activities :
Depreciation 34,618 69,730
Loss on disposal of equipment (400) -
Loss on sale of marketable securities - 680
Loss on Investment in less than
50% owned entities 10,369 19,431
Services Acquired through issuance
of common stock 35,000 31,000
Decrease(increase) in trade accounts
receivable - 34,889
Decrease(increase) in trade accounts
receivable - affiliates (10,048) 23,946
Decrease(increase) in other receivables 3,277 -
Decrease(increase) in other receivables
- affiliates - (16,124)
Decrease(increase) in inventory 770 -
Decrease(increase) in prepaid expense 11,021 37,373
Decrease(increase) in deposits - (10)
(Decrease) increase in accounts payable 235 (5,931)
(Decrease)increase in accrued expenses 36,643 90,885
------------ ------------
Total Adjustments 121,485 285,869
------------ ------------
Net Cash generated (used)
by operating activities $ (56,084) $ (33,888)
------------ ------------
Cash Flows from Investing Activities
Purchase of equipment $ (4,500) $ -
Purchase of artifacts - -
Increase in other investments - -
Issuance of notes receivable
from affiliates - -
Proceeds from disposal of equipment 400 -
Proceeds from the sale of marketable
securities - 8,504
Payments received on notes receivable - -
Decrease in investment in affiliate - -
------------ ------------
Net Cash provided (used) by investing
activities $ (4,100) $ 8,504
------------ ------------
6
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Cash Flows from Financing Activities
Proceeds from issuance of common stock - 6,500
Proceeds from issuance of warrants - -
Advances from related parties 57,078 -
Issuance of notes payable - other - -
Issuance of notes payable - related - 25,000
Repayment of notes (1,000) (428)
Repayment of notes - related - -
Payments on capital lease payable - -
------------ ------------
Net Cash provided (used) by
financing activities 56,078 31,072
------------ ------------
NET (DECREASE) INCREASE IN CASH
AND CASH EQUIVALENT (4,106) 5,688
CASH AND CASH EQUIVALENT
BEGINNING OF QUARTER 536 8,191
------------ ------------
CASH AND CASH EQUIVALENT
END OF QUARTER $ (3,570) $ 13,880
============ ============
Summary of significant non cash transactions
During 1996 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:
Common
Amount Shares
------------ ------------
Accounts payable $ 16,000 64,000
Accrued salary 28,000 200,000
------------ ------------
44,000 264,000
During 1996 the Company issued 200,000 shares to three unrelated consultants
for services rendered in the amount of $31,200.
7
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SEAHAWK DEEP OCEAN TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES CONSOLIDATED ON FINANCIAL STATEMENTS
MARCH 31 1997(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 31,1996.
From January 1, 1997, the Company considers the status of Mr. John Morris and
Mr. Greg Stemm and their affiliates as non-related parties. Since they had
previously been treated in the financial statements as related parties, the
comparative figures as at December 31, 1996, have been adjusted from those
shown in the Company's Form 10-KSB for the year ended December 31, 1996. The
items affected are as follows:
Per 10-KSB Restated
Dec 31, 1996 Comparatives
------------ ------------
CURRENT LIABILITIES
Accounts payable $ 535,259 $ 535,259
Accrued expenses
Salaries 205,305 205,305
Interest due related parties 55,383 -
Interest due to others 70,486 125,869
Other 132,085 132,085
Due to related parties 424,143 126,589
Notes payable - others 253,129 550,683
------------ ------------
Total current liabilities 1,675,790 1,675,790
------------ ------------
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 March 31, 1997, results of
operations, and cash flows for the interim periods presented. Operating
results for the three months ended March 31, 1997, are not necessarily
indicative of the results that may be expected for the year ended December 31,
1997.
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.
8
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NOTE 3 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 4 COMMON STOCK TRANSACTIONS WITH RELATED PARTIES
During April 1996, 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, 1995:
Number Unpaid
Name of Shares Remuneration
---- --------- ------------
John Lawrence 152,183 $21,305.62
John Balch 152,183 $21,305.62
During February 1997, the Company issued 100,000 shares of Common Stock to the
following two employees and officers of the Company as payment for accrued and
unpaid remuneration for the month ended June 30, 1996:
Number Unpaid
Name of Shares Remuneration
---- --------- ------------
John Lawrence 50,000 $6,125
John Balch 50,000 $6,125
NOTE 5 COMMON STOCK TRANSACTIONS WITH OTHERS
During January 1996, the Company issued 314,784 shares of its Common Stock to
twenty accredited investors. The investors originally invested in a private
offering during July through October 1995, and according to the terms of the
private offering , if the Company did not register the original shares by the
end of 1995, the Company was required to issue additional shares in an amount
equal to 25% of the shares originally purchased.
During January 1996, the Company issued 64,000 shares of common stock to a
company in exchange for accounts payable. The Company issued 200,000 shares
of common stock to three individuals for services rendered to affiliates, and
the Company issued 200,000 shares of common stock to an individual for unpaid
accrued compensation.
During February 1997, The Company issued 260,000 shares of its common stock to
two individuals as compensation for consultancy work performed on the
Company's behalf in South America and the Company issued 20,000 shares of its
common stock to five individuals as compensation for acting as advisors to the
Company's Board of Directors.
9
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SEAHAWK DEEP OCEAN TECHNOLOGY, INC. AND SUBSIDIARIES
BALANCE SHEETS - AFFILIATES
Three Months Ended March 31, 1997
Seahawk I, Seahawk II, Eagle Part-
Ltd. Ltd. ners, Ltd.
------------ ------------ ------------
Current Assets
Cash $ 249 $ 52 $ 0
Inventory - other 1,146 - -
------------ ------------ ------------
Total Current Assets 1,395 52 0
------------ ------------ ------------
Other Assets
Artifact inventory 625,275 - -
------------ ------------ ------------
Total Assets 626,670 - -
------------ ------------ ------------
Current Liabilities
Accounts payable - trade 4,087 2,217 3,525
Accounts payable
- general partner 626,417 20,158 1,042,128
Accrued liabilities 576 - -
Notes payable limited partners 24,437 - -
Notes payable general partner 369,565 - 56,232
Losses in excess of investment
In affiliate 26,138
------------ ------------ ------------
Total Current Liabilities 1,025,082 22,375 1,128,023
------------ ------------ ------------
Partners' Capital
Capital contributed 2,511,041 1,371,251 150,100
Accumulated loss (2,909,453) (1,393,574) (1,278,123)
------------ ------------ ------------
Net Capital (398,412) (22,323) (1,128,023)
------------ ------------ ------------
Total Liabilities
and Capital 626,670 52 0
------------ ------------ ------------
STATEMENTS OF OPERATION - AFFILIATES
Revenues $ 0 $ 0 $ 0
Expenses
Administrative expenses 5,441 2,500 2,500
------------ ------------ ------------
Total Expenses 5,441 2,500 2,500
------------ ------------ ------------
Other Income (Expenses) (14,071) 0 (1,233)
------------ ------------ ------------
Net (Loss) $ (19,512) $ (2,500) $ (3,733)
------------ ------------ ------------
10
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Item 2 Management Discussion and Analysis of Financial Conditions and Results
of Operations.
Results of Operations
Three Months Ended March 31, 1997 Compared to Three Months Ended March 31,
1996
The net loss for the three months to March 31, 1997 was $177,568 compared to a
loss of $319,757 in the corresponding quarter of 1996.
Total revenues in the 1997 quarter at $15,698 were down $36,012 from the 1996
quarter primarily as a result of the absence of charter hire of the M/V
Seahawk Retriever, which was sold in April 1996. Total expenses of $171,315
were incurred in the first quarter of 1997, compared to $347,690 in the
equivalent period in 1996. This resulted in the loss from operations being
lower at $155,617 in 1997 compared to $295,980 in 1996.
The Company's cost of vessel operations were down by $74,137 to $11,151 for
the quarter ending March 31, 1997 as compared to the first quarter in 1996
when vessel operations cost $85,288. This resulted largely from decreased
expenses for marine equipment maintenance of $12,862 with a decrease in
insurance costs of $17,283 for the quarter ending March 31, 1997 as compared
to the quarter ending March 31, 1996. Other savings totaling $27,700 were made
on the payroll and consulting costs. These reductions occurred due to the
relative inactivity of the RV Seahawk and the sale in 1996 of the Retriever.
Conservation and archaeology expenses were $12,546 for the quarter ending
March 31, 1997 as compared to $13,002 for the equivalent period during 1996.
Depreciation was $34,619 for the quarter ending March 31, 1997, $35,111 lower
than the charge for depreciation in the equivalent period in 1996. The
difference resulted from depreciation expense no longer being charged for the
Retriever after its sale in the first quarter of 1996.
Rent increased $2,957 for the quarter ending March 31, 1997 to $25,025
compared to $22,068 during the equivalent quarter of 1996, largely because of
penalties for late payment.
Administrative costs decreased by $69,627 for the quarter ending March 31,
1997 as compared to the like quarter of 1996. There was a decrease in legal
costs(to $467 from $5,084) resulting primarily from a lower level of activity
during the quarter ending March 31, 1997 compared to the same quarter in 1996.
There was a decrease in travel related costs (to $3,733 from $19,796)
resulting from less expenses associated with efforts to obtain permits for
future marine projects. Salary expense increased (to $60,843 from $52,733) due
to general payroll increases incurred after the quarter ending March 31, 1996.
Consulting costs were down to $2,500 in the 1996 quarter from $25,800 during
the 1995 quarter as a result of less expenses incurred for assistance with
permit applications in Brazil during the quarter ending March 31, 1997.
Interest expense increased to $28,143 for the quarter ending March 31, 1997
compared to $19,991 in the first quarter of 1996. The increase was due to
loans taken out after the first quarter of 1996. Interest income was $14,548
for the first quarter of 1997 earned from notes receivable from affiliates.
There was $16,123 interest income for the equivalent period during 1996.
11
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The loss on investment in less than 50% owned entities was $10,369 in the 1997
quarter, down $9,062 from the first quarter of 1996. 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 $19,513 primarily resulting from
interest costs of a note due to the Company and from the cost of accounting
and administrative requirements. Seahawk II, Ltd. incurred an administrative
loss of $2,500 and Eagle Partners, Ltd. incurred administrative and interest
costs of $3,733 which resulted in net losses of those amounts for the
quarter.
Liquidity and Capital Resources
During the quarter ended March 31, 1997, the Company's working capital deficit
decreased by $114,129 to a negative $(1,730,033). At December 31, 1996 the
Company had a working capital deficit of $(1,615,904).
The deficit increased mainly due to a net operating loss before depreciation
during the period of $130,592.
The Company continues to have very restricted liquidity. This situation
results principally through the lack of revenue from operations. The Company
has sought to produce revenue through the following:
1. Sales of subsea services to entities involved in shipwreck recovery
projects which are originated by the Company.
2. Sales of subsea services to other entities.
3. Lease of ships and subsea equipment.
4. Sale of artifacts and artifact related merchandise.
The Company's main source of revenue, sales to affiliated project entities
such as Limited Partnerships, depends on those partnerships being properly
funded. The existing Limited Partnerships, Seahawk II, Ltd., and Eagle
Partners, Ltd., are out of cash.
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
on two occasions to vote on terminating the Partnership. The results of those
votes were inconclusive.
Eagle Partners, Ltd. is also out of cash but has continued its search for a
shipwreck, known as the Golden Eagle, believed to have sunk off the east coast
of the Untied States. The Company has in the past 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.
During 1995, Eagle Partners Limited raised funds to continue its search for
the Golden Eagle using the Company's services. On July 18, 1995 the Company
announced that Eagle Partners Limited had entered into a limited partnership
agreement with Sea Miners, Inc. a Baltimore, MD company, to resume the search
for this shipwreck. The name of the new limited partnership is Eagle Miners
Limited. The joint venture incorporates research by both parties concerning
the Golden Eagle and a pooling of resources to continue the search operations.
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Under the agreement, the Company will continue to be the offshore contractor
to Eagle Miners Limited for all marine operations.
The Company earned no revenues during 1996 or 1977 from this Joint Venture but
expects to earn revenue in the future if Eagle Miners Limited can raise
sufficient funding.
The Company is currently seeking to assist Eagle Miners limited in raising
sufficient funding to complete the Golden Eagle project. If properly funded,
the project will generate cash flow for the Company. Substantial cash would
be produced for the Company if the Golden Eagle is located and its cargo is
recovered and disposed of profitably.
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 or similar entities 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.
During 1995 the Company generated over $50,000 selling its services to
non-shipwreck related customers and some $400,000 through the chartering of
its recovery vessel, the Seahawk Retriever. The charter agreement was with
International Diving and Consulting Services and was to produce an annual
revenue of $900,000 for five years. However, 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 due to the Company on December 10, 1994.
On March 7, 1995, the U.S. Bankruptcy Court Western Division 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
declined the option to purchase the Retriever and 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 11 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 were made. No further payments were 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 December 31, 1995 was provided for as bad debt by the
Company 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 Court.
13
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During the period December 8, 1995 to March 31, 1996 the Company chartered the
Retriever to American Oilfield Divers Inc. of Lafayette, Louisiana ("AOD").
The main terms of the charter were that AOD would pay a day rate of $2,050 per
day when the vessel was working and pay any dockage costs when it was not.
During the period AOD incurred $47,250 of charter fees. On April 4, 1996, AOD
purchased the Retriever for $1,438,750 on an as-is-where-is basis via a wholly
owned subsidiary S&H Diving L.L.C. The purchase agreement provided for a sum
of $100,000 to be held in escrow for six months to pay for any bona fide lien
claims encumbering the vessel which accrued prior to March 31, 1996.
After settlement of the mortgage on the vessel and various selling fees, the
sale of the Retriever generated approximately $440,000 cash in the second
quarter of 1996. The sale of the Retriever means that no other revenue will
be produced for the Company from that asset in the future.
In November 1995 the Company acquired all the outstanding common stock of
Seahawk, Inc. a company that owns the RV Seahawk, the ship that the Company
uses for survey work. Prior to the acquisition the Company had chartered the
vessel at a cost of $6,000 per month, almost continually since March 1989.
The acquisition reduced rental costs in 1996 and thereafter.
In November 1996, the Company signed an agreement with the Collier County
Museum, Naples Florida, to exhibit certain of the artifacts recovered from the
Seahawk I site. Under the agreement the Company provided the artifacts and
display materials for 6 months in return for a $20,000 fee. The exhibit opened
in February 1997 and attracted record numbers of visitors to the museum.
In October 1997, the Company signed an agreement with Michael's International
Treasure Jewelry, Inc., Key West Florida, to exhibit certain artifacts for a
minimum period of 12 months, at a rental of $57,500 per quarter in advance.
The artifacts included the entire inventory of Seahawk I, Ltd. The agreement
also provided for Michael's to have an option to purchase the artifacts for
$2,500,000 ($750,000 cash and $1,750,000 in common stock of Vanderbilt Square,
Inc., a publicly quoted affiliate of Michael's) at any time during the term of
the lease. Any revenue from the agreement was to be divided between the
Company and Seahawk I, Ltd. in the ratio of the respective book values of the
assets involved. On February 10, 1998, Vanderbilt changed its name to Treasure
and Exhibits International, Inc.("TEI"). Prior to the agreement, the Company
signed an agreement with Odyssey Marine Exploration, Inc. to pay Odyssey 10%
of any proceeds from the lease or subsequent sale pursuant to the introduction
by Odyssey of Michaels and Vanderbilt to the Company.
On March 19, 1998, TEI entered an agreement with the Company and Seahawk I,
Ltd. To purchase all of Seahawk I, Ltd.'s artifacts, their related
documentation and all of the Company's artifacts. The consideration was
$822,056 in cash and 9,500,000 newly issued shares of TEI's common stock which
were valued at the time of the agreement at $0.17 per share or $1,615,000.
Immediately thereafter Seahawk I, Ltd. repaid all its debt to the Company in
cash and TEI stock, repaid other loans to two of the limited partners and made
a pro rata distribution to the limited partners of the remaining TEI stock
based on the limited partners' total investment in Seahawk I, Ltd.
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On July 20,1998, the Company agreed to sell its remaining holding of 5,302,084
shares in TEI to First Consolidated Financial Corp., a Florida corporation,
for a total consideration of $450,677 ($0.085 per share). The agreement
provided for the cash to be paid in five tranches, $180,270 on the date of the
agreement and at least $50,000 during each of September, October and November
1998 with the balance in by December 31, 1998. In the event, after paying the
first tranche, no further payment was made until November 10, 1998, when the
Company accepted a discount of $10,407 in return for the whole of the balance
being paid on that date.
Apart from seeking to raise revenue from assets the Company has also sought to
conserve cash by the conversion of debt into equity.
During 1996 the Company issued 363,143 shares of its common stock in payment
of $65,000 of outstanding debt and 536,866 shares were issued against
exercised warrants for $77,112, to settle outstanding debt.
During 1997 the Company issued 270,185 shares of its common stock for $36,000
in cash and 333,333 shares in payment of an overdue Note for $50,000. In the
same year the Company received $319,000 in loans from various individuals
$46,000 of which was later converted into 256,000 shares of common stock.
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.
15
<PAGE>
<PAGE>
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
16
<PAGE>
<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.
(REGISTRANT) SEAHAWK DEEP OCEAN TECHNOLOGY, INC.
By (SIGNATURE) /s/ John T. Lawrence
(NAME AND DTITLE) John T. Lawrence, President
(DATE) February 15, 1999
17
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
balance sheets and statements of operations found on page 2 and 4 of the
Company's Form 10-QSB for the year to date, and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1997
<CASH> (3,570)
<SECURITIES> 0
<RECEIVABLES> 10,574
<ALLOWANCES> 0
<INVENTORY> 2,917
<CURRENT-ASSETS> 40,713
<PP&E> 701,048
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,344,544
<CURRENT-LIABILITIES> 1,770,747
<BONDS> 0
<COMMON> 13,328,997
0
50,000
<OTHER-SE> (13,805,200)
<TOTAL-LIABILITY-AND-EQUITY> 1,344,544
<SALES> 0
<TOTAL-REVENUES> 15,698
<CGS> 0
<TOTAL-COSTS> 83,340
<OTHER-EXPENSES> 87,975
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (28,135)
<INCOME-PRETAX> (177,568)
<INCOME-TAX> 0
<INCOME-CONTINUING> (177,568)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (177,568)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
