<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 3 TO
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS UNDER SECTION 12(b)
OR 12(g) OF THE SECURITIES EXCHANGE OF 1934
Global Seafood Technologies, Inc.
----------------------------------------------
(Name of Small Business Issuer in Its Charter)
State of Nevada 95-4117828
- ------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
555 Bayview Avenue, Biloxi, Mississippi 39530
---------------------------------------------
(Address of Principal Executive Offices)
(228) 435-3632
------------------------
Issuers telephone number
Securities to be registered pursuant to Section 12(b) of the Act: None
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock
----------------
(Title of class)
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PART I
ITEM 1. DESCRIPTION OF THE BUSINESS
General
The company's principal line of business is the full-service
processing, packaging, and storage of shrimp and other seafood. This business is
principally conducted through a wholly-owned subsidiary, Custom Pack, Inc.
("Custom Pack"). The company maintains an Aquaculture Division within Custom
Pack, which is engaged in the production of freshwater prawns. The company also
packages and distributes recreational fishing bait products through its Killer
Bee, Inc. subsidiary.
Custom Pack was incorporated under the laws of the State of Mississippi
on February 15, 1988. Through a reverse merger completed on October 31, 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., incorporated in Nevada on
May 29, 1986. On December 21, 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 production of seafood, and processing, packaging, and
distribution of bait products for recreational fishing.
Industry Overview and Competition
According to data provided by the United Nations Food and Agricultural
Organization, the annual worldwide market for seafood products is in excess of
$50 billion, of which the United States market is approximately $8 billion.
Consumption demand for seafood products, and principally shrimp, has risen
steadily throughout the last two decades.
The worldwide market for shrimp is the largest segment of the industry
at $30 billion. The United States shrimp market was estimated at $2.5 billion.
Shrimp is the number one seafood in this country, with annual consumption
averaging 2.7 lbs per person in 1997. Approximately 75% of the shrimp consumed
worldwide are caught in the oceans, and about 25% are grown in aquaculture.
The seafood industry is very fragmented. It is characterized by
thousands of suppliers and middlemen throughout the distribution chain from
product procurement, to wholesale distributors, and to retail food stores or
restaurants. Seafood is sold fresh or frozen in blocks or by IQF (Individual
Quick Freeze) methods. The company is one of the IQF (Individual Quick Freeze)
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
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of suppliers. Product availability and consistency of quality are important
factors in the service provided.
The company does not operate under government contracts or other
long-term contracts and has no backlog.
The recreational bait industry represents a $1.0 Billion sales market
annually in the United States, according to Department of Commerce Wildlife and
Fisheries 1996 data. The company is not aware of any single dominant company or
nationally recognized brand name for bait products.
Statutory and Regulatory Changes
Hazard Analysis and Critical Control Point ("HACCP") regulations took
effect in the seafood processing industry in December 1997. The company's plants
were in compliance in advance of the effective date and are fully approved.
Compliance with HACCP will not affect the company's operations, but compliance
may affect competition, which might not be in the same position.
The discharge of water wastes from company facilities is in full
compliance with existing government regulations and standards. The company does
not envision that any significant capital expenditures will be required for
environmental control procedures for the foreseeable future.
Company Strategy
In its core business activities, 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. The company will
continue to focus on packaging innovations and value-added specialty entrees to
expand sales and increase margins in these areas.
The recreational bait segment of the business is seen as offering great
potential to utilize the established business strengths of the company in
procuring and processing bait products, and in making the products available
through distribution to convenient outlets.
As a long term strategy, the company 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.
Products and Services
The company's core operations involve the utilization of
state-of-the-art equipment for IQF (Individual Quick Freeze) freezing,
processing, and packaging of frozen shrimp and seafood. The products are
distributed to many of the nation's largest seafood restaurant chains and retail
grocery outlets. This business is conducted through the Custom Pack subsidiary.
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The seafood products and packaging are well developed. Frozen, headless
shrimp (with shell on) is the principal product processed, which is frequently
packaged in consumer friendly, one pound and two pound packages. Peeled shrimp
is also processed under private labels for customers or for distribution to
restaurants. Frozen fish fillets are packaged for distribution, as well. For the
respective periods of the fiscal year ending March 31, 1999 and the interim nine
months ending December 31, 1999, this segment accounted for 99.9% and 93.2% of
revenues.
In 1997 the company acquired Co Mar Foods, which produces 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 products
produced at Co Mar Foods are in the process of being integrated into Custom Pack
during the March 31, 2000 fiscal year.
The company's Aquaculture subsidiary is engaged in the development of
farm grown seafood, principally freshwater prawns, at its facility in Ocean
Springs, MS, which was acquired in 1997. The facility hatches and nurses shrimp
larvae for stocking in ponds operated by independent growers in Mississippi.
Revenues from this segment are not presently significant, accounting for 0.01%
in the fiscal year and 0.18% in the interim nine months period.
In 1998 the principals of the company developed a full line of branded
frozen bait products for recreational fishermen. These products include
varieties of bait shrimp, catfish bait, eels, cut squid, cigar minnows,
ballyhoo, frozen chum, and menhaden oil. In April, 1999 this activity was
incorporated as a wholly-owned subsidiary, Killer Bee, Inc., and was
consolidated into the company. The products are packaged in the Custom Pack
facility and in contracted independent facilities in Pascagoula, MS. The "Killer
Bee Bait" name is a registered trade name, and the products are sold through Wal
Mart, K Mart, and independent marinas and bait stores. For the interim nine
months period, Killer Bee accounted for 6.66% of total revenues of the company.
Marketing
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.
Customer Support
For fiscal year ended March 31, 1997, one customer, Ocean To Ocean
Seafood Sales, generated 85% of total revenues for the year. For the fiscal
years ended March 31, 1998, the sales to two customers, Ocean To Ocean Seafood
Sales and Seacoast Foods, amounted to 25% and 22%. For the fiscal years ended
March 31, 1999, the sales to these two customers amounted to 36% and 32%. 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. All significant sales were in the seafood packaging
and processing segment.
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Suppliers
Seafood products are readily available in the domestic and
international markets. Company operations rely on outside sources for seafood
product. Current product is usually purchased at the dock source or trucked in
for processing. Buying agents are employed in the 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 material amount of product to the company, but it
is the company's intention to develop this business as a consistent source of
supply for the future.
In fiscal year ending March 31, 1996 no supplier accounted for more
than 10% of purchases. In fiscal year ending March 31, 1997 , two suppliers
accounted for a total of 27% and 16% of purchases, respectively. In fiscal year
ending March 31, 1998 , three suppliers accounted for a total of 26%, 15%, and
15% of purchases, respectively. In fiscal year ending March 31, 1999 , these
three suppliers accounted for a total of 22%, 15%, and 12% of 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. All significant purchases were in
the seafood packaging and processing segment.
The company utilizes many of the supply sources for its seafood
products to supply the "Killer Bee Bait" line of bait products. Because of its
established sources of supply for seafood products and the relative volume of
existing business, the company believes that it is in a position to acquire
abundant supplies of recreational fishing bait products to support this line of
business.
Proprietary Rights
The company has acquired a federally-registered service mark for the
"Killer Bee Bait" name and for its bait products. In addition, the company
relies upon common law rights to establish and protect its intellectual
property. There can be no assurance that the company's measures to protect its
intellectual property will deter or prevent the unauthorized use of the
company's intellectual property. If the company is unable to protect its
intellectual property rights, including existing trademarks and service marks,
it could have a material adverse effect upon the company's results of
operations.
Regulation
The terms and conditions under which the Company prepares, packs and
distributes its 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.
Employees
As of October 31, 1999 there were approximately 120 persons employed by
the Company. This number does not include its independent commission salesmen,
who are
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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. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
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. The data for the
interim nine month period ending December 31, 1999, which is included in the
Exhibits, has not been subjected to audit and has been derived from the
Company's internally produced financial records. While the Company believes such
interim data to be materially correct, their failure to be subjected to
independent audit or to auditing standards should be noted. 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
<TABLE>
<CAPTION>
Audited Percentage Audited Percentage
3/31/99 of Net Sales 3/31/98 of Net Sales
<S> <C> <C> <C> <C>
INCOME STATEMENT
REVENUE: $ 13,841 100.00 $ 14,055 100.00
COST OF SALES: $ 11,702 84.55 $ 12,298 87.50
GROSS MARGIN: $ 2,139 15.45 $ 1,757 12.50
OPER. EXPENSES $ 2,056 14.86 $ 1,570 11.17
INCOME BEFORE
OTHER ITEMS $ 82 0.59 $ 187 1.33
OTHER INC (EXP) $ (44) (0.32) $ 32 0.23
NET INCOME
BEFORE TAX $ 38 0.27 $ 219 1.56
PROVISION FOR
INCOME TAX $ 9 0.07 $ 87 0.62
-------- -------- -------- -------
NET INCOME $ 29 0.21 $ 131 0.94
NET INCOME (LOSS)
PER SHARE(1) $ 0.00 $ 0.01
</TABLE>
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AS OF AND FOR THE NINE MONTHS ENDED DECEMBER 31
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Unaudited Percentage Unaudited Percentage
12/31/99 of Net Sales 12/31/98 of Net Sales
<S> <C> <C> <C> <C>
INCOME STATEMENT
REVENUE: $ 11,300 100.00 $ 11,071 100.00
COST OF SALES: $ 8,854 78.35 $ 9,003 81.32
GROSS MARGIN: $ 2,447 21.65 $ 2,068 18.68
OPER. EXPENSES $ 2,575 22.78 $ 1,869 16.88
INCOME BEFORE
OTHER ITEMS $ (128) (1.13) $ 199 1.80
OTHER INC (EXP) $ (21) (0.19) $ 44 0.40
NET INCOME
BEFORE TAX $ (149) (1.32) $ 244 2.20
PROVISION FOR
INCOME TAX $ 1 0.01 $ 0 0.00
-------- ------- -------- --------
NET INCOME $ (150) (1.33) $ 244 2.20
NET INCOME (LOSS)
PER SHARE(1) $ (0.01) $ 0.02
</TABLE>
<TABLE>
<CAPTION>
Audited Audited Unaudited Unaudited
3/31/99 3/31/98 12/31/99 12/31/98
<S> <C> <C> <C> <C>
BALANCE SHEET:
TOTAL ASSETS: $ 4,282 $ 3,178 $ 7,153 $ 4,281
LONG-TERM
OBLIGATIONS:(2) $ 1,653 $ 1,126 $ 1,459 $ 1,458
</TABLE>
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(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.
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Management's Discussion and Analysis of Financial Condition and Results of
Operations
The following discussion is provided to afford the reader an
understanding of the major elements of the Company's financial condition,
results of operation, capital resources and liquidity. It should be read in
conjunction with the financial statements and notes thereto and other
information appearing elsewhere in this Registration Statement.
Overview
The core seafood packaging business of the company does not require
significant inventory requirements, as products are either sold immediately from
processing or are packaged for third-party accounts. However, subsequent to
March 31, 1999, the Company acquired Killer Bee, Inc. and began packaging and
distributing frozen bait products for the recreational fishing industry. The
recreational bait products require that the company 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 December 31, 1999 reflects an
increase in inventory from $-0- at March 31, 1999 to $533,304 due to the
operations of Killer Bee.
Subsequent to its fiscal year end, the Company entered into several
financial transactions which provided additional liquidity to support the
anticipated growth of inventory and accounts receivable assets (See "Liquidity
and Capital Resources" below).
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: 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, 1999 declined from the previous
year from $14,054,926 to $13,841,059. However, Gross Margin increased from
$1,756,514 to $2,138,690 an increase of 21.75%. This increase in Gross Margin
properly reflects the higher level of production activity in the March 31, 1999
year, where gross profits were earned from a higher level of products which were
processed on consignment in that year relative to the previous year. The Company
attributes the increased production activity to the continued expansion of its
customer base for packaged seafood by its Custom Pack subsidiary.
Net Sales for the nine months period ended December 31, 1999 increased
2.0% to $11,300,455 from $11,071,189 in the comparable period ended December 31,
1998. This increase reflects $753,214 in Net Sales from Killer Bee.
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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 the Company charges a
processing fee and does not maintain any inventory level of product for its own
account. The decline in Cost of Sales from $12,298,412 to $11,702,369 (minus
4.8%) reflects the higher level of consignment processing in the March 31, 1999
year. The nine months periods ending December 31, 1999 and 1998 reflects in
increase in third party processing from 19% to 32% of Net Sales. The increase in
Gross Margins to 21.7% from 18.7% reflects this relative increase in processing
sales as well as the additional contribution of Killer Bee products.
Selling, general and administrative expenses increased from $1,275,453
to $1,672,925, an increase of 31.2% in the latest fiscal year. CoMar Foods was
acquired in October 1997, and therefore approximately $100,000 of the increase
is a direct result of the recognition of a full year's operations of CoMar in
the March 31, 1999 year. The balance of the increase reflects the Company's
investment in expanded corporate overhead in anticipation of future revenue
growth from aquaculture and expanded seafood processing. In comparing December
31, 1999 to 1998, the activities of Killer Bee added $527,303 or 101% of the
$521,844 increase.
OTHER INCOME (EXPENSES)
The Company reported Other income of $66,822 and $142,833 in the two
fiscal years ended March 31, 1999 and 1998, respectively. For the interim
periods ending December 31, 1999 and 1998 Other Income was $29,911 and $119,611.
Other Income predominantly reflects lease payments received from rental of
Company-owned property to the Casino industry in Biloxi, Mississippi. The
decline during the last fiscal year resulted from the termination of a lease
agreement for parking on land owned by the Company and leased to a casino.
NET INCOME
Net Income from the core business of Custom Pack, Inc. has been used by
the Company to offset operating losses from CoMar Foods and the Aquaculture
Division for the fiscal years ending March 31, 1999 and 1998, when net income
declined from $131,393 to $28,600. In the last fiscal year, losses of $227,734
and $185,340, respectively from those areas, offset $495,400 net profit from
Custom Pack. The Company is integrating 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. The Company
views the initial losses in the Aquaculture Division as an investment in the
future for the Company. For the interim nine months ending December 31, 1999 the
loss in CoMar Foods was reduced to $99,069 and the Aquaculture Division loss
declined to $61,811. Operations of Killer Bee, also in a beginning phase,
contributed $552,368 to the reported $149,722 net loss for the nine months
period ending December 31, 1999. These operating losses offset $594,210 net
income from Custom Pack. Killer Bee was not included in the December 31, 1998
results. Company expects Killer Bee to be a net income provider in the near
future.
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Gain on Sale of Assets
During the fiscal year ending March 31, 1999 the company sold two
pieces of equipment is 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.
Seasonality
Because of the availability of seafood throughout the world markets,
there is only a modest seasonal factor for the company's 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 which
is found in the wild. The Company expects that the operations of Killer Bee will
demonstrate seasonality which reflects the higher recreational fishing
activities in the warmer months of the year.
Inflation
The Company's business is not significantly affected by inflation. The
Company anticipates that any increased costs would be passed on to its
customers.
New Products and Services
On April 1, 1999 the company issued 152,564 common shares for the
acquisition of Killer Bee, Inc. assets, brand name and customer lists valued at
$238,000. The number of shares was determined by the share price of $1.56 which
existed at the time of the transaction. 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. The Company believes that these bait products compliment existing
seafood operations and will enhance Net Sales significantly.
On June 25, 1999 the Company purchased the assets and brand name of
Drag N Bait, Inc., for $339,000 cash consideration. The purchase price was
determined by asset values agreed to by the Company and the seller. 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. The operations of Drag N Bait after June
25, 1999 have been consolidated with those of Killer Bee in the nine months
interim financial reports.
Liquidity and Capital Resources
The operations of the Company and its subsidiaries have historically
been provided principally from cash flow from operations of Custom Pack.
Financing activities have more recently provided significant capital resources.
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OPERATING ACTIVITIES
The Company's Consolidated Statement of Cash Flows reported $685,572
generated from Operating Activities in the March 31, 1999 fiscal year.
Depreciation provided $350,639 and net changes in working capital accounts
contributed $334,933. For the nine months ended December 31, 1999, Operation
Activities used $1,317,634 in funds, primarily in increased Accounts Receivable
($546,559) and increased inventories from Killer Bee ($533,304). Depreciation
provided $313,233 in the latest nine month period.
INVESTING ACTIVITIES
The Company purchased additional property and equipment of $475,333 and
$391,535 in the last fiscal years from March 31, 1999 to 1998, respectively.
Sales of property and equipment generated $31,000 in the latest year only.
Purchases of property and equipment in the December 31, 1999 and 1998 nine month
periods were $622,824 and $506,497, 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. $3,290,610 was provided from this source in the nine months ended
December 31, 1999, primarily from $2,792,600 in additional capital contributed.
Net cash of $463,848 was provided in the 1999 fiscal year from
Financing Activities. $100,000 was provided from sale of additional preferred
stock, and $363,848 was provided from net changes in notes payable and lease
obligations.
Subsequently, 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.
On March 5, 1999 we issued 1,050,000 shares to four investors to be
held in escrow until cash proceeds of $650,000 was received by the company. As
of the date hereof, we received $477,600 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.
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SUMMARY DISCUSSION OF LIQUIDITY
The net increase in cash from Operating Activities, Investing
Activities, and Financing Activities for the March 31, 1999 fiscal year totaled
$705,087. Subsequent Operating Activities, Investing Activities, and Financing
Activities between March 31 and December 31, 1999 have contributed an additional
$1,350,153 in net cash.
Lines of Credit from banks totaling $1,000,000 are available for normal
business activities. $500,000 was outstanding as of December 31, 1999.
ITEM 3. PROPERTIES
The seafood processing and packaging business is conducted through the
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.
Certain value-added, ready-to cook, ready-to-eat food items are
packaged at the company-owned CoMar Foods, Inc. plant location at 10200 Cody
Driskell Road, Irvington, AL. There is 12,800 square feet of processing space on
10 acres of property.
The company's aquaculture business is conducted at its Ocean Springs,
MS facility, which occupies 25 acres, with 10.7 acres developed, and includes
three geothermal water wells.
Year 2000
The company believes that it has addressed potential technological
concerns related to the "Year 2000". The company hired an independent consultant
to evaluate internal computer needs and "Y2K" compliance, and, as a result, the
company has replaced its computer systems and software within the last year.
Additionally, the company has communicated with its major vendors and customers
and has ascertained their respective readiness to address potential "Y2K"
problems. No problems are expected.
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 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
This table describes the ownership of our outstanding common stock as
of December 31, 1999 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:
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<TABLE>
Name and Address Amount and Nature of Percentage of
Of Beneficial Owner Beneficially Owned Class
------------------- ------------------ -------------
<S> <C> <C>
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 JTWROS 2,666,666 20.71%
555 Bayview Avenue
Biloxi, MS 39530
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%
</TABLE>
(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 may be 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.
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ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
Years of Service
Name Age Position with the Company
- ---- --- -------- ----------------
<S> <C> <C>
Brent Gutierrez 37 Director, Chief Executive 11
Officer, President, Chief
Financial Officer and
Treasurer
Clayton F. Gutierrez 34 Director, Senior Vice 11
President and Secretary
Frank C. Gutierrez 64 Director 11
Anita K. Gutierrez 57 Director 11
William Schofield 62 Director 9 mos.
</TABLE>
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.
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 on April 12,
1999. He is Chairman and Chief Executive Officer of Schofield & Associates,
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.
14
<PAGE> 15
Each of the Company's principal officers is elected by and serves at
the pleasure of the Board of Directors.
ITEM 6. 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
Annual Long Term Compensation
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>
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.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Except as set forth below, there have neither occurred within the
preceding three year period, nor are there pending or proposed, any direct or
indirect material transactions between
15
<PAGE> 16
the Company and any of its directors, executive officers or controlling
shareholders outside the ordinary course of the Company's business.
On April 1, 1999 the Company issued 152,564 shares of its 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 nine month period ending
December 31, 1999 totaled $172,586, or 1.5% of Net Revenues for the period.
ITEM 8. DESCRIPTION OF SECURITIES
The Company's only authorized classes of capital stock consist of:
i) 50,000,000 shares of common stock, par value $.001, of which
12,876,915 shares were issued and outstanding as of December
31, 1999 and 11,678,082 shares as of March 31, 1999; and,
ii) 25,000,000 shares of preferred stock, par value $.001, of
which 200,000 shares were issued and outstanding as of
December 31, 1999 and 30,000 shares as of March 31, 1999.
Voting Rights
Each holder of common stock is entitled to cast one vote for each share
held on all issues requiring a shareholder vote, but may not cumulate his, her
or its votes for the election of directors or for any other purpose. The
Company's bylaws authorize the holders of 10% or more of the outstanding capital
stock to call a shareholder meeting, and the Nevada General Corporation Act
separately authorizes a state district court to order the conduct of a
shareholder meeting, upon application of any shareholder, when the Company has
failed to hold an annual
16
<PAGE> 17
meeting within the 30 day period succeeding occurrence of the last date
designated therefore. To the date of this filing, no such application has been
made.
Restrictions on Transferability
As of October 25, 1999 there were 8,574,246 shares of the company's
issued and outstanding shares which are recorded as restricted on the books of
the transfer agent.
Distributions in Respect of Shareholdings
The Company has not declared or paid a dividend on its common shares.
The future dividend or distribution policy of the Company will be
determined at the discretion of the Board of Directors, and will depend upon a
number of factors, including future earnings, financial conditions, liquidity
and general business conditions. Each share will participate equally in
dividends or other distributions, which will be payable when and as declared by
the Board of Directors out of funds legally available for that purpose.
Liquidation Rights
In any liquidation of substantially all of the Company's assets,
dissolution of its corporate existence or winding up of its operations or
affairs, each holder of one or more common shares of the Company's outstanding
capital stock will be entitled to a ratable portion of all assets available for
distribution after the Company's payment and satisfaction of all of its debts,
liabilities and preferences.
Vote Required to Amend
Under the Nevada General Corporation Act, the Company's Articles of
Incorporation are subject to amendment at any regular or special meeting of the
shareholders by the affirmative vote of the holders of a majority of the
Company's outstanding shares of capital stock, unless the vote of the holders of
a greater number of shares is required by the specific terms of such
Certificate. The Company's Articles of Incorporation contains no such
requirement.
Preemptive Rights
Generally, holders of shares of the Company's capital stock do not have
any preemptive or other right to subscribe for additional shares on a pro rata
basis when and if such additional shares are offered for sale.
Fully Paid and Non-Assessable
No share of the Company's common stock may be issued before being fully
paid. Consequently, once issued, the holders of such shares may not be subjected
to further assessment by the Company for the purpose of restoring impaired
capital or otherwise.
17
<PAGE> 18
Transfer Agent and Registrar
The transfer agent and registrar for outstanding shares of the
Company's capital stock is: Fidelity Transfer Agency, 1800 South West Temple,
Suite 301, Salt Lake City, UT 84115.
18
<PAGE> 19
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
As of March 31, 1999, the Company reported 11,678,082 outstanding
shares of common stock, $.001 par value. As a result of financial transactions
occurring after the close of the company's fiscal year on March 31, 1999,
outstanding shares of the company's common stock increased to 12,876,915 and
preferred shares increased to 200,000.
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 as a condition precedent to
achieving such NASDAQ listing.
The following table sets forth the high ask and low bid prices for the
periods indicated:
<TABLE>
<CAPTION>
Quarter ended High Ask Low Bid
------------- -------- -------
<S> <C> <C>
December 31, 1999 1 3/8 0.68
September 30, 1999 1 7/8 1 5/16
June 30, 1999 2 1/2 1 1/8
March 31, 1999 2 3/4 1
December 31, 1998 1 5/16 0.61
September 30, 1998 2 1 1/8
June 30, 1998 2 5/8 1 7/16
March 31, 1998 2 11/16 1 7/16
December 31, 1997 3 1/16 1 3/8
</TABLE>
There were 285 shareholders of record as of October 25, 1999. There
were 1,287 reported beneficial owners of the Company's common stock as of
November 4, 1999.
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.
ITEM 2. LEGAL PROCEEDINGS
In the ordinary course of its business, the Company is periodically
made a party to routine proceedings or litigation, the expected results of which
will have no material adverse affect upon its financial or operating condition.
At the present time, neither the Company nor
19
<PAGE> 20
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 3. 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.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
On or about June 1, 1997 we issued 300,000 shares to Daniel Jackson,
esq. In exchange for legal services performed bt Mr. Jackson on our behalf. We
relied on the exemption from registration at Section 4 (2) of the Securities Act
of 1933 for non-public offerings.
On October 1, 1997 we issued an aggregate of 422,492 shares to
shareholders of CoMar Foods, Inc. These shares were issued in connection with
the acquisition by us of all of the outstanding shares of CoMar. We relied on
the exemption from registration at Section 4 (2) of the Securities Act of 1933
for non-public offerings.
Between January 20, 1998 and May 13, 1998 we issued 30,000 shares of
preferred stock to three individuals for an aggregate of $300,000. We relied on
the exemption from registration at Section 4 (2) of the Securities Act of 1933
for non-public offerings. On June 14, 1999 all 30,000 shares of preferred stock
were converted into an aggregate of 300,000 shares of our common stock.
On November 1, 1998 we issued 1,000,000 common stock purchase warrants
to Equity Advisors, Inc. exercisable at the rate of $1.00 per share. The
warrants are exercisable until July 1, 2008. We relied on the exemption from
registration at Section 4 (2) of the Securities Act of 1933 for non-public
offerings.
On March 5, 1999 we issued 50,000 shares of our common stock to the
I.R. Firm, Inc. in exchange for financial public relations services. The company
accounted for the transaction as an expense and amortized the expense over the
one year life of the service contract. The price of $1 per share represented the
closing market price on December 31, 1998. We relied on the exemption from
registration at under Regulation D, Rule 504 of the Securities Act of 1933.
On March 5, 1999 we issued 1,050,000 shares to four investors to be
held in escrow until cash proceeds of $650,000 was received by the company. As
of the date of the audit report on March 31, 1999 no payments had been received,
so the shares were not listed in the reconciliation of shareholder's equity as
of that date. As of the date hereof, we have received $477,600 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. The
offering was conducted under Regulation D, Rule 504 of the Securities Act of
1933.
20
<PAGE> 21
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. Mr. Brent
Gutierrez is the company's CEO, President, CFO, Treasurer and a Director. Mr.
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 5. 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.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements of the Company, which are furnished herein as
of March 31, 1999 and 1998, have been audited by Jones, Jensen & Company,
independent auditors, as described in its reports with respect thereto. The
accompanying financial reports for the nine months reporting period as of and
ending December 31, 1999 are unaudited. In the opinion of management, the
amounts reflected in the interim reports include all adjustments, which are
21
<PAGE> 22
consist of normal recurring adjustments, necessary for a fair presentation of
the results of operations presented for the period.
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
Registration Statement, as well as the page number on which each statement or
exhibit commences:
Financial Statements
AUDITED FISCAL YEAR END MARCH 31, 1999 AND 1998
<TABLE>
<S> <C> <C>
1. Index to Financial Statements F-2
2. Independent Auditor's Report F-3
3. Balance Sheets, March 31, 1999 and 1998 F-4-5
4. Consolidated Statements of Operations for each of
the years ended March 31, 1999 and 1998 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, 1999, 1998, and 1997 F-8-9
7. Notes to Financial Statements F-10-21
UNAUDITED FINANCIAL STATEMENTS FOR NINE MONTHS ENDED DECEMBER 30, 1999 AND 1998
8. Company cover letter of February 9, 2000 F-22
9. Index to financial statements F-23
10. Balance Sheets, December 31, 1999 and 1998 F-24-25
11. Consolidated Statements of Operations for each of
the nine months ended December 30, 1999 and 1998 F-26
12. Consolidated Statements of Shareholder's Equity
since March 31, 1999 F-27
13. Consolidated Statements of Cash Flows for each of
the nine months ended December 31, 1999, and 1998 F-28
14. Notes to Financial Statements F-29-39
</TABLE>
22
<PAGE> 23
INDEPENDENT AUDITORS' REPORT
Board of Directors
Global Seafood Technologies, Inc.
(Formerly International Custom Pack, Inc.)
Biloxi, Mississippi
We have audited the accompanying consolidated balance sheets of Global Seafood
Technologies, Inc. (formerly International Custom Pack, Inc.) as of March 31,
1999 and 1998 and the related consolidated statements of operations,
stockholders' equity and cash flows for the years ended March 31, 1999, 1998 and
1997. 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 audits 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. (formerly International Custom Pack, Inc.) as of
March 31, 1999 and 1998 and the results of their operations and their cash flows
for the years ended March 31, 1999, 1998 and 1997, in conformity with generally
accepted accounting principles.
/s/ JONES, JENSEN, & COMPANY
Jones, Jensen, & Company
Salt Lake City, Utah
June 25, 1999
<PAGE> 24
GLOBAL SEAFOOD TECHNOLOGIES, INC.
(FORMERLY INTERNATIONAL CUSTOM PACK, INC.)
CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999 AND 1998
<PAGE> 25
C O N T E N T S
<TABLE>
<S> <C>
Independent Auditors' Report................................................................................... 3
Consolidated Balance Sheets ................................................................................... 4
Consolidated Statements of Operations ......................................................................... 6
Consolidated Statements of Stockholders' Equity ............................................................... 7
Consolidated Statements of Cash Flows.......................................................................... 8
Notes to the Consolidated Financial Statements.................................................................10
</TABLE>
<PAGE> 26
GLOBAL SEAFOOD TECHNOLOGIES, INC.
(Formerly International Custom Pack, Inc.)
Consolidated Balance Sheets
<TABLE>
<CAPTION>
ASSETS
March 31,
-----------------------
1999 1998
---------- ----------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents (Note 1) $ 743,718 $ 38,631
Accounts receivable - net (Note 1) 477,247 388,055
Accounts receivable, related parties - net (Note 1) 153,771 46,139
Prepaid income taxes (Note 8) 46,111 38,572
Prepaid expenses (Note 1) 50,000 6,045
Inventories (Note 1) -- 153,655
Deferred tax asset, current (Note 8) 2,300 --
---------- ----------
Total Current Assets 1,473,147 671,097
---------- ----------
PROPERTY AND EQUIPMENT - NET (Notes 1 and 2) 2,785,230 2,503,885
---------- ----------
OTHER ASSETS
Deferred tax asset (Note 8) 12,300 --
Deposits 11,144 3,089
---------- ----------
Total Other Assets 23,444 3,089
---------- ----------
TOTAL ASSETS $4,281,821 $3,178,071
========== ==========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements
4
<PAGE> 27
GLOBAL SEAFOOD TECHNOLOGIES, INC.
(Formerly International Custom Pack, Inc.)
Consolidated Balance Sheets (Continued)
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31,
-----------------------
1999 1998
---------- ----------
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable - trade $ 689,875 $ 336,637
Accounts payable - related party (Note 1) 71,583 980
Accrued expenses 27,185 35,823
Income taxes payable (Note 8) 918 17,144
Notes payable, current portion (Note 3) 140,051 556,702
Notes payable to related parties (Note 4) 113,500 114,211
Obligations under capital leases, current portion (Note 6) 93,581 138,012
---------- ----------
Total Current Liabilities 1,136,693 1,199,509
---------- ----------
LONG-TERM LIABILITIES
Notes payable (Note 3) 1,337,806 349,883
Obligations under capital leases (Note 6) 81,501 81,458
---------- ----------
Total Long-Term Liabilities 1,419,307 431,341
---------- ----------
Total Liabilities 2,556,000 1,630,850
---------- ----------
COMMITMENTS AND CONTINGENCIES (Note 9)
STOCKHOLDERS' EQUITY
Preferred stock: 25,000,000 shares authorized
of $0.001 par value, 30,000 and 20,000 shares
issued and outstanding, respectively 30 20
Common stock: 50,000,000 shares authorized
of $0.001 par value, 11,678,082 and 11,628,082
shares issued and outstanding, respectively 11,678 11,628
Additional paid-in capital 1,289,316 1,139,376
Retained earnings 424,797 396,197
---------- ----------
Total Stockholders' Equity 1,725,821 1,547,221
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $4,281,821 $3,178,071
========== ==========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements
5
<PAGE> 28
GLOBAL SEAFOOD TECHNOLOGIES, INC.
(Formerly International Custom Pack, Inc.)
Consolidated Statements of Operations
<TABLE>
<CAPTION>
For the Years Ended March 31,
-------------------------------------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
NET SALES $ 13,841,059 $ 14,054,926 $ 15,909,617
EXPENSES
Cost of sales 11,702,369 12,298,412 14,452,998
Non-complete covenant 32,800 32,800 32,800
Depreciation expense 350,639 258,465 221,204
Bad debt expense -- 3,288 --
Selling, general and administrative 1,672,925 1,275,453 896,743
------------ ------------ ------------
Total Expenses 13,758,733 13,868,418 15,603,745
------------ ------------ ------------
INCOME BEFORE OTHER
INCOME (EXPENSES) 82,326 186,508 305,872
------------ ------------ ------------
OTHER INCOME (EXPENSES)
Other income 66,822 142,833 77,841
Interest income 5,482 1,800 1,135
Gain on disposition of assets 25,326 -- --
Interest expense (141,740) (112,421) (101,591)
------------ ------------ ------------
Total Other Income (Expenses) (44,110) 32,212 (22,615)
------------ ------------ ------------
NET INCOME BEFORE
INCOME TAXES 38,216 218,720 283,257
PROVISION FOR INCOME
TAXES (Note 8) 9,616 87,327 105,506
------------ ------------ ------------
NET INCOME $ 28,600 $ 131,393 $ 177,751
------------ ------------ ------------
BASIC EARNINGS PER SHARE $ 0.00 $ 0.01 $ 0.02
------------ ------------ ------------
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 11,628,082 11,414,278 10,905,590
------------ ------------ ------------
FULLY DILUTED EARNINGS
PER SHARE $ 0.00 $ 0.01 $ 0.02
------------ ------------ ------------
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 11,824,148 11,458,113 10,905,590
------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements
6
<PAGE> 29
GLOBAL SEAFOOD TECHNOLOGIES, INC.
(Formerly International Custom Pack, Inc.)
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
Preferred Stock Common Stock Additional
---------------- ----------------------- Paid-in Retained
Shares Amount Shares Amount Capital Earnings
------ ------ ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, March 31, 1996 -- $ -- 10,905,590 $ 10,906 $ (220,748) $ 87,053
Additional capital contributed -- -- -- -- 2,159 --
Net income for the year ended
March 31, 1997 -- -- -- -- -- 177,751
------ ------- ---------- ----------- ----------- -----------
Balance, March 31, 1997 -- -- 10,905,590 10,906 (218,589) 264,804
Common stock issued in
lieu of debt (Note 1) -- -- 300,000 300 224,700 --
Common stock issued
to purchase CoMar Foods, Inc.
on October 1, 1997 -- -- 422,492 422 933,285 --
Preferred stock issued for cash
during 1997 20,000 20 -- -- 199,980 --
Net income for the year ended
March 31, 1998 -- -- -- -- -- 131,393
------ ------- ---------- ----------- ----------- -----------
Balance, March 31, 1998 20,000 20 11,628,082 11,628 1,139,376 396,197
Preferred stock issued for
cash during 1998 10,000 10 -- -- 99,990 --
Common stock issued for
prepaid consulting services
on March 31, 1999 -- -- 50,000 50 49,950 --
Net income for the year ended
March 31, 1999 -- -- -- -- -- 28,600
------ ------- ---------- ----------- ----------- -----------
Balance, March 31, 1999 30,000 $ 30 11,678,082 $ 11,678 $ 1,289,316 $ 424,797
====== ======= ========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements
7
<PAGE> 30
GLOBAL SEAFOOD TECHNOLOGIES, INC.
(Formerly International Custom Pack, Inc.)
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
For the Years Ended March 31,
-----------------------------------------------------
1999 1998 1997
--------------- --------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 28,600 $ 131,393 $ 177,751
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 350,639 258,465 221,204
(Gain) loss on sale of assets (25,326) -- 2,517
Bad debts -- 3,288 --
Changes in assets and liabilities:
(Increase) decrease in accounts receivable
and accounts receivable - related (196,824) (141,581) (31,335)
(Increase) decrease in taxes receivable (7,539) (38,572 --
(Increase) decrease in deferred tax asset (14,600) 16,075 5,167
(Increase) decrease in inventories 153,655 (46,724) (25,958)
(Increase) decrease in prepaid expenses 6,045 15,690 (21,735)
(Increase) decrease in deposits (8,055) (3,089) 45,000
Increase (decrease) in accounts payable
and accounts payable - related 423,841 157,099 (33,293)
Increase (decrease) in taxes payable (16,226) (73,583) 68,027
Increase (decrease) in accrued expenses (8,638) 14,505 (3,083)
--------------- --------------- ---------------
Net Cash Provided by Operating Activities 685,572 292,966 404,262
--------------- --------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale of property and equipment 31,000 -- --
Purchase of property and equipment (475,333) (391,535) (117,415)
--------------- --------------- ---------------
Net Cash Used in Investing Activities (444,333) (391,535) (117,415)
--------------- --------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Additional capital contributed -- -- 2,159
Proceeds from sale of preferred stock 100,000 200,000 --
Payments on notes payable and leases payable (956,152) (280,539) (247,721)
Proceeds of notes payable and leases payable 1,320,000 -- 62,631
--------------- --------------- ---------------
Net Cash Provided (Used by)
Financing Activities 463,848 (80,539) (182,931)
--------------- --------------- ---------------
NET INCREASE (DECREASE) IN CASH 705,087 (179,108) 103,916
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 38,631 217,739 113,823
--------------- --------------- ---------------
CASH AND CASH EQUIVALENTS AT
END OF YEAR $ 743,718 $ 38,631 $ 217,739
=============== =============== ===============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements
8
<PAGE> 31
GLOBAL SEAFOOD TECHNOLOGIES, INC.
(Formerly International Custom Pack, Inc.)
Consolidated Statements of Cash Flows (Continued)
<TABLE>
<CAPTION>
For the Years Ended March 31,
--------------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for:
Interest $141,740 $112,421 $103,402
Income taxes $ 27,126 $183,407 $ 37,479
NON CASH FINANCING ACTIVITIES
Property and equipment purchased under
capital leases $118,860 $ 21,905 $ --
Property and equipment acquired by assuming
notes payable $ -- $200,000 $
Common stock issued for the purchase of
CoMar Foods, Inc. $ -- $933,707 $ --
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements
9
<PAGE> 32
GLOBAL SEAFOOD TECHNOLOGIES, INC.
(Formerly International Custom Pack, Inc.)
Notes to the Consolidated Financial Statements
March 31, 1999 and 1998
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
The consolidated financial statements include those of Global Seafood
Technologies, Inc. (formerly International Custom Pack, Inc.) (ICP) and its
wholly-owned subsidiaries, Custom Pack, Inc. and CoMar Foods, 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".
Global Seafood Technologies, Inc. (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.
During the year ended March 31, 1998, management of the Company discovered
that a third party had paid a $225,000 debt of GST prior to the
reorganization with Custom. As a result, the Company issued 300,000 shares
of its outstanding stock in lieu of the $225,000 debt. The consolidated
statements of stockholders' equity have been retroactively restated to
reflect this transaction. The 300,000 shares issued were recorded at the
fair market value of the shares on the date of issuance.
On October 1, 1997, the Company completed an Agreement and Plan of
Reorganization whereby GST issued 422,492 shares of its common stock and
$300,000 of cash 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.
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.
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.
10
<PAGE> 33
GLOBAL SEAFOOD TECHNOLOGIES, INC.
(Formerly International Custom Pack, Inc.)
Notes to the Consolidated Financial Statements
March 31, 1999 and 1998
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
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, 1999 was $639,845.
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, 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. and CoMar Foods, 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, seafood storage bags, packing boxes and other
miscellaneous packaging materials.
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:
<TABLE>
<S> <C>
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
</TABLE>
h. Accounts Receivable
Accounts receivable are recorded net of the allowance for
doubtful accounts of $5,886 and $5,886 for the years ended March
31, 1999 and 1998, respectively.
11
<PAGE> 34
GLOBAL SEAFOOD TECHNOLOGIES, INC.
(Formerly International Custom Pack, Inc.)
Notes to the Consolidated Financial Statements
March 31, 1999 and 1998
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
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, 1999 and 1998
was $71,583 and $980, respectively.
The Company also sells some of its product to the same related
company. The amounts owed from this company at March 31, 1999 and 1998
was $153,771 and $46,139, 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, 1999 financial statement presentation.
m. Advertising
The Company follows the policy of charging the costs of advertising to
expense as incurred.
n. Change in Accounting Principle
The Company adopted Statement of Financial Accounting Standards (SFAS)
No. 128, "Earnings Per Share" during the year ended March 31, 1999. In
accordance with SFAS No. 128, diluted earnings per share must be
calculated when an entity has convertible securities, warrants,
options, and other securities that represent potential common shares.
The purpose of calculating diluted earnings (loss) per share is to
show (on a pro forma basis) per share earnings or losses assuming the
exercise or conversion of all securities that are exercisable or
convertible into common stock and that would either dilute or not
affect basis EPS. As permitted by SFAS No. 128, the Company has
retroactively applied the provisions of this new standard by showing
the fully diluted earnings per common share for all years presented.
12
<PAGE> 35
GLOBAL SEAFOOD TECHNOLOGIES, INC.
(Formerly Global Seafood Technologies, Inc.)
Notes to the Consolidated Financial Statements
March 31, 1999 and 1998
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
o. Prepaid Expenses
During the year ended March 31, 1999, the Company issued 50,000 shares
of its outstanding common stock valued at $1.00 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 which
approximates the fair value of the shares on the date of issuance. The
$50,000 has been recorded by the Company as a prepaid expense to be
amortized during the year ended March 31, 2000. Prepaid expenses as of
March 31, 1998 relate to prepaid insurance
NOTE 2 - PROPERTY AND EQUIPMENT
Property and equipment at March 31, 1999 and 1998 consisted of the
following:
<TABLE>
<CAPTION>
March 31,
--------------------------
1999 1998
----------- -----------
<S> <C> <C>
Land $ 102,926 $ 102,926
Buildings and improvements 2,057,887 1,950,207
Furniture and fixtures 26,780 26,780
Machinery and equipment 2,618,001 2,129,745
Vehicles 27,820 27,820
Water well 121,441 121,441
----------- -----------
Total 4,954,855 4,358,919
Less accumulated depreciation (2,169,625) (1,855,034)
----------- -----------
Property and equipment - net $ 2,785,230 $ 2,503,885
=========== ===========
</TABLE>
Depreciation expense for the years ended March 31, 1999, 1998 and 1997
was $350,639, $258,465 and $221,204, respectively.
13
<PAGE> 36
GLOBAL SEAFOOD TECHNOLOGIES, INC.
(Formerly Global Seafood Technologies, Inc.)
Notes to the Consolidated Financial Statements
March 31, 1999 and 1998
NOTE 3 - NOTES PAYABLE
Notes payable at March 31, 1999 and 1998 consisted of the following:
<TABLE>
<CAPTION>
March 31,
-----------------------
1999 1998
---------- ----------
<S> <C> <C>
Note payable to a bank, secured by property and equipment,
interest at 8.25%, interest and principal payments of $8,530 due
monthly, matured on March 5, 1998 $ -- $ 307,278
Line of credit with a bank, maximum balance of $200,000, secured
by property and equipment, interest at the bank's prime rate
(8.5% as of March 31, 1998), interest payments due monthly,
principal amount due March 10, 1998 -- 172,530
Note payable, secured by property, interest at 9.0%,
interest and principal payments of $1,497 due monthly,
matures on July 1, 2012 141,435 143,974
Note payable, secured by property, interest at 8.0%,
interest and principal payments of $702 due monthly,
matures on November 23, 2003 32,413 37,999
Note payable, secured by property, interest at 12.0%,
interest and principal payments of $3,337 due monthly,
matured on November 1, 2002 -- 140,631
Note payable, secured by property, interest at 14.5%,
interest and principal payments of $4,136 due monthly,
matured on August 15, 2000 -- 99,348
Note payable, secured by property, interest at 8.05%,
interest and principal payments of $16,124 due monthly,
matures on July 5, 2003 1,260,603 --
Note payable, secured by property, interest at 7.5%,
interest and principal payments of $399 due monthly,
matures on November 15, 2002 15,285 --
Note payable, secured by property, interest at 7.5%,
interest and principal payments of $737 due monthly,
matures on October 15, 2002 27,000 --
Note payable, secured by property, interest at 15.77%,
interest and principal payments of $47 due monthly,
matures December 16, 2001 493 1,060
Note payable, secured by property, interest at 11.09%,
interest and principal payments of $628 due monthly,
matures during April 1999 628 3,765
---------- ----------
Total notes payable $1,477,857 $ 906,585
========== ==========
</TABLE>
14
<PAGE> 37
GLOBAL SEAFOOD TECHNOLOGIES, INC.
(Formerly Global Seafood Technologies, Inc.)
Notes to the Consolidated Financial Statements
March 31, 1999 and 1998
NOTE 3 - NOTES PAYABLE (Continued)
<TABLE>
<S> <C> <C>
Total notes payable $ 1,477,857 $ 906,585
Less: current portion (140,051) (556,702)
------------ ------------
Long-term notes payable $ 1,337,806 $ 349,883
============ ============
</TABLE>
Maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
Year Ending
March 31, Amount
------------ -----------
<S> <C>
2000 $ 140,051
2001 152,359
2002 166,884
2003 184,354
2004 834,209
2005 and thereafter --
-----------
Total $ 1,477,857
===========
</TABLE>
NOTE 4 - NOTES PAYABLE - RELATED PARTIES
<TABLE>
<CAPTION>
March 31,
-----------------------
1999 1998
---------- ----------
<S> <C> <C>
Note payable to a related individual, unsecured, interest
at 10%, interest and principal payments of $200 due
quarterly, matured on March 31, 1999 $ -- $ 711
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 $ 114,211
========== ==========
</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 $500,000. The line is renewed annually and
currently expires on October 5, 1999. The balance outstanding on the
line of credit at March 31, 1999 was $-0-.
NOTE 6 - CAPITAL LEASES
The Company leases certain equipment with lease terms ending in
October 1999 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. The
capitalized cost of $945,388 less accumulated depreciation of $705,621
is included in property and equipment in the accompanying consolidated
financial statements at March 31, 1999.
15
<PAGE> 38
GLOBAL SEAFOOD TECHNOLOGIES, INC.
(Formerly International Custom Pack, Inc.)
Notes to the Consolidated Financial Statements
March 31, 1999 and 1998
NOTE 6 - CAPITAL LEASES (Continued)
Obligations under capital leases at March 31, 1999 and 1998 consisted
of the following:
<TABLE>
<CAPTION>
March 31,
----------------------
1999 1998
--------- ---------
<S> <C> <C>
Total $ 175,082 $ 219,470
Less: current portion (93,581) (138,012)
--------- ---------
Long-term portion $ 81,501 $ 81,458
========= =========
</TABLE>
The future minimum lease payments under these capital leases and the
net present value of the future minimum lease payments are as follows:
<TABLE>
<CAPTION>
Year Ending
March 31, Amount
----------- ----------
<S> <C>
2000 $ 106,242
2001 34,710
2002 19,578
2003 19,578
2004 9,789
2005 and thereafter --
------------
Total future minimum lease payments 189,897
Less, amount representing interest (14,815)
------------
Present value of future minimum lease payments $ 175,082
============
</TABLE>
NOTE 7 - MAJOR CUSTOMERS AND SUPPLIERS
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.
For the year ended March 31, 1997, one customer generated sales in
excess of 10% of the Company's total sales. Sales to this customer
made up approximately 85% of total revenues for the year ended March
31, 1997.
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.
16
<PAGE> 39
GLOBAL SEAFOOD TECHNOLOGIES, INC.
(Formerly International Custom Pack, Inc.)
Notes to the Consolidated Financial Statements
March 31, 1999 and 1998
NOTE 7 - MAJOR CUSTOMERS AND SUPPLIERS (Continued)
The Company purchased product from two suppliers during the year ended
March 31, 1997 that generated costs in excess of 10% of the Company's
total purchases. Purchases from these two suppliers made up
approximately 27% and 16%, respectively, of total purchases for the
year ended March 31, 1997.
All significant sales and purchases that exceeded 10% during the years
ended March 31, 1999, 1998 and 1997 were in the seafood packaging and
processing segment.
NOTE 8 - INCOME TAXES
Provision for income taxes for the years ended March 31, 1999, 1998
and 1997 consisted of the following:
<TABLE>
<CAPTION>
March 31,
----------------------------------------------
1999 1998 1997
------------- ------------ -----------
<S> <C> <C> <C>
Current:
Federal income taxes $ 19,376 $ 70,670 $ 86,292
State income taxes 4,840 17,144 14,047
Deferred:
Federal income taxes (14,600) (487) 5,167
------------- ------------ -----------
Total provision for income taxes $ 9,616 $ 87,327 $ 105,506
============= ============ ===========
</TABLE>
As of March 31, 1999 and 1998, the Company owed $918 and $17,144 in
state income taxes, respectively.
As of March 31, 1999 and 1998, the Company overpaid its federal income
taxes by $46,111 and $38,572, respectively.
As of March 31, 1999 and 1998, a deferred tax asset of $14,600 and
$-0- was recognized and recorded.
A reconciliation of income taxes at the federal statutory rate to the
effective tax rate is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
----------- ---------- -----------
<S> <C> <C> <C>
Income taxes computed at the
federal statutory rate $ 24,216 $ 81,079 $ 109,422
Non-deductible allowance for
bad debts (2,300) -- --
Other non-deductible items -- 6,248 11,085
Accelerated depreciation expense (12,300) -- (15,001)
----------- ---------- -----------
Income Tax Expense $ 9,616 $ 87,327 $ 105,506
============= ============ ===========
</TABLE>
17
<PAGE> 40
GLOBAL SEAFOOD TECHNOLOGIES, INC.
(Formerly International Custom Pack, Inc.)
Notes to the Consolidated Financial Statements
March 31, 1999 and 1998
NOTE 9 - COMMITMENTS AND CONTINGENCIES
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. The
current agreement calls for annual payments of $32,800. Future minimum
payments are required as follows:
<TABLE>
<CAPTION>
Year Ending
March 31, Amount
----------- ---------
<S> <C>
2000 $ 32,800
2001 32,800
2002 32,800
2003 32,800
2004 32,800
2005 10,500
Thereafter --
---------
Total $ 174,500
=========
</TABLE>
Subsequent to March 31, 1999, the Company issued 114,800 shares of its
outstanding common stock in lieu of the future payments required under
the non-compete agreement (see Note 12).
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, 1999
since the ultimate outcome is currently not estimatable.
The Company is also 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, 1999.
18
<PAGE> 41
GLOBAL SEAFOOD TECHNOLOGIES, INC.
(Formerly International Custom Pack, Inc.)
Notes to the Consolidated Financial Statements
March 31, 1999 and 1998
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:
<TABLE>
<CAPTION>
Year Ending
March 31, Amount
----------- ---------
<S> <C>
2000 $ 152,424
2001 113,204
2002 10,894
2003 10,894
2004 5,147
2005 and thereafter --
----------
Total $ 292,563
==========
</TABLE>
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.
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
year ended March 31, 1999.
NOTE 11 - CONSOLIDATED PROFORMA STATEMENT OF OPERATIONS
The historical information contained herein has been consolidated on a
proforma basis and is presented as unaudited. The purchase of assets
and liabilities from CoMar on October 1, 1997 are described in Note 1.
Unaudited pro forma consolidated results of operations for the years
ended March 31, 1998 and 1997 as though CoMar had been acquired as of
April 1, 1996 follows:
<TABLE>
<CAPTION>
For the Year Ended
March 31,
---------------------------------
1998 1997
-------------- --------------
<S> <C> <C>
NET SALES $ 14,334,591 $ 16,469,001
-------------- --------------
NET LOSS $ (142,794) $ (369,941)
-------------- --------------
BASIC (LOSS) PER SHARE $ (0.01) $ (0.03)
-------------- --------------
</TABLE>
19
<PAGE> 42
GLOBAL SEAFOOD TECHNOLOGIES, INC.
(Formerly International Custom Pack, Inc.)
Notes to the Consolidated Financial Statements
March 31, 1999 and 1998
NOTE 12 - SUBSEQUENT EVENTS
Subsequent to March 31, 1999, the following significant events
occurred:
1) On April 1, 1999, the Company issued 152,564 shares of its
outstanding common stock to purchase the assets, brand name and
customer lists of Killer Bee, Inc., a Mississippi corporation.
The acquisition will be accounted for as a purchase. On the same
date, the Company granted warrants to purchase a total of
1,500,000 shares of common stock (500,000 each) at $1.56 per
share for a period of 10 years to Brent Gutierrez, Clay Gutierrez
and Larry Gollott, the original owners of Killer Bee, Inc. Brent
Gutierrez and Clay Gutierrez are also current officers and
directors of Global Seafood Technologies, Inc.
2) On April 7, 1999, the Company issued 114,800 shares of its
outstanding common stock in lieu of future payments under the
non-compete agreement (Note 9), in the amount of $143,500.
3) During April 1999, the Company issued to a director 200,000
shares of its outstanding preferred stock valued at $10.00 per
share for $2,000,000 in cash. In connection with the preferred
issuance, the Company also granted warrants to purchase 2,000,000
shares of common stock to the director. The warrants are
exercisable at $1.00 per share until July 15, 2001.
4) Prior to March 31, 1999, the Company issued 1,050,000 shares of
its outstanding common stock to be held in escrow until the cash
proceeds of $650,000 was received. Through the date of our audit
report, a total of $371,100 had been received.
5) On April 7, 1999, the Company authorized the issuance of 32,000
shares of common stock for services rendered valued at $40,000.
6) The 30,000 shares of preferred stock outstanding at March 31,
1999 were converted into 300,000 shares of common stock.
7) On June 25, 1999, the Company entered into an agreement to
purchase the assets, brand name and customer lists of Drag N'
Baits, Inc., a Florida corporation, for a cash price of $339,000.
The acquisition will be accounted for as a purchase.
20
<PAGE> 43
CONSOLIDATED FINANCIAL STATEMENTS
February 9, 2000
The accompanying consolidated balance sheets of Global Seafood Technologies,
Inc. as of December 31, 1999 and 1998 and the related consolidated statements of
operations, stockholders' equity and cash flows for the nine months period
ending December 31, 1999 and 1998 are the responsibility of the Company's
management.
The data has not been subjected to audit and has been derived from the Company's
internally produced financial records. While the Company believes such interim
data to be materially correct, their failure to be subjected to independent
audit or to auditing standards should be noted. 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.
Management believes that the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Global Seafood Technologies, Inc. (formerly International Custom Pack, Inc.) as
of December 31, 1999 and 1998 and the results of its operations and cash flows
for the nine months period ended December 31, 1999 and 1998 consistent with
previously prepared financial reports.
/s/ BRENT GUTIERREZ
Brent Gutierrez, Chairman and President
Global Seafood Technologies, Inc.
<PAGE> 44
GLOBAL SEAFOOD TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
UNAUDITED
December 31
1999 1998
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents (Note 1) 2,093,871 16,989
Accounts Receivable- net (Note 1) 1,168,128 1,257,844
Accounts Receivable - Related, net (Note 1) 115,948 2,016
Pre-paid income taxes 46,111 38,572
Pre-paid Expenses 171,410 6,045
Inventories (Note 1) 533,304 153,655
Deferred tax asset, current 2,300 0
------------ ------------
TOTAL CURRENT ASSETS $ 4,131,072 $ 1,475,122
PROPERTY AND EQUIPMENT (Notes 1 and 2)
Land 102,926 102,926
Buildings and Improvements 2,086,214 1,998,970
Furniture and Fixtures 26,780 26,780
Machinery and Equipment 3,212,499 2,587,477
Vehicles 27,820 27,820
Water Well 121,441 121,441
------------ ------------
TOTAL FIXED ASSETS 5,577,679 4,865,413
Less Accumulated Depreciation (2,482,857) (2,062,691)
------------ ------------
PROPERTY AND EQUIPMENT, NET $ 3,094,822 $ 2,802,721
OTHER ASSETS
Deferred tax asset 12,300 0
Deposits 20,809 3,089
------------ ------------
Total Other Assets $ 33,109 $ 3,089
TOTAL ASSETS $ 7,259,004 $ 4,280,932
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements
4
<PAGE> 45
GLOBAL SEAFOOD TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
UNAUDITED
December 31
1999 1998
<S> <C> <C>
CURRENT LIABILITIES
Accounts Payable 478,657 485,068
Accounts Payable - Related (Note 1) 9,891 7,040
Accrued expenses 30,788 29,969
Income taxes payable 16 (10,122)
Notes Payable, short-term (Note 5) 500,000 70,000
Notes Payable, current portion (Note 3) 159,973 108,456
Notes Payable - Related (Note 4) 113,500 113,611
Obligations under capital leases (Note 6) 31,729 128,343
------------ ------------
TOTAL CURRENT LIABILITIES $ 1,324,555 $ 932,365
LONG-TERM LIABILITIES
Notes Payable (Note 3) 1,399,622 1,368,777
Obligations under capital leases (Note 6) 59,626 89,034
------------ ------------
TOTAL LONG-TERM LIABILITIES $ 1,459,247 $ 1,457,811
TOTAL LIABILITIES $ 2,783,802 $ 2,390,176
STOCKHOLDER'S EQUITY
Preferred stock 200 30
(Issued and outstanding) 200,000 30,000
Common stock 13,049 11,628
(Issued and outstanding) 13,048,954 11,628,082
Additional Paid-in Capital 4,186,875 1,239,365
Treasury Stock 0 0
Retained Earnings 275,078 639,733
------------ ------------
TOTAL STOCKHOLDER'S EQUITY $ 4,475,201 $ 1,890,756
TOT. LIAB. AND EQUITY $ 7,259,004 $ 4,280,932
COMMITMENTS AND CONTINGENCIES (Note 8)
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements
5
<PAGE> 46
GLOBAL SEAFOOD TECHNOLOGIES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
UNAUDITED
Nine Months Ended December 31
1999 1998
<S> <C> <C>
Processing Sales 2,745,940 2,146,328
Sales of Product 8,554,515 8,924,861
------------ ------------
NET SALES $ 11,300,455 $ 11,071,189
EXPENSES
Cost of Sales 8,853,623 9,003,128
Non-compete covenant 23,916 16,400
Depreciation expense 313,233 207,659
Bad debt expense 0 0
Selling, general and administrative 2,237,375 1,644,514
------------ ------------
TOTAL EXPENSES $ 11,428,147 $ 10,871,701
INCOME BEFORE OTHER ITEMS $ (127,692) $ 199,488
Other income 29,911 119,611
Interest income 59,964 3,199
Gain of disposition of assets 0 18,000
Interest expense (110,986) (96,761)
------------ ------------
TOTAL OTHER INCOME (EXPENSE) $ (21,111) $ 44,048
NET INCOME BEFORE TAXES $ (148,804) $ 243,536
PROVISION FOR TAXES 918 0
NET INCOME $ (149,722) $ 243,536
BASIC EARNINGS PER SHARE $ (0.01) $ 0.02
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 12,873,702 11,628,082
FULLY DILUTED EARNINGS
PER SHARE $ (0.01) $ 0.02
WEIGHTED AVERAGE NUMBER
OF DILUTED SHARES 16,429,258 11,961,415
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements
6
<PAGE> 47
GLOBAL SEAFOOD TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Additional
Preferred Stock Common Stock Paid-in Retained
Shares Amount Shares Amount Capital Earnings
<S> <C> <C> <C> <C> <C> <C>
Balance, March 31, 1999 30,000 $ 30 11,678,082 $ 11,678 $1,289,316 $ 424,797
Common stock issued on
April 1, 1999 to purchase the
assets of Killer Bee, Inc. 152,564 $ 153 $ 237,847
Common stock issued in lieu
of future payments under
non-compete agreement 114,800 $ 115 $ 143,385
Preferred stock issued for
cash in April, 1999 200,000 $ 200 $1,999,800
Cash received for common
stock issued into escrow prior
to March 31, 1999 771,508 $ 772 $ 476,828
Common stock issued for
prepaid promotional services
in April, 1999 32,000 $ 32 $ 39,968
Outstanding preferred stock (30,000) $ (30) $ (299,970)
converted to common stock 300,000 $ 300 $ 299,700
Net income for nine months
ended December 31, 1999 $ (149,722)
Balance, December 31, 1999 200,000 $ 200 13,048,954 $ 13,049 $4,186,875 $ 275,078
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements
7
<PAGE> 48
GLOBAL SEAFOOD TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
UNAUDITED
Nine Months Ended December 31
1999 1998
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ (149,722) $ 243,536
Adjustments to Net Income:
Depreciation 313,233 207,659
(Gain) Loss on Sale of Assets 0 0
Bad Debts 0 0
------------ ------------
Total Adjustments to Net Income $ 313,233 $ 207,659
Changes in Assets and Liabilities:
(Increase) Decrease in Accounts Receivable
and Accounts Receivable Related (653,059) (825,666)
(Increase) Decrease in Taxes Receivable 0 0
(Increase) Decrease in Deferred Tax Asset 0 0
(Increase) Decrease in Inventories (533,304) (0)
(Increase) Decrease in Pre-paid Expenses (121,410) (0)
(Increase) Decrease in Deposits (9,665) (0)
Increase (Decrease) in Accounts Payable
and Accounts Payable Related (272,909) 154,491
Increase (Decrease) in Taxes Payable 2,345 (27,266)
Increase (Decrease) in Accrued Expenses 356 (5,854)
------------ ------------
Total Changes in Assets and Liabilities $ (1,587,646) (704,296)
------------ ------------
Net Cash Provided by Operating Activities $ (1,424,134) $ (253,101)
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale of Property and Equipment
Purchase of Property and Equipment (622,824) (506,497)
------------ ------------
Net Cash Used in Investing Activities $ (622,824) (506,497)
CASH FLOWS FROM FINANCING ACTIVITIES:
Additional Capital Contributed 899,100 0
Proceeds From Sale of Preferred Stock 2,000,000 100,000
Net Proceeds (Payments) Notes Payable and Leases Payable 498,010 637,955
------------ ------------
Net Cash Provided (Used) by Financing Activities $ 3,397,110 737,955
NET INCREASE (DECREASE) IN CASH $ 1,350,153 $ (21,642)
BEGINNING CASH AND CASH EQUIVALENTS $ 743,718 $ 38,631
ENDING CASH AND CASH EQUIVALENTS $ 2,093,871 $ 16,989
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements
8
<PAGE> 49
GLOBAL SEAFOOD TECHNOLOGIES, INC.
(Formerly International Custom Pack, Inc.)
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Organization
The consolidated financial statements include those of Global Seafood
Technologies, Inc. (formerly International Custom Pack, Inc.) 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 "Aquaculture Division" in the consolidated
financial statements, although it is not a separate subsidiary.
Collectively, they are referred to herein as "the Company".
Global Seafood Technologies, Inc. (GSFT) 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 GSFT 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 GSFT. GSFT is the acquiring entity for legal
purposes and Custom is the surviving entity for accounting purposes.
During the year ended March 31, 1998, management of the Company
discovered that a third party had paid a $225,000 debt of GSFT prior
to the reorganization with Custom. As a result, the Company issued
300,000 shares of its common stock in lieu of the $225,000 debt. The
Consolidated Statements of Stockholders' Equity have been
retroactively restated to reflect this transaction. The 300,000 shares
issued were recorded at the fair value of the shares on the date of
issuance.
On October 1, 1997, the Company completed an Agreement and Plan of
Reorganization whereby GSFT issued 422,492 shares of its common stock
and $300,000 of cash in exchange for all of the outstanding common
stock of CoMar Foods, Inc. (CoMar). The acquisition was 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 442,492 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.
1
<PAGE> 50
GLOBAL SEAFOOD TECHNOLOGIES, INC.
(Formerly International Custom Pack, Inc.)
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 1- ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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. in the nine months interim financial
statements.
Custom, a wholly-owned subsidiary, was incorporated under the laws 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 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 Company's bank employs an overnight "sweep" to invest
cash balances which are in excess of daily operating needs.
d. Basic and 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
2
<PAGE> 51
GLOBAL SEAFOOD TECHNOLOGIES, INC.
(Formerly International Custom Pack, Inc.)
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 1- ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
financial statements. Common stock equivalents, consisting of the
preferred shares, have been included in the 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.
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:
Machinerry 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 allowance for doubtful
accounts of $5,886 and $5,886 for the periods ending December 31, 1999
and 1998, respectively.
i. Related Party Transactions
The Company purchases some of its product and supplies from a related
company. The amounts owed to this company as Accounts Payable at
December 31, 1999 and 1998 was $9,891 and $7,040, respectively.
For the nine month period ending December 31, 1999 and 1998 the
Company also sold $172,586 and $110,298 of its product to the same
related company.
3
<PAGE> 52
GLOBAL SEAFOOD TECHNOLOGIES, INC.
(Formerly International Custom Pack, Inc.)
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 1- ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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
December 31, 1999 financial statement presentation.
m. Advertising
The Company follows the policy of charging the costs of advertising to
expense as incurred.
n. Change in Accounting Principle
The Company adopted Statement of Financial Accounting Standards (SFAS)
No. 128, "Earnings Per Share" during the year ended March 31, 1999. In
accordance with SFAS No. 128, diluted earnings per share must be
calculated when an entity has convertible securities, warrants,
options, and other securities that represent potential common shares.
The purpose of calculating diluted earnings (loss) per share is to
show (on a pro forma basis) per share earnings or losses assuming the
exercise or conversion of all securities that are exercisable or
convertible into common stock and that would either dilute or not
affect basic EPS. As permitted by SFAS No. 128, the Company has
retroactively applied the provisions of this new standard by showing
the fully diluted earnings per common share for all periods presented.
o. Prepaid Expenses
During the year ended March 31, 1999, the Company issued 50,000 shares
of its outstanding common stock valued at $1.00 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, which
4
<PAGE> 53
GLOBAL SEAFOOD TECHNOLOGIES, INC.
(Formerly International Custom Pack, Inc.)
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 1- ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
approximates the fair value of the shares on the date of issuance. The
$50,000 has been recorded by the company as a prepaid expense to be
amortized during the year ended March 31, 2000. Prepaid expenses as of
December 30, 1998 relate to prepaid insurance.
NOTE 2 - PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1999 and 1998 consisted of the
following:
December 31
1999 1998
----------- -----------
Land $ 102,926 $ 102,926
Buildings and improvements 2,086,214 1,998,970
Furniture and fixtures 26,780 26,780
Machinery and equipment 3,212,499 2,587,477
Vehicles 27,820 27,820
Water Well 121,441 121,441
----------- -----------
Total $ 5,577,679 $ 4,865,413
Less accumulated depreciation (2,482,857) (2,062,691)
Property and equipment - net $ 3,094,822 $ 2,802,721
Depreciation expense for the nine month periods ended December 31,
1999 and 1998 was $313,233 and $207,659, respectively.
NOTE 3 - NOTES PAYABLE
Notes payable at December 31, 1999 and 1998 consisted of the
following:
December 30
-----------
1999 1998
Note payable, secured by property, interest
at 9.0%, interest and principal payments
of $1,497 due monthly, matures July 1, 2012. 137,367 142,298
Note payable, secured by property, interest
at 8.0%, interest and principal payments of
$702 due monthly, matures November 23, 2003. 27,900 33,803
5
<PAGE> 54
GLOBAL SEAFOOD TECHNOLOGIES, INC.
(Formerly International Custom Pack, Inc.)
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 3 - NOTES PAYABLE (Continued)
December 30
-----------
1999 1998
---------- ----------
Balance forward $ 165,267 $ 276,101
Note payable, secured by property, interest
at 8.05%, interest and principal payments of
$16,124 due monthly, matures July 5, 2003 1,191,060 1,283,684
Note payable, secured by property, interest
at 7.5%, interest and principal payments of
$399 due monthly, matures November 15, 2002 12,498 16,186
---------- ----------
Balance forward $1,368,825 $1,475,971
Note payable, secured by property, interest
at 7.5%, interest and principal payments of
$737 due monthly, matures October 15, 2002 22,426 --
Note payable, secured by property, interest
at 15.77%, interest and principal payments of
$47 due monthly, matures December 16, 2001 67 634
Note payable, secured by property, interest
at 11.09%, interest and principal paymentsof
$628 due monthly, matured April , 1999 173 628
Note payable, secured by property, interest at
9.25%, interest and principal payments of $440
due monthly, matures September 22, 2002 12,785 --
Note payable, secured by property, interest
at 7.5%, interest and principal payments of
$492 due monthly, matures April 1, 2004 20,752 --
Note payable, secured by property, interest at
8.12%, interest and principal payments of $1,531
due monthly, matures June 25, 2004 69,178 --
Note payable, secured by property, interest
at 8.12%, interest and principal payments of
$1,447 due monthly, matures June 25, 2004 65,388
6
<PAGE> 55
GLOBAL SEAFOOD TECHNOLOGIES, INC.
(Formerly International Custom Pack, Inc.)
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 3 - NOTES PAYABLE (Continued)
December 30
-----------
1999 1998
----------- -----------
Total notes payable 1,559,595 1,477,233
Less: current portion (159,973) (108,456)
----------- -----------
Long-term notes payable $ 1,399,622 $ 1,368,777
Maturities of long-term debt are as follows:
Period Amount
------ ------
12 months ending December 31, 2000 $ 159,426
12 months ending December 31, 2001 172,392
12 months ending December 31, 2002 183,557
12 months ending December 31, 2003 181,497
12 months ending December 31, 2004 165,727
2005 and thereafter 696,995
----------
Total $1,559,595
NOTE 4 - NOTES PAYABLE RELATED PARTIES
Notes payable to related parties at December 31, 1999 and 1998
consisted of the following:
December 31
-----------
1999 1998
---- ----
Notes payable to shareholders, unsecured,
interest at 10%, interest payments due
quarterly and annually, principal amount
is due on demand. 113,500 113,611
NOTE 5 - LINE OF CREDIT
The Company has a line of credit with a bank which is secured by a
deed of trust and mortgage on commercial property and a commercial
security agreement. The line of credit is renewed annually and
presently matures on October 5, 2000. Borrowings, if any, would have a
maximum balance outstanding at December 31, 1999 and 1998 of
$1,000,000 and $500,000. As of December 31, 1999 and 1998, the actual
balance outstanding under the line was $ 500,000 and $ 70,000,
respectively.
7
<PAGE> 56
GLOBAL SEAFOOD TECHNOLOGIES, INC.
(Formerly International Custom Pack, Inc.)
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 6 - CAPITAL LEASES
The Company leases certain equipment with lease terms ending 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. The capitalized cost
less accumulated depreciation is included in property and equipment in
the accompanying consolidated financial statements at December 31,
1999.
Obligations under capital leases at December 31, 1999 and 1998 were as
follows:
December 30
-----------
1999 1998
-------- ---------
Total $ 91,355 $ 217,377
Less: current portion (31,729) (128,343)
-------- ---------
Long-term portion $ 59,626 $ 89,034
The future minimum lease payments under these capital leases from
December 31, 1999 and the net present value of the future minimum
lease payments are as follows:
<TABLE>
<CAPTION>
Twelve months ending
--------------------
<S> <C>
December 31, 2000 $ 29,400
December 31, 2001 $ 27,700
December 31, 2002 22,840
December 31, 2003 16,315
December 31, 2004 0
December 31, 2005 and thereafter 0
---------
Total future minimum lease payments $ 96,255
Less, amount representing interest (4,900)
----------
Present value of future minimum lease payments $ 91,355
</TABLE>
NOTE 7 - MAJOR CUSTOMERS AND SUPPLIERS
Certain customers in the seafood processing and packaging segment
generated in excess of 10% of the Company's total sales. For the
nine months ended December 31, 1999 two customers each generated
sales of approximately 46% and 37% of total revenues, respectively.
For the nine months ended December 31, 1998, two customers each
generated sales of approximately 29% and 28% of total revenues,
respectively.
The Company purchased product from two suppliers during the nine
months periods ending December 31, 1999 and 1998 that generated
costs in excess of 10% of the
8
<PAGE> 57
GLOBAL SEAFOOD TECHNOLOGIES, INC.
(Formerly International Custom Pack, Inc.)
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
Company's total costs. Purchases from these two suppliers made up 22%
and 23%, and 24% and 30%, of total costs for the nine months ended
December 31, 1999 and 1998, respectively.
NOTE 8 - 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 December
31, 1999 since the outcome is currently not estimatable.
The company is also 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 December 31, 1999.
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:
Three months ending
March 31, 2000 $ 43,394
Year ending
March 31, 2001 $ 113,204
March 31, 2002 10,894
March 31, 2003 10,894
March 31, 2004 5,147
March 31, 2005 and thereafter 0
----------
Total future minimum lease payments $ 183,533
9
<PAGE> 58
GLOBAL SEAFOOD TECHNOLOGIES, INC.
(Formerly International Custom Pack, Inc.)
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 9 - WARRANTS OUTSTANDING
On November 1, 1998, the Company granted warrants to a consultant to
purchase 1,000,000 shares of the Company's 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 compensation was recorded for
the respective periods.
10
<PAGE> 59
PART III
ITEM 1. Index to Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description Location
- ------ ----------- --------
<S> <C> <C>
2.0 Stock for Stock Acquisition Agreement Filed electronically
between Enviro Solution Int'l. and Custom in the initial filing
Pack dated October 31, 1995
3.0 Articles of Incorporation dated May 29, 1986 Filed electronically
in the initial filing
3.1 Certificate of Amendment of Articles of Filed electronically
Incorporation dated July 18, 1994 in the initial filing
3.2 Certificate of Amendment of Articles of Filed electronically
Incorporation dated November 21, 1994 in the initial filing
3.3 Certificate of Amendment of Articles of Filed electronically
Incorporation dated November 22, 1995 in the initial filing
3.4 Certificate of Amendment of Articles of Filed electronically
Incorporation dated November 25, 1997 in the initial filing
3.5 Certificate of Amendment of Articles of Filed electronically
Incorporation dated December 22, 1998 in the initial filing
3.6 By-Laws Filed electronically
in the initial filing
4.0 Specimen of common stock certificate Filed electronically
in the initial filing
4.1 Common stock purchase warrant dated Filed electronically
November 1, 1998 in the initial filing
4.2 Form of common stock purchase warrant Filed electronically
dated April 1, 1999 in the initial filing
4.3 Form of common stock purchase warrant Filed electronically
dated July 16, 1999 in the initial filing
</TABLE>
23
<PAGE> 60
<TABLE>
<S> <C> <C>
10.0 Agreement and Plan of Reorganization dated Filed electronically
October 1, 1997 between the company and in the initial filing
shareholders of CoMar Foods, Inc.
</TABLE>
<TABLE>
<CAPTION>
Exhibit
Number Description Location
- ------ ----------- --------
<S> <C> <C>
10.1 Asset Purchase Agreement dated June 25, Filed electronically
1999 in the initial filing
21.0 List of Company's Subsidiaries Filed electronically
in the initial filing
27 Financial Data Schedule Filed electronically
herewith
</TABLE>
24
<PAGE> 61
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.
April 24, 2000 GLOBAL SEAFOOD TECHNOLOGIES, INC.
By: /s/ Brent Gutierrez
-----------------------------
Brent Gutierrez,
President and Chief Executive
Officer
25
