U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED JUNE 30, 1996
COMMISSION FILE NO. 0-17981
HAWK MARINE POWER, INC.
A Florida Corporation 59-1886450
3025 N.E. 188 Street, Miami, Florida 33180
Issuers telephone number: (305) 932-9230
Check whether the issuer (1) 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. Yes X No ___.
State the number of shares outstanding of each of the registrant's classes of
common equity as of the latest practicable date. 2,990,198 shares of the
registrant's common stock are issued and outstanding as of August 12, 1996.
Total number of pages contained in this document 10.
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HAWK MARINE POWER, INC.
INDEX
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENT (UNAUDITED)
Condensed Consolidated Balance Sheets as of June 30, 1996 and September 30,
1995.
Condensed Consolidated Statements of Operations for the Nine months ended June
30, 1996 and 1995.
Condensed Consolidated Statements of Cash Flows for the Nine months ended June
30, 1996 and 1995.
Notes to Condensed Consolidated Financial Statements.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
PART II. OTHER INFORMATION
ITEM 1. - 5.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
2
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PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
HAWK MARINE POWER, INC.
CONSOLIDATED BLANCE SHEETS
JUNE 30, 1996 SEPTEMBER 30, 1995
-------------- ------------------
(UNAUDITED)
ASSETS
CURRENT ASSETS
Cash $ 18,180 $ 89,013
Accounts Receivable, Net 116,477 167,014
Inventory 338,614 295,715
Other Current Assets 35,304 46,184
-------- --------
TOTAL CURRENT ASSETS 508,575 597,926
PROPERTY AND EQUIPMENT
Furniture & Equipment 234,740 234,459
Less: Accumulated Depreciation 209,989 204,354
-------- --------
PROPERTY AND EQUIPMENT - NET 24,751 30,101
-------- --------
TOTAL ASSETS $533,326 $628,027
======== ========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3
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HAWK MARINE POWER, INC.
CONSOLIDATED BLANCE SHEETS (Cont.)
JUNE 30, 1996 SEPTEMBER 30, 1995
------------- ------------------
(UNAUDITED)
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $ 100,624 $ 68,992
Accrued Expenses 35,124 35,286
Customer Deposits 142,402 136,056
Notes Payable 99,174 101,173
----------- -----------
CURRENT LIABILITIES 377,324 341,507
----------- -----------
TOTAL LIABILITIES 377,324 341,507
----------- -----------
SHAREHOLDERS' EQUITY
Common Stock - $.001 par
value authorized - 50,000,000
shares; issued and outstanding
2,990,198 shares 2,990 2,990
Additional Paid in Capital 1,604,045 1,604,045
Accumulated Deficit (1,451,033) (1,320,515)
----------- -----------
TOTAL SHAREHOLDERS' EQUITY 156,002 286,520
----------- -----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 533,326 $ 628,027
=========== ===========
See Notes to Consolidated Financial Statements
4
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HAWK MARINE POWER, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
JUNE 30 JUNE 30 JUNE 30 JUNE 30
1996 1995 1996 1995
---------- ----------- ---------- -----------
Net Sales $ 339,478 $ 466,600 $ 766,512 $ 1,417,432
Cost of Sales 299,254 213,879 656,596 1,029,346
----------- ----------- ----------- -----------
Gross Margin 40,224 252,721 109,916 388,086
Selling, General
and Administrative
Expenses 86,000 103,051 240,669 252,212
----------- ----------- ----------- -----------
Operating (45,776) 149,670 (130,753) 135,874
Income (Loss)
Interest - Net 12 45 235 8,147
----------- ----------- ----------- -----------
Net Income $ (45,764) $ 149,625 $ (130,518) $ 127,727
(Loss) =========== =========== =========== ===========
Income (Loss) Per
Common Share $ (.02) $ (.05) $ (.04) $ (.04)
=========== =========== =========== ===========
Weighted Shares
Outstanding 2,990,198 2,990,198 2,990,198 2,990,198
=========== =========== =========== ===========
See Notes to Consolidated Financial Statements
5
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HAWK MARINE POWER, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
NINE MONTHS ENDED
JUNE 30
--------------------------
1996 1995
---------- ---------
OPERATING ACTIVITIES
Net Income (Loss) $(130,518) $ 127,727
Adjustments to Reconcile Net
Loss to Net Cash Provided
by Operating Activities:
Depreciation & Amortization 5,632 10,921
(Increase) Decrease in:
Accounts Receivable - Net 50,537 (134,429)
Inventory (42,899) 117,957
Other Current Assets 10,880 28,958
Increase (Decrease) in:
Accounts Payable 31,632 15,114
Accrued Expenses (162) 5,453
Customer Deposits 6,346 (157,456)
--------- ---------
Net Cash (Used) Provided
by Operating Activities (68,552) 14,245
CASH FLOWS FROM INVESTING
ACTIVITES:
Equipment Purchases (281) (729)
CASH FLOWS FROM FINANCING
ACTIVITES:
Net payments on Notes Payable (2,000) (9,558)
--------- ---------
Net Increase (Decrease) in Cash (70,833) 3,958
CASH AT BEGINNING OF PERIOD 89,013 122,410
--------- ---------
CASH AT END OF PERIOD 25,336 $ 126,368
========= =========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6
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HAWK MARINE POWER, INC.
NOTES TO CONSOLIDATD FINANCIAL STATEMENTS
JUNE 30, 1996
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying consolidated financial statements of Hawk Marine Power, Inc.
have been prepared in accordance with generally accepted accounting principles
for interim financial information, and with the instructions to Form 10-QSB and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements.
In the opinion of the Company's management, all adjustments (consisting of
normal recurring accruals) considered to be necessary for a fair presentation
have been included. Operating results for the nine months ended June 30, 1996
are not necessarily indicative of the expected results for the year ending
September 30, 1996. For further information, refer to the financial statements
and footnotes included in the Company's annual report on Form 10-KSB for the
year ended September 30, 1995.
NOTE B - GOING CONCERN CONSIDERATION
The Company's consolidated financial statements have been presented on the basis
that it is a going concern, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The Company
reported cumulative losses since inception of $1,451,033. In addition, the
Company's $405,000 11% notes payable (principal balance of $99,173 at June 30,
1996) were due November 1, 1991.
The Company is past due on its obligations to certain noteholders pursuant to a
settlement agreement dated April 16, 1992. The Company's ability to continue
operations is dependent upon maintaining reduced costs and its current level of
business.
7
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NOTE C - FAS 109
Deferred income taxes are provided on the tax effect of changes in temporary
differences. Deferred tax assets are subject to a valuation allowance if their
realization is not reasonably assured. Deferred tax assets are comprised of the
following at June 30, 1996:
Net Operating Loss Carry Forward $ 470,348
Valuation Allowance (470,348)
-----------
Net Deferred Tax Asset $ 0
===========
NOTE D - MAJOR CUSTOMER
For the years ended September 30, 1995 and 1994, approximately 33% and 62% of
the company's sales were with the Cigarette Racing Team, Inc. A principal
shareholder and chief executive officer of the company is also an officer and
employee of Cigarette. During the quarter ended June 30, 1996, $104,737 or 31%
of total sales were generated by Cigarette. The loss of this customer, or a
substantial decrease in engine orders would have a material adverse affect on
the Company's operations.
NOTE E - LITIGATION
The Company is a defendant in a lawsuit filed on March 20, 1995 in the Circuit
Court of Dade County, Florida styled as PETROCELLI ELECTRONIC COMPANY, INC. ET
AL VS. HAWK MARINE POWER, INC. (Case No. 95-5279 CA01-01). The Plaintiffs are
holders of Promissory Notes which the Company executed on November 10, 1988 and
which were the subject of various settlement agreements executed on April 16,
1992 which were fulfilled in part by the Company. There are seven Plaintiffs
represented in this litigation who are seeking damages of in excess of $40,000
together with interest and cost of collection. The Company has filed a Motion to
Dismiss the Plaintiff's complaint and is awaiting a ruling by the court.
In January, 1996, the Company was named in a lawsuit arising from the sale of
engines. In HRH TUNKU IRRAHIM ISMAIL VS. ROBERT E. TORTER, CIGARETTE RACING
TEAM, INC., JEFFREY I. FRIEDMAN, CENTRAL MANUFACTURING, INC. F/K/A CIGARETTE
RACING TEAM, INC., CRAIG Barrie, HAWK MARINE POWER, INC. (Case No. 95-2252 CIV -
GRAHAM), a suit filed in the U.S. District Court for the Southern District of
Florida, the plaintiff is seeking damages in connection with alleged breach of
contract. The Company's involvement in the lawsuit pertains to engines the
plaintiff allegedly ordered and paid for, but, did not receive.
8
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The Company contends that it did not receive payment for the engines and has
vigorously contested the complaint. Based upon information presently available
to the Company, management believes the outcome of this litigation will not have
a material adverse effect on the financial position of the Company.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
RESULTS OF OPERATIONS
For the quarter ended June 30, 1996 the Company reported a net loss of $45,776
compared to net income of $149,625 for the quarter ended June 30, 1995. Net
revenues of $339,478 during the current quarter decreased 27% from $466,600
during the same period in fiscal 1995.
Selling, general and administrative expenses for the quarter ended June 30, 1996
are $86,000, a 17% decrease from the same period in fiscal 1995. The change
resulted from decreased overhead costs.
LIQUIDITY AND CAPITAL RESOURCES
The Company had cash on hand in the amount of $18,180 at June 30, 1996 compared
to $89,013 at September 30, 1995. Working capital decreased from $256,419 at
September 30, 1995 to $131,251 at the end of the current quarter. The decrease
was related to a loss from operations during the first nine months of fiscal
1996.
The Company was obligated to retire at November 1, 1991, $405,000 principal
amount of its 11% secured promissory notes issued to a group of private
investors in October 1988. On April 16, 1992, the Company agreed to enter into
settlement with the noteholders pursuant to which the participants who accepted
the terms of the settlement agreement would receive a cash payment equal to 86%
of their entire investment.
The Company made the first payment to the noteholders in April 1992. However,
due to insufficient cash flow, the Company was unable to make the August 15
installment pursuant to the settlement agreements. On October 8, 1992, the
Company made a partial payment of $9,026 to certain noteholders who had
initiated litigation, leaving a balance due of $58,673 pursuant to the
settlement. The Company has extended the due date and is continuing to seek
alternative financing from related or independent financing sources, or through
manufacturing arrangements or affiliations with independent industry sources.
(See Note E)
9
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PART II. OTHER INFORMATION
Items 1 - 5
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: None
(b) Reports on Form 8-K: None
SIGNATURES
In accordance with requirements of the Exchange Act, the Issuer caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: August 12, 1996 HAWK MARINE POWER, INC.
BY: /s/ CRAIG N. BARRIE
----------------------
CRAIG N. BARRIE
President and Chief
Executive Officer
10
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 18,180
<SECURITIES> 0
<RECEIVABLES> 116,477
<ALLOWANCES> 0
<INVENTORY> 338,614
<CURRENT-ASSETS> 508,575
<PP&E> 234,740
<DEPRECIATION> 209,989
<TOTAL-ASSETS> 533,326
<CURRENT-LIABILITIES> 377,324
<BONDS> 0
0
0
<COMMON> 2,990
<OTHER-SE> 153,012
<TOTAL-LIABILITY-AND-EQUITY> 533,326
<SALES> 339,478
<TOTAL-REVENUES> 40,224
<CGS> 299,254
<TOTAL-COSTS> 86,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (12)
<INCOME-PRETAX> (45,764)
<INCOME-TAX> 0
<INCOME-CONTINUING> (45,764)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (45,764)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
