SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
Current Report Pursuant to Section 13 or 15(d) of
The Securities Act of 1934
October 31, 1996
________________________________________________
Date of Report (Date of earliest event reported)
CONTROLLED ENVIRONMENT AQUACULTURE
TECHNOLOGY, INC.
________________________________________________
(Exact name of registrant as specified in its charter)
Colorado 0-25868 84-1293167
________________________________________________
(State or other (Commission (I.R.S.Employer
jurisdiction File Number) Identification No.)
of incorporation)
4750 Table Mesa Drive, Boulder, CO 80303
________________________________________________
Address of principal executive office (Zip Code)
(303) 494-3000
________________________________________________
Registrant's telephone number, including area code
<PAGE>
Item 7. Financial Statements and Exhibits
The following Financial Statements and Exhibits are filed
as part of this report:
(a) Financial statements for Aquacare Environment, Inc. for
ten months ended October 31, 1996. On October 31, 1996, the
registrant acquired all of the issued and outstanding stock of
Aquacare Environment, Inc., in a stock for stock exchange, and
Aquacare Environment, Inc. is now a wholly-owned subsidiary of
the registrant.
(b) Pro Forma Condensed Consolidated Financial Statements
of Controlled Environment Aquaculture Technology, Inc. (the
Registrant) as of and for the ten months ended October 31, 1996.
FINANCIAL STATEMENTS
AQUACARE ENVIRONMENT, INC.
<PAGE>
AQUACARE ENVIRONMENT, INC.
Index to Financial Statements
Independent Auditor's Report F-3
Balance Sheet F-4
Statement of Revenue, Expenses and
Retained Earnings F-6
Statement of Cash Flows F-8
Notes to Financial Statements F-11
Index to Pro Forma Condensed
Consolidated Financial Statements F-16
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Aquacare Environment, Inc.
Bellingham, Washington
I have audited the accompanying balance sheet of Aquacare
Environment, Inc. as of October 31, 1996 and the related
statements of revenue, expenses and retained earnings, and cash
flows for the ten months then ended. These financial statements
are the responsibility of the management of Aquacare
Environment, Inc. My responsibility is to express an opinion on
these financial statements based on my audit.
I conducted my audit in accordance with generally accepted
auditing standards. Those standards require that I plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. I believe that my audit
provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Aquacare
Environment, Inc. as of October 31, 1996, and the results of its
operations and its cash flows for the ten months then ended in
conformity with generally accepted accounting principles.
/s/
Vaughn S. Hagan, CPA, PS
119 N. Commercial, Suite 660
Bellingham, Washington 98225
December 18, 1996<PAGE>
AQUACARE ENVIRONMENT, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
<S> <C>
OCT-31-96
CURRENT ASSETS:
Cash 2,936
Accounts receivable 105,316
Inventory, at cost 115,040
Notes receivable (Note 3) 30,000
Prepaid insurance 1,100
Prepaid income taxes 1,200
Interest receivable 950
Total Current Assets 256,542
EQUIPMENT, at cost (Note 2)
Equipment 120,511
Less accumulated
depreciation (74,620)
NOTES RECEIVABLE (Note 3) 790,000
TOTAL ASSETS 1,092,433
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable 52,570
Accrued and withheld taxes 16,345
Accrued interest 1,305
Loans from stockholder 2,800
Billings in excess of costs on
uncompleted contracts
(Note 4) 10,000
Note payable-line of
credit (Note 6) 68,378
Loans payable 17,850
Equipment note payable 1,400
Long term debt due
within one year 3,500
Total Current Liabilities 174,148
DEFERRED INCOME TAXES
(Note 7) 66,750
LONG-TERM DEBT, net of amount due
within one year (Note 8) 15,968
STOCKHOLDERS' EQUITY
Common stock, $1 par value
200,000,000 shares authorized;
1,800 issued and
outstanding 86,500
Paid in capital 23,937
Retained earnings 725,130
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
1,092,433
</TABLE>
See the accompanying notes and auditor's report.<PAGE>
AQUACARE ENVIRONMENT, INC.
STATEMENT OF REVENUE, EXPENSES
AND RETAINED EARNINGS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Ten Months Ten Months
Year Ended Year Ended Ended Ended
DEC-31-94 DEC-31-95 OCT-31-95 OCT-31-96
UNAUDITED
SALES
Waste water treatment
systems 603,116 502,714 546,919 23,274
Aquaculture systems 184,115 391,131 352,585 221,091
Other aquaculture revenue 113,260 66,463 53,130 7,790
Sales refunds (19,086) (20,719) (20,719) (32,191)
Total Revenue 881,405 939,589 931,915 220,144
COST OF SALES
Material 501,242 632,313 589,043 124,502
Labor 57,034 72,283 16,677 -
Travel 95,365 36,050 27,757 10,504
Total Cost of Sales 653,641 740,646 633,477 135,006
GROSS PROFIT 227,764 198,943 298,438 85,138
GENERAL AND ADMINISTRATIVE EXPENSES
Officer's salary 71,352 48,000 40,000 40,000
Other salaries and wages 46,231 52,000 68,333 43,635
Taxes and licenses 25,261 15,996 11,779 8,698
Telephone 24,401 21,946 17,127 13,389
Advertising 9,303 19,930 14,027 3,935
Bad debts 15,000 1,928 - 7,553
Professional services 9,167 5,231 5,082 2,967
Office 8,206 5,881 7,746 6,510
Insurance 5,353 5,198 4,195 6,414
Rent 5,025 5,400 4,500 4,284
Postage 2,924 5,707 5,136 1,496
Market research 2,529 622 622 354
Dues and subscriptions 2,520 1,231 850 738
Miscellaneous 2,919 - 272 -
Interest 3,045 1,618 5,958 7,801
Depreciation 10,317 9,350 9,000 10,715
Other Expenses 13,623
LOSS FROM
OPERATIONS (15,789) (555) (73,351)
OTHER EXPENSE
Loss on investment (20,000) - -
INTEREST INCOME - 450 500
OTHER INCOME
Gain on sale of
business unit (NOTE 3) - - 860,000
INCOME BEFORE PROVISION FOR
INCOME TAXES - - 90,188 787,149
PROVISION FOR INCOME
TAXES (NOTE 7) - - - 66,750
NET LOSS (35,789) (105) -
NET INCOME - - 90,188 720,399
RETAINED EARNINGS
beginning of year 40,625 4,836 4,731
RETAINED EARNINGS
end of year 4,836 4,731 725,130
See the accompanying notes and auditor's report.<PAGE>
AQUACARE ENVIRONMENT, INC.
STATEMENT OF CASH FLOWS
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Ten Months Ten Months
Year Ended Year Ended Ended Ended
DEC-31-94 DEC-31-95 OCT-31-95 OCT-31-96
UNAUDITED
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss (35,789) (105) -
Net income - - 720,399
Adjustments to reconcile net income to net
cash used for operating activities:
Depreciation 10,317 9,350 10,715
Loss on disposal of
investment 20,000 - -
Gain on sale of business unit - - (860,000)
Deferred federal income taxes - - 66,750
Decrease in accounts
receivable 10,501 - 13,389
Increase in accounts
payable 19,418
Increase in inventory (76,463) (17,418) (21,159)
Increase in interest
receivable - (450) (500)
Increase in prepaid
insurance - - (1,100)
Increase in prepaid income
taxes - (1,200) -
Decrease in deferred
income taxes (1,110) - -
Decrease in accounts payable - - (20,309)
Increase in accrued taxes 9,469 - 10,509
Increase in accrued interest - - 1,305
Increase in billings
in excess of costs on
uncompleted contracts 11,066 (11,066) 10,000
NET CASH USED FOR OPERATING ACTIVITIES
(32,591) (47,756) (70,001)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment (5,825) (13,823) (4,212)
Repayment of advances to
stockholders 51,500 - -
Increase in investments - (500) -
Increase in loans to
stockholders - (5,000) -
Collections on notes
receivable - - 50,000
Decrease in investments - - 500
NET CASH FROM
INVESTING ACTIVITIES 45,675 (19,323) 46,288
CASH FLOWS FROM FINANCING ACTIVITIES
Working capital loans
from bank 55,000 50,000 68,378
Advances from stockholder 2,800 - -
Increase in other borrowings 12,600 - 14,000
Principal payments
on working capital loans (55,000) - -
Principal payments on
other borrowings (8,750)
Principal payments on
equipment loans (239) (2,796) (2,199)
Principal payments
on loans from bank - - (50,000)
NET CASH FROM FINANCING ACTIVITIES
15,161 47,224 21,429
INCREASE IN CASH 28,245 - -
DECREASE IN CASH - (19,875) (2,284)
BEGINNING CASH DEFICIT
(3,150) - -
BEGINNING
CASH BALANCE - 25,095 5,220
ENDING
CASH BALANCE 25,095 5,220 2,936
SUPPLEMENTAL INFORMATION
Cash paid during the year for:
Interest 3,045 1,618 (NOTE 5)
Income taxes - 1,110 (NOTE 5)
Income tax deposits - 1,200 (NOTE 5)
NONCASH FINANCING ACTIVITIES:
Fully depreciated equipment with a cost basis of $7,232 was abandoned during the year
1995.
See the accompanying notes and accountant's report.<PAGE>
AQUACARE ENVIRONMENT, INC.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1996
Note 1 - SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
The Company began operations in 1988 and develops and markets
equipment and systems for modern, intensive land-based fish
farming. The Company's revenue is from the sale of inventory
and also from both fixed-price and time-and-material contracts
which typically last less than a year. The Company grants credit
to customers, substantially all of whom are located in the United
States, Canada and Mexico.
The Company uses the direct write-off method to account for bad
debts.
The Company has elected to report income using the completed
contract method whereby contract revenue and contract costs are
reported in the year the contract is completed. This method is
used because the typical contract is completed in six months or less
and financial position and results of operations do not vary
significantly from those which would result from use of the
percentage of completion method. A contract is considered
complete when all costs except insignificant items have been
incurred and the work has been accepted by the customer.
Contract costs include all direct material and labor costs and those
indirect costs related to contract performance. General and
administrative costs are charged to expense as incurred.
Costs in excess of amounts billed are classified under current
assets as costs in excess of billings on uncompleted contracts.
Billings in excess of costs are classified under current liabilities as
billings in excess of costs on uncompleted contracts.
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.
NOTE 2 - PROPERTY AND EQUIPMENT
Depreciation is computed on the straight-line method for financial
statement purposes. Estimates of useful lives are as follows:
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Vehicles 5 years
Office furniture and equipment 5 to 7 years
</TABLE>
NOTE 3 - NOTES RECEIVABLE
Notes receivable, current and long-term, consist of the following:
1. Two separate laons of $5,000 each to Thomas Belton, a 2%
shareholder of the Company. Both notes bear interest at the rate
of 5% per annum and are due October 26, 1996 and June 12,
1997, respectively. They are secured by stock in Aquacare
Environment, Inc. The first note is on a month to month
extension as of October 26, 1996.
2. A note from Prince Wallace, James Van Alstine and John
Malinka on behalf of AquaCare International, Inc. (an unrelated
company), with a face value of $950,000. This note resulted from
the sale of the Company's SBEACR waste water business unit May
1, 1996, for $1,000,000. The terms of the note are as follows:
Payments are payable from 50% of the gross profits
received from all Aquacare SBEACR system sales,
royalties, license fees and all other revenue so generated
directly related to SBEACR until the balance is paid in full.
The balance is due and payable in full May 1, 2000
provided there has been gross profits totaling $2,000,000.
In the event gross profits total less than $2,000,000 as of
May 1, 2000, the due date of this note shall be extended by
one year increments until the balance of the note has been
paid in full, but no later than May 1, 2005.
In the event of default in payments to Aquacare Environment, Inc.,
ownership of the SBEACR business unit will revert back to
Aquacare Environment, Inc. In the event of a change in
ownership of the purchaser company, the note will become
immediately payable.
In management's opinion, they anticipate full receipt of this note
within three to five years based on the buyers' financial
commitment and international marketing program.
The note is no-interest bearing and, therefore, has been discounted
from $950,000 to $810,000 for financial statement reporting
purposes. As a result, the gain on sale of the business unit, as
reported in the statement of revenue, has been discounted from
$1,000,000 to $860,000.
NOTE 4 - COSTS AND ESTIMATED EARNINGS ON
UMCOMPLETED CONTRACTS
<TABLE>
<CAPTION>
<S> <C>
Costs and estimated earnings on uncompleted contracts $ 5,000
Less: billings to date (15,000)
(10,000)
</TABLE>
Included in the accompanying balance sheet under "Billings in
excess of costs and estimated earnings on uncompleted contracts."
NOTE 5 - CASH FLOWS
For purposes of the statement of cash flows, the Company
considers all investments purchased with a maturity of three
months or less to be cash equivalents.
Supplemental information to the statement of cash flows:
Cash paid during the year for Interest - $6,496
Noncash investing activities:
Long-term debt in the amount of $20,811 was incurred during the
year when the Company; purchased new equipment.
NOTE 6 - NOTE PAYABLE-LINE OF CREDIT
The Company has a line of credit with Key Bank of Washington.
It borrowed $68,378 for working capital at an interest rate of
prime rate plus 2.5%, payable monthly. The note was due
October 31, 1996, and is on a month to month extension. The line
of credit is renewable based on an annual review and is secured by
accounts receivable, fixed assets and inventory.
NOTE 7 - INCOME TAXES
For income tax purposes, depreciation is calculated using
accelerated methods. Deferred income taxes result from timing
differences between the recognition of certain income and expense
items for income tax reporting purspoes and financial reporting
purposes. For income tax purposes, the gain on the sale of the
business unit is deferred and recognized as income when the
related installment note receivable is paid.
The components of income tax expense are as follows:
<TABLE>
<CAPTION>
<S> <C>
Deferred federal tax expense attributable
to sale of business unit $81,750
Deferred federal tax benefit from
continuing operations (15,000)
Net deferred tax expense $66,750
</TABLE>
NOTE 8 - LONG-TERM DEBT
Long-term debt at December 31, 1996 consists of the following:
<TABLE>
<CAPTION>
Note payable - Key Bank
<S> <C>
Payable $446 monthly
including interest at 10.25%
per annum; secured by
vehicle: $19,468
less amount due within one year (3,500)
$15,968
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Maturities of long-term debt are as follows:
Year ending
December 31 Amount
1997 3,500
1998 3,900
1999 4,500
2000 5,400
2001 2,168
TOTAL 19,468
</TABLE>
<PAGE>
NOTE 9 - LEASE AGREEMENT
The Company conducts its business from facilities that are leased
form the Bellingham Herald. On July 5, 1996 the Company signed
a month to month lease with monthly payments of $499. Rent
expense for ten months ended October 31, 1996 was $4,284.
NOTE 10 - RELATED PARTY TRANSACTION
In July, 1996, the Company transferred its Advanced Recycling
Technology systems to Ecologic Technology, a company consisting
of four individuals who own 85% of the stock in Aquacare
Environment, Inc. Financial terms are pending.
NOTE 11 - PLAN OF REORGANIZATION
On October 11, 1996, the Company entered into a plan of
reorganization with Controlled Environment Aquaculture
Technology, Inc. (CEA TECH), an unrelated company, under a
tax free exchange of stock in accordance with the provisions of
368(a)(1)(B) of the Internal Revenue Code.
Under the terms of the agreement, the stockholders of Aquacare
Environment, Inc., exchanged 100% of their shares for shares of
common stock in CEA TECH. The closing of this agreement
occurred on October 31, 1996.
<PAGE>
Controlled Environment Aquaculture Technology, Inc.
Index to Pro Forma Condensed Consolidated Financial Statement
Pro Forma Condensed
Consolidated Financial Statements F-18
Notes to Pro Forma Condensed
Consolidated Financial Statements F-21<PAGE>
CONTROLLED ENVIRONMENT AQUACULTURE
TECHNOLOGY, INC
Pro Forma Condensed Consolidated Financial Statements
As of and for the Ten Months Ended October 31, 1996
(UNAUDITED)
The following pro forma condensed consolidated balance sheet
(unaudited) as of October 31, 1996 and the pro forma condensed
consolidated statement of operations (unaudited) for the ten months
ended October 31, 1996, give effect to the acquisition of all the
outstanding stock of Aquacare Environment, Inc., by Controlled
Environment Aquaculture Technology, Inc., which acquisition was
completed on October 31, 1996, and accounted for as a pooling of
interest. The pro forma consolidated balance sheet presents the
financial position of Controlled Environment Aquaculture
Technology, Inc., as if it had acquired Aquacare Environment,
Inc., as of October 31, 1996. The pro forma condensed
consolidated statement of operations presents the results of
operations of Controlled Environment Aquaculture Technology,
Inc., as if it had acquired Aquacare Environment, Inc., as of
January 1, 1996.
The pro forma condensed consolidated balance sheet (unaudited)
as of October 31, 1996, and the pro forma condensed consolidated
statement of operations (unaudited) for the ten months ended
October 31, 1996, may not be indicative of the results that actually
would have occurred if the combination had been in effect on the
dates indicated or which may be obtained in the future. These pro
forma consolidated financial statements (unaudited) should be read
in conjunction with the Controlled Environment Aquaculture
Technology, Inc. financial statements contained in the report on
Form 10-QSB for the quarter ended October 31, 1996, and the
audited financial statements of Aquacare Environment, Inc.,
contained elsewhere herein.
<PAGE>
CONTROLLED ENVIRONMENT AQUACULTURE
TECHNOLOGY, INC.
Pro Forma Condensed Consolidated Balance Sheet
As of and for the Ten Months Ended October 31, 1996
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
<S> <C>
CURRENT ASSETS
Cash 2,936
Accounts Receivable 105,316
Notes Receivable 115,040
Prepaid Expenses 30,000
Other Current Assets 950
Total Current Assets 256,542
EQUIPMENT, at cost 120,511
less accumulated depreciation (74,620)
NOTES RECEIVABLE 790,000
OTHER ASSETS 346
TOTAL ASSETS 001,092,779
LIABILITIES AND STOCKHOLDERS EQUITY
CURRENT LIABILITIES
Accounts Payable 52,570
Accrued Taxes 16,345
Accrued Interest 1,305
Loan from Stockholder 2,800
Current portion long-term debt 4,900
Note payable - Bank 58,378
Note payable - Other 17,850
Other current liabilities 10,000
Total Current Liabilities 174,148
DEFERRED INCOME TAXES 66,750
LONG-TERM DEBT 15,968
STOCKHOLDERS EQUITY
Common Stock 95,025
Paid in Capital 23,937
Retained Earnings 716,951
Total Stockholders Equity 835,913
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY 1,092,779
<PAGE>
CONTROLLED ENVIRONMENT AQUACULTURE
TECHNOLOGY, INC.
Pro Forma Condensed Consolidated Statement of Operations
As of and for the Ten Months Ended October 31, 1996
(UNAUDITED)
Ten Months
Ended
October 31, 1996
REVENUES
Operating Revenue 1,080,644
Cost of Sales 135,006
GROSS PROFIT 945,638
OPERATING COSTS
General and Administrative 147,774
Depreciation 10,715
NET INCOME BEFORE TAX 787,149
PROVISION FOR INCOME TAX 66,750
NET INCOME 720,399
PRO FORMA NET INCOME
PER SHARE $0.29
PRO FORMA COMMON SHARES
OUTSTANDING 2,457,000<PAGE>
CONTROLLED ENVIRONMENT AQUACULTURE
TECHNOLOGY, INC.
Notes to Pro Forma Condensed Consolidated
Financial Statements
As of and for the Ten Months Ended October 31, 1996
(UNAUDITED)
1. GENERAL
The pro forma condensed consolidated balance sheet (unaudited)
as of October 31, 1996 and the pro forma condensed consolidated
statement of operations (unaudited) for the ten months ended
October 31, 1996, reflect the following reorganization (the
"Reorganization"):
- - On October 31, 1996, Controlled Environment Aquaculture
Technology, Inc., acquired all of the issued and
outstanding stock of Aquacare Environment, Inc., in a
stock exchange under Section 368(a)(1)(B) of the Internal
Revenue Code.
These pro forma consolidated financial statements (unaudited)
represent the consolidated financial position and operations of
Controlled Environment Aquaculture Technology, Inc., and
Aquacare Environment, Inc., as if the Reorganization had occurred
January 1, 199___.
These pro forma consolidated financial statements (unaudited) do
not purport to be indicative of the results that actually would have
been obtained if the operations were combined for the ten months
ended October 31, 1996, and this presentation is not intended to
be a projection of future results or trends.<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.
CONTROLLED ENVIRONMENT AQUACULTURE
TECHNOLOGY, INC.
/s/ J. A. Garcia, President 2/12/97
________________________________________________
(Signature) (Date)
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