U.S. 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 the quarterly period ended October 31,
1998.
....Transition report under section 13 or 15(d) of the Securities
Exchange Act of 1934 [No Fee Required] for the transition period
from _________ to _________.
Commission File No: 0-25868
CONTROLLED ENVIRONMENT
AQUACULTURE TECHNOLOGY, INC.
(Name of small business in its charter)
Colorado 84-1293167
(State or other (IRS Employer Id. No.)
jurisdiction of Incorporation)
CEA TECH USA, Inc.
3375 Koapaka Street, Suite H402
Honolulu, Hawaii 96819
(Address of Principal Office) Zip Code
Issuer's telephone number: (808) 836-3707
7 Waterfront Plaza, Suite 400
500 Ala Moana Blvd., Honolulu, HI 96813
(Former name or former address, if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act during the past 12
months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes ..X.. No ....
Applicable only to issuers involved in bankruptcy proceedings during
the past five years
Check whether the issuer has filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court. Yes ____
No ____
Applicable only to corporate issuers
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 3,905,450 shares
of common stock outstanding as of October 31, 1998.
Transitional Small Business Disclosure
Format (Check one):
Yes ____ No X <PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONTROLLED ENVIRONMENTAL AQUACULTURE
TECHNOLOGY, INC.
(a development stage company)
and subsidiaries
Quarter Ended October 31, 1998<PAGE>
CONTROLLED ENVIRONMENTAL AQUACULTURE
TECHNOLOGY, INC.
(a development stage company)
and subsidiaries
<TABLE>
<CAPTION>
Index to Consolidated Condensed Financial Statements
<S> <C>
Consolidated Condensed Balance Sheet 5
Consolidated Statement of Operations and
Accumulated Deficit 7
Consolidated Condensed Statement of Cash Flows 10
Notes to Consolidated Condensed Financial Statements 11
</TABLE>
<PAGE>
CONTROLLED ENVIRONMENTAL AQUACULTURE
TECHNOLOGY, INC.
(a development stage company)
and subsidiaries
CONSOLIDATED CONDENSED BALANCE SHEET - October 31,
1998
(unaudited)
<TABLE>
<CAPTION>
October 31,
1998
(UNAUDITED)
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents 499,716
Accounts receivable (net) 3,287
Stock subscription receivable 50,000
Inventory 432,085
Deposits and prepaid expenses 66,838
Notes receivable 45,000
TOTAL CURRENT ASSETS 1,096,926
PROPERTY AND EQUIPMENT (net) 3,470,659
OTHER ASSETS (net) 141,689
TOTAL ASSETS 4,709,274
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable 275,263
Other Current Liabilities 323,686
TOTAL CURRENT LIABILITIES 598,949
Long term debt 1,102,331
TOTAL LIABILITIES AND 1,701,280
STOCKHOLDERS' EQUITY
Common stock - no par value
Authorized - 100,000,000 shares
Issued and outstanding -
3,905,450 shares as of October
31, 1998 4,758,794
Additional paid-in capital 175
Deficit accumulated during the
development stage (1,750,975)
TOTAL STOCKHOLDERS' EQUITY 3,007,994
TOTAL LIABILITIES 4,709,274
AND STOCKHOLDERS' EQUITY
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.<PAGE>
CONTROLLED ENVIRONMENTAL AQUACULTURE TECHNOLOGY,
INC.
(a development stage company)
and subsidiaries
Consolidated Condensed Statement of Operations and Deficit Accumulated
During the Development Stage for the Three and Nine months ended October
31, 1998 and 1997, and for the Period from January 19, 1995 to October 31,
1998
(unaudited)
Page 1 of 2
<TABLE>
<CAPTION>
For the For the
Three months Three months
ended October 31 ended October 31
1998 1997
<S> <C> <C>
Sales 152,726 4,572
Cost of Goods Sold 98,722 1
Gross Operating
Profit 54,004 4,571
General and Administrative
Expenses 383,877 142,032
Net Loss (329,873) (137,461)
Deficit Accumulated During the Development Stage
Beginning of period (1,146,902) (365,133)
Conversion of Preferred
Stock (4,200) -
End of period (1,750,975) (502,594)
Basic and diluted loss per
common share (.07) (.06)
Weighted average number of
shares outstanding 3,614,950 2,213,651
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.<PAGE>
CONTROLLED ENVIRONMENTAL AQUACULTURE TECHNOLOGY,
INC.
(a development stage company)
and subsidiaries
Consolidated Statements of Operations and Deficit Accumulated During the
Development Stage for the Three and Nine months ended October 31, 1998
and 1997, and for the Period from January 19, 1995 to October 31, 1998
(unaudited)
Page 2 of 2
<TABLE>
<CAPTION>
Period from
Jan. 19, 1995
For the For the (inception)
nine months nine months through
ended October 31 ended October 31 October 31
1998 1997 1998
<S> <C> <C> <C>
Sales 211,110 28,189 271,768
Cost of Goods Sold 148,234 19,421 235,888
Gross Operating Profit 62,876 8,768 35,880
General and Administrative
Expenses 937,634 436,467 1,762,031
Net Loss (874,758) (427,699) (1,762,151)
Deficit Accumulated During the Development Stage
Beginning of period (851,393) (74,895) -
Preferred Stock
Dividend (20,624) - (20,624)
Conversion of Preferred
Stock (4,200) - (4,200)
End of period (1,750,975) (502,594) (1,750,975)
Basic and diluted loss per
common share (.22) (0.19) (.55)
Weighted average number of
shares outstanding 3,614,950 2,213,651 3,004,966
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.<PAGE>
CONTROLLED ENVIRONMENTAL AQUACULTURE TECHNOLOGY,
INC.
(a development stage company) and subsidiaries
Consolidated Condensed Statement of Cash Flows for the Nine Months Ended
October 31, 1998 and 1997 and for the Period From January 19, 1995 to
October 31, 1998
<TABLE>
<CAPTION>
Period from
Jan 19, 1995
For the For the (inception)
nine months nine months through
1998 1997 October 31, 1998
<S> <C> <C> <C>
Cash flows from
operating activities
Net cash used in
operating activities (489,382) (515,794) (1,512,649)
Cash flow from investing
activities
Net cash used in
investing activities (2,294,556) (526,846) (3,268,121)
Cash flow from financing
activities
Net cash provided by
financing activities 2,748,056 1,046,699 5,280,486
Net increase (decrease)
in cash and cash
equivalents (35,882) 4,059 499,716
Cash and cash equivalents at
beginning of period 535,598 582,849 -
Cash and cash equivalents at
end of period 499,716 586,908 499,716
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.<PAGE>
CONTROLLED ENVIRONMENTAL AQUACULTURE
TECHNOLOGY, INC.
(a development stage company)
NOTES TO CONSOLIDATED CONDENSED FINANCIAL
STATEMENTS - October 31, 1998
NOTE 1. Basis of Presentation
The information included in the consolidated condensed
financial statements is unaudited, but includes all adjustments
(consisting of normal recurring items) which are, in the opinion of
management, necessary for a fair representation of the interim period
presented.
The consolidated statements include the accounts of Controlled
Environment Aquaculture Technology, Inc. (the "Company") and its
wholly-owned subsidiaries, Ceatech HHGI Breeding Corp., Ceatech
Plantations, Inc., and Sunkiss Shrimp Co., Ltd. All significant inter-
company transactions and balances have been eliminated in
consolidation. The consolidated financial statements and notes
included herein should be read in conjunction with the financial
statements and notes included in the Company's Annual Report on
Form 10-KSB for the fiscal year ended January 31, 1998.
NOTE 2. Development Stage Company
The Company, formerly known as Global Capital Access
Corporation, was incorporated under the laws of the State of Colorado
on January 19, 1995. The Company is an enterprise in the
development stage as defined by Statement No. 7 of the Financial
Accounting Standards Board and has not engaged in any business
other than organizational efforts. The Company has made an
aggressive commitment to commercialize state of the art, second
generation technologies for intensive, sustainable growout production
of shrimp, utilizing high health genetically improved (HHGI) specific
pathogen free (SPF) broodstock, technologies and breeding techniques
developed and verified at commercial scales in the State of Hawaii.
NOTE 3. Interest and Income Tax Expenses
The Company paid interest of $491.64 during hte period. The
Company neither incurred nor paid any income tax liabilities during
the interim periods presented.
NOTE 4. Secured Indebtedness
On October 20, 1998, Ceatech Plantations, Inc., a wholly
owned subsidiary of the Company, executed a loan agreement with
Bank of America, Bank of America Community Development Bank,
of Rancho Cordova, California, for a $3.0 million loan. The loan is
structured as a one-year construction loan converting to a seven-year
term loan. Proceeds from the loan will be used for construction of
additional facilities at the Kekaha Agricultural Park in Kekaha, Kauai,
Hawaii.
During the construction phase, the Company may make draws
based upon progress and inspections, and although interest will
accrue, no payments are required to be made. At the end of one
year, or upon completion of construction (in the event construction is
completed in less than one year), the loan will convert into a seven-
year fully-amortizing term loan requiring monthly payments of
principal and interest.
During the construction period and for the first two years of
the term loan, the interest rate is based upon a specified margin over
the Prime Lending Rate of Bank of America. Beginning on
September 9, 2001, the Company may elect to change the terms of
the loan to have the interest rate based upon a specified margin over
the current rate on one-year Treasury Notes.
The Rural Development Agency of the United States
Department of Agriculture has provided Bank of America with a 90%
loan guarantee. In addition, the Company and its subsidiaries have
pledged substantially all of their assets, including all inventory and
accounts receivable, as collateral for repayment of the loan.
Note 5. Conversion of Preferred Stock
During the period ending October 31, 1998, all outstanding
Series A, 8.25% Cumulative Preferred Shares were converted to
common shares on the basis of 50 common shares for each Series
Preferred Share, thereby resulting in the issuance of 250,000 shares of
common stock. In conjunction with the conversion the Board of
Directors authorized issuance of 200,000 Warrants to the former
Preferred Shareholder. Each of the Warrants provides the right to
purchase one additional share of common stock at a price of $2.00 per
share at any time on or before December 31, 2001, and the Warrants
expire on December 31, 2001, if not exercised on or before that date.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR
PLAN OF OPERATION.
The information included in this Form 10-QSB should be read in
conjunction with the Management's Discussion and Analysis of
Financial Conditions or Plan of Operations and financial statements
and notes thereto, included in the Company's Report 10-KSB dated
January 31, 1998.
During the quarter ended October 31, 1998, the Company continued
construction of the Company's growout ponds at the Kauai Ag Park.
The First Phase of this construction was completed during the period,
and consisted of six half-acre nursery ponds and five one-acre
growout production ponds. The growout ponds have been stocked
with shrimp supplied by the Company's hatchery. The first harvest is
scheduled for January, 1999.
On October 20, 1998, the Company signed a loan agreement with the
Bank of America, which provides a $3.0 million, one-year
construction loan, converting to a seven-year term loan. This loan is
guaranteed by the United States Department of Agriculture and is
secured by substantially all of the Company's assets. The proceeds of
this loan are being used to complete construction of additional
facilities at the Kauai Ag Park, including fifteen additional one-acre
growout ponds, and a 4,800 square foot warehouse.
Total stockholder equity stood at $3,007,994 at the end of the period.
During the quarter, cash decreased from $579,069 to $499,716 as a
result of continued investment in fixed assets. Total Assets were
$4,709,274 and consisted primarily of Property, Plant & Equipment
of $3,470,659 (net). Accounts Payable decreased during the quarter
from $410,597 to $275,263 as a result of the completion of the first
phase of construction and the funding of the Bank of America loan.
At October 31, 1998, the Company's long term debt stood at
$1,102,331 versus zero in previous periods. Management feels that
the long-term debt is an appropriate structure considering the long-
term nature of the majority of the Company's assets.
The Company continued in the development and start-up stage during
this quarter with minimal revenue and continued losses during
construction of the facilities.
It is anticipated that the Company will continue to receive only
minimal revenue and will continue to incur operating losses
throughout the remainder of the current fiscal year. The Company
anticipates that it will begin to receive increased revenues from both
the sale of hatchery products (broodstock and postlarvae) and from the
regular harvest and sale of shrimp at the end of the fourth quarter of
the current fiscal year and during the first quarter of the following
fiscal year.
The Company does not currently believe that Year 2000 issues are
material to its business, operations or financial condition. It has not
adopted any general plan to address Year 2000 issues relating to its
business and does not currently believe that any expenses it may incur
to remediate Year 2000 issues it encounters will be material.
CAUTIONARY STATEMENT REGARDING FORWARD-
LOOKING INFORMATION
This report contains various forward-looking statements that are based
on the Company's beliefs as well as assumptions made by and
information currently available to the Company. When used in this
report, the words "believe," "expect," "anticipate," "estimate" and
similar expressions are intended to identify forward-looking
statements. Such statements may include statements regarding
completion of construction of facilities, commencement of operations,
operation and expansion of facilities, planned levels of production and
sale of broodstock, postlarvae and shrimp, marketing matters, and the
like, and are subject to certain risks, uncertainties and assumptions
which could cause actual results to differ materially from projections
or estimates contained herein. Factors which could cause actual
results to differ materially include, among others, unanticipated delays
or difficulties in completion of construction of facilities, lack of
adequate financing, unexpected problems in obtaining licenses or
permits, environmental costs and risks, competition and changes in
market conditions, unanticipated problems or difficulties in operation
of facilities, lack of adequate personnel, changes in project parameters
as plans continue to be refined, and the like. Should one or more of
these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially from
those anticipated, estimated or projected. The Company cautions
against placing undue reliance on forward-looking statements all of
which speak only as of the date made.
Part II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(c) During the period ending October 31, 1998, the holder of
the outstanding Preferred Shares elected to convert all of the Series A,
8.25% Cumulative Convertible Preferred Stock to common shares. In
accordance with its terms, the Series A Preferred was converted on
the basis of 50 common shares for each Series Preferred Share,
thereby resulting in the issuance of 250,000 shares of common stock.
As an incentive for conversion of the Series A Preferred, the Board of
Directors authorized issuance to the former Preferred Shareholder of
200,000 Warrants, each of which provides the right to purchase one
additional share of common stock at a price of $2.00 per share at any
time on or before December 31, 2001. The Warrants expire on
December 31, 2001, if not exercised on or before that date.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 27 - Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter
ended October 31, 1998.
Signatures
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CONTROLLED ENVIRONMENTAL AQUACULTURE
TECHNOLOGY, INC.
(Registrant)
/s/____________________________________________
R. L. Ilsley, Chief Financial Officer,
Treasurer and Director
(Name, Title)
Date: December 14, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-END> OCT-31-1998
<CASH> 499,716
<SECURITIES> 0
<RECEIVABLES> 3,287
<ALLOWANCES> 0
<INVENTORY> 432,085
<CURRENT-ASSETS> 1,096,926
<PP&E> 3,581,739
<DEPRECIATION> 111,080
<TOTAL-ASSETS> 4,709,274
<CURRENT-LIABILITIES> 598,949
<BONDS> 0
0
0
<COMMON> 4,758,794
<OTHER-SE> 175
<TOTAL-LIABILITY-AND-EQUITY> 4,709,274
<SALES> 152,726
<TOTAL-REVENUES> 152,726
<CGS> 98,722
<TOTAL-COSTS> 98,722
<OTHER-EXPENSES> 383,877
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (329,873)
<INCOME-TAX> 0
<INCOME-CONTINUING> (329,873)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (329,873)
<EPS-PRIMARY> (.07)
<EPS-DILUTED> (.07)
</TABLE>
