The Anatomy Of A Tourist Submarine

Transcript

Over six billion people live upon our planet. Three fourths of its surface is covered with water. Within those depths, a fabulous wonderland awaits. Replete with creatures remarkable and unique. A proven business opportunity now exists... To show tourists the wonders of the subsea world. U.S. SUBMARINES, INC. Written by: L. Bruce Jones Copyright 2008, U.S. Submarines, Inc. All rights reserved. 1 Contents WARNING & COPYRIGHT NOTICE ............................................. 2 CONTENTS ............................................................................... 3 INTRODUCTION ......................................................................... 4 THE OPPORTUNITY ................................................................... 5 THE ADVANTAGES OF OPERATING A TOURIST SUBMARINE ........... 6 THE TOURIST SUBMARINE INDUSTRY ......................................... 8 OPERATING LOCATION SELECTION ............................................ 11 INFRASTRUCTURE REQUIREMENTS ............................................ 13 FINANCIAL CONSIDERATIONS ................................................... 15 COMMON MISTAKES & DIFFICULTIES ...................................... 18 THE FUTURE OF TOURIST SUBMARINES .................................... 19 BUSINESS & TECHNICAL SUPPORT ........................................... 22 SUPPORTING DOCUMENTS ....................................................... 23 AVAILABLE SUBMARINES: THE ARGOS .................................................... 24 AVAILABLE SUBMARINES: THE SPT-16 .................................................. 25 AVAILABLE SUBMARINES: THE VOYAGER I & II ...................................... 26 AVAILABLE SUBMARINES: THE DEEPSTAR ............................................... 27 ARTICLE: THE ANATOMY OF A TOURIST SUBMARINE ................................ 28 NEW CONSTRUCTION: DEEPVIEW 66 TECHNICAL DESCRIPTION ................. 30 ARTICLE: SAFETY & SUBMARINE DESIGN ............................................... 36 ARTICLE: PREPARING THE COMPREHENSIVE BUSINESS PLAN ..................... 38 Copyright 2008, U.S. Submarines, Inc. All rights reserved. 3 A serious opportunity to enter a fascinating and profitable business. P roven profitability and market differentiation. These are the results of tourist submarine operations across the globe. Last year this industry carried over 2 million passengers and enjoyed $150 million in revenue; and the story has just begun. Passenger submarines represent successful, tried and true technology and demonstrated profitability. Since the first contemporary tourist submarine went into operation in 1985, over 45 purpose-built vehicles have entered service. No longer are trained divers the exclusive visitors to the subsea world. Now, regardless of age or physical condition, passengers can directly experience the myriad denizens of the deep from the air conditioned comfort of a contemporary tourist submarine. Clearly, the economic imperative has driven the rapid growth of this highly profitable industry. Under correct conditions, all the capital equipment and pre-development expenses can be amortized in an 18-month pe- Copyright 2008, U.S. Submarines, Inc. All rights reserved. riod. If you have an interest in profitability and the requisite business acumen – you should seriously consider a tourist submarine operation. U.S. Submarines, Inc. is uniquely positioned to provide you with complete support for the establishment of a successful tourist submarine operation. From site feasibility analysis, comprehensive business plans, capital acquisition assistance, site selection and submarine purchase, to crew acquisition and training, pre-marketing and operational planning, U.S. Submarines can provide a complete turn-key business solution or we can assist you with any particular aspect of developing the business. The following pages will provide you with relevant information on the tourist submarine industry, the financial profitability of operations and the logistics requirements. The highly informative supporting documentation section contains information on available submarines and additional industry-specific articles. 4 Hawaii Cuba Mallorca Martinique The Canary Islands The Bahamas St. Thomas Okinawa Copyright 2008, U.S. Submarines, Inc. All rights reserved. 5 The advantages of operating a tourist submarine should not be overlooked. T he most successful tourist submarine operating today has gross revenues of US$1 million per month derived from a single 48-passenger submarine and associated souvenir sales. Annual net pre-tax revenue from this operation is in excess of $7 million. The profits are based on a 10-12 dive per day schedule, 330 operating days per year, a 90% passenger load factor and a ticket price of $95. While this operation is, indeed, quite successful, it suffices to illustrate the profit potential of a tourist submarine operating business. In any location at which a passenger submarine operates, it is notably unique in its ability to capture a significant portion of the tourist arrivals. In some island locations, over 25% of incoming tourists will enjoy the submarine experience before they depart. Across the globe, interest in the underwater world is growing rapidly. Today, travel tourism is the world’s largest single employer representing 6% of the world’s population and an annual turnover of two trillion dollars. The marine leisure sector is the fastest growing segment of the travel industry, as is evidenced by the success and growth of public and private aquariums and marine parks, the cruise ship industry, seaside destination resorts, harbor and dinner cruises and sport diving. in its natural setting can people be effectively motivated to act to protect the marine environment. And tourist submarines themselves are entirely nonpolluting, with battery powered electric thrusters that emit no hydrocarbons or other effluents. The submarines operate at low speeds, and are extraordinarily maneuverable so that they never come in contact with coral reefs or marine life. In fact, these vehicles are routinely approved to operate in the most ecologically sensitive marine parks and preserves. Tourist submarines constitute the only direct experience that most people will have with the undersea world. Passengers of any age and physical condition can enjoy a comfortable and safe experience that is so unique it boasts a 95+% satisfaction level. And after having carried millions of passengers, the industry enjoys a perfect safety record without a single serious injury to any passenger. No other marine leisure experience can compare with a dive on a contemporary tourist submarine, and wherever a tourist submarine operates, it is sure to be the most popular amenity in the area. Tourist submarines are available in a wide variety of sizes and configurations to match a variety of operating conditions and Tourist submarines also promote environmental stewardship, for only in seeing and appreciating marine life Copyright 2008, U.S. Submarines, Inc. All rights reserved. locations. Smaller submarines in the 10-16 passenger size range can operate profitably in more isolated locations with fewer tourists while large 66 passenger subs are best suited for popular tourist destinations. 6 The forward pilot’s viewports of virtually all tourist subs are quite large and provide exceptional viewing. The interior of this 16-passenger tourist submarine is quite large for its size with a 2.45 meter (8.0 foot) diameter passenger compartment. This submarine is rated to dive to 100 meters and is available for sale. Copyright 2008, U.S. Submarines, Inc. All rights reserved. 7 The tourist submarine industry enjoys a history of unique profitability and growth. T he first tourist submarine, the Auguste Piccard, was built for the 1964 Swiss National Exhibition. The 40-passenger vehicle was capable of diving to 610 meters, and in a 16 month period the submarine carried 32,000 people to the bottom of Lake Leman. After the exhibition, regulatory difficulties precluded the use of the submarine for passenger carrying purposes in the U.S., and the submarine later was converted to commercial application. The vehicle was quite large, with a length of 28.5 meters and a displacement of 180 tons. Notably, it is still the largest and deepest diving tourist submarine yet built. In 1984 a British Columbia based company managed by people who had worked on modifications to the Auguste Piccard, designed and built a 28-passenger tourist submarine which began operations the following year in Grand Cayman. The same company had placed two more vehicles in service by 1987, and at that time other firms began establishing operations of their own. Today, the largest single tourist submarine company has designed and constructed 12 tourist submarines with three different capacities; 28, 46- and 64passengers. All 12 vehicles are company owned and operated and the firm builds submarines only for itself and its joint venture partners. In the mid 1970s, Japan’s Kawasaki Heavy Industries executed a design for a 40-passenger tourist submaAnother independent submarine rine, but the vehicle was never conmanufacturer has built a total of structed. It was not until the advent 14 submarines while other manuof a company named Research Subfacturers have contributed smaller The Auguste Piccard in 1964 mersibles in 1983, that true passennumbers of vessels to the industry. ger carrying operations were established; however, the vehicles were converted commerOperating locations for tourist submarines include the cial submersibles with a limited seating capacity of one Caribbean, the Red Sea, the Mediterranean, the South pilot and two observers. They plied the depths of the Pacific, the Atlantic, the South China Sea, the Gulf of famed Cayman Wall, often times to as deep as 600 Mexico and the Pacific Ocean. A total of 63 vehicles meters. RSL still exists today and routinely operates its have been placed into operation over the history of the Perry class submarines to the 300 meter level. industry. Copyright 2008, U.S. Submarines, Inc. All rights reserved. 8 Tourist Submarines: Historical Operating Locations & Vehicle Count Location Number Switzerland 1 Grand Cayman 5 Bahamas 2 Barbados 1 Rota 1 St. Thomas 1 St. Croix 1 Saipan 1 Canary Islands 2 Hawaii 7 Bermuda 1 South Korea 1 Guam 1 Japan 1 Okinawa 1 Egypt 1 Israel 1 Location Number Aruba 1 Sint Maarten 1 Spain 3 Florida 1 Indonesia 1 France 2 Monaco 1 Taiwan 1 Malta 1 Martinique 1 Mexico 1 Italy 2 Columbia 1 Fiji 1 Scotland 1 Brazil 1 Refit/retired 7 Copyright 2008, U.S. Submarines, Inc. All rights reserved. Tourist Submarines: Total Passenger Seats by Year - First 12 Years 2000 1800 1600 1400 1200 1000 800 600 400 200 0 83 84 85 86 87 88 89 90 91 92 93 94 95 9 A History of Tourist Submarine Operating Locations 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 Yr 64 83 84 85 85 85 87 87 87 87 87 87 88 88 88 88 88 88 88 88 89 89 89 89 90 90 90 90 90 90 91 91 91 91 91 91 91 92 92 92 92 92 92 93 93 92 92 93 93 94 94 93 94 94 94 94 94 99 98 99 02 03 03 Submarine Auguste Piccard PC-8 PC-1802 PC-1205 PC-1203 Atlantis I Atlantis II PC-1201 Atlantis III PC-14 Pisces II Mareia I (Sirena I) Aquarius Discovery was PC-1601 Looking Glass (LG50) Golden Trout (RS250) Atlantis IV Enterprise (LG50) Mareia III (RS250) Atlantis V Coral Adventure (RS250) Atlantis VII Moglyn Golden Salmon (RS250) Mergo 10 Sinbad (Mark III) Jacqueline (SM-100) Atlantis VI Odyssey I Sub Fun (Mark III) SPT-16 Beluga (Odyssey II) SMAL 2 SMAL 5 M. Magico-Golden Shark Atlantis IX Atlantis X Atlantis XI Seabus/Deepstar Hai Yan - Meirenyu Nemo Primero (Mark III Tritone (Mark III) SM-100/26 SeaMaid TS IV Atlantis XII Tritone II - Tritone Neptune Dolphin (Mark III) SM-100/26 Atlantis XIV Taurus SM-100/3 SM-100/50 - Voyager I SM-100/50 - Voyager II SM-100/26 Argos ST-100 Yonggoong 48 Atlantis XV Sadko SM-100/50 Subcat Subcat Jiah (Mark V) Cap 40 2 3 2 2 28 28 2 46 2 2 48 2 10 48 48 46 48 48 46 48 46 40 48 10 48 48 46 36 48 16 36 2 5 48 46 46 46 44 48 48 48 24 48 46 48 40 48 24 66 6 2 46 46 24 16 48 46 40 48 28 28 65 Location Switzerland - Texas OOS Grand Cayman - Bulgaria ICS Grand Cayman OOS Grand Cayman Grand Cayman G. Cayman - Bahamas - OOS Barbados - OOS Rota, Marianas - Florida ICS St. Thomas, USVI St. Croix, USVI - Florida - Germany ICS Grand Cayman - British Columbia (display) Saipan - Miami OOS FS Oahu, Hawaii - Seattle ICS Scotland (storage) OOS St. Thomas - Los Cabos, Mexico - Missing at sea Tenerife, Canary Islands Kona - Oahu - Maui, HI Bermuda - OOS Cheju-do Island, S. Korea Guam Japan - Hurghada, Egypt Oahu - Kona, Hawaii Okinawa Gran Canaria, Canary Islands OOS Cypress - Switzrld - Mauritius Hurghada, Eygpt Eilat, Israel - Unknown Aruba, Antillies Sint Maarten, Antillies OOS Spain - Lanzarote, Canary Islands Switzerland - storage (Florida) - Branson,MO Bali, Indonesia La Ciotat, France ICS Bora Bora Spain - Cuba - Puerto Mogan, Canaries Oahu, Hawaii Oahu, Hawaii Grand Cayman Monaco - Bahamas - Storage FS Taiwan, R.O.C., - Hainan Island, China Mallorca, Spain Capri, Italy - Cheju-do Is., Korea Malta - Finland OOS Martinique - Maldives Cancun. Mexico - Cozumel, Mexico Genoa, Italy - Sokcho City, Korea Antigua, B.W.I. - OOS Lanzarote, Canary Islands Columbia - Finland OOS Oahu, Hawaii Loch Ness, Scotland - S. Africa Solomon Islands - Finland OOS Oahu, Hawaii - S. Korea Oahu, Hawaii - S. Korea N.A. ? Incomplete construction OOS Rio de Janeiro, Brazil FS S. Korea Barbados St. Lucia - Cyprus Puerto Rico - Phuket Thailand - Saipan Canary Islands - Antigua (pending) Greece FS Cheju-do Island, Korea Operator Piccard - Horton RSL - S.A.S. RSL - Atlantis RSL RSL - Atlantis RSL RSL - Atlantis RSL Atlantis Atlantis M.I. C. - DSA Atlantis Sub Adventures - Perry - Unk. research group RSL - B.C. Museum Dosa Subsea - Pacific Subsea Sub Voyages - Subsea Wkbts L. Segura Looking Glass - Comex - LG Sub Tours Subtrek Atlantis Subs Hawaii L.P. Enterprise Submarine Daekuk Subsea Atlantis Time Associates - Sinbad Sub Atlantis Subs Hawaii L.P. Japan Sub. Tourism Ltd. Subtrek Blue Safaris Sinbad Tourism Co. Scandive - Coral World - Unknown Atlantis Sub Safaris Sub Fun SL J. Almeida - Deep Lake Submarine Tours ('08) PT Sub. Safaris Asia SMAL Industries Blue Safaris Top Diving S.A. - Subtrek - Atlantida Atlantis Subs Hawaii L.P. Atlantis Subs Hawaii L.P. Atlantis Comex - Aquatic Leisure - For Sale Jan-An Steamship - Aisike Sub Nemo Submarines Gorgonia, S.R.L. - Tritone Marine Builder Bankruptcy CBSP - N.A Atlantis Plankton, S.R.L. - Tritone Subs Unknown Russian Group Subtrek Barracuda Submarine Invests. Atlantis Subs Hawaii L.P. Silvercrest - N.A. Builder Bankruptcy Submarines Hawaii - Jeju Sub Submarines Hawaii - Unknown Builder Bankruptcy Consub Daewoo Atlantis Rubin Deep Sea Subs - Phuket Subs - Pacific Subsea Subibor - Trident Adventures ('08) N/A Daekuk Subsea Year is year of launch. Last entry is current location and operator. OSS refers to "out of service" (in storage, in refit, retired or scrapped) FS refers to "for sale." ICS refers to "in commercial service" (research or subsea work only) Copyright 2008, U.S. Submarines, Inc. All rights reserved. 10 The selection of an appropriate operating location is critical to success. T ourist submarines operate successfully in a wide variety of locations. Many of the existing businesses are situated in tropical island areas noted for water clarity and abundant marine life. Still others ply the waters around larger cities, and one tourist submarine formerly dove to the depths of Loch Ness in Scotland on a continual search for the mythical Loch Ness monster. Water is an obvious requirement for tourist submarine operations. Ideally, the water at the dive site has an average visibility in excess of 5 meters and some marine life in the vicinity. In many cases, artificial reefs, derelict ships and planes and other items can be placed on the sea floor to attract marine life and entertain customers. For instance, a 55-meter ship and some artificial reef materials turned a desolate sand-bottomed dive site off Waikiki into a virtual oasis in a few short weeks. Tourists are the next key ingredient. In order to make the operation of a tourist submarine a success, a minimum of 10,000 annual tourist arrivals per seat on a submarine are required given average industry capture ratios. In addition, the passengers should have sufficient income to purchase a ticket which will cost a minimum of $75 per adult. The conditions surrounding the dive site are also important. Because the submarine will remain on-site, atsea during the day, the dive site itself should be within a 20 minute boat ride from the shore in order to efficiently transport the passengers and maintain an hourly dive schedule. In addition, the surface wave conditions should be below sea state three on at least 270 days per year. Above that, and passenger transfer becomes difficult, so an alternate dive site is often the solution. Currents too, are an issue and in most cases should be below one knot on the submerged route. Moreover, the water depth at the dive site should not exceed the maximum rated depth of the submarine. Once a year the submarine is removed from the water for a two week annual maintenance period and classification society inspection. Access to a marine railway, crane or hoist is also a requirement. Some underwater locations require no enhancement. In Monaco, one enterprising company built a stern section of a second century Roman galleon, complete with artificial amphoras and placed it in 40 meters of water at the entrance to the harbor, along with a diving bell and an abandoned tug boat. A large number of potential operating locations exist. The operation of a smaller submarine is considerably less demanding in terms of capital cost, infrastructure and site requirements. Literally hundreds of excellent operating locations are available throughout the world. However, operating a large submarine in a more populous destination can be remarkably profitable. A thorough site analysis virtually guarantees success. The key is to entertain and educate the customers for a dive duration of approximately 45 minutes. Copyright 2008, U.S. Submarines, Inc. All rights reserved. 11 Tourist Submarines: Some Potential Operating Locations Palau is a diver’s paradise suitable for a specialty sub. At U.S. Submarines we have extensive experience in analyzing prospective operating locations. Our site feasibility analysis evaluates over 240 separate factors in the following ten categories: Lake Tahoe, Nevada Catalina, California Key West, Florida Miami, Florida Ko Olina, Hawaii St. Maarten, N.A. Malta Fiji Cozumel, Mexico Acapulco, Mexico Mazatlan, Mexico Galapagos, Ecuador Palau Truk Juneau, Alaska Monterey, California Rhodes, Greece Curacao, N.A. Hainan Island, China Jamaica Japan Puerto Rico Mauritius Seychelles Venezuela Thailand Malaysia Indonesia • Dive Site Quality - (e.g. visibility, depth, features) • Dive Site Logistics - (e.g. currents, sea state) • Dock Site Facilities • Maintenance and Haul-out Facilities • Storm Refuge Plan • Passenger Facilities • Market Profile & Visitor Demographics • Maritime Law • Environmental Permits • Long Term Growth Potential The selection of an appropriate operating location is critical, but very complex. Most of the major problems associated with past tourist submarine operations can be attributed to inappropriate site selection. Without access to substantive experience in this business you are not likely to have the knowledge necessary to select an appropriate site. A wreck makes a fascinating addition to a t-sub dive site. Copyright 2008, U.S. Submarines, Inc. All rights reserved. 12 A certain infrastructure is necessary for tourist submarine operations. T he submarine itself is the most technologically advanced and important piece of equipment that the operation owns. But in addition to the submarine and its support equipment, the operator will need a comfortable passenger transfer vessel capable of carrying twice the number of passengers that the submarine can hold. A rigid bottom inflatable will also be necessary and carries the surface officer who stays in contact with the submarine via an underwater telephone. The surface officer remains on station above the submarine and keeps the area clear of surface traffic. The highly trained professional crew of a tourist submarine. crews per day. In general, operational staff requirements for a one-shift (6-dive) per day scenario operating 28 days per month are: A transfer vessel and tender converge on a tourist sub. A passenger service dock with ticket sales area and optionally, a souvenir shop, is part of the shore facility requirement. Most submarines include a container that houses the air compressor, battery chargers and spare parts, and this should be situated adjacent to the submarine’s berth. At night, the submarine maintenance crew will charge the batteries for up to eight hours, recharge the high pressure air tanks, the oxygen cylinders and the carbon dioxide scrubbing compound. Operations manager ............................ 1 Submarine pilots .................................. 2 Submarine co-pilots ............................. 2 Shuttle boat crew ................................. 2 Surface officer ...................................... 2 Maintenance crew ............................... 2 In addition, sufficient administrative and marketing staff are necessary to effectively operate the business. For a small (e.g. 10-20 passenger) submarine operation with a modest dive schedule approximately 15 people are required. With a large sub operation doing both day dives and night dives a staffing level of 50 people is not unusual. In the case of operations by a resort or ground tour company these staff positions can often be advantageously integrated with the existing infrastructure. Personnel requirements vary with the location and dive schedule. A single crew working a 10-hour shift can accomplish 6 dives per day. Many submarines can make up to 12 one-hour dives per day and so require two Copyright 2008, U.S. Submarines, Inc. All rights reserved. 13 Gift shops like this can help increase revenues. In some locations gift shop sales average over $50 per passenger. A dock located in a protected area is necessary for passenger loading and for submarine maintenance. Copyright 2008, U.S. Submarines, Inc. All rights reserved. In some cases the submarine support equipment is quite elaborate. This is a self powered submarine base with built-in generators, compressors, and a hydraulic lift. Temperate waters are also very suitable for tourist submarine operations. 14 Financial considerations play an important role in the decision making process. T he capital expenditures inherent in the establishment of a tourist submarine operation are significant. But, yet, so is the potential return. Many of the larger tourist submarine businesses were established by several joint venture partners, while others are independently owned. Regardless of the ownership structure, passenger submarine operators almost inevitably enjoy the support of the business community and local government. Financial support and tax holidays are often offered as incentives for implementing such a popular and highprofile business endeavor. The maximum utility of a 16-passenger sub would require 12 dives per day, each with 16-passengers, on a 330 day per year schedule for an annual total passenger count of 63,000. Passenger load factors are more likely to average 80% on an 8 dive per day schedule on 300 days per year for a passenger count of 30,000. At an average $95 ticket price, this translates to approximately $2.8 million in gross income and $1.6 million in annual pre-tax profit. Example of Income vs. Ticket Price and Passenger Load, 16-passenger submarine Capital costs vary substantially. The costs associated with establishing a one-submarine tourist operation can vary from $2 million to over $10 million depending on the submarine’s size and sophistication and whether it is new or used. 7000 An approximation of the capital costs associated with establishing the least expensive 16-passenger sub operation are as follows: 5000 100% $125 6000 80% $95 Ticket Price 60% Used submarine, complete ................... $1,650,000 Support equipment ................................... $95,000 Spare parts ............................................... $75,000 Shop tools & equipment ........................... $25,000 Shipping ................................................... $50,000 Site improvements .................................. $150,000 Transfer vessel ........................................ $150,000 Tender vessel ............................................ $50,000 Predevelopment costs & travel ................ $130,000 Operating cash reserve ........................... $250,000 TOTAL .......................................... $2,650,000 Pre-tax Profits (000's) 4000 $75 Load Factor % 3000 40% $50 2000 1000 0 10 20 30 40 50 60 -1000 Passengers Per Year (000's) Copyright 2008, U.S. Submarines, Inc. All rights reserved. 15 The ticket price is situation dependent. Tourist submarine prices range from $70 per adult passenger to $500, though the later price is for a dive to 250 meters aboard a three person deep submersible. The average price for a trip aboard a 48-passenger submarine diving to 50 meters is $85. Smaller subs, like the 16-passenger vehicle we’ve used in this example, offer a more personal, spacious and comfortable experience. The submarine has large viewports available, and dives to 100 meters as opposed to 50 meters. Comparatively, the minimum adult ticket price should be $95, and the maximum approximately $150. The ticket price will inevitably be a function of demand at the chosen operating location. Diving at night, diving deeper, and diving for longer periods, are other reasons for increased ticket prices. Operating costs also depend on the location. An estimate of the annual operating costs for our 16-passenger submarine at a foreign location include: Projected Income at $125 ticket, 65% passenger load Month 1 VARIABLES Maximum passengers/dive Day Dives/day Night Dives/day Day Dive Ticket price: adult (80%) Day Dive Ticket price: child (20%) Night Dive Ticket price: adult (90%) Night Dive Ticket price: child (10%) Operating Days/month Total annual operating days Passenger Load Factor SALES Monthly Ticket Sales Souvenier Sales (15%) Less cost of sales Commissions (10%) Cost of souveniers (50%) NET SALES Wages & benefits .................................... $732,000 Facilities rental ......................................... $36,000 Advertising & promotion .......................... $78,000 Insurance ............................................... $116,000 Consumables & maintenance ................... $90,000 Travel ....................................................... $30,000 Utilities & communication ....................... $30,000 Contingency ............................................. $56,000 TOTAL .......................................... $1,168,000 MONTHLY EXPENSES Wages Management (2) Pilots (3) Surface Officer (2) Co-Pilots (2) & Boat crew (2) Cashiers (2) & Secretary (1) Maintenance (2) Employee Benefits (15%) Facility rental Advertising & promotion Submarine insurance Site insurance Maintenance & Repair Consumables & Fuel Utilities Travel Communications Contingency (5%) TOTAL MONTHLY EXPENSES NET Earnings Monthly Annual Earnings (EBITDA) 16 6 2 $125 $100 $150 $120 26 26 65% $272,563 $40,884 $27,256 $20,442 $265,749 $12,000 $10,500 $7,000 $10,000 $6,000 $7,500 $7,950 $3,000 $6,500 $9,000 $700 $3,000 $4,500 $1,500 $2,500 $1,000 $4,633 $97,283 $168,467 $2,021,599 Young passenger on night dive. Copyright 2008, U.S. Submarines, Inc. All rights reserved. 16 Larger tourist submarine operations have a unique set of challenges, but the profits can be extraordinary. Because the fixed operating costs do not vary directly with submarine size but income does, the economics favor larger submarines. However, the initial capital costs are quite high and the operating location must have sufficient tourist traffic to support the greater number of seats. On the positive side, a well thought-out and professionally implemented and managed company can pay for itself in 18 months or less. A tourist submarine operation consisting of two 66passenger tourist submarines operating from a semisubmersible ocean activity center anchored off a major tourist location could expect gross incomes of over $20 million per year on a $25 million investment. The floating offshore activity center (OAC) would have an underwater restaurant and bar, an underwater observation area, gift shop, sub bathing area, water sports equipment rental section and snack bar. The OAC would act as a permanent base of operations for the two submarines that would, as a result, enjoy an extended dive schedule from 0800 to 2200 daily. The submarines would be partially lifted from the water by integrated hydraulic platforms and this, coupled with the OACs Copyright 2008, U.S. Submarines, Inc. All rights reserved. substantive stability, would allow submarine operations and passenger transfer in virtually all weather conditions, significantly increasing operational profit. The OAC is a day-long destination for a wide variety of tourists, sun-worshippers, water sports enthusiasts and diners, all of which pay fees to use the facilities, and as such is a separate profit center. 17 The mistakes that adversely affect tourist submarine business profitability have been made. S tarting a tourist submarine business is a complex and capital intensive endeavor. However, all of the major business mistakes have already been made and at U.S. Submarines we are familiar with the operational history of virtually every tourist submarine company that has been formed. As a result, we are uniquely qualified to advise you on related business and technical subjects and we can keep you from repeating past mistakes. The first step is to retain professional advice early as it relates to selecting a potential operating location. When we hear that clients are “studying and analyzing the site and forming a team to develop a business plan,” we interpret that to mean that they have no financial resources and that they find dreaming about piloting their own submarine a great way to pass the time. To get into a multi-million dollar business endeavor requires some financial resources and a significant amount of commitment. Several people with modest means have been successful in raising the funds to enter the business but they all did it by using outside consultants whose written opinions and plans had credibility with prospective investors. Poor site selection is the major reason for business failure. The old adage about “location, location, location,” is absolutely true in the tourist submarine business. As indicated earlier, our site feasibility study analyzes 300 separate factors. Overlooking just one adverse factor can negatively effect the entire business endeavor. Some obvious examples include; excess seasonal currents at the operating site, weather problems that do not allow passenger transfer on at least 270 days per year, tourist traffic seasonality, lack of availability of a suitable drydock. Less obvious examples include the operation that was shut down for excessive noise from generators necessary to charge the batteries and high pressure air systems at night, to the company that after running their own shuttle buses and suffering complaints from the Copyright 2008, U.S. Submarines, Inc. All rights reserved. Tourist submarines are necessarily complex but they must also be very reliable. taxi union were forced to hire passenger buses at extortionate rates. Technical difficulties that affect reliability must be avoided. The tourist submarine used must be extremely reliable and capable of operating virtually every day of the year with minimum down-time. This means utilizing a submarine built with components that have a proven track record in sub-sea operation. Ample cash reserves are required. It can take several months to achieve positive cash flow and cash must be available to support the business during the development period. Permits and permissions must be in hand early. Nothing is worse than having a dive-ready submarine operation with passengers lined up to pay for tickets and yet not being able to dive because one bureaucrat is holding up a permit. Every permit and permission requirement must be identified early in the development process. There is very little available true expertise in the tourist submarine business and this is a major limitation to industry growth. However, at U.S. Submarines we can provide the know-how you need to succeed. 18 The future will include the implementation of new concepts and business models. T he tourist submarine industry has prospered by uniformly adapting a common business model. A typical tourist submarine operation will consist of a single 48-passenger, 50-meter capable tourist sub that is all battery powered, based from a dock in a protected area and supported by a passenger transfer vessel, a surface officer’s vessel and a towboat. The sub will be towed at low speed to the dive site in the morning and will remain on station all day making identical 50 minute dives at one-hour intervals while passengers are ferried back and forth to shore by the transfer vessel. At the end of the day the sub is towed back to base where the batteries are recharged and maintenance performed. The business model has been uniformly duplicated across the globe, with only the size of the submarine changing, and both submarine manufacturers and operators have displayed a stunning lack of imagination by never significantly deviating from the formula over the industry’s 22 year history. Outside of the work done by U.S. Submarines, only twice has the industry experienced real innovation; once with the advent of the world’s first transparent-hulled submarine in 1992 and again with the construction of a 150 meter capable, 50passenger submarine that made dives to 125 meters to This unique 50-passenger submarine dives to 500 feet and is based from a custom drydock. see the remains of well preserved square riggers sunk during the eruption of Mt. Pelee in Martinique in 1904. Larger conventional tourist submarines are inevitable. The largest tourist sub currently operating is a 64-passenger steel-hulled vehicle with a 50 meter rated depth. At U.S. Submarines our DeepView 66 seats 66 passengers, dives to 100 meters and has an acrylic transparent pressure hull. Tourist submarines that carry over 100 passengers are easily implemented and would be very profitable to operate in the right market. Operations in conjunction with a floating semi-submersible ocean activity center increase profits by providing a greater number of dives per year and can be independent profit centers as well. The inclusion of underwater hotel rooms in the OAC are also possible. Deeper diving submarines will provide the opportunity for true exploration. Today you can spend $35,000 to dive two miles below the surface on a deep submersible to the wreck of the Titanic. While the price is extreme there is certainly market demand for dives to depths that exceed those available on conventional tourist submarines. Our Nomad and Marlin diesel electric The advent of the world’s first transparent-hulled submarine in 1992 broke new ground for the industry. Copyright 2008, U.S. Submarines, Inc. All rights reserved. 19 The Nomad 1000 is a 20 meter (65’) multi-role diesel electric submarine with a 1000 mile surface range and a 305 meter (1000’) diving depth. In the mid 1980s a company proposed a 10-passenger tourist submersible composed of three interconnected acrylic spheres that would dive to 2500 feet. This is an entirely feasible concept that could be built cost-effectively. submarines dive to 305 meters (1000 feet), but for deeper diving submarines with large viewing areas some further ingenuity is required. Submarines composed of inter-linked acrylic spheres provide a design mechanism to achieve depths of 1000 meters while enjoying incredible viewing. Cylindrical pressure hulls have been used successfully to carry people to depths of over 4000 meters. Journeys beyond that depth generally require pressure hulls composed of metallic or composite spheres. A spherical pressure hull carried Don Walsh and Jacques Piccard to the bottom of the Marianas Trench at 10,915 meters in 1960. We have not been back since but that is not because such a trip is technically unachievable. At U.S. Submarines we can build a tourist sub that is capable of achieving any depth in the ocean, it is simply a matter of economic feasibility. Diesel electric submarines provide great operational versatility. U.S. Submarines’ Nomad, in its 24- or 36passenger tourist submarine configuration or the 16passenger Marlin 1000 are capable of recharging their batteries and high-pressure air banks while underway. This autonomy eliminates the need for expensive surface support ships and shore facilities, and obviates the need for passenger transfers at sea while giving the submarines greater performance. When compared to contemporary tourist submersibles, our diesel electric submarines will dive six times deeper (300 meters vs. 50 meters) and travel six times faster (12 knots vs. 2 knots) with 50 times the range (1000 miles vs. 20 miles). These submarines are clearly more versatile than their conventional all-electric shallow-diving counterparts. Nomad 1000 - a multi-role diesel electric submarine Copyright 2008, U.S. Submarines, Inc. All rights reserved. 20 Submarine cruise ships are another concept under development. Given the incredible success and popularity of the cruise ship industry and its continued diversification into specialty products, combined with the success of tourist submarines and the importance of the marine leisure market sector, a submarine cruise ship is a logical next step. At U.S. Submarines we have developed the Poseidon 1000, the world’s first submarine cruise ship. The Poseidon is 87 meters (286’) in overall length and will carry 72 passengers on two or three day voyages to depths as great as 300 meters (1000’). Each passenger cabin contains a large acrylic viewport and switches to control underwater lights and automatic fish feeders. The Posei- 8-passenger deep submersible diver lock out and submarine dry transfer don is designed with lounges of unsurpassed luxury and will serve 5-star cuisine. Naturalists and guest scientists will provide educational lectures for the passengers. The Poseidon is equipped with a closed cycle Stirling power system for submerged propulsion and submerged electrical power generation and utilizes conventional diesels for surface propulsion. It is anticipated that the submarine cruise ship business with the Poseidon 1000 and all necessary support equipment plus the pre-development costs and cash reserves will require $150 million. The business should net $24 million EBITDA on annual sales of $35 million. surface boat storage passenger lounge for surface observation pilot’s station for surface operation main deck access hatch upper deck quarters upper deck lounge main deck quarters main deck galley, bar, lounge & dining area forward lounge main engine room battery deck pilot’s station for submerged operation A larger submarine like U.S. Submarines’ Phoenix 1000 at 65 meters in length (shown here) or the Poseidon 1000 at 87 meters provide ample space and can be equipped with closed cycle Stirling power for extended submerged cruising. Copyright 2008, U.S. Submarines, Inc. All rights reserved. 21 Business development, technical and training support can be provided for your entire project. U .S. Submarines, Inc. is a U.S. company with manufacturing facilities located in Vero Beach, Florida and Portland, Oregon with offices in Seattle, Washighton as well as in Paris, France and Dubai, U.A.E. The administrative office is outside Coeur d’Alene, Idaho. The firm provides business development, technical support and marketing services to the tourist submarine and undersea leisure industries. In addition, U.S. Submarines is capable of designing, engineering and constructing tourist submarines of all types and sizes, diesel electric luxury private submarines, deep submersibles for marine science and commercial applications, small patrol and surveillance submarines and floating and sea floor undersea residences and resorts. The management team at U.S. Submarines has been involved in over 70 submarine and submersible projects, including direct experience with 20 different tourist submarine operations. The company has been involved in every aspect of the tourist submarine business, including the design, engineering and construction of tourist submersibles, and the business planning, sea trials, crew Copyright 2008, U.S. Submarines, Inc. All rights reserved. training, start-up, pre-marketing and ongoing daily operation of the submarines themselves. The company’s President, L. Bruce Jones, is one of the world’s foremost authorities on the tourist submarine industry with 20 years or experience. Mr. Jones was for eight years the Chairman of the Marine Technology Society’s Manned Submersible Committee and he is a member of the American Bureau of Shipping’s Special Committee on Undersea Vehicles. He is also the President of Poseidon Undersea Resorts, L.L.C. (http:// poseidonresorts.com) U.S. Submarines is uniquely qualified to assist you with all aspects involved in the establishment of a tourist submarine business. Most importantly this should include the critical comprehensive site feasibility analysis. Based on those results our further services could include the execution of a comprehensive business plan for capital acquisition, crew selection and training, regulatory agency liaison, pre-marketing, etc. We can also contract with you to provide a complete turn-key operation. 22 Supporting Documents Copyright 2008, U.S. Submarines, Inc. All rights reserved. 23 Available Submarines: The Argos T he Argos is a 16-passenger submarine with a 100 meter depth rating that is currently available for sale. The submarine made 117 dives and was subsequently placed in storage. The price is $1,600,000 and includes basic support equipment and a 20’ container. The price includes a complete refit to “as-new” condition and a transfer of class from DNV to ABS. For more information please contact us on +1 208-687-9057. Copyright 2008, U.S. Submarines, Inc. All rights reserved. Argos Technical Specifications: Classification: Maximum Depth: Passengers: Crew: Length: Height: Width: Pressure hull diameter: Draft: Weight in air: Autonomy: Mission time: Maximum speed: Electrical power: Forward/reverse thrust: Lateral thrust: Vertical thrust: DNV +1A1 100 meters 16 2 10.7 meters 5.0 meters 3.5 meters 2.1 meters 3.1 meters 40.6 tons 80 hours 8 hours 3 knots 120VDC/24VDC 4 x 5 HP 1 x 5 HP 2 x 5 HP 24 Available Submarines: The SPT-16 T he SPT-16 was built in Switzerland and is now in storage in Key West, Florida. The 16-passenger submarine with a 100 meter depth rating originally cost $9 million to construct and is the most superbly built tourist submarine yet manufactured. The cost of the SPT-16 with a complete refit to “asnew” condition and a fresh ABS class certificate is $1,600,000. An extensive set of spares and support equipment is included. This submarine is currently under option and will be operated in Branson, Missouri at Table Rock Lake. Copyright 2008, U.S. Submarines, Inc. All rights reserved. SPT-16 Technical Specifications: Classification: Maximum Depth: Passengers: Crew: Length: Height: Width: Pressure hull diameter: Draft: Weight in air: Autonomy: Mission time: Maximum speed: Electrical power: Forward/reverse thrust: Lateral thrust: Vertical thrust: ABS +A1 100 meters 16 2 13.3 meters 4.9 meters 2.6 meters 1.9 meters 2.3 meters 30.6 tons 80 hours 8 hours 3 knots 120VDC/24VDC 1 x 15 HP 2 x 2 HP 2 x 2 HP 25 Available Submarines: Voyagers I & II Both Submarines Sold by 6/2004 Two virtually identical SM100/50 class submarines were available for sale with their basic support equipment and spares. Each submarine made approximately 11,000 dives and were operated by Voyager Submarines off Waikiki, Hawaii. One submarine was slightly older than the other. Both submarines were sold to operating companies in South Korea and are currently in passenger carrying service. Copyright 2008, U.S. Submarines, Inc. All rights reserved. Voyager Technical Specifications: Classification: Maximum Depth: Passengers: Crew: Length: Height: Width: Pressure hull diameter: Draft: Weight in air: Autonomy: Mission time: Maximum speed: Electrical power: Forward/reverse thrust: Lateral thrust: Vertical thrust: ABS +A1 100 meters 48 2 19.5 meters 5.3 meters 2.6 meters 1.9 meters 3.0 meters 99.0 tons 80 hours 8 hours 6 knots 240VDC/24VDC 1 x 75 HP 2 x 15 HP 2 x 15 HP 26 Available Submarines: Deepstar (ex-Seabus) T he Deepstar is a remarkable 44-passenger tourist submarine with a transparent acrylic pressure hull. The submarine has made 3,000 dives and has been in storage since 1998. The submarine comes as part of a complete integrated suite of vessels including a 26-meter self-propelled support barge with integrated hydraulic lift that carries the submarine and contains all of the support equipment. A 90-passenger high speed catamaran is also included. The price for all three vessels, icluding a comprehensive refit and a valid ABS class certificate is $3.5 million. A sale is currently pending. Copyright 2008, U.S. Submarines, Inc. All rights reserved. Deepstar Technical Specifications: Classification: Maximum Depth: Passengers: Crew: Length: Height: Width: Pressure hull diameter: Draft: Weight in air: Autonomy: Mission time: Maximum speed: Electrical power: Forward/reverse thrust: Lateral thrust: Vertical thrust: ABS +A1 80 meters 44 2 19.5 meters 6.2 meters 4.1 meters 2.1 meters 3.0 meters 91.0 tons 80 hours 8 hours 6 knots 240VDC/24VDC 2 x 13 HP 2 x 13 HP 2 x 13 HP 27 Article: The Anatomy of a Tourist Submarine T he following provides a brief overview of the major components of a typical tourist submarine. This will provide background to understand the technical description that follows as well as the article on safety and submarine design issues. The Conning Tower is a hollow fiberglass enclosure situated over the main hatch to protect it and passengers from sea spray and rain. The Deck Railing is required on all tourist submarines for the protection of the passengers. Main Thrusters are located on the stern of the submarine and provide fore and aft propulsion. Sometimes they are located on the rudder to provide directional control, and other times they are fixed with a rudder behind, or installed with their own rotational mechanism. In many cases the thrusters are fixed with directional control provided by differential thrust or the use of a bow thruster. Vertical Thrusters are vertically mounted in the deck, either in the bow and stern or on either side of the midbody of the submarine. They provide precise vertical positioning of the vehicle when submerged. Lateral Thrusters are located athwartships in the bow and stern of the submarine and allow the submarine to sidle (translate left or right) or spin in its own length. Conning tower Oxygen storage bottles Main ballast tanks (6) They are very helpful in maneuvering in close to submerged objects for a better view. The Hatch Assembly exists in two locations; forward, just behind the Pilot's compartment and farther aft along the centerline of the submarine. The hatches are large enough to provide comfortable access and have springs to compensate for their weight and locking dogs to secure them prior to diving. The Forward Viewport is a hemisperical sector of transparent acrylic and provides excellent viewing for the pilot. A Crash Guard of heavy steel pipework protects the viewport from damage. The Main Ballast Tanks are vented to seawater at the base and when filled with air provide buoyancy, freeboard and stability while the submarine is surfaced. They can be "blown" at depth to provide emergency ascent capability. The Variable Ballast Tanks are one-atmosphere steel tanks that compensate for differences in passenger load to keep the submarine neutrally buoyant. They can also be used for differential trim. A Trim Weight which moves on a track is used on some submarines to provide longitudinal trim. An emergency drop weight is also available for the pilot to release when an emergency ascent is required. Hatch assembly Passenger compartment Crash guard Vertical thruster (2) Pilot’s compartment Rudder Main thrusters (2) Machinery compartment A/C Coil 600mm viewports (16) Variable ballast tanks (4) Copyright 2008, U.S. Submarines, Inc. All rights reserved. Skid assembly Lateral thruster Forward viewport 28 Underwater Lights are used to provide increased visibility at depth or during night dives. Pneumatic Fish Feeders are also common. The Skid Assembly provides a solid base for the submarine when on land or on the bottom and also provides attachment points for many pieces of external equipment. Oxygen Bottles located outside the pressure hull store oxygen at high pressure which is injected into the submarine to make up for the oxygen consumed by the passengers during the dive. Two banks exist, one for daily oxygen consumption and another that provides 72 hours of emergency life support for the crew and passengers. Thruster controls High Pressure Air Bottles located outside the submarine hull under the main deck or between the skids provide air for the ballast tanks and pneumatic control valves. The Aft Machinery Compartment contains the air conditioners, carbon dioxide scrubbers, electric motors and control circuits, hydraulics, etc. The Passenger Compartment is the largest section of the submarine and provides comfortable seating for the passengers. The Battery Compartment is located below the passenger seats and contains several tons of batteries that provide electrical power for the main systems. In some submarines the batteries are in external one-atmosphere pressure vessels. High pressure air and oxygen bottles are stored under the deck. The Pilot's Compartment is in the bow of the submarine and contains all of the control, communication and navigation equipment utilized by the pilot. A moveable Kort nozzle provides steering. Copyright 2008, U.S. Submarines, Inc. All rights reserved. 29 New Construction: DeepView 66: A Brief Technical Description U .S. Submarines has developed a line of stateof-the-art transparent hulled tourist submarines called the DeepView series. The submarines are available in sizes that range from 6-passengers to 66passengers. The following technical description provides additional information on the DeepView 66 model. INTRODUCTION The DeepView 66 is a fourth generation autonomous acrylic-hulled tourist submarine designed and built by U.S. Submarines, Inc. of Fort Lauderdale, Florida. The submarine is 32-meters in overall length and weighs approximately 160,000 kg. The submarine is designed to ✠A1 Manned Submersible classification of the American Bureau of Shipping (ABS) with the pressure hull designed in accordance with American Society of Mechanical Engineers (ASME) Code for Pressure Vessels for Human Occupancy 1 (PVHO-1). The submarine is capable of transporting 66 passengers and three crew members to depths of 100 meters. It is the largest and most advanced tourist submarine currently available. PRESSURE HULL & EXTERNAL FRAME The pressure hull resists the hydrostatic forces imposed by seawater and isolates the occupants from the external environment. The pressure hull is comprised of eight cylindrical acrylic sections mated to a forward steel hemisphere with integrated spherical sector viewport, and also joined to an aft hemispherical steel section. The pressure hull is composed of transparent polymethyl methacrylate with an internal diameter of 2700 mm, a length of 2500 mm and a shell thickness of 100 mm. Ring joining frames are placed between the cylindrical sections and serve to stiffen the hull, while eight 60 mm diameter high tensile tie rods pre-load the structure in the axial direction. The DeepView's rated design depth is 100 meters. The forward 120° hemispherical sector viewport for the pilot is also composed of transparent polymethyl methacrylate (acrylic plastic) and is 2000 mm in diameter, with a thickness of 80 mm. The aft hemisphere is composed of ASTM 537 steel. Two entrance trunk and hatch combinations, one forward and one aft, are 1000 mm in diameter. The DeepView has a metallic framework attached to the pressure hull that provides support for the fiber- Copyright 2008, U.S. Submarines, Inc. All rights reserved. glass deck and superstructure as well as attachment points for high pressure air and oxygen bottles, main ballast tanks, etc. Main structural support for the acrylic pressure hull is provided by two steel one-atmosphere battery pods with a steel skid assembly that provides a base that protects the bottom of the pressure hull and is used for securing hard ballast tanks, the drop weight assembly, thrusters and other components. A pipework frame provides collision protection for the forward viewport. INTERNAL ARRANGEMENT The DeepView was designed to provide passengers with a comfortable environment from which to view the subsea world, and the degree of comfort and the quality of the view are obviously critical to passenger acceptance of the vehicle and the experience as a whole. The 66passengers sit in luxurious, high-backed cinema style seats situated back to back along the center line of the vehicle. Passengers enjoy an unsurpassed floor to ceiling panoramic view with no discernable distortion as well as the most comfortable seating ever installed in a tourist submarine. Moreover, the DeepView, with a 2500 mm passenger compartment diameter is considerably more spacious than any tourist submarine. The overall effect is one of spacious comfort. The passenger cabin is further characterized by two wide aisles providing easy access to the passenger seats. Aft of the passenger space is a non-structural bulkhead divider with two hinged doors that provide access to the machinery compartment. 30 are emptied by the introduction of air at 200 psi over ambient. Differential longitudinal trim is effected by filling or venting either the bow tanks or the stern tanks to compensate for passenger movement within the pressure hull. The high pressure air system for the MBTs and VBTs is composed of cylinders with a total capacity of 2400 liters at 200 bar. The cylinders are divided into independent main and reserve systems of 1200 liters each. Pressure reducing valves allow for a reduction in pressure to 200 psi. The DeepView also has a provision for lead ballast that can be varied to compensate for differences in water salinity or additions or deletions of equipment. Forward of the passenger space is the pilot’s compartment situated behind a large spherical sector acrylic viewport located in the forward portion of the pressure hull. All control and navigation functions are carried out from this area. An emergency lead drop weight is located between the skids. The weight is released by the actuation of two hydraulic cylinders powered by a manual pump mounted in the pilot's compartment. Releasing the drop weight will allow the submarine to surface with a full load of passengers and crew in the event of a subsea entanglement or other emergency. BALLAST & TRIM SYSTEMS ELECTRICAL POWER & DISTRIBUTION The DeepView has a main ballast tank (MBT) system composed of port and starboard rectangular soft tanks in groups fitted to rigid longitudinal frames connecting the fore and aft sections. Twelve tanks in total provide 24 m3 of buoyancy and are vented to seawater at the base. The twelve vents are air actuated cone valves with their outlets manifolded together in two fore and aft groups and fed through a pair of powerful centrifugal air fans. The fans are driven by high speed axial piston hydraulic motors run off the thruster power pack. The fans provide low pressure air to blow down the MBTs when surfaced. The purpose of the main ballast tanks is to provide the vehicle with the necessary freeboard, stability and buoyancy while in the surfaced condition. Main ballast tanks can also be blown at depth with high pressure air in an emergency, resulting in a rapid, uncontrolled ascent. The DeepView derives power from lead acid storage batteries. The batteries are contained in two exernal oneatmosphere battery pods with each pod containing two 240V groups of cells and two 24V groups. The cells are 720 Ah and produce a total of 608 kWH at 80% discharge. The main hydraulic motors and other large consumers use 240V power with the control and communication instrumentation requiring 24 V. Power is sufficient for 24 hours of submerged travel at the average rate of consumption. The variable water ballast tank (VBT) system, sometimes referred to as hard ballast, is designed to allow the vehicle to be neutrally buoyant regardless of passenger load. The VBT capacity is equivalent to the weight of the rated maximum number of passengers. This will allow the submarine to operate with a total of only two crew on board, in which case the variable ballast tanks would be full, or with a full load of passengers and empty VBTs. The VBTs are one-atmosphere, pressure resistant tanks, located in the center of the port and starboard main ballast tank groups. Water free-floods into the tanks when the requisite valves are actuated, and the tanks Copyright 2008, U.S. Submarines, Inc. All rights reserved. Battery selection and systems design is critical to a safe and successful vehicle. The batteries chosen are an advanced lead acid traction type battery equipped with autofill and air bubble recirculation. The system reduces outgassing and water consumption yet retains a capacity equal to the best tubular plate traction cell. The batteries were selected to last a minimum of 1000 deep cycle charges or five years. Recharging time is approximately 9 hours. The batteries are grouped in eight 60V cases 2.0 m long and one 2 x 12V case, 1.2 m long. These cases, weighing 1,320 kg each are mounted on flanged wheels running on rails inside the pod. The foremost case is fitted with a 24V motor and control system geared to the axles. For inspection, a length of rail is positioned in front of the pod and the self powered vehicle contiaing the batteries motors out. The DeepView has well designed electrical systems with extensive circuit protection and ground fault detection capability. 31 PROPULSION & MANEUVERING CONTROL LIFE SUPPORT & SAFETY SYSTEMS Tourist submarines generally have considerable parasitic drag as a result of the externally mounted components, including thrusters, main and variable ballast tanks, exostructure, high pressure air and oxygen bottles, external frames and other equipment. Speeds are quite low, with a typical maximum of 3.0 knots. Actual operating speeds are in the region of 0.5 – 1.0 knot, as faster speeds tend to be the enemy of observation. In a tourist submarine the cabin pressure is always maintained at very close to one atmosphere, regardless of the depth of the vessel. Life support is effected by injecting pure oxygen into the cabin to maintain 19%22% by volume, while the carbon dioxide is absorbed by a chemical compound in a scrubber system. The DeepView 66 uses a safe, low-maintenance and above all, reliable, hydraulic power system proven in subsea applications. Two identical power packs are installed in the aft end of each battery pod. The location minimizes any noise that might be heard by the passengers. Driving each power pack is a 40kW industrial square frame motor running at constant speed and designed for a 20 year service life. Two axial piston displacement pumps are mounted in tandem on each motor. One pump which is either displacement or pressure controlled drives the main prop and the other pressure controlled motor drives the thrusters. One power pack alone is sufficient for normal operations. The pumps are housed in a pressure vessel maintained at ambient pressure with an external reservoir fitted with a diaphragm. The motor shaft is sealed by a Crane type mechanical seal fitted to the inside of the pressure vessel. The six maneuvering thrusters and LP blowers are connected to a hydraulic main ring through groups of oilfilled solenoid valves while the main prop motor is connected to its main through a single large bore valve for reverse capability. No hydraulic pipework enters the main pressure hull, which reduces the fire hazard. The main thruster has been designed to lesson the effect of efficiency losses inherent in hydrostatic transmission systems. The propeller is a large 1.3 meter fivebladed unit turning at a maximum speed of 310 rpm. The motor is a crank type five cylinder radial piston hydraulic unit fitted with an extension housing for thrust bearings and a PTFE shaft seal. The prop is fitted in a fixed Kort nozzle with a pair of vertical eyelid deflectors used to maintain track and undertake large radius turns with main steering control coming from bow and stern lateral hydraulic thrusters of 38 kW and 22 kW respectively. Four vertical hydraulic thrusters have a combined thrust of 1300 kilograms. Maneuvering is intuitively accomplished through a single proportional joystick control. Course changes to port and starboard are caused by moving the joystick to the left or right which activates the bow thruster. Forward or reverse thrust is caused by pushing the joystick forward or pulling it aft. The joystick is also used to actuate the vertical thrusters. Copyright 2008, U.S. Submarines, Inc. All rights reserved. High pressure oxygen is stored in individual bottles located outside the pressure hull. The main oxygen system consists of 100 liters at 205 bar. A second, independent emergency oxygen system consists of two banks of 450 liters at 205 bar and provides a minimum of 96 hours of life support for a full complement of passengers and crew. The oxygen supply, reduced in pressure by a regulator, is injected into the cabin and is controlled automatically. The carbon dioxide component of the air in the passenger cabin is removed through adsorbtion by circulation through a porous bed of soda-lime. A high volume blower forces the air through the scrubber cannisters. Carbon dioxide levels are thus maintained at levels below 0.5% by volume. Aboard DeepView there are two electrically powered scrubbers, each with 240V fan units for normal operation and 24V units for use in an emergency. Each scrubber is capable of absorbing the CO2 produced by 66 people over a 12-hour period. Emergency scrubber compound is stored in accessible sealed containers within the pressure hull. In the event of emergency the scrubber compound can be replaced periodically. Carbon dioxide is monitored by the atmospheric monitor system and a manual gas monitor is also included in the emergency supplies. The DeepView also has an air conditioning system to cool and dehumidify the cabin air. The system consists of two individual units located under the floor of the passenger cabin. One unit cools the forward portion of the main cabin, the other the aft portion. Cool air flow is directed downward over the acrylic to prevent misting. Fire protection includes both active and passive fire systems. Passive systems include flame retardant materials, while the active systems include high temperature alarms and two portable 6 kg Halon 1301 fire suppression extinguishers. Individual closed circuit emergency breathing systems with two hour capability are provided for each passenger for use in the event of atmospheric contamination by fire. Emergency food and water rations, inflatable life preservers and first aid kits are included in the submarine emergency equipment. 32 sounder will provide a profile of any obstacles ahead along with distance information. A gyroscope provides an inertial attitude reference to the horizontal plane and course information with a maximum drift of one degree per hour. A color video camera mounted above the sail provides external viewing to the pilot through a monitor located on the pilot's console. Passengers are equipped with monitors as well, and a video cassette deck is also available. COMMUNICATIONS, NAVIGATION & MONITORING During tourist submarine operations a Surface Officer aboard a tender vessel tracks the submarine and remains in constant contact with the submarine pilot through an underwater telephone (UWT). It is the responsibility of the Surface Officer to make sure there are no vessel traffic conflicts when the submarine surfaces. The UWT for the DeepView operates on two frequencies (8.8 kHz and 27 kHz), the appropriate frequency being condition dependent. A 37 kHz emergency pinger locator is also integrated into the UWT system. In addition to the UWT there is a pilot controlled VHF radio for surface communications, and an internal intercom system and an AM-FM radio and tape deck as well. Navigation is typically accomplished by reference to submerged objects and dead reckoning. Virtually all tourist submarines are constrained to one or two dive sites, and the pilots quickly become familiar with the subsea route which is usually less than one nautical mile in length. A fluxgate electronic compass provides heading information on a digital display located on the pilot's console. A Bourdon tube style depth gauge provides depth information while a color depth sounder provides altitude data, the bottom profile and also has an adjustable proximity alarm. In addition, a front facing depth Other instrumentation includes an alarm system for water egress, atmospheric monitors for O2, CO2 and H2, motor over-temperatures, etc. In addition there are electrical voltage and amperage monitors, oxygen and high pressure air pressure readouts, battery amp-hour metering, as well as a wide variety of control valves, electrical switches and circuit breakers. However, unlike other tourist submarines the DeepView has a sophisticaed computer controlled control and monitoring system which reduces panel clutter and increases pilot visibility while decreasing the pilot workload. Normal operation relies on color flat screen monitors with touch screen controls and animated graphic displays. The fully redundant CPUs are able to compute ballast levels against the passenger manifest, integrate vertical speed, vertical acceleration and navigation data; monitor AH%, average total energy consumption rate, etc. All data with alarms is monitored at a single point. Manual backup systems are provided as necessary. IN SUMMARY The DeepView represents a state-of-the-art autonomous tourist submarine built to the highest possible safety standards by a leading subsea technology company noted for the exceptional experience and technical competence of its management team. Submarine & Submersible Design, Engineering, Refit & Construction Tourist Submarines • Semi-submersibles • SeaRoom Habitats Marine Leisure Business Plans • Turnkey Operations Comprehensive Site Survey • T-Sub Site Selection Feasibility Studies • Personnel Recruitment Submersible Operations • Training Copyright 2008, U.S. Submarines, Inc. All rights reserved. 33 DeepView 66 Technical Specifications General Classification: Maximum certified depth: Test depth: Passengers: Crew: Length overall: Pressure hull Height overall: Beam: Pressure hull diameter: Draft: Weight in air: Autonomy: Mission time: Maximum speed: Electrical power: Forward/reverse thrust: Lateral bow thrust: Lateral stern thrust: Vertical thrust: ABS ✠A1 Manned Submersible 110 meters 138 meters 66 3 or 4 32.0 meters 25.0 meters 6.0 meters 3.5 meters 2.7 meters 3.2 meters 160,000 kilograms 80 hours 24 hours 4 knots 240VDC/24VDC 1 x 75 kW 1 x 38 kW 1 x 22 kW 4 x 22 kW Acrylic Components Cylinder diameter: Internal diameter: Cylinder thickness: Cylinder length: Short term critical pressure: Maximum operating temperature: 2.7 meters 2.5 meters 100 mm 2.45 meters 10 N/mm2 38° C Bow dome diameter: Thickness: Angle: Short term critical pressure: Maximum operating temperature: 2.0 meters 80 mm 120° 10 N/mm2 38° C Battery 240V: 24V service: 24V emergency (internal): Hydraulic Power Packs (2) Motors: Control unit: Main Prop pumps: Thruster pumps: Main Propeller Type: Diameter: Copyright 2008, U.S. Submarines, Inc. All rights reserved. 4 banks, 553 kWh total at 80% discharge Cell type: Varta 10PzS720 H 4 banks, 55 kWh total at 80% discharge Cell type: Varta 10PzS720 H 2 banks, 53 kWh total at C5 rate Cell type: Varta 11PzS1100 H 180 frame 240VDC, 40kW at 2,000 rpm Compound field winding for load regulation Three contact resistor soft start with field loss relay Mannesman Rexroth A4VSO-63, 63cc/rev, 215 bar Mannesman Rexroth A4VSO-40, 40cc/rev, 215 bar 5-blade in Kort nozzle 1.3 meter 34 Motor: Mannesmann Rexroth MRP 800, 800 cc/rev, 75kW at 215 bar and 310 rpm. Thrusters (Mannesmann Rexroth Hydromarine) Bow: Stern: Vertical: 1, size 05/06, 450 mm dia., 38 kW, 5.8 kN thrust 1, size 05, 380 mm dia., 22kW, 3.3 kN thrust 4, size 05, 380 mm dia., 22kW, 3.3 kN thrust Ballast System Main ballast tanks: Passenger compensating tanks: Variable tanks: 12, 24,000 liters total 5,000 liters total 1,500 liters total High Pressure Air System Main: Reserve: 1200 liters at 200 bar 1200 liters at 200 bar Air Conditioning & Life Support Total life support capacity: 12 hours plus 96 hours reserve for 70 persons Scrubber: Absorbent capacity: Absorbent type: Total reserve storage capacity: Bed depth: Cross section area: Air flow speed: Residence time: Air flow rate: Proportion of A/C flow Fan pressure: Fan power: 40 kg Sofnolime 1025 600 kg, 6700 man hours 330 mm 0.13m2 (360 x 360) 0.4 m/sec 0.825 sec 190 m3/hr 24% 50 mm H20 (forward incline) 300 W, 120 VDC, 24V emergency, 300W Air conditioning: Heat reject rate: Compressor: Compressor motor: Evaporator: Condenser: Expansion valve: Fan type: Fan capacity: Pressure: Power: Speed control: Air changes: Oxygen System Day: Reserve 1: Reserve 2: 10 kW (33,000 BTU/hr) Motorcoach type axial piston with open shaft 3.3 kW, 240VDC 500mm x 500mm x 100mm Tungum trombone, 12mm bore Thermostatic, duct temperature sensing Forward incline, variable speed 800m3/hr 50 mm H20 1000W 240VDC compound wound motor +/- 10% with field control from cabin ther mostat 12/hr 100 liters at 205 bar 450 liters at 205 bar 450 liters at 205 bar Marine Group 1st Street, Fort Lauderdale, Florida 33311 33311 U.SBrownie’s SUBMARINES, INC. •940 936NW N.W. First St., Ft. Lauderdale, Florida Tel: 954/462-5570 Fax: 954/462-6115 Email: [email protected] Tel: 954/467-9028 • Fax: 954/467-9584 • E-mail: [email protected] Copyright 2008, U.S. Submarines, Inc. All rights reserved. 35 Article: Safety & Submarine Design by: L. Bruce Jones T here are a number of important criteria useful in evaluating passenger submarine design, but the first question asked by a prospective customer is "Are they safe?" The answer, in a word, is "very". Passenger submarines are designed and built under the supervision of, and in accordance with the regulations and rules established by, one of the major classification societies. The three largest classification organizations are the American Bureau of Shipping (ABS), Lloyds Register of Shipping and Det Norske Veritas. The ABS has the most experience of the three in submarine certification, having classified most of the manned submersibles built in the last several decades. It is pertinent to note that there has never been a serious injury or fatality to any passenger stemming from the operation of an ABS certified commercial or passenger submersible. Involvement by the classification society begins with the approval of the initial design, evolves to a survey process during construction and continues with annual inspections of the submarine throughout its life. Submersibles that meet the stringent requirements of the ABS are awarded "class" and are listed in the Record of the Society as ✠A1 Manned Submersible, or in the case of Lloyds Registry ✠100A. The ✠ is deleted if the craft was not constructed under society supervision but was later surveyed and awarded classification. In order to retain classification, which is important as it would be virtually impossible to operate and insure a submersible without the A1 or 100A rating, the submersible undergoes a thorough annual survey that includes the detailed inspection of ten major systems. Additionally, every three years the submarine undergoes an even more stringent survey that involves pressure and hydrostatic tests, dimensional checks of the pressure hull, instrument calibration and a special test dive. In the United States the U.S. Coast Guard will approve the submarine design and survey construction, actually duplicating work done by the ABS. The Coast Guard also stipulates requirements for the experience levels and licensing of the submersible crew, insures the existence of adequate documentation which includes opera- Copyright 2008, U.S. Submarines, Inc. All rights reserved. tion and maintenance manuals, applicable logs, records and checklists, etc., and assures compliance with a substantial body of safety and other regulations. Assurance of submersible safety begins with the design process. The cost to design a contemporary passenger submarine that might cost $5.0 million to build approaches, and in some cases exceeds $300,000. Literally thousands of man hours are required and hundreds of drawings are generated. Detailed calculations are required in such areas as pressure vessel stress analysis, life support systems, electrical load requirements and buoyancy and stability analysis. All materials to be used during construction must be certified and specified beforehand. The design specifications generally follow the requirements of such regulations as proposed in Rules for Building and Classing Underwater Systems and Vehicles by the ABS, the American Society of Mechanical Engineer's Safety Standard for Pressure Vessels for Human Occupancy as well as various bulletins of the Welding Research Council. When the design is finally complete it will be exhaustively analyzed by the engineers of the regulatory agency and classification society, and those plans that are satisfactory will be approved. Once all plans have been authorized, construction may commence. Society surveyors are on hand for the construction process. They assure the quality of the materials and the construction techniques. They monitor the welding process, implement and review extensive non destructive testing procedures, and they witness the hydrostatic testing of piping and gas storage systems and ballast tanks. Inspectors also verify the installation and testing of mechanical and electrical systems, check safety de36 vices and examine critical dimensions. Subsequent to pressure hull completion a hydrostatic submergence or "drop" test with strain gauges is carried out to 1.25 times the design depth. Requirements for submarine design classification include many redundant systems that can be used in the event of a primary system malfunction. These include ballast/trim, life support, propulsion and electrical systems. The ballast/trim systems of the submarine control the craft's buoyancy and insure its stability under a broad range of conditions. The ballast system controls the submarine's ability to descend underwater, maintain depth or rise to the surface, while the trim system controls weight distribution along the length of the craft, or its angle of incline in reference to the horizontal. Ballast and trim systems are composed of three components; 1) the "hard" or variable ballast tanks which are externally mounted and use high pressure air to control buoyancy and adjust for variations in weight distribution (trim) in the submarine. Hard ballast can also be pumped dry by an electric ballast pump. 2) Soft ballast tanks are non-pressurized and are also externally mounted and are used primarily to provide additional freeboard and stability while the submarine is on the surface. They are vented through the bottom to the water, which is displaced by the introduction of high pressure air. In an emergency the soft tanks can be "blown" full of air, causing the submarine to rise rapidly to the surface. 3) A drop-weight of one or more sections can be manually released in an emergency, dramatically lightening the submarine and causing it to surface. In some designs moveable weights are used to control trim either in conjunction with, or in substitution for, variable ballast trim procedures. A further method of surfacing is the vertical thruster system which can be actuated to propel the submarine upwards. Indeed, some submersibles are designed in such a way as to always be slightly positively buoyant, and they require the constant use of the vertical thrusters to remain submerged. In summary, ABS certification requires that the submarine be able to surface with the largest single volume flooded, with the exception of the pressure hull. This can be accomplished by blowing or pumping the hard ballast tanks, blowing the soft tanks, releasing the dropweights or powering to the surface with thrusters. Life support systems consist of oxygen supply and delivery, an atmosphere control mechanism and a carbon dioxide removal process. Most larger passenger submarines have one or two freon based air conditioning units Copyright 2008, U.S. Submarines, Inc. All rights reserved. that maintain cabin temperatures at 72 degrees and control humidity and remove odors. These are operated in conjunction with a scrubber system that removes the carbon dioxide to a level of 0.5% or below. Oxygen is supplied from high pressure cylinders and is automatically injected into the cabin at a rate that replaces the oxygen consumed and maintains a level of 21% by volume. In the event of a failure, a manual bypass system with flow meters and monitoring equipment are available. In addition, built in breathing sets for each person on board must have a two hour air supply. A purge compressor is used to maintain atmospheric pressure regardless of the depth of the submarine or the internal temperature. This also prevents accidental over pressure in the event of a high pressure air leak. Regulatory agencies and the certifying society require at least 72 hours of oxygen supply and carbon dioxide removal capability for an entire complement of crew and passengers. Leisure submarines are usually powered by several externally mounted brushless DC motors or internal electro-hydraulic propulsion devices. In either case sufficient system redundance exists to allow for the propulsion of the craft in the event of a unit failure. Electrical power is provided by either sealed lead acid traction batteries or sealed gel cell batteries. Either type are capable of providing power for the submarine for 10 to 14 operating hours per day, and can be fully recharged in an eight hour period. The batteries have a minimum useful life of 1500 deep cycle charges. Main power is either 120V or 240V DC which provides electricity for the main propulsion devices, lighting, etc. A separate 24V/12V system is used for life support systems, navigation and communication equipment. Moreover, a secondary separate 24V/12V emergency power system is also required. Sophisticated circuit breakers and power shut-off equipment are available to provide circuit isolation as necessary. The battery compartments are isolated and have their own hydrogen removal/scrubbing purge compressor/ventilation systems. The submarines are equipped with several bilge pumps, and both active and passive fire fighting systems. The craft is in constant contact with the surface support vessel via a dual frequency underwater telephone, or when surfaced, with a VHF marine band radio. While in a brief article it is impossible to delineate all the safety features inherent in a classified contemporary passenger submarine, their pristine operating records provide a tribute to the classification societies and manufacturers. There may well be no safer form of transportation. 37 Preparing the Comprehensive Business Plan for Underwater Leisure Projects By: L. Bruce Jones I. Introduction: The Purpose of the Business Plan The business community typically views the business plan as a critical component in the equation for capital acquisition. While there is little doubt that few businesses are successful in raising funds without a well executed business plan, the document itself serves a broader purpose. Generating a business plan forces management to focus on a number of critical issues, and to define objectives and the methods for achieving pertinent goals. II. Characteristics of Successful Business Plans Successful business plans differ in intent, format, organization and scope, so there are a number of different presentations capable of achieving the capital acquisition goal. The guidelines that follow apply to all business endeavors, and are not limited solely to underwater leisure projects. A. Professional Presentation The business plan typically provides the first impression a potential investor will have of a company, and as a consequence the plan itself should be representative of the image the company would like to portray. In addition, many professional investors, venture capitalists and commercial lending institutions see hundreds of business plans each week. If the plan is not well organized; if it’s too long or too difficult to follow, then there is a very good chance that it will not be given serious consideration. Limit the plan to a maximum of 40-50 pages of concise writing. The chapters should be well organized and in appropriate order, and the entire document should be neat in appearance. If the business plan requires supporting information and additional documentation, place it in a second, separate volume. The plan should include a two page executive summary that explains the firm’s current status and describes its future plans, and this should be written after the plan is complete. Make sure that the business plan is clearly written and thoughtfully edited. If there are doubts about the Management team’s ability to concisely express themselves, then consider using a consultant or professional editor. Copyright 2008, U.S. Submarines, Inc. All rights reserved. B. Defined Corporate Goals Where does the Company want to be in five to seven years? Where does Management want to be? Answers to these questions are important to investors, and to the founding partners as well. Corporate founders differ in objectives. Some are startup specialists that are fascinated by the challenge of implementing a new business. Once things are up and running smoothly, they may lose interest and want to move on. Alternately, a dedicated founder may feel that he or she wants to devote the rest of their life to the success of the Company. Yet others may view the business as a sort of personal R&D laboratory, and are looking for an opportunity to continually develop new products. To this type of person, monetary rewards may well be secondary in importance. Other founders may view the business solely as an opportunity to make money, or to maintain a certain lifestyle, and the businesses growth could be compromised by their unwillingness to make sacrifices. While these are just a few possibilities, an understanding of what each of the founders wants from the business will go a long way toward keeping the partnership intact. The objectives of the business should be clearly defined as well. For example, if you are starting a firm that intends to develop a design for a revolutionary deep diving, titanium and acrylic, nuclear powered, 200 passenger leisure submarine, you have several choices; 1. Go public. Here is a reasonable goal, planned for five to seven years in the future when the Company manages twenty million in sales. It will allow you and your partners the chance to “cash out” and it will give your investors the opportunity to more than recoup the millions of dollars they put up to see you through construction of your first vessel. 2. Be Acquired. After the company has become profitable, shown steady growth, and is for all intents and purposes, stable, it may be time to sell out to a larger firm, say a Boeing or an Airbus Industries. Here again, the original founders and investors will have the opportunity to cash out after having seen the desired capital appreciation. They may also elect to “ride along” and participate both financially and managerially with the new owners. 3. Become a Fortune 500 Company. This is most entrepreneur’s fondest dream; becoming an industry giant. In this case you are dead set on operating a 38 fleet of transoceanic passenger “cruise ship” type submarines. If you are seriously considering this as a goal, don’t tell anyone unless you want to be laughed out of the board room. That is of course, unless you’ve done it before. It’s safer, and easier on the ego to at least wait until you’ve gone public. 4. A Money Machine. Some companies are started with the express intent of reaching a steady state in annual net profits, most of which are funnelled into the founder’s pockets. In your case, you are achieving revenues of $20 million annually from dive tours to the bottom of the Marianas Trench. You have no desire to make any more money and prefer to take nine months off each year and to live as far away from water as possible. 5. Become a Joint Venture Partner. Here you may only desire to complete the design for your submarine, and then to joint venture construction with General Dynamics. The advantages to this approach are obvious, unless you have a $100 million of your own floating around and plenty of confidence. 6. License Design. You intend to complete the design and then license the manufacturing rights to several groups in various foreign countries. 7. Exploit Niches. You have decided to operate your own 12 passenger diesel electric submarines at small private resorts and nudist colonies. Obviously there are many choices. Some are achievable, and others are more speculative. Explore various options and build a logical argument for Management’s ability to attain a specific goal. C. Market Orientation What is the most critical single component in the success of any new business? It is not the product. It is not the management team. It is not even the financial status of the organization. It is, clearly and unequivocally, the customer. Surprisingly, many entrepreneurs completely ignore this fact and tend to get caught up in the development of the product. As an example, there are a number of designs for tourist submarines that are fascinating examples of technical sophistication, but they will never be built, simply because no one will buy them. The designers spent considerable sums of money in the execution of the design, but they never seriously considered who the final user would be. Don’t make this mistake. A successful business plan clearly demonstrates the product or service’s benefit to the user. The faster that your product or service pays for itself, the more successful you will be in your selling efforts. A professional investor will require that you Copyright 2008, U.S. Submarines, Inc. All rights reserved. clearly demonstrate that there is a market out there. This can be done quantitatively, by researching industry statistics, or it can be done qualitatively through market studies or via pre-sales of the product. Let’s take tourist submarines. We know that something like 1,500,000 people have paid to ride these vessels. We also know that some companies are making significant quantities of money in the pursuit of this business. Conversely, we have seen one or two firms go under as well. Site selection is clearly critical, and like any other business, effective management and reasonable capitalization are important. User benefit is definable, and if you can effectively prove that the cumulative net after tax profit is capable of paying for your submarine and support equipment by year two; you’ll probably find an investor. D. Financial Justification New companies never achieve their financial projections. A strong statement perhaps, but one that is true for the vast preponderance of business start-ups. Typically, professionally funded businesses only achieve from 20% to 80% of their pro formas, and some never survive past the third year. Business planning calls for solid projections of from three to five years in the future, and these proforma income statements, cash flow forecasts and balance sheets are important because they form the basis of how much equity the founders must give up so that the investors can meet their financial requirements for capital appreciation. Realistic projections are vitally important, and usually nothing turns an investor off faster than overly optimistic proformas. The numbers should be reflective of what has already been demonstrated in the industry; and if they are not the investors are going to want to know why. Presuming of course that they continue to take you seriously at all. The income statements should delineate sales, expenses, margins, and income or loss and should be prepared monthly through year two and quarterly for years three through five. The cash-flow forecast shows the cash receipts, disbursements and cash requirements over the same time period as the income statements. The balance sheet shows assets and liabilities, and a break-even analysis should be included as well. The financial projections should be straight forward and easily understandable. If detailed spreadsheet analysis is required, do not put it in the business plan. Investors have neither the time nor the inclination to wade through reams of financial data. If they require supporting evidence, they will ask for it. 39 E. Management Image The Management team should portrait itself as an experienced group of erudite businessmen. The company management should be composed of a team, usually a group of from two to five individuals that have different, but complementary areas of expertise. They should all have previous business experience, and the more experience available in the company’s particular field of endeavor, the better. A “one man” management team has little hope of attracting investment capital. If a sole entrepreneur is to guide the company, he must identify and attract additional management experience. Each manager’s experience and qualifications should be clearly demonstrated in the business plan. When at all possible, the entire Management team should be identified and responsibilities assigned. Additionally, attracting a seasoned Board of Directors that can help guide the company is also useful. Care must be taken in the determination of management compensation. Young companies can seldom afford significant salaries for the founders, and high initial salaries are immediately questioned by veteran investors. Employment contracts that provide monetary incentives for meeting financial goals are one effective method to insure adequate and fair compensation. In general, the founders should each expect relatively equal compensation over the long term. Investors will also look for evidence of commitment on the part of management, and they like to see such things as financial contributions by the founders, or stock sale agreements that tie the founders down to three to five years of work prior to major monetary compensation. Professional investors also look closely for evidence of focus. It is the rare management team indeed that can field more than one product initially. Intense focus on one product or service goes a long way toward assuring success. F. Clear Status and Plans for Product Development The entrepreneur with a lucid vision of the penultimate modular underwater hotel, may well have an excellent idea that could prove profitable, but he has a long way to go to demonstrate the feasibility of the concept. If he hires an experienced architect and executes the design and engineering calculations in detail, he stands a better chance of seeing his vision become reality. If he specifies the materials, builds a scale model, has it hydrostatically tested and selects an appropriate site for the first installation, he is further along still, and his chances of raising investment capital are greatly enhanced. If he actually builds and profitably operates a small habitat, has plans for several more and letters of intent from Copyright 2008, U.S. Submarines, Inc. All rights reserved. customers, his ability to raise capital is reasonably assured. Product development requires action, not words. It is anything but a writing exercise, and the more development that has been done, the less risk inherent in the project. The less risk, the more equity the founder can expect to keep for himself. Keeping these principals in mind, and understanding that investors prefer to see more money spent marketing a product than designing one, the founder should clearly and accurately portrait the status and plans of product, or service, development. Prospective investors also appreciate a proprietary position. Patents, trademarks and assurances of exclusivity in the face of competition may well be the deciding factor in some investment decisions. Erudite investors also show a marked preference for a basic product that does not require considerable custom engineering which often times greatly reduces productivity without engendering adequate compensation. G. Finding the Appropriate Investors and Addressing Their Needs There are a myriad of techniques for raising investment funds. There are stock techniques, such as IPO’s, self underwritings, private placements, and offerings of warrants and preferred stock. There are debt methods like borrowing, convertible debentures, bond private placements and leveraged buyouts. And there are partnership techniques; venture capital, joint ventures, limited partnerships, R&D partnerships and franchising. Add other possibilities like licensing agreements, letters of credit, SBA loans, government guarantees and incubators, and the end result is, at the very least, completely confusing to the uninitiated. Each example mentioned is far more appropriate to some circumstances than to others. Some are quite specific in their requirements. If you have a completed business plan and still have doubts as to who might be interested in investing in your project, seek some professional advice. Try to obtain introductions to prospective lenders and investors. Failing that, circulate the executive summary for signs of interest, as opposed to the entire business plan. Identifying prospective investors early on is an excellent idea. Then, in your business plan be certain to address their concerns. Remember that investors are looking to make a substantial profit in from three to seven years, and that their perceived risk must be justified by the return. For well developed underwater leisure projects requiring $500,000 to $5 million, typical professional investors will require an annualized return of at least 30%. 40 L. Bruce Jones: Qualifications In 1993 L. Bruce Jones co-founded U.S. Submarines, Inc. and today U.S. Submarines is the undisputed world leader in its field with further prospects of exceptional growth. Bruce, 51, is the president of the company and he is also the president of Poseidon Undersea Resorts, LLC., a company developing the world’s first undersea resort (http://poseidonresorts.com). Bruce’s life-long fascination with all things sub-sea related began at an early age. Bruce’s father was a rocket scientist at Lockheed and his mother a civil engineer. He was raised by his mother and step-father, a Master Mariner who ran DeLong Corporation, one of the world’s largest marine construction companies. Bruce’s grandfather, Leon B. DeLong developed the world’s first self-elevating jack-up rigs and he also created the world’s first containerized shipping company. Bruce grew up living on heavy marine construction platforms in the South China Sea and the Persian Gulf. He learned to dive at the age of nine under the jacket of an oil tanker terminal seven miles off of Kuwait. His first jobs were in the marine construction business and usually involved diving or operating a boat. He had the opportunity to travel extensively from a very young age and has visited over 100 countries. Bruce attended high school at Culver Military Academy and it was there that he began sketching submarines and underwater habitats and writing letters to Jacques Cousteau. Bruce was formerly the President of L. Bruce Jones & Associates, Ltd., the leading technical and business development consulting firm on the tourist submersible industry. The firm published both Passenger Submarines: A Comprehensive Analysis of the Submarine Tour Industry, as well as the periodic newsletter Viewports. Copyright 2008, U.S. Submarines, Inc. All rights reserved. The company also developed business plans on a consulting basis for a wide array of marine and undersea leisure related businesses. Current notable projects under development at U.S. Submarines and being managed by Bruce and his partner, Jean Claude Carme, include the world’s first submarine cruise ship, an 85 meter, 2300 ton submarine that will carry 72 passengers on two and three day undersea cruises in five star luxury. A second project, under the direction of Patrick Lahey, is a new series of small submersibles designed to be based aboard large yachts. The Triton class submersibles are designed in two and three passenger versions capable of either 1000 or 3000 foot depths and the first Triton was delivered to the yacht Mine Games in December of 2007. Bruce is an expert in all aspects of manned submersibles and tourist submarines. Over the past 20 years he has consulted for most of the companies active, or interested in, this field and he has evaluated all the major civil submersible and submarine designs and has been responsible for tourist submarine related business development, capital acquisition, and operational startups. He has conceived and co-designed several personal luxury submarines as well. He has carried out extensive site surveys in the Caribbean, Pacific, Atlantic and the Med. For eight years Bruce was the Chairman of the Manned Submersibles Committee of the Marine Technology Society, and he is a review panel member of the Society of Naval Architects & Marine Engineers — U.S. Coast Guard Submersible Safety Panel. He is an appointed member to The American Bureau of Shipping’s Special Committee on Underwater Systems & Vehicles. Bruce holds a degree in Geological Science from Trinity University and he did further graduate work in that 41 field at the University of Washington. He attended the Executive MBA program at St. Mary’s University. He was at one time one of the world’s leading research gemologists and he held substantial credentials in that field (G.G., F.G.A., DGemG) and he currently maintains a private gem research lab. He was formerly the President of Pacific Gemological Services, the Vice President of Research and Education at AGMS and the CEO of Air Shuttle, Inc. He was also, until recently, a member of the Board of Directors of the Aviation Technology Group (www.avtechgroup.com). Bruce is a fixed wing, helicopter and ultralight pilot. He is also an experienced diver and submersible pilot and a former U.S. National Skydiving champion. He has many years of experience sailing internationally on both power and sailing vessels and is currently writing a book entitled “Passagemaking: Practical Long Distance Cruising in Motoryachts.” He is married and has four children. Copyright 2008, U.S. Submarines, Inc. All rights reserved. Bruce spends a considerable amount of time these days leading a world-class team in the development of the Poseidon Undersea Resort project. The company is purchasing a private island in Fiji where the resort will open in the first quarter of 2010. U.S, Submarines will build five submarines for the resort, four Tritons, as each resort guest will have an opportunity to learn to pilot a submarine in our lagoon, and one Deepview 20. Bruce has recently returned from 15 months of living in Dubai in the United Arab Emirates where he was working on a major project and promoting the business of civil submarines and underwater resorts/habitats. He is currently focused on expanding U.S. Submarines in Florida and constructing an acrylic manufacturing facility in Portland, Oregon that will produce the viewports for Poseidon. As of February 2008 U.S. Submarines is about to begin construction of two tourist submarines, a Discovery 1000 and the five subs for Poseidon. 42 Brownie’s Marine Group U.S. SUBMARINES, INC. Tel: 954/462-5570• Fax: Email: [email protected] Tel: 208/687-9057 Fax:954/462-6115 208/441-7478 • E-mail: [email protected] Copyright 2008, U.S. Submarines, Inc. All rights reserved. 43 Award Winning Website: http://ussubs.com Website: www.BrowniesMarineGroup.com