SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[x] Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 For the quarterly period ended March 31, 2005
[ ] Transition Report under Section 13 or 15(d) of the Exchange Act
Commission File Number: 021-64091
NEPTUNE INDUSTRIES, INC.
(Name of Small Business Issuer in its charter)
Florida 65-0838060
(State of Incorporation) (I.R.S. Employer I.D. Number)
2234 N. Federal Highway
Suite 372
Boca Raton, FL 33034
(Address of principal executive offices)
(561)-482-8408)
(Issuer's telephone number)
Securities registered under Section 12(b) of the Act: NONE
Securities registered under Section 12(g) of the Act: COMMON STOCK
Check whether the issuer (1) filed all reports required to be filed by Sections
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the issuer was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
[x]Yes [ ] No
1
Applicable Only to Issuers Involved in Bankruptcy
Proceedings During the Preceding Five Years
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court
[ ] Yes [ ] No
Applicable Only to Corporate Issuers
The number of shares outstanding of each of the issuer's classes of such common
equity, as of June 15, 2005 was : Common Shares 10,046,382 shares.
Class A preferred Shares 1,500,000 shares
Class B Preferred Shares 3,500,000 shares
Transitional Small Business Disclosure Format (check one): Yes___; No_X_
2
FORM 10-QSB
PERIOD ENDED MARCH 31, 2005
TABLE OF CONTENTS
PART I
Item 1. FINANCIAL STATEMENTS.................................................. 4
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR
PLAN OF OPERATIO...............N.................................... 17
Item 3. CONTROLS AND PROCEDURES.............................................. 24
PART II
Item 1. LEGAL PROCEEDINGS.....................................................24
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES
AND USE OF PROCEEDS................................................. 24
Item 3. DEFAULTS UPON SENIOR SECURITIES...................................... 25
Item 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS................... 25
Item 5. OTHER INFORMATION.................................................... 25
Item 6. EXHIBITS AND REPORTS ON FORM 8-K..................................... 25
3
Part I.
Item 1. Financial Information.
NEPTUNE INDUSTRIES, INC.
(Formerly Move Films, Inc.)
(A Development Stage Company)
BALANCE SHEETS
(Unaudited)
March 31, December 31,
2005 2004
-------------------- ------------------
Assets: $ - $ -
==================== ==================
Liabilities - Accounts Payable $ 2,080 $ 2,080
-------------------- ------------------
Stockholders' Equity:
Preferred Stock, par value $.0001, Authorized 20,000,0000
shares, Issued 0 shares at March 31, 2005
and December 31, 2004 - -
Common Stock, par value $.0001,
Authorized 100,000,000 shares, Issued 2,817,500 shares
at March 31, 2005 and December 31, 2004 282 282
Paid-In Capital 3,653 3,653
Deficit Accumulated During the Development Stage (6,015) (6,015)
-------------------- ------------------
Total Stockholders' Equity (2,080) (2,080)
-------------------- ------------------
Total Liabilities and Stockholders' Equity $ - $ -
==================== ==================
See accompanying notes
4
NEPTUNE INDUSTRIES, INC.
(Formerly Move Films, Inc.)
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(Unaudited)
Cumulative
since April
2, 2001
Inception
For the three months ended of
March 31, development
2005 2004 stage
------------------ ----------------- -----------------
Revenues: $ - $ - $ -
Expenses: - - 6,015
------------------ ----------------- -----------------
Net Loss $ - $ - $ (6,015)
================== ================= =================
Basic &
Diluted loss
per share $ - $ -
================== =================
Weighted Average
Shares Outstanding 2,817,500 2,817,500
================== =================
See accompanying notes
5
NEPTUNE INDUSTRIES, INC.
(Formerly Move Films, Inc.)
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(Unaudited)
Cumulative
since April 2,
2001
For the three months ended Inception of
March 31, Development
2005 2004 Stage
----------------- ------------------ ------------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net Loss $ - $ - $ (6,015)
Common Stock Issued for Services - - 182
Increase (Decrease) in Accounts Payable - - 2,080
----------------- ------------------ ------------------
Net Cash Used in operating activities - - (3,753)
----------------- ------------------ ------------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Net cash provided by investing activities - - -
----------------- ------------------ ------------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Capital Contributed by Shareholder 2,753
Common Stock Issued for Cash - - 1,000
----------------- ------------------ ------------------
Net Cash Provided by
Financing Activities - - 3,753
----------------- ------------------ ------------------
Net (Decrease) Increase in
Cash and Cash Equivalents - - -
Cash and Cash Equivalents
at Beginning of Period - - -
----------------- ------------------ ------------------
Cash and Cash Equivalents
at End of Period $ - $ - $ -
================= ================== ==================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ - $ - $ -
Franchise and income taxes $ - $ - $ -
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES: None
See accompanying notes
6
NEPTUNE INDUSTRIES, INC.
(Formerly Move Films, Inc.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of accounting policies for Neptune Industries, Inc.
(formerly Move Films, Inc.) (a development stage company) is presented to assist
in understanding the Company's financial statements. The accounting policies
conform to generally accepted accounting principles and have been consistently
applied in the preparation of the financial statements.
Going Concern
The accompanying financial statements have been prepared in conformity
with accounting principles generally accepted in the United States, which
contemplates the Company as a going concern. However, the Company has sustained
substantial operating losses in recent years and has used substantial amounts of
working capital in its operations. Realization of the assets reflected on the
accompanying balance sheet is dependent upon continued operations of the Company
which, in turn, is dependent upon the Company's ability to meet its financing
requirements and succeed in its future operations. Management believes that
actions presently being taken to revise the Company's operating and financial
requirements provide them with the opportunity for the Company to continue as a
going concern.
Interim Reporting
The unaudited financial statements as of March 31, 2005 and for the
three month period then ended reflect, in the opinion of management, all
adjustments (which include only normal recurring adjustments) necessary to
fairly state the financial position and results of operations for the three
months. Operating results for interim periods are not necessarily indicative of
the results which can be expected for full years.
Organization and Basis of Presentation
The Company was incorporated under the laws of the State of Texas on
April 2, 2001 under the name ILN Pelham Corporation to serve as a vehicle to
effect a merger, exchange of capital stock, asset acquisition, or other business
combination with a domestic or foreign private business. Since April 2, 2001,
the Company is in the development stage, and has not commenced planned principal
operations.
The Company entered into a business combination and acquired all of the
assets and liabilities of The Expresso Express, on October 2, 2001, pursuant to
an agreement and plan of reorganization.
7
NEPTUNE INDUSTRIES, INC.
(Formerly Move Films, Inc.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
The Expresso Express was a sole proprietorship formed on September 14,
2001, created to engage in the drive-thru espresso business. Subsequent to the
Agreement and Plan of Reorganization, the name ILN Pelham Corporation was
changed to Expresso Express, Inc. The agreement and plan of reorganization set
forth that Pelham would issue 20,000,000 shares to the owner of The Expresso
Express. This business combination was accounted for as a purchase.
Pursuant to an agreement and plan of reorganization dated December 31,
2001, the Company acquired all the assets of Motion Entertainment Group, a
California partnership, and commenced the business operations formally conducted
by Motion. The Company subsequently changed its name from Expresso Express, Inc.
to Move Films, Inc. and discontinued all of its business activities in the
drive-thru espresso business. This business combination was accounted for as a
purchase. As part of that combination, the 20,000,000 shares of stock issued in
the Expresso Express transaction were returned to the Company and canceled.
Motion Entertainment Group was formed to engage in the business of
development, production and distribution of full length feature film properties.
The agreement and plan of reorganization required the Company to issue
15,000,000 shares to the general partners of Motion Entertainment Group in
exchange for the 20,000,000 shares held by Jennifer Baker and Simon Gaunt,
former directors which were then canceled.
On January 2, 2002, the Company agreed to cancel the plan of
reorganization with Motion and the 15,000,000 shares to be issued in that
transaction were canceled as of December 31, 2001.
Nature of Business
The Company has no products or services as of March 31, 2005. The
Company was organized as a vehicle to seek merger or acquisition candidates. The
Company intends to acquire interests in various business opportunities, which in
the opinion of management will provide a profit to the Company.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or less
to be cash equivalents to the extent the funds are not being held for investment
purposes.
8
NEPTUNE INDUSTRIES, INC.
(Formerly Move Films, Inc.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Loss per Share
Basic loss per share has been computed by dividing the loss for the
year applicable to the common stockholders by the weighted average number of
common shares outstanding during the years. There were no common equivalent
shares outstanding at March 31, 2005 and 2004.
Pervasiveness of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles required management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Concentration of Credit Risk
The Company has no significant off-balance-sheet concentrations of
credit risk such as foreign exchange contracts, options contracts or other
foreign hedging arrangements.
NOTE 2 - INCOME TAXES
As of March 31, 2005, the Company had a net operating loss carryforward
for income tax reporting purposes of approximately $6,000 that may be offset
against future taxable income through 2023. Current tax laws limit the amount of
loss available to be offset against future taxable income when a substantial
change in ownership occurs. Therefore, the amount available to offset future
taxable income may be limited. No tax benefit has been reported in the financial
statements, because the Company believes there is a 50% or greater chance the
carryforwards will expire unused. Accordingly, the potential tax benefits of the
loss carryforwards are offset by a valuation allowance of the same amount.
NOTE 3 - DEVELOPMENT STAGE COMPANY
The Company has not begun principal operations and as is common with a
development stage company, the Company has had recurring losses during its
development stage.
9
NEPTUNE INDUSTRIES, INC.
(Formerly Move Films, Inc.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 4 - COMMITMENTS
As of March 31, 2005, all activities of the Company have been conducted
by corporate officers from either their homes or business offices. Currently,
there are no outstanding debts owed by the company for the use of these
facilities and there are no commitments for future use of the facilities.
NOTE 5 - COMMON STOCK TRANSACTIONS
The Company issued 5,000,000 shares of common stock to ILN Industries,
LLC for a total value of $1,000 on April 2, 2001. On October 2, 2001, ILN
Industries, LLC returned the 5,000,000 shares to the Company for cancellation.
The Company issued 5,000,000 shares of common stock to ILN Industries,
LLC for a total value of $1,000 on October 2, 2001. On January 2, 2002, ILN
Industries, LLC returned 4,000,000 shares to the company for cancellation.
During October, 2001, 20,000,000 shares were issued pursuant to a plan
of reorganization for a total of $2,000. The 20,000,000 shares were later
returned for cancellation in December, 2001, and 15,000,000 shares were issued
under the plan of reorganization dated December 31, 2001, in exchange for total
assets of $7,800,000. The plan of reorganization dated December 31, 2001, was
later rescinded, the 15,000,000 shares were returned for cancellation, effective
December 31, 2001, and the $7,800,000 in assets were never received.
NOTE 7 - STOCK INCENTIVE PLAN
During the period ended December 31, 2001, the Company adopted a Stock
Incentive Plan and issued 1,817,500 pursuant to the Stock Incentive Plan. The
purpose of the plan is to assist in attracting and retaining key employees,
non-employee directors and consultants to achieve long-term corporate
objectives. Theses shares were recorded at a par value of $0.0001. In connection
with issuance of the shares, $182 was recorded as consulting expense.
NOTE 8 - SUBSEQUENT EVENTS
On June 7, 2005, a the Company merged with Neptune Industries and
Subsidiaries, a Florida corporation. The merger was accounted for as a reverse
merger, with Neptune Industries being treated as the acquiring entity for
financial reporting purposes. In connection with this merger, Neptune
Industries, Inc. issued 2,817,500 shares of common stock for 100% of the
outstanding common stock of the Company.
10
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
On June 9, 2005, Move Films, Inc., a publicly-held Texas corporation,
merged into Neptune Industries, Inc. and Subsidiaries, a Florida corporation.
See "The Acquisition". The following unaudited pro forma condensed combined
financial statements are based on the June 30, 2004 and March 31, 2005
historical financial statements of Neptune Industries, Inc. and Move Films, Inc.
contained elsewhere herein, giving effect to the transaction under the purchase
method of accounting, with Neptune Industries, Inc. treated as the acquiring
entity for financial reporting purposes. The fiscal year end of Neptune
Industries, Inc., June 30, has been continued as the fiscal year of the
Surviving Corporation.
The unaudited pro forma condensed combined balance sheet at June 30,
2004 presenting the financial position of the Surviving Corporation assumes the
merger occurred as of June 30, 2004. The unaudited pro forma condensed combined
statement of operations for the year ended June 30, 2004 presents the results of
operations of the Surviving Corporation, assuming the acquisition was completed
on July 1, 2004. The unaudited pro forma condensed combined balance sheet at
March 31, 2005 presenting the financial position of the Surviving Corporation
assumes the merger occurred as of March 31, 2005. The unaudited pro forma
condensed combined statement of operations for the nine months ended March 31,
2005 presents the results of operations of the Surviving Corporation, assuming
the acquisition was completed on July 1, 2004.
The unaudited pro forma condensed combined financial statements have
been prepared by management of Move Films, Inc. and Neptune Industries, Inc.
based on the financial statements included elsewhere herein. The pro forma
adjustments include certain assumptions and preliminary estimates as discussed
in the accompanying notes and are subject to change. These pro forma statements
may not be indicative of the results that actually would have occurred if the
combination had been in effect on the dates indicated or which may be obtained
in the future. These pro forma financial statements should be read in
conjunction with the accompanying notes and the historical financial information
of Move Films, Inc. and Neptune Industries, Inc. (including the notes thereto)
included in this Form. See "FINANCIAL STATEMENTS."
11
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
JUNE 30, 2004
Pro Forma
Neptune Move Pro Forma Combined
Industries, Inc. Films, Inc. Adjustments Balance
------------------- ------------------- ------------------ -------------------
ASSETS
Cash $37,958 $ - $ - $37,958
Accounts Receivable 3,806 - - 3,806
Inventory 275,756 - - 275,756
------------------- ------------------- ------------------ -------------------
Total Current Assets 317,520 - - 317,520
Property and Equipment, Net 558,001 - - 558,001
Security Deposit 4,040 - - 4,040
------------------- ------------------- ------------------ -------------------
Total Assets $879,561 $ - $ - $879,561
=================== =================== ================== ===================
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts Payable $86,116 $2,080 $ - $88,196
Accrued Liabilities 821,241 - - 821,241
Current Portion of Long-Term Debt 55,945 - - 55,945
------------------- ------------------- ------------------ -------------------
Total Current Liabilities 963,302 2,080 - 965,382
Note Payable - Officers 70,000 - - 70,000
Note Payable 201,973 - - 201,973
Convertible Note 50,000 - - 50,000
------------------- ------------------- ------------------ -------------------
Total Liabilities 1,285,275 2,080 - 1,287,355
------------------- ------------------- ------------------ -------------------
Stockholders' Equity:
Preferred Stock - - - -
Common Stock 33,796 282 2,535 A 36,613
Additional Paid in Capital 2,227,884 3,653 (8,550) A 2,222,987
Retained Earnings (Deficit) (2,667,394) - (2,667,394)
Deficit Accumulated During the Development Stage - (6,015) 6,015 A -
------------------- ------------------- ------------------ -------------------
Total Stockholders' Equity (Deficit) (405,714) (2,080) - (407,794)
------------------- ------------------- ------------------ -------------------
Total Liabilities and Stockholders' Equity $879,561 $ - $ - $879,561
=================== =================== ================== ===================
See accompanying notes to unaudited pro forma condensed combined financial
statements.
12
UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 2004
Pro Forma
Neptune Move Pro Forma Combined
Industries, Inc. Films, Inc. Adjustments Balance
------------------- ------------------- ------------------ -------------------
Revenues $320,838 $ - $ - $320,838
Cost of Sales 344,489 - - 344,489
------------------- ------------------- ------------------ -------------------
Gross Profit (23,651) - - (23,651)
Expenses:
General & Administrative 684,907 - - 684,907
------------------- ------------------- ------------------ -------------------
Total Operating Expenses 684,907 - - 684,907
------------------- ------------------- ------------------ -------------------
Net Operating Income (Loss) (708,558) - - (708,558)
Other Income (Expense):
Interest Expense (69,695) - - (69,695)
------------------- ------------------- ------------------ -------------------
Net Income (Loss) $(778,253) $ - $ - $(778,253)
=================== =================== ================== ===================
Loss per share $ (0.03) $ - $ - $ (0.02)
=================== =================== ================== ===================
Weighted average shares outstanding 30,519,787 2,817,500 33,337,287
=================== =================== ===================
See accompanying notes to unaudited pro forma condensed combined financial
statements.
13
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
MARCH 31, 2005
Pro Forma
Neptune Move Pro Forma Combined
Industries, Inc. Films, Inc. Adjustments Balance
------------------- ------------------- ------------------ --------------------
ASSETS
Cash $119,602 $ - $ - $119,602
Accounts Receivable 51,819 - - 51,819
Inventory 702,928 - - 702,928
------------------- ------------------- ------------------ --------------------
Total Current Assets 874,349 - - 874,349
Property and Equipment, Net 529,929 - - 529,929
Security Deposit 8,327 - - 8,327
------------------- ------------------- ------------------ --------------------
Total Assets $1,412,605 $ - $ - $1,412,605
=================== =================== ================== ====================
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts Payable $86,115 $2,080 $ - $88,195
Accrued Liabilities 1,013,333 - - 1,013,333
Current Portion of Long-Term Debt 65,748 - - 65,748
------------------- ------------------- ------------------ --------------------
Total Current Liabilities 1,165,196 2,080 - 1,167,276
Note Payable - Officers 70,000 - - 70,000
Note Payable 258,282 - - 258,282
Convertible Note 50,000 - - 50,000
------------------- ------------------- ------------------ --------------------
Total Liabilities 1,543,478 2,080 - 1,545,558
------------------- ------------------- ------------------ --------------------
Stockholders' Equity:
Preferred Stock - - - -
Common Stock 33,796 282 2,535 A 36,613
Additional Paid in Capital 2,997,799 3,653 (8,550) A 2,992,902
Retained Earnings (Deficit) (3,162,468) - - (3,162,468)
Deficit Accumulated During the Development Stage - (6,015) 6,015 A -
------------------- ------------------- ------------------ --------------------
Total Stockholders' Equity (Deficit) (130,873) (2,080) - (132,953)
------------------- ------------------- ------------------ --------------------
Total Liabilities and Stockholders' Equity $1,412,605 $ - $ - $1,412,605
=================== =================== ================== ====================
See accompanying notes to unaudited pro forma condensed combined financial
statements.
14
UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED MARCH 31, 2005
Pro Forma
Neptune Move Pro Forma Combined
Industries, Inc. Films, Inc. Adjustments Balance
------------------- ------------------- ------------------ -------------------
Revenues $429,881 $ - $ - $429,881
Cost of Sales 265,334 - - 265,334
------------------- ------------------- ------------------ -------------------
Gross Profit 164,547 - - 164,547
Expenses:
General & Administrative 577,232 - - 577,232
------------------- ------------------- ------------------ -------------------
Total Operating Expenses 577,232 - - 577,232
------------------- ------------------- ------------------ -------------------
Net Operating Income (Loss) (412,685) - - (412,685)
Other Income (Expense):
Interest Expense (82,389) - - (82,389)
------------------- ------------------- ------------------ -------------------
Net Loss $(495,074) $ - $ - $(495,074)
=================== =================== ================== ===================
Loss per share $ (0.02) $ - $ - $ (0.01)
=================== =================== ================== ===================
Weighted average shares outstanding 33,796,375 2,817,500 36,613,875
=================== =================== ===================
See accompanying notes to unaudited pro forma condensed combined financial
statements.
15
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(1) GENERAL
In the acquisition involving Move Films, Inc. and Neptune Industries,
Inc., Move Films, Inc. merged into Neptune Industries, Inc. in a statutory
merger under Texas law, effective June 9, 2005. Neptune Industries, Inc. is
considered the acquiring entity for financial reporting purposes. Under the Plan
of Acquisition, Move Films, Inc.'s common stock shareholders received 2,817,500
shares of Neptune Industries, Inc.'s common stock in exchange for all of the
outstanding common stock of Move Films, Inc. As a result of the acquisition,
Move Films, Inc. ceased to exist under Texas law, and all of its assets,
liabilities and obligations have been assumed by Neptune Industries, Inc.
(2) FISCAL YEAR ENDS
The unaudited pro forma condensed combined statements of operations for
the year ended June 30, 2004 and for the nine months ended March 31, 2005,
include Move Films, Inc. and Neptune Industries, Inc. operations on a common
fiscal year.
(3) PRO FORMA ADJUSTMENTS
The adjustments to the accompanying unaudited pro forma condensed
combined balance sheet at June 30, 2004 are described below:
A) Record acquisition of Move Films, Inc. by issuing 2,817,500 shares
of Neptune Industries, Inc. common stock to the shareholders of Move Films, Inc.
in exchange for 100 percent of Move Films, Inc.'s outstanding stock.
The adjustments to the accompanying unaudited pro forma condensed
combined balance sheet at March 31, 2005 are described below:
A) Record acquisition of Move Films, Inc. by issuing 2,817,500 shares
of Neptune Industries, Inc. common stock to the shareholders of Move Films, Inc.
in exchange for 100 percent of Move Films, Inc.'s outstanding stock.
16
Item 2. Management's Discussion and Analysis or Plan of Operation.
Neptune Industries, Inc., (the "Company") was incorporated in the State of
Florida on May 8, 1998. It operates on a June 30, 2005 fiscal year. Its common
shares are traded on the Pink Sheets under the symbol NPNI. Since its inception,
the Company has been engaged in aquaculture (fish farming) through its
wholly-owned subsidiary, Blue Heron Aqua Farms, LLC, in Florida City, Florida
and in the development of new technologies for aquaculture and related marine
uses. On June 9, 2005, the Company merged with Move Films, Inc., a Texas
corporation, with the Company as the surviving entity. The merger was reported
in the Company's 10-KSB report filed with the SEC on June 17, 2005.
The Company's mission is to become a leading supplier of sustainable seafood
products through the development of a vertically integrated production and
distribution enterprise, encompassing fish farms, processing facilities,
wholesale distribution, and value-added product lines. The catalyst to the
Company's business model is the patent-pending S.A.F.E.(TM) (Solar-powered,
Aquaculture, Finfish, Environment) technology. S.A.F.E.(TM) provides a highly
efficient, environmentally friendly solution to current seafood production
requirements, while opening up new areas of the world to commercial farming. The
Company has already received interest from around the world to license,
purchase, and distribute the technology. Licensing, sales and joint venture
activities will further expedite and enhance the Company's business model. The
final strategic phase of the Company's mission involves the utilization of its
publicly traded vehicle to conduct a roll-up of the highly fragmented
aquaculture and distribution industries. The acquisition of other seafood
related businesses should allow the Company to expand, diversify, and integrate
its technology in the most efficient capacity.
The founders of the Company, Messrs. Ernest D. Papadoyianis and X.T. "Sal"
Cherch began designing and testing what today is known as the S.A.F.E.(TM)
System over 8 years ago. The S.A.F.E.(TM) system is designed to address and
resolve the concerns of environmentalists. Today, through a contractual
arrangement, Neptune has spent over 6 years and more than three million dollars
in completing the development of the S.A.F.E.(TM) system, perfecting production
methods, performing market analyses, acquiring lease sites, and creating a
cornerstone production facility through its subsidiary, Blue Heron Aqua Farms,
LLC.
Blue Heron operates a spectacular 48 acre fish farm in Florida City, FL that
incorporates a "one of a kind" flow-through environment which is virtually
extinct in the U.S. today. In October, 2004, management completed a
state-of-the-art nursery expansion in order to increase production capacity of
its sashimi quality hybrid striped bass (branded as EVERGLADES STRIPED BASS(TM))
by over 25%. The market for all seafood, particularly fresh farm-raised product,
has grown to tremendous proportions, warranting immediate and extensive
expansion of production and diversification to other popular species. With only
four acres of its site under production at this time, the Company estimates that
it can produce close to 2 M lbs of fish/year from this site alone.
17
Prior to the formation of Blue Heron, the founders continued their prior efforts
toward exploiting a unique and abundant resource in South Florida. Massive, yet
pristine quarry lakes spread throughout the state and provide an ideal
environment for fish production. Management focused its efforts on further
research and development of the various components of the S.A.F.E.(TM) system
technology, while fine tuning production methods for use in quarry lake aqua
farms. Among the many technological developments tested during this period was a
solar powered programmable, automated, feeding system which allows controlled
amounts of feed to be fed at specific times of the day. This insures a more
rapid growth rate, with less waste. Through the development and operation of
three previous pilot farms, Neptune improved its technology, and production
techniques to effectuate the efficient and economical production of seafood in
large, open bodies of water. The applications now extend to an open worldwide
market. In addition, Neptune successfully raised and marketed three commercially
viable species (hybrid striped bass, redfish and tilapia). The Company's farms
purchase fingerling fish, raise the product to market size (1.25-2+ lbs), then
harvest and distribute it to wholesalers, processors, market chains, etc.
throughout the U.S., Canada, and the Caribbean. Management has proven that its
unique, low-cost production strategy, technology, and existing distribution
allow it to bring its products to market faster and cheaper than the
competition.
DEVELOPMENT STRATEGY
Having established a strong distribution network for its fresh farm raised
seafood products throughout the United States, Canada and the Caribbean, the
Company has focused its attention on a 3 phase expansion program at its Florida
City site in order to meet market demand. In addition, the Company has moved
into the final stages of preparation for the commercial production of the
S.A.F.E.(TM) System.
FARMING OPERATIONS
The Company is poised to expand its facilities, diversify its production, and
vertically integrate its operations. Neptune intends to produce over 2 million
pounds of hybrid striped bass, redfish, tilapia, Nile perch and other species;
operate the only hybrid striped bass nursery in South Florida; and utilize its
effluent wastewater to produce a diversity of hydroponic vegetables and herbs.
The combination of Neptune's commercial aquaculture expertise, management and
technology, teamed with the expansive 48 acre fish farm facility, has created
one of the most premier commercial operations on the east coast and perhaps the
U.S.
In addition to the Florida City site, the Company has entered discussions with
four of the largest mining companies in South Florida to lease prime quarry lake
sites. Historically, management has focused its production and technology on
developing these vast man-made impoundments which are abundant in South Florida
and offer tremendous opportunity for development. Quarry sites are intended to
be developed utilizing S.A.F.E.(TM) System technology which was designed and
engineered from years of practical experience in commercial production in S.
Florida quarries. Quarry lake development presents an ideal opportunity to
establish multiple farm locations with minimal capital outlay for infrastructure
and lease payments.
18
TECHNOLOGY
The S.A.F.E.(TM) System incorporates many features which make it suitable for
use in all parts of the world. The Company continues to be deluged with
inquiries.
The S.A.F.E.(TM) System is a floating, articulating, patent pending containment
system which utilizes alternative energy to power many of its components. The
system can be utilized as a stand alone single tank (an Eco-Tank(TM)) in a
variety of sizes or several tanks can be interconnected into "Eco-pods(TM)". In
an Eco-pod(TM) configuration, each tank is connected to another via an
underwater conveyance pipe. This allows the operator to move fish from tank to
tank with out removing them from the water, or handling. Therefore, an
Eco-pod(TM) system actually becomes a self contained nursery and grow-out area.
An automated solar powered feeding system and a revolutionary waste collection
system insure rapid growth without contamination of surrounding waters. Since
each tank has solid sides, predators cannot get in, crops cannot escape, and in
the event of contamination of surrounding waters, the crops can be isolated and
protected.
OTHER AREAS OF DEVELOPMENT
The Company's future development plans expand far beyond it South Florida
production base. Management has identified several acquisition candidates that
would allow immediate production benefit and secure the hybrid striped bass
hatchery operations. The Company also intends to diversify its operations to
include marine products such as baitfish for the multi-million dollar sport
fishing market; production of hydroponic herbs and vegetables; wholesale
distribution and live delivery (hybrid striped bass and tilapia) to the Asian
and Latin markets; value added products; and franchise/joint venturing of its
S.A.F.E.(TM) System technology. Whether land or lake based operations, the
Company's strategic South Florida location with its twelve month growing season,
tremendous local market, and a select niche market for live products, provides a
significant advantage over competitors. A focus on products limited in the wild,
or by seasonality, further increases market value and demand.
Risk Factors.
UNCERTAINTY OF PRODUCT DEVELOPMENT
The Company is in the development stage and has realized only limited material
operating revenues. The Company's targeted products are in various stages of
analyses, development and testing. Most of the products will require further
development and investment before they can be determined to be capable of being
successfully commercialized. During the development stage, significant technical
and practical obstacles may be identified which may need to be overcome for
commercial viability or prior to obtaining necessary regulatory approvals.
Furthermore, some of the Company's proposed products which are successfully
developed might be subject to requisite regulatory approval prior to their
commercial sale, which may not be obtained. No assurance can be given that the
Company will succeed in the development, governmental approval or marketing of
any product.
19
The Company cannot achieve profitable operations unless its products are
successfully commercialized or licensed. The Company does not expect to achieve
significant revenues to finance its research activities. The transition from
test trials to commercial production will involve distinct management and
technical challenges and will require additional personnel and capital. There
can be no assurance that these development efforts will be successful or that
any given product will be effective, capable of being manufactured in commercial
quantities at an acceptable cost, approved by appropriate regulatory
authorities, successfully marketed or that capital will be available when
needed.
UNCERTAINTY OF FUTURE PROFITABILITY
The Company has not been profitable since inception and there can be no
assurance that the Company will ever achieve profitability. For the period from
inception to March 31, 2005, the Company incurred losses. The Company has
generated certain material operating revenues however expects operating losses
to increase over the near future. Thus, there can be no assurance that the
Company will be able to obtain outside financing for its operations that will be
sufficient to meet the Company's operating expenses. The Company's financial
statements do not include any adjustments that might be necessary should the
Company be unable to continue as a going concern.
The Company's ability to achieve profitability will depend in part on completing
research and development on, and obtaining regulatory approvals for, its
proposed products and successfully licensing or commercializing its products.
Until completion of the sale of the Common Shares, the Company had depended on
modest equity investments and spent minimal amounts on operating expenses. As a
result, the level of the Company's research and development activities has been
lower than such activities would have been with greater financial resources.
While the Company believes it has nonetheless made significant progress in its
research and development, financial limitations on the Company's activities may
have a material adverse effect on the Company in the future. No assurance can be
given that the Company will be able to complete sales of the Common Shares
offered hereby, or that the Company's product development efforts will be
completed, that required regulatory approvals will be obtained, that any
products will be manufactured or marketed successfully or that profitability
will be achieved. See "Business."
NO MARKET RESEARCH OF POTENTIAL DEMAND FOR PRODUCTS.
The Company has neither conducted nor have others made available to it results
of market research such that management might have absolute assurance from which
to estimate potential demand for its products. There is no assurance that
sufficient market penetration can be achieved so that planned production is
absorbed by the market in the event such a demand can be identified.
FUTURE CAPITAL NEEDS; INABILITY TO ACCESS CAPITAL MARKETS
The Company will continue to expend substantial funds on research and
development and commercialization efforts for its products. As of June 15, 2005,
the Company did not have any significant reserves of cash (See "Financial
20
Statements). The Company will require additional funds for these purposes and
will seek funds through equity financing, debt financing, collaborative
arrangements with corporate partners or from other sources. No assurance can be
given that such additional funds will be available to the Company on acceptable
terms, or at all. If adequate funds are not available from operations or
additional sources of financing, the Company's business will be materially and
adversely affected.
DEPENDENCE ON OTHERS; LIMITED COMMERCIAL EXPERIENCE
The Company has not yet commercially introduced any new products. To be
successful, the Company's products must be manufactured in compliance with
regulatory requirements and at acceptable costs. At present, the Company has
limited commercial manufacturing operations. The Company will either need to
provide such operations internally or license or subcontract the manufacturing
and/ or distribution of its products in order to achieve acceptable production
and/or sales levels. To the extent that the Company determines not to, or is
unable to, enter into joint marketing, distribution or manufacturing
arrangements or to arrange third party distribution or manufacturing for its
products, significant additional capital expenditures, management resources and
time will be required to develop manufacturing capabilities, a sales force and a
distribution network. There can be no assurance that the Company will be able to
establish such capabilities, sales force or network or enter into such joint
marketing, distribution or manufacturing arrangements or be successful in
gaining market acceptance for its products. In addition, the introduction of the
Company's products in foreign markets normally requires obtaining foreign
regulatory approvals and particular marketing expertise. There can be no
assurance that the Company will be able to market its products successfully in
the U.S. or overseas.
RAPID TECHNOLOGICAL ADVANCEMENT; COMPETITION
Aquaculture is a rapidly evolving field in which developments are likely to
continue at a rapid pace. Technological competition from aquacultural companies
and others diversifying into the field is intense and expected to increase. Many
of these companies have significantly greater research and development,
marketing, financial and managerial resources than the Company and, therefore,
represent significant competition for the Company. Moreover, competitors which
are able to complete trials, obtain required regulatory approvals and commence
commercial sales of their products before the Company may enjoy a significant
competitive advantage. There can be no assurance that developments by others
will not render the Company's products or technologies noncompetitive or that
the Company will be able to keep pace with technological developments.
OPERATING HAZARDS.
The Company's operations are subject to the hazards faced by any food production
company, most especially contamination from outside sources. Also, outside
agents introduced into its products may cause personal injury to a consumer.
Should the Company sustain an uninsured loss or liability, its ability to
continue operations would in all likelihood be adversely affected.
21
UNCERTAINTY OF AQUACULTURE BUSINESS.
The Aquaculture business is subject to many factors outside management's
control, which factors may have a proportionately greater impact on small, less
established firms such as the Company. The Seafood and aquaculture industries
are affected by a multitude of factors, including changes in the general market
for such products, weather, disease and other natural phenomena, as well as
national and international economic conditions. The competition among present
suppliers is based on numerous factors, including the type and quality of
available product, as well as other factors, including access to areas
throughout the world where fish and rock are available for commercial purposes.
Given the anticipated small size of the Company even after this offering has
closed and the proceeds have been applied as planned, the business of the
Company will remain fragile and even more vulnerable to these factors than will
businesses generally.
COMPETITION
The Company is an insignificant participant in the seafood industry. Management
believes it may successfully compete due to its proprietary techniques and
management's knowledge and experience. However, the Company is at a significant
competitive disadvantage compared to its competitors which have successfully
commercialized and obtained nation-wide distribution. Such national companies,
as well as some other well-established local brands, have significantly greater
financial resources and marketing strength than does the Company.
SUBSTANTIAL DILUTION
The shares of Common Stock held by a majority of Company's present stockholders
were purchased for prices significantly lower than the Offering price. At June
15, 2005, the Company had approximate book value of $(0.0234) per share of
Common Stock.
DIVIDENDS
Since its inception, the Company has not paid any cash dividends on its Common
Stock. The Company intends to retain future earnings, if any, to provide funds
for the operation of its business and accordingly, does not anticipate paying
any cash dividends on its Common Stock in the future.
CONFLICTS OF INTEREST
The Company relies on certain of its Directors and executive officers who have
experience that is germane to the evaluation and development of the Company's
products and assisting the Company in formulating its product research and
development strategy. Some of the members of the Board of Directors are employed
other than by the Company and may have commitments to or consulting or advisory
contracts with other entities that may limit their availability to the Company.
22
DEPENDENCE ON KEY MANAGEMENT
The development of the Company's business and operations has been and will be
materially dependent upon the active participation of Messrs. Papadoyianis and
Cherch. The loss of the services of either of these key personnel or other key
employees of the Company would have a material adverse effect on the ability to
attract and retain qualified employees, particularly management employees.
LIMITED ASSETS OF THE COMPANY.
The Company has limited tangible assets. Any business activity that the Company
undertakes will likely require substantial capital. In addition, the Company may
incur substantial costs in connection with its search and negotiations for
business opportunities, which may further deplete the limited assets of the
Company.
RISKS INVOLVED IN SALES TO DEVELOPING OR UNSTABLE BUSINESSES.
The Company may provide its products to new or developing companies, which would
increase its business risks. There are substantial risks inherent in doing
business with companies which do not possess the financial soundness of more
seasoned companies. These companies have little or no assets and are financially
unstable. The abilities of these companies to pay the Company fully for its
products, and, therefore, the ability of the Company to operate profitably, may
therefore be deemed to be of a high risk dependent upon numerous factors outside
the control of the Company.
GOVERNMENT REGULATION.
As with most companies engaged in general business operations, from time to
time, and depending upon the success of its proposed operations, the Company
will be subject to a wide variety of federal, state and local zoning and
building codes, statutes, rules and regulations, including: Anti-Trust Laws;
Labor Relations Laws; Federal and State Labor Laws; Federal Trade Commission and
State Trade Laws; Environmental Protection Laws, the Americans With Disabilities
Act, and the Occupational & Safety Health Administration (OSHA) and other
government regulatory mandates.
RULE 144 STOCK SALES.
All of the shares presently issued and outstanding, except for those shares
issued to seed capital investors are restricted securities as defined by Rule
230.144 of the Act. Under the recent amendments to Rule 144, such shares may be
sold in public transactions after a one year holding period, subject to certain
restrictions: I) on the manner of sale; II) the quantity allowed to be sold in
each 90 day period; iii) the availability of 'public' information; and iv) the
filing of a Form 144 Notice with the SEC. After a two year holding period,
non-affiliates may sell Shares under Rule 144(k) without regard to the stated
restrictions. The sale of any of such shares may have a negative and detrimental
effect upon the trading market (assuming such exists) at the time of sale.
23
PENNY STOCK REGULATIONS.
While there is no assurance that a public trading market will be established and
maintained, in the event that such does occur, the Securities And Exchange
Commission has established specific regulations and rules for low priced
securities classified as penny stocks. Subject to certain exemptions, securities
which trade at less than $5.00 per share may be deemed penny stocks and trading
would be subject to regulations requiring the broker/dealers to comply with
specific disclosure and customer qualification standards. Should the Company's
shares trade at less than $5.00 and therefore be regarded as a penny stock,
there may be significant negative and detrimental effects on the trading market
from broker compliance with such regulations and rules.
ITEM 3. CONTROLS AND PROCEDURES
The Company's Chief Executive Officer and Chief Financial Officer are
responsible for establishing and maintaining disclosure controls and procedures
for the Company.
(a) Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report, the Company carried
out an evaluation, under the supervision and with the participation of the
Company's management, including the Company's President, of the effectiveness of
the design and operation of the Company's disclosure controls and procedures
pursuant to Rule 13a-15 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). Based upon the evaluation, the Company's President
concluded that, as of the end of the period, the Company's disclosure controls
and procedures were effective in timely alerting him to material information
relating to the Company required to be included in the reports that the Company
files and submits pursuant to the Exchange Act.
(b) Changes in Internal Controls
Based on his evaluation as of March 31, 2005, there were no significant
changes in the Company's internal controls over financial reporting or in any
other areas that could significantly affect the Company's internal controls
subsequent to the date of his most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no legal proceedings against the Company and the Company is
unaware of such proceedings contemplated against it.
ITEM 2. CHANGES IN SECURITIES
None
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ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits required by Item 601 of Regulation S-B
31.1 Certification of Chief Executive Officer Pursuant to Section
302 of the Sarbanes-Oxley Act
31.2 Certification of Chief Financial Officer Pursuant to Section
302 of the Sarbanes-Oxley Act
32 Certification of Chief Executive Officer and Chief Financial
Officer Pursuant to Section 906 of the Sarbanes-Oxley Act
(b) Reports on Form 8-K
None
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, Neptune Industries, Inc. has duly caused this quarterly report on
Form 10-QSB to be signed on its behalf by the undersigned, hereunto duly
authorized.
Dated: June 20, 2005
NEPTUNE INDUSTRIES, INC.
By: /s/ Ernest Papadoyianis
- ------------------------------------
Ernest Papadoyianis
CEO, President and Director
By: /s/ Robert Hipple
- ------------------------------------
Robert Hipple
Chief Financial Officer
26