<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                              Washington D.C. 20549

                                    FORM 10-K

(Mark One)
|X|      ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
         OF 1934 For the fiscal year ended December 31, 2000

|_|      TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
         ACT OF 1934
         For the transition period from _________ to _________

                         Commission File Number 0-29796

                         MARINE SHUTTLE OPERATIONS INC.
             ------------------------------------------------------
             (Exact Name of Registrant as Specified in Its Charter)

              Nevada                                   91-1913992
----------------------------------         -----------------------------------
  (State or Other Jurisdiction of           (I.R.S. Employer Identification
  Incorporation or Organization)                          No.)

      Luramyrveien 29, Sandnes, Norway                        N-4391
---------------------------------------------        ---------------------------
  (Address of Principal Executive Offices)                  (Zip Code)


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<S>                                                            <C>
Registrant's telephone number, including area code:            (713) 529-7498
                                                               --------------

Securities registered under Section 12(b) of the Exchange Act:  None

Securities registered under Section 12(g) of the Exchange Act:  Common Stock, par value $.001 per share
                                                                ---------------------------------------
                                                                (Title of class)
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         Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 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 __

         Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. |X|

         The aggregate market value of the voting stock held by non-affiliates
of the Registrant as of March 23, 2001 was approximately $3,514,045 computed
based on the average bid and asked prices of the Common stock on the OTC
Bulletin Board on such date.

         There were 54,844,346 shares of the Registrant's common stock
outstanding as of March 23, 2001.

                      DOCUMENTS INCORPORATED BY REFERENCE:

                                      None


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                       SECURITIES AND EXCHANGE COMMISSION
                                    FORM 10-K
                                TABLE OF CONTENTS

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<S>                                                                                                              <C>
PART I............................................................................................................3

   ITEM 1. BUSINESS...............................................................................................3
   ITEM 2. PROPERTIES............................................................................................17
   ITEM 3. LEGAL PROCEEDINGS.....................................................................................17
   ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...................................................17

PART II..........................................................................................................18

   ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.............................................18
   ITEM 6.  SELECTED FINANCIAL DATA..............................................................................19
   ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS................20
   ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK...........................................25
   ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA..........................................................26
   ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND......................................45

PART III.........................................................................................................45

   ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS.....................................................................45
   ITEM 11. EXECUTIVE COMPENSATION...............................................................................47
   ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.......................................48
   ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.......................................................49
   ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.....................................50
</TABLE>


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                                     PART I

ITEM 1.  BUSINESS

General

         Marine Shuttle Operations Inc. (the "Company"), through its
wholly-owned Norwegian subsidiary, Marine Shuttle Operations AS, is seeking to
become a leading player in the market for decommissioning, installing, and
transporting offshore oil and gas structures. The Company is in the development
stage, has not generated any revenues from operations, and does not expect to
generate any significant revenues from operations until the year 2003, at the
earliest.

         Offshore oil and gas structures typically are decommissioned or
installed using crane ships and other support vessels. Most structures, however,
are too large to be lifted by existing cranes. As a result, decommissioning is
accomplished by cutting the particular structure into many pieces before being
lifted. For installation, the structure must be fabricated in numerous pieces
and assembled at the installation site. In both cases, the procedure is
difficult, dangerous, expensive, and time consuming.

         The Company has designed a vessel, the "Offshore Shuttle," which it
believes will be capable of lifting and carrying large offshore oil and gas
structures, eliminating the need for extensive cutting prior to decommissioning
and permitting onshore assembly prior to installation. The Company anticipates
that construction of the first Offshore Shuttle will begin six months after
sufficient financing is obtained and will be operational approximately 18 months
thereafter. Construction of a second Offshore Shuttle is intended to commence
one year after construction of the first Offshore Shuttle begins, and
construction of a third and a fourth Offshore Shuttle is intended to commence
one year after construction of the second begins.

         The Company has formed strategic alliances with Thyssen Krupp
Stahlunion GmbH, RC Consultants AS, and Schuller Industrieentsorgung AG to test,
develop, manufacture, and commercialize the Offshore Shuttle concept.

The Market

         There are now more than 6,500 offshore oil and gas installations
worldwide located on the continental shelf of approximately 53 countries. Of
these, there are approximately 4,000 structures in the Gulf of Mexico, 950 in
Asia, 700 in the Middle East, 400 in Europe, and the balance are scattered
throughout the rest of the world. Of the European total, more than 300 are in
the North Sea and the North East Atlantic.

         Many different types of installations exist, each one being uniquely
designed based on the characteristics of the installation site, including the
water depth, the seabed characteristics, and the reservoir, wave, and current
conditions. Of the current installed base of structures, more than 5,800 are
fixed steel installations. Although most fixed steel installations are situated
in shallow waters (i.e., less than 75 meters), there are three hundred to four
hundred fixed steel installations situated in intermediate water depths (i.e.,
75 to 200 meters). These deeper water structures tend to be much larger than
their shallow water counterparts.

         Fixed steel installations are comprised of two elements: the topside
and the substructure or "jacket." The topside is the above-water portion of the
installation that contains the processing, drilling, and accommodation
facilities. Topsides vary enormously in size and function. Weights range from a
few hundred tons for small topsides in the Gulf of Mexico to over 50,000 tons
for large topsides in the North Sea. Topsides may be built as separate modules,
as an integrated unit, or as a combination of the two (i.e., an integrated deck
containing process facilities topped by individual modules). The choice of
system depends on the facilities required and the method by which the topside is
installed. Topsides typically are transported offshore either on barges or on
the deck of the crane vessels.

         A jacket is a lattice-work of steel tubes anchored to the seabed by
piles driven up to 100 meters into the soil. They can weigh over 30,000 tons,
have a wide base (up to 120 meters across), and taper towards the top. The vast
majority of jackets are transported to their offshore site by barge. Small
jackets can be lifted off the barge and placed in the water vertically. Large


                                      -3-
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jackets, whether barge launched or crane lifted, enter the water horizontally
and are then ballasted by controlled flooding to the vertical position before
being lowered into place. Once the jacket is piled into the seabed, the topside
generally is installed by crane.

         In addition to fixed steel structures, the current installed base of
structures includes:

                  o        concrete gravity base structures (typically found in
                           shallow and intermediate water depths);

                  o        various types of floating structures such as tension
                           leg platforms, deep draft caisson vessels, compliant
                           towers, spars, and floating production, storage and
                           offloading vessels (typically situated in deep waters
                           --i.e., more than 200 meters), and

                  o        subsea structures which include the equipment needed
                           to develop satellite fields and the seabed equipment
                           associated with floating installations.

         The Company believes that over the next 20 years, approximately $35
billion will be spent on the installation of new structures. The Company also
believes that over the next 30 years, most of the currently installed base of
structures will have to be decommissioned at an estimated cost of $20 billion to
$40 billion. It is anticipated that significant portion of this amount will be
spent on the three hundred to four hundred large, steel, intermediate water
depth installations that are substantially more difficult to remove using
existing technology than their shallow water counterparts. This is most evident
in the North Sea and the North East Atlantic where, due to the harsh environment
and the significant number of large, intermediate depth steel structures, the
anticipated decommissioning costs are considerably greater than in the rest of
the world. Indeed, it is estimated that approximately fifty to sixty percent of
worldwide decommissioning costs will be spent in the North Sea and the North
East Atlantic, even though such regions account for just five percent of the
total number of installations. The Company's initial decommissioning efforts
will focus on these large, intermediate depth steel structures.

Decommissioning

         Decommissioning is the multi-stage process of removing an offshore oil
or gas installation. The process includes planning and engineering the removal
of the installation, obtaining necessary regulatory approvals, removing the
installation, sealing the wells, and transporting the installation for re-use,
recycling, or disposal. Removal costs can range from $2 million for smaller
platforms in shallow waters to more than $140 million for larger ones in deeper
waters.

         A number of different methods currently are utilized to remove an
offshore installation. Determining which method is most appropriate for a
particular installation is a function of numerous factors, including:

                  o        the installation's size, weight, construction type,
                           and distance from shore;

                  o        the water depth, seabed characteristics, reservoir,
                           wave, and current conditions of the site of
                           installation; and

                  o        safety considerations.

         The typical method of removal involves cutting the particular structure
into many pieces. Crane ships and other support vessels are used to lift the
pieces onto barges or, in some instances, onto the deck of the crane ships
themselves. The cutting is necessitated by the limited lifting capabilities of
existing crane ships. Complications often arise, however, in determining the
maximum lift capability during decommissioning operations. The largest cranes
theoretically are capable of lifting objects up to 14,000 tons. During an actual
lift, however, various factors will significantly reduce the theoretical lift
capability including:

                  o        vertical and horizontal clearance;


                                      -4-
<PAGE>

                  o        the required outreach and/or upreach of the crane
                           boom;

                  o        anchoring requirements;

                  o        proximity to other facilities, subsea wellheads, and
                           pipelines;

                  o        location characteristics, and

                  o        the size and structural integrity of the pieces to be
                           lifted.

         This is best illustrated by the removal of the Odin jacket in Norway.
Two cranes, with a combined maximum theoretical lift capacity of 14,000 tons,
were engaged to remove a jacket that weighed approximately 10,000 tons. Despite
the significant disparity between the cranes' maximum theoretical lift capacity
and the weight of the jacket, the jacket had to be cut into four sections, each
of which was lifted separately.

         Several companies have offered and/or have proposed solutions for
lifting large platforms in one piece. These involve the use of multiple barges,
twin-hull tankers, split-hull tankers, and U-shaped semi-submersibles. One such
solution, known as Versatruss, is comprised of two barges and an array of booms,
rigging, and winches. The components are assembled together to produce what is
essentially a giant scissors jack. The barges are symmetrically placed around
the platform, and the booms from each barge are placed in receptacles that have
been welded to the platform deck. The barges are pulled together sideways using
winches. This causes the angle of inclination of the booms to increase, forcing
the deck upwards. The Company believes that the utility of Versatruss and most
of these other alternative solutions will be limited to the lifting of topsides
in calm waters. Although some of such lifting systems may be capable of lifting
jackets, the Company believes that the vertical clearance limitations inherent
in each of such systems will inhibit their ability to lift the jackets onshore.
Rather, the Company believes that such systems only will be capable of towing
jackets from one installation site to another. The Company cannot assure you
that its beliefs will prove to be accurate.

         Removal of a few of the larger, older jackets that are equipped with
flotation systems may be attempted by re-floating them. During installation, the
flotation systems were used to float the jackets while being towed to the
installation site. At the site, the flotation tanks were ballasted, foundation
piles were then added to fasten these structures to the seabed, and any
temporary buoyancy aids were removed. If the foundation piles can be removed and
the flotation tanks can be deballasted or temporary buoyancy aids can be added,
then it might be possible to refloat the structures. Given the age of these
structures, however, the condition of the flotation systems is questionable.

         Certain countries also permit the decommissioning of offshore oil and
gas structures by partially removing them or by toppling the structures and
leaving them on the seabed. Many countries, however, citing environmental and
other concerns, do not allow these forms of decommissioning in their territorial
waters.

         The Company believes that the Offshore Shuttle will represent a new,
cost-effective alternative for decommissioning offshore oil and gas platforms,
particularly large, intermediate depth structures.

Installation

         Limited crane capacity also affects the topside installation market.
Topsides often are installed by transporting the topside to the site on a barge,
and using cranes to lift it from the barge onto the structure on which it is to
be installed. The Company believes that many of the topsides that will be
installed over the next 20 years will be too large to be lifted by existing
cranes, precluding them from being assembled onshore and installed in one piece.
Rather, they will have to be fabricated in numerous pieces and assembled at the
installation site. This is not ideal since offshore platform assembly can cost
up to ten times more than onshore assembly. As an alternative, topside
installation can be accomplished by transporting the topside to the site using
two vessels aligned in a catamaran-type fashion, floating over the structure on
which the topside is to be installed, and lowering the topside onto the
structure by flooding the tanks in the transport vessels. The weight of the
topsides that can be installed using this "float over" method is limited,
however, because of the pitching and heaving of the transport vessels during
transport and installation. As offshore exploration increases with increased


                                      -5-
<PAGE>

demand for oil and gas, the Company believes that the cost savings from a
"single lift" solution will become even more prominent. The Company believes the
Offshore Shuttle will provide such a solution.

The Offshore Shuttle

         Operation. The Offshore Shuttle's design is based on the Archimedes
principle: putting water into a floating object will cause it to submerge, and
letting water out will cause it to rise. In essence, the Offshore Shuttle is
designed to be a large buoyancy tank that can be submerged for placement under
or adjacent to an offshore installation and then elevated to lift the
installation.

         The Company envisions a typical platform removal operation commencing
with the preparation of the Offshore Shuttle at its home base and the
preparation of the platform for removal. Pre-removal preparations will include:

                  o        conducting a detailed analysis and preparing a
                           comprehensive method statement of all of the tasks to
                           be performed in the removal operation,

                  o        adjusting the Offshore Shuttle's lifting frame for
                           the installation to be removed, and

                  o        equipping the topside support legs or the underside
                           of the topside deck with specially prepared docking
                           connections.

         Upon completion of the pre-removal preparations, the Offshore Shuttle
will be towed--it is not a self-propelled vessel--to the offshore site by
several vessels, one of which will serve as the control center for the removal
operation.

         The topside will be removed first. The Offshore Shuttle will be
partially submerged (i.e., ballasted) and guided into position under the topside
by the use of guidance tugs or mooring anchors. The tugs or anchors will keep
the Offshore Shuttle in position while the topside is cut from the jacket.
Alternatively, the Offshore Shuttle can be moved into position after cutting the
topside from the jacket. Once cut, the topside and the jacket will be
temporarily secured to each other by clamps that will be designed specifically
for the installation being removed. The Offshore Shuttle will be deballasted,
causing it to rise in the water until the lifting frame on the Offshore Shuttle
connects with the docking connections on the topside. The temporary clamps then
will be unfastened from the jacket. Once the topside is lifted, it can be
seafastened to the Offshore Shuttle for transport to another offshore site, or
to a land site for dismantling or refurbishment.

         The Offshore Shuttle then will be towed to the offshore location to
perform the jacket removal. At the site, the Offshore Shuttle will be ballasted
at one end so that it is sitting vertically in the water. It will be maneuvered
by tugs or mooring anchors into position and connected with the jacket. The tugs
or anchors will keep the Offshore Shuttle in place while the connection to the
jacket is made. The top of the jacket will be connected by tension mechanisms to
the top of the Offshore Shuttle and the jacket legs will be cut at the seabed.
Alternatively, the Offshore Shuttle can be moved into position after cutting the
jacket legs at the seabed. The Offshore Shuttle will "scoop up" the jacket by
deballasting into its original horizontal position. The jacket will be
seafastened to the Offshore Shuttle and transported to another offshore site, or
to a land site for dismantling or refurbishment.

         The Company believes the Offshore Shuttle will be able to remove most
of the largest topsides in one piece and also will be capable of diving partly
below the water surface to remove a complete jacket in one operation. The
maximum weight of the structures which can be handled is a matter of design, but
the Company believes that a 19,000 ton Offshore Shuttle will be capable of
lifting topsides weighing up to approximately 22,000 tons and jackets weighing
up to approximately 12,000 tons in one piece without the use of large crane
barges.

         Once a structure is removed, the Company believes that the Offshore
Shuttle will be able to be used as a barge for transport. It is anticipated that
the removed structure will lie in project-specific cradles on the Offshore
Shuttle to help prevent damage to the object during transportation. This is
particularly important where reuse of the marine structure is of interest. In


                                      -6-
<PAGE>

addition, the Company believes that it may be possible to design the Offshore
Shuttle with a cover at one end so that by ballasting it 180 degrees into a
vertical position, a very large working deck would be created 50 to 60 meters
above water level. If so, the working deck could be positioned above structures
(e.g., ships) or beneath structures (e.g., bridges) for use as a platform from
which equipment could be operated.

         The cost of constructing an Offshore Shuttle is estimated to be between
$100 million and $200 million, depending on size. Moreover, the Company
anticipates that approximately 20 people will be required for a typical Offshore
Shuttle decommissioning operation compared to the typical crane ship operation
that requires up to 200 people. Additional support vessels are needed for both
crane ship and Offshore Shuttle operations.

         The Company believes that the Offshore Shuttle's principal advantage
over existing decommissioning methods will be its ability to remove and carry
large structures in one piece. By eliminating the need to cut installations into
many smaller units, offshore operation time, costs, and risks will be
significantly reduced and reuse of the installation will become a more viable
alternative. The Company believes the Offshore Shuttle's anticipated versatility
will make it a unique alternative for handling marine objects, both inshore and
offshore.

         Dimensions. Based on current designs, each Offshore Shuttle will
consist of six longitudinal tubes, four transverse tubes, and twelve vertical
tubes. Although the dimensions of each Offshore Shuttle will vary based on the
average size installation a particular Offshore Shuttle is designed to handle,
it is anticipated that each Offshore Shuttle will be 130 to 200 meters long, 70
to 95 meters wide, and 60 meters high. The diameter of each tube will be
approximately 10 meters. Each tube will be ring-stiffened in order to resist the
hydrostatic pressure associated with installation or retrieval of marine
structures. The longitudinal tubes may be ballasted by letting water in or
deballasted by pumping water out.

         There may be a fixed, 4,000 ton ballast in one of the outer transverse
tubes to ensure sufficient stability. In addition, there will be separate
ballasting compartments at one end of the two outer lower longitudinal tubes.
These compartments will enable the Offshore Shuttle to maintain a horizontal
position when the center of gravity of the object being transported or unloaded
is close to the bottom of the Offshore Shuttle.

         It is anticipated that the total weight of each Offshore Shuttle will
range from 8,000 tons to 20,000 tons, depending upon the task for which it is
designed. The main dimensions (as described above) may be changed depending on
the Company's determination of the number and types of marine objects which are
to be installed or removed in the foreseeable future. It is the Company's
intention to have each Offshore Shuttle built for a dedicated region, however,
it is anticipated that only the first Offshore Shuttle will be capable of diving
partly below the surface to remove a jacket.

         Testing. The Company believes that the technical risks associated with
the Offshore Shuttle concept have been reduced by extensive model testing and
rigorous calculations.

         o             Using a 1:50 scale model of an Offshore Shuttle, motions
                       in different ballast conditions were tested.

         o             Ballasting/deballasting sequences were tested without any
                       marine object, with a 1:50 scale model of 7,000 ton
                       jacket, and with a 1:50 scale model of an 8,000 ton
                       topside.

         o             Hydrodynamics were tested by examining the motions of the
                       Offshore Shuttle (with and without a marine object)
                       in different positions and when subjected to wave
                       forces, as well as its towing resistance in calm
                       water and storm.

         In addition, based on engineering documentation, calculations, and
model testing, Det Norske Veritas AS, an internationally-recognized society
responsible for classification and technical inspections of merchant vessels,
issued a Statement of Approval verifying the technical feasibility of the
Offshore Shuttle concept for the transport and removal of certain offshore
platform deck structures and jackets.

         Despite the testing, documentation, and approval, there can be no
assurance that construction of the Offshore Shuttle will be successfully
completed or that, if constructed, the Offshore Shuttle will function properly,


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will be operationally safe and environmentally friendly, or will enable the
Company to provide decommissioning, installation, and transportation services in
an effective manner or at all.

Business Strategy

         The Company is in the process of evaluating bids received from a number
of construction yards which it believes have the capacity and capability to
build an Offshore Shuttle. Construction of the first Offshore Shuttle is
intended to start approximately six months after sufficient financing is
obtained, and it is expected to be operational approximately 18 months
thereafter. Construction of a second Offshore Shuttle is intended to commence
one year after construction of the first Offshore Shuttle begins, and
construction of a third and a fourth Offshore Shuttle is intended to commence
one year after construction of the second begins.

         Subject to market demand, performance results, and other factors, the
Company anticipates that the first Offshore Shuttle will conduct two commercial
operations in its first year in service, five operations each year the next two
years, and six operations in each year thereafter. The Company anticipates that
the second, third and fourth Offshore Shuttles will perform four operations in
their first year of service, and six in each year thereafter. In making the
foregoing forecasts, the Company has assumed that each commercial operation,
including all pre-engineering work, will take up to one year to complete, with
the offshore portion calculated to be four weeks on average.

         The Company intends to focus its initial efforts on installing topsides
in the Gulf of Mexico and off the coast of West Africa and Brazil, and on
decommissioning large, intermediate depth structures in the North Sea, the North
East Atlantic, and other regions where the Company anticipates the advantages of
using the Offshore Shuttle will be most prominent. The Company ultimately
intends to provide a full range of services, including decommissioning,
installing, transporting, and recycling/disposing of various types of
structures.

         Offshore decommissioning activity in the North Sea and the North East
Atlantic is highly seasonal, principally as a result of weather conditions.
Historically, the greatest demand for offshore decommissioning services in such
regions has been during the period from May through September. The Company may
seek to partially offset the anticipated seasonality of its proposed operations
by pursuing other potential opportunities such as leasing the Offshore Shuttle
to third parties for bridge building, dry docking ships and floating platforms,
and other uses. The Company cannot assure you that such other opportunities, if
successful, will result in the anticipated offset of the seasonality of its
proposed operations.

Strategic Alliances

         The Company's business strategy is dependent upon forming strategic
alliances and relationships with joint venture partners, contract manufacturers,
or other third parties, and upon the subsequent success of these parties in
performing their responsibilities. In this regard, the Company has formed
strategic alliances with Thyssen Krupp Stahlunion GmbH, RC Consultants AS, and
Schuller Industrieentsorgung AG.

         o        Thyssen Krupp Stahlunion GmbH. Thyssen Krupp Stahlunion GmbH,
                  a subsidiary of Thyssen Krupp AG, will assist the Company in
                  its marketing efforts and will provide it with the material
                  and equipment procurement services necessary to build the
                  Offshore Shuttle. Jurgen Ternieden, a director of the Company,
                  is an officer and the head of the Pipes, Offshore, Special
                  Products Department of TKSU.

         o        RC Consultants AS. RC Consultants AS, a Norwegian engineering
                  company with more than 400 skilled offshore engineers, will
                  assist in the Company's engineering and operational
                  activities.

         o        Schuller Industrieentsorgung AG. Schuller Industrieentsorgung
                  AG, a German service company, will provide the Company with
                  expertise regarding waste management, onshore dismantling, and
                  oil pollution prevention and cleanup. Franz Eder, the
                  Company's President and Chairman of the Board, and Dr. Hubert
                  Besner, a director of the Company, are members of the
                  Supervisory Board of Schuller. Mr. Eder also is a shareholder
                  of Schuller.


                                      -8-
<PAGE>

         In addition, the Company's proposed offshore activities may require the
use of large tug boats, unloading docks, subsea specialists, marine operators,
diving support vessels, and various safety and supply boats. The Company may
seek to form strategic alliances and relationships with third parties who
provide these and other services.

         The Company believes that the use of these outside parties will help
minimize its fixed costs and increase its flexibility by gaining access to
qualified personnel when needed. The Company cannot assure you that such
arrangements will be successful. If any of these arrangements are cancelled
and/or are unsuccessful, and if the Company is unable to secure new alliances in
their place, there would be a material adverse effect on the Company.

Proprietary Protection

         The Company has seven patents regarding various aspects of the Offshore
Shuttle design and operation, and numerous patent applications are pending. In
addition, the Company relies on unpatented proprietary know-how and trade
secrets, and employs various methods including confidentiality agreements with
employees, consultants and marketing partners to protect its trade secrets and
know-how.

Competition

         The Company will face competition from companies which provide
decommissioning, installation, or transport services using cranes and barges. In
addition, several companies have offered or have proposed solutions for lifting
large platforms in one piece. These involve the use of multiple barges,
twin-hull tankers, split-hull tankers, and U-shaped semi-submersibles.
Competition may also arise from vessels, processes, and/or technologies
currently in development, or developed in the future, by other companies.

         The Company believes that its ability to compete will depend on many
factors, both within and beyond its control, including the reliability and
cost-effectiveness of the Offshore Shuttle, the effectiveness of its sales and
marketing efforts, the quality of its strategic partners, and the timing and
market acceptance of new or improved vessels, processes, or technologies
developed by the Company or others.

Regulations

         Decommissioning of facilities is governed by national legislation
within the framework of international and regional regulations. Determining the
applicable regulatory framework will depend, in part, on how the Offshore
Shuttles are classified--e.g., as "ships," "vessels," "installations," etc.,
whether, and if so, where the Offshore Shuttles are registered or documented,
and where its intended operations are performed.

         Although details differ, most oil and gas producing countries have
adopted a similar approach to decommissioning. All feasible options for removal
and disposal of offshore installations are assessed on a case-by-case basis. The
offshore platform operator is required to prepare a decommissioning and
abandonment plan which identifies the decommissioning and abandonment options,
evaluates the technical feasibility of each option, assesses impacts on the
environment and on society, and minimizes risks to human health and safety. The
offshore platform operator then recommends to the responsible ministry the
option which best balances the factors involved.

         In 1989, the International Maritime Organization, a technical arm of
the United Nations dealing with safety of navigation, issued guidelines dealing
with the removal of offshore platforms. Recognizing the magnitude and complexity
of removal operations, the IMO Guidelines took into account not only the size of
the platforms but also the capabilities of the removal vessels. The IMO
Guidelines provide that installations weighing less than 4,000 tons that are in
less than 75 meters of water must be completely removed, while bigger and deeper
structures need be only partially removed provided the remains are covered by an
unobstructed water column at least 55 meters deep. For structures emplaced on
the seabed on or after January 1, 1998, the water depth threshold increases from
75 meters to 100 meters. In addition, all platforms installed on or after
January 1, 1998 must be designed so that removal is feasible.

         In July, 1998, the contracting parties to the Convention for the
Protection of the Marine Environment of the North East Atlantic (also known as


                                      -9-
<PAGE>

the "OSPAR Convention"), which include the United Kingdom, Ireland, France,
Spain, Portugal, Belgium, Germany, Denmark, Norway, Sweden, Finland, Luxembourg,
the Netherlands, Iceland, the European Union, and Switzerland, agreed to
restrictions more stringent than those set forth in the IMO Guidelines. Based on
the premise that reuse, recycling, or onshore disposal generally will be the
preferred options for decommissioning offshore platforms, the OSPAR Convention
provides for a ban, effective February, 1999, on the dumping and the leaving
(wholly or partially) in place of disused offshore installations located in the
North Sea, the North East Atlantic, and certain other regions. Permits may be
issued for alternative means of disposal if significant reasons can be shown as
to why such alternative means are preferable to reuse, recycling, or onshore
disposal.

Employees

         Marine Shuttle Operations Inc. employs three people, all of whom are
executive officers. Marine Shuttle Operations AS employs four people. The
employees are not unionized or employed pursuant to any collective bargaining
agreement or any similar agreement. The Company believes that the relationship
with its employees is satisfactory.

Technical Development

         Technical development expenses for the year ended December 31, 2000,
and 1999 were $27,267 and $554,206, respectively. The Company did not incur
technical development costs in 1998. The Company intends to continue to devote
resources and capital, to the extent available, to technical development so it
can develop and commercialize the Offshore Shuttle.

Safe Harbor For Forward Looking Statements Under the Securities Litigation
Reform Act of 1995; Risk Factors

         This Annual Report on Form 10-K and the other reports, releases, and
statements (both written and oral) issued by the Company and its officers from
time to time may contain statements concerning the Company's future results,
future performance, intentions, objectives, plans, and expectations that are
deemed to be "forward-looking statements". Such statements are made in reliance
upon safe harbor provisions of the Private Securities Litigation Reform Act of
1995. The Company's actual results, performance, and achievements may differ
significantly from those discussed or implied in the forward-looking statements
as a result of a number of known and unknown risks and uncertainties including,
without limitation, those discussed below and in "Management's Discussion and
Analysis of Financial Condition and Results of Operations." In light of the
significant uncertainties inherent in such forward-looking statements, the
inclusion of such statements should not be regarded as a representation by the
Company or any other person that the Company's objectives and plans will be
achieved. Words such as "believes," "anticipates," "expects," "intends," "may,"
and similar expressions are intended to identify forward-looking statements, but
are not the exclusive means of identifying such statements. The Company
undertakes no obligation to revise any of these forward-looking statements.

         The risks presented below may not be all of the risks the Company may
face. These are the factors that the Company believes could cause actual results
to be different from expected and historical results. Other sections of this
report include additional factors that could have an effect on the Company's
business and financial performance. The industry that the Company competes in is
very competitive and changes rapidly. Sometimes new risks emerge and management
may not be able to predict all of them, or be able to predict how they may cause
actual results to be different from those contained in any forward-looking
statements. You should not rely upon forward-looking statements as a prediction
of future results.

The Company has a limited operating history and no revenues from operations

         The Company was incorporated in May 1997 to serve as a holding company
for one or more unidentified operating subsidiaries. The Company's limited
operating history makes it difficult to evaluate its performance and prospects,
and its proposed operations are subject to all of the risks inherent in the
establishment of a new business enterprise. To date, the Company has no
significant assets and the Company has not generated any revenues from


                                      -10-
<PAGE>

operations. The Company believes that it will not generate any revenues from
operations until 2003, at the earliest. The Company cannot assure you that
significant revenues will ever develop, or that the Company will achieve
profitable operations. The likelihood of the Company's success must be
considered in light of the problems, expenses, difficulties, complications, and
delays frequently encountered in connection with a new business, particularly
one that is seeking to develop and commercialize a new product and operate in a
competitive environment.

The Company needs additional capital to implement its business strategy

         As of December 31, 2000, the Company had an accumulated deficit of
$18,933,079 and a working capital deficit of $6,191,824. The Company needs
additional funds to finance its proposed operations. If additional funds are
raised through the issuance of equity or convertible debt securities, the
Company's stockholders may experience dilution and the securities may have
rights, preferences and privileges senior to those of the common stock. If
capital is raised through a debt financing with financial institutions, the
Company would likely become subject to restrictive covenants relating to its
operations and finances.

         In September 1999, the Board of Westdeutsche Landesbank Girozentrale
(WestLB) of Dusseldorf, Germany issued its conditional approval to underwrite a
U.S. $157.5 million loan facility for the first Offshore Shuttle. The West LB
financing is subject to numerous material conditions, none of which have been
satisfied. The Company cannot assure you that the conditions to the WestLB
Financing will be satisfied or, if satisfied, that the WestLB Financing will be
consummated on reasonable terms or at all.

          If the Company is not able to raise a substantial amount of additional
capital, the Company may be required to significantly curtail or cease its
proposed activities.

Due to the Company's holding company structure, any funds distributed to the
Company from its subsidiary may be subject to domestic and foreign taxes

         The Company currently own all of the issued and outstanding capital
stock of MSOAS. Based on this ownership structure, any dividends paid to the
Company by MSOAS are subject to Norwegian withholding taxes and U.S. income
taxes (which can be offset to the extent of the Norwegian withholding taxes).
Thus, the amount of funds that may be distributed by MSOAS to the Company for
working capital, acquisitions, investments, or other purposes will be reduced to
the extent such taxes are payable.

The Company may lose the rights to the offshore shuttle concept

         The intellectual property rights to the Offshore Shuttle concept were
transferred to the Company by Gunnar Foss and Per Bull Haugs0en, the developers
of the Offshore Shuttle concept. The Company granted Messrs. Foss and Haugs0en a
right of first refusal with respect to the transfer of the intellectual property
rights. In addition, if the Company ceases to actively engage in activities
relating to the Offshore Shuttle concept, then the intellectual property rights
will revert back to them. In such event, the Company would be unable to obtain
any value from the future sale or exploitation of the rights. Messrs. Foss and
Haugs0en have agreed to relinquish their right of first refusal and their right
to have the intellectual property rights transferred back to them, but only if
certain conditions are satisfied. These conditions include the Company's receipt
of a written commitment for the financing of the first Offshore Shuttle, and the
Company entering into contracts for the design, construction, and fabrication of
the first Offshore Shuttle. The Company cannot assure you that these conditions
will be met.

A substantial amount of time will lapse until commercial introduction of the
first Offshore Shuttle

         The Company is in the process of evaluating bids received from a number
of construction yards which the Company believes have the capacity and
capability to build an Offshore Shuttle. The Company cannot assure you that it
will be able to negotiate acceptable contract manufacturing arrangements. The
Company anticipates that physical construction of the first Offshore Shuttle
will start six months after the receipt of sufficient capital and will be
operational 18 months thereafter. Construction of a second Offshore Shuttle is
intended to commence one year after construction of the first Offshore Shuttle


                                      -11-
<PAGE>

begins, and construction on a third and a fourth Offshore Shuttle is intended to
commence one year after construction of the second begins. The Company cannot
assure you as to the time required to complete construction or that construction
will be successfully completed at all.

         The Company anticipates that each Offshore Shuttle will conduct between
two and six commercial operations per year. The Company does not anticipate
generating any significant revenues until the year 2003, at the earliest. The
Company cannot assure you that its assumptions regarding the number of
operations to be performed will prove to be accurate, or that the Company will
ever achieve commercially significant sales. To date, the Company has not
entered into any contracts for the use of its proposed services, and the Company
cannot assure you that any such contracts will materialize.

The Offshore Shuttle may not function as intended

         The Company cannot assure you that construction of the Offshore Shuttle
will be successfully completed or that, if constructed, the Offshore Shuttle
will function properly, will be operationally safe and environmentally friendly,
or will enable the Company to provide decommissioning, installation, and
transportation services in an effective manner or at all. In addition, the
Company anticipates that the Offshore Shuttle will be equipped with an
adjustable lifting frame, and specially-prepared docking connections will be
utilized during removal operations. To date, neither the lifting frame nor the
docking connections have been completely engineered, and the Company cannot
assure you that such engineering will be successfully completed. If the Company
is unable to engineer the lifting frame and/or the docking connections, it could
have a material adverse effect on the Company.

The Company may face intense competition and its technology may become obsolete

         The Company will face competition from companies that provide
decommissioning, installation, and transport services using cranes and barges.
In addition, several companies have offered or have proposed solutions for
lifting large platforms in one piece. These involve the use of multiple barges,
twin-hull tankers, split-hull tankers, and U-shaped semi-submersibles.
Competition also may arise from vessels, processes, and/or technologies
currently in development, or developed in the future, by other companies. The
development by others of new or improved vessels, processes, or technologies may
make the services to be marketed by the Company less competitive or obsolete.
Many of the Company's current and potential competitors are likely to have
substantially greater financial, managerial, and technical resources than the
Company. The Company cannot assure you that it will be able to compete
successfully in the marketplace, if at all.

Protection of the Company's proprietary rights may be inadequate

         The Company has seven Norwegian patents regarding various aspects of
the Offshore Shuttle design and operations, and numerous patent applications are
pending in Norway, the United States, and other countries. The Company cannot
assure you that patents will issue from any of its patent applications or as to
the range or degree of protection the issued patents will afford. In addition,
the Company cannot assure you that others will not obtain patents claiming
aspects similar to those covered by the patent applications or patents or that
the Company's patents will not be challenged by third parties, invalidated,
rendered unenforceable, or designed around.

         If a competitor were to infringe on the Company's patents, the costs of
enforcing the patent rights may be substantial or even prohibitive. The Company
cannot assure you that the Company will be successful in any action for
infringement. In addition, the Company cannot assure you that the Offshore
Shuttle will not infringe on the patent rights of others, or that patents do not
exist or will not be issued in the future that would have an adverse effect on
its ability to manufacture or operate the Offshore Shuttle. The Company is aware
of the existence of a Norwegian patent which claims the use of a U-shaped
structure designed for removing and/or installing topsides. Based on the opinion
of patent counsel, Bryns Patentkontor A/S, the Company believes that the
Offshore Shuttle will not infringe on this Norwegian patent because, unlike the
structure covered by the Norwegian patent, the Offshore Shuttle will not utilize
movable transverse beams mounted to its upper beams. The Company cannot assure
you that infringement proceedings will not be brought against the Company.

         The Company also may desire or be required to obtain licenses from
others in order to further develop, produce, and market the Offshore Shuttle


                                      -12-
<PAGE>

effectively. The Company cannot assure you that licenses will be obtainable on
commercially reasonable terms, if at all, that the patents underlying the
licenses will be valid and enforceable, or that the proprietary nature of the
unpatented technology underlying the licenses will remain proprietary. In
addition, the Company relies on unpatented proprietary know-how and trade
secrets, and employs various methods including confidentiality agreements with
employees, consultants and marketing partners to protect its trade secrets and
know-how. These methods may not afford complete protection and the Company
cannot assure you that others will not independently develop trade secrets and
know-how or obtain access to them.

The Company must maintain and establish strategic alliances and other third
party relationships to implement its business strategy

         The Company's strategy for testing, developing, manufacturing, and
commercializing the Offshore Shuttle concept is dependent upon forming strategic
alliances and relationships with joint venture partners, contract manufacturers,
or other third parties, and upon the subsequent success of these parties in
performing their responsibilities. The Company cannot assure you that the
Company's arrangements with Thyssen Krupp Stahlunion GmbH, RC Consultants AS,
and Schuller Industrieentsorgung AG will be successful. If any of these
arrangements are cancelled or are unsuccessful, and if the Company is unable to
secure new alliances in their place, there would be a material adverse effect on
the Company.

         In addition, the Company's proposed offshore activities may require the
use of large tug boats, unloading docks, subsea specialists, marine operators,
diving support vessels, and various safety and supply boats. The Company may
seek to form strategic alliances and relationships with third parties who
provide these and other services. If the Company is unable to negotiate
acceptable arrangements, or if any of such arrangements are unsuccessful, it
could have a material adverse effect on the Company.

The Company has no manufacturing facilities

         Physical construction of the first Offshore Shuttle is intended to
commence six months after receipt of sufficient capital. However, the Company
does not have the ability to manufacture the Offshore Shuttle. The Company is in
the process of evaluating bids received from a number of construction yards
which the Company believes have the capacity and capability to build an Offshore
Shuttle. The Company cannot assure you that the Company will be able to
negotiate acceptable joint venture or contract manufacturing arrangements, or
that any of these arrangements will be successful.

The Company has limited marketing and sales capabilities

         The Company has limited marketing and sales capabilities. Thyssen Krupp
Stahlunion GmbH has agreed to assist the Company in its marketing efforts. The
Company cannot assure you that the Company will be able to effectively market or
sell its services through sales representatives, through arrangements with an
outside sales force, or through strategic partners.


                                      -13-
<PAGE>

The Company's services may not be readily accepted by the market

         As with any new technology, there is the risk that the market may not
recognize the benefits or the potential applications of the Offshore Shuttle or
other future products or technologies that may be developed by the Company.
Market acceptance of the Company's proposed services will depend, in large part,
on the Company's ability to demonstrate to prospective customers the potential
advantages of the Offshore Shuttle over other types of vessels and/or
technologies performing similar functions. The Company cannot assure you that
the Company will be successful in marketing its services to the oil and gas
industry or other markets, or that the use of the Offshore Shuttle will be
embraced by the oil and gas industry or other markets.

The Company's business is subject to factors outside its control

         The Company's business may be affected by a variety of factors, many of
which are outside its control. Factors that may affect the Company's business
include:

         o        the success of the Company's marketing campaign;

         o        competition;

         o        the Company's ability to attract qualified personnel;

         o        technical difficulties in building the Offshore Shuttle;

         o        the amount and timing of operating costs and capital
                  expenditures necessary to establish the Company's business,
                  operations, and infrastructure;

         o        governmental regulation; and

         o        general economic conditions as well as economic conditions
                  specific to the offshore oil and gas industry.

The Company will be exposed to numerous risks associated with international
operations.

         The Company intends to market the Company's services in international
markets. International operations entail various risks, including:

         o        political instability;

         o        economic instability and recessions;

         o        exposure to currency fluctuations;

         o        difficulties of administering foreign operations generally;

         o        reduced protection for intellectual property rights;

         o        potentially adverse tax consequences; and

         o        obligations to comply with a wide variety of foreign laws and
                  other regulatory requirements.

Seasonality, weather conditions, and other factors may affect the Company's
business

         Offshore decommissioning and installation activity in the North Sea and
the North East Atlantic is highly seasonal, principally as a result of weather
conditions. Historically, the greatest demand for offshore decommissioning and


                                      -14-
<PAGE>

installation services in such regions has been during the period from May
through September. As a result, the Company anticipates that a disproportionate
amount of the Company's future revenues, if any, will be generated during the
second and third quarters of each year. In addition, full year results are not
likely to be a direct multiple of any particular quarter or combination of
quarters. The Company may seek to partially offset the anticipated seasonality
of the Company's proposed operations by pursuing other potential opportunities
such as leasing the Offshore Shuttles to third parties for bridge building, dry
docking ships and floating platforms, and other uses. The Company cannot assure
you that such other opportunities, if successful, will result in the anticipated
offset of the seasonality of the Company's proposed operations.

         Demand for the Company's proposed services also will be affected by the
level of spending by oil and gas companies for decommissioning, installation,
and other similar activities. The expenditures are influenced by the price of
oil and gas, the discovery rates of new oil and gas reserves in offshore areas,
local and international regulations and political and economic conditions, and
the oil and gas industry's access to capital.

The Company's business is dependent upon Franz Eder, the Company's Chairman and
President, and the Company's ability to attract and retain other key personnel

         The Company's success depends to a significant extent upon the services
of Franz Eder, the Company's President and Chairman of the Board. Mr. Eder has
entered into an employment agreement with the Company which provides that he
shall devote only so much (but not less than 75%) of his professional and
business time, attention, and energies to his duties and responsibilities as is
reasonable to insure the Company's proper conduct. The Company does not have,
and the Company has no current plans to obtain, key person life insurance
covering Mr. Eder or any of the Company's other executive officers. The loss of
Mr. Eder's services could have a material adverse effect on the Company.

         The Company believes that the Company's future success also will depend
on the Company's ability to attract and retain highly-skilled managerial and
technical personnel. Competition for such personnel is intense. The Company
competes for such personnel with other companies, academic institutions,
governmental entities and other organizations, some of which may have
substantially greater capital resources than the Company. The Company cannot
assure you that it will be successful in attracting and retaining such
personnel.

The Company's proposed operations are inherently risky, and the Company has no
insurance to protect against these risks

         The Company's proposed operations will be subject to all of the
inherent risks of offshore marine activity, including accidents, environmental
mishaps, mechanical failures, and vessels colliding, capsizing, grounding, or
sinking. These occurrences can result in significant personal injury or loss of
life, severe damage to or destruction of property and equipment, pollution or
environmental damage, and suspension of the Company's proposed operations.
Moreover, litigation arising from any such occurrence may result in the Company
being named as a defendant in lawsuits asserting large claims.

         The Company intends to obtain insurance against some of these types of
risks. The Company also anticipates that the Company will be adequately
protected by the insurance policies of the companies that utilize its services,
and the Company intends to further limit the Company's risk by capping the
Company's liability exposure in its service contracts with these companies. The
Company cannot assure you that the policies of these companies will cover the
Company or, if they do, that the insurance (or the insurance obtained by the
Company, if any) will be sufficient or effective under all circumstances or
against all hazards to which the Company may be subject. In addition, the
Company cannot assure you that any contractual limits on liability will be
enforceable or will adequately and effectively limit the Company's liability
exposure, or that the companies that use the Company's proposed services will
nevertheless seek to be indemnified by the Company with respect to the losses or
damages they suffer or incur.


                                      -15-
<PAGE>

Governmental and environmental laws and regulations may restrict the Company's
business

         The Company's operations may be subject to and affected by various
types of national and international laws and regulations. The technical
requirements of the various laws and regulations are complex and stringent, and
compliance is often difficult and expensive. The Company may be required to
obtain certain permits, licenses and certificates with respect to the Company's
proposed operations and to comply with rigorous safety, workplace, and
environmental standards. Moreover, certain of the Company's employees may be
covered by laws that operate to make liability limits, if any, established by
state workers' compensation laws inapplicable to these employees and permit the
employees and their representatives to pursue actions against the Company for
job related injuries with generally no limits on the Company's potential
liability.

         Violations of various statutes and regulations that may be applicable
to the Company's proposed operations can result in, among other things,

o        civil penalties;

o        remediation expenses;

o        monetary damages;

o        injunctions;

o        cease and desist orders; and

o        criminal penalties.

          Some environmental statutes impose strict liability, rendering a
person liable for environmental damage without regard to negligence or fault on
the part of such person. In addition, because such laws and regulations are
changed frequently, it is difficult for the Company to accurately predict the
cost or impact of such laws and regulations on its planned operations.

The Company's President currently controls approximately 14% of common stock

         Franz Eder, the Company's President and Chairman of the Board,
presently owns 7,722,000 shares of common stock (approximately 14% of the common
stock currently outstanding). As such, Mr. Eder will have a significant voice in
all matters submitted to stockholders for approval and in the Company's
management and affairs.

A substantial number of the Company's shares are reserved for issuance

         The Company has reserved a total of 2,000,000 shares of common stock
for issuance upon the exercise of options that may be granted pursuant to the
Company's 1998 Stock Option Plan. The issuance of options pursuant to the Stock
Option Plan may adversely affect the Company's ability to consummate future
equity financing. Further, the holders of such options may exercise them at a
time when the Company would otherwise be able to obtain additional equity
capital on terms more favorable to the Company. The exercise and sale of the
common stock underlying the options would have a dilutive effect on the
Company's stockholders, and may have a material adverse effect on the market
price of the common stock.

Anti-takeover provisions may discourage takeover attempts

         Provisions of the Nevada General Corporation Law could have the effect
of delaying or preventing a change of control of the Company.

There is a limited public market for the common stock; the Company's stock is a
"penny stock"


                                      -16-
<PAGE>

         There is a limited public market for the Company's common stock, and
the Company cannot assure you that a more active public market for the common
stock will ever develop or be sustained. The development of a more active public
market for the Company's common stock may be impaired because the common stock
currently falls within the definition of a "penny stock." The Securities and
Exchange Commission has adopted regulations which define a "penny stock" to be
any equity security that has a market price of less than $5.00 per share,
subject to certain exceptions, including an exception for securities authorized
for quotation on certain stock exchanges and on the Nasdaq Small Cap Market. For
any transaction involving a penny stock, the rules require the delivery, prior
to the transaction, of a disclosure schedule prepared by the SEC relating to the
penny stock market. Disclosure also must be made about commissions payable to
both the broker-dealer and the registered representative, and about current
quotations for the security. Finally, monthly statements must be sent disclosing
recent price information for the penny stock held in the account and information
on the limited market in penny stocks. As long as the Company's common stock
continues to trade below $5.00 per share, the trading market for the Company's
common stock could be materially adversely affected.

The availability of a substantial number of shares eligible for future sale may
adversely affect the Company's stock price and ability to raise capital

         A substantial number of shares are available for future sale. No
prediction can be made as to the effect, if any, that sales of these shares, or
even the availability of such shares for sale, will have on the market prices
prevailing from time to time. The possibility that substantial amounts of common
stock may be sold in the public market may adversely affect prevailing market
prices for the common stock and could impair the Company's ability to raise
capital through the sale of the Company's equity securities.

ITEM 2. PROPERTIES

         MSOAS leases office space in Sandnes, Norway pursuant to a lease
agreement with RC Group ASA. The lease agreement provides for an average annual
rent of NOK 435,852 (approximately $49,027), and expires in 2003. Sverre
Hanssen, the Chairman of Marine Shuttle Operations AS, is the Chairman and the
principal shareholder of RC Group ASA.

ITEM 3. LEGAL PROCEEDINGS

         The Company currently is not a party to any material legal proceeding.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         None.


                                      -17-
<PAGE>

                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         The Company's common stock commenced trading on the OTC Bulletin Board
on December 22, 1997 and is traded under the symbol "ZSUB". The following table
sets forth for the periods indicated the high and low bid quotations for the
common stock as reported on the OTC Bulletin Board. The quotations reflect
inter-dealer prices, without retail mark-up, mark-down or commission, and may
not represent actual transactions.

                                                          Price Range
                                                          -----------
                                                      High             Low
                                                      ----             ---

Year Ended December 31, 2000
----------------------------

1st Quarter                                          $1.75            $0.62
2nd Quarter                                          $0.968           $0.562
3rd Quarter                                          $0.75            $0.437
4th Quarter                                          $0.593           $0.14

Year Ended December 31, 1999
----------------------------

1st Quarter                                          $5.0625          $1.625
2nd Quarter                                          $2               $1.0625
3rd Quarter                                          $4.25            $0.875
4th Quarter                                          $1.4375          $0.6875


         As of March 9, 2001, there were approximately 200 holders of record of
the common stock, including record holders which may hold such stock for
beneficial owners and which have not been polled to determine the extent of
beneficial ownership.

         The Company has never declared or paid dividends, and does not intend
to pay any dividends in the foreseeable future on shares of common stock.
Earnings of the Company, if any, are expected to be retained for use in
expanding the Company's business. The payment of dividends is within the
discretion of the Board of Directors of the Company and will depend upon the
Company's earnings, if any, capital requirements, financial condition, and such
other factors as are considered to be relevant by the Board of Directors from
time to time.

         In December 2000, the Company sold 475,000 shares of common stock to a
foreign person pursuant to Regulation S for gross proceeds of $190,000.

          In January 2001, the $1,450,000 that had been advanced to the Company
by a foreign person under a loan agreement, plus $42,396 in interest thereon,
was converted into 3,730,990 shares of the Company's common stock. The shares
were issued pursuant to Regulation S.

         In January 2001, the Company sold 1,000,000 shares of common stock to a
foreign investor pursuant to Regulation S for gross proceeds of $200,000.

         In February and March 2001, the Company sold 5,000,000 shares and
warrants to purchase 5,000,000 shares exercisable at $0.10 per share to various
foreign persons pursuant to Regulation S for aggregate gross proceeds of
$505,000. The warrants expire on July 1, 2001. Also in February and March 2001,
the Company sold a total of 650,000 shares to various of its officers, directors
and employees, pursuant to Regulation S, for aggregate gross proceeds of
$65,000.


                                      -18-
<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA

         The following selected financial data are derived from the consolidated
financial statements of the Company. The data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements and related notes thereto
included herein.

<TABLE>
<CAPTION>
                                               May 23,                                                             May 23,
                                                 1997                                                               1997
                                             (inception)          Year              Year           Year ended     (inception)
                                               Through           ended             ended           December        Through
                                               December         December        December 31,       31, 1998       December
                                               31, 2000         31, 2000            1999              (1)          31, 1997
                                             -------------    -------------    ---------------     -----------    -----------
<S>                                         <C>            <C>                 <C>               <C>              <C>
Consolidated Statements of
Operation Data:
Operating revenues                          $    339,601   $      218,088      $     105,136     $     16,376     $       -
Total operating expenses                      19,763,953        6,790,165          7,829,051        4,979,806        164,931
Net (loss)                                   (18,933,079)      (6,362,150)        (7,363,850)      (5,042,148)      (164,931)
Net (loss) per share, (basic and diluted)                  $        (0.15)     $       (0.22)    $      (0.20)    $    (0.01)
Weighted average number of common
shares outstanding (basic and diluted)                         42,869,305         33,611,545       25,720,000     18,931,982

                                                                December        December 31,        December       December
                                                                31, 2000            1999            31, 1998       31, 1997
Consolidated Balance Sheet Data:                              -------------    ---------------     ----------- -- -----------
Working capital                                            $   (6,191,824)     $  (2,498,097)    $ (3,588,380)   $   (10,931)
Total assets                                                   37,330,903         39,245,995       37,936,227          9,015
Notes payable                                                   4,900,000          2,550,000        3,605,390             -
Total liabilities                                               6,767,280          4,118,442        4,810,551         19,946
Minority interest                                                      -             228,826          555,417             -
Accumulated deficit                                           (18,933,079)       (12,570,929)      (5,207,079)      (164,931)
Shareholders' equity                                           30,563,623         34,898,727       32,570,259        (10,931)
</TABLE>

(1) In April 1998, the Company acquired all of the outstanding stock of MSOAS.
In December 1998, the Company acquired approximately 68% of the outstanding
stock of Offshore Shuttle AS ("OSAS"). OSAS merged with and into MSOAS in
September 1999, and the Company acquired the remaining minority interest in
MSOAS in April and June 2000. See further information at Item 7.


                                      -19-
<PAGE>



ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

         The following information contains forward-looking statements which are
subject to risks and uncertainties. Should one or more of these risks or
uncertainties materialize, actual results may differ from those expressed or
implied by the forward looking statements. The following information should be
read in conjunction with the consolidated financial statements of the Company
and the notes thereto set forth elsewhere herein.

General

         The Company, through its wholly-owned Norwegian subsidiary, Marine
Shuttle Operations AS ("MSOAS"), is seeking to become a leading player in the
market for installing, decommissioning, and transporting offshore oil and gas
structures.

         The Company has designed a vessel, the "Offshore Shuttle," which it
believes will be capable of lifting large topsides in one piece and also will be
capable of diving partly below the water surface to remove a complete jacket in
one operation. The Company anticipates that construction of the first Offshore
Shuttle will commence six months after the receipt of sufficient capital and
will be operational 18 months thereafter. Construction of a second Offshore
Shuttle is intended to commence one year after the first Offshore Shuttle
begins, and construction of a third and a fourth Offshore Shuttle is intended to
commence one year after construction of the second begins.

         The Company was incorporated in Nevada in May 1997 under the name
Geoteck International, Inc. On May 29, 1998, the Company changed its name to
Marine Shuttle Operations Inc. In 1998, the Company acquired all of the
outstanding stock of MSOAS in exchange for 7,600,000 shares of common stock. The
Company also acquired approximately 68% of the outstanding stock of Offshore
Shuttle AS ("OSAS"), the holder of the licensing and marketing rights to the
Offshore Shuttle design, in exchange for 4,937,607 shares of common stock. This
transaction was accounted for using the purchase method.

         To benefit from a more rational and cost efficient use of the resources
in MSOAS and OSAS, the Board of Directors of the two companies proposed to merge
the two companies. The proposed merger plan was approved by the shareholders of
both companies on May 30, 1999, and the merger became effective in September
1999. The OSAS shareholders received 1.5 MSOAS shares for each of their OSAS
shares. As a result of the merger, the Company owned approximately 81% of MSOAS,
and MSOAS acquired the licensing and marketing rights to the Offshore Shuttle.

         In April 2000, the Company acquired an additional 8.4% of the
outstanding shares of MSOAS from two individuals in exchange for an aggregate of
1,030,002 shares of common stock. In June 2000, the Company acquired an
additional 9.7% of the outstanding shares of MSOAS in exchange for an aggregate
of 1,186,283 shares of its common stock, and the Company acquired the remaining
1% of the MSOAS shares for cash. These acquisitions were accounted for as
purchases. The Company now owns all of the outstanding shares of MSOAS.

Results of Operations

Year Ended December 31, 2000 compared with Year Ended December 31, 1999

         The Company is in the development stage and has generated revenues to
date only from study work. Since the merger of OSAS into MSOAS, the Company's
main operations have been conducted through MSOAS. The Company incurred net
losses of $6,362,150 for 2000 compared with $7,363,850 for 1999.

         Operating revenues. Operating revenues for 2000 were $218,088, an
increase of $112,952 compared to $105,136 in 1999. The revenues were generated
from sporadic study work reimbursed by clients. The Company is still in the
development stage and does not expect to generate significant revenues from
operations until 2003 at the earliest, except from some sporadic study work.

         Personnel costs. Personnel costs include costs for both employees and
hired personnel and were $1,494,695 for 2000, an increase of $216,757 from the


                                      -20-
<PAGE>

personnel costs of $1,277,938 in 1999. The increase in costs was mainly due to
more personnel working on client studies.

         Legal, audit and advisory services. Legal, audit and advisory services
for 2000 were approximately $396,432, a decrease of $76,526 compared to legal,
audit and advisory services of $472,958 in 1999. The decrease was mainly due to
lower consulting fees as work was shifted from consultants to our personnel.

         General and administrative expenses. General and administrative
expenses for 2000 were $639,430, a decrease of $630,983 from the general and
administrative expenses of $1,270,413 in 1999. The decrease in costs was mainly
due to cost savings achieved as a result of the merger between MSOAS and OSAS in
September 1999, and a slowdown of spending by the Company to conserve capital.

         Marketing. Marketing expenses for 2000 were $167,736, a decrease of
$132,421from the marketing expenses of $300,157 in 1999. The decrease was a
result of purchasing fewer marketing materials and services in the current
period.

         Technical Development. Technical development costs for 2000 were
$27,267, a decrease of $526,939 compared to $554,206 in 1999. The decrease was
due to less technical development work performed in the current period.

         Interest income. The interest income for 2000 was $12,266, a decrease
of $44,598 from the interest income of $56,864 in 1999. The decrease was a
result of less interest bearing cash and cash equivalents during 2000.

Year Ended December 31, 1999 compared with Year Ended December 31, 1998

         The following comparisons are affected by the 1998 acquisitions of OSAS
and MSOAS since their results of operations are only included in the
consolidated results of operations since their respective acquisition dates.

         The Company incurred net losses of $7,363,850 for 1999 compared with
$5,042,148 for 1998.

         Operating Revenues. Operating revenues for 1999 were $105,136 compared
to $16,376 in 1998. The increase was due to increased study work performed for
clients.

         Personnel costs. Personnel costs includes costs for both employees and
contract personnel and were $1,277,938 for 1999, an increase of $1,092,444 over
personnel costs of $185,494 in 1998. The increase in costs was a result of
increased activities and increased personnel in MSOAS.

         Legal, audit and advisory services. Legal, audit and advisory services
for the year ended December 31, 1999 were approximately $472,958, a decrease of
$646,742 compared to legal, audit and advisory services of $1,119,700 in 1998.
The decrease from 1998 to 1999 was mainly due to lower consulting fees as work
was shifted from consultants to Company personnel.

         Cost of cancelled financing. The cost of cancelled financing in 1998
was $606,721, which was incurred in connection with a planned public offering in
1998. The public offering was cancelled and the costs were expensed.

         General and administrative expenses. General and administrative
expenses for 1999 were $1,270,413, an increase of $867,667 over the general and
administrative expenses of $402,745 in 1998. The increase was due to increased
activities in MSOAS and MSOAS moving into new offices during 1999.

         Marketing. Marketing expenses for 1999 were $300,157, a decrease of
$352,333 from $652,490 for 1998. The decrease was a result of purchasing fewer
marketing materials and services in 1999, and higher costs in 1998 related to
participation in the Offshore Northern Sea Exhibition in Norway.

         Technical Development. Technical development costs for 1999 were
$554,206 compared to no cost in 1998. The majority of these expenses were


                                      -21-
<PAGE>

incurred by OSAS, which majority-interest was acquired in December 1998.

         Amortization of goodwill and intangibles. Amortization of goodwill and
intangibles for 1999 was $3,885,167, an increase of $2,002,963 over the
amortization of goodwill and intangibles of $1,882,204 in 1998. This increase is
due to amortization of goodwill and intangibles acquired in connection with the
acquisition of approximately 68% of the OSAS common stock in 1998. Goodwill of
$32,929,340 and other purchased intangibles of $3,591,615 were acquired in the
acquisition and all being amortized over 10 and 5 to 10 years, respectively.

         Interest expense. Interest expense for 1999 was $23,389, which was
$69,880 below interest expenses of $93,268 in 1998. The reason for the decrease
in interest expense is that in 1999, a larger portion of the borrowings were
allocated to the construction of the Offshore Shuttle and therefore were
capitalized rather then expensed.

         Results of operations for 2000, 1999 and 1998 are not indicative of the
results expected in future periods due to increased costs to be incurred in
developing, financing and constructing the first Offshore Shuttle, with no
anticipated revenues from operation of the first Offshore Shuttle until 2003, at
the earliest.

Business Strategy

         The Company is in the process of evaluating bids received from a number
of construction yards which it believes have the capacity and capability to
build an Offshore Shuttle. Construction of the first Offshore Shuttle is
intended to start approximately six months after sufficient financing is
obtained, it is expected to be operational approximately 18 months thereafter.
Construction of a second Offshore Shuttle is intended to commence one year after
construction of the first Offshore Shuttle begins, and construction of a third
and a fourth Offshore Shuttle is intended to commence one year after
construction of the second begins.

         Subject to market demand, performance results, and other factors, the
Company anticipates that the first Offshore Shuttle will conduct two commercial
operations in its first year in service, five operations each year the next two
years, and six operations in each year thereafter. The Company anticipates that
the second, third and fourth Offshore Shuttles will perform four operations in
their first year of service, and six in each year thereafter. In making the
foregoing forecasts, the Company has assumed that each commercial operation,
including all pre-engineering work, will take up to one year to complete, with
the offshore portion calculated to be four weeks on average.

         The Company intends to focus its initial efforts on installing topsides
in the Gulf of Mexico and off the cost of West Africa and Brazil, and on
decommissioning large, intermediate depth structures in the North Sea, the North
East Atlantic, and other regions where it anticipates the advantages of using
the Offshore Shuttle will be most prominent. The Company ultimately intends to
provide a full range of services, including decommissioning, installing,
transporting, and recycling/disposing of various types of structures.

Rights to the Offshore Shuttle

         The intellectual property rights to the Offshore Shuttle concept (the
"Rights") were transferred to MSOAS (by virtue of its merger with OSAS) by two
individuals, the developers of the Offshore Shuttle concept, pursuant to an
Agreement Regarding Intellectual Property dated March 31, 1998 (the
"Intellectual Property Agreement"). The Intellectual Property Agreement provides
that if MSOAS shall cease to actively engage in its activities relating to the
Offshore Shuttle concept, then, subject to a six-month cure period, the Rights
shall revert back to the two individuals. In such event, the Company would be
unable to obtain any value from the future sale or exploitation of the rights.
In addition, if MSOAS desires to transfer the Rights, the two individuals have a
right of first refusal with respect to such transfer. In March, 2000, an
Addendum to the Intellectual Property Agreement was signed which provide that
the two individuals shall waive their right to have the Rights transferred back
to them as well as their right of first refusal. The waiver is subject to
fulfillment of certain conditions, including that the Company receive a written
commitment for the financing of the first Offshore Shuttle, and that the Company
enter into contracts for the design, construction, and fabrication of the first
Offshore Shuttle. In consideration of the waiver, the Company shall grant each
of the two individuals, upon the satisfaction of such conditions, warrants to
purchase 125,000 shares of Common Stock at $1 per share.


                                      -22-
<PAGE>

Goodwill and Other Intangibles

         Goodwill and other purchased intangibles arising from the acquisitions
of MSOAS and OSAS are being amortized over periods ranging from 5 to 10 years,
their estimated useful lives. Goodwill is being amortized over 10 years which is
the expected future benefit period over which cash flows will be generated to
recover the goodwill. Since the Company is a development stage company, there
can be no assurance that such cash flows will be generated. As of December 31,
2000, goodwill represented 69.45% of total assets and 84.82% of total
shareholders' equity.

Liquidity and Capital Resources

         The Company's ability to continue as a going concern is dependent on
its ability to obtain significant additional financing. As of December 31, 2000,
the Company had cash and cash equivalents of $203,207, an accumulated deficit of
$18,933,079, shareholders' equity of $30,563,623, and a working capital deficit
of $6,191,824. The Company is in the development stage with no operating assets
presently generating cash to fund its operating and capital requirements.
Accordingly, the independent auditor's report on the Company's financial
statements has an explanatory paragraph addressing the Company's ability to
continue as a going concern.

         On March 1, 1999, the Company entered into a loan agreement with
ValorInvest, Ltd., an investment company, pursuant to which ValorInvest agreed
to lend the Company an aggregate of up to $6,000,000. The loan agreement was
amended and restated as of December 31, 1999, and was further amended as of
December 31, 2000. The loan agreement provides that advances shall be made in
increments of $250,000 and shall not exceed $500,000 in any single month unless
agreed to by ValorInvest. Any monies advanced under the loan agreement shall
bear interest at the rate of 7.5% per annum and shall be due and payable on June
30, 2001; except that if the Company raises, in the aggregate, in excess of
$5,000,000 from equity or long term debt financing after January 1, 2000, then
the loan shall be due to the extent of 25% of such excess. As of December 31,
2000, $3,875,000 had been advanced under the loan agreement, and $2,550,000 was
outstanding under the loan agreement.

         In August 1999, the Company entered into a loan agreement with Statens
naerings og distriktsutviklingsfond (the Norwegian Industrial and Regional
Development Fund, "SND"), pursuant to which SND agreed to lend the Company an
aggregate of up to NOK 4,000,000, (approximately $450,000), to finance specific
tasks within the Offshore Shuttle project. As of December 31, 2000, NOK
2,358,617 ($265,300) had been advanced under the loan agreement. The principal
is repayable over a five year period commencing two years after disbursement, in
semi-annual installments, each in the amount of NOK 400,000.

         In February 2000, the Company entered into a loan agreement with MFC
Merchant Bank S.A, an investment company, pursuant to which MFC agreed to lend
an aggregate of up to $2,000,000, provided that advances shall not exceed
$350,000 in any single month. Any monies advanced under this loan agreement
shall bear interest at the rate of LIBOR plus 3.5% per annum and shall be due
and payable in full on February 25, 2001. As of December 31, 2000, $900,000 was
outstanding under this agreement. MFC has agreed to extend the maturity date of
the $900,000 loan to June 30, 2001.

         In April 2000, the Company consummated a private placement of 450,000
shares of common stock for gross proceeds of $315,000. In June 2000, the Company
consummated a private placement of 571,429 shares of common stock for gross
proceeds of $400,000. In December 2000 the Company consummated a private
placement of 475,000 shares of common stock for gross proceeds of $190,000.

         In July 2000, the Company entered into a loan agreement with Mr. Holger
Timm pursuant to which Mr. Timm agreed to lend the Company an aggregate of up to
$1,500,000, provided that advances shall not exceed $500,000 in any single
month. Any monies advanced under the loan agreement shall bear interest at the
rate of 7.5% per annum and shall be due and payable in full on December 31,
2000. The advances may be converted at the option of Mr. Timm into shares of our
common stock at 80% of the five day average trading price of the common stock
prior to conversion, but not less than a floor price as calculated pursuant to
the loan agreement. In January 2001, the $1,450,000 that had been advanced under
the loan agreement plus $42,396 in interest thereon was converted into shares of


                                      -23-
<PAGE>

the Company's common stock at $0.40 per share.

         In January 2001 the Company sold 1,000,000 shares of common stock for
gross proceeds of $200,000.

         In February and March 2001, the Company sold 5,000,000 shares and
warrants to purchase 5,000,000 shares exercisable at $0.10 per share for
aggregate gross proceeds of $505,000. The warrants expire on July 1, 2001. Also
in February and March 2001, the Company sold a total of 650,000 shares to
various of its officers, directors and employees for aggregate gross proceeds of
$65,000.

         The Company is seeking to obtain additional capital. In October 1998,
the Company entered into an engagement letter with MFC Merchant Bank S.A.
pursuant to which MFC shall act, on a best-efforts basis, as agent for the
Company in raising additional capital. As consideration for its services, MFC
shall receive a success fee equal to five percent of the capital raised plus DM
100,000 (approximately $47,350) per month until the completion or termination of
the MFC financing. In addition, all of MFC's out-of-pocket expenses shall be
reimbursed, and if the Company raises the necessary funds through another
source, MFC shall receive a break-up fee equal to the greater of $1,200,000 or
350,000 shares of common stock. MFC agreed to defer the monthly fee obligation
from May 1, 2000 through December 1, 2000. In return for granting this deferral,
the deferred fees were increased by 10%. This 10% premium may be paid with
shares of common stock. Effective April 1, 2001, MFC will no longer receive a
monthly fee, but will invoice the Company for services rendered at the request
of the Company.

         In November, 2000, the Company retained Frost & Partner GbR ("F&P") to
help arrange a $20 million to $40 million financing for the Company. Under the
terms of the agreement, F&P received $15,000 upon being retained, and will
receive up to an additional $30,000 in connection with their due diligence and
the preparation of presentation documents. In addition, F&P will receive a
success fee equal to two percent of the capital raised during the term of the
agreement or during the six month period thereafter (or 1% if the money is
raised other than through F&P's efforts). The agreement expires March 31, 2001.

         In September 1999, the Board of Westdeutsche Landesbank Girozentrale
(WestLB) of Dusseldorf issued its conditional approval to underwrite a U.S.
$157.5 million loan facility for the first Offshore Shuttle. Based on such
approval, the Company has mandated WestLB to act as sole arranger and
underwriter for the financing. WestLB's commitment is subject to several
material conditions, including satisfactorily completing its due diligence, the
Company's obtaining European government guarantees to secure a significant
portion of the loan facility, and its completing of an additional equity
financing. The Company is seeking to fulfill these conditions.

         There can be no assurance that the conditions to the WestLB financing
will be satisfied or, if satisfied, that the WestLB financing will be
consummated on reasonable terms or at all. If it is not completed, the Company
may be required to significantly curtail or cease its proposed activities.
Although the Company believes that the proceeds from the WestLB financing, if
completed, will enable it to construct the first Offshore Shuttle, there can be
no assurance in that regard. Moreover, even if the WestLB financing is
consummated, the Company's future capital requirements could vary significantly
and will depend on certain factors, many of which are not within its control.
Such factors include

         o        the need for cash to fund the construction of additional
                  Offshore Shuttles;
         o        greater than anticipated expenses; and
         o        longer engineering, development, and construction times than
                  now contemplated.

         If the Company is successful in completing the first Offshore Shuttle,
it believes it will be able to fund the construction of additional Offshore
Shuttles from its future operating cash flows and/or short or medium term debt
financing. There can be no assurance, however, that the Company's beliefs will
prove to be accurate.

Recent Pronouncements

         In June 1998, the Financial Accounting Standards Board issued Statement
No. 133, Accounting for Derivative Instruments and Hedging Activities. The
Statement requires the Company to recognize all derivatives on the balance sheet
at fair value. Derivatives that are not hedges must be adjusted to fair value
through income. The adoption of Statement No. 133 on January 1, 2001 will result


                                      -24-
<PAGE>

in no cumulative effect of an accounting change as the Company does not utilize
derivatives.


ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

         The Company's exposure to market risk for changes in interest rates
relates primarily to the Company's notes payable and long-term debt. The Company
believes its exposure to interest rate risk is not material since its current
notes payable consist of fixed rate indebtedness, and the long-term variable
rate debt obligation is not material. The fair value of the fixed rate notes
payable approximates its carrying value due to its short-term maturity.

         Interest rate risk may arise if the Company is successful in obtaining
debt financing to finance the building of the first Offshore Shuttle. In such an
event, the Company will assess the extent of its interest rate risk and may
enter into hedging transactions to reduce its exposure and to ensure its ability
to service its debt.

Foreign Exchange Risk

         Foreign exchange risk may arise if the Company is required to use
different currencies for various aspects of its operations. Although the
principal currency used in the offshore decommissioning industry in the U.S.
Dollar, the local expenditures of MSOAS (e.g., rent, telephone, payroll, etc.)
are likely to be paid in Norwegian Kroner, and it is possible that the contract
for construction of the first Offshore Shuttle will be denominated in a currency
other than the U.S. Dollar or the Norwegian Kroner. The Company currently has no
foreign exchange contracts.


                                      -25-
<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                                                                        Page
                                                                       --------
Financial Statements of Marine Shuttle Operations Inc.:
Reports of Independent  Auditors.....................................     27
    Consolidated Balance Sheets......................................     29
    Consolidated Statements of Loss and Comprehensive Loss...........     30
    Consolidated Statements of Cash Flows............................     31
    Consolidated Statements of Shareholders' Equity..................     32
    Notes to Consolidated Financial Statements.......................     33


                                      -26-
<PAGE>



                         REPORT OF INDEPENDENT AUDITORS

To the Shareholders and Board of Directors
Marine Shuttle Operations Inc.

We have audited the accompanying consolidated balance sheets of Marine Shuttle
Operations Inc. (a development stage enterprise) as of December 31, 2000 and
1999, and the related consolidated statements of loss and comprehensive loss,
shareholders' equity, and cash flows for the years then ended, and for the
period from May 23, 1997 (inception) through December 31 2000. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. The financial statements as of December 31, 1998, and for the period
May 23, 1997 (inception) through December 31, 1998, were audited by other
auditors whose report dated March 18, 1999 expressed an unqualified opinion on
those statements and included an explanatory paragraph for the going concern
uncertainty discussed in Note 2 to the financial statements. The financial
statements for the period May 23, 1997 (inception) through December 31, 1998
include total revenues and net loss of $16,376 and $5,207,079, respectively. Our
opinion on the consolidated statements of loss and comprehensive loss,
shareholders' equity, and cash flows for the period May 23, 1997 (inception)
through December 31, 2000 insofar as it related to amounts for prior periods
through December 31, 1998, is based solely on the report of other auditors.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits and the report of other auditors
provide a reasonable basis for our opinion.

In our opinion, based on our audits and the report of other auditors, the
financial statements referred to above present fairly, in all material respects,
the consolidated financial position of Marine Shuttle Operating Inc. at December
31, 2000 and 1999, and the consolidated results of its operations and its cash
flows for each of the three years in the period ended December 31, 2000 and the
period from May 23, 1997 (inception) through December 31, 2000, in conformity
with accounting principles generally accepted in the United States.

The accompanying financial statements have been prepared assuming that Marine
Shuttle Operations Inc. will continue as a going concern. As more fully
described in Note 2, the Company has incurred recurring operating losses and has
a working capital deficit. These conditions raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans in regard
to these matters are also described in Note 2. The financial statements do not
include any adjustments to reflect the possible future effects on the
recoverability and classification of assets or the amounts and classification of
liabilities that may result from the outcome of this uncertainty.

/s/ ERNST & YOUNG AS
Gustav Eriksen
Stavanger, Norway
March 28, 2001


Independent Auditors' Report


                                      -27-
<PAGE>

[Deloitte & Touche logo]   ____________________________________
                            Deloitte & Touche LLP     Telephone: (604) 669-4466
                            Suite 2100                Facsimile: (604) 685-0458
                            1055 Dunsmuir Street
                            P.O. Box 49279
                            Four Bentall Centre
                            Vancouver, British Columbia
                            V7X 1P4

To the Board of Directors and Stockholders of
Marine Shuttle Operations Inc.

We have audited the consolidated statements of loss and comprehensive loss,
shareholders' equity (deficiency) and cash flows for the year ended December 31,
1998 of Marine Shuttle Operations Inc. and subsidiaries (collectively, the
"Company"). These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards
in the United States. Those standards require that we plan and perform an audit
to obtain reasonable assurance whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, these consolidated financial statements present fairly, in all
material respects, the results of operations and cash flows for the year ended
December 31, 1998, in conformity with accounting principles generally accepted
in the United States.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company's negative working capital and deficit raises
substantial doubt about its ability to continue as a going concern. Management's
plans concerning this matter are also described in Note 2. The financial
statements do not contain any adjustments that might result from the outcome of
this uncertainty.



/s/DELOITTE & TOUCHE
Chartered Accountants
Vancouver, British Columbia, Canada
March 18, 1999


                                      -28-
<PAGE>
<TABLE>
<CAPTION>

                         MARINE SHUTTLE OPERATIONS INC.
                          (A development stage company)

                           CONSOLIDATED BALANCE SHEETS
                                  (U.S.Dollars)

                                                            December 31,       December 31,
                                                                2000               1999
                                                          ----------------------------------
<S>                                                        <C>               <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents                                  $    203,207      $  1,119,564
Restricted cash                                                  21,863            54,478
Accounts receivables                                             28,270            38,620
Other current assets                                             56,804           114,304
                                                           ------------      ------------
Total Current Assets                                            310,144         1,326,966
                                                           ------------      ------------

Property, plant and equipment, net                            6,445,875         5,980,857
Debt issue cost                                               1,936,867         1,109,510
Goodwill, net                                                25,925,553        28 096,422
Patents and agreements, net                                   2,712,464         2,732,240
                                                           ------------      ------------
TOTAL ASSETS                                               $ 37,330,903      $ 39,245,995
                                                           ============      ============

LIABILITIES AND SHAREHOLDERS` EQUITY
CURRENT LIABILITIES
Accounts payable                                           $    847,868      $    933,817
Notes payable                                                 4,900,000         2,550,000
Other current liabilities                                       754,100           341,246
                                                           ------------      ------------
Total current liabilities                                     6,501,968         3,825,063
                                                           ------------      ------------

Long Term Debt                                                  265,312           293,379

Minority interests                                                  --            228,826

Contingency (Note 2)

SHAREHOLDERS' EQUITY
Authorized 75,000,000 common shares with a par value
of $0.001. Issued and outstanding 44,463,356 common
shares with a par value of $0.001 at December 31, 2000
and 40,750,642 common shares at December 31, 1999                44,463            40,751
Additional paid in capital                                   50,292,949        47,684,739
Deficit accumulated during the development stage            (18,933,079)      (12,570,929)
Accumulated other comprehensive income (loss)                  (840,710)         (255,834)
                                                           ------------      ------------
Total shareholders' equity                                   30,563,623        34,898,727
                                                           ------------      ------------

TOTAL LIABILITIES AND SHAREHOLDERS` EQUITY                 $ 37,330,903      $ 39,245,995
                                                           ============      ============
</TABLE>

See accompanying notes to consolidated financial statements.


                                      -29-
<PAGE>

                         MARINE SHUTTLE OPERATIONS INC.
                          (A development stage company)

             CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
                                  (U.S.Dollars)

<TABLE>
<CAPTION>
                                                    Cumulative to
                                                  December 31, 2000
                                                      from date of       Year ended        Year ended       Year ended
                                                       inception        December 31,      December 31,     December 31,
                                                      May 23, 1997             2000              1999             1998
                                                 -------------------  ---------------  ---------------- ----------------
<S>                                               <C>                  <C>              <C>               <C>
Operating revenues                                $         339,601    $     218,088    $      105,136    $      16,376
                                                 -------------------  ---------------  ---------------- ----------------

EXPENSES
Personnel costs                                           2,998,127        1,494,695         1,277,938          185,494
Legal, audit and advisory services                        2,061,518          396,432           472,958        1,119,700
Cost of cancelled financing                                 606,721            --                  --           606,721
General and administrative                                2,365,091          639,430         1,270,413          402,745
Marketing                                                 1,120,382          167,736           300,157          652,489
Technical development                                       581,473           27,267           554,206              --
Depreciation                                                185,197           78,513            96,217           10,467
Amortization - goodwill and intangibles                   9,770,126        4,002,754         3,885,167        1,882,204
Write down on investment                                     90,000              --                --            90,000
Currency exchange loss (gain)                               (14,682)         (16,662)          (28,005)          29,985
                                                 -------------------  ---------------  ---------------- ----------------

Total operating expenses                          $      19,763,953    $   6,790,165    $    7,829,051    $   4,979,805
                                                 -------------------  ---------------  ---------------- ----------------

Interest expense, net of capitalized                        144,923           28,266            23,389           93,268
Interest income                                             (83,679)         (12,266)          (56,864)         (14,549)

Net loss before minority interest                 $     (19,485,596)   $  (6,588,077)   $   (7,690,440)   $  (5,042,148)
                                                 -------------------  ---------------  ---------------- ----------------

Minority interest                                          (552,518)        (225,927)         (326,591)             --
                                                 -------------------  ---------------  ---------------- ----------------

Net loss                                          $     (18,933,079)   $  (6,362,150)   $   (7,363,850)   $  (5,042,148)
                                                 ===================  ===============  ================ ================
Other comprehensive loss:
Accumulated other comprehensive income (loss)-
foreign currency translation adjustments                   (840,710)        (584,876)         (266,352)          10,517
                                                 -------------------  ---------------  ---------------- ----------------

Comprehensive loss                                $     (19,773,789)   $  (6,947,026)   $   (7,630,201)   $  (5,031,631)
                                                 -------------------  ---------------  ---------------- ----------------

Basic and diluted loss per share                                       $       (0.15)   $        (0.22)   $       (0.20)
                                                                      ===============  ================ ================

Weighted average shares outstanding
                                                                          42,869,305        33,611,545       25,720,000
                                                                      ===============  ================ ================
</TABLE>
See accompanying notes to consolidated financial statements.


                                      -30-
<PAGE>

                         MARINE SHUTTLE OPERATIONS INC.
                          (A development stage company)

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (U.S.Dollars)

<TABLE>
<CAPTION>
                                                        Cumulative to
                                                      December 31, 2000
                                                          from date of       Year ended        Year ended       Year ended
                                                           inception        December 31,      December 31,     December 31,
                                                          May 23, 1997             2000              1999             1998
                                                     -------------------  ---------------  ---------------- ----------------
<S>                                                   <C>                  <C>              <C>               <C>
OPERATING ACTIVITIES
Net Loss                                              $     (18,933,079)   $  (6,362,150)   $   (7,363,850)   $  (5,042,148)
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization                                 9,955,322        4,081,267         3,981,385        1,892,671
Minority interest                                              (552,517)        (225,927)         (326,591)             --
loss on investment                                               90,000              --               --             90,000
Loss on disposals of assets                                       5,708            5,708
Unrealized (gain)/loss on foreign currency                       33,751           (6,040)            7,698           32,092
Changes in non-cash working capital:
Accounts receivable                                             (28,270)          10,350           (22,366)         (16,254)
Other current receivables and restricted cash                   (78,664)          90,116           (81,850)         (86,931)
Accounts payable                                                847,868          (85,949)          (30,092)         947,817
Other current liabilities                                       403,050          101,597           441,444         (143,842)
                                                     -------------------  ---------------  ---------------- ----------------
Net cashflow used on operating activities                    (8,256,831)      (2,391,028)       (3,394,222)      (2,326,595)
                                                     -------------------  ---------------  ---------------- ----------------

INVESTING ACTIVITIES
Investments                                                    (100,000)             --                --          (100,000)
Capital expenditures                                         (5,763,164)        (888,832)       (4,158,657)        (715,675)
Proceeds on sale of investment                                   55,196           44,936               260           10,000
Advance to Marine Shuttle Operations AS                        (249,986)             --                --          (249,986)
Acquisition of Marine Shuttle Operations AS                     416,635              --                --           416,635
Advance to Offshore shuttle AS                                 (100,000)             --                --          (100,000)
Acquisition of Offshore                                         482,476              --                --           482,476
                                                     -------------------  ---------------  ---------------- ----------------
Net cashflow used on investing activities                    (5,258,843)        (843,896)       (4,158,397)        (256,550)
                                                     -------------------  ---------------  ---------------- ----------------


FINANCING ACTIVITIES
Issuance of capital stock                                    11,754,050          905,000        10,679,050              --
Share issue cost                                               (746,881)         (10,500)         (720,381)             --
Debt issue cost                                              (1,936,867)        (827,357)       (1,109,510)             --
Payment on Note payable                                      (5,875,000)             --         (5,875,000)             --
Borrowing on Note payable                                    11,068,379        2,350,000         5,218,379        3,500,000
                                                     -------------------  ---------------  ---------------- ----------------
Net cashflow provided by financing activities                14,263,680        2,417,143         8,192,537        3,500,000
                                                     -------------------  ---------------  ---------------- ----------------
Effect of exchange rate change in cash and cash                (544,799)         (98,576)         (424,158)         (22,065)
Net increase (decrease) in cash and cash equiv.      $          203,207   $     (916,357)  $       215,760   $      894,790
                                                    -------------------  ---------------  ---------------- ----------------

Cash and cash equivalents at beginning of                          --          1,119,564           903,805            9,015
                                                    -------------------  ---------------  ---------------- ----------------

Cash and cash equivalents at end of period           $          203,207   $      203,207   $     1,119,565   $      903,805
                                                    ===================  ===============  ================ ================

Supplemental disclosure of cash flow information
Cash paid for interest                               $           61,566   $       23,004   $        38,562   $         --
</TABLE>

See accompanying notes to consolidated financial statements.


                                      -31-
<PAGE>

                         MARINE SHUTTLE OPERATIONS INC.
                          (A development stage company)

                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                                  (U.S.Dollars)
<TABLE>
<CAPTION>

                                                                            Accumulated
                                                                               other
                                         Common Shares                      Comprehensive                        Total
                                 --------------------------      Paid-in       income       Accumulated      Shareholders'
                                      Shares        Amount       Capital       (loss)         (Deficit)          Equity
----------------------------------------------------------------------------------------------------------------------------
<S>                                 <C>            <C>          <C>          <C>             <C>              <C>
Issued on incorporation             10,000,000     $ 10,000     $            $               $                $     10,000

Private placement                   10,020,000       10,020      133,980                                           144,000

Net loss                                                                                      (164,931)           (164,931)
----------------------------------------------------------------------------------------------------------------------------
Balance at December 31,1997         20,020,000       20,020                         --        (164,931)            (10,931)
----------------------------------------------------------------------------------------------------------------------------
                                                                 133,980

Issued on acquisition of MSOAS       7,600,000        7,600   22,792,400                                        22,800,000


Issued on acquisition of OSAS        4,937,607        4,938   14,807,833                                        14,812,821

Net loss                                                                                    (5,042,148)         (5,042,148)

Other comprehensive income -
foreign currency translation
adjustments                                                                       10,517                            10,517
----------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1998        32,557,607       32,558   37,734,263          10,517    (5,207,079)         32,570,259
----------------------------------------------------------------------------------------------------------------------------

Private placements:
February 1999                        1,149,750        1,150    5,517,650                                         5,518,800
December 1999                        7,043,285        7,043    4,432,826                                         4,439,869

Net loss                                                                                    (7,363,850)         (7,363,850)
Other comprehensive (loss) -
foreign currency translation
adjustments                                                                     (266,351)                         (266,351)
----------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1999        40,750,642       40,751   47,684,739        (255,834)  (12,570,929)         34,898,727
----------------------------------------------------------------------------------------------------------------------------

Private placements:
April                                  450,000          450      304,050                                           304,500
June                                   571,429          571      399,429                                           400,000
December                               475,000          475      189,525                                           190,000

Issued on acquisition of:
8.41%of MSOAS                        1,030,002        1,030      861,082                                           862,112
9.68% of MSOAS                       1,186,283        1,186      854,124                                           855,310

Net Loss                                                                                    (6,362,150)         (6,362,150)

Other comprehensive loss -
foreign currency translation
adjustments                                                                     (584,876)                         (584,876)
----------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 2000        44,463,356     $ 44,463  $50,292,949      $ (840,710) $(18,933,079)        $30,563,623
----------------------------------------------------------------------------------------------------------------------------

</TABLE>

See accompanying notes to consolidated financial statements.


                                      -32-
<PAGE>

                         MARINE SHUTTLE OPERATIONS INC.
                          (A development stage company)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2000

1.       NATURE OF OPERATIONS

         Marine Shuttle Operations Inc. (the "Company"), through its
wholly-owned Norwegian subsidiary, Marine Shuttle Operations AS ("MSOAS"), is
seeking to become a leading player in the market for installing,
decommissioning, and transporting offshore oil and gas structures. The Company,
being in the development stage, has not generated any significant revenues from
operations and does not expect to generate any significant revenues from
operations until the year 2003, at the earliest. There can be no assurance,
however, that the Company will ever achieve commercially significant sales. To
date, the Company has not entered into any contracts for the use of its proposed
services, and no assurance can be given that any such contracts will
materialize.

         In 1998, the Company acquired 100% of MSOAS, and approximately 68% of
the outstanding capital stock of Offshore Shuttle AS ("OSAS"). At the time, OSAS
held the licensing and marketing rights to the "Offshore Shuttle", a vessel
being developed to lift and carry large offshore oil and gas installations. In
September 1999, OSAS merged into MSOAS. As a result, MSOAS became the holder of
the licensing and marketing rights to the Offshore Shuttle, and the Company's
ownership interest in MSOAS became approximately 81%. In April and June 2000,
the Company acquired the remaining outstanding minority interest and the Company
now owns all of the outstanding shares of MSOAS. See Note 8. Unless the context
otherwise requires, the term "Company" hereinafter includes Marine Shuttle
Operations Inc. and its subsidiaries.

2.       GOING CONCERN

         The Company's ability to continue as a going concern is dependent on
its ability to obtain significant additional financing. As shown in the
financial statements, the Company is in the development stage and at December
31, 2000 had accumulated losses from operations amounting to $18,933,079 and a
working capital deficit of $6,191,824, with no operating assets presently
generating cash to fund its operating and capital requirements. These conditions
raise substantial doubt about the Company's ability to continue as a going
concern. The Company is seeking to raise additional capital. There can be no
assurance that the Company will be able to raise additional capital on
reasonable terms, if at all, or that any financing transaction will not be
dilutive to current shareholders. If the Company is not able to raise additional
capital, it may be required to significally curtail or cease its operating
activities. The financial statements have been prepared assuming that the
Company will continue as a going concern, and do not include any adjustments to
reflect the possible future effects on the recoverability and classification of
assets or the amounts and classification of liabilities that may result from the
outcome of this uncertainty.

3.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         These financial statements have been prepared in accordance with
generally accepted accounting principles in the United States and reflect the
following significant accounting principles:

         PRINCIPLES OF CONSOLIDATION

         The consolidated financial statements include the accounts of the
Company and MSOAS. Intercompany transactions and balances have been eliminated.

         ESTIMATES AND ASSUMPTIONS

         The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amount of revenues and expenses during
the reporting period. Actual results could differ from those estimates.


                                      -33-
<PAGE>

                         MARINE SHUTTLE OPERATIONS INC.
                          (A development stage company)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2000

3.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

         MARKETING

         All marketing and advertising costs are expensed as incurred.

         CASH AND CASH EQUIVALENTS

         Cash and cash equivalents consist of cash on hand, deposits in banks
and highly liquid investments with an original maturity of three months or less.

         EQUIPMENT

         Equipment is recorded at cost. Depreciation is charged to operations
over the estimated useful lives of the assets as follows:
         Computer equipment............    30-35%
         Office equipment..............    20-30%

         The average building period for an Offshore Shuttle is estimated to be
18 months. All direct costs including interest related to the construction of
the Offshore Shuttle are capitalized as incurred, and depreciation will commence
when the Offshore Shuttle is available for operation.

         GOODWILL AND OTHER INTANGIBLES

         Goodwill arising from acquisitions and other purchased intangibles are
amortized on a straight-line basis over 10 years and 5 years to 10 years,
respectively.

         Patents are recorded at cost or fair value at date of acquisition less
accumulated amortization, which is calculated on a straight-line basis over
their estimated lives.

         IMPAIRMENT OF LONG-LIVED ASSETS

         The carrying value of long-lived assets, principally goodwill and
equipment, is reviewed for potential impairment when events or changes in
circumstances indicate that the carrying amount of such assets may not be
recoverable. For goodwill and equipment, the determination of recoverability is
made based upon the estimated undiscounted future net cash flows of the related
assets.

         OPERATING REVENUE RECOGNITION

         As discussed in Note 1, the Company is in its development stage and
therefore has no significant operating revenue. However, if and when the
operations for installing, decommissioning or transporting offshore oil or gas
installations begin, the Company will recognize revenue based on contractual
terms as services are performed. Operating revenue recognized in 2000, 1999 and
1998 pertains to study work performed on behalf of clients and was recognized as
the work was performed.


                                      -34-
<PAGE>

                         MARINE SHUTTLE OPERATIONS INC.
                          (A development stage company)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2000

3.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

         STOCK-BASED COMPENSATION

         In accordance with the provisions of the Financial Accounting Standards
Board's ("FASB") Statement of Accounting Standard ("SFAS") No. 123, Accounting
for Stock-Based Compensation, the Company has elected to follow the Accounting
Principles Board's Opinion No. 25, Accounting for Stock Issued to Employees and
the related interpretations (`APB 25") in accounting for its employee
stock-based compensation plans. Under APB 25, if the exercise price of employee
stock options equals or exceeds the fair value of the underlying stock on the
date of grant, no compensation expense is recognized.

         FINANCIAL INSTRUMENTS AND RISK CONCENTRATION

         The Company estimates that the carrying values of its cash and cash
equivalents, current receivables and, payables, and notes payable approximate
fair value at December 31, 2000 and 1999 due to the short-term maturity of the
balances. Financial instruments which potentially subject the Company to
concentration of credit risk are primarily cash and cash equivalents. It is the
Company's practice to place its cash and cash equivalents in time deposits at
commercial banks with high credit ratings. In foreign locations, local financial
institutions are generally utilized for local currency needs. The Company limits
the amount of exposure to any one institution and does not believe it is exposed
to any significant credit risk.

         FOREIGN CURRENCY TRANSLATION

         The U.S. dollar is the functional currency of Marine Shuttle Operations
Inc. MSOAS uses Norwegian Kroner ("NOK") as its functional currency.
Accordingly, MSOAS translate assets and liabilities at current rates of exchange
in effect at the balance sheet date. The resulting gains and losses from
translation are deferred and recorded as a separate component of comprehensive
income (loss) and as a component of shareholders' equity. Revenue and expense
for MSOAS is translated using the average exchange rates in effect for the
period. Foreign currency exchange gains and losses are recognized in other
income (expense) as incurred.

         Revenues and expenses are translated at the average exchange rate for
the reporting period. Gains and losses arising from translation of financial
statements of subsidiaries not reporting in U.S. dollars are deferred and
recorded as a separate component of comprehensive income (loss). The exchange
rate between the NOK and U.S. dollar at December 31, 2000 was 8.89 NOK to the US
dollar.

         RECENT PRONOUNCEMENTS

         In June 1998, the Financial Accounting Standards Board issued Statement
No. 133, Accounting for Derivative Instruments and Hedging Activities. The
Statement requires the Company to recognize all derivatives on the balance sheet
at fair value. Derivatives that are not hedges must be adjusted to fair value
through income. The adoption of Statement No. 133 on January 1, 2001 will result
in no cumulative effect of an accounting change as the Company does not utilize
derivatives.


                                      -35-
<PAGE>

                         MARINE SHUTTLE OPERATIONS INC.
                          (A development stage company)
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                                DECEMBER 31, 2000

4.       RESTRICTED CASH

         Restricted cash includes taxes withheld from employees of the Norwegian
subsidiaries of $21,863 and $33,791, for 2000 and 1999, respectively. In 1999
the Company also had rental deposits of $20,687.

5.       ACCOUNTS RECEIVABLE

         Accounts receivable are recorded at net realizable value. No allowance
for doubtful accounts has been provided.

6.       OTHER CURRENT ASSETS

December 31,                                      2000                1999
----------------------------------- ------------------- -------------------
Prepaid expenses                              $ 17,344            $ 35,519
VAT receivable                                  25,200              30,162
Other current assets                            14,260              48,623
                                    ------------------- -------------------
Total other current assets                    $ 56,804            $114,304
                                    ------------------- -------------------

7.       LOSS ON INVESTMENT

         On December 31, 1997, the Company entered into a Securities Purchase
Agreement ("Agreement") to acquire 100 shares (constituting a 50% interest) of
Kaizen Food Corporation ("Kaizen"), a Canadian private company. Pursuant to the
Agreement the Company purchased 100 shares of Kaizen for $100,000, and was
required to raise $500,000 on or before January 20, 1998 to fund Kaizen's
research and development activities. Kaizen repurchased the stock during 1998
for $10,000 in full payment of the repurchase price.

8.       ACQUISITIONS

         On April 14, 1998, the Company acquired 100% of the issued and
outstanding stock of Marine Shuttle Operations AS, a Norwegian company
("MSOAS"), in exchange for 7,600,000 common shares of the Company. 6,840,000 of
such shares (the "Trust Shares") are held by a trustee pursuant to the terms of
a trust agreement. The Trust Shares cannot be sold prior to the release from the
trust. 2,280,000 of the Trust Shares are to be released on each of July 1, 2001,
2002, and 2003. This transaction was accounted for using the purchase method of
accounting. The excess of the purchase price over the fair value of the net
assets acquired was allocated to goodwill and is being amortized on a
straight-line basis over 10 years. The result of operations of MSOAS have been
consolidated from April 14, 1998.

         In 1998, the Company acquired 3,291,738 shares of Offshore Shuttle AS
("OSAS"), a Norwegian limited company, representing approximately 68% of the
outstanding OSAS capital stock, in exchange for 4,937,607 shares of the
Company's common stock. The shares of the Company's common stock that were
issued were recorded at a deemed value of $3.00 per share based on the estimated
fair value of the net assets acquired from OSAS. This transaction was accounted
for using the purchase method. The excess of the purchase price over the fair
value of the net assets acquired was allocated to goodwill and identified
intangibles and is being amortized on a straight-line basis over 10 years. The
results of operations of OSAS have been consolidated from December 31, 1998.

         In September 1999, OSAS merged into MSOAS. As a result, the Company's
ownership in MSOAS became approximately 81%, and MSOAS became the holder of the
licensing and marketing rights to the Offshore Shuttle. In April and June 2000,
the Company acquired the remaining outstanding minority interest in MSOAS and
the Company now owns all of the outstanding shares of MSOAS.


                                      -36-
<PAGE>

                         MARINE SHUTTLE OPERATIONS INC.
                          (A development stage company)
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                                DECEMBER 31, 2000


8        ACQUISITIONS  (continued)

The selected pro forma consolidated financial information for the Company set
forth below gives effect to the acquisitions of the shares of MSOAS and OSAS,
and presents the results of operations of the Company for 1997 and 1998, as if
the MSOAS and OSAS acquisitions were made effective May 23, 1997.

<TABLE>
<CAPTION>
                                                                              Period from
                                                     Year ended           May 23, 1997 to
                                              December 31, 1998         December 31, 1997
------------------------------------       ---------------------   -----------------------
<S>                                                <C>                         <C>
Revenue                                            $     29,633                $   56,940
                                           ---------------------   -----------------------
Net loss                                           $ (6,029,096)              $(4,942,563)
                                           ---------------------   -----------------------
Basic and diluted loss per share                   $      (0.19)                $   (0.16)
                                           ---------------------   -----------------------
</TABLE>

9.       EQUIPMENT

<TABLE>
<CAPTION>
December 31,                                              2000                 1999
------------------------------------------------ --------------     ----------------
<S>                                                <C>                  <C>
Computer and office equipment                      $    217,921         $    328,562
Construction in progress                              6,374,435            5,758,979
                                                 --------------     ----------------
                                                      6,592,356            6,087,541
Accumulated depreciation                                146,481              106,684
                                                 --------------     ----------------
                                                   $ 6,445,875          $  5,980,857
                                                 ==============     ================
</TABLE>

Cumulative capitalized interest on construction in progress was $543,961 and
$226,665, for the years ending December 31, 2000 and 1999 respectively.

10.      GOODWILL
<TABLE>
<CAPTION>
December 31,                                              2000                 1999
---------------------------------------------- ----------------     ----------------
<S>                                                <C>                  <C>
Total cost                                         $ 34,127,918         $ 32,929,340
Accumulated amortization                              8,202,365            4,832,918
                                               ----------------     ----------------
                                                   $ 25,925,553         $ 28,096,422
                                               ================     ================
</TABLE>

11.      PATENTS AND AGREEMENTS
<TABLE>
<CAPTION>
December 31,                                              2000                 1999
---------------------------------------------- ----------------     ----------------
<S>                                                <C>                  <C>
Total cost                                         $  4,280,224         $  3,666,693
Accumulated amortization                              1,567,760              934,453
                                               ----------------     ----------------
                                                   $  2,712,464         $  2,732,240
                                               ================     ================
</TABLE>

12.      OTHER CURRENT LIABILITIES
<TABLE>
<CAPTION>
December 31,                                              2000                 1999
---------------------------------------------- ----------------     ----------------
<S>                                                <C>                  <C>
Accrued salary and social security cost            $     76,413         $    107,180
Debt issue cost payable                                 488,488               56,363
Accrued other operating expenses                        189,199              177,703
                                               ----------------     ----------------
Total other current liabilities                    $    754,100         $    341,246
                                               ================     ================
</TABLE>


                                      -37-
<PAGE>

                         MARINE SHUTTLE OPERATIONS INC.
                          (A development stage company)
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                                DECEMBER 31, 2000

13.      EXTERNAL FINANCING

         In October 1998, the Company entered into an engagement letter with MFC
Merchant Bank S.A. pursuant to which MFC shall act, on a best_efforts basis, as
agent for the Company in raising additional capital. As consideration for its
services, MFC shall receive a success fee equal to five percent of the capital
raised plus DM 100,000 (approximately $47,350) per month until the completion or
termination of the MFC financing. In addition, all of MFC's out_of_pocket
expenses shall be reimbursed, and if the Company raises the necessary funds
through another source, MFC shall receive a break_up fee equal to the greater of
$1,200,000 or 350,000 shares of common stock. MFC agreed to defer the monthly
fee obligation from May 1, 2000 through December 1, 2000. In return for granting
this deferral, the deferred fees were increased by 10%. This 10% premium may be
paid with shares of common stock. Effective April 1, 2001, MFC will no longer
receive a monthly fee, but will invoice the Company for services rendered at the
request of the Company.

         On March 1, 1999, the Company entered into a loan agreement with
ValorInvest Ltd., an investment company, pursuant to which ValorInvest agreed to
lend the Company an aggregate of up to $6,000,000. The loan agreement was
amended and restated as of December 31, 1999, and was further amended as of
December 31, 2000. The loan agreement provides that advances shall be made in
increments of $250,000 and shall not exceed $500,000 in any single month unless
agreed to by ValorInvest. Any monies advanced under the loan agreement shall
bear interest at the rate of 7.5% per annum and shall be due and payable on June
30, 2001, except that if the Company raises, in the aggregate, in excess of
$5,000,000 from equity or long term debt financings after January 1, 2000, then
the loan shall be due to the extent of 25% of such excess. As of December 31,
2000, $3,875,000 had been advanced under the loan agreement, and $2,550,000 was
outstanding under the loan agreement.

         In August 1999, the Company entered into a loan agreement with Statens
naerings og distriktsutviklingsfond (the Norwegian Industrial and Regional
Development Fund, "SND"), pursuant to which SND agreed to lend the Company an
aggregate of up to NOK 4,000,000, (approximately $450,000) to finance specific
tasks within the Offshore Shuttle project. As of December 31, 2000, NOK
2,358,617 (approximately $265,300) had been advanced under the loan agreement.
The principal is repayable two years after disbursement, over five years in
semi-annually installments, each in the amount of NOK 400,000.

         In September 1999, the Board of Westdeutsche Landesbank Girozentrale
(WestLB) of Dusseldorf issued its conditional approval to underwrite a U.S.
$157.5 million loan facility for the first Offshore Shuttle. Based on such
approval, the Company has mandated WestLB to act as sole arranger and
underwriter for the financing. WestLB's commitment is subject to several
material conditions, including satisfactorily completing its due diligence, the
Company's obtaining European government guarantees to secure a significant
portion of the loan facility, and its completing of an additional equity
financing. The Company is seeking to fulfill these conditions. The Company has
deferred debt issue costs related to the financing.

         In February 2000, the Company entered into a loan agreement with MFC
Merchant Bank S.A pursuant to which MFC agreed to lend an aggregate of up to
$2,000,000, provided that advances shall not exceed $350,000 in any single
month. Any monies advanced under this loan agreement shall bear interest at the
rate of LIBOR plus 3.5% per annum and shall be due and payable in full on
February 25, 2001. As of December 31, 2000, $900,000 was outstanding under this
agreement. MFC has agreed to extend the maturity date of the $900,000 loan to
June 30, 2001.

         In April 2000, the Company consummated a private placement of 450,000
shares of common stock for gross proceeds of $315,000. In June 2000, the Company
consummated a private placement of 571,429 shares of common stock for gross
proceeds of $400,000.


                                      -38-
<PAGE>

                         MARINE SHUTTLE OPERATIONS INC.
                          (A development stage company)
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                                DECEMBER 31, 2000

13.      EXTERNAL FINANCING (continued)

         In July 2000, the Company entered into a loan agreement with Mr. Holger
Timm pursuant to which Mr. Timm agreed to lend the Company an aggregate of up to
$1,500,000, provided that advances shall not exceed $500,000 in any single
month. Any monies advanced under the loan agreement shall bear interest at the
rate of 7.5% per annum and shall be due and payable in full on December 31,
2000. The advances may be converted at the option of Mr. Timm into shares of the
Company's common stock at 80% of the five day average trading price of the
common stock prior to conversion, but not less than a floor price as calculated
pursuant to the loan agreement. In January 2001, the $1,450,000 that had been
advanced under the loan agreement plus $42,396 in interest thereon was converted
into shares of the Company's common stock at $0.40 per share.

         In November, 2000, the Company retained Frost & Partner GbR ("F&P") to
help arrange a $20 million to $40 million financing for the Company. Under the
terms of the agreement, F&P received $15,000 upon being retained, and will
receive up to an additional $30,000 in connection with their due diligence and
the preparation of presentation documents. In addition, F&P will receive a
success fee equal to two percent of the capital raised during the term of the
agreement or during the six month period thereafter (or 1% if the money is
raised other than through F&P's efforts). The agreement expires March 31, 2001.

         In December 2000, the Company consummated a private placement of
475,000 shares of common stock for gross proceeds of $190,000.

14.      COMMITMENTS

         The Company had rental expenses for office lease of $127,717 and
$212,167 for 2000 and 1999, respectively.

         MSOAS leases office space in Sandnes, Norway pursuant to a lease
agreement with RC Group ASA. The lease agreement provides for an average annual
rent of NOK 435,852 (approximately $49,027), and expires in 2003. Sverre
Hanssen, the Chairman of MSOAS, is the President and the principal shareholder
of RC Group ASA.

15.      RELATED PARTY TRANSACTIONS

         MSOAS is a party to a personnel services agreement with RC Consultants
AS ("RCC"), and leases office space from RC Group ASA. RCC is wholly owned
subsidiary of RC Group ASA. The Chairman of RCC is also the Chairman of MSOAS
and the President and principal shareholder of RC Group ASA. The Company paid
approximately $539,963, $2,093,701 and $532,200 in 2000, 1999 and 1998,
respectively, to RCC for services under the personnel services agreement.
Compensation for services rendered under such agreement is to be based on normal
trade terms. The Company paid a total of approximately $677,592, $2,336,915 and
$587,995, in 2000, 1999 and 1998, respectively, to companies within the RC
Group.

         MSOAS is a party to a cooperation agreement with Schuller
Industrieentsorgung AG ("Schuller") pursuant to which Schuller shall provide
waste management, onshore dismantling, oil pollution prevention, and cleanup
services. The Company paid approximately $69,146, $193,309 and $127,217 in 2000,
1999 and 1998, respectively, to Schuller for marketing research and other
services rendered. The President and a director of the Company are members of
the supervisory board of Schuller. The President also is a shareholder of
Schuller.

         MSOAS has entered into an agreement with Thyssen Krupp Stahlunion GmbH
("TKSU") with respect to marketing and procurement services. The Company paid
approximately $171,615, $224,217 and $65,126 in 2000,


                                      -39-
<PAGE>

                         MARINE SHUTTLE OPERATIONS INC.
                          (A development stage company)
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                                DECEMBER 31, 2000


15.      RELATED PARTY TRANSACTIONS (continued)

1999 and 1998, respectively, to TKSU under such agreement. A director of the
Company is an officer and the head of the Pipes, Offshore, Special Products
Department of TKSU.

         During the years ended December 31, 2000, 1999 and 1998, the Company
paid approximately $1,606, $23,313 and $103,894, respectively, to a law firm, a
member of which is a director of the Company.

         Under a consultancy agreement, the Company paid remuneration of
approximately $51,069, $120,350 and $127,265 in 2000, 1999 and 1998,
respectively, to a shareholder of the Company and a former Board member of OSAS.

         On March 31, 1998, MSOAS entered into an agreement with a former member
of the Board of OSAS and a former Managing Director of OSAS regarding the
exclusive transfer of the intellectual property rights relating to the Offshore
Shuttle concept (the "Rights"). The agreement provides that if MSOAS for any
reason whatsoever should cease to continue in an active manner its activities
related to the concept, the Rights could be transferred back to them against
certain compensation. In the event that MSOAS wishes to transfer the rights to a
third party, the two individuals shall have the right of first refusal with
respect to such transfer.

         An addendum to the intellectual property agreement was signed in March,
2000 which provides that, subject to the fulfillment of certain conditions, the
two individuals shall waive and relinquish the right of first refusal and any
and all rights to have the Rights transferred back to them. The conditions are
related to the Company achieving a written confirmation for a financing for the
full and complete design and fabrication of the first Offshore Shuttle, and the
Company entering into such contracts as are required for the design,
construction and complete fabrication of the first Offshore Shuttle. In
consideration of the waiver of the Rights, the Company shall grant to each of
the two individuals warrants to purchase 125,000 shares of common stock of the
Company exercisable at $1 per share. Such warrants shall be granted only upon
satisfaction of the above mentioned conditions.

         In June 2000, the Company sold 571,429 shares to Sylke Timm for gross
proceeds of $400,000. Sylke Timm is the wife of Holger Timm, and Holger Timm is
a principal stockholder of the Company.

         In July 2000, the Company entered into a loan agreement with Mr. Holger
Timm pursuant to which Mr. Timm agreed to lend us an aggregate of up to
$1,500,000, provided that advances shall not exceed $500,000 in any single
month. Any monies advanced under the loan agreement shall bear interest at the
rate of 7.5% per annum and shall be due and payable in full on December 31,
2000. The advances may be converted at the option of Mr. Timm into shares of our
common stock at 80% of the five day average trading price of the common stock
prior to conversion, but not less than a floor price as calculated pursuant to
the loan agreement. In January 2001, the $1,450,000 that had been advanced under
the loan agreement plus $42,396 in interest accrued thereon was converted into
shares of the Company's common stock at $0.40 per share.

         Also in January 2001, the Company sold 1,000,000 shares of common stock
to Holger Timm for gross proceeds of $200,000.

         In February and March 2001, the Company sold to Holger Timm 2,000,000
shares and warrants to purchase 2,000,000 shares exercisable at $0.10 per share
for aggregate proceeds of $202,000. The warrants are exercisable until July 1,
2001. In February 2001, the Company also sold to Intervest AS 1,000,000 shares
and warrants to purchase 1,000,000 shares exercisable at $0.10 per share for
aggregate proceeds of $101,000. The warrants are exercisable until July 1, 2001.
Sverre Hansen, the Chairman of the Board of Directors of MSOAS, is a principal


                                      -40-
<PAGE>

                         MARINE SHUTTLE OPERATIONS INC.
                          (A development stage company)
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                                DECEMBER 31, 2000


15.      RELATED PARTY TRANSACTIONS (continued)

stockholder of Intervest AS.

         Also in February and March 2001, the Company sold a total of 650,000
shares for gross proceeds of $65,000 to various officers, employees and
directors of the Company.

16.      ROYALTY AGREEMENT

         In June 2000, the Company entered into a royalty agreement with one of
the developers of the Offshore Shuttle concept and former Board Member of OSAS.
According to the agreement, an annual royalty of $120,000 will be paid in twelve
monthly installments for a period of 10 consecutive years subject to the
fulfillment of certain conditions.

17.      STOCK OPTION PLAN

         The Company has established a Stock Option Plan for employees,
officers, directors, consultants, and advisors. Options granted under the Stock
Option Plan may be either incentive stock option or non-qualified stock options.
The Company has reserved 2,000,000 common shares for issuance under the Stock
Option Plan. Options granted for issuance under the Stock Option Plan generally
are not transferable, and the exercise price of incentive stock options must be
at least equal to 100% (110% in the case of optionees who own more than 10% of
the total combined voting power of all classes of stock of the Company) of the
fair market value of the common shares on the date of grant. In February 2000, a
Vice President and Director of the Company was granted incentive stock options
to purchase 100,000 shares of common stock at the price of $1.00 per share (the
fair market value of the common stock on the date of grant). The options vested
upon issuance and the calculated value of the options using the Black Scholes
method under FAS 123 is immaterial. In July 2000, a consultant of the Company
was granted non-qualified stock options to purchase 10,000 shares of common
stock at the price of $1.00 per share (a premium over the current fair market
value of the common stock on the date of grant). The options vested upon
issuance and the related value of the options was immaterial and was expensed.
As of December 31, 2000, options to purchase 110,000 had been granted and were
outstanding under the Stock Option Plan.

         The Stock Option Plan may be administered by the Board of Directors or
a committee of the Board (the "Committee"). The Board of Directors or the
Committee, as the case may be, has the power to determine the terms of any
options granted thereunder, including the exercise price, the number of shares
subject to the option, and the exercisability thereof. The term of any option
granted under the Stock Option Plan may not exceed ten years. The specific terms
of each option grant shall be approved by the Board of Directors or the
Committee.


                                      -41-
<PAGE>

                         MARINE SHUTTLE OPERATIONS INC.
                          (A development stage company)
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                                DECEMBER 31, 2000

17.      STOCK OPTION PLAN (continued)

         In 1997, OSAS adopted a stock option plan which provides for the
granting of incentive options to employees and board members to purchase an
aggregate of 220,000 shares of OSAS common stock at prices and terms to be
decided by the Board of Directors. Options granted under the stock option plan
may be exercisable for a period of up to three years from the date of grant. All
options granted under this plan have exercise prices equal to the fair market
value of the stock on the date of grant and increasing at a rate of one percent
per month. Upon the merger in 1999 with MSOAS, the OSAS stock option plan was
adopted by MSOAS. Options to purchase 30,000 shares of common stock in MSOAS
have been issued to employees and are outstanding.

         The activities in relation to the stock incentive plan are summarized
as follows:

                                                              Number of
                                                               Shares
                                                         -------------------
Granted  in and outstanding at December 31, 1997                    135,000
Granted in 1998                                                      45,000
Exercised in 1998                                                    15,000
Cancelled in 1998                                                    15,000
                                                         -------------------
Outstanding at December 31, 1999 and 1998                           150,000
                                                         -------------------
Expired in 2000                                                     120,000
                                                         -------------------
Outstanding at December 31, 2000                                     30,000
                                                         -------------------
No stock options were granted or exercised under this plan during 2000 or 1999.

         The Company applies APB 25 in accounting for its stock option plans.
Accordingly, because the option price is equal to the fair market price at the
date of grant, no compensation expense has been recognized for its stock option
plans.

18.      INCOME TAXES

         The Company has no provision for income taxes for the year ended
December 31, 2000 because the Company generated a loss for the year which may
not be currently benefited. The Company's net operating loss carry-forwards for
U.S. and Norwegian tax purposes as of December 31, 2000, 1999 and 1998 were
approximately as follows:

<TABLE>
<CAPTION>
December 31,                                                 2000                  1999                 1998
------------------------------------------------------------------------------------------------------------

<S>                                                   <C>                   <C>                  <C>
U.S.                                                  $ 3,605,849           $ 2,758,757          $ 2,021,108
Norway                                                $ 8,592,833           $ 6,999,678          $ 4,050,483
                                                      -----------           -----------          -----------
Total                                                 $12,198,682           $ 9,758,435          $ 6,071,591
</TABLE>

         To the extent not used, the operating loss carry forwards will expire
in varying amounts beginning in the year 2007. Based on available evidence,
including the Company's history of operating losses, the uncertainty of future
profitability and the impact of tax laws which may limit the Company's ability
to utilize such loss carry-forwards, management has recorded a full valuation
allowance against the Company's net deferred tax assets.


                                      -42-
<PAGE>


                         MARINE SHUTTLE OPERATIONS INC.
                          (A development stage company)
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                                DECEMBER 31, 2000

18.      INCOME TAXES (continued)

         The difference between the Company's effective tax rate and the U.S.
statutory rate for income taxes was as follows:

<TABLE>
<CAPTION>
                                                   YEAR ENDED           YEAR ENDED             YEAR ENDED
                                                  DECEMBER 31,         DECEMBER 31,           DECEMBER 31,
                                                      2000                 1999                   1998
                                               -------------------  --------------------  ----------------------

<S>                                            <C>                  <C>                   <C>
 Statutory Rate                                            35.00%                35.00%                  35.00%

 Amortization of Goodwill                                 -21.18%               -17.68%                 -13.07%

 Other Permanent Differences                               -0.03%                -0.03%                  -0.20%

 Foreign Tax Rate Differential                             -1.86%                -2.74%                  -1.81%

 Change in Valuation Allowance                            -11.93%               -14.55%                 -19,92%

                                               -------------------  --------------------  ----------------------
 Effective Rate                                             0.00%                 0.00%                   0.00%
                                               ===================  ====================  ======================
</TABLE>

         Significant components of the Company's deferred tax assets and
liabilities were approximately as follows:

<TABLE>
<CAPTION>
December 31,                                                        2000              1999              1998
------------------------------------------------------------------------------------------------------------
<S>                                                          <C>               <C>                <C>
Net Operating Loss Carry-forwards                            $3,666,040        $2,934,760         $1,832,062

Valuation Allowance                                         ($3,666,040)      ($2,934,760)      ($1,832,062)
                                                        ----------------------------------------------------
Net Deferred Tax Asset                                               Nil               Nil               Nil
</TABLE>

19.      SEGMENT DISCLOSURES

         The Company is currently marketing and making preparations for the
construction of its first Offshore Shuttle. In accordance with SFAS No. 131 the
Company considers its business to consist of one reportable operating segment.
All of the Company's physical assets are located in Norway.

20.      SUBSEQUENT EVENTS

         In January 2001, the $1,450,000 advanced under the loan agreement
entered into in July 2000 with Mr. H. Timm and $42,396 in interest thereon was
converted into 3,730,990 shares of the Company's common stock. Also in January
2001, the Company sold 1,000,000 shares of common stock for gross proceeds of
$200,000.

         In January 2001, three employees of the Company's subsidiary were each
granted stock options to purchase 100,000 shares of common stock at the price of
$0.50 per share (a premium over the current fair market price).

         In February and March 2001, the Company sold 5,000,000 shares and
warrants to purchase 5,000,000 shares exercisable at $0.10 per share for gross
proceeds of $505,000. The warrants are exercisable until July 1, 2001. Also in
February and March 2001, the Company sold 650,000 shares for gross proceeds of
$65,000.


                                      -43-
<PAGE>


                         MARINE SHUTTLE OPERATIONS INC.
                          (A development stage company)
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                                DECEMBER 31, 2000

21.      COMPUTATION OF BASIC AND DILUTED LOSS PER SHARE


<TABLE>
<CAPTION>
                                                             YEAR ENDED          YEAR ENDED           YEAR ENDED
                                                            DECEMBER 31,        DECEMBER 31,         DECEMBER 31,
                                                                2000                1999                 1998
                                                        --------------------------------------------------------------
<S>                                                            <C>                 <C>                  <C>
Net loss  for the period attributable to basic loss
per share                                                      $ (6,362,150)       $ (7,363,850)        $ (5,042,148)
Net loss for the period attributable to diluted
earnings per share                                             $ (6,362,150)       $ (7,363,850)        $ (5,042,148)
Weighted average shares outstanding                               42,869,305          33,611,545           25,720,000
Dilutive stock options                                                     -                   -                    -
Total shares for basic and fully diluted loss per share           42,869,305          33,611,545           25,720,000
Basic loss per share                                           $       (0.15)      $       (0.22)       $       (0.20)
Diluted loss per share                                         $       (0.15)      $       (0.22)       $       (0.20)
</TABLE>




                                      -44-
<PAGE>


ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

         On May 24, 1999 and June 24, 1999, the Company filed Current Reports on
Form 8-K reporting a change in the Company's certifying accountants.


                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS

         The following table sets forth the names, ages and positions of the
executive officers and directors of the Company:

<TABLE>
<CAPTION>
Name                                                   Age      Position with Company
----                                                   ---      ---------------------

<S>                                                    <C>      <C>
Franz                                                  40       President and Chairman of the Board
Eder..................................................
Iqbal                                                  57       Vice President, CFO, Treasurer, and a Director
Akram................................................
Stephen                                                51       Vice President, Secretary, and a Director
Adshead..........................................
Jurgen                                                 58       Director
Ternieden(1)......................................
Hubert                                                 37       Director
Besner(1)..........................................
</TABLE>

--------------------------------------

(1) Member of the Audit Committee

         Franz Eder has been the Company's President and Chairman of the Board
since April 14, 1998, and a director of MSOAS since December, 1997. He has been
Chairman of the Supervisory Board of Schuller Industrieentsorgung AG since May,
1998, and served as the General Manager of Schuller from July, 1997 through May,
1998. From 1992 to 1997, Mr. Eder was General Manager at CETEM
Industrieentsorgung und Wiederverwertung GmbH, a German company engaged in waste
management. From 1990 to 1991, he was a consultant to several companies, and
from 1989 to 1990, he was the head of the trade finance department at AMRO
Handelsbank AG in Munich, Germany. Mr. Eder received a Masters of Business
degree from Business University of Vienna in 1985.

         Iqbal Akram has been a director of the Company since April 14, 1998. He
has been Vice President of the Company since February 19, 1998 and served as a
consultant to the Company for a period of approximately two weeks prior thereto.
On July 31, 2000, Mr. Akram became Chief Financial Officer and Treasurer of the
Company. Since 1992, he has been the Managing Director and a partner in
Peregrine Consultants, S.A., a Luxembourg management consulting firm. He also
has been the sole principal of Peregrine Consultants, United Kingdom since 1998.
From February 1996 through March 1998, he served as a Group Finance and
Corporate Director of the House of Habib, a Pakistani industrial, manufacturing,
and financial services group. In 1995, he served as Group Financial Advisor to
the Southern Electric Group in the implementation of a power project in
Pakistan. He is currently a Fellow of the Institute of Directors, the Institute
of Cost and Management Accountants, and the Institutes of Chartered Accountants
in England, Canada, and Pakistan. He also is a director of Lombard Financial
Investments S.A., an investment company located in Luxembourg, and Elan Asset
Management Ltd., a SFA regulated asset management company in UK. He received a
Bachelor of Science Honor degree from the London School of Economics and
Political Science in 1965.



                                      -45-
<PAGE>


         Stephen Adshead has been Vice President and a director of the Company
since February 8, 2000, has been Secretary of the Company since July 31, 2000,
and has been Managing Director and a member of the Board of MSOAS since
December, 1997. Since February, 1998, he has been the owner, an employee and a
director of Mancorp AS, a consulting company. He has 26 years of experience in
the oil, gas and shipbuilding industry managing large projects. From 1991 to
1998, Mr. Adshead worked for Phillips Petroleum Company Norway, where he was a
member of the project management team assigned to the Ekofisk II project from
1994 to 1998. Mr. Adshead received his Honours Degree in Engineering from
Edinburgh University in 1972.

         Jurgen Ternieden has been a director of the Company since April 14,
1998, Chairman of the Board of Offshore Shuttle AS from March 1998 until its
merger with MSOAS in September 1999, and an officer and the head of the Pipes,
Offshore, Special Products Department of Thyssen Krupp Stahlunion GmbH since
1991. From 1981 to 1990, he was a senior sales manager and head of the Pipes
Department at TKSU. Mr. Ternieden received his intermediate high school
certificate from Realschule Muelheim in 1959.

         Hubert Besner has been a director of the Company since May 6, 1998.
Since January 2001, he has been partner in the international law firm Brobeck
Hale and Dorr. From 1994 to 2000, he has been a partner in the law firm of
Besner Kreifels Weber, Munich, Germany. From 1992 to 1994, he was the head of
the legal department of Schneider AG, a German real estate development company.
He currently is the head of the Supervisory Boards of Cybernet
Internet-Dienstleistungen AG and PIPECAD Integrierte Softwaresysteme AG, a
director of Cybernet Internet Services International, Inc., and a member of the
Supervisory Boards of Schuller, Vianet Telekommunikations AG, Typhoon Networks
AG, and IPO Beteiligungen. Dr. Besner received his First State Exam in Law from
Ludwig-Maximilians-Universitat in 1986, and his doctorate magna cum laude from
Ludwig-Maximilians-Universitat in 1988.

         No family relationship exists between any director or executive officer
and any other director or executive officer.

         Currently, the Company does not compensate its directors for their
services in such capacity.

Employment Agreements

         On June 1, 1998, the Company entered into a two-year employment
agreement with Franz Eder to serve as President and Chairman of the Board. On
April 10, 2000, the agreement was extended to June 1, 2001. The agreement
provides that Mr. Eder shall devote only so much (but not less than 75%) of his
professional and business time, attention, and energies to his duties and
responsibilities as is reasonable to insure the Company's proper conduct, and
shall receive a salary of $100,000 per annum.

         Effective April 14, 1998, the Company entered into a two-year
employment agreement with Iqbal Akram to serve as Vice President. On April 10,
2000, the agreement was extended to June 30, 2001. The agreement provides that
Mr. Akram shall devote at least 50% of his professional and business time to the
Company and shall receive a salary of $60,000 per annum.

         Effective February 8, 2000, the Company entered into a two-year loan
out agreement with Mancorp AS for the services of Stephen Adshead. The agreement
provides that Mancorp AS shall loan out the services of Mr. Adshead to the
Company, and Mr. Adshead shall devote at least 50% of his professional and
business time to the Company. In consideration thereof, Mancorp AS shall receive
an annual fee of $60,000. Mr. Adshead also is paid at a daily rate of NOK6,000
(approximately $675) for serving as Managing Director of MSOAS.



                                      -46-
<PAGE>


ITEM 11. EXECUTIVE COMPENSATION

         Summary Compensation Table

         The following table sets forth information with respect to the
compensation paid by the Company to its Chief Executive Officer and to each of
the Company's other executive officer who received salary and bonus payments in
excess of $100,000 during the year ended December 31, 2000.

<TABLE>
<CAPTION>
                     Annual Compensation                                Long Term Compensation
                     -------------------                                ----------------------
                                                                        Awards                  Payouts
                                                                        ------                  -------
                                                                        Restricted
Name and                                              Other Annual      Stock        Option/    LTIP         All Other
Principal            Fiscal     Salary      Bonus     Compensation      Award(s)     SARs       Payouts      Compensation
Position             Year       ($)         ($)       ($)               ($)          (#)        ($)          ($)
---------            ----       ---         ---       ---               ---          ---        ---          ---
<S>                  <C>        <C>         <C>       <C>               <C>          <C>        <C>          <C>
Franz Eder,          2000       100,000     --        --                --           --         --           --
Chairman of the      1999       100,000     --        --                --           --         --           --
Board and President  1998       58,333      --        --                --           --         --           --

Stephen Adshead      2000       129,619     --        --                --           --         --           --
Director and Vice    1999       129,834     --        --                --           --         --           --
President            1998       101,061     --        --                --           --         --           --
</TABLE>

Compensation Committee Interlocks and Insider Participation

         Compensation decisions are made by Hubert Besner and Jurgen Ternieden,
the non-employee directors of the Company. Jurgen Ternieden is an officer and
the head of the Pipes, Offshore, Special Products Department of Thyssen Krupp
Stahlunion GmbH ("TKSU"). During 2000, the Company paid approximately $171,615
to TKSU. During 2000, Hubert Besner was a member of the law firm Besner,
Kreifels, Weber. During 2000, the Company paid approximately $1,606 to Besner,
Kreifels, Weber.

         No interlocking relationship exists between any member of the Company's
board of directors and any member of the board of directors or compensation
committee of any other company.

Section 16(a) Beneficial Ownership and Reporting Compliance

         The Company's executive officers, directors, and beneficial owners of
more than 10% of any class of its equity securities registered pursuant to
Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), are required under the Exchange Act to file reports of ownership and
changes in beneficial ownership of the Company's equity securities with the
Securities and Exchange Commission. Copies of those reports must also be
furnished to the Company. Based solely on a review of the copies of reports
furnished to the Company pursuant to the Exchange Act, the Company believes that
during the year ended December 31, 2000, all filing requirements applicable to
the reporting persons were complied with.




                                      -47-
<PAGE>


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth, certain information as of March 23,
2001, regarding beneficial ownership of the common stock by (i) each stockholder
known by the Company to be the beneficial owner of more than five percent (5%)
of the outstanding shares of Common Stock; (ii) each director of the Company;
(iii) each executive officer of the Company identified in the Summary
Compensation Table above; and (iv) all of the Company's executive officers and
directors as a group.

<TABLE>
<CAPTION>
                                                                                Number of Shares of
                                                                                    Common Stock         Percentage of Class
Name of Beneficial Holder                                                        Beneficially Owned      Beneficially Owned
-------------------------                                                       -------------------      -------------------

<S>                                                                                 <C>                           <C>
Franz Eder...........................................................                   7,722,000(1)                  14.1%
Iqbal Akram..........................................................                     150,000(2)                      *
Stephen Adshead......................................................                        102,205                      *
Jurgen Ternieden.....................................................                        434,704                      *
Hubert Besner........................................................                              0                     0%
Holger Timm..........................................................                    9,444,990(3)                 16.6%
BEG Berliner Effektenbeteiligungsgesellschaft AG.....................                3,950,000 (4)(5)                  7.2%
All officers and directors as a group (5 persons)....................                    8,408,909(2)                 15.3%
</TABLE>
-----------

   *Less than 1%
   (1) 6,840,000 of such shares are being held by a trustee pursuant to the
       terms of a pooling trust agreement. Such shares may not be disposed of by
       Mr. Eder until they are released to him by the trustee. Mr. Eder will
       receive 2,280,000 of such shares on July 1st of each of the three years
       beginning in 2001. The trustee shall seek instructions from Mr. Eder
       before taking any action as a stockholder with respect to any of the
       shares held in trust.
   (2) Includes 100,000 shares underlying currently exercisable stock options.
   (3) Includes 2,000,000 shares underlying currently exercisable warrants, but
       does not include 571,429 shares owned by his wife.
   (4) Based on the Schedule 13G, dated February 11, 1999. Does not include
       800,000 shares of common stock owned by Berliner Effektengesellschaft AG
       ("BEAG") a 40% shareholder of BEG Berliner
       Effektenbeteiligungsgesellschaft AG.
   (5) Such shares, as well as the 800,000 shares of common stock owned by BEAG,
       are being held by a pooling trustee pursuant to the terms of a pooling
       trust agreement and will not be released until August 3, 2001. During
       such time, the trustee shall seek instructions from BEG Berliner
       Effektenbeteilgungsgesellschaft AG and BEAG, respectively, before taking
       any action as a stockholder with respect to any of such shares.




                                      -48-
<PAGE>


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The Company is a party to a cooperation agreement with Schuller
Industrieentsorgung AG ("Schuller") pursuant to which Schuller shall provide
waste management, onshore dismantling, and oil pollution prevention and cleanup
services. The Company paid approximately $69,146 in 2000 to Schuller for
marketing research and other services rendered. Franz Eder and Hubert Besner are
members of the supervisory board of Schuller. Mr. Eder also is a shareholder of
Schuller.

         The Company is a party to an agreement with Thyssen Krupp Stahlunion
GmbH ("TKSU") with respect to marketing and procurement services. The Company
paid approximately $171,615 in 2000 to TKSU under such agreement. Jurgen
Ternieden, a director of the Company, is an officer and the head of the Pipes,
Offshore, Special Products Department of TKSU.

         During 2000, the Company paid approximately $1,606 to the law firm
Besner, Kreifels, Weber. During 2000, Hubert Besner, a director of the Company,
was a member of Besner, Kreifels, Weber.

         During 2000, the Company paid approximately $539,963 to RC Consultants
AS for engineering services. Sverre Hanssen served as the Chairman of the Board
of RC Consultants AS until May 1999, and is the Chairman of the Board of
Directors of MSOAS. In addition, MSOAS leases office space in Sandnes, Norway
pursuant to a agreement with RC Group ASA. The lease agreement provides for an
average annual rent of NOK 435,852 (approximately $49,027), and expires in 2003.
RC Group ASA was the sole shareholder of RC Consultants AS until July 2000, and
Sverre Hanssen is the Chairman and the principal shareholder of RC Group ASA.

         In June 2000, the Company acquired an aggregate of 1,186,283 shares of
common stock of MSOAS in exchange for an aggregate of 1,186,283 shares of the
Company's common stock. As part of that transaction, Jurgen Ternieden, a
director of the Company, and Stephen Adshead, an officer and director of the
Company, each received 2,205 shares of the Company's common stock in exchange
for their shares in MSOAS. In addition, Intervest AS received 16,500 shares of
the Company's common stock in exchange for its shares in MSOAS. Sverre Hansen,
the Chairman of the Board of Directors of MSOAS, is a principal stockholder of
Intervest AS.

         In June 2000, the Company sold 571,429 shares to Sylke Timm for gross
proceeds of $400,000. Sylke Timm is the wife of Holger Timm, and Holger Timm is
a principal stockholder of the Company. In addition, Mr. Timm is a stockholder
and an officer Berliner Effektengesellschaft AG ("BEAG") and an officer of BEG
Berliner Effektenbeteiligungsgesellschaft AG. BEAG is a stockholder of the
Company and a 40% shareholder of BEG Effektenbeteiligungsgesellschaft AG, a
principal stockholder of the Company.

         In July 2000, the Company entered into a loan agreement with Mr. Holger
Timm pursuant to which Mr. Timm agreed to lend the Company an aggregate of up to
$1,500,000, provided that advances shall not exceed $500,000 in any single
month. Any monies advanced under the loan agreement shall bear interest at the
rate of 7.5% per annum and shall be due and payable in full on December 31,
2000. The advances may be converted at the option of Mr. Timm into shares of the
Company's common stock at 80% of the five day average trading price of the
common stock prior to conversion, but not less than a floor price as calculated
pursuant to the loan agreement. In January 2001, the $1,450,000 that had been
advanced under the loan agreement plus $42,396 in interest thereon was converted
into shares of the Company's common stock at $0.40 per share.

         In January 2001, the Company sold 1,000,000 shares of common stock to
Holger Timm for gross proceeds of $200,000. In February and March 2001, the
Company sold to Holger Timm 2,000,000 shares and warrants to purchase 2,000,000
shares exercisable at $0.10 per share for an aggregate purchase price of
$202,000. The warrants are exercisable until July 1, 2001.

         In February 2001, the Company sold to Intervest AS 1,000,000 shares and
warrants to purchase 1,000,000 shares exercisable at $0.10 per share for an
aggregate purchase price of $101,000. The warrants are exercisable until July 1,
2001. Sverre Hansen, the Chairman of the Board of Directors of MSOAS, is a
principal stockholder of Intervest AS.



                                      -49-
<PAGE>


         Also in February and March 2001, the Company sold a total of 350,000
shares for gross proceeds of $35,000 to various officers and directors of the
Company as follows: 100,000 of the shares were sold to each of Stephen Adshead,
a Vice President and a director of the Company, Jurgen Ternieden, a director of
the Company, and Franz Eder, President and a director of the Company, and 50,000
shares were sold to Iqbal Akram, a Vice President and a director of the Company.

         The Company believes that the transactions set forth above were made on
terms no less favorable to the Company than could have been obtained from
unaffiliated third parties.



ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)      The following documents are filed as part of this report:

1.       Financial Statements (included in Part II, Item 8)



                                                                          Page
                                                                         -------
Financial Statements of Marine Shuttle Operations Inc.:
Reports of Independent  Auditors........................................   27
    Consolidated Balance Sheets.........................................   29
    Consolidated Statements of Loss and Comprehensive Loss..............   30
    Consolidated Statements of Cash Flows...............................   31
    Consolidated Statements of Shareholders' Equity.....................   32
    Notes to Consolidated Financial Statements..........................   33



3.       Exhibits included herein:

         See Exhibit index below for exhibits filed as part of this Form 10-K.

(b)      Reports on Form 8-K.
         The Company filed a Form 8-K, dated October 13, 2000, disclosing an
         information letter that had been disseminated to its shareholders.



                                      -50-
<PAGE>


                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.

                                    MARINE SHUTTLE OPERATIONS INC.

                                    /s/ Franz Eder
                                    --------------
Date:  March 28, 2001               Franz Eder, Chairman of the Board and
                                    President
                                    (principal executive officer)

                                    /s/ Iqbal Akram
                                    ---------------
                                    Iqbal Akram, Chief Financial Officer
                                    (principal financial and accounting officer)

                                    /s/ Kirsten O. Lima
                                    -------------------
                                    Kirsten O. Lima, Finance Director MSOAS

In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.

<TABLE>
<CAPTION>
               Signature                                 Title                                   Date
<S>                                                     <C>                                 <C>
/s/ Franz Eder                                          Director                            March 28, 2001
--------------------
Franz Eder

/s/ Iqbal Akram                                         Director                            March 28, 2001
--------------------
Iqbal Akram

/s/ Stephen Adshead                                     Director                            March 28, 2001
--------------------
Stephen Adshead

/s/ Jurgen Ternieden                                    Director                            March 28., 2001
--------------------
Jurgen Ternieden

/s/ Hubert Besner                                       Director                            March 28, 2001
--------------------
Hubert Besner
</TABLE>




                                      -51-
<PAGE>


                                INDEX TO EXHIBITS

<TABLE>
<CAPTION>
Exhibit       Document                                                                                        Page
--------      --------                                                                                        ----
<S>           <C>                                                                                             <C>
2.1           Stock Purchase Agreement, dated February 19, 1998, between the Registrant and Franz Eder.
              Incorporated by reference to Exhibit 2.1 to the Registrant's Registration Statement on Form
              S-1, File No. 333-58465.

3.1           Articles of Incorporation of the Registrant, as amended.  Incorporated by reference to
              Exhibit 3.1 to the Registrant's Registration Statement on Form S-1, File No. 333-58465.

3.2           Amended and Restated By-laws of the Registrant. Incorporated by reference to Exhibit 3.2 to
              the Registrant's Registration Statement on Form S-1, File No. 333-58465.

4.1           Form of Common Stock Certificate. Incorporated by reference to Exhibit 4.1 to the Registrant's
              Registration Statement on Form S-1, File No. 333-58465.

10.1          Co-operation Agreement between Marine Shuttle Operations AS and Schuller Industrieentsorgung
              AG. Incorporated by reference to Exhibit 10.2 to the Registrant's Registration Statement on
              Form S-1, File No. 333-58465.

10.2          Personnel Services Contract between RC Consultants AS and Marine Shuttle Operations AS dated
              February 26, 1998. Incorporated by reference to Exhibit 10.3 to the Registrant's Registration
              Statement on Form S-1, File No. 333-58465.

10.3          Accounting Services Contract between RC Consultants AS and Marine Shuttle Operations AS
              dated February 26, 1998. Incorporated by reference to Exhibit 10.4 to the Registrant's
              Registration Statement on Form S-1, File No. 333-58465.

10.4          Amended and Restated Loan Agreement, dated as of December 31, 1999, between the Registrant and
              ValorInvest Ltd. (including promissory note dated as of December 31, 1999) (incorporated by
              reference to Exhibit 10.5 of the Registrant's Annual Report on Form 10-K for the year ended
              December 31, 1999), as further amended by letter agreement dated as of December 31, 2000
              (including promissory note dated as of December 31, 2000).

10.5          Marketing Agreement between Marine Shuttle Operations AS and Thyssen Stahlunion GmbH, dated
              April 14, 1998. Incorporated by reference to Exhibit 10.6 to the Registrant's Registration
              Statement on Form S-1, File No. 333-58465.

10.6          The Registrant's 1998 Stock Option Plan. Incorporated by reference to Exhibit 10.7 to the
              Registrant's Registration Statement on Form S-1, File No. 333-58465.

10.7          Employment Agreement, dated as of June 1, 1998, between the Registrant and Franz Eder
              (incorporated by reference to Exhibit 10.8 to the Registrant's Registration Statement on Form
              S-1, File No. 333-58465), amended by letter agreement dated April 10, 2000 (incorporated by
              reference to Exhibit 10.1 of the Registrant's Form 10-Q for the quarter ended March 31, 2000).

10.8          Employment Agreement, dated as of April 14, 1998, between the Registrant and Iqbal Akram
              (incorporated by reference to Exhibit 10.9 to the Registrant's Registration Statement on Form
              S-1, File No. 333-58465), amended by letter agreement dated April 10, 2000 (incorporated by
              reference to Exhibit 10.2 of the Registrant's Form 10-Q for the quarter ended March 31, 2000).
</TABLE>



                                      -52-
<PAGE>


<TABLE>
<S>           <C>                                                                                             <C>
10.9          Lease, dated October 15, 2000, by and between Marine Shuttle Operations AS and RC Gruppen
              ASA.  Incorporated by reference to Exhibit 10 to the Registrant's Form 10-Q for the quarter
              ended September 30, 2000.

10.10         Credit Agreement, dated February 17, 2000 between the Registrant and MFC Merchant Bank, S.A.
              (incorporated by reference to Exhibit 10.13 to the Registrant's Annual Report on Form 10-K for
              the year ended December 31, 1999), as amended by that certain letter agreement dated March 20,
              2001.

10.11         Agreement, dated as of February 8, 2000, among the Registrant, Mancorp AS, and Stephen
              Adshead. Incorporated by reference to Exhibit 10.14 of the Registrant's Annual Report on Form
              10-K for the year ended December 31, 1999.

10.12         Intellectual Property Agreement among Gunnar Foss, Per Bull Haugs0en, Marine Shuttle
              Operations AS, and the Registrant (incorporated by reference to Exhibit 10.1 to the
              Registrant's Registration Statement on Form S-1 File No.333-50465), as amended by Addendum No.
              1 to Intellectual Property Agreement (incorporated by reference to Exhibit 10.15 of the
              Registrant's Annual Report on Form 10-K for the year ended December 31, 1999).

10.13         Frame Agreement for Procurement Services between Marine Shuttle Operations AS and Thyssen
              Stahlunion GmbH (incorporated by reference to Exhibit 10.1 of the Registrant's Quarterly
              Report on Form 10-Q for the quarter ended June 30, 1999).

10.14         Loan Agreement (including promissory note) between Marine Shuttle Operations AS and Statens
              naerings og distriktsutviklingsfond (the Norwegian Industrial and Regional Development Fund).
              Incorporated by reference by Exhibit 10 to the Registrant's Quarterly Report on Form 10-Q for
              the quarter ended September 30, 1999.

10.15         Royalty Agreement, dated June 23, 2000 between the Registrant and Mr. Gunnar Foss.
              Incorporated by reference to Exhibit 10.1 of the Registrant's Form 10-Q for the quarter ended
              June 30, 2000.

21.           List of the Registrant's Subsidiaries.

99.1          Statement of Approval from Det Norske Veritas AS regarding the technical feasibility of the
              Offshore Shuttle concept. Incorporated by reference to Exhibit 99.1 to the Registrant's
              Registration Statement on Form S-1, File No. 333-58465.

99.2          Engagement letter, dated October 26, 1998, between the Registrant and MFC Merchant Bank S.A.
              (incorporated by reference to Exhibit 99.2 to the Registrant's Registration Statement on Form
              S-1, File No. 333-58465), amended by letter agreement dated June 7, 2000 (incorporated by
              reference to Exhibit 99.1 of the Registrant's Form 10-Q for the quarter ended June 30, 2000),
              as further amended by that certain letter agreement dated March 20, 2001 (included in Exhibit
              10.10).

99.3          Intermediation Contract, dated November 28, 2000, between the Registrant and Frost & Partner,
              GbR.
</TABLE>





                                      -53-