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 March 31, 2000
or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE
EXCHANGE ACT
For the transition period from ___________ to ______________
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 934 uring
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 March 31, 2000, Registrant had outstanding 4,902,941 shares of
common stock, its only class of common equity outstanding.
Transitional Small Business Disclosure Format
(Check one): Yes [ ] No [ X ]
INDEX
PART 1. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS Page No.
Condensed Consolidated Balance Sheets at March 31, 2000
(unaudited)and June 30, 1999 3
Condensed Consolidated Statements of Operations for the
Three and Nine Months ended March 31, 2000 and 1999 (unaudited) 5
Condensed Consolidated Statements of Cash Flows for the Nine
Months ended March 31, 2000 and 1999 (unaudited) 7
Notes to Unaudited Condensed Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
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
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
AquaPro Corporation
Condensed Consolidated Balance Sheets
March 31, June 30,
2000 1999
(Unaudited) (Note 1)
Assets ----------- -----------
Current assets:
Cash and cash equivalents $313,269 $86,264
Trade accounts receivable 417,810 243,136
Other receivables 52,695 104,000
Live fish inventories 5,146,963 6,264,923
Prepaid expenses 102,987 21,038
------------ ------------
Total current assets 6,033,724 6,719,361
Property, buildings and equipment, net 6,774,772 7,035,066
Investments in cooperatives 169,240 411,456
Other assets 133,167 170,205
------------- ------------
Total assets $13,110,903 $14,336,088
============= =============
See accompanying notes to unaudited condensed consolidated
financial statements.
March 31, June 30,
2000 1999
(Unaudited) (Note 1)
------------- --------------
Liabilities and stockholders' equity
Current liabilities:
Notes payable $431,380 $1,388,493
Accounts payable 237,808 548,768
Accrued expenses 264,985 99,002
Current maturities of long-term debt 1,409,021 1,523,347
------------ ------------
Total current liabilities 2,342,746 3,559,610
Long-term debt, less current maturities 4,404,162 4,334,081
Stockholders' equity:
Common stock, no par value - authorized
100,000,000 shares, issued
and outstanding 4,902,941 at
March 31, 2000 and 4,890,381
shares at June 30, 1999 15,381,006 15,371,912
Unearned compensation (11,180) (32,444)
Retained earnings (deficit) (9,005,831) (8,897,071)
------------ ------------
Total stockholders' equity 6,363,995 6,442,397
------------ ------------
Total liabilities and stockholders'
equity $13,110,903 $14,336,088
============= =============
See accompanying notes to unaudited condensed consolidated
financial statements.
AquaPro Corporation
Condensed Consolidated Statements of Operations
(Unaudited)
Three Months ended
March 31
2000 1999
------------- -------------
Net sales $1,666,637 $1,330,351
Cost of products sold 1,283,184 998,385
------------- --------------
Gross profit 383,453 331,966
Selling, general and administrative 411,179 386,444
-------------- --------------
Operating loss (27,726) (54,478)
Other income (expense):
Equity in losses on investment in
cooperatives 0 (154,111)
Interest expense (137,033) (111,616)
Other, net 63,001 100,417
-------------- --------------
(74,032) (165,310)
-------------- --------------
Net loss $(101,758) $(219,788)
============== ==============
Basic and diluted net loss per share $(0.02) $(0.05)
============ ==============
Basic and diluted weighted average
common shares outstanding 4,895,021 4,883,006
============ ==============
See accompanying notes to unaudited condensed consolidated
financial statements.
AquaPro Corporation
Condensed Consolidated Statements of Operations
(Unaudited)
Nine Months ended
March 31
2000 1999
------------- -------------
Net sales $5,520,457 $4,879,214
Cost of products sold 4,135,781 3,721,587
-------------- --------------
Gross profit 1,384,676 1,157,627
Selling, general and administrative 1,214,274 1,224,713
-------------- --------------
Operating income (loss) 170,402 (67,086)
Other income (expense):
Equity in losses on investment in
cooperatives ---- (221,681)
Interest expense (472,114) (361,691)
Other, net 192,952 291,790
-------------- -------------
(279,162) (291,582)
-------------- -------------
Net loss $(108,760) $(358,668)
============= ===========
Basic and diluted net loss per share $(0.02) $(0.07)
============= ===========
Basic and diluted weighted average
common shares outstanding 4,893,537 4,842,202
============= ===========
See accompanying notes to unaudited condensed consolidated
financial statements.
AquaPro Corporation
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Nine Months ended
March 31
2000 1999
----------- -----------
Net cash provided by operating activities $1,668,706 $1,126,898
Cash flows from investing activities:
Purchases of property and equipment (350,987) (266,283)
Proceeds from note receivable from affiliate ---- 27,998
Refund on stock investment ---- 14,220
------------- -------------
Net cash used in investing activities (350,987) (224,065)
Cash flows from financing activities:
Net increase in notes payable (957,115) (599,964)
Principal payments on long-term borrowings (644,973) (257,703)
Proceeds from long-term borrowings 502,280 92,574
------------- ------------
Net cash used in financing activities (1,099,808) (765,093)
------------- ------------
Net increase in cash and cash equivalents 227,005 137,740
Cash and cash equivalents at beginning of period 86,264 112,631
------------- ------------
Cash and cash equivalents at end of period $313,269 $250,371
============= =============
Non-cash financing and investing activities:
Conversion of Preferred Warrants to common
stock ---- $48,530
------------- --------------
Cancellation of 12,560 shares of common stock ---- $48,000
============= =============
Surrender of Delta Pride Cooperative Stock $242,216 ----
Issuance of 12,560 shares of common stock $9,904 ----
============= =============
See accompanying notes to unaudited condensed consolidated
financial statements
AquaPro Corporation
Notes to Condensed Consolidated Financial Statements
(Unaudited)
March 31, 2000
1. Basis of Presentation of Unaudited Financial Statements
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 nine-month periods ended March 31, 2000
is not necessarily indicative of the results that may be expected for the
fiscal year ended June 30, 2000.
The condensed consolidated balance sheet at June 30, 1999 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, 1999.
2. Subsequent Events
In April, 2000, the Company obtained a $900,000 revolving line of credit to
fund purchased of feed and a $800,000 revolving line of credit for catfish
production. The terms of the agreement are essentially the same as the
revolving lines of credit that were paid in fiscal 2000. Each line of credit
expires March 15, 2001.
In May, 2000, the Company purchased land, ponds and improvements, and certain
buildings and equipment for $25,000 cash, a $76,000 note payable to the
sellers, and assumption of $800,000 of long-term debt. The ponds and
improvements acquired consist of approximately 525 total water acres.
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 MARCH 31, 2000 COMPARED TO THREE MONTHS ENDED
MARCH 31, 1999
NET SALES. Net sales during the three-month period ended March 31, 2000
totaled $1,666,637 compared to $1,330,351 for the same period in 1999.
This represents an increase of $336,286 or 25.3%. Volume increased 286,435
pounds to 2,132,555 pounds of fish sold compared to 1,846,120 pounds sold
during the three-month period ended March 31, 1999. Accordingly, volume
represented a 15.5% increase during the three months ended March 31, 2000
compared to the same period in fiscal 1999. The average price per pound sold
increased from 72.1 to 78.2 cents, an 8.5% increase, in the three-month
period ended March 31, 2000 compared to the same period in fiscal 1999.
COST OF PRODUCTS SOLD AND GROSS PROFIT. Cost of products sold was
$1,283,184, an increase of $284,799 or 28.5% compared to the same three-
month period in 1999, while net sales increased 25.3%. On a per pound
basis, the costs of products sold was 60.2 cents in the three-month periods
ended March 31, 2000, compared to 54.1 cents per pound during the same
period in fiscal 1999. The increase in costs of products sold, per pound,
was due to sales from the Kroeker farm described below. The gross profit
margin from fish sales was 23.0% during the three-month period ended
March 31, 2000 as compared to 25.0% in the same period in fiscal 1999.
Cost of products sold is largely dependent on the Company's cost structure
in the previous year due to the 12 - 18 month grow out period required for
fish to mature.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses during the three-month period ended March 31, 2000 were $383,453
or $24,735 more than in the three-month period ended March 31, 1999. The
selling, general and administrative expenses represented a decrease in
relation to sales volume, from 29.1% of sales in the three-month period
month ended March 31, 1999 compared to 24.7% of sales in the same period
in 2000.
INTEREST EXPENSE. Interest expense increased $25,417 or 22.8% to $137,033
in the three-month period ended March 31, 2000 compared to the same period
in 1999, due principally to an increase in average borrowings.
RESULTS OF OPERATIONS NINE MONTHS ENDED MARCH 31, 2000 COMPARED TO NINE
MONTHS ENDED MARCH 31, 1999
NET SALES. Net sales during the nine-month period ended March 31, 2000
totaled $5,520,457 compared to $4,879,214 for the same period in fiscal 1999.
This represents an increase of $641,243 or 13.1%. Volume increased 682,385
pounds to 7,417,615 pounds of fish sold compared to 6,735,230 pounds sold
during the nine-month period ended March 31, 1999. Accordingly, volume
represented a 10.1% increase during the nine-months ended March 31, 2000
compared to the same period in 1999. The increase in volume for the nine-
month period resulted from additional sales volume capacity with the
addition of the Kroeker farm in fiscal 1999, and the rebuilding of 135
acres of the Hidden Lakes farm. Volume is expected to increase at
approximately the same percentage during fiscal 2000. This volume
increase was enhanced by an increase of approximately two cents per pound
in the average selling price of fish.
COST OF PRODUCTS SOLD AND GROSS PROFIT. Cost of products sold was
$4,135,781, an increase of $414,194 or 11.1% compared to the same nine-
month period of 1999, while net sales increased 13.1%. On a per pound
basis, the costs of products sold increased from 55.3 cents in the nine-
month period ended March 31, 1999 to 55.8 cents in fiscal 2000. Margin
from fish sales was 25.1% during the nine-month period ended March 31,
2000 as compared to 23.7% in the same period in fiscal 1999. The Kroeker
farm added 790,000 pounds of fish production in the nine months ended
March 31, 2000. The initial production costs at this location, were
significantly higher than the average costs at the more mature farms.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses during the nine-month period ended March 31, 2000 were $1,214,274
or $10,439 less than the nine-month period ended March 31, 1999. Selling,
general and administrative expenses also represented a decrease in relation
to sales volume, from 25.1% of sales for the nine-months ending
March 31, 1999 to 22.0% of sales in fiscal 2000, due to an increase in
production and sales volume.
INTEREST EXPENSE. Interest expense increased $110,423 or 30.5% to $472,114
in the nine-month period ended March 31, 2000 compared to the same period
in 1999, due principally to approximately $2 million in debt associated
with the Kroeker farm purchase in fiscal year 1999.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2000, the Company had a current ratio of 2.58 to 1, compared
to 1.89 to 1 at June 30, 1999. Current assets exceeded current liabilities
by $3,690,978 at March 31, 2000 compared to $3,159,751 at June 30, 1999.
Cash and cash equivalents increased during the nine-month period ended
March 31, 2000 by $227,005.
Cash and cash equivalents were used primarily to grow live fish
inventories. Live fish inventories decreased by 1,734,000 pounds to
approximately 8,966,000 pounds at March 31, 2000, and the cost basis of
this inventory decreased by approximately $1,118,000. Feeding activity is
typically at its lowest level during the winter months of the Company's
third fiscal quarter. Thus, while additions to inventory decrease during
this quarter, sales remain somewhat level, thereby reducing inventory
quantities.
In April of 2000, the Company contracted with its feed vendor to purchase
approximately 13,000 tons of catfish feed. Due to the fluctuating market
price of feed, the Company has not fixed the final price per ton for fiscal
2000, but, currently , the feed prices is somewhat higher than last fiscal
year.
Subsequent to March 31, 2000, the Company negotiated with a bank in
Mississippi for a feed line of credit and a line of credit to cover catfish
production costs during the coming growing season. The terms of the lines
of credit are approximately the same as to the previous year's agreements,
which were paid prior to the expiration date of the lines. The amount of
available borrowings was increased by $600,000, compared to the prior year,
upon the purchase of additional 525 water acres of ponds and improvements
(see note 2).
For the nine-month period ended March 31, 2000, the Company had cash flows
from operations of $1,668,706 compared to an inflow of $1,126,898 for the
same period in the previous year, a 48.0% improvement over last year.
During the nine-month period ended March 31, 2000, the Company purchased
approximately $350,987 in property and equipment to replace and or upgrade
existing assets.
OUTLOOK*
This outlook section contains a number of forward-looking statements, all of
which are based on current expectations. Actual results may differ materially.
These statements do not reflect the potential impact of any future mergers or
acquisitions except as noted below.
NET SALES. The Company's revenues increased by 13.1 percent for the first
nine months of fiscal 2000. If the Company's sales budgets are met for
its spring fiscal quarter, management expects revenues to increase over
those for the same period during last year by approximately the same
percentage. The Company's catfish sales from the 325 acre Kroeker farm
acquired in fiscal 1999 are expected to contribute significantly to an
increase in the Company's revenues and cash flow, in its fourth fiscal
quarter of this year but not to earnings because of the current high cost
of inventory.
During fiscal 2000, management plans to seek additional financing in order
to acquire additional land and production capacity. If the Company is
successful in adding additional capacity in fiscal 2000, an increase in
catfish production from this expansion should be experienced by the spring
of 2001, when the Company and the industry have been historically short of
fish. Cyclically, catfish prices are typically the highest for the year
during the spring season. By adding production capacity to increase sales
during the spring, the Company hopes to increase revenues and margins by
taking advantage of the historical price cycle.
COSTS OF PRODUCTS SOLD AND GROSS PROFIT. The Company's continuing efforts
to reduce costs of operations have resulted in decreases in overall feed
cost and other costs of products sold, thereby increasing the Company's
gross profit margins. These reductions have more than offset the increase
in costs of production due to having higher live fish inventory costs in
connection with the Company's commencement of production at the Kroeker
farm in fiscal 1999. Management believes that its continued efforts to
control feed and other operational costs together with its anticipated
reduction in production costs relating to the Kroeker farm inventory,
will continue to reduce cost of products sold as a percentage of revenues.
The reduction of costs of production have resulted in increase of operational
profit margins. Other conditions affecting the Company's margins include fish
prices (which increased in calender 1999 and the first two month of 2000) and
startup cost which would likely be incurred in connection with the Company's
acquisition of additional farming capacity. In addition, analysis of the
Company's costs of maintaining a special crew for seining led to a reduction
of labor and vehicle costs by outsourcing those responsibilities.
SELLING, GENERAL AND ADMINISTRATIVE. General and administrative expenses
continue to decline as a result of management's efforts. The Company's
increased sales volume has not caused a corresponding increase in general
and administrative expenses. Selling expenses tend to be variable and do
increase with increasing sales. In November of 1999 the Company outsourced
the seining of fish for sale.
OTHER INCOME AND LOSSES.
The Company withdrew as a member of the Delta Pride processing cooperative
in December 1999. As a result, the Company is no longer subject to past or
future operating losses of this cooperative. The Company is arranging
processing of its fish through independent processors. These processors are
currently paying prices equal or greater than that received from the Delta
Pride cooperative. As these processors are independent, the Company is not
subject to liability for assessment or charge-backs based on the processors
operating deficits. Additionally, management is exploring options to
establish ownership, either alone or through investment with others, of
proprietary processing facilities.
REST OF THIS PAGE LEFT BLANK INTENTIONALLY
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
9,000 shares of common stock issued to George S. Hasting's as
restricted grants as part of his compensation package.
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: None
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, thereunto duly authorized.
AquaPro Corporation
(Registrant)
Dated: May 5, 2000 By: /s/ Mike Horton
CFO & Secretary
[ARTICLE] 5
<TABLE>
<S> <C>
[PERIOD-TYPE] 3-MOS
[FISCAL-YEAR-END] JUN-30-2000
[PERIOD-START] JAN-01-2000
[PERIOD-END] MAR-31-2000
[CASH] 313,269
[SECURITIES] 0
[RECEIVABLES] 470,505
[ALLOWANCES] 0
[INVENTORY] 5,146,963
[CURRENT-ASSETS] 405,394
[PP&E] 10,406,702
[DEPRECIATION] 3,628,930
[TOTAL-ASSETS] 13,110,903
[CURRENT-LIABILITIES] 2,342,746
[BONDS] 4,404,162
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 15,381,007
[OTHER-SE] (9,017,011)
[TOTAL-LIABILITY-AND-EQUITY] 13,110,903
[SALES] 5,520,457
[TOTAL-REVENUES] 5,520,457
[CGS] 4,135,781
[TOTAL-COSTS] 4,135,781
[OTHER-EXPENSES] 0
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 472,114
[INCOME-PRETAX] (108,760)
[INCOME-TAX] 0
[INCOME-CONTINUING] (108,760)
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] (108,760)
[EPS-BASIC] (.02)
[EPS-DILUTED] (.02)
</TABLE>
