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 July 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.
7 Waterfront Plaza, Suite 400
500 Ala Moana Blvd.
Honolulu, HI 96813
(Address of Principal Office) Zip Code
Issuer's telephone number: (808) 521-1801
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: 3,664,950 shares
of common stock outstanding as of July 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 July 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 - July 31,
1998
(unaudited)
<TABLE>
<CAPTION>
July 31,
1998
(UNAUDITED)
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents 579,069
Accounts receivable (net) 2,700
Stock Subscription Receivable 50,000
Inventory 352,004
Deposits and Prepaid Expenses 51,212
Notes Receivable 45,000
Total current assets 1,079,985
PROPERTY AND EQUIPMENT (net) 2,617,713
OTHER ASSETS (net) 141,689
TOTAL ASSETS 3,839,387
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable 410,597
Other Current Liabilities 91,023
TOTAL CURRENT LIABILITIES 501,620
TOTAL LIABILITIES 501,620
STOCKHOLDERS' EQUITY
Preferred stock - no par value
Authorized - 10,000,000 shares
Issued and outstanding - 5,000
shares Series A 8.25% Cumulative
Convertible at stated value
of $100 per share 495,800
Common stock - no par value
Authorized - 100,000,000 shares
Issued and outstanding -
3,664,950 shares as of July
31, 1998 4,258,794
Additional paid-in capital 75
Retained Deficit (1,416,902)
TOTAL STOCKHOLDERS' EQUITY 3,337,766
TOTAL EQUITY AND LIABILITIES 3,839,387
</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 Statement of Operations and Accumulated Deficit for the Three
and Six months ended July 31, 1998 and 1997, and for the Period from
January 19, 1995 to July 31, 1998
(unaudited)
Page 1 of 2
<TABLE>
<CAPTION>
For the For the
three months three months
ended July 31 ended July 31
1998 1997
<S> <C> <C>
Sales 48,934 18,166
Cost of Goods Sold 39,924 17,240
Gross Profit (Loss) 9,010 926
General and Administrative
Expenses 268,607 111,765
Net Profit (259,599) (110,839)
Accumulated deficit
Beginning of period (1,146,993) (254,294)
Preferred Stock
Dividend (10,312) -
End of period (1,416,902) (365,133)
Basic and diluted loss per
common share (.07) (.06)
Weighted average number of
shares outstanding 3,614,950 1,975,659
</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 Statement of Operations and Accumulated Deficit for the Three
and Six months ended July 31, 1998 and 1997, and for the Period from
January 19, 1995 to July 31, 1998
(unaudited)
Page 2 of 2
<TABLE>
<CAPTION>
Period from
Jan. 19, 1995
For the For the (inception)
six months six months through
ended July 31 ended July 31 July 31
1998 1997 1998
<S> <C> <C> <C>
Sales 58,384 23,617 119,042
Cost of Goods Sold 49,512 19,420 137,166
Gross Profit (Loss) 8,872 4,197 (18,124)
General and Administrative
Expenses 553,757 294,435 1,378,154
Net Profit (Loss) (544,885) (290,238) (1,396,278)
Accumulated deficit
Beginning of period (851,393) (74,895) -
Preferred Stock
Dividend (20,624) - (20,624)
End of period (1,416,902) (365,133) (1,416,902)
Basic and diluted loss per
common share (.16) (0.14) (.46)
Weighted average number of
shares outstanding 3,302,200 2,027,666 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 Six Months Ended
July 31, 1998 AND 1997 and for the Period From January 19, 1995 to July
31, 1998
<TABLE>
<CAPTION>
Period from
Jan 19, 1995
For the For the (inception)
six months six months through
1998 1997 July 31, 1998
<S> <C> <C> <C>
Cash flows from
operating activities
Net cash used in
operating activities (5,245) (340,228) (1,261,126)
Cash flow from investing
activities
Net cash used in
investing activities (932,033) (154,209) (2,293,165)
Cash flow from financing
activities
Net cash provided by
financing activities 239,687 382,810 4,133,360
Net increase (decrease)
in cash and cash
equivalents (697,591) (111,627) 579,069
Cash and cash equivalents at
beginning of period 1,276,660 582,849 -
Cash and cash equivalents at
end of period 579,069 471,222 579,069
</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 - July 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 neither incurred nor paid any interest or income
tax liabilities during the interim periods presented.
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 July 31, 1998, the Company completed
construction of the hatchery operated by its wholly owned subsidiary,
CEATECH HHGI Breeding Corp. The facility at Kekaha, on the
island of Kauai, Hawaii, became operational May 1, 1998, and will
operate as the broodstock repository, hatchery and maturation facility
for the Company's high-health, genetically improved shrimp "seed
supply." The facility will provide shrimp nauplii and post larvae
("seed") for the Company's growout ponds. During the last week of
July 1998, approximately 2.2 million post larvae shrimp were
transferred from the hatchery facility to the first phase of Ceatech
Plantations growout ponds. During the second quarter, Ceatech
HHGI also began making shipments of broodstock to both domestic
and international shrimp producers. The Company is continuing to
receive orders for both broodstock and seed from both domestic and
international customers.
On June 1, 1998, Ceatech Plantations began construction of the
Company's growout ponds at the Kauai Ag Park. The first stage calls
for the construction of 20 one-acre growout ponds and six half-acre
nursery ponds, on approximately 83 acres. As of July 31, 1998, two
of the half-acre nursey ponds had been completed. Management
currently anticipates that construction of the remainder of the first
stage growout and nursery ponds will be completed during the fourth
quarter of the current fiscal year, and anticipates that harvests of
mature shrimp will begin on a continuing basis by the middle of the
fourth quarter of the current fiscal year.
Ceatech Plantations continues to evaluate an additional 300 acres of
land adjacent to the current growout facility.
The sale of additional units from the Private Placement was
terminated by the Company effective May 31, 1998. The Company
believes that Private Placement proceeds received to date, coupled
with the anticipated receipt of proceeds from the pending long-term
loan will provide sufficient capital to fulfill its projected first-phase
needs until the commencement of regular harvest of shrimp product
and start of steady revenue expected to begin during the last quarter
of this year.
During the quarter ended July 31, 1998, the Company received final
approval from the United States Department of Agriculture to provide
a $3.0 million loan guarantee to the loan commitment from the Bank
of America. This construction loan is for one year, followed by a
seven-year term loan. This loan is in the final documentation phase.
Management expects to close this financing during the third quarter.
Total stockholders equity increased from $1,180,561 as of the end of
the second quarter of the previous fiscal year and $2,237,027 at the
fiscal year ended January 31, 1998 to $3,337,766. Cash decreased
from $1,276,660 from $579,069 during the second quarter, primarily
as a result of the Company's investment into additional fixed assets.
The Company's second quarter cash position increased from $471,222
for the same period ending July 31, 1997 to $579,069 for the period
ending July 31, 1998. Total current assets increased to $1,079,985
from $943,886 at January 31, 1998, and $766,480 at July 31, 1997.
As of July 31, 1998, the Company had no long-term debt and total
liabilities of $501,620, as compared to total liabilities of $101,774 as
of July 31, 1997, and total liabilities of $62,216 as of January 31,
1998. The increase in liabilities during the second quarter is
primarily a result of the Company's construction activities and the
commencement of operation at the hatchery facility.
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 until the
fourth quarter of the current fiscal year. The Company anticipates
that it will begin to receive revenues from the regular harvest and sale
of shrimp during the fourth quarter.
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 shrimp
production, 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) The Company terminated its private placement offering of
unregistered securities during the quarter ended July 31, 1998. The
unregistered securities, which were units consisting of 20,000 shares
of common stock and 10,000 Class A warrants, were offered and sold
solely to accredited investors pursuant to an exemption from
registration provided by Regulation D and Section 4(2) of the
Securities Act of 1933, and Rule 506 thereunder. The Class A
Warrants included as part of the units give holders the right to
purchase one additional share of common stock at a price of $2.00 per
share, and expire, if not exercised, on December 31, 2001. The
offering price was $50,000 per unit.
During the quarter the Company received gross cash proceeds
of $250,000 from the sale of units to accredited investors and as a
result, issued a total of 100,000 additional shares of its common
stock. The offering proceeds have been applied in part to working
capital and in part to the payment of costs incurred in conjunction
with construction of the Company's hatchery and the start of
development of the Company's initial growout ponds.
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 July 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: August 27, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-END> JUL-31-1998
<CASH> 579,069
<SECURITIES> 0
<RECEIVABLES> 52,700
<ALLOWANCES> 0
<INVENTORY> 352,004
<CURRENT-ASSETS> 1,079,985
<PP&E> 2,666,228
<DEPRECIATION> 48,515
<TOTAL-ASSETS> 3,839,387
<CURRENT-LIABILITIES> 501,620
<BONDS> 0
0
495,800
<COMMON> 4,258,794
<OTHER-SE> 75
<TOTAL-LIABILITY-AND-EQUITY> 3,839,387
<SALES> 48,934
<TOTAL-REVENUES> 48,934
<CGS> 39,924
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 268,607
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (259,599)
<INCOME-TAX> 0
<INCOME-CONTINUING> (259,599)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (259,599)
<EPS-PRIMARY> (.07)
<EPS-DILUTED> (.07)
</TABLE>
