<PAGE>

                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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

                                    FORM 10-Q

(Mark One)
|X|  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
     SECURITIES EXCHANGE ACT OF 1934
     For the quarterly period ended June 30, 2001

                                       OR

|_|  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                         4391
------------------------------------------        ------------------------------
  (Address of Principal Executive Offices)                  (Zip Code)


Registrant's Telephone Number, Including Area Code (47) 51962300
                                                   -------------


     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
                                             ---   ---

The number of outstanding shares of the issuer's common stock at August 10, 2001
was 56,804,346.

<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                                    FORM 10-Q

                                TABLE OF CONTENTS


PART I.  FINANCIAL INFORMATION.............................................   3

ITEM 1.  FINANCIAL STATEMENTS (UNAUDITED)..................................   3

CONSOLIDATED BALANCE SHEETS.................................................  3

CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS.....................   4

CONSOLIDATED STATEMENTS OF CASH FLOWS......................................   5

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.............................   6

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
         AND RESULTS OF OPERATIONS........................................   10

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.......
                                                                             15

PART II. OTHER INFORMATION.................................................  16

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS.........................  16

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K..................................  16

SIGNATURES.................................................................  17


                                       2
<PAGE>

                                     PART I.

                              FINANCIAL INFORMATION


ITEM 1.  FINANCIAL STATEMENTS

                         MARINE SHUTTLE OPERATIONS INC.
                          (A development stage company)
                           CONSOLIDATED BALANCE SHEETS
                                 (U.S. Dollars)

<TABLE>
<CAPTION>
                                                                        June 30,              December 31,
                                                                          2001                    2000
                                                                   --------------------   ---------------------
                                                                       (unaudited)              (note 1)
<S>                                                                <C>                    <C>
ASSETS
Current assets
 Cash and cash equivalents                                         $            23,821    $            203,207
 Restricted cash                                                                13,477                  21,863
 Accounts receivable                                                                --                  28,270
 Other current assets                                                          199,161                  56,804
                                                                   --------------------   ---------------------
 Total current assets                                                          236,459                 310,143

 Property, plant and equipment, net                                          6,295,587               6,445,875
 Debt issue cost                                                             2,094,108               1,936,867
 Goodwill, net                                                              24,219,158              25,925,553
 Patents and agreements, net                                                 2,609,580               2,712,464
                                                                   --------------------   ---------------------

 TOTAL ASSETS                                                      $        35,454,892    $         37,330,902
                                                                   ====================   =====================

 LIABILITIES AND SHAREHOLDERS' EQUITY
 Current liability
 Accounts payable                                                  $           806,271    $            847,868
 Notes payable                                                               3,450,000               4,900,000
 Other current liabilities                                                     926,594                 754,100
                                                                   --------------------   ---------------------
 Total current liabilities                                                   5,182,865               6,501,968
 Long term debt                                                                430,103                 265,311
 Contingency (Note 3)

 SHAREHOLDERS' EQUITY
 Authorized 75,000,000 common shares with a par value
 of $0.001. Issued and outstanding 56,804,346, and
 44,463,356 common shares with a par value of $0.001
 at June 30, 2001 and December 31, 2000 respectively                            56,804                  44,464
 Additional paid in capital                                                 52,822,603              50,292,948
 Deficit accumulated during the development stage                          (21,919,906)            (18,933,079)
 Accumulated other comprehensive loss                                       (1,117,577)               (840,710)
                                                                   --------------------   ---------------------
 Total shareholders' equity                                                 29,841,924              30,563,623

 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                        $        35,454,892    $         37,330,902
                                                                   ====================   =====================
</TABLE>

See accompanying notes to consolidated financial statements.


                                       3
<PAGE>

                         MARINE SHUTTLE OPERATIONS INC.
                          (A development stage company)
             CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
                                 (U.S. Dollars)
                                   (unaudited)

<TABLE>
<CAPTION>
                                            Cumulative to
                                             June 30, 2001         Three Months Ended              Six Months Ended
                                              from date of              June 30,                       June 30,
                                               inception      ------------------------------  ---------------------------
                                             May 23, 1997               2001           2000          2001           2000
                                           -----------------  ---------------  -------------  ------------  -------------
<S>                                        <C>                <C>              <C>            <C>           <C>
Operating revenues                         $         390,360  $            --  $          --  $     50,759  $          --
                                           -----------------  ---------------  -------------  ------------  -------------

OPERATING EXPENSES
 Personnel costs                                  3,564,276          183,548        221,165       566,150        536,975
 Legal, audit and advisory services               2,231,539          113,798        115,312       170,020        230,617
 Cost of cancelled financing                        606,721               --             --            --             --
 General and administrative                       2,523,888           68,355        128,843       158,797       377, 855
 Marketing                                        1,178,074           34,957         49,396        57,692        104,552
 Technical development                              581,473                                                       29,197
 Depreciation                                       213,876           12,627         13,726        28,679         37,229
 Amortization -- goodwill
  and intangibles                                11,808,622        1,021,290        996,368     2,038,496      1,968,939
 Loss on investment                                  90,000               --             --            --             --
 Currency exchange loss (gain)                      (14,395)             920         (1,944)          287         (6,573)
                                           -----------------  ---------------  -------------  ------------  -------------

 Total operating expenses                  $     22,784,074   $    1,435,495   $  1,522,866   $ 3,020,121   $  3,278,792
                                           -----------------  ---------------  -------------  ------------  -------------

 Interest expense, net of capitalized               168,000           14,547          1,152        23,077          8,498
 Interest income                                    (89,290)          (2,075)        (3,432)       (5,610)        (7,863)

 Net loss before minority interest         $    (22,472,424)  $   (1,447,967)  $ (1,520,586)  $(2,986,829)  $ (3,279,428)
                                           -----------------  ---------------  -------------  ------------  -------------

 Minority interest                                 (552,518)              --        (44,302)           --       (225,927)
                                           -----------------  ---------------  -------------  ------------  -------------

 Net loss                                  $    (21,919,906)  $   (1,447,967)  $ (1,476,283)  $(2,986,829)  $ (3,053,501)
                                           =================  ===============  =============  ============  =============

 Other comprehensive loss:
  Accumulated other comprehensive loss           (1,117,577)        (126,444)       (79,860)     (276,867)      (154,462)
                                           -----------------  ---------------  -------------  ------------  -------------

 Comprehensive loss                        $    (23,037,483)  $   (1,574,411)  $ (1,556,143)  $(3,263,696)  $ (3,207,963)
                                           -----------------  ---------------  -------------  ------------  -------------

 Basic and diluted loss per share                             $        (0.03)  $      (0.03)  $     (0.05)  $      (0.07)
                                                              ===============  =============  ============  =============

 Basic and diluted weighted average shares outstanding            56,151,013     42,460,399    54,919,264     41,605,521
                                                              ===============  =============  ============  =============
</TABLE>

See accompanying notes to consolidated financial statements.


                                       4
<PAGE>

                         MARINE SHUTTLE OPERATIONS INC.
                          (A development stage company)
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (U.S. Dollars)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                          Cumulative to                   Six Months Ended
                                                          June 30, 2001                       June 30,
                                                        from date of inception    ----------------------------------
                                                          May 23, 1997                 2001              2000
                                                        ------------------        ---------------   ----------------
<S>                                                     <C>                       <C>                <C>
 OPERATING ACTIVITIES
 Net Loss                                               $     (21,919,906)        $   (2,986,829)    $   (3,053,501)
 Adjustments to reconcile net loss to net cash
 used in operating activities:
 Depreciation and amortization                                 12,022,497              2,067,175          2,006,168
 Minority interest                                               (552,517)                    --           (225,927)
 Loss on investment                                                90,000                     --                 --
 Loss on disposal of assets                                         5,708                     --                 --
 Unrealized gain on foreign currency                               34,038                    287             (6,573)
 Changes in working capital:
 Accounts receivable                                                   --                 28,270             38,619
 Other current receivables and restricted cash                   (212,636)              (133,971)           (58,909)
 Accounts payable                                                 806,271                (41,597)          (486,446)
 Other current liabilities                                        892,556                172,206            491,080
                                                        ------------------        ---------------   ----------------
 Net cash used in operating activities                  $      (8,833,990)        $     (894,459)   $    (1,295,488)
                                                        ------------------        ---------------   ----------------

 INVESTING ACTIVITIES
 Investments                                                     (100,000)                    --                 --
 Capital expenditures                                          (5,740,898)              (240,678)          (913,870)
 Proceeds on sale of investment                                    55,196                     --                 --
 Advance to Marine Shuttle Operations AS                         (249,986)                    --                 --
 Acquisition of Marine Shuttle Operations AS                      416,635                     --                 --
 Advance to Offshore shuttle AS                                  (100,000)                    --                 --
 Acquisition of Offshore Shuttle AS                               482,476                     --                 --
                                                        ------------------        ---------------   ----------------
 Net cash used in investing activities                  $      (5,236,577)        $     (240,678)   $      (913,870)
                                                        ------------------        ---------------   ----------------

 FINANCING ACTIVITIES
 Issuance of capital stock                                     14,136,446              2,382,396            715,000
 Share issue cost                                                (746,881)                    --            (10,500)
 Debt issue cost                                               (2,094,108)              (157,241)          (353,574)
 Payment on note payable                                       (7,325,000)            (1,450,000)                --
 Borrowing on long term note payable                           11,244,870                176,491          1,350,000
                                                        ------------------        ---------------   ----------------
 Net cash provided by financing activities              $      15,215,327         $      951,646    $     1,700,926
                                                        ------------------        ---------------   ----------------

Effect of exchange rate change in cash and
cash equivalents                                               (1,120,938)                 4,105           (237,692)

 Net increase (decrease) in cash and
 cash equivalents                                       $          23,821         $     (179,386)   $      (746,123)
                                                        ------------------        ---------------   ----------------

 Cash and cash equivalents at beginning of period
                                                                       --                203,207          1,119,564
                                                        ------------------        ---------------   ----------------
 Cash and cash equivalents at end of period             $          23,821         $       23,821    $       373,441
                                                        ==================        ===============   ================
</TABLE>

See accompanying notes to consolidated financial statements.


                                       5
<PAGE>

                         MARINE SHUTTLE OPERATIONS INC.
                          (A development stage company)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)


1.       BASIS OF PRESENTATION

         The accompanying consolidated financial statements have been prepared
in accordance with accounting principles generally accepted in the United States
for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by accounting principles generally accepted
in the United States for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
three and six month periods ended June 30, 2001 are not necessarily indicative
of the results that may be expected for the year ended December 31, 2001. The
balance sheet at December 31, 2000 has been derived from the audited financial
statements at that date but does not include all of the information and
footnotes required by generally accepted auditing principles for complete
financial statements. In connection with the preparation of these financial
statements, management was required to make estimates and assumptions that
affect the reported amount of assets, liabilities, revenues, expenses and
disclosure of contingent liabilities. Actual results could differ from such
estimates. These financial statements should be read in conjunction with the
financial statements and footnotes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31, 2000.

2.       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.

3.       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 June 30,
2001 had accumulated losses from operations amounting to $21,919,906 and a
working capital deficit of $4,946,406, 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 significantly 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.


                                       6
<PAGE>

                         MARINE SHUTTLE OPERATIONS INC.
                          (A development stage company)

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                   (unaudited)


4.       EXTERNAL FINANCING

         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.

         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 June 30, 2001,
$3,875,000 had been advanced under the loan agreement, and $2,550,000 was
outstanding under the loan agreement. The Company currently is in discussions
with ValorInvest Ltd. to extend the maturity date of the loan.

         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 $430,103) to finance specific
tasks within the Offshore Shuttle project. As of June 30, 2001, NOK 4,000,000
(approximately $430,103) 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 June
30, 2001. As of June 30, 2001, $900,000 was outstanding under this agreement.
The Company currently is in discussions with MFC to extend the maturity date of
the loan.


                                       7
<PAGE>

                         MARINE SHUTTLE OPERATIONS INC.
                          (A development stage company)

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                   (unaudited)


4.       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. In January 2001, the $1,450,000 that had been advanced under the loan
agreement plus $42,396 in interest thereon was converted into 3,730,990 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 expired May 30, 2001.

         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 October 1, 2001. In
May 2001, warrants to purchase 1,000,000 shares were exercised for gross
proceeds of $100,000.

         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.

         In April 2001, the Company sold a total of 200,000 shares to an
employee for aggregate gross proceeds of $20,000.

         In May 2001, the Company sold 760,000 shares to a foreign person as
consideration for waiving certain rights associated with the Intellectual
Property Right Agreement between the Company and such person. The market value
of the shares were $159,600 and were part of the total payment of $219,875. The
total cost of $219,875 has been capitalized as intangible assets and will be
amortized over 10 years.

5.       INCOME TAXES

         The Company has not provided for an income tax liability due to the
availability of operating loss carry-forwards. The Company has net operating
losses which may give rise to future tax benefits of approximately $4,100,100 as
of June 30, 2001. To the extent not used, net operating loss carry-forwards
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 realization of the net deferred tax assets.


                                       8
<PAGE>

                         MARINE SHUTTLE OPERATIONS INC.
                          (A development stage company)

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                   (unaudited)


6.       SUBSEQUENT EVENT

         In July 2001, the Company issued 1,500,000 shares pursuant to the
exercise of warrants for gross proceeds of $150,000.













                                       9
<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
         CONDITION AND RESULT OF OPERATIONS

         The following discussion and analysis of the Company's financial
condition and results of operations should be read in conjunction with the
financial statements and the notes thereto which appear elsewhere in this
quarterly report and in the Company's Annual Report on Form 10-K for the year
ended December 31, 2000.

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 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 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
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 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

         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.

Three months ended June 30, 2001 and 2000:

         Personnel costs. Personnel costs include costs for both employees and
hired personnel and were $183,548 for the three month period ended June 30,
2001, and $221,165 for the three month period ended June 30, 2000. The decrease
in costs of $37,617 was mainly due to less personnel costs related to client
studies.


                                       10
<PAGE>

         General and administrative expenses. General and administrative
expenses were $68,355 and $130,699 for the three month periods ended June 30,
2001 and 2000, respectively. The decrease in costs of $ 62,344 was mainly due to
a slowdown of spending by the Company to conserve capital.

         Marketing. Marketing expenses for the three month period ended June 30,
2001 were $34,957, a decrease of $14,439 from the marketing expenses of $49,396
for the same period in 2000. The decrease in costs was mainly due to the
purchase of fewer marketing materials and services in the current period.

         Amortization of goodwill and intangibles. Amortization of goodwill and
intangibles for the three month period ended June 30, 2001 was $1,021,290, an
increase of $24,922 compared to the amortization of goodwill and intangibles of
$996,368 for the same period in 2000. The increase was mainly due to
amortization of increased goodwill and intangibles resulting from the
acquisition of the minority interest in MSOAS in June 2000.

         Interest expense. Interest expense for the three month period ended
June 30, 2001 was $14,547, an increase of $13,395 compared to interest expense
of $1,152 for the same period in 2000. The reason for the increase was that the
Company has had higher interest bearing debt in the current quarter compared to
the same period in 2000.

         Six months ended June 30, 2001 and 2000:

         Personnel costs. Personnel costs include costs for both employees and
hired personnel and were $566,150 for the six month period ended June 30, 2001,
an increase of $29,175 from the personnel costs of $536,975 for the six month
period ended June 30, 2000. The increase in costs is mainly due to more
personnel working on client studies during first quarter of 2001.

         Legal, audit and advisory services. Legal, audit and advisory services
for the six month period ended June 30, 2001 were approximately $170,020, a
decrease of $60,597 compared to legal, audit and advisory services of $230,617
for the same period in 2000. The decrease was mainly due to reduced use of legal
and financial services as a result of the slowdown in activities.

         General and administrative expenses. General and administrative
expenses for the six month period ended June 30, 2001 were $158,797, a decrease
of $219,058 from the general and administrative expenses of $377,855 for the
same period in 2000. The decrease in costs was mainly due to a slowdown of
spending by the Company to conserve capital.

         Marketing. Marketing expenses for the six month period ended June 30,
2001 were $57,692, a decrease of $46,860 from the marketing expenses of $104,552
for same period in 2000. The decrease in costs was mainly due to the purchase of
fewer marketing materials and services in the current period.

         Technical Development. The Company did not have any technical
development costs for the six month period ended June 30, 2001, mainly due to a
slowdown of spending by the Company to conserve capital. The technical
development costs for the same period in 2000 was $29,197.

         Interest expense. Interest expense for the six month period ended
June 30, 2001 was $23,077, an increase of $14,578 compared to interest expense
of $8,498 for the same period in 2000. The reason for the increase was that the
Company has had higher interest bearing debt in the current quarter compared to
the same period in 2000.

         Currency exchange loss/gain. For the six months period ended June 30,
2001 the Company had a currency exchange loss of $287, compared to a gain of
$6,572 for same period in 2000. The difference of $6,859 was a result of
weakening of the Norwegian Kroner against the US Dollar during the period in
2001.


                                       11
<PAGE>

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 June 30, 2001, the
Company had cash and cash equivalents of $23,821, a deficit accumulated during
the development stage of $21,919,906 and a working capital deficit of
$4,946,406. The Company is in the development stage with no operating assets
presently generating cash to fund its operating and capital requirements.

         Net cash used in operating activities was $894,459 for the six month
period ended June 30, 2001, a decrease of $401,029 compared to $1,295,488 used
for the six month period ended June 30, 2000. The decrease was the result of
the Company's efforts to reduce spending until the Company can raise additional
funds.

         For the six month period ended June 30, 2001 the Company incurred
$240,678 on capital expenditures, a decrease of $673,192 from the capital
expenditures of $913,870 for the same period in 2000. The decrease was the
result of the Company's efforts to reduce engineering work for the Offshore
Shuttle until the Company can raise additional funds.

         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 June 30, 2001,
$3,875,000 had been advanced under the loan agreement, and $2,550,000 was
outstanding under the loan agreement. The Company currently is in discussions
with ValorInvest Ltd. to extend the maturity date of the loan.

         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 $430,103), to finance specific
tasks within the Offshore Shuttle project. As of June 30, 2001, NOK 4,000,000
($430,103) had been advanced under the loan agreement. The principal is
repayable over a five year period commencing two years after disbursement, in
semi-annual instalments, 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 June 30, 2001. As of June 30, 2001, $900,000 was
outstanding under this agreement. The Company currently is in discussions with
MFC to extend the maturity date of the loan.

         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. 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 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 October 1, 2001. In
May 2001, warrants to purchase 1,000,000 shares were exercised for gross
proceeds of $100,000.


                                       12
<PAGE>

         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.

         In April 2001, the Company sold a total of 200,000 shares to an
employee for aggregate gross proceeds of $20,000.

         In May 2001, the Company issued 760,000 shares to a foreign person as
consideration for waiving certain rights associated with the Intellectual
Property Right Agreement between the Company and such person.

         In July 2001, the Company issued 1,500,000 shares pursuant to the
exercise of warrants for gross proceeds of $150,000.

         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 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 the WestLB financing or any other
substantial financing 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 or another substantial 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.


                                       13
<PAGE>

International Operations

         The Company intends to market its 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.

Forward-looking Statements

         The information set forth herein includes certain forward-looking
statements within the meaning of Section 21E of the Securities Exchange Act of
1934. These forward-looking statements include, without limitation, statements
regarding the Company's anticipated operations, market size, the capabilities of
the Offshore Shuttle, the dates on which construction of the Offshore Shuttles
will commence and be completed, the number of Offshore Shuttles to be
constructed, the WestLB financing and the Company's ability to satisfy the
conditions precedent to the WestLB financing, and the Company's ability to fund
the construction of additional Offshore Shuttles. Actual results could differ
materially from those anticipated in such forward-looking statements as result
of various known and unknown factors including, without limitation, future
economic, competitive, regulatory and market conditions, future business
decisions, the receipt of financing, construction delays, demand for the
Company's services and those risks discussed in the Company's Registration
Statement on Form S-1 filed with the Securities and Exchange Commission on May
8, 2001, and in the Company's Annual Report on Form 10-K for the year ended
December 31, 2000. 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. Readers are cautioned not to put undue reliance on these
forward-looking statements. The Company undertakes no obligation to revise any
of these forward-looking statements.


                                       14
<PAGE>

ITEM 3.  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.


                                       15
<PAGE>

                                     PART II

                                OTHER INFORMATION

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

         During the quarter ended June 30, 2001, the Company completed the
following transactions in reliance on Regulation S:

         In April 2001, the Company sold a total of 200,000 shares to a foreign
person for aggregate gross proceeds of $20,000.

         In May 2001, the Company issued 1,000,000 shares to a foreign person
pursuant to the exercise of warrants for gross proceeds of $100,000. Also in May
2001, the Company issued 760,000 shares to a foreign person as consideration for
waiving certain rights associated with the Intellectual Property Right Agreement
between the Company and such person.


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

Exhibits.

         (a)      Exhibits

                  The following exhibits are filed herewith:

                  10.1     Addendum to employment agreement with Franz Eder
                  10.2     Addendum to employment agreement with Iqbal Akram


         (b)      Report on Form 8-K.

                  The Company did not file any reports on Form 8-K during the
                  three month period ended June 30, 2001.


                                       16
<PAGE>

                                   SIGNATURES

     Pursuant to the requirements 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.





Date:  August 10, 2001             MARINE SHUTTLE OPERATIONS INC.



                                   By: /s/ Iqbal Akram

                                   Iqbal Akram, Chief Financial Officer

                                   (Principal Financial and Accounting Officer)




                                       17
<PAGE>

                                INDEX TO EXHIBITS

 Exhibit #                        Document                                 Page

    10.1     Addendum to employment agreement with Franz Eder
    10.2     Addendum to employment agreement with Iqbal Akram