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, 1997
COMMISSION FILE NO. 0-17981
ALCHEMY HOLDINGS, INC.
F/K/A 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. 2,237,377 shares of the
registrant's common stock are issued and outstanding as of August 15, 1997.
Total number of pages contained in this document 11.
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ALCHEMY HOLDINGS, INC.
INDEX
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENT (UNAUDITED)
Condensed Balance Sheets as of June 30, 1997 and September 30, 1996.
Condensed Statements of Operations for the Nine months ended June 30, 1997 and
1996.
Condensed Statements of Cash Flows for the Nine months ended June 30, 1997 and
1996.
Notes to Condensed 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
<TABLE>
<CAPTION>
ALCHEMY HOLDINGS, INC.
BALANCE SHEETS
JUNE 30, 1997 SEPTEMBER 30, 1996
-------------------- ----------------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 12,857 $ 85,737
Accounts Receivable, Net 24,683 8,321
Inventory 272,699 247,610
Other Current Assets - 2,968
-------------------- ----------------------
TOTAL CURRENT ASSETS 310,239 344,636
PROPERTY AND EQUIPMENT
Furniture & Equipment 234,740 234,740
Less: Accumulated Depreciation 213,298 211,866
-------------------- ----------------------
PROPERTY AND EQUIPMENT - NET 21,442 22,874
-------------------- ----------------------
TOTAL ASSETS $ 331,681 $ 367,510
==================== ======================
</TABLE>
See Notes to Financial Statements
3
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<TABLE>
<CAPTION>
ALCHEMY HOLDINGS, INC.
BALANCE SHEETS (Continued)
JUNE 30, 1997 SEPTEMBER 30, 1996
------------------- ---------------------
(UNAUDITED)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $ 91,677 $ 83,169
Accrued Expenses 21,757 26,989
Customer Deposits 192,010 121,700
Notes Payable 65,000 101,173
------------------- ---------------------
TOTAL LIABILITIES 370,444 333,031
------------------- ---------------------
SHAREHOLDERS' EQUITY
Common Stock - $.001 par value
authorized - 50,000,000 shares; issued
and outstanding 2,237,377 shares 2,238 2,990
Additional Paid in Capital 1,604,797 1,604,045
Accumulated Deficit (1,645,798) (1,572,556)
------------------- ---------------------
TOTAL SHAREHOLDERS' EQUITY (38,763) 34,479
------------------- ---------------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 331,681 $ 367,510
=================== =====================
</TABLE>
See Notes to Financial Statements
4
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<TABLE>
<CAPTION>
ALCHEMY HOLDINGS, INC.
STATEMENT OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
------------------------------------ ------------------------------------
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1997 1996 1997 1996
---------------- ----------------- --------------- -----------------
<S> <C> <C> <C> <C>
Net Sales $ 147,014 $ 339,478 $ 602,309 $ 766,512
Cost of Sales 128,590 299,254 513,314 656,596
---------------- ----------------- --------------- -----------------
Gross Margin 18,424 40,224 88,995 109,916
Selling, General and
Administration Expenses 45,484 86,000 162,490 240,669
---------------- ----------------- --------------- -----------------
Operating (Loss) (27,060) (45,764) (73,495) (130,753)
Interest - Net 85 12 253 235
---------------- ----------------- --------------- -----------------
Net (Loss) $ (26,975) $ (45,764) $ (73,242) $ (130,518)
================ ================= =============== =================
(Loss) Per Common Share $ (0.01) $ (0.02) $ (0.02) $ (0.04)
================ ================= =============== =================
Weighted Shares Outstanding 2,237,377 2,990,198 2,237,377 2,990,198
================ ================= =============== =================
</TABLE>
See Notes to Financial Statements
5
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<TABLE>
<CAPTION>
ALCHEMY HOLDINGS, INC.
STATEMENT OF CASH FLOWS
(UNAUDITED)
NINE MONTHS ENDED JUNE 30,
--------------------------------------
1997 1996
-------------- ---------------
<S> <C> <C>
OPERATING ACTIVITIES
Net (Loss) $ (73,242) $ (130,518)
Adjustments to Reconcile Net (Loss) to
Net Cash Provided by Operating Activities:
Depreciation and Amortization 1,432 5,632
(Increase) Decrease in:
Accounts Receivable - Net (16,362) 50,537
Inventory (25,089) (42,899)
Other Current Assets 2,968 10,880
Increase (Decrease) in:
Accounts Payable 8,508 31,632
Accrued Expenses (5,232) (162)
Customer Deposits 70,310 6,346
-------------- ---------------
Net Cash (Used) by Operating Activities (36,707) (68,552)
CASH FLOWS FROM INVESTING
ACTIVITIES
Equipment Purchases - (281)
CASH FLOWS FROM FINANCING
ACTIVITIES
Net Payments on Notes Payable (36,173) (2,000)
-------------- ---------------
Net (Decrease) in Cash (72,880) (70,833)
CASH AT BEGINNING OF PERIOD 85,737 89,013
-------------- ---------------
CASH AT END OF PERIOD $ 12,857 $ 18,180
============== ===============
</TABLE>
See Notes to Financial Statements
6
<PAGE>
ALCHEMY HOLDINGS, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying financial statements of Alchemy Holdings, 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, 1997
are not necessarily indicative of the expected results for the year ending
September 30, 1997. 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, 1996.
NOTE B - GOING CONCERN CONSIDERATION
The Company's 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 $1,645,798.
The Company's ability to continue operations is dependent upon reducing costs
and increasing 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, 1997:
Net Operating Loss Carry Forward $ 510,197
Valuation Allowance (510,197)
--------------
Net Deferred Tax Asset $ 0
==============
NOTE D - MAJOR CUSTOMER
For the years ended September 30, 1996 and 1995, approximately 24% and 33% 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, 1997, no 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.
8
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ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
For the quarter ended June 30, 1997 the Company reported a net loss of $12,857
compared to a net loss of $45,776 for the quarter ended June 30, 1996. Net
revenues of $147,014 during the current quarter decreased 57% from $339,478
during the same period in fiscal 1996.
Selling, general and administrative expenses for the quarter ended June 30,
1997 were $45,484, a 47% decrease from the same period in fiscal 1996. The
change resulted from decreased overhead costs.
LIQUIDITY AND CAPITAL RESOURCES
The Company had cash on hand in the amount of $12,857 at June 30, 1997 compared
to $85,737 at September 30, 1996. Working capital decreased from $11,605 at
September 30, 1996 to a deficit of $60,205 at the end of the current quarter.
The decrease was related to a loss from operations during the first nine months
of fiscal 1997.
PART II. OTHER INFORMATION
Items 1 - 5
On May 12, 1997, the Company held a special meeting of the Board of Directors
and decided that in the best interests of the Company's shareholders that they
would attempt to engage in the business of licensing, designing and marketing
of merchandise and apparel as opposed to its current activities of high
performance engine manufacturing, in order to provide the Company's current
shareholders with the potential of future liquidity in their stock ownership
and the possibility of future gain. As such, the Company has sought and located
management to assist in such project, and said management will undertake to
raise capital through debt or equity instruments to fund its future operations.
The Board of Directors acknowledge that such a transaction will be a high risk
venture and the opportunity for success may be remote. However, inasmuch as the
Company is not currently operating profitably and has no other prospects of
generating operating income or shareholder value, the Directors believe it is
in the best interests of the Company and its shareholders to proceed with such
an undertaking.
In connection therewith, at the Directors meeting, a unanimous consent of the
Board of Directors and a majority of the outstanding stockholders represented
at the meeting
9
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approved that the Company adopt a recapitalization pursuant to which the issued
and outstanding shares of the Company's common stock are reverse split, or
consolidated, on a 1-for-80 basis so that the shareholders receive one share of
the Company's common stock for every 80 shares held; no fractional shares are to
be issued and any fractional interests are to be rounded to the nearest whole
number.
Furthermore, the following individuals were elected as officers and directors
of the Company to serve until their successors are elected or appointed: Craig
N. Barrie, President / Director; Berton J. Lorow, Vice-President / Director;
Adam C. Schild, Secretary / Director; John H. Burmeister, Director; and Kevin A.
Lichtman, Director.
Additionally, the Company adopted a proposal to amend the Articles of
Incorporation of the Company and change the name of the Company from Hawk
Marine Power, Inc. to Alchemy Holdings, Inc. Subsequent to the change of the
Company's name from Hawk Marine Power, Inc. to Alchemy Holdings, Inc., the
Company intends to form a new corporation under the laws of the State of
Delaware, a wholly owned subsidiary of the Company to be known as "Hawk Marine
Power, Inc." to operate its high performance engine manufacturing business.
Subsequent to the change of the Company's name from Hawk Marine Power, Inc. to
Alchemy Holdings, Inc., and subsequent to the formation of the wholly owned
subsidiary to be known as "Hawk Marine Power, Inc.", the Company sold all of
its assets and liabilities of its high performance engine building operation to
the Company's wholly owned subsidiary Hawk Marine Power, Inc. in exchange for
100 shares of Hawk Marine Power, Inc., the new wholly owned subsidiary. The 100
shares exchanged represents 100% of the issued and outstanding shares of Hawk
Marine Power, Inc.
The Company issued 2,000,000 post-split restricted shares of the Company's
common stock to Offshore Racing, Inc., in exchange for the Company's exclusive
world-wide right and license to use the trademarks, and service marks of
"Cigarette Racing Team, Inc.", for all goods and services other than the use of
the trademarks and service marks on any form of watercraft. In conjunction with
the purchasing of the licensing agreement, the Company has formed a corporation
under the laws of the State of Delaware, to be organized as a wholly owned
subsidiary of the Company to be known as "Cigarette Licensing, Inc." to operate
the Company's licensing business.
Lastly, the Company issued 200,000 post-split shares of the Company's common
stock to the professionals responsible for the professional services related to
and for negotiating, arranging and brokering the licensing and other related
transactions described herein on behalf of the Company.
As a result, on May 20, 1997, the split became effective and the Company began
trading under its new symbol "ALCH" on the NASD Electronic Bulletin Board.
10
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Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: 27 - Financial Data Schedule
(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 15, 1997 ALCHEMY HOLDINGS, INC
BY: /s/ CRAIG N. BARRIE
--------------------------
CRAIG N. BARRIE
President and Chief
Executive Officer
11
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EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 12,857
<SECURITIES> 0
<RECEIVABLES> 24,683
<ALLOWANCES> 0
<INVENTORY> 272,699
<CURRENT-ASSETS> 310,239
<PP&E> 234,740
<DEPRECIATION> 213,298
<TOTAL-ASSETS> 331,681
<CURRENT-LIABILITIES> 370,444
<BONDS> 0
0
0
<COMMON> 2,238
<OTHER-SE> (41,001)
<TOTAL-LIABILITY-AND-EQUITY> 331,681
<SALES> 147,014
<TOTAL-REVENUES> 147,014
<CGS> 128,590
<TOTAL-COSTS> 45,484
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (85)
<INCOME-PRETAX> (26,975)
<INCOME-TAX> 0
<INCOME-CONTINUING> (26,975)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (26,975)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> 0
</TABLE>
