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UNITED STATES
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 December 31, 2000
or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE EXCHANGE ACT
For the transition period from to
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Commission file number 0-29258
AQUAPRO CORPORATION
(Exact name of Registrant as specified in its charter)
Tennessee 62-1598919
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification number)
1100 Highway 3, Sunflower, Mississippi 38778
(Address and Zip Code of Principal Executive Offices)
Registrant's telephone number, including area code: (662) 569-3331
Check whether the Issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the Registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
Yes [X] No [ ]
As of December 31, 2000, Registrant had outstanding 4,915,273 shares of common
stock, its only class of common equity outstanding.
Transitional Small Business Disclosure Format (Check
one): Yes [ ] No [X]
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INDEX
PART 1. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS Page No.
Condensed Consolidated Balance Sheets at
December 31, 2000 (unaudited) and
June 30, 2000 3
Condensed Consolidated Statements of
Operations for the three and six months ended
December 31, 2000 and 1999 (unaudited) 5
Condensed Consolidated Statements of
Cash Flows for the six months ended
December 31, 2000 and 1999 (unaudited) 6
Notes to Unaudited Condensed Consolidated
Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security
Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
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PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
AquaPro Corporation
Condensed Consolidated Balance Sheets
December 31, June 30,
2000 2000
(Unaudited) (Note 1)
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Assets
Current assets:
Cash and cash equivalents $ 99,821 $ 46,604
Trade accounts receivable 584,894 487,987
Other receivables 15,000 87,090
Live fish inventories 6,289,898 5,939,966
Prepaid expenses 65,649 52,443
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Total current assets 7,055,262 6,614,090
Property, buildings and equipment, net 7,475,671 7,872,569
Investments in cooperatives 169,240 169,240
Other assets 185,094 160,961
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Total assets 14,885,267 $14,816,860
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See accompanying notes to unaudited condensed consolidated financial statements.
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December 31, June 30,
2000 2000
(Unaudited) (Note 1)
Liabilities and stockholders' equity
Current liabilities:
Notes payable $ 1,550,560 $ 1,348,678
Accounts payable 884,352 398,063
Accrued expenses 238,573 145,449
Current maturities of long-term debt 682,390 1,617,848
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Total current liabilities 3,355,875 3,510,038
Long-term debt, less current maturities 5,739,631 4,977,708
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Total liabilities 9,095,506 8,487,746
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Stockholders' equity:
Common stock, no par value -
authorized 100,000,000 shares,
4,915,273 issued and outstanding shares
at December 31, 2000 and 4,905,273
shares at June 30, 2000 15,388,444 15,383,334
Unearned compensation (8,422) (8,320)
Retained earnings (deficit) (9,590,261) (9,045,900)
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Total stockholders' equity 5,789,761 6,329,114
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Total liabilities and stockholders'
equity $ 14,885,267 $ 14,816,860
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See accompanying notes to unaudited condensed consolidated financial statements.
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AquaPro Corporation
Condensed Consolidated Statement of Operations
(Unaudited)
Three Months ended
December 31
2000 1999
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Net sales $ 2,209,523 $ 1,838,118
Cost of products sold 1,952,947 1,375,416
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Gross profit 256,576 462,702
Selling, general and administrative 444,630 441,470
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Operating income (loss) (188,054) 21,232
Other income (expense):
Interest expense 195,908 169,421
Other, net (105,361) (70,842)
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90,547 98,579
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Net loss $ (278,601) $ (77,348)
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Basic net loss per share $ (0.06) $ (0.02)
Diluted net loss per share $ (0.06) $ (0.02)
Basic weighted average common shares
outstanding 4,915,273 4,892,381
Diluted weighted average common shares
outstanding 4,915,273 4,892,381
See accompanying notes to unaudited condensed consolidated financial statements.
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AquaPro Corporation
Condensed Consolidated Statement of Operations
(Unaudited)
Six Months ended
December 31
2000 1999
Net sales $ 3,559,764 $ 3,853,819
Cost of products sold 3,035,393 2,852,596
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Gross profit $ 524,371 $ 1,001,223
Selling, general and administrative 832,311 803,095
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Operating income (loss) (307,940) 198,128
Other (income) expense
Equity in losses on investment in cooperatives (11,814)
Interest expense 401,726 335,080
Other, net (165,305) (118,136)
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236,421 205,130
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Net loss (544,361) $ (7,002)
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Basic and diluted net loss per share $ (0.11) $ (0.00)
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Basic and diluted weighted average
common shares outstanding 4,912,130 4,892,881
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See accompanying notes to unaudited condensed consolidated financial statements
AquaPro Corporation
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Six Months ended
December 31
2000 1999
Net cash provided by (used in) operating
activities $105,163 $482,138
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Cash flows from investing activities:
Purchases of property and equipment (40,293) (338,857)
Investment in joint venture (40,000) --
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Net cash used in investing activities (80,293) (338,857)
Cash flows from financing activities:
Net increase (decrease) in notes payable 201,882 (309,104)
Proceeds from long-term borrowings 313,647
Principal payments on long-term borrowings (173,535) (247,809)
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Net cash provided by (used in) financing
activities 28,347 (240,359)
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Net increase (decrease) in cash and cash
equivalents 53,217 (85,264)
Cash and cash equivalents at beginning of
period 46,604 86,264
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Cash and cash equivalents at end of
period $ 99,821 $ 1,000
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See accompanying notes to unaudited condensed consolidated financial statements
AquaPro Corporation
Notes to Condensed Consolidated Financial Statements
(Unaudited)
December 31, 2000
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-QSB.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for three-month and six-month periods ended December 31, 2000
is not necessarily indicative of the results that may be expected for the year
ended June 30, 2001.
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The balance sheet at June 30, 2000 has been derived from the audited
consolidated financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements.
For further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's annual report on Form 10-KSB for the
year ended June 30, 2000.
2. Long-term debt
In January 2001, the Company refinanced a $910,000 mortgage with two
lenders over five years. The loans require monthly payments of $11,754 and
$6,543 and are at fixed interest rates of 13% and 14%. One of the loans will
have a $315,000 balloon payment due at maturity. The classification of the debt
in the accompanying condensed consolidated balance sheet reflects the terms of
the refinanced loans.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This report contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. Actual results could differ materially from those projected in the
forward-looking statements as a result of certain factors including those set
forth in this Item 2 and elsewhere in, or incorporated by reference into, this
report. The Registrant has attempted to identify forward-looking statements in
this report by placing an asterisk (*) following each sentence containing such
statements.
RESULTS OF OPERATIONS THREE MONTHS ENDED DECEMBER 31, 2000
COMPARED TO THREE MONTHS ENDED DECEMBER 31, 1999
REVENUE. Net sales during the three-month period ended December 31, 2000 totaled
$2,209,523 compared to $1,838,118 for the same period in 1999. This represents
an increase of $371,405 or 20.2%. Volume increased 781,170 pounds to 3,331,025
pounds of fish sold compared to 2,549,855 pounds sold during the three-month
period ended December 31, 1999. Accordingly, volume represented a 30.6% increase
during the three months ended December 31, 2000 compared to the same period in
1999. The average price per pound sold declined from 72.1 cents per pound in the
three months ended December 31, 1999 to 66.3 cents per pound in the same period
in 2000. The decrease in selling price per pound of catfish sold resulted
primarily from adequate supplies of fish available to meet the processors'
demand during this period. The selling price of fish is seasonal. Typically in
the spring supplies of fish decrease about the time the feeding season begins
and the price of fish increases.
COST OF PRODUCTS SOLD AND GROSS PROFIT. Cost of products sold was $1,952,947, an
increase of $577,531 or 42.0% compared to the same three-month period of 1999,
while net sales decreased 20.2%. On a per pound basis, the costs of products
sold increased from 53.9 cents in the three-month period ended December 31, 1999
to 58.6 cents in the same period in 2000. Gross profit from fish sales was 11.6%
during the three-month period ended December 31, 2000 as compared to 25.2% in
the same period in 1999. Cost of product sold is largely dependent on the
Company's cost structure in the previous year due to the nine to eighteen month
grow out period required for fish to reach a marketable size.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses during the three-month period ended December 31, 2000 were $444,630 or
$3,160 higher than in the three-month period ended December 31, 1999. The
selling, general and administrative expenses decreased in
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relation to sales volume, from 17.3 cents per pound sold in the three-month
period ending December 31, 1999 to 13.3 cents per pound in the same period in
2000.
INTEREST EXPENSE. Interest expense increased $26,487 or 15.6% to $195,908
in the three-month period ended December 31, 2000 compared to the same
period in 1999. The Company's long-term debt outstanding was higher in 2000 from
financing the purchase of certain land, ponds and improvements, and machinery
and equipment in May 2000.
RESULTS OF OPERATIONS SIX MONTHS ENDED DECEMBER 31, 2000 COMPARED TO SIX MONTHS
ENDED DECEMBER 31, 1999
NET SALES. Net sales during the six-month period ended December 31, 2000,
totaled $3,559,764 compared to $3,853,819 for the same period in 1999. This
represents a decrease of $294,055 or 7.6%. Volume decreased 53,292 pounds to
5,231,768 pounds of fish sold compared to 5,285,060 pounds sold during the
six-month period ended December 31, 2000 and 1999 respectively. Accordingly,
volume represented a 1.0% decrease during the six months ended December 31, 2000
compared to the same period in 1999. The decrease in volume for the six-month
period is primarily a result of reduced sales volume in the first quarter of
fiscal 2001 attributable to the extreme hot weather and algae problems that
affected the Company's ability to sell fish during that period. This decrease in
sales was exacerbated by a decrease of approximately 4.9 cents per pound in the
average selling price of fish. Had the selling price been the same as the same
period last year, the Company would have received $256,356 more in revenues on
the pounds it sold during the first six months of it fiscal year.
COST OF PRODUCTS SOLD AND GROSS PROFIT. Cost of products sold was $3,035,394, an
increase of $182,798 or 6.4% compared to the same six-month period of 1999 while
net sales decreased 7.6%. On a per pound basis, the costs of products sold
reflected an increase from 54.0 cents in the six-month period ended December 31,
1999 to 58.0 cents in 2000. Gross profit on fish sales was 14.7% during the
six-month period ended December 31, 2000 as compared to 26.0% in the same period
for 1999. This deterioration in gross profit is due principally to higher feed
costs and much higher fuel costs, and the decrease in the average selling price
per pound.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses during the six-month period ended December 31, 2000 were $832,311 or
$29,216 higher than in the six-month period ended December 31, 1999. Selling,
general and administrative expenses also increased in relation to sales volume
from 20.8% of sales for the six months ending December 31, 1999 to 23.4% of
sales in 2000, due primarily to a decrease in sales volume.
INTEREST EXPENSE. Interest expense increased 66,646 or 20% to 401,726 in the
six-month period ended December 31, 2000 compared to the same period in 1999,
due principally to an increase in average borrowings.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 2000, the Company had a current ratio of 2.1 to one, compared
to 1.9 to one at June 30, 2000. Current assets exceeded current liabilities by
$3,699,387 as of December 31, 2000 compared to $3,104,052 as of June 30, 2000.
Live fish inventories increased from approximately 10.2 million pounds at June
30, 2000 to approximately 11.0 million pounds at December 31, 2000, while
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the carrying amount inventory increased by $349,932. From early summer through
October, fish consume the greatest amount of feed.
For the six-month period ended December 31, 2000, the Company net cash from
operating activities of $105,163 compared to $482,138 for the same period in the
previous year.
During the six-month period ended December 31, 2000, the Company purchased
$40,293 in property and equipment, most of which was financed by notes.
The Company is current on all of its notes payable and long-term debt, payroll,
and payroll tax obligations. However, unsecured vendor accounts payable of
approximately $400,000 relating to purchases through November 2000 are past due
as of December 31, 2000. The Company's feed and production lines of credit with
a bank require that fifty percent of all collections of accounts receivable be
applied to the outstanding balance of each until paid.
The balance on the feed line was $157,700 at December 31, 2000, and $517,000 on
the production line. The feed line was paid during the second week of January,
2001, and those funds are available for the Company's use.
The Company has a $250,000 unsecured credit facility from a creditor that makes
short-term loans to businesses. Loan proceeds are paid directly to the Company's
vendors, and the Company repays borrowings and loan fees of 2 1/2% to the
creditor over six months. Borrowings bear interest at 12% per annum. During
August 2000, the Company utilized the facility from this creditor for operating
expenses in addition to those funded by the Company's bank lines of credit. As
of December 31, 2000, the Company's outstanding balance with the short-term
creditor was $151,800.
HIDDEN LAKES BALLOON MORTGAGE REFINANCED
In January 2001, the Company repaid the outstanding balance of
approximately $910,000 on the loan secured by the Company's Hidden Lakes farm.
The repayment was financed by the proceeds from two new loans; a $630,000 loan
from Secured Loans, Inc., a private lender, secured by a trust lien on the
Hidden Lakes real property, and a $280,000 loan from Union Planters Bank secured
by a first lien on the Hidden Lakes equipment and a second lien on that farm's
real property. The $630,000 loan is payable $11,750 per month for sixty months,
at which time the balance of approximately $315,000 is due and payable. The
$280,000 loan is payable in sixty equal monthly payments of $6,542.
SUBSEQUENT EVENTS
In mid-January 2001, the Company paid the feed portion of its seasonal credit
line with Community Bank. This was two months prior to the maturity date and
allowed the Company to borrow from the bank $250,000 in order to pay a portion
of its past due accounts payable. Repayment of this loan requires six weekly
payments of $41,600 in addition to the payment of the remaining $316,214 of the
seasonal credit line, which must be repaid in full by March 15, 2001.
Substantially all of the Company's sales revenues are pledged to the payment of
these loans,thus until these loans are paid in full, the Company will not have
cash available to pay its existing accounts payable which are expected to be as
much as $600,000. Moreover, the existing seasonal credit line must be paid off
before the bank will extend a new seasonal credit line to the Company in April.
The new seasonal credit line is necessary to finance the Company's operations
during the 2001-2002 growing season.
During calendar 2000, the Company expended approximately $1.0 million in the
acquisition, stocking of fish, feeding and operating costs for its new Indian
Lakes farm. The Company acquired this 525 water acre farm in April 2000 and
financed these amounts from cashflow and borrowings. The Company expects sales
of fish from the Indian Lakes farm to commence in June 2001. The Company had
planned to finance these costs with the proceeds from an USDA business and
industrial loan in the Fall of 2000. The Company received tentative approval,
however, final approval was not obtained. The Company is still pursuing this
loan application, but there is no assurance that the Company will be successful.
Unless other financing is obtained, the Company will likely not be able to pay
its remaining accounts payable until after the 2001-2002 growing season starts
in April. The Company is exploring other institutional and private financing
OTHER EVENTS
NEW HEAD OF FARM PRODUCTION
Commencing January 1, 2000, the Company named Joseph Evans its provisional head
of farm production. Mr. Evans ,57,has twenty-one years of experience in the
catfish industry. He managed his own farm from 1980 to 1990. He managed over 900
water acres for Bearden Farms, one of the largest catfish operations in the
United States at the time. From 1994 to 1996, he managed over 750 water acres
for Tackett fish farms, the largest catfish farming operation in the United
States. From 1996 into 1998, he managed over 1,500 water acres at Straight Creek
farms when AquaPro hired him. At AquaPro, he managed approximately half of its
water acres until this recent promotion. Mr. Evans replaces Randall Willoughby
as head of production. Effective December 26, 2000, the Company had terminated
Mr. Willoughby as an officer and employee, for various reasons including
unsatisfactory performance.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
During the quarter ending December 31, 2000 the company issued 4,000 shares of
restricted Common stock to senior management. The stock has a two-year vesting
period.
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
Exhibits: Financial data schedule
Reports on Form 8-K: None
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
AquaPro Corporation
(Registrant)
Dated: February 10, 2001 By: /s/ George S. Hastings, Jr.
Chief Executive Officer,
President and
Chairman of the Board