<PAGE>
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 June 30, 1999
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
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(State of other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
5102 SOUTH WESTSHORE BLVD.
TAMPA, FLORIDA 33611
----------------------------------------------------------
(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 July 20, 2000, the Registrant had 28,477,614 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 - June 30, 1999
and December 31, 1998............................ 3 - 4
Consolidated Statements of Operations - Three
Months Ended June 30, 1999 and 1998, and Six
Months Ended June 30, 1999 and 1998 ............ 5
Consolidated Statements of Cash Flows
for the Six Months Ended June 30, 1999 and
1998 ............................................ 6 - 7
Notes to Consolidated Financial Statements....... 8 - 10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations....... 11 - 16
Part II: Other Information................................ 17
Item 1. Legal Proceedings....................... 17
Item 2. Change in Securities.................... 17
Item 3. Defaults Upon Senior Securities......... 17
Item 4. Submission of Matters to a Vote
of Security Holders..................... 17
Item 5. Other Information....................... 17
Item 6. Exhibits and Reports on Form 8-K........ 17
Signatures... .............................................. 18
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SEAHAWK DEEP OCEAN TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
ASSETS (Unaudited)
June 30 December 31
1999 1998
------------ ------------
CURRENT ASSETS
Cash and cash equivalents $ 24,376 $ 16,510
Accounts receivable Other 31,500 6,200
Prepaid expenses 19,655 11,115
------------ ------------
Total current assets 75,531 33,825
------------ ------------
PROPERTY AND EQUIPMENT
Net of accumulated depreciation
of $893,248 and $880,744 264,505 526,523
------------ ------------
OTHER ASSETS
Accounts and Notes Receivable
Affiliates less losses in excess
of investment in affiliates
of $46,775 and $41,775 - -
Deposits 6,575 14,025
------------ ------------
Total other assets 6,575 14,025
------------ ------------
TOTAL ASSETS $ 346,611 $ 574,373
============ ============
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SEAHAWK DEEP OCEAN TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
LIABILITIES AND STOCKHOLDERS' EQUITY (Unaudited)
June 31 December 31
1999 1998
------------ ------------
CURRENT LIABILITIES
Accounts payable $ 161,732 $ 264,664
Accrued expenses
Salaries 27,543 45,284
Interest due related parties 107,774 198,415
Interest due to others 37,221 29,131
Other 35,500 23,905
Provision for lawsuit 700,000 700,000
Due to related parties 1,109,800 293,800
Accrued officers' salaries 44,000 574,900
Notes payable - others 344,101 176,747
------------ ------------
Total current liabilities 2,567,671 2,306,845
------------ ------------
STOCKHOLDERS' EQUITY
Preferred stock - no par value
60,000,000 shares authorized;
12,272,416 and 552,460 shares
issued and outstanding 285,274 116,500
Common stock - no par value;
30,000,000 shares authorized;
28,501,991 and 28,181,991 shares
issued and outstanding 13,605,227 13,595,628
Paid in capital-stock options 5,191 5,191
Accumulated (deficit) (16,116,752) (15,449,791)
------------ ------------
Total Stockholders' equity ( 2,221,060) ( 1,727,472)
------------ ------------
TOTAL LIABILITY AND STOCKHOLDERS' EQUITY $ 346,611 $ 574,373
============ ============
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SEAHAWK DEEP OCEAN TECHNOLOGY, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS(Unaudited)
Three Months Six Months
Ended June 30 Ended June 30
1999 1998 1999 1998
--------- --------- --------- ---------
REVENUES
Income from affiliates $ 2,500 $ 5,000 $ 5,000 $ 15,000
Income from others 70,400 50,000 75,805 108,250
Gain from sale of artifacts - - - 439,356
--------- --------- --------- ---------
Total Revenues 72,900 55,000 80,805 562,606
OPERATING EXPENSES
Vessel operations 37,017 70,750 74,073 233,726
South American project - 20,464 - 22,387
Conservation - 3,000 - 3,000
Depreciation 27,116 34,414 63,635 70,197
Rent 21,390 17,588 31,952 35,175
--------- --------- --------- ---------
Total Operating Expenses 85,523 146,216 169,660 364,485
GENERAL AND ADMINISTRATIVE
EXPENSES 166,273 109,781 319,695 253,476
--------- --------- --------- ---------
Total Expenses 251,796 255,997 489,355 617,961
--------- --------- --------- ---------
(LOSS) FROM OPERATIONS (178,896) (200,996) (408,550) (55,355)
--------- --------- --------- ---------
OTHER INCOME (EXPENSE)
Interest income affiliate 4 1,247 11 16,088
Interest expense (65,988) (38,452) (131,343) (105,739)
Reduction of accounts payable
provision 67,092 - 67,092 -
Provision for loss on sale
of marketable securities - - - (476,425)
Gain (Loss)on disposal of
equipment 4,178 - 4,178 (12,751)
Provision for loss on sale of
vessel - - (193,350) -
Gain (Loss) on investment in
Less than 50% owned entities ( 2,500) (6,246) (5,000) 741,029
--------- --------- --------- ---------
Total other income (expense) 2,786 (43,452) (258,412) 162,201
--------- --------- --------- ---------
NET (LOSS) (176,110) (244,449) (666,962) 106,845
========= ========= ========= =========
(LOSS) PER SHARE $ (0.01) $ (0.01) $ (0.02) $ 0.01
--------- --------- --------- ---------
Weighted average number of
common shares and common shares
equivalents outstanding. 28209169 27693991 28209169 27693991
--------- --------- --------- ---------
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SEAHAWK DEEP OCEAN TECHNOLOGY, INC. AND SUBSIDIARIES
STATEMENT OF CASH FLOWS
Source (use) of Cash
Six Months Ended June 30
1999 1998
------------ ------------
Cash Flows from Operating Activities
Net Profit( Loss) $ (666,962) $ 106,847
Adjustments to reconcile net loss to net
cash used by operating activities :
Depreciation 63,634 70,196
(Decrease in)provision for bad debt - (5,317)
Provision for impairment in value
of vessel 193,350 -
(Gain)Loss on disposal of equipment (4,174) 12,750
(Gain)Loss on investment in less than
50% owned entities 5,000 (741,029)
Services acquired through issuance
of stock 9,600 55,000
Decrease(increase) in:
trade accounts receivable (31,500) -
other receivables 6,200 (203,879)
other receivables - affiliates (5,000) 619,993
inventory - 303,073
prepaid expense (8,540) (23,777)
deposits 7,450 500
(Decrease) increase in:
accounts payable (102,932) (99,633)
accrued expenses 197,119 172,096
------------ ------------
Total Adjustments 330,207 159,640
------------ ------------
Net Cash generated (used)
by operating activities $ (336,755) $ 266,487
------------ ------------
Cash Flows from Investing Activities
Purchase of equipment $ (9,831) $ (4,340)
Increase in other investments - (450,678)
Proceeds from disposal of equipment 12,000 -
Payments received on notes receivable - 423,857
------------ ------------
Net Cash provided (used) by investing
activities $ 2,169 $ (31,161)
------------ ------------
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Cash Flows from Financing Activities
Proceeds from issuance of preferred stock 168,774 -
Advances from related parties 16,000 75,500
Issuance of notes payable - other 182,000 124,145
Issuance of notes payable - related - -
Repayment of notes - other (24,322) (430,377)
Repayment of notes - related - -
------------ ------------
Net Cash provided (used) by
financing activities 342,452 (230,732)
------------ ------------
NET (DECREASE) INCREASE IN CASH
AND CASH EQUIVALENT 7,866 4,594
CASH AND CASH EQUIVALENT
BEGINNING OF QUARTER 16,510 (871)
------------ ------------
CASH AND CASH EQUIVALENT
END OF QUARTER $ 24,376 $ 3,723
============ ============
Summary of significant non cash transactions
In April 1999, accrued salaries of $ 641,785 and interest thereon of $177,715
was converted into notes totalling $819,500.
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SEAHAWK DEEP OCEAN TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES CONSOLIDATED ON FINANCIAL STATEMENTS
JUNE 30, 1998 (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, 1998.
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 June 30, 1999, results of
operations, and cash flows for the interim periods presented. Operating
results for the six months ended June 30, 1999, are not necessarily indicative
of the results that may be expected for the year ended December 31, 1999.
NOTE 2 GOING CONCERN CONSIDERATION
The Company incurred a net loss of $666,962 for the first half of 1999 and has
incurred substantial net losses for each of the past several years resulting
in an accumulated deficit of $16,116,752 at June 30, 1999. At that date the
Company had negative working capital as indicated by current liabilities
exceeding current assets by $2,492,140. These factors raise substantial doubt
about the Company's ability to continue as a going concern. The financial
statements do not include any adjustments that might be necessary if the
Company is unable to continue as a going concern
NOTE 3 AFFILIATES FINANCIAL INFORMATION
The Company is the General Partner and a less than 50% interest owner in
Seahawk II, Ltd. a Florida limited partnership. The partnership is accounted
for on the equity method. Summarized financial statement information is shown
on page 9.
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SEAHAWK DEEP OCEAN TECHNOLOGY, INC. AND SUBSIDIARIES
SEAHAWK II, LTD.
BALANCE SHEET AT JUNE 30, 1999
Current Assets
Cash $ 52
-----------
Total Current Assets 52
-----------
Current Liabilities
Accounts payable - general partner 36,775
Notes payable general partner -
Losses in excess of investment In
affiliate -----------
Total Current Liabilities 36,775
-----------
Partners' Capital
Capital contributed 1,371,251
Accumulated loss (1,407,974)
-----------
Net Capital (36,723)
-----------
Total Liabilities and Capital 52
-----------
STATEMENTS OF OPERATION FOR THE SIX MONTHS TO JUNE 30, 1999
Revenues $ 0
Expenses
Administrative expenses 5,000
------------
Total Expenses 5,000
------------
Other Income (Expenses) 0
------------
Net (Loss) $ (5,000)
------------
As of June 30, 1999 Eagle Partners, Ltd. was accounted for on a Liquidation
basis. At that date the Partnership had no assets to use to pay its
liabilities, which were all due to the Company. He debts were fully provided
for in the books of the Company. The Partnership was closed on December 31,
1999.
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NOTE 4 INCOME TAXES
The Company provides for deferred income taxes resulting from the timing
differences in reporting income and expenses for financial statement purposes
compared to the method of reporting for income tax purposes. No deferred
income taxes are reflected in the accompanying financial statements due to the
Company's losses from operations.
NOTE 5 STOCK TRANSACTIONS WITH RELATED PARTIES
In February 1999, the company issued 20,000 shares of its common stock to
Robert Shaw as compensation for acting as sole officer and director of its
subsidiary RV Seahawk, Inc.
In February 1999, the two executive directors each donated 50,000 of their
unrestricted common stock in the Company to a lender as an incentive to lend
the Company $154,000. In compensation the Company agreed to pay each executive
director $3,500 in cash and issued each of the directors 100,000 shares of its
common stock.
In March, 1999 the Company entered an agreement with Drexel Aqua Technologies,
Inc., a Delaware corporation controlled by Mr. Parisi, under which Drexel was
to purchase 36,000,000 shares of the Company's Series 2 Preferred Stock for
$500,000. The consideration was to be paid at the rate of $50,000 or more each
month and the stock was to be issued on a pro rata basis. On payment of the
first $50,000 Drexel were entitled to appoint two directors to the board of
the Company and on payment of the second $50,000 Drexel were entitled to
appoint a third director. On full payment of the consideration Drexel were
entitled to appoint a total of four directors.
The proceeds of the sale were to be used specifically for current payroll,
taxes, rent, administrative expenditures, legal fees and the costs of
shareholder meetings. At the same time the Company and Drexel signed an
agreement subject to due diligence, for the Company to acquire the entire
share capital of Drexel's wholly owned subsidiary, Sindia Expedition,
Inc.("SEI") for shares of Common Stock in the Company. The number of shares to
be issued for the acquisition of SEI was to depend on the valuation of that
corporation. SEI is the sole owner of all the rights to a shipwreck in Ocean
City, New Jersey known as the Sindia.
The receipts from the Drexel private placement enabled the Company to pay its
day to day expenses while the installments were received. However, after the
first three installments the payments were always later and less than provided
for by the contract. During the second quarter of 1999 the Company issued
8,119,716 shares of its Series 2 Preferred Stock for $112,774 pursuant to this
agreement. As of May 15, 2000 the Company had received only $257,374 of the
$500,000 due under the Drexel arrangement and the agreement was canceled.
NOTE 6 STOCK TRANSACTIONS WITH OTHERS
In May 1999, the Company issued 100,000 shares of its common stock to an
individual as an inducement to sign an employment contract.
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<PAGE>
ITEM 2 MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS
OF OPERATIONS.
This Report contains forward-looking statements that involve a number of risks
and uncertainties. While these statements represent the Company's current
judgment in the future direction of the business, such risks and uncertainties
could cause actual results to differ materially from any future performance
suggested herein. The Company undertakes no obligation to publicly release the
results of any revisions to these forward-looking statements that may be made
to reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events. Certain factors that could cause results
to differ materially from those projected in the forward-looking statements
are set forth in ``Risk Factors,'' and ``Business'' in the Company's annual
report on Form 10KSB for the year ended December 31, 1998.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1999 COMPARED TO THREE MONTHS ENDED JUNE 30, 1998.
The net loss for the three months to June 30, 1999 was $176,110 compared to a
loss of $244,449 in the corresponding quarter of 1998.
Total revenues in the 1999 quarter at $72,900 were down $17,900 from the 1998
quarter. Total expenses of $251,796 were incurred in the second quarter of
1999, compared to $255,997 in the equivalent period in 1998. Operating
expenses decreased to $85,523 in the second quarter of 1999 from $146,216 in
the equivalent quarter in 1998 but there was an increase in general and
administrative expense to $166,273 during the 1999 quarter from $109,781 in
the 1998 quarter. This resulted in the 1999 quarter's loss from operations
being slightly lower at $178,896 in 1999 compared to $200,997 in 1998.
The Company's cost of vessel operations in the quarter ended June 30, 1999 was
$37,017 compared to $70,750 for the second quarter of 1998. In the 1999
quarter the RV Seahawk was laid up in dock awaiting work, and the expenditure
consisted mainly of dockage, insurance, minimum crew and maintenance costs.
However, in the 1998 quarter the crew costs of $39,775 and fuel costs of
$11,186 reflect the extra costs of offshore activity in that quarter.
During the three months ended June 30, 1998 the Company's share of
administrative expenditure of a South American joint venture amounted to
$20,464. There were no such costs in the 1999 quarter, and no further costs of
that nature will be incurred because a settlement agreement made in June 1998
with the Company's partner in the joint venture provides that all future
administrative costs will be borne by that partner.
Depreciation was $27,116 for the quarter ending June 30, 1999, lower than the
$34,414 charge for depreciation in the equivalent period in 1998 because
certain assets became fully depreciated at the end of 1998.
Rent was $21,390 for the 1999 quarter. Rent was $17,588 for the quarter ending
June 30, 1998 as a result of a negotiated reduction in rent.
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Administrative costs increased by $56,492 to $166,273 for the quarter ending
June 30, 1999 from $109,781 during the same period of 1998. The increase
resulted largely from an increase of $16,076 to $85,291 for legal and
professional fees, higher payroll costs ($13,339 from $3,030) and a higher
amount expended on travel and subsistence expenses ($14,366 from $7,816).
Interest expense increased to $65,988 for the quarter ending June 30, 1999
compared to $38,452 in the second quarter of 1998. The increase was due
largely to the effect of default interest on overdue notes and the interest
burden of the mortgage on the R/V Seahawk.
Interest income was negligible for the second quarter of 1999 compared to
$1,246 in the 1998 equivalent quarter because the Note receivable from Eagle
Partners, Ltd. was written off at the end of December 1998.
The loss on investment in less than 50% owned entities was $2,500 in the 1999
quarter, down from $6,246 in the second quarter of 1998 as no losses from
Eagle Partners were being incurred in 1999.
SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO SIX MONTHS ENDED JUNE 30, 1998
The net loss for the six months ending June 30, 1999 was $666,962, this
compared to a profit of $106,847 in the corresponding period of 1998.
Total revenues in the half year ended June 30 1998 were $80,805, a decrease of
$481,801 over the 1998 equivalent period due to a $439,356 gain on sale of
artifacts made in the earlier period. Total expenditure in the first half of
1999, at $489,355, was $128,606 less than the $617,961 expended in the first
half of 1998 and an operating loss of $408,550 was suffered in the 1999 period
compared to a loss of $55,355 in the 1998 period.
The vessel RV Seahawk was fully operational and working in the Caribbean in
the first half of 1998 and had moved to the Mediterranean where she was mostly
laid up in dock during the first half of 1999. Consequently the cost of vessel
operations, including $44,509 from $173,391 for subcontracted crew and
equipment costs in the six months ended June 30, 1998 were $159,653 lower at
$74,073 than the $233,726 incurred during the 1998 half. As well as the
subcontracted crew and equipment costs, the 1989 vessel operations absorbed
$6,745 (down from $12,136) in consumables, $2,537 down from $6,581 for repairs
and renewals.
During the six months ended June 30, 1998 the Company's share of
administrative expenditure of a South American joint venture amounted to
$22,387. There were no such costs in the 1999 period, because a settlement
agreement made in June 1998 with the Company's partner in the joint venture
provides that all future administrative costs will be borne by that partner.
Depreciation was $63,635 for the six months ending June 30, 1999, and $70,197
for the 1998 period.
Rent was $31,952 for the quarter ending June 30, 1999 compared to $35,175 for
the equivalent quarter during 1998, lower as a result of a negotiated
reduction in annual rent.
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Administrative costs increased by $66,219 to $319,695 for the six months
ending June 30, 1999 from $253,476 during the same period of 1998. Most
categories of administrative expenditure saw small increases in the 1999
period compared to the 1998 period but the higher costs were largely due to
extra legal and professional charges for preparing overdue audits and
defending the lawsuit brought by three former directors.
Interest expense increased to $131,343 for the half year ending June 30, 1999
compared to $105,739 in the first half of 1998. The increase was due to the
effect of default interest on overdue notes and the commencement of the
mortgage on the R/V Seahawk.
Interest income was negligible for the first half of 1999 compared to $16,088
in the 1997 equivalent because the Note receivable from Eagle Partners, Ltd.
was written off at the end of December 1998.
In the six months to June 30, 1999, a sale of some redundant equipment
provided a profit on disposal of $4,177, but this was offset by a provision
for devaluation of the RV Seahawk in the sum of $193,350. The provision was
estimated to be the loss that would be suffered on the forced sale of the
vessel that eventually took place in January 2000. Assets with a net book
value of $12,751 were retired during the three months ended June 30, 1998,
causing a loss on disposal of assets of that amount.
During the first half of 1999, the loss on investment in the Company's
affiliates was $5,000. During the first half of 1998 the Company's affiliate,
Seahawk I, Ltd. paid off its note and its account payable to the Company
releasing a provision for non payment of $742,301 which accounted for most of
the $741,029 gain on investment in affiliates for that quarter.
LIQUIDITY AND CAPITAL RESOURCES
During the six months ended June 30, 1999, the Company's working capital
deficit increased by $219,121 to a negative $(2,492,141). At December 31,
1998 the Company had a working capital deficit of $(2,273,020).
The deficit increased during the first quarter of 1999 because of a net loss
before depreciation and before the provision for impairment of value of the
R/V Seahawk during the period of $409,976, which was offset by the sale of
preferred stock for $168,774.
As a result, 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 operational 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.
5. Acquisition of revenue earning businesses for stock.
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<PAGE>
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. In 2000, the General Partner will again seek to close
down Seahawk II, Ltd., to eliminate the expenses of administration of the
Partnership.
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.
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 was Eagle Miners Limited. The joint venture incorporated research
by both parties concerning the Golden Eagle and a pooling of resources to
continue the search operations. Under the agreement, the Company continued to
be the offshore contractor to Eagle Miners Limited for all marine operations.
The Company earned no revenues during 1997,1998 and 1999 from this Joint
Venture and will not earn revenue in the future.
Eagle Partners Limited and Eagle Miners Limited were dissolved on December 31,
1999. In accordance with the December 31, 1998 Eagle Partners Ltd. plan of
liquidation, the financial statements for that partnership, as of December 31,
1998, were stated on a liquidation basis with an estimated liquidation value
of zero. Accordingly, the Company wrote off its investment and related
receivable accounts from Eagle Partners, Ltd. at December 31, 1998 against a
provision for losses in excess of investment and the provision for doubtful
debt, totalling $1,151,376. The net effect was zero.
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
may 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 1998 the Company generated over $313,000 selling its services to
shipwreck related customers. In 1999 $121,209 was generated by that means.
On March 19, 1998, Treasure & Exhibits International, Inc. 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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<PAGE>
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 installments, $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 installment, 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 raise cash from issues of stock and
conserve cash by the conversion of debt into equity.
In March, 1999 the Company entered an agreement with Drexel Aqua Technologies,
Inc., a Delaware corporation, under which Drexel was to purchase 36,000,000
shares of the Company's Series 2 Preferred Stock for $500,000. The
consideration was to be paid at the rate of $50,000 or more each month and the
stock was to be issued on a pro rata basis. On payment of the first $50,000
Drexel were entitled to appoint two directors to the board of the Company and
on payment of the second $50,000 Drexel were entitled to appoint a third
director. On full payment of the consideration Drexel were entitled to appoint
a total of four directors. The proceeds of the sale were to be used
specifically for current payroll, taxes, rent, administrative expenditures,
legal fees and the costs of shareholder meetings. At the same time the Company
and Drexel signed an agreement subject to due diligence, for the Company to
acquire the entire share capital of Drexel's wholly owned subsidiary, Sindia
Expedition, Inc.("SEI") for shares of Common Stock in the Company. The number
of shares to be issued for the acquisition of SEI was to depend on the
valuation of that corporation. SEI is the sole owner of all the rights to a
shipwreck in Ocean City, New Jersey known as the Sindia.
The receipts from the Drexel private placement enabled the Company to pay its
day to day expenses while the installments were received. However, after the
first three installments the payments were always later and less than provided
for by the contract. As of May 15, 2000 the Company had received only $257,374
of the $500,000 due under the Drexel arrangement and the agreement was
canceled. In order for the Company to remain in business it is necessary for
the Company to generate new sources of revenue or to 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. On June
26, 2000, the Company signed an agreement with Consolidated Holdings
Investment & Philanthropic Group, Inc.,(CHIP)a privately held Pennsylvania
corporation, which has options to invest in companies involved in engineering,
manufacturing and real estate, to acquire the entire share capital of CHIP for
newly issued shares of the Company's no par common stock. The Agreement is
subject to due diligence being performed by and appropriate warranties being
given by both parties and subject to approval at a Special Meeting of the
Company's stockholders. Immediately prior to the acquisition, the Company
plans to effect a one for one hundred reverse split of its common stock and
issue CHIP's shareholders with approximately 8 million shares of Common stock
in exchange for CHIP's share capital. Immediately after the acquisition,
CHIP's shareholders will own approximately 75 % of the Company's issued common
shares. If the acquisition is completed the Company believes that the
reorganized company's operational cash flow will be sufficient to enable
controlled growth by further acquisitions using stock and cash.
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YEAR 2000 COMPLIANCE
The Company reviewed the effect that the year 2000 would have on its essential
computer systems, especially those related to its ongoing operations and its
internal control systems, including the preparation of financial information.
The Company's computer systems are used primarily for basic accounting, word
processing, spreadsheet applications and access to the inter-net and world-
wide web. The Company employs three PC computers with year 2000 compliant
hardware. The Company does not depend on any specialized computer hardware
that became non-functional due to year 2000 problems. The Company utilizes
commonly used software packages, the vendors of which all addressed the issue
of year 2000 compliance, and the Company did not suffer any year 2000 related
software problems and there was no significant adverse effect on its
operations or accounting records related to the year 2000.
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<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings - None
Item 2. Changes in Securities
During the three months ended June 30, 1999, the Company issued 8,119,716 of
its Series 2 Preferred Stock and 320,000 shares of its Common Stock. The
Series 2 Preferred Stock and the Common stock was issued pursuant to the
exemption provided by Rule 506 to a corporate investor that had been supplied
with information regarding the investment, and that the Company believes had
knowledge and experience in financial and business matters such that the
investor was capable of evaluating the merits and risks of the investment. The
certificate representing the Series 2 Preferred Stock bear an appropriate
legend restricting the transfer of such securities.
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
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<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.
SEAHAWK DEEP OCEAN TECHNOLOGY, INC.
Date: July 25, 2000 By: /s/ John T. Lawrence
John T. Lawrence, President
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<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION METHOD OF FILING
27 Financial Data Schedule Filed herewith electronically
