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 DECEMBER 31, 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 [X] No [ ].
State the number of shares outstanding of each of the registrant's classes of
common equity as of the latest practicable date. 2,237,394 shares of the
registrant's common stock are issued and outstanding as of February 1, 1998.
Total number of pages contained in this document 11.
<PAGE>
ALCHEMY HOLDINGS, INC.
INDEX
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENT (UNAUDITED)
Condensed Balance Sheets as of December 31, 1997 and September 30, 1997.
Condensed Statements of Operations for the Three months ended December 31, 1997
and 1996.
Condensed Statements of Cash Flows for the Three months ended December 31, 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
DECMBER 31, 1997 SEPTEMBER 30, 1997
---------------- ------------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash
$ 21,530 $ 44,753
Accounts Receivable, Net
54,078 53,931
Inventory
165,994 165,994
Other Current Assets 1,943 3,863
-------- --------
TOTAL CURRENT ASSETS 243,545 268,541
PROPERTY AND EQUIPMENT
Furniture & Equipment 234,740 234,740
Less: Accumulated
Depreciation 214,251 213,775
-------- --------
PROPERTY AND EQUIPMENT - NET 20,489 20,965
-------- --------
TOTAL ASSETS $264,034 $289,506
======== ========
</TABLE>
See Notes to Financial Statements
3
<PAGE>
<TABLE>
<CAPTION>
ALCHEMY HOLDINGS, INC.
BALANCE SHEETS (Continued)
DECEMBER 31, 1997 SEPTEMBER 30, 1997
----------------- ------------------
(UNAUDITED)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $ 59,982 $ 63,640
Accrued Expenses 25,498 30,538
Customer Deposits 51,725 51,725
Notes Payable 176,548 172,173
---------- ----------
TOTAL LIABILITIES 313,753 318,076
---------- ----------
SHAREHOLDERS' EQUITY
Common Stock - $.001 par value
authorized - 50,000,000 shares; issued
and outstanding 2,237,394 shares 2,237 2,237
Additional Paid in Capital 1,606,998 1,606,998
Accumulated Deficit (1,658,954) (1,637,805)
---------- ----------
TOTAL SHAREHOLDERS' EQUITY (49,719) 28,570
---------- ----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 264,034 $ 289,506
========== ==========
</TABLE>
See Notes to Financial Statements
4
<PAGE>
ALCHEMY HOLDINGS, INC.
STATEMENT OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED
----------------------------------
DECEMBER 30, DECEMBER 30,
1997 1996
----------- -----------
Net Sales $ 206,402 $ 282,883
Cost of Sales 200,332 238,690
----------- -----------
Gross Margin 6,070 44,193
Selling, General and
Administration Expenses 27,219 63,009
----------- -----------
Operating (Loss) (21,149) (18,816)
Interest - Net 123
----------- -----------
Net (Loss) $ (21,149) $ (18,693)
=========== ===========
(Loss) Per Common Share $ (0.01) $ (0.50)
=========== ===========
Weighted Shares Outstanding
(Restated) 2,237,394 37,377
=========== ===========
See Notes to Financial Statements
5
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ALCHEMY HOLDINGS, INC.
STATEMENT OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED DECEMBER 30,
1997 1996
----------- ----------
OPERATING ACTIVITIES
Net (Loss) $(21,149) $(18,693)
Adjustments to Reconcile Net
(Loss) to
Net Cash Provided by Operating
Activities:
Depreciation and Amortization 476 479
(Increase) Decrease in:
Accounts Receivable - Net (147) 629
Inventory 39,369
Other Current Assets 1,920 (1,564)
Increase (Decrease) in:
Accounts Payable (3,658) (17,688)
Accrued Expenses (5,040) 1,206
Customer Deposits (63,600)
-------- --------
Net Cash (Used) by Operating
Activities (27,598) (59,862)
CASH FLOWS FROM FINANCING
ACTIVITIES
Increase in Notes Payable 4,375
-------- --------
NET (DECREASE) IN CASH (23,223) (59,862)
CASH AT BEGINNING OF PERIOD 44,753 85,737
-------- --------
CASH AT END OF PERIOD $ 21,530 $ 25,875
See Notes to Financial Statements
6
<PAGE>
ALCHEMY HOLDINGS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 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 three months ended December 31,
1997 are not necessarily indicative of the expected results for the year ending
September 30, 1998. 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, 1997.
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 $1,658,954.
The Company's ability to continue operations is dependent upon reducing costs
and increasing its current level of business.
7
<PAGE>
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 December 30, 1997:
Net Operating Loss Carry Forward $ 536,302
Investment Credit 7,712
Valuation Allowance (544, 014)
--------------
Net Deferred Tax Asset $ -
==============
NOTE D - MAJOR CUSTOMER
For the years ended September 30, 1997 and 1996, approximately 17% and 24% of
the company's sales were with the Cigarette Racing Team, Inc. A principal
shareholder and officer of the company is also an officer and employee of
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
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
RESULTS OF OPERATIONS
For the quarter ended December 31, 1997 the Company reported a net loss of
$21,149 compared to a net loss of $46,223 for the quarter ended December 31,
1996. Net revenues of $206,402 during the current quarter decreased 27% from
$282,883 during the same period in fiscal 1996.
Selling, general and administrative expenses for the quarter ended December 31,
1997 were $27,219 a 57% 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 $21,530 at December 31, 1997
compared to $44,753 at September 30, 1997. Working capital decreased from a
deficit $51,588 at September 30, 1997 to a deficit of $70,208 at the end of the
current quarter. The decrease was related to a loss from operations during the
first three months of fiscal 1998.
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.
9
<PAGE>
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 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 and
Adam C. Schild, Secretary / 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.
10
<PAGE>
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.
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: February 12, 1998 ALCHEMY HOLDINGS, INC
By: /s/ CRAIG N. BARRIE
----------------------------
CRAIG N. BARRIE
President
11
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EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
27.0 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 21,530
<SECURITIES> 0
<RECEIVABLES> 54,078
<ALLOWANCES> 0
<INVENTORY> 165,994
<CURRENT-ASSETS> 243,545
<PP&E> 20,489
<DEPRECIATION> 0
<TOTAL-ASSETS> 264,034
<CURRENT-LIABILITIES> 313,753
<BONDS> 0
0
0
<COMMON> 2,237
<OTHER-SE> (5,956)
<TOTAL-LIABILITY-AND-EQUITY> 264,034
<SALES> 206,402
<TOTAL-REVENUES> 206,402
<CGS> 200,332
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 27,219
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (21,148)
<INCOME-TAX> (21,148)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (21,149)
<EPS-PRIMARY> (0.01)
<EPS-DILUTED> 0.00
</TABLE>
