SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15d
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15d
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from: ____________ to ____________
Commission file number:
33-55254-26
SEAVIEW UNDERWATER RESEARCH, INC.
------------------------------------------------------
(exact name of registrant as specified in its charter)
NEVADA 87-0438640
- ------------------------------- -------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
SEAVIEW UNDERWATER RESEARCH, INC.
200 MADONNA BLVD. SUITE A
TIERRA VERDE , FL 33715
(727) 866-3660
----------------------------------------------------
(Registrant's telephone number, including area code)
GOPHER, INC.
--------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15d of the Securities and Exchange Act of 1934
during the preceding 12 months (or 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.
[X] Yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practical date.
Total number of shares of Common Stock, as of October 5, 1999: 6,680,000
<PAGE>
SEAVIEW UNDERWATER RESEARCH, INC.
INDEX
<TABLE>
<CAPTION>
Part I. FINANCIAL INFORMATION Page No.
<S> <C> <C>
Item 1. Financial Statements 3 - 7
Item 2. Management's Discussion and Analysis of Financial 8 - 11
Condition and Results of Operations
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
Exhibits 14 - 15
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial statements
SEAVIEW UNDERWATER RESEARCH, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
------------ ------------
(Unaudited)
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents ........................ $ 40,550 $ 14,515
Inventory ........................................ 93,712 59,713
----------- -----------
TOTAL CURRENT ASSETS .......................... 134,262 74,228
Property and equipment, net .......................... 95,430 96,230
Other assets ......................................... -- --
TOTAL ASSETS .................................. $ 229,692 $ 170,458
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities: ......................................... -- --
Stockholders' equity:
Capital stock ........................................ 7,700 5,000
Additional paid-in capital ........................... 3,595,451 42,684
Unearned Restricted Stock Compensation ............... (3,373,459) --
Retained earnings .................................... 0 122,774
----------- -----------
TOTAL STOCKHOLDERS' EQUITY .................... 229,692 170,458
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .... $ 229,692 $ 170,458
=========== ===========
</TABLE>
The accompanying notes are an integral part of these
financial statements.
3
<PAGE>
SEAVIEW UNDERWATER RESEARCH, INC.
STATEMENT OF OPERATIONS
(Unaudited)
THREE MONTHS
ENDED MARCH 31,
1999
Sales ..................................... $ 300,869
Cost of goods sold ........................ 48,256
----------
GROSS PROFIT ..................... 252,613
Operating expenses:
Salaries & Wages .................... 74,989
Advertising & Promotions ............ 75,274
Depreciation ......................... 3,950
Rent & Utilities ..................... 20,626
Other Expenses ....................... 20,081
----------
TOTAL OPERATING EXPENSES ......... 194,920
----------
NET INCOME ................................ $ 57,693
==========
PRO FORMA TAX EXPENSE (NOTE 2) ............ $ 20,072
PRO FORMA NET INCOME (NOTE 2) ............. $ 37,621
Pro forma basic net income per common share $ 0.01
Pro forma diluted net income per common
share ................................ $ 0.01
Basic weighted average common shares
outstanding .......................... 5,000,000
Diluted weighted average common shares
outstanding .......................... 5,181,233
The accompanying notes are an integral part of these
financial statements.
4
<PAGE>
SEAVIEW UNDERWATER RESEARCH, INC
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
THREE MONTHS
ENDED MARCH 31,
1999
---------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ............................................. $ 57,693
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation ........................................ 3,950
Amortization of unearned compensation ............... 1,541
(Increase) decrease in:
Inventory ........................................... (33,999)
---------
Net cash used in operating activities ............... 29,185
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment .................... (3,150)
---------
Net cash used in investing activities ............... (3,150)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from recapitalization ......................... 250,000
Distribution to shareholders ........................... (250,000)
---------
Net cash provided by financing activities ........... 0
Net increase in cash and cash equivalents ........... 26,035
Cash and cash equivalents at beginning of period ............ 14,515
Cash and cash equivalents at end of period .................. $ 40,550
=========
The accompanying notes are an integral part of these
financial statements.
5
<PAGE>
SEAVIEW UNDERWATER RESEARCH, INC.
Notes to Interim Consolidated Financial Statements
March, 1999 (Unaudited)
1. OPERATIONS AND ORGANIZATION
Seaview Underwater Research, Inc. ("the Company") sells underwater
video cameras direct to the public and through an expanding retailers
network. The manufacturing of the video cameras is contracted out to an
independent company.The company was incorporated in the State of
Florida on April 2, 1998, and had no operations prior to incorporation.
The company is located at 200 Madonna Blvd. Suite A, Tierra Verde,
Florida 33715.
2. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION/BASIS OF CONSOLIDATION. The accompanying
unaudited financial statements have been prepared in accordance with
prescribed guidance of the Securities and Exchange Commission ("SEC"),
and therefore, do not include all information and footnotes necessary
for a complete presentation of financial position, results of
operations, cash flows and stockholders' equity in conformity with
generally accepted accounting principals. In the opinion of management,
all adjustments considered necessary for a fair presentation of the
results of operations and financial position have been included and all
such adjustments are of a normal recurring nature. Operating results
for the quarter ended March 31, 1999, are not necessarily indicative of
the results that can be expected for a full fiscal year.
INVENTORIES. Inventories consist of finished goods held for resale and
are stated at the lower of cost or market. Inventory costs are
determined using the first-in, first-out (FIFO) method.
PROPERTY AND EQUIPMENT. Property and equipment are stated at cost less
accumulated depreciation. Depreciation on property and equipment is
calculated on the straight line method over the estimated useful lives
of the assets ranging from five to seven years. Maintenance and repairs
are charged to expense as incurred.
STOCK BASED COMPENSATION. In October 1995, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standard
("SFAS") No. 123, "Accounting for Stock-Based Compensation". SFAS 123
allows companies which have stock based compensation arrangements with
employees to adopt a fair-value basis of accounting for equity
instruments or to continue to apply the intrinsic value based method
required by with Accounting Principles Board ("APB") Opinion No. 25,
"Accounting for Stock issued to Employees". The company has elected to
account for stock based compensation arrangements in accordance with
APB No. 25.
REVENUE RECOGNITION. Revenue is recognized at the time of product
shipment. Such revenue is recorded net of Estimated product return. At
March 31, 1999, estimated amounts for returns are not considered
material.
INCOME TAXES. Prior to April 1, 1999, the company had elected S
Corporation status under Section 1362(a) of the Internal Revenue Code.
Under the election, the stockholders included their share of the
Company's applicable taxable income or loss on their federal income tax
return. Accordingly, no provision for income taxes had been made. On
April 1, 1999, the Company elected to terminate its Subchapter S status
in favor of a taxable C Corporation as designated in the Internal
Revenue Code. Accordingly, pro forma income taxes, net income, and
earnings per share have been included on the face of the historical
income statement for the period presented. In addition, a pro forma
adjustment has been made to reclassify undistributed earnings of
$180,467 as additional paid in capital.
6
<PAGE>
USE OF ESTIMATES. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect certain reported amounts and
disclosures. Accordingly, actual results could differ from those
estimates.
3. STOCK AWARD AGREEMENT
Under a Professional Services Agreement effective March 25, 1999,
2,700,000 shares of restricted common stock were issued to a key
employee. Upon issuance of stock under the plan, unearned compensation
equivalent to the market value of the stock at the date of grant is
charged to stockholders' equity and subsequently amortized over the
period of the agreement, three years. Amortization of $1,541 was
recorded for the three months ended March 31, 1999.
Because the terms of the Professional Services Agreement call for no
cash payment by the employee, the intrinsic value of the compensation
to the employee as defined by APB No. 25 equals the fair market value
of the award as defined by SFAS No. 123. Thus, pro forma disclosures of
net income and earnings per share, as if the fair value based method of
accounting had been applied, have been omitted.
4. RECAPITALIZATION
On March 24, 1999, Gopher, Inc. ("Gopher") acquired all of the
outstanding common stock of Seaview Underwater Research, Inc. in
exchange for 5,000,000 shares of Gopher's restricted stock and $250,000
cash. Gopher was formed as a non-operating public shell company, and,
therefore, for accounting purposes, the combination has been treated as
a recapitalization of Seaview Underwater Research, Inc. and the
issuance of stock by the company for the net monetary assets of Gopher.
The transaction is recorded as a capital transaction as described
above, and, as such, pro forma information is not presented, since the
transaction does not result in a business combination. The historical
financial statements prior to March 24, 1999 are those of Seaview
Underwater Research, Inc., and reflect the restatement of the equity
accounts based on the ratio of the exchange of 5,000,000 shares of
Gopher for 100 shares of Seaview Underwater Research, Inc.
5. COMMITMENTS AND CONTINGENCIES
The Company is involved in various claims and legal actions arising in
the ordinary course of business. In the opinion of management, the
ultimate disposition of these matters will not have a material adverse
effect on the Company's financial position, results of operations or
liquidity.
6. SUBSEQUENT EVENTS
On April 8, 1999 and October 5, 1999, the company filed registration
statements with the Securities and Exchange Commission for the issuance
of 1,430,000 and 250,000 shares, respectively, of its common stock for
the purpose of compensating consultants for services rendered.
7
<PAGE>
Item 2. Management's discussion and analysis of financial condition and
results of operations
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
A. OVERVIEW
Seaview Underwater Research, Inc. ("the Company") was incorporated in
the State of Florida on April 2, 1998, and was not in operation prior to this
date. The company sells underwater video cameras direct to the public and
through an expanding retailers network. The production is performed by an
outside assembly company. The Company has registered trademarks for many of its
products. The Company has a patented design of the SeaView Camera.
B. RESULTS OF OPERATIONS
The following table sets forth, as a percentage of net
revenue(consisting of management fees derived pursuant to the Services and
Support Agreements), certain items in the Company's statements of operations for
the quarters indicated. The performance of the Company during this quarter is
not indicative of future financial results or conditions.
Quarter Ended
MARCH 31, 1999
--------------
Net Revenue .................... 100.0%
Cost of goods sold ............. 16.0%
----
Gross Profit ................. 84.0%
Operating expenses:
Salaries & Wages ............. 24.9%
Advertising & Promotions...... 25.0%
Depreciation ................. 1.3%
Rent & Utilities ............. 6.9%
Other Expenses ............... 6.7%
-----
Total operating expenses ....... 64.8%
----
Net Income ..................... 19.2%
----
8
<PAGE>
QUARTER ENDED MARCH 31, 1999 COMPARED TO QUARTER ENDED MARCH 31, 1998
There is no comparison to March 31, 1998 since the Company was not in
operations at this time. For the quarter ending June 30, 1999, there will be a
comparison to the quarter ending June 30, 1998.
Net Revenue.
Cost of goods sold. Cost of goods sold is the parts and fees paid to
outside companies for manufacturing the product.
Salaries and wages. Salaries and wages comprises of inside wages and
outside labor.
Advertising and promotions. Advertising and promotions comprises the
expense to advertise at boat shows and to advertise in industry magazines. This
number also includes postage, printing and travel, attributable to advertising
and promotion.
Depreciation. Depreciation on equipment is calculated on the straight
line method over the estimated useful lives of the assets ranging from five to
seven years.
Rent and Utilities. This number includes office rent, telephone and
utilities.
Other expenses. Other expenses comprise of cost of insurance, property
taxes, bank charges and other miscellaneous expenses.
Income Taxes. Prior to April 1, 1999, the company had elected S
Corporation status under Section 1362(a) of the Internal Revenue Code. Under the
election, the stockholders included their share of the Company's applicable
taxable income or loss on their federal income tax return. Accordingly, no
provision for income taxes is made. On April 1, 1999, the Company elected to
terminate its Subchapter S status in favor of a taxable C Corporation as
designated in the Internal Revenue Code.
C. LIQUIDITY AND CAPITAL RESOURCES
On March 24, 1999, Gopher, Inc. ("Gopher") acquired all of the outstanding
common stock of the Company in exchange for 5,000,000 shares of Gopher's
restricted stock and $250,000 cash. Gopher was formed as a non-operating public
shell company, and, therefore, for accounting purposes, the combination has been
treated as a
9
<PAGE>
recapitalization of the Company and the issuance of stock by the company for the
net monetary assets of Gopher.
On March 25, 1999, 2,700,000 shares of restricted common stock were
issued to a key employee. Unearned compensation equivalent to the market value
of the stock at the date of grant is charged to stockholders' equity at the time
of issuance.
On April 8, 1999 and October 5, 1999, the company filed registration
statements with the Securities and Exchange Commission for the issuance of
1,430,000 and 250,000 shares, respectively, of its common stock for the purpose
of compensating consultants for services rendered.
The Company funds its operations from cash flow of the business
operations.
Many computer systems in use today were designed and developed using
two digits, rather than four digits, to specify the year. As a result, such
systems will recognize the year 2000 incorrectly (1900 instead of 2000). This
could cause many computer systems to fail completely or create many problems
when the January 1, 2000 arrives.
The Company utilizes software and related computer technologies
essential to its operations that may be affected by the Year 2000 issues. The
company has tested all of its software and hardware to make sure it is in
compliance with the year 2000.
The Company has made inquires to third parties who provide material
impact on related goods and services to evaluate their year 2000 compliance
plans and state of readiness. Also, to determine whether a year 2000 related
event will impede the ability of such third parties to continue to provide such
goods and services as the year 2000 approaches.
The costs associated with the year 2000 issue have been immaterial and
the Company estimates that the future costs will not have a material impact on
the Company's financial condition or results of operations. However, there can
be no guarantee that the actual costs won't differ materially from these
estimates. The Company intends to fund from its operations the costs of the year
2000 issue.
The Company does not believe that it can develop a contingency plan
which will protect the Company from a possible ripple effect throughout the
entire economy that could be caused by problems of others with the year 2000
issue. Also, there can be no assurance that third parties will be year 2000
compliant or that such third parties systems will not fail due to noncompliance
and result in a disruption of service to the Company which could in turn have a
material adverse effect on the Company's operations.
10
<PAGE>
SPECIAL NOTICE REGARDING FORWARD LOOKING STATEMENTS
This Form 10-Q, the quarterly report, and certain information provided
periodically in writing or orally by the Company's Officers or its agents
contains statements which constitute "forward-looking statements" within the
meaning of Section 27A of the Securities Act, as amended and Section 21E of the
Securities Exchange Act of 1934. The terms "Seaview Underwater Research,"
"company," "we," "our" and "us" refer to Seaview Underwater Research, Inc. The
words "expect," "believe," "plan," "intend," "estimate" and similar expressions
and variations thereof if used are intended to specifically identify
forward-looking statements. Those statements appear in a number of places in
this Form 10-Q and in other places, particularly, "Management's Discussion and
Analysis of Financial Condition and Results of Operations," and include
statements regarding the intent, belief or current expectations of the Company,
its directors or its officers with respect to, among other things:
(i) the successful expansion of the Company in new and existing markets
(ii) our liquidity and capital resources
(iii) our future performance and operating results; and
Investors and prospective investors are cautioned that any such
forward-looking statements are not guarantees of future performance and involve
risks and uncertainties, and that actual results may differ materially from
those projected in the forward-looking statements as a result of various
factors. The factors that might cause such differences include, among others,
the following:
(i) any adverse effect or limitations caused by any governmental
regulations or actions;
(ii) any increased competition in business and in acquisitions;
(iii) inability to successfully conduct our business in new markets;
(iv) the continued relationship with and success of our
professional association customers and their continued ability
to grow in conjunction with our growth;
(v) any inability to meet or exceed analysts expectations in any future
period
We undertake no obligation to publicly update or revise the forward looking
statements made in this Form 10-Q or annual report to reflect events or
circumstances after the date of this Form 10-Q and annual report or to reflect
the occurrence of unanticipated events.
11
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS OF FORM 8-K.
SEE EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
11.1 Computation of Earnings per Share
27 Financial Data Schedule for the quarter Ended March 31, 1999 (SEC only)
12
<PAGE>
SEAVIEW UNDERWATER RESEARCH, INC.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of St.
Petersburg, State of Florida on December 15, 1999.
SEAVIEW UNDERWATER RESEARCH, INC.
By: _________________________
RICH MCBRIDE
Chief Executive Officer
By: _________________________
J.R. COX
Secretary and Treasurer
13
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ------- -------------------
11.1 Computation of Per share Earnings.
27 Financial Data Schedule for the quarter March 31, 1999 (for SEC use
only)
14
<PAGE>
EX - 11.1
COMPUTATION OF PER SHARE EARNINGS
SEAVIEW UNDERWATER RESEARCH, INC.
EXHIBIT 11.1
COMPUTATION OF PER SHARE EARNINGS
THREE MONTHS ENDED
MARCH 31, 1999
Net income ............................................ $ 57,693
==========
Shares:
Basic weighted average number of shares outstanding ... 5,000,000
Additional shares adjusted-under nonvested stock for
diluted earnings per share ....................... 181,233
----------
Diluted weighted average number of shares outstanding . 5,181,233
==========
BASIC EARNINGS PER SHARE:
Net income ............................................ $ .01
==========
DILUTED EARNINGS PER SHARE:
Net income ............................................ $ .01
==========
15
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 40,550
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 93,712
<CURRENT-ASSETS> 134,262
<PP&E> 99,380
<DEPRECIATION> 3,950
<TOTAL-ASSETS> 229,692
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 7,700
<OTHER-SE> 221,992
<TOTAL-LIABILITY-AND-EQUITY> 229,692
<SALES> 300,869
<TOTAL-REVENUES> 300,869
<CGS> 48,256
<TOTAL-COSTS> 48,256
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 57,693
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 57,693
<EPS-BASIC> .01
<EPS-DILUTED> .01
</TABLE>
