UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-KSB
ANNUAL REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 2000
Commission File Number 0-28495
GLOBAL SEAFOOD TECHNOLOGIES, INC.
(Name of small business issuer in its charter)
Nevada 95-41778228
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
555 Bayview Avenue 39530
Biloxi, Mississippi (zip code)
(Address of principal executive offices)
Issuer's telephone number: (228) 435-3632
Securities registered under Section 12 (b) of the Exchange Act:
None
Securities registered under Section 12 (g) of the Exchange Act:
Common Stock
(Title of class)
Indicate by check mark whether the issuer (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act during the past
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 __
Indicate by check mark if there is no disclosure of delinquent filers
in response to Item 405 of Regulation S-B contained in this form, and no
disclosure will be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part III
of this Form 10-KSB or any amendment to this Form 10-KSB. (___)
The issuer's revenues for its most recent fiscal year ended March 31,
2000 were $14,205,602
The aggregate market value of the voting and non-voting common equity
held by non-affiliates computed by reference to the price at which common equity
was sold, or the average bid and asked price of such common equity, as of June
29, 2000 was $3,319,000 (calculated by excluding restricted shares which
includes shares owned beneficially by directors and officers). The total number
of shares of issuer's common equity outstanding as of June 29, 2000 was
13,124,046
DOCUMENTS INCORPORATED BY REFERENCE
The following documents are incorporated by reference into the
following parts of this Form 10-KSB: certain information required in Part III of
this Form 10-KSB is incorporated from the issuer's Proxy Statement for its 2000
Annual Meeting of Shareholders and certain information required in Parts I and
II of this Form 10-KSB is incorporated from its Annual Report to Shareholders
for the year ended March 31, 2000.
Transitional Small Business Disclosure Format: Yes No X
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PART 1
ITEM 1. DESCRIPTION OF BUSINESS
Business Development
The Company was founded as Custom Pack, Inc., which was incorporated under the
laws of the State of Mississippi in 1988. Through a reverse merger completed in
1995, Custom Pack became a wholly-owned subsidiary of International Custom Pack,
Inc., the successor in name to predecessor entities Enviro Solutions
International, Inc. and Rue de Rivoli Perfumeries of America, Ltd., which had
been incorporated in Nevada in 1986. In December, 1998 the company changed its
name to Global Seafood Technologies, Inc. to reflect the expansion of business
activities beyond the core business of seafood processing and packaging. The
expanded activities include the aquaculture production of seafood, and
processing, packaging, and distribution of bait products for recreational
fishing.
Business Description
Custom Pack
Our principal line of business is the full-service processing, packaging, and
storage of shrimp and other seafood. This business is conducted through our
wholly-owned subsidiaries, Custom Pack, Inc. ("Custom Pack") as well as CoMar
Foods, Inc. The products are distributed to many of the nation's largest seafood
restaurant chains and retail grocery outlets. For the last three fiscal years,
(1998, 1999, 2000), the operations from this business segment accounted for
99.9%, 99.9%, and 91.7% of total company revenues, respectively. All of the
company's sales were to the United States for the last three fiscal years.
Foreign or export sales are not expected to be a material factor in future
revenues.
Seafood consumption is a large and growing market. The United Nations Food and
Agricultural Organization estimates the annual worldwide market for seafood
products to be in excess of $50 billion, of which the United States market is
approximately $8 billion. The world market for shrimp alone is $30 billion, with
the United States portion being $2.5 billion. Consumption of all seafood
products, and principally shrimp, has risen steadily throughout the last two
decades.
The seafood industry is very fragmented. It is characterized by thousands of
suppliers and middlemen throughout the distribution chain from product
procurement, wholesale distributors, and retail food stores or restaurants.
Seafood is sold fresh, or frozen in blocks or by IQF (Individual Quick Freeze)
methods. Custom Pack is one of the IQF processors of seafood in the United
States.
There is no major player in the seafood industry that commands a significantly
large market share, creates a nationally recognized brand name, or establishes
descriptive product standards. Products like shrimp are sold on a commodity-type
basis with little uniformity of size or species. Restaurants, supermarkets, and
other outlets buy a variety of products from a variety of suppliers. Product
availability and consistency of quality are important factors in the service
provided.
Products and Services
In its core business activity, the company has established itself to provide an
increasing variety of seafood items, which are of consistent quality and are
conveniently packaged for commercial or consumer use. Frozen, headless shrimp
(with shell on) is the principal product processed, which is frequently packaged
in one-pound and two-pound packages. Peeled shrimp is also processed under
private labels for customers or for distribution to restaurants. A small volume
of frozen fish fillets are packaged for distribution, as well.
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We continue to focus on packaging innovations and value-added specialty entrees
to expand sales and increase margins in these areas. The IQF processing method
has contributed to many innovations in bringing seafood products to the
consumer. Within the last year, Custom Pack has developed a shrimp stir fry
product for the Aurora Foods "Chef's Choice" brand, which has helped the company
achieve increased sales. In 1997 the company acquired Co Mar Foods, which
produced breaded and stuffed shrimp, stuffed lobster, cooked shrimp rings (with
cocktail sauce) and other value-added, ready-to-cook, ready-to-eat seafood
products. The processing of these products has been integrated into the Custom
Pack facility during the latest fiscal year. Since the introduction of the
cooked shrimp rings, market acceptance has lead sales of this product to become
less seasonal in nature.
Customer Support
Custom Pack processes and packages products principally for the account of third
parties under various brand names, and relies on seafood brokers and
distributors to market and distribute the products. Ocean To Ocean Seafood Sales
is a principal customer, as is Aurora Foods and Van DeCamp. The company does not
operate under government contracts or other long-term contracts and has no
backlog.
For the fiscal year ended March 31, 1999, the sales to two Custom Pack customers
amounted to 36% and 32% of total company sales. For the fiscal year ended March
31, 2000, the sales to these two customers amounted to 34% and 13%. In the
opinion of management, the loss of these customers would have a material,
short-term impact on the company, but this business could be generated from
other sources, if necessary.
Suppliers
Seafood products are readily available in domestic and international markets.
Our operations rely on outside sources for seafood products. Our current
products are usually purchased at the dock source or trucked in for processing.
Buying agents are employed in the United States along the South Atlantic Coast
and Gulf of Mexico from North Carolina to Texas. The company also imports
seafood from Asia and Central and South America. The aquaculture subsidiary does
not supply a significant amount of product to the company, but it is our
intention to develop this business as a consistent source of supply for the
future.
The company purchased product from two suppliers during the year ended March 31,
2000 that comprised approximately 27% and 20% of total purchases. In fiscal year
ending March 31, 1999, the company purchased product from three suppliers that
accounted for a total of 22%, 15%, and 12% of total purchases, respectively. In
the opinion of management, the loss of these suppliers would have a material,
short-term impact on the company, but the purchases could be generated from
other sources, if necessary.
Aquaculture
The company maintains an Aquaculture Division within Custom Pack, which is
engaged in the development of farm grown seafood, principally freshwater shrimp,
at its facility in Ocean Springs, MS. The facility was acquired in 1997 as a
tilapia farm, and has been converted to a hatchery and nursery for freshwater
shrimp larvae for stocking in ponds operated by independent growers. Revenues
from this segment are not presently significant, accounting for 0.01% in the
1999 fiscal year and 0.40% in the latest fiscal year. However, expansion could
be achieved rapidly as commercial production is demonstrated. Approximately 75%
of some $30 Billion of shrimp consumed worldwide are caught in the oceans, and
about 25% are grown in aquaculture.
In March, we entered into a joint venture with a private investor to develop
approximately 100 acres of ponds for commercial production of freshwater shrimp
in Mississippi, utilizing the larvae seed stock produced in Ocean Springs. We
are actively exploring other opportunities for similar commercial production
arrangements
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with other parties. This could lead to significant expansion of the nursery and
hatchery business, as well as increased revenues from the sale of product and
from the processing of the product at Custom Pack.
Shrimp grown in freshwater have been produced overseas and imported to the
United States on a relatively limited basis. Custom Pack processed approximately
2 million pounds of this product last year. Given the demand for shrimp and the
limitations on future supplies from the oceans, the company believes that the
development of the freshwater shrimp industry in this country could, over time,
parallel the success demonstrated in the catfish industry.
We have developed certain business knowledge and practices relating to the
commercial production of freshwater shrimp, which we deem to be proprietary.
Patents do not protect this intellectual property, but the company relies upon
common law rights and contracts to establish and protect its interests. There
can be no assurance that our measures to protect our intellectual property will
deter or prevent its unauthorized use, but we believe that we have, at a
minimum, established an advantage in the initial commercial production of this
product. If we are unable to protect our intellectual property rights, we
believe it could negatively affect the results of future operations through
increased competition.
Killer Bee Bait
We package and distribute recreational fishing bait products through our Killer
Bee, Inc. subsidiary, which was acquired in April, 1999. These products include
varieties of bait shrimp, catfish bait, eels, cut squid, whole squid, cigar
minnows, ballyhoo, frozen chum, and menhaden oil. The products are primarily
packaged in frozen form at the Finicky Pet Foods facilities in Pascagoula, MS.
This segment of the company's business is seen as offering great potential to
utilize our established business strengths in procuring, processing, packaging,
and in making the products available through distribution to convenient outlets.
We utilize many of our supply sources for our seafood products to supply the
"Killer Bee Bait" line of bait products. Because of our established sources of
supply for seafood products and the relative volume of existing business, we
believe that we are in a position to acquire abundant supplies of recreational
fishing bait products to support this line of business.
The acquisition of the assets and brand name of Drag N Bait, Inc. in June 1999
further strengthened the company's source of supply for one, key bait product,
ballyhoo. Drag N Bait is a recognized supplier of ballyhoo to the recreational
fishing market, particularly in Florida. The operations of Drag N Bait have been
consolidated with those of Killer Bee, but certain products continue to be sold
under the established Drag N Bait name, and the full line of Killer Bee products
have now been made available to former Drag N Bait customers.
The "Killer Bee Bait" name is a registered trade name, and the products are sold
through Wal Mart, K Mart, and other large retail outlets, and at independent
marinas and bait shops. At the end of the last fiscal year - the first year of
introduction to the market - Killer Bee products were being sold in over 100
large retail outlets and to over 200 independent outlets in a 10 state area from
Texas to Virginia. For the year, Killer Bee registered $1,124,345 in sales last
year and accounted for 7.9% of total revenues of the company. Gross Profit
Margin from this segment is higher than the processing business segment, and
continued expansion is expected.
The recreational bait industry represents a $1.0 Billion sales market annually
in the United States, according to 1996 Department of Commerce Wildlife and
Fisheries data, which include both freshwater and saltwater fishing. We have
chosen to focus initially on establishing ourselves in the saltwater market in
the Southeastern states, but we expect to further develop its customer base to
include other saltwater fishing states as well as the inland freshwater market.
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The company is not aware of any single dominant company or nationally recognized
brand name for bait products, and has the objective of establishing Killer Bee
Bait in that position over time.
Statutory and Regulatory Changes
Hazard Analysis and Critical Control Point ("HACCP") regulations took effect in
the seafood processing industry in December 1997. Our plants were in compliance
in advance of the effective date and are fully approved. Continued compliance
with HACCP will not affect the company's operations, but compliance may affect
competition, which might not be in the same position as we are.
The discharge of water wastes from our facilities is in full compliance with
existing government regulations and standards. We do not envision that any
significant capital expenditures will be required for environmental control
procedures for the foreseeable future.
The terms and conditions under which we prepare, pack and distribute our seafood
products are subject to government regulation. Federal laws and FTC regulations
apply to interstate distribution of frozen seafood products, while particular
state regulatory authorities have jurisdiction over seafood distribution and
sale within their borders.
Company Strategy
In the near term, we plan to continue product innovation within our core
business at Custom Pack, continue expansion of the distribution of our Killer
Bee products, and promote the development of our aquaculture business.
As a long term strategy, we will entertain strategic mergers and acquisitions of
both processing and sales entities, which would increase market share, improve
profit margins, and facilitate unified marketing efforts that create brand
identification.
Employees
As of March 31, 2000 there were approximately 120 persons employed by the
Company. This number does not include its independent commission salesmen, who
are classified by the Company as independent contractors rather than employees.
The Company's employees are not unionized, and the Company believes that its
relationship with its employees is good.
ITEM 2. DESCRIPTION OF PROPERTIES
The seafood processing and packaging business is conducted through our Custom
Pack subsidiary at its plant located at 555 Bayview Avenue, Biloxi, MS. The
plant facility occupies over 50,000 square feet of floor space, including
processing areas, coolers, and freezers and is on 3.7 acres of property. This
facility also contains our corporate offices. This property collateralizes the
company's line of credit with its bank.
We have discontinud operations at our CoMar Foods, Inc. plant location at 10200
Cody Driskell Road, Irvington, AL. The products, which were produced at that
location, are now being produced at the Custom Pack facility. The CoMar
location, consisting of 12,800 square feet of processing space on 10 acres of
property, is currently offered for sale or lease. The Company has taken a
financial write down of $775,000 in the carrying value of this property in the
latest fiscal year in anticipation of such a sale or lease.
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Our aquaculture business is conducted at our Ocean Springs, MS facility, which
occupies 25 acres, with 10.7 acres developed, and includes three geothermal
water wells. This site will be expanded to meet the requirements of the
aquaculture business segment, as needed.
Should the company's freezing and storage capacity be affected by widespread
municipal power shortages, the company would have a period of five to seven days
to address such loss of power through alternative means before any losses would
be experienced.
ITEM 3. LEGAL PROCEEDINGS
In the ordinary course of its business, we are periodically made a party to
routine proceedings or litigation, the expected results of which will have no
material adverse affect upon our financial or operating condition. At the
present time, neither the Company nor any of its directors or executive
officers, nor any controlling shareholder, is a party to any pending legal or
administrative proceeding having the potential for any material affect upon any
matter herein discussed, nor are any of the Company's properties the subject of
such a proceeding, and no such proceeding is known to be overtly threatened.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to security holders for a vote during the course
of the fourth quarter of the last fiscal year. Other matters being submitted to
shareholders at the annual meeting are included in proxy material for that
meeting and are incorporated by reference.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
As of March 31, 2000, the Company reported 13,124,046 outstanding shares of
common stock, $.001 par value and 200,000 convertible preferred shares. Based on
a closing market price of $0.97 per share, the outstanding common stock had a
market capitalization of approximately $12,730,325 at that time, which includes
restricted shares owned beneficially by officers and directors.
The company has outstanding 4,500,000 warrants to purchase additional common
shares at prices between $1.00 to $1.56 and expiring on or before July 1, 2001
to April 1, 2009.
Presently, the Company's securities are traded over-the counter under the symbol
"GSFT". Prior to December 22, 1998, the Company's securities traded under the
symbol "IPCK". The shares have not been eligible for listing on any securities
exchange or under the NASDAQ system. The Company's directors expect to undertake
such actions as may be required to achieve such NASDAQ listing when the
requirements to do so have been met.
The following table sets forth the high and low historical quotes for the
periods indicated:
Quarter ended High Low
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March 31, 2000 1.200 0.600
December 31, 1999 1.375 0.680
September 30, 1999 1.875 0.937
June 30, 1999 2.500 1.125
March 31, 1999 2.750 1.000
December 31, 1998 1.156 0.610
September 30, 1998 2.062 1.125
June 30, 1998 2.625 1.437
There were approximately 1,500 shareholders of record listed by the Company's
transfer agent and reported beneficial owners of the Company's common stock as
of June 1, 2000.
The Company has not paid cash dividends on its common stock and does not expect
to pay cash dividends on its common stock in the future.
RECENT SALES OF UNREGISTERED SECURITIES
During the course of the last fiscal year, the company issued additional
securities as described below:
On April 1, 1999 we issued 152,564 shares to G & G Trading Company and an
aggregate of 1,500,000 common stock purchase warrants exercisable at the rate of
$1.56 to Brent Gutierrez (500,000 warrants) Clayton Gutierrez (500,000 warrants)
and Larry Gollott (500,000 warrants) in connection with the purchase of the
assets, brand name and customer lists of Killer Bee, Inc., which were valued at
$238,000. The number of shares issued and the exercise price of the warrants
were both determined by the $1.56 per share price that existed at the time of
the transaction. Mr. Brent Gutierrez is the company's CEO, President, CFO,
Treasurer and a Director. Mr.
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Clayton Gutierrez is the company's Senior Vice President, Secretary and a
Director. We relied on the exemption from registration at Section 4(2) of the
Securities Act of 1933 for non-public offerings.
On April 7, 1999 we issued 114,800 shares of the company's common stock to Henry
Gutierrez in lieu of future payments of $143,500 which were due under a certain
non-compete agreement between the company and Mr. Gutierrez. We relied on the
exemption from registration at Section 4(2) of the Securities Act of 1933 for
non-public offerings.
On June 23, 1999 we issued 32,000 shares of the company's common stock to Finch
Enterprises, LLC in lieu of consulting services valued at $40,000. We relied on
the exemption from registration at Section 4(2) of the Securities Act of 1933
for non-public offerings.
During April, 1999 we issued 200,000 shares of preferred stock valued at $10.00
per share and 2,000,000 warrants exercisable at the rate of $1.00 per share,
expiring on July 15, 2001 for $2,000,000 in cash to William Schofield, a
Director of the company. We relied on the exemption from registration at Section
4(2) of the Securities Act of 1933 for non-public offerings.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following selected financial data, as of, and for each of the last two years
ended March 31, have been extracted from the audited financial statements of the
Company, a copy of which is included herein. All such data should be read only
in conjunction with, and is qualified in their entirety by reference to, the
Company's financial statements and accompanying notes.
SELECTED FINANCIAL DATA
(Dollars in thousands, except per share data)
AS OF AND FOR THE YEARS ENDED MARCH 31,
Percentage Percentage
1999 of Net Sales 2000 of Net Sales
INCOME STATEMENT
REVENUE: $ 13,841 100.00 $ 14,206 100.00
COST OF SALES: $ 11,702 84.55 $ 10,467 73.68
GROSS PROFIT: $ 2,139 15.45 $ 3,738 26.32
OPER. EXPENSES $ 2,056 14.86 $ 3,933 27.69
INCOME BEFORE
OTHER ITEMS $ 82 0.59 $ (196) (1.37)
OTHER INC (EXP) $ (44) (0.32) $ (841) (5.92)
NET INCOME
BEFORE TAX $ 38 0.27 $ (1,036) (7.29)
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PROVISION FOR
INCOME TAX $ 9 0.07 $ - 0.01
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NET INCOME $ 29 0.21 $ (1,036) (7.29)
NET INCOME (LOSS)
PER SHARE(1) $ 0.00 $ (0.08)
Audited Audited
1999 2000
BALANCE SHEET:
TOTAL ASSETS: $ 4,232 $ 5,485
LONG-TERM OBLIGATIONS:(2) $ 1,653 $ 1,688
TOTAL STOCKHOLDERS' EQUITY $ 1,676 $ 3,605
(1) Net Income (Loss) from continuing operations per share includes the
weighted average number of shares of the Company's common capital
outstanding
(2) Long-term Obligations includes the current portion of long-term debt
and capital leases.
Overview and Forward-Looking Statements
This report and other oral and written statements made by the Company to the
public contain forward-looking statements within the meaning of the "safe
harbor" provisions of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements are based on management's current expectations of
beliefs and are subject to a number of factors and uncertainties that could
cause actual results to differ materially from those described.
Our core seafood packaging business of the company provided nearly 100% of
revenues in the 1999 fiscal year and 92% last year. While revenues from this
core business have been relatively flat from year to year, more significant
rates of growth in revenue and profit for our operations are expected to come
from our Killer Bee subsidiary and our aquaculture division. Contributions from
these latter areas should appear in the financial results of the 2000-01 fiscal
year and thereafter.
Growth in Working Capital
Historically, the core business has not required that significant inventory be
maintained, as products are either sold immediately from processing or are
packaged for third-party accounts. However, beginning with the acquisition of
Killer Bee, Inc. last year, we began packaging and distributing frozen bait
products for the recreational fishing industry. The nature of this business
segment requires that we acquire, process, and have available for distribution
an adequate supply of product in inventory. As this segment of business expands,
the company's relative levels of inventory will expand accordingly. The balance
sheet as of March 31, 2000 reflects an increase in inventory from $-0- at March
31, 1999 to $641,708 due to the operations of Killer Bee.
Similarly, sales in the core business segment are generally settled at the time
of wholesale delivery, so that accounts receivable have customarily been
maintained at relatively low levels. The nature of the recreational bait
business requires that normal account terms be extended to corporate accounts.
$216,042 of the reported $374,471 increase in accounts receivable is related to
the addition of Killer Bee.
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The capital received last year by the Company from several financial
transactions provided additional liquidity to support the growth of inventory
and accounts receivable assets (See "Liquidity and Capital Resources" below). As
of March 31, 2000 the company maintained cash reserves of $1.3 Million. Current
Assets more than doubled from the previous year from $1,423,147 to $3,197,325.
Current Liabilities declined by 63% from the previous year, primarily through a
reduction in trade accounts payable by $640,000 (-93%). As a result, the company
established considerable liquidity, as measured by the current ratio of 7.56.
Additionally, the company maintains a $1,000,000 line of credit with its bank
that had no borrowings outstanding at year end.
Net Sales
Net Sales primarily reflects the results of processing and packaging operations.
The amount of revenues recognized in any given year is a function of whether the
products are either: a) purchased, processed, and packaged by the Company, or;
b) processed and packaged for third parties on a consignment basis. In the first
instance, revenues would be higher, reflecting the cost of the product, and in
the latter case revenues would only reflect a processing charge. Gross Margins
are relatively unaffected by either scenario, but the reported Net Sales figures
can be greatly affected.
Net Sales for the year ended March 31, 2000 increased from the previous year
from $13,841,059 to $14,205,602, primarily from the introduction of $1,124,345
in sales from Killer Bee. The reported contribution from the core business
segment was relatively flat as to total sales. However, core business sales
continued to reflect the higher level of production activity in consignment
sales, where the recorded level of sales is lower and gross profits as a
percentage of sales are higher. The Company attributes the increased production
activity to the continued expansion of its customer base for packaged seafood by
its Custom Pack subsidiary.
Cost of Sales sets forth the processing and packaging costs, including plant
labor, in-bound and out-bound freight, and the raw material (seafood) costs
where the products are processed for the Company's own account. Where processing
is done for third-party account, the raw material (seafood) costs are not
carried on the Company's books. Approximately 20% to 30% of Net Sales is
reflected in processing for third parties, where we charge a processing fee and
do not maintain any inventory level of product for our own account. The decline
in Cost of Sales from $11,702,369 to $10,467,143 (minus 10%) reflects the higher
level of consignment processing in the March 31, 2000 year. The increase in
Gross Profit Margins to 26.32% from 15.45% reflects this relative increase in
processing sales as well as the additional contribution of Killer Bee products,
which are produced with higher profit margins.
Selling, general and administrative expenses increased from $1,672,925 to
$3,490,382, an increase of 109% in the latest fiscal year. The increase reflects
our expanded corporate overhead expenses incurred in anticipation of future
revenue growth from Killer Bee.
Operating Income
Operating Income from our core business of Custom Pack, Inc. has been used by us
to offset operating losses from Comar Foods and the Aquaculture Division, and in
this last fiscal year, Killer Bee, as well. For the fiscal year ending March 31,
1999, net income declined to $28,600 because the operating losses from CoMar and
Aquaculture offset $495,400 profit from Custom Pack. For the fiscal year ending
March 31, 2000, Custom Pack recorded an operating profit of $595,353 before
intercompany and other expenses, however, the operating losses from the other
areas exceeded this figure. The CoMar and Aquaculture operating losses were
collectively $100,000, and the operating loss of Killer Bee was $568,087.
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We have integrated the CoMar operations with those of Custom Pack by
transferring packaging and processing operations of CoMar to the Custom Pack
facility to improve the performance of that business. We view the initial losses
in the Aquaculture Division as an investment in the future for the Company, and
operating cash flow for Aquaculture last year was actually slightly positive.
The revenues of Killer Bee are seasonal in nature, but are expanding at a rate,
which we believe will provide sufficient profits to cover operating expenses in
the 2001 fiscal year.
Other Income (Expenses)
Impairment Loss
During the last fiscal year, the Company reached a decision to discontinue the
operations at the CoMar Foods facility. This decision was influenced by the
cessation of certain product lines and the transfer of other processing
operations to Custom Pack. The CoMar facility was listed for sale, and the
Company has recorded a one time Impairment Loss of $775,000.
We reported Other Income of $66,822 in the fiscal year ended March 31, 1999 and
a loss of $840,512 in the latest year, reflecting Interest Expense of $162,704
in addition to the Impairment Loss. Other Income predominantly reflects lease
payments received from rental of Company-owned property to the Casino industry
in Biloxi, Mississippi, and Interest Income.
Gain on Sale of Assets
During the fiscal year ending March 31, 1999 the company sold two pieces of
equipment in separate transactions to unrelated parties for cash totaling
$31,000. These assets had a net book value of $5,674, which resulted in a Gain
on Sale of Assets of $25,326. In the fiscal year ending March 31, 2000, we
disposed of assets that resulted in an net gain of only $8,324.
Seasonality
Because of the availability of seafood throughout the world markets, there is
only a modest seasonal factor for the company's core business. Typically, the
Company's operating activities increase slightly during the Spring and Fall
domestic shrimp harvesting seasons, depending on the abundance of the crop that
is found in the wild. The revenues of Killer Bee demonstrate seasonality that
reflects the higher recreational fishing activities in the warmer months of the
year.
Inflation
The Company's business is not significantly affected by inflation. We anticipate
that any increased costs can be passed on to our customers.
New Products and Services
On April 1, 1999 we acquired the assets, brand name and customer lists of Killer
Bee, Inc. and became a supplier of bait products to the recreational fishing
industry. Killer Bee packages and distributes over 30 brand name bait products
for recreational fishermen. These products are currently sold along the United
States Gulf Coast and the Atlantic coast from Florida to Virginia through
selected K Mart and Wal Mart stores and independent outlets. These bait products
compliment our existing seafood operations and contributed $1,124,345 in sales
last year.
On June 25, 1999 we purchased the assets and brand name of Drag N Bait, Inc. The
purchase price was determined by asset values agreed to by the Company and the
seller, and there was no affiliation between the parties. Drag N Bait is a
recognized supplier of ballyhoo to the recreational fishing market, particularly
in Florida. Ballyhoo is considered a premium bait product, and this addition has
expanded the availability of
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products for Killer Bee. The operations of Drag N Bait after June 25, 1999 have
been consolidated with those of Killer Bee in the company's financial
statements.
Liquidity and Capital Resources
The operations of the Company and its subsidiaries have historically been funded
from cash flow from operations of Custom Pack. This continues to be the case,
however, financing activities have more recently provided significant capital
resources, as well. In combination, net cash increased by $559,402 last year and
$705,087 in the previous fiscal year.
Operating Activities
The Company's Consolidated Statement of Cash Flows reported $1,210,615 in funds
used by Operating Activities in the latest fiscal year compared to $685,572
generated from Operating Activities in the March 31, 1999 fiscal year. This
change was primarily due to an increase in both accounts receivable ($571,151)
and inventory ($217,569) related to the start up of Killer Bee and a reduction
in accounts payable ($712,170) from cash reserves. Depreciation provided
$411,769 and the $775,000 Impairment loss was a non-cash charge to earnings.
Investing Activities
Net Investing Activities consumed an additional $652,602 in funds compared to
$444,333 used in the previous year. We purchased additional property and
equipment of $823,023 and $475,333 in the last fiscal years ending March 31,
2000 and 1999, respectively. The bulk of the increase in the March 31, 2000
fiscal year resulted from activities of Killer Bee, including the $337,000
acquisition of Drag N Bait plus purchases of freezers and packaging equipment.
Our aquaculture division invested approximately $125,000 in fixed asset
improvements, which are included in that increase as well. Sales of property and
equipment generated $170,421 and $31,000, respectively.
Financing Activities
Financing activities have become a much more significant source of net cash for
the Company and the expansion of the business activities of its subsidiaries.
$2,422,619 was provided from this source in the last fiscal year, primarily from
$2,577,599 in proceeds from sale of preferred and common stock and additional
capital contributed. These funds were utilized to support the use of funds in
Operating Activities described above.
On April 1, 1999 the Company issued 152,564 common shares for the acquisition of
Killer Bee, Inc. assets valued at $238,000. On April 7, 1999 the Company issued
114,800 common shares to buy out the balance of $143,500 in payments due under
the outstanding non-compete agreement, and issued 32,000 common shares for
services rendered, which had a value of $40,000.
In March of the 1999 fiscal year, we issued 1,050,000 shares to four investors
to be held in escrow until proceeds of $650,000 was received by the company. We
received $477,600 in the 2000 fiscal year and an aggregate of 771,508 shares
were delivered to the investors. We intend on canceling the balance of the
subscriptions and returning 278,492 shares to our treasury.
During April, 1999 we issued 200,000 shares of preferred stock valued at $10.00
per share and 2,000,000 warrants exercisable at the rate of $1.00 per share,
expiring on July 15, 2001 for $2,000,000 in cash to William Schofield, a
Director of the company. We relied on the exemption from registration at Section
4(2) of the Securities Act of 1933 for non-public offerings and Rule 506 under
Regulation D. These funds are designated by the Company to support working
capital requirements for the expansion of the Killer Bee bait products.
12
<PAGE>
ITEM 7. FINANCIAL STATEMENTS
Financial Statements are incorporated by reference and attached as an exhibit.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
There have been no changes and disagreements with accountants on accounting and
financial disclosure.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT
Years of
Service with
Name Age Position Company
---- --- -------- -------
Brent Gutierrez 38 Director, Chief Executive 12
Officer, President, Chief
Financial Officer and
Treasurer
Clayton F. Gutierrez 35 Director, Senior Vice 12
President and Secretary
Frank C. Gutierrez 65 Director 12
Anita K. Gutierrez 59 Director 12
William Schofield 64 Director 1
Mr. Brent Gutierrez is a founder of the Company and has served as its Chairman
of the Board of Directors, Chief Executive Officer and President since its
activation in February 1988 as Custom Pack, Inc. Prior to his involvement with
the Company he was attending Mississippi State University.
Mr. Clayton F. Gutierrez is also a founder of the Company and has served as a
member of the Board of Directors and Senior Vice President since 1988. Prior to
his involvement with the Company he was attending the University of Southern
Mississippi.
Mr. Frank Gutierrez is a founding Director of the Company. Prior to his
involvement he was an owner and manager of Biloxi Freezing Company.
13
<PAGE>
Mrs. Anita Gutierrez is a founding Director of the Company. Prior to her
involvement she served as Controller of Biloxi Freezing Company.
Mr. Schofield was elected to the Board of Directors of the Company in April
1999. He is Chairman and Chief Executive Officer of Finicky Pet Foods, Inc. and
W. F Schofield, Inc., engaged in pet food raw materials brokerage.
The Company's Bylaws indicate that the Company will hold an annual shareholder
meeting within the third or fourth calendar month following the conclusion of
its preceding fiscal year of operations, the specific date to be determined by
the incumbent directors, at which Company directors shall be elected.
Accordingly, the normal term of office of each director is fixed at one year,
commencing on the date of his election at such shareholder meeting and
continuing until his reelection or replacement at the succeeding such meeting.
The Company conducted its 1999 annual shareholder meeting during the month of
June 1999. We anticipate conducting our 2000 annual meeting in August 2000.
Each of the Company's principal officers is elected by and serves at the
pleasure of the Board of Directors.
ITEM 10. EXECUTIVE COMPENSATION
No Director is specially compensated for the performance of duties in that
capacity or for his/her attendance at Director meetings. Neither the Company's
bylaws nor Nevada law requires the Board of Directors to conduct regular
meetings during an operating period. As the Company's Directors, in their
separate capacities as the Company's operating officers, meet daily to review
Company activities, no regular or special meetings of the Company's Board of
Directors were called or conducted during 1999, nor within the portion of the
current fiscal year preceding the filing of this Registration Statement. No
Board of Directors Committees operated during 1999 or prior thereto.
The following table sets forth certain information regarding the compensation
paid to each of the Company's officers during the calendar years indicated:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
----------------------------------------------------------------------------------------------------------------
Long Term Compensation
Annual Compensation Awards Payouts
--------------------------------------------------------------------------------------------------
Name and Other Restricted All Other
Principal Compen- Stock Options/ Compen-
Position Year Salary Bonus sation Awards SAR's Payouts sation
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Brent 1999 $134,000 $0 $0 $0 0 $0 $0
Gutierrez 1998 $104,000 $0 $0 $0 0 $0 $0
1997 $95,000 $0 $0 $0 0 $0 $0
Clayton 1999 $134,000 $0 $0 $0 0 $0 $0
Gutierrez 1998 $104,000 $0 $0 $0 0 $0 $0
1997 $95,000 $0 $0 $0 0 $0 $0
----------------------------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE>
The referenced periodic compensation was set by the Company's directors. The
Company has no form of employment agreement with either senior officer, nor any
contractual arrangement under which, upon the individual's resignation or other
termination of service, or upon the occurrence of any change in the control of
the Company, the individual would receive any special compensation.
There were no individual grants of stock options or stock appreciation rights
(SARs) to any executive officers or directors during the last fiscal year and no
stock options or SARs were exercised by any executive officers or directors
during the last fiscal year. The following table illustrated the aggregate
amount of outstanding stock options for the company's directors as of the fiscal
year end. All such outstanding options are in the form of warrants which were
purchased for value as described in the footnotes to the company's financial
statements.
<TABLE>
<CAPTION>
Aggregate Option/SAR Exercises in the Last Fiscal Year and FY-End Option/SAR Values
---------------------------------------------------------------------------------------------------------
Shares Number (#) of Securities
Acquired Underlying Unexercised
on Options/SARs at Value of Unexercised In-the Money
Exercise Value FY-End Options/SARs at FY-End ($)
Name (#) Realized ($) Exercisable/Unexercisable Exercisable/Unexercisable
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Brent Gutierrez 0 0 500,000 0
---------------------------------------------------------------------------------------------------------
Clay Gutierrez 0 0 500,000 0
---------------------------------------------------------------------------------------------------------
William Schofield 0 0 2,000,000 0
---------------------------------------------------------------------------------------------------------
</TABLE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
This table describes the ownership of our outstanding common stock as of March
31, 2000 by (i) each of our officers and directors; (ii) each person who is
known by us to own more than 5% of the Company's outstanding common stock; and
(iii) all of our officers as a group:
Name and Address Amount and Nature of Percentage of
Of Beneficial Owner Beneficially Owned Class
Brent Gutierrez 3,217,522 (1) 24.05%
555 Bayview Avenue
Biloxi, MS 39530
Clayton Gutierrez 3,217,521 (2) 24.05%
555 Bayview Avenue
Biloxi, MS 39530
Frank and Anita Gutierrez 2,666,666 20.71%
JTWROS
555 Bayview Avenue
Biloxi, MS 39530
15
<PAGE>
William Schofield 5,555,556 (3) 30.14%
15340 Fiddlesticks Blvd.
Ft. Meyers, FL 33912
Equity Advisors, Inc. 1,000,000 (4) 7.77%
14502 N. Dale Mabry Hwy
Tampa, FL 33618
All officers and directors
As a group (5 persons) 14,657,265 (1) (2) (3) 75.43%
(1) Includes 500,000 shares which may be obtained by Brent Gutierrez upon
the exercise of warrants owned by Mr. Gutierrez in the like amount.
(2) Includes 500,000 shares which may be obtained by Clayton Gutierrez upon
the exercise of warrants owned by Mr. Gutierrez in the like amount.
(3) Consists of 3,555,556 shares which could have been obtained by Mr.
Schofield upon the conversion of preferred shares as of December 31,
1999 and 2,000,000 shares which may be obtained by Mr. Schofield upon
the exercise of warrants owned by Mr. Schofield in the like amount.
(4) Includes 1,000,000 shares which may be obtained by Equity Advisors,
Inc. upon the exercise of warrants owned by it in the like amount.
As ownership of shares of the Company's common stock by each of the Company's
directors and executive officers is included within the foregoing table, and as
the Company currently employs no additional executive officers, no separate
table has been provided to identify Company stock ownership by management
personnel.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Except as set forth below, there have neither occurred within the preceding two
year period, nor are there pending or proposed, any direct or indirect material
transactions between us and any of our directors, executive officers or
controlling shareholders outside the ordinary course of our business.
On April 1, 1999 we issued 152,564 shares of our outstanding common stock to
purchase the assets, brand name, and customer lists of Killer Bee, Inc., a
company jointly controlled by Brent Gutierrez and Clayton Gutierrez. The
acquisition was valued at $238,000, which represented the value of acquired
inventory, as the brand name and customer lists were given no value. On the same
date, the Company granted warrants to purchase 1,000,000 shares of common stock
(500,000 each) to Brent Gutierrez and Clayton Gutierrez in connection with such
purchase. The number of shares given as consideration as well as the exercise
price of the options granted to the former owners of Killer Bee, Inc. was
determined by the market share price of $1.56 which existed at the time of the
transaction.
During April, 1999 William F. Schofield was elected as a director of the
Company, and he purchased 200,000 shares of preferred stock, which was issued by
the Company for $2,000,000 cash consideration. The 200,000 convertible preferred
shares were issued at the same stated value of $10 per share and under the same
terms as were applicable to preferred shares previously authorized and issued by
the Company.
The company purchases some of its product from a related company, G & G Trading
Company, and derives a portion of its revenues from sales to that related
company. All transactions are at the same prices as with unaffiliated companies.
Invoices to this related company for the fiscal year ending March 31, 2000
totaled $282,269 or 2% of Net Revenues for the period.
16
<PAGE>
ITEM 13. EXHIBITS AND REPORTS
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Nevada General Corporation Act (the "Nevada Act") provides that each
existing or former director and officer of a corporation may be indemnified in
certain instances against certain liabilities which he or she may incur,
inclusive of fees, costs and other expenses incurred in connection with such
defense, by virtue of his or her relationship with the corporation, or with
another entity to the extent that such latter relationship shall have been
undertaken at the request of the corporation; and may have advanced such
expenses incurred in defending against such liabilities upon undertaking to
repay the same in the event an ultimate determination is made denying
entitlement to indemnification. The Company's bylaws incorporate the statutory
form of indemnification by specific reference. The Company has never acquired or
applied for any policy of directors' and officers' liability insurance as a
means of offsetting its obligation for indemnity.
Reports to Shareholders
We intend to voluntarily send annual reports to our shareholders, which will
include audited financial statements. We are a reporting company, and file
reports with the Securities and Exchange Commission (SEC), including this Form
10-KSB as well as quarterly reports under Form 10-QSB.
The public may read and copy any materials filed with the SEC at the SEC's
Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549.
Information on the operation of the Public Reference Room may be obtained by
calling the SEC at 1-800-SEC-0330. The company files its reports electronically,
and the SEC maintains an Internet site that contains reports, proxy and
information statements and other information filed by the company with the SEC
electronically. The address of that site is http://www.sec.gov.
The company also maintains an Internet site, which contains information about
the company, news releases, and summary financial data. The address of that site
is http://www.globalsea.com.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements of the Company, which are furnished herein as of March
31, 2000 and 1999, have been audited by HJ & Associates, LLC (formerly known as
Jones, Jensen & Company), independent auditors, as described in its reports with
respect thereto.
The following list sets forth a brief description of each of the Company's
financial statements and exhibits being filed as a part of this Form 10 KSB, as
well as the page number on which each statement or exhibit commences:
17
<PAGE>
Audited Fiscal Year End March 31, 2000 and 1999
1. Index to Financial Statements F-2
2. Independent Auditor's Report F-3
3. Balance Sheets, March 31, 2000 and 1999 F-4-5
4. Consolidated Statements of Operations for each of
the years ended March 31, 2000 and 1999 F-6
5. Consolidated Statements of Shareholder's Equity
since March 31, 1996 F-7
6. Consolidated Statements of Cash Flows for each of
the years ended March 31, 2000, 1999, and 1998 F-8-9
7. Notes to Financial Statements F-10-21
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
July 11, 2000 GLOBAL SEAFOOD TECHNOLOGIES, INC.
By: /s/ Brent Gutierrez
-----------------------------------
Brent Gutierrez, President and
Chief Executive Officer
18
<PAGE>
GLOBAL SEAFOOD TECHNOLOGIES, INC.
CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000 and 1999
F-1
<PAGE>
C O N T E N T S
Independent Auditors' Report............................................... F-3
Consolidated Balance Sheets ............................................... F-4
Consolidated Statements of Operations ..................................... F-6
Consolidated Statements of Stockholders' Equity ........................... F-7
Consolidated Statements of Cash Flows...................................... F-9
Notes to the Consolidated Financial Statements.............................F-11
F-2
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Global Seafood Technologies, Inc.
Biloxi, Mississippi
We have audited the accompanying consolidated balance sheets of Global Seafood
Technologies, Inc. as of March 31, 2000 and 1999 and the related consolidated
statements of operations, stockholders' equity and cash flows for the years
ended March 31, 2000, 1999 and 1998. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Global
Seafood Technologies, Inc. as of March 31, 2000 and 1999 and the results of
their operations and their cash flows for the years ended March 31, 2000, 1999
and 1998, in conformity with generally accepted accounting principles.
/s/ HJ & Associates, LLC
HJ & Associates, LLC
Salt Lake City, Utah
June 15, 2000
F-3
<PAGE>
<TABLE>
<CAPTION>
GLOBAL SEAFOOD TECHNOLOGIES, INC.
Consolidated Balance Sheets
ASSETS
March 31,
---------------------------------------
2000 1999
----------------- -----------------
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents (Note 1) $ 1,303,120 $ 743,718
Accounts receivable - net (Note 1) 851,718 477,247
Accounts receivable, related parties - net (Note 1) 350,451 153,771
Prepaid income taxes (Note 8) 46,111 46,111
Prepaid expenses 1,827 -
Inventories (Note 1) 641,708 -
Deferred tax asset, current (Note 8) 2,300 2,300
----------------- -----------------
Total Current Assets 3,197,235 1,423,147
----------------- -----------------
PROPERTY AND EQUIPMENT - NET (Notes 1 and 2) 2,263,051 2,785,230
----------------- -----------------
OTHER ASSETS
Deferred tax asset (Note 8) 12,300 12,300
Deposits 12,228 11,144
----------------- -----------------
Total Other Assets 24,528 23,444
----------------- -----------------
TOTAL ASSETS $ 5,484,814 $ 4,231,821
================= =================
The accompanying notes are an integral part of these consolidated financial statements
</TABLE>
F-4
<PAGE>
<TABLE>
<CAPTION>
GLOBAL SEAFOOD TECHNOLOGIES, INC.
Consolidated Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31,
---------------------------------------
2000 1999
----------------- -----------------
CURRENT LIABILITIES
<S> <C> <C>
Accounts payable - trade $ 49,288 $ 689,875
Accounts payable - related party (Note 1) - 71,583
Accrued expenses 29,049 27,185
Income taxes payable (Note 8) - 918
Notes payable, current portion (Note 3) 199,647 140,051
Notes payable to related parties (Note 4) 113,500 113,500
Obligations under capital leases, current portion (Note 6) 31,270 93,581
----------------- -----------------
Total Current Liabilities 422,754 1,136,693
----------------- -----------------
LONG-TERM LIABILITIES
Notes payable (Note 3) 1,402,584 1,337,806
Obligations under capital leases (Note 6) 54,261 81,501
----------------- -----------------
Total Long-Term Liabilities 1,456,845 1,419,307
----------------- -----------------
Total Liabilities 1,879,599 2,556,000
----------------- -----------------
COMMITMENTS AND CONTINGENCIES (Note 9)
STOCKHOLDERS' EQUITY
Preferred stock: 25,000,000 shares authorized
of $0.001 par value, 200,000 and 30,000 shares
issued and outstanding, respectively 200 30
Common stock: 50,000,000 shares authorized
of $0.001 par value, 13,124,046 and 11,678,082
shares issued and outstanding, respectively 13,124 11,678
Additional paid-in capital 4,411,285 1,367,316
Prepaid consulting (Note 1) - (78,000)
Prepaid non-compete agreement (Note 1) (111,612) -
Subscription receivable (46,486) -
Retained earnings (deficit) (661,296) 374,797
----------------- -----------------
Total Stockholders' Equity 3,605,215 1,675,821
----------------- -----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 5,484,814 $ 4,231,821
================= =================
The accompanying notes are an integral part of these consolidated financial statements
</TABLE>
F-5
<PAGE>
<TABLE>
<CAPTION>
GLOBAL SEAFOOD TECHNOLOGIES, INC.
Consolidated Statements of Operations
For the Years Ended March 31,
------------------------------------------------------------
2000 1999 1998
----------------- ----------------- -----------------
<S> <C> <C> <C>
NET SALES $ 14,205,602 $ 13,841,059 $ 14,054,926
EXPENSES
Cost of sales 10,467,143 11,702,369 12,298,412
Non-complete covenant 31,888 32,800 32,800
Depreciation expense 411,769 350,639 258,465
Bad debt expense - - 3,288
Selling, general and administrative 3,490,382 1,672,925 1,275,453
----------------- ----------------- -----------------
Total Expenses 14,401,182 13,758,733 13,868,418
----------------- ----------------- -----------------
INCOME (LOSS) BEFORE OTHER
INCOME (EXPENSES) (195,580) 82,326 186,508
----------------- ----------------- -----------------
OTHER INCOME (EXPENSES)
Other income 61,209 66,822 142,833
Interest income 27,658 5,482 1,800
Gain on disposition of assets 8,324 25,326 -
Asset impairment loss (Note 2) (775,000) - -
Interest expense (162,704) (141,740) (114,421)
----------------- ----------------- -----------------
Total Other Income (Expenses) (840,513) (44,110) 30,212
----------------- ----------------- -----------------
NET INCOME (LOSS) BEFORE
INCOME TAXES (1,036,093) 38,216 216,720
PROVISION FOR INCOME
TAXES (Note 8) - 9,616 87,327
----------------- ----------------- -----------------
NET INCOME (LOSS) $ (1,036,093) $ 28,600 $ 129,393
================= ================= =================
BASIC EARNINGS (LOSS) PER SHARE $ (0.08) $ 0.00 $ 0.01
================= ================= =================
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 12,633,545 11,628,082 11,414,278
================= ================= =================
FULLY DILUTED EARNINGS (LOSS)
PER SHARE $ (0.08) $ 0.00 $ 0.01
================= ================= =================
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 12,633,545 11,824,148 11,458,113
================= ================= =================
The accompanying notes are an integral part of these consolidated financial statements
</TABLE>
F-6
<PAGE>
<TABLE>
<CAPTION>
GLOBAL SEAFOOD TECHNOLOGIES, INC.
Consolidated Statements of Stockholders' Equity
Preferred Stock Common Stock Additional Retained
------------------------------- --------------------------- Paid-in Subscription Earnings
Shares Amount Shares Amount Capital Receivable (Deficit)
--------------- -------------- ------------- ------------ ----------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance,
March 31, 1997 - $ - 10,905,590 $ 10,906 $ (393,589) $ - $ 216,804
Common stock
issued in lieu
of debt - - 300,000 300 449,700 - -
Common stock
issued to purchase
CoMar Foods, Inc. - - 422,492 422 933,285 - -
Preferred stock
issued for cash 20,000 20 - - 199,980 - -
Net income for the
year ended
March 31, 1998 - - - - - - 129,393
------ ------------ ---------- ---------- ---------- ------------ -----------
Balance,
March 31, 1998 20,000 20 11,628,082 11,628 1,189,376 - 346,197
Preferred stock
issued for cash 10,000 10 - - 99,990 - -
Common stock
issued for prepaid
consulting services - - 50,000 50 77,950 - -
Net income for the
year ended
March 31, 1999 - - - - - - 28,600
------ ------------ ---------- ---------- ---------- ------------ -----------
Balance,
March 31, 1999 30,000 $ 30 11,678,082 $ 11,678 $1,367,316 $ - $ 374,797
------ ------------ ---------- ---------- ---------- ------------ -----------
The accompanying notes are an integral part of these consolidated financial statements
</TABLE>
F-7
<PAGE>
<TABLE>
<CAPTION>
GLOBAL SEAFOOD TECHNOLOGIES, INC.
Consolidated Statements of Stockholders' Equity (Continued)
Preferred Stock Common Stock Additional Retained
------------------------------- --------------------------- Paid-in Subscription Earnings
Shares Amount Shares Amount Capital Receivable (Deficit)
--------------- -------------- ------------- ------------ ----------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance,
March 31, 1999 30,000 $ 30 11,678,082 $ 11,678 $1,367,316 $ - $ 374,797
Common stock
issued for cash - - 846,600 847 523,238 (46,486) -
Common stock
issued as prepaid
non-compete agreement - - 114,800 115 143,385 - -
Common stock
issued for services - - 32,000 32 39,968 - -
Conversion of
preferred shares
to common (30,000) (30) 300,000 300 (270) - -
Common stock
issued to purchase
Killer Bee, Inc.
(Note 1) - - 152,564 152 237,848 - -
Preferred stock
issued for cash 200,000 200 - - 1,999,800 - -
Additional capital
contributed (Note 11) - - - - 100,000 - -
Net loss for the
year ended
March 31, 2000 - - - - - - (1,036,093)
------- ------------ ---------- ---------- ---------- ------------ -----------
Balance,
March 31, 2000 200,000 $ 200 13,124,046 $ 13,124 $4,411,285 $ (46,486) $ (661,296)
======= ============ ========== ========== ========== ============ ===========
The accompanying notes are an integral part of these consolidated financial statements
</TABLE>
F-8
<PAGE>
<TABLE>
<CAPTION>
GLOBAL SEAFOOD TECHNOLOGIES, INC.
Consolidated Statements of Cash Flows
For the Years Ended March 31,
-----------------------------------------------------------
2000 1999 1998
----------------- ----------------- -----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net income (loss) $ (1,036,093) $ 28,600 $ 129,393
Adjustments to reconcile net income (loss) to
net cash provided (used) by operating activities:
Depreciation 411,769 350,639 258,465
(Gain) loss on sale of assets (8,324) (25,326) -
Bad debts - - 3,288
Asset impairment loss 775,000 - -
Common stock issued for services 40,000 - -
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable
and accounts receivable - related (571,151) (196,824) (141,581)
(Increase) decrease in taxes receivable - (7,539) (38,572)
(Increase) decrease in deferred tax asset - (14,600) 16,075
(Increase) decrease in inventories (217,569) 153,655 (46,724)
(Increase) decrease in prepaid expenses 108,061 6,045 15,690
(Increase) decrease in deposits (1,084) (8,055) (3,089)
Increase (decrease) in accounts payable
and accounts payable - related (712,170) 423,841 157,099
Increase (decrease) in taxes payable (918) (16,226) (73,583)
Increase (decrease) in accrued expenses 1,864 (8,638) 16,505
----------------- ----------------- -----------------
Net Cash Provided (Used) by Operating Activities (1,210,615) 685,572 292,966
----------------- ----------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale of property and equipment 170,421 31,000 -
Purchase of property and equipment (823,023) (475,333) (391,535)
----------------- ----------------- ----------------
Net Cash Used in Investing Activities (652,602) (444,333) (391,535)
----------------- ----------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Additional capital contributed 100,000 - -
Proceeds from sale of preferred and common stock 2,477,599 100,000 200,000
Payments on notes payable and leases payable (234,980) (956,152) (280,539)
Proceeds of notes payable and leases payable 80,000 1,320,000 -
----------------- ----------------- -----------------
Net Cash Provided (Used by)
Financing Activities 2,422,619 463,848 (80,539)
----------------- ----------------- -----------------
NET INCREASE (DECREASE) IN CASH 559,402 705,087 (179,108)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 743,718 38,631 217,739
----------------- ----------------- -----------------
CASH AND CASH EQUIVALENTS AT
END OF YEAR $ 1,303,120 $ 743,718 $ 38,631
================= ================= =================
The accompanying notes are an integral part of these consolidated financial statements
</TABLE>
F-9
<PAGE>
<TABLE>
<CAPTION>
GLOBAL SEAFOOD TECHNOLOGIES, INC.
Consolidated Statements of Cash Flows (Continued)
For the Years Ended March 31,
-----------------------------------------------------------
2000 1999 1998
----------------- ----------------- -----------------
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for:
<S> <C> <C> <C>
Interest $ 162,704 $ 141,740 $ 112,421
Income taxes $ 918 $ 27,126 $ 183,407
NON CASH FINANCING ACTIVITIES
Property and equipment purchased under
capital leases $ 3,665 $ 118,860 $ 21,905
Property and equipment acquired by assuming
notes payable $ - $ - $ 200,000
Common stock issued for the purchase of
subsidiary $ 238,000 $ - $ 933,707
Common stock issued for services $ 40,000 $ - $ -
Common stock issued as prepaid
non-compete agreement $ 143,500 $ - $ -
The accompanying notes are an integral part of these consolidated financial statements
</TABLE>
F-10
<PAGE>
GLOBAL SEAFOOD TECHNOLOGIES, INC.
Notes to the Consolidated Financial Statements
March 31, 2000 and 1999
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Organization
The consolidated financial statements include those of Global
Seafood Technologies, Inc. (GST) and its wholly-owned
subsidiaries, Custom Pack, Inc., CoMar Foods, Inc. and Killer Bee,
Inc. Custom Pack, Inc. has a separate division that is accounted
for as the "Aguaculture Division" in the consolidated financial
statements, although it is not a separate subsidiary.
Collectively, they are referred to herein as "the Company".
GST was incorporated under the laws of the State of Nevada on May
29, 1986 under the name of Rue de Rivoli Perfumeries of America,
Ltd. It later changed its name to Enviro Solutions International,
Inc. on November 21, 1994 in contemplation of a merger with Enviro
Solutions International, Inc. of Utah. The merger was never
completed. However, the name was still changed.
On October 31, 1995, the Company completed an Agreement and Plan
of Reorganization whereby GST issued 8,000,000 shares of its
common stock in exchange for all of the outstanding common stock
of Custom Pack, Inc. (Custom). Pursuant to the reorganization, the
name was changed to International Custom Pack, Inc. The Company
later changed its name to Global Seafood Technologies, Inc. during
1998.
The reorganization was accounted for as a recapitalization of
Custom because the shareholders of Custom control the Company
after the acquisition. Therefore, Custom is treated as the
acquiring entity. Accordingly, there was no adjustment to the
carrying value of the assets or liabilities of GST. GST is the
acquiring entity for legal purposes and Custom is the surviving
entity for accounting purposes.
On October 1, 1997, the Company completed an Agreement and Plan of
Reorganization whereby GST issued 422,492 shares of its common
stock valued at $933,707, paid $300,000 in cash and assumed
liabilities of $266,293 for a total of $1,500,000 in exchange for
all of the outstanding common stock of CoMar Foods, Inc. (CoMar).
The acquisition has been accounted for as a purchase. The 422,492
shares issued were valued at $933,707 or $2.21 per share. The
$2.21 per share amount was determined based upon the market price
of the 422,492 shares issued over a reasonable period of time
before and after the Agreement and Plan of Reorganization was
reached, which approximated the fair market value of the assets
and liabilities acquired through the purchase.
On April 1, 1999, the Company issued 152,564 shares of its common
stock to purchase the assets of a related company, Killer Bee,
Inc. (Killer Bee) for $238,000. The acquisition was accounted for
by the purchase method. The 152,564 shares issued were valued at
$238,000 or $1.56 per share, the market value of the shares on the
date of the acquisition.
On June 25, 1999, the Company purchased the assets and brand name
of Drag N Bait, Inc., a recognized supplier of recreational
fishing bait in the Southeastern United States, and particularly
in Florida. The acquisition was $339,000 cash, which represented
the value of the assets acquired, and was accounted for by the
purchase method. The operations of Drag N Bait after June 25, 1999
have been consolidated with those of Killer Bee, Inc. for the year
ended March 31, 2000.
GST was incorporated for the purpose of creating a vehicle to
obtain capital to seek out, investigate and acquire interests in
products and businesses which may have a potential for profit.
F-11
<PAGE>
GLOBAL SEAFOOD TECHNOLOGIES, INC.
Notes to the Consolidated Financial Statements
March 31, 2000 and 1999
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
a. Organization (Continued)
Custom, a wholly-owned subsidiary, was incorporated under the laws
of the State of Mississippi on February 15, 1988. It was
incorporated for the purpose of being a full service processor,
packager, and storage provider of shrimp and other seafood.
CoMar, a wholly-owned subsidiary, was incorporated under the laws
of the State of Alabama on February 26, 1993. CoMar is a full
service processor and packager of shrimp and other seafood
products.
Killer Bee, a wholly-owned subsidiary, was incorporated under the
laws of the State of Mississippi on September 18, 1998. It was
incorporated for the purpose of being a full service processor,
packager and distributor of bait and other recreational fishing
products.
b. Accounting Method
The Company's consolidated financial statements are prepared using
the accrual method of accounting. The Company has elected a March
31 year end.
c. Cash and Cash Equivalents
Cash equivalents include short-term, highly liquid investments
with maturities of three months or less at the time of
acquisition. The Company's cash accounts at its banks are insured
by the FDIC up to $100,000. The amount in excess of the insured
limits at March 31, 2000 was $929,026.
d. Basic and Fully Diluted Earnings Per Share
The computations of basic earnings per share of common stock are
based on the weighted average number of shares outstanding during
the period of the consolidated financial statements. Common stock
equivalents, consisting of the preferred shares and warrants, have
been included in the fully diluted earnings per share.
e. Principles of Consolidation
The consolidated financial statements include those of Global
Seafood Technologies, Inc. and its wholly-owned subsidiaries,
Custom Pack, Inc., CoMar Foods, Inc. and Killer Bee, Inc. All
significant intercompany accounts and transactions have been
eliminated.
f. Inventories
Inventory supplies are stated at the lower of cost (computed on a
first-in, first-out basis) or market. The inventory consists of
seafood, bait products, seafood storage bags, packing boxes and
other miscellaneous packaging materials.
F-12
<PAGE>
GLOBAL SEAFOOD TECHNOLOGIES, INC.
Notes to the Consolidated Financial Statements
March 31, 2000 and 1999
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
g. Property and Equipment
Property and equipment are stated at cost. Expenditures for small
tools, ordinary maintenance and repairs are charged to operations
as incurred. Major additions and improvements are capitalized.
Depreciation is computed using the straight-line and accelerated
methods over estimated useful lives as follows:
Machinery and equipment 5 to 7 years
Furniture and fixtures 5 to 7 years
Buildings 3 to 7 years
Vehicles 5 years
Water well 7 years
h. Accounts Receivable
Accounts receivable are recorded net of the allowance for doubtful
accounts of $5,886 and $5,886 as of March 31, 2000 and 1999,
respectively.
i. Related Party Transactions
The Company purchases some of its product and supplies from a
related company. The amounts owed to this company at March 31,
2000 and 1999 was $-0- and $71,583, respectively.
The Company also sells some of its product to the same related
company. The amounts owed from this company at March 31, 2000 and
1999 was $158,477 and $153,771, respectively.
In addition, the Company has advanced funds to a related company
for operating expenses. Total amount owed from this Company at
March 31, 2000 and 1999 was $191,974 and $-0-, respectively.
j. Revenue Recognition
Revenue is recognized upon shipment of goods to the customer.
k. Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires 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.
l. Reclassifications
Certain prior period amounts have been reclassified to conform to
the March 31, 2000 financial statement presentation.
F-13
<PAGE>
GLOBAL SEAFOOD TECHNOLOGIES, INC.
Notes to the Consolidated Financial Statements
March 31, 2000 and 1999
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
m. Advertising
The Company follows the policy of charging the costs of
advertising to expense as incurred.
n. Change in Accounting Principle
In June 1998, the FASB issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities" which requires
companies to record derivatives as assets or liabilities, measured
at fair market value. Gains or losses resulting from changes in
the values of those derivatives would be accounted for depending
on the use of the derivative and whether it qualifies for hedge
accounting. The key criterion for hedge accounting is that the
hedging relationship must be highly effective in achieving
offsetting changes in fair value or cash flows. SFAS No. 133 is
effective for all fiscal quarters of fiscal years beginning after
June 15, 1999. Management believes the adoption of this statement
had no material impact on the Company's consolidated financial
statements.
o. Prepaid Consulting
During the year ended March 31, 1999, the Company issued 50,000
shares of its outstanding common stock valued at $1.56 per share
under a consulting/investment relations agreement for a 12-month
period beginning April 1, 1999. The 50,000 shares issued have been
valued at the fair market value of the services to be performed or
$78,000 which approximates the fair value of the shares on the
date of issuance. The $78,000 has been recorded by the Company as
prepaid consulting as on March 31, 1999, and was fully amortized
during the year ended March 31, 2000.
p. Prepaid Non-Compete Agreement
The Company entered into a covenant-not-to-compete during the year
ended March 31, 1991. The original agreement required $492,000 to
be paid over 10 years at $49,200 each year. The agreement was
amended in 1994 due to an examination by the Internal Revenue
Service that reduced the required annual payment to $32,800.
During the year ended March 31, 2000, the Company issued 114,800
shares of its outstanding common stock in lieu of the future
payments required under the non-compete agreement. These shares
were valued at $143,500 or $1.25 per share. Amortization on the
prepaid agreement through March 31, 2000 was $31,888.
F-14
<PAGE>
GLOBAL SEAFOOD TECHNOLOGIES, INC.
Notes to the Consolidated Financial Statements
March 31, 2000 and 1999
NOTE 2 - PROPERTY AND EQUIPMENT
Property and equipment at March 31, 2000 and 1999 consisted of the
following:
March 31,
----------------------------
2000 1999
------------ ------------
Land $ 102,926 $ 102,926
Buildings and improvements 1,373,324 2,057,887
Furniture and fixtures 29,319 26,780
Machinery and equipment 3,096,515 2,618,001
Vehicles 27,820 27,820
Water well 121,441 121,441
------------ ------------
Total 4,751,345 4,954,855
Less accumulated depreciation (2,488,294) (2,169,625)
------------ ------------
Property and equipment - net $ 2,263,051 $ 2,785,230
============ ============
Depreciation expense for the years ended March 31, 2000, 1999 and
1998 was $411,769, $350,639 and $258,465, respectively.
During the year ended March 31, 2000, the Company recorded an
impairment loss of $775,000 on the building and improvements based
upon the decline in market value of the building during the year.
NOTE 3 - NOTES PAYABLE
Notes payable at March 31, 2000 and 1999 consisted of the
following:
<TABLE>
<CAPTION>
March 31,
-------------------------------
2000 1999
-------------- ---------------
<S> <C> <C>
Note payable, secured by property, interest at 8.05%,
interest and principal payments of $16,124 due monthly,
matures on July 5, 2003. $ 1,166,816 $ 1,260,603
Note payable, secured by property, interest at 9.0%,
interest and principal payments of $1,497 due monthly,
matures on July 1, 2012. 136,469 141,435
Note payable, secured by property, interest at 8.0%,
interest and principal payments of $702 due monthly,
matures on November 23, 2003. 26,351 32,413
Note payable, secured by property, interest at 7.5%,
interest and principal payments of $399 due monthly,
matures on November 15, 2002. 11,532 15,285
Note payable, secured by property, interest at 7.5%,
interest and principal payments of $737 due monthly,
matures on October 15, 2002. 20,673 27,000
Note payable, unsecured, interest at 8.0%, interest
due annually, principal due from gross profits (Note 11). 80,000 -
-------------- ---------------
Balance forward $ 1,441,841 $ 1,476,736
-------------- ---------------
F-15
<PAGE>
GLOBAL SEAFOOD TECHNOLOGIES, INC.
Notes to the Consolidated Financial Statements
March 31, 2000 and 1999
NOTE 3 - NOTES PAYABLE (Continued)
<CAPTION>
March 31,
-------------------------------
2000 1999
-------------- ---------------
<S> <C> <C>
Balance forward $ 1,441,841 $ 1,476,736
Note payable to a bank, secured by property and equipment,
interest at 9.25%, interest and principal payments of $440 due
monthly, matures in September 2002. 11,751 -
Note payable to a bank, secured by property and
equipment, interest at 8.0%, interest and principal
payments of $492 due monthly, matures in January 2004. 19,656 -
Note payable to a bank, secured by property, interest
at 8.0%, interest and principal payments of $1,531
due monthly, matures in June 2004. 65,895 -
Note payable to a bank, secured by property, interest at
8.0%, interest and principal payments of $1,447 due
monthly, matures June 2004. 62,284 -
Other notes payable 804 1,121
-------------- ---------------
Total notes payable 1,602,231 1,477,857
Less: current portion (199,647) (140,051)
-------------- ---------------
Long-term notes payable $ 1,402,584 $ 1,337,806
============== ===============
</TABLE>
Maturities of long-term debt are as follows:
Year Ending
March 31, Amount
2001 $ 199,647
2002 222,343
2003 236,469
2004 922,159
2005 21,613
2006 and thereafter -
--------------
Total $ 1,602,231
==============
F-16
<PAGE>
GLOBAL SEAFOOD TECHNOLOGIES, INC.
Notes to the Consolidated Financial Statements
March 31, 2000 and 1999
NOTE 4 - NOTES PAYABLE - RELATED PARTIES
<TABLE>
<CAPTION>
March 31,
-------------------------------
2000 1999
-------------- ---------------
<S> <C> <C>
Note payable to shareholder, unsecured, interest at 10%,
interest payments due quarterly and annually, principal
amount is due on demand. $ 113,500 $ 113,500
-------------- ---------------
Total notes payable - related parties $ 113,500 $ 113,500
============== ===============
</TABLE>
NOTE 5 - LINE OF CREDIT
The Company has a line of credit with a bank. The loan is secured
by commercial property under a deed of trust and mortgage and by a
UCC commercial security agreement, accrues interest at 7.5% per
annum, and has a maximum balance of $1,000,000. The line is
renewed annually and currently expires on October 5, 2000. The
balance outstanding on the line of credit at March 31, 2000 was
$-0-.
NOTE 6 - CAPITAL LEASES
The Company leases certain equipment with lease terms through
September 2003. Obligations under these capital leases have been
recorded in the accompanying consolidated financial statements at
the present value of future minimum lease payments.
Obligations under capital leases at March 31, 2000 and 1999
consisted of the following:
March 31,
--------------------------
2000 1999
------------ ------------
Total $ 85,531 $ 175,082
Less: current portion (31,270) (93,581)
------------ ------------
Long-term portion $ 54,261 $ 81,501
============ ============
The future minimum lease payments under these capital leases and
the net present value of the future minimum lease payments are as
follows:
Year Ending
March 31, Amount
--------- ------
2001 $ 36,039
2002 20,907
2003 20,575
2004 9,789
2005 -
2006 and thereafter -
---------
Total future minimum lease payments 87,310
Less, amount representing interest (1,779)
---------
Present value of future minimum lease payments $ 85,531
=========
F-17
<PAGE>
GLOBAL SEAFOOD TECHNOLOGIES, INC.
Notes to the Consolidated Financial Statements
March 31, 2000 and 1999
NOTE 7 - MAJOR CUSTOMERS AND SUPPLIERS
For the year ended March 31, 2000, two customers generated sales
in excess of 10% of the Company's total sales. Sales to these two
customers made up approximately 34% and 13%, respectively, of
total revenues for the year ended March 31, 2000.
For the year ended March 31, 1999, two customers generated sales
in excess of 10% of the Company's total sales. Sales to these two
customers made up approximately 36% and 32%, respectively, of
total revenues for the year ended March 31, 1999.
For the year ended March 31, 1998, two customers generated sales
in excess of 10% of the Company's total sales. Sales to these two
customers made up approximately 25% and 22%, respectively, of
total revenues for the year ended March 31, 1998.
The Company purchased product from two suppliers during the year
ended March 31, 2000 that generated costs in excess of 10% of the
Company's total purchases. Purchases from these two suppliers made
up approximately 27% and 20%, respectively, of total purchases for
the year ended March 31, 2000.
The Company purchased product from three suppliers during the year
ended March 31, 1999 that generated costs in excess of 10% of the
Company's total purchases. Purchases from these three suppliers
made up approximately 22%, 15% and 12%, respectively, of total
purchases for the year ended March 31, 1999.
The Company purchased product from three suppliers during the year
ended March 31, 1998 that generated costs in excess of 10% of the
Company's total purchases. Purchases from these three suppliers
made up approximately 26%, 15% and 15%, respectively, of total
purchases for the year ended March 31, 1998.
All significant sales and purchases that exceeded 10% during the
years ended March 31, 2000, 1999 and 1998 were in the seafood
packaging and processing segment.
NOTE 8 - INCOME TAXES
Provision for income taxes for the years ended March 31, 2000,
1999 and 1998 consisted of the following:
<TABLE>
<CAPTION>
March 31,
----------------------------------------------------
2000 1999 1998
-------------- --------------- --------------
<S> <C> <C> <C>
Current:
Federal income taxes $ - $ 19,376 $ 70,670
State income taxes - 4,840 17,144
Deferred:
Federal income taxes - (14,600) (487)
-------------- --------------- --------------
Total provision for income taxes $ - $ 9,616 $ 87,327
============== =============== ==============
</TABLE>
As of March 31, 2000 and 1999, the Company owed $-0- and $918 in
state income taxes, respectively.
As of March 31, 2000 and 1999, the Company overpaid its federal
income taxes by $46,111 and $46,111, respectively.
As of March 31, 2000 and 1999, a deferred tax asset of $14,600 and
$14,600 was recognized and recorded.
F-18
<PAGE>
GLOBAL SEAFOOD TECHNOLOGIES, INC.
Notes to the Consolidated Financial Statements
March 31, 2000 and 1999
NOTE 8 - INCOME TAXES (Continued)
A reconciliation of income taxes at the federal statutory rate to
the effective tax rate is as follows:
<TABLE>
<CAPTION>
2000 1999 1998
--------------- ---------------- ---------------
<S> <C> <C> <C>
Income taxes computed at the
federal statutory rate $ - $ 24,216 $ 81,079
Non-deductible allowance for
bad debts - (2,300) -
Other non-deductible items - 6,248
Accelerated depreciation expense - (12,300) -
--------------- ---------------- ---------------
Income Tax Expense $ - $ 9,616 $ 87,327
=============== ================ ===============
</TABLE>
NOTE 9 - COMMITMENTS AND CONTINGENCIES
Common Stock Contingency
The Company is aware of numerous possible claims by individuals
that received either through purchase or otherwise, 850,000 forged
shares of the Company's common stock that purport to represent
issued and outstanding shares. The shares are not listed on the
Company's shareholder records and do not represent duly issued and
outstanding shares of the Company's common stock. Although no
litigation is pending in relation to these shares, it is possible
that the Company may have to honor these 850,000 shares of common
stock in the future. The shares have not been recorded by the
Company at March 31, 2000 since the ultimate outcome is currently
not estimatable.
The Company is in the process of trying to recover 1,700,000
common shares. The holder of the shares is claiming breach of
contract and claims that he is entitled to the shares. The claim
is currently in litigation and management intends on vigorously
contesting the claim. The Company has filed an answer and a
counterclaim against the holder seeking specific performance of a
settlement agreement previously entered into. While the
possibility that an unfavorable outcome exists, the Company has
determined that the potential loss is remote and fully intends on
recovering the entire 1,700,000 shares. It is remotely possible,
however, that the Company may have to honor these shares in the
future, although the shares have not been recorded by the Company
as outstanding shares as of March 31, 2000.
The Company is also in the process of trying to recover 203,400
shares that were issued for no consideration. The shares have been
requested to be returned for cancellation but are in receivership
pending authorization to be returned. Management of the Company
fully intends on receiving the shares back and will pursue
litigation, if necessary, to recover the shares. It is remotely
possible, however, that the Company may have to honor these shares
in the future, although the shares have not been recorded by the
Company as outstanding shares as of March 31, 2000.
F-19
<PAGE>
GLOBAL SEAFOOD TECHNOLOGIES, INC.
Notes to the Consolidated Financial Statements
March 31, 2000 and 1999
NOTE 9 - COMMITMENTS AND CONTINGENCIES (Continued)
Leases
The Company has entered into several non-cancelable leases,
accounted for as operating leases, of certain machinery and
equipment used in operations. The minimum future payments required
under the operating leases are as follows:
Year Ending
March 31, Amount
--------- ------
2001 $ 113,204
2002 10,894
2003 10,894
2004 5,147
2005 -
2006 and thereafter -
-----------------
Total $ 140,139
=================
NOTE 10 - WARRANTS OUTSTANDING
On November 1, 1998, the Company granted warrants to a consultant
to purchase 1,000,000 shares of common stock at $1.00 per share
which approximated market value for the shares at the time of
issuance. This is consistent with the accounting treatment of SFAS
No. 123, "Accounting for Stock-Based Compensation." The warrants
are exercisable until July 1, 2008.
During April 1999, the Company granted warrants to an investor to
purchase 2,000,000 shares of the Company's common stock at $1.00
per share, which was the prevailing market value for the shares at
the time of issuance. This is consistent with the accounting
treatment of SFAS No. 123, "Accounting for Stock-Based
Compensation". The warrants are exercisable until July 15, 2001.
On April 1, 1999, the Company granted warrants to purchase
1,500,000 shares of the Company's common stock at $1.56 per share
in connection with the purchase of the assets of Killer Bee, Inc.
Warrants of 500,000 shares were granted to each of the sellers
(three individuals, which included two executive officers and
directors of the Company). The warrants were valued at the
prevailing market value of $1.56 per share at the time of
issuance. This is consistent with the accounting treatment of SFAS
No. 123, "Accounting for Stock-Based Compensation". The warrants
are exercisable until April 1, 2009.
The Company estimates the fair value of each stock option and
warrant at the grant date by using the Black-Scholes pricing
model. The following assumptions were used: risk- free interest
rate of 6%, eight year expected life, 35% expected volatility, and
no expected dividends. Accordingly, no additional expense was
recorded for the years ended March 31, 2000 and 1999.
F-20
<PAGE>
GLOBAL SEAFOOD TECHNOLOGIES, INC.
Notes to the Consolidated Financial Statements
March 31, 2000 and 1999
NOTE 11 - JOINT PARTICIPATION AGREEMENT
On March 20, 2000, the Company entered into a joint participation
agreement for the allocation and distribution of profit to be
derived from participation in an aquaculture farming operation in
the State of Mississippi. As part of the agreement, the other
participant paid a $100,000 participation fee to the Company that
was recorded as additional capital contributed for the year ended
March 31, 2000. In addition, the participant loaned the Company
$80,000 to be used for working capital in the operation of the
farm (see Note 3). The Company is to provide the agricultural land
lease, expertise in producing freshwater prawns, macrobrachia
post-larvae to seed the ponds, equipment and housing for the
operation.
Profits derived from the operation of the farm will be allocated
51% to the Company and 49% to the other participant, after the
$80,000 loan is repaid. No profit had been earned at March 31,
2000. The agreement is for one year, but can be extended annually
at the agreement of the parties.
F-21
