<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Mark one
(X) Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended January 31, 1996
or
( ) Transition Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
Commission File Number 33-23460-LA
AQUASEARCH, INC.
----------------------------------------------------
Exact Name of Registrant as Specified in its Charter
Colorado 33-0034535
- -------------------------------------- ----------------------------
State or Other Jurisdiction of IRS Employer
Incorporation or Organization Identification Number
4350 Executive Drive, Suite 246
San Diego, California 92128
- -------------------------------------- ----------------------------
Address of Principal Executive Offices Zip Code
(800) 471-0711
---------------------------------------------
Registrant's Telephone Number,
Including Area Code
Not Applicable
---------------------------------------------
Former Name, Former Address and Former Fiscal
Year, if Changes Since Last Report
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
The number of shares outstanding of Registrant's common stock, $0.0001 par value
at January 31, 1996 was 37,527,688 shares.
Transitional Small Business Disclosure Format Yes No X
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<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
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CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
BALANCE SHEETS F-2
STATEMENTS OF LOSS AND ACCUMULATED F-3
DEFICIT
STATEMENTS OF CASH FLOWS F-4
NOTES TO FINANCIAL STATEMENTS F-5
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATION F-6
</TABLE>
<PAGE>
Aquasearch, Inc.
(a development stage enterprise)
BALANCE SHEETS
<TABLE>
<CAPTION>
January 31, October 31,
1996 1995
(Unaudited) (Audited)
--------------- --------------
<S> <C> <C>
Assets
Current Assets
Cash $ 363,034 $ 27,208
Stock subscriptions receivable 231,600 35,000
Prepaid expenses 17,707 9,177
Other current assets 1,735 2,535
------------ -----------
Total current assets 619,076 73,920
Plant and Equipment - At Cost
Plant 447,988 408,219
Other equipment 16,200 7,740
Less accumulated depreciation (10,912) (320)
------------ -----------
Net plant equipment 453,276 415,639
Other Assets
Organization costs (net) - -
------------ -----------
Total assets $ 1,067,352 $ 489,559
============ ===========
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable $ 82,061 $ 233,181
Accounts payable - related parties - -
Deposits held - -
Accrued payroll - -
Accrued interest - -
Deposits payable - -
------------ -----------
Total current liabilities 82,061 233,181
Stockholders' Equity
Common stock, $0.0001 par value, 50,000,000 shares
authorized 4,873 4,379
Additional paid-in capital 2,400,842 1,704,785
Common stock subscribed 231,600 -
Accumulated deficit (1,652,024) (1,452,786)
------------ -----------
Total stockholders' equity (deficit) 990,291 256,378
------------ -----------
Total liabilities and
stockholders' equity $ 1,067,352 $ 489,559
============ ===========
</TABLE>
F-2
<PAGE>
AQUASEARCH, INC
(a development stage enterprise)
STATEMENTS OF LOSS AND ACCUMULATED DEFICIT
<TABLE>
<CAPTION>
For the period For the three For the three
From inception months ended months ended
to January 31, 1996 January 31, 1996 January 31, 1995
(unaudited) (unaudited) (unaudited)
------------------- ---------------- -----------------
<S> <C> <C> <C>
OPERATIONS
Revenues $ - $ - $ -
Cost of sales 101,029 101,029 -
Research and development costs 444,165 - -
------------- ------------ -----------
Total cost of sales and research costs 545,194 101,029 -
------------- ------------ -----------
Gross profit (loss) (545,194) (101,029) -
General and administrative expenses 892,704 98,209 14,571
------------- ------------ -----------
Earnings (loss) from operations (1,437,898) (199,238) (14,571)
OTHER INCOME (EXPENSE)
Interest (12,244) - -
Other - - -
Investment in joint venture (147,096) - -
------------- ------------ -----------
Total other income and (expense) (159,340) - -
------------- ------------ -----------
Earnings (loss) before income taxes and
extraordinary item (1,597,238) (199,238) (14,571)
Extraordinary item - loss on write down
of assets to liquidation basis (14,502) - -
------------- ------------ -----------
Earnings (loss) before income taxes (1,611,740) (199,238) (14,571)
Federal and state income taxes (6,016) - -
------------- ------------ -----------
Net income (loss) (1,617,756) (199,238) (14,571)
ACCUMULATED DEFICIT
Balance, beginning of period (34,268) (1,452,786) (1,163,973)
------------- ------------ -----------
Balance, end of period $ (1,652,024) $ (1,652,024) $(1,178,544)
============= ============ ===========
Loss per share $ (0.09) $ (0.01) Nil
============= ============ ===========
Weighted average shares outstanding 19,000,000 32,583,688 23,463,313
============= ============ ===========
</TABLE>
F-3
<PAGE>
AQUASEARCH, INC.
(a development stage enterprise)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the period For the three For the three
From inception months ended months ended
to January 31, 1996 January 31, 1996 January 31, 1995
(unaudited) (unaudited) (unaudited)
------------------- ----------------- -----------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(1,617,756) $(199,238) $(14,571)
Adjustments to reconcile net loss to net cash
cash provided by operating activities:
Amortization 3,527 - -
Depreciation 16,619 10,592 -
Expenses paid with stock and additional paid in capital 218,865 35,500 -
Loss on write down of assets to liquidation basis 5,392 - -
Changes in:
Other current assets (19,442) (7,730) 1,207
Accounts payable (1,637) (151,121) 13,986
----------- --------- --------
Cash used by operating activities (1,394,432) (311,997) 622
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets (373,773) (48,230) -
----------- --------- --------
Cash used by investing activities (373,773) (48,230) -
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock 2,199,593 715,000 -
Increase in notes payable - - -
Offering costs (68,409) (18,947) -
----------- --------- --------
Cash provided by financing activities 2,131,184 696,053 -
----------- --------- --------
Net increase in cash 362,979 335,826 622
Cash - beginning of period 55 27,208 1,213
----------- --------- --------
Cash - end of period $ 363,034 $ 363,034 $ 1,835
=========== ========= ========
Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest $ 4,400 $ - $ -
Income taxes $ 12,244 $ - $ 800
</TABLE>
F-4
<PAGE>
Aquasearch, Inc.
(A development stage enterprise)
NOTES TO FINANCIAL STATEMENTS
January 31, 1996 (Unaudited)
1. Related party transactions
--------------------------
The Company uses office space provided by an officer of the Company. Monthly
rent expense for this space is $380.
2. Common stock and stock purchase warrants
----------------------------------------
As of January 31, 1996, there were 3,348,000 Class B warrants issued and
outstanding. No Class B warrants were exercised during the three months ended
January 31, 1996. The Class B warrants are exercisable at $1 per share. The
exercise period for the Class B warrants will expire on March 15, 1996 unless
extended by the Board of Directors.
An analysis of the changes in stockholders' equity is as follows:
<TABLE>
<CAPTION>
Total
Shares of Additional Common Stock-
Common Common Paid-in Accumulated Stock holders'
Stock Stock Capital Deficit Subscribed Equity
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, October 31, 1995
(audited) 32,583,688 $4,379 $1,704,785 $(1,452,786) $ 256,378
Stock issued during the quarter
in a regulation D offering 4,000,000 400 580,651 581,051
Stock issued during the quarter
in a regulation S offering 640,000 64 79,936 80,000
Stock issued during the quarter
for services 304,000 30 35,470 35,500
Common Stock Subscribed 231,600 231,600
Loss for the three months ended
January 31, 1996 - - - (199,238) (199,238)
---------- ------- ---------- ----------- --------- ---------
Balance, January 31, 1996 37,527,688 $4,873 $2,400,842 $(1,652,024) $231,600 $ 990,291
========== ======= ========== =========== ========= =========
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
3. Management's representations of interim financial information
-------------------------------------------------------------
These financial statements reflect all adjustments which are, in the opinion
of management, necessary to a fair statement of the results of operations for
the interim period presented. These adjustments are of a normal and recurring
nature. The Company's results of operations for the three months ended January
31, 1996 are not necessarily indicative of the results to be expected for the
full year.
The unaudited condensed financial statements have been prepared in
accordance with the instructions for Form 10-QSB and, therefore, certain
information and footnote disclosures normally contained in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted. These financial statements should be read in conjunction
with the Financial Statements and notes thereto included in the Company's Annual
Report to Shareholders on Form 10-KSB for the fiscal year ended October 31,
1995.
F-5
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDTION AND RESULTS
----------------------------------------------------------------------
OF OPERATIONS
-------------
PLAN OF OPERATION.
The Company has completed the initial testing of its astaxanthin product
and the specifications for this product have been approved by Svenska Fodor AB.
The Company is currently working to increase production of astaxanthin to the
levels required under its contract with Svenska Fodor AB and anticipates making
its first shipment of product under the contract with Svenska Fodor AB in March
1996. The Company's production of astaxanthin is currently limited by the lack
of a suitable process dryer. The Company expects to complete specifications and
testing and commence operation of a small prototype process dryer in the first
quarter. After a satisfactory testing of the prototype unit, the Company plans
to lease or purchase a custom-built commercial process dryer designed to meet
and exceed its manufacturing requirements under Svenska Fodor AB contract. The
Company estimates a six month lead time for the manufacture and installation of
the commercial dryer at a cost, if purchased rather than leased, of
approximately $300,000.
During the fiscal quarter ended January 31, 1996, the Company sold
4,640,000 shares of its Common Stock for $661,051 in two private placements. The
Company also received subscriptions to purchase an additional 1,800,000 shares
of Common Stock for $231,600 in another private placement. The Company will use
the net proceeds from these offerings to provide working capital and to
purchase or finance the acquisition of additional capital equipment. The Company
believes that the net proceeds from these offerings will be sufficient to
sustain the Company's operations for four to eight months depending upon the
level of capital expenditures and the timing of receipt of any revenues under
the contract with Svenska Fodor AB. In order to sustain operations and acquire
the capital equipment necessary to expand the Company's business in accordance
with its current business plan (including, but not limited to, acquisition of
the commercial drying unit), the Company anticipates that it will be necessary
to raise additional capital during the next six months.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
-----------------
None.
Item 2. Changes in Securities.
---------------------
None.
Item 3. Defaults upon Senior Securities.
-------------------------------
None.
Item 4. Submission of Matters to a Vote of Security Holders.
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None.
Item 5. Other Information.
-----------------
None.
Item 6. Exhibits and Reports of Form 8-K.
--------------------------------
a) Exhibits. None.
--------
b) Reports on Form 8-K. None.
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<PAGE>
Signature
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
AQUASEARCH, INC.
Dated: March 13, 1996 By: /s/Tana Alcalay
-------------------------
Tana Alcalay, Secretary
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> NOV-01-1995
<PERIOD-END> JAN-31-1996
<CASH> 363,034
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 614,076
<PP&E> 464,188
<DEPRECIATION> 10,912
<TOTAL-ASSETS> 1,067,352
<CURRENT-LIABILITIES> 82,061
<BONDS> 0
0
0
<COMMON> 4,873
<OTHER-SE> 980,418
<TOTAL-LIABILITY-AND-EQUITY> 1,067,352
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 101,029
<TOTAL-COSTS> 199,238
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (199,238)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,617,756)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (199,238)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
