<PAGE>   1

                     U.S. Securities and Exchange Commission
                             Washington, D.C. 20549

                                   FORM 10-KSB

(Mark One)

[X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

         For the fiscal year ended June 30, 2000

[ ]      TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

         For the transition period from

                         Commission File Number 0-29258
                                                -------

                               AQUAPRO CORPORATION
--------------------------------------------------------------------------------
                 (Name of small business issuer in its charter)

           Tennessee                                       62-1598919
 ------------------------------                        -------------------
(State or other jurisdiction of                         (I.R.S. Employer
 incorporation or organization)                        Identification No.)

                       1100 Highway 3, Sunflower, MS 38778
--------------------------------------------------------------------------------
              (Address of Principal executive offices (Zip Code)

         Issuer's telephone number (662) 569-3331
                                   ---------------

         Securities registered under Section 12(b) of the Exchange Act:

         Title of each class           Name of each exchange on which registered

                 None                                   None
         -------------------           -----------------------------------------

         Securities registered under Section 12 (g) of the Exchange Act:

                           Common Stock, no par value
--------------------------------------------------------------------------------
                                (Title of Class)

         Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the 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 [ ]

         Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]

         State issuer's revenues for its most recent fiscal year $6,994,423

         The aggregate market value of the voting stock held by non affiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock as of August 31, 2000 was $3,678,954 $, based
on the last sale price of $.75 as reported by the NASD Over the Counter Bulletin
Board.

         As of August 31, 2000, Registrant had outstanding 4,905,273 shares of
common stock, its only class of common equity outstanding.

         Transitional Small Business Disclosure Format (check one):
Yes [ ]  No [X]


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                                TABLE OF CONTENTS

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                                                                              PAGE

<S>                                                                           <C>
PART I ....................................................................... -1-
         Item 1.  Description of Business..................................... -1-
         Item 2.  Description of Property.....................................-18-
         Item 3.  Legal Proceedings...........................................-19-
         Item 4.  Submission of Matters to a Vote of Security Holders.........-19-

PART II ......................................................................-20-
         Item 5   Market for Common Equity and Related Stockholder Matters....-20-
         Item 6.  Management's Discussion and Analysis or Plan of Operation...-22-
         Item 7.  Financial Statements........................................-29-
         Item 8.  Changes In and Disagreements With Accountants on
                  Accounting and Financial Disclosure.........................-29-

PART III .....................................................................-30-
         Item 9.  Directors, Executive Officers, Promoters and Control
                  Persons, Compliance with Section 16(a) of the
                  Exchange Act................................................-30-
         Item 10. Executive Compensation......................................-32-
         Item 11. Security Ownership of Certain Beneficial Owners
                  and Management..............................................-35-
         Item 12. Certain Relationships and Related Transactions..............-36-
         Item 13. Exhibits and Reports on Form 8-K............................-36-
         LIST OF EXHIBITS.....................................................-37-
         FINANCIAL STATEMENTS.................................................-41-

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                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

GENERAL

         THE COMPANY. AquaPro Corporation ("Registrant," "AquaPro" or the
"Company") was incorporated on March 20, 1995. The Company engages in the
business of owning and managing catfish aquaculture farms ("Aquaculture")
directly and through its two wholly-owned subsidiaries, American Fisheries
Corporation, a Mississippi Corporation ("American") and Circle Creek
Aquaculture, Inc., a Tennessee Corporation ("Circle Creek"). The Company
currently owns 2,651 water acres of aquaculture ponds. All of the Company's
catfish farming activities are conducted in the State of Mississippi and are
conducted through Circle Creek and American.

         Mr. Hastings, the Company's Chairman and Chief Executive Officer caused
Circle Creek to be incorporated in 1983 under the name of Hastings & Company,
Inc. It changed to its current name in March 1995. Until 1996, the business of
Circle Creek was primarily the sponsorship and operation of catfish farming
investment limited partnerships. Through 1996, Circle Creek sponsored eight such
limited partnerships which engaged in catfish farming (the "Circle Creek
Partnerships"), Circle Creek Aquaculture, L.P. ("CCA I"), Circle Creek
Aquaculture II, L.P. ("CCA II"), Circle Creek Aquaculture III, L.P. ("CCA III"),
Circle Creek Aquaculture IV, L.P. ("CCA IV"), Circle Creek Aquaculture V, L.P.
("CCA V"), Circle Creek Aquaculture VI, L.P. ("CCA VI"), Circle Creek
Aquaculture VII, L.P. ("CCA VII"), and Circle Creek Aquaculture VIII, L.P. ("CCA
VIII"), (collectively, the "Circle Creek Partnerships"). Each of the Circle
Creek Partnerships was organized under the laws of the State of Tennessee.

         Mr. Hastings acquired all of the outstanding stock of American in
February 1994. American had been formed in 1988 by unrelated persons to manage
catfish farming operations. At the time it was acquired by Mr. Hastings,
American served as manager for each of the six Circle Creek Partnerships then
existing. In 1995, Mr. Hastings and Ms. Hastings transferred all of their
interest in the stock of American and Circle Creek to the Company. Effective on
December 31, 1995, the Company acquired all of the assets and assumed all of the
liabilities of CCA I, CCA II, CCA III and CCA IV, pursuant to certain merger
transactions (the "Prior Consolidation"). Effective June 30, 1997, the Company
acquired all of the assets and assumed all of the liabilities of CCA V, CCA VI,
CCA VII, and CCA VIII (the "Recent Consolidation").

         Mr. Hastings sponsored and acted as sole general partner for the first
six Circle Creek Partnerships which were formed between 1989 and 1994. In 1995
and 1996, Mr. Hastings and the Company co-sponsored, and acted as co-general
partners of, CCA VII and CCA VIII. Effective December 31, 1995, Mr. Hastings
assigned all of his economic interest as general partner of each of the eight
Circle Creek Partnerships to the Company. These interests consisted of a one
percent (1%) interest in Partnership capital, profits and losses and a
promotional contingent interest of twenty-five percent (25%) of Partnership
distributions following a minimum cumulative return to the limited partners. The
general partner did not receive any distributions pursuant to this contingent
promotional interest in any of the Circle Creek Partnerships.

         The Company changed its fiscal year to June 30 commencing with the
period ended June 30, 1997. Management believes the change in fiscal year
allowed its accounting period to better reflect operations during



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the normal catfish Aquaculture business cycle and thus more accurately reflect
the Company's performance in its business segment.

         The Company moved its corporate offices in April 1999 to 1100 Highway
3, Sunflower, MS 38778. The Company's catfish farms and offices are located in
the north central area of Mississippi in the region known as the "Mississippi
Delta" or the "Delta." The investor relations office was move also and now is
706 Newhall Drive, Nashville, Tennessee 37206.

THE CATFISH FARMING INDUSTRY

         The Company grows channel catfish for ultimate sale and processing.
Channel catfish account for substantially all of the commercial catfish
production within the United States. The channel catfish has many qualities
making it a superior candidate for commercial production over other species of
catfish. These qualities include ease of spawning, easily controlled
reproduction, relatively simple dietary needs, a relatively hardy constitution,
the ability to survive over a wide range of temperatures and the ability to
adapt well to commonly used culture systems.

         According to the National Fisheries Institute, farm-raised catfish now
ranks as the fifth most popular seafood in America, with a per capita annual
consumption of one and one tenth pound. The National Agricultural Statistic
Service ("NASS") of the Agricultural Statistic Board, U.S. Department of
Agriculture, has released survey data for the catfish farming industry for 1999.
NASS reports that catfish growers in the fifteen (15) selected states had total
sales of $488 million during 1999, an increase of 4.6% over the $469 million
sold in 1998. NASS also reports that on during January 1, 2000 through June 30,
2000, water acres used for catfish production totaled 189,230 acres, an increase
of 4.1% percent from the previous year.

         The Food and Drug Administration ("FDA") funded a study in 1991, which
showed farm-raised catfish to be the fourth most popular seafood in the U.S. The
average prices paid by major processors per pound for farm-raised catfish during
the past fifteen years, according to the U.S. Department of Agriculture, are as
follows:

                  HISTORIC AVERAGE PROCESSOR PRICE FOR CATFISH

<TABLE>
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                    Year             Average Price Per Pound
                    ----             -----------------------
                    <S>              <C>

                    1985                      72.6
                    1986                      66.8
                    1987                      61.8
                    1988                      76.4
                    1989                      71.5
                    1990                      77.3
                    1991                      63.1
                    1992                      60.0
                    1993                      71.0
                    1994                      78.9
                    1995                      78.8
                    1996                      77.0
                    1997                      71.2
                    1998                      74.2
                    1999                      73.7
                    2000 (through 6/30)       78.0

</TABLE>


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         There are two major channels of distribution for farm-raised catfish:
retail grocery store outlets and the food service sector. Each accounts for
approximately half of total catfish sales. Catfish farmers can access these
markets directly only if they process their own production. The vast majority of
farmers, including the Company, do not have processing capability and thus must
sell their products to either cooperatively owned or independent processors. The
Company sells its catfish to a limited number of cooperative and independent
catfish processors. The terms of sale generally permit payment within 4 weeks of
delivery and does not require collateral for payment. For the year ended June
30, 2000, three processors represented 36%, 32% and 14% respectively, of the
Company's net sales. For the year ended June 30, 1999, three processors
represented 51%, 34%, and 7%, respectively, of the Company's net sales. These
cooperatives sell processed catfish both to retail groceries and to the food
service industry.

THE COMPANY'S CATFISH FARMING OPERATIONS

         CATFISH AQUACULTURE. Channel catfish are grown in outdoor ponds in
which the water is about four to five feet deep. The Company's operations are
conducted in ponds ranging from 10 to 20 water acres in size. Each pond is
separated by levees that must be large and strong enough to support a semi truck
and trailer hauling up to 40,000 pounds of catfish. The levee system provides
access to the ponds for feeding, oxygen checking (oxygen level regulation),
aeration and other maintenance chores. Ponds are supplied with water from
underground sources (wells). The water does not flow back and forth between the
ponds because of the higher, heavy clay levees. The ponds have relatively flat,
regular sides and bottoms, since this shape facilitates harvesting. Individual
ponds average 13 land acres and 4 to 5 feet in depth from the bottom of the pond
to the top of the levee.

         Successful catfish farming requires stocking the ponds and feeding the
fish at the highest rate possible, while still maintaining a healthy living
environment. In prior years, Management believed that 5,000 stocker fish and
8,000 to 10,000 5" to 6" fingerlings per acre for the initial stocking, and
7,000 to 10,000 5" to 6" fingerlings each year thereafter, is the optimum number
of fish to maintain maximum production levels. During the year ended June 30,
1998, new farm management lowered these levels to 5,000 stocker fish and 6,000
to 8,000 5" to 6" fingerlings per acre for the initial stocking, and 6,000 to
8,000 5" to 6" fingerlings each year thereafter. Furthermore, Management now
believes stocking rates of 7,500 head per acre are cost-effective on a long-term
basis in the present industry environment. Current stocking rates in the
industry range from approximately 3,000 head to more than 10,000 head per acre.
Once fully stocked, a well-managed catfish farm can produce 6,500 pounds of
catfish per water acre per year, although the industry average is less. Catfish
farms in the Mississippi Delta average 4,000 to 5,000 pounds of catfish per acre
per year.

         The time period required for a catfish to progress from 5-6" fingerling
to its optimum weight of 1 1/4 to 1-1/2 pounds is 8 to 12 growing months,
depending on the feeding, health, density of population and other factors, many
of which, including climatic conditions, will be outside the control of
Management. There are normally eight growing months during a calendar year
(March through October) so fish are generally in the water over a two calendar
year period. Historically, most catfish were harvested and processed in the
months of June through October. However, as a result of an active marketing
campaign by the catfish industry and consistent year-round production, consumer
demand for catfish has become more year-round in recent years.

         Channel catfish grow fastest and healthiest under certain environmental
conditions. The optimal temperature for channel catfish growth is about
85(degree). Because the growing of catfish in outdoor ponds is by far the most
economical (cultivation in tanks or heated water is much more expensive and is
commercially feasible only when some unique circumstance exists, such as the
opportunity to sell fish at an exceptional



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price), catfish are most easily grown in a location where average daily water
temperatures are above 70(degree) for at least 180 days a year, with at least
120 days above 80(degree). Thus, climate is one reason for choosing the
Mississippi Delta region to grow the fish. When the water approaches 50(degree)
Fahrenheit, feeding activity slows, almost stopping as temperature drops
further. In the Mississippi Delta region, the heaviest feeding times are spring,
summer, and fall. (Channel catfish can survive, however, for long periods of
time at water temperatures ranging from just above freezing to about
104(degree)).

         The Company cultures its fry, fingerlings, and stockers until they
reach marketable size (or weight). Within the catfish farming industry, three
sizes of food-size fish are recognized. Large food-size catfish are 3 pounds and
above. Medium food-size catfish are 11/2 to 3 pounds, and small food-size
catfish are 3/4 to 11/2 pounds. While catfish of 3/4 of a pound or more are
considered market weight, Management intends to market the Company's catfish at
a weight of 1 1/4 to 11/2 pounds. In Management's experience, this is the
optimum size for marketing because it yields the best fillet when processed. The
highest demand for catfish production is for fillet cuts. In addition,
processors have recognized the lack of profitability in their operations when
they try to process fish smaller than 1 1/4 pounds. Accordingly, the catfish
will be fed and maintained until they weigh 1 1/4 to 11/2 pounds before any will
be ready to harvest and sell to a processor. As catfish are sold, additional fry
and fingerlings will be purchased periodically to restock the ponds. Generally,
the Company would replace inventory with 5" to 6" fingerlings. This is because,
for production during a full growing season, it is generally more efficient to
purchase 5" to 6" fingerlings than to devote one or more of the Company's ponds
to catfish spawning. The price paid for fingerlings ranges between .75(cent) and
1.50(cent) per inch. Management anticipates that this price range will remain
fairly constant. However, fry are much less costly than larger stock-size fish,
and where ponds are newly refurbished or reworked they are sterile and ideal for
growing fry-size fish.

         NECESSARY RESOURCES AND MATERIALS. As discussed in further detail
below, the raw materials necessary for the Company's agriculture operations
consist primarily of stock fish, feed, electricity and fuel. The Company also
requires equipment and general supplies to maintain its operations. The Company
purchases its feed principally through cooperatives. The price of feed closely
reflects the costs of the raw materials used in the synthesis thereof, including
soybean, corn and other agricultural products. Accordingly, the price of feed
fluctuates in response to the prices of these commodities on the world markets.
The Company uses significant amounts of electricity and fuel in operating its
aerators, particularly during the warmer months (principally spring, summer, and
fall) during which fish activity and thus, oxygen consumption is greatest. Thus,
the Company is subject to price fluctuations in electricity and fuel prices. The
Company uses both unspecialized equipment, such as tractors, trucks, etc., and
specialized equipment, aerators, seining equipment, etc., in its operations. New
and used equipment in the past has been available at competitive prices and
terms to the Company, primarily because of the concentration of catfish farming
in the Delta area. The Company anticipates this trend will continue and
anticipates that both new and used equipment will continue to be readily
available to the Company as needed. Another major expense of the Company's
business is labor. The Company currently employs a non-organized labor field
staff. Most of the Company's field staff requires low level skills and training
and thus, the Company believes that competent labor at competitive prices will
continue to be available to the Company in the area of its operations.

         FEED. Catfish are fed a diet of "puffed" high protein, floating food
pellets which are a mixture of soybean, corn, wheat, vitamins, minerals and fish
meal, produced by feed mills. The food is scientifically formulated, not only to
provide an optimal level of nutrition to the individual fish but also to produce
a meat of a mild, sweet flavor and the absence of any "fishy" odor during
cooking. One of the advantages of catfish Aquaculture is the higher
feed/conversion ratio of this meat source. Laboratory studies have shown
conversion ratios for channel catfish as high as 1.75 pounds of feed per one
pound of fish produced. However, based on its experience, Management believes
the "real life" conversion rate for catfish grown under commercial


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conditions is closer to 2.5:1 and management uses this rate in its inventory
control and monitoring procedures. The Company expects mortality of
approximately two to three percent of the fish pounds in the water during the
year. By comparison, chicken has a conversion ratio of approximately 3:1; pork
has a conversion ratio of approximately 4:1; and beef has a conversion ratio of
approximately 8:1.

         Feed prices can vary greatly from year to year. In 1995, feed prices
averaged $235 per ton. Increases in soybean, corn and wheat prices in 1996 and
early 1997 pushed feed prices to $287 per ton in early 1997. In 1999, decreases
in soybean, corn and wheat prices had caused feed prices to decrease to
approximately $190 per ton. In early 2000, feed prices started to rise again.
The Company booked 10,000 tons(its approximate feed needs from May 2000 through
early 2001) at $209 per ton and an additional 5,000 tons for 2001 at $202 per
ton Feed prices have a direct relationship with the Company's costs of products
sold. The price of feed is subject to crop yields, which cannot be predicted
with certainty. In order to help control its feed costs, the Company owns shares
in Indi-Bell Feed Mill Cooperative ("Delta Western"). As a member of this
Cooperative, the Company has the opportunity to buy feed at wholesale prices and
to purchase feed on an "as needed" basis on two days' prior notice. Thus, the
Company can avoid having to purchase and store large amounts of catfish feed in
order to lock in current prices. The Delta Western Cooperative has over 250
members. This cooperative hedges against price fluctuations for its members
through the purchase of futures option contracts on the Chicago Board of Trade
Futures Exchange.

         Management expects to contract for the balance of its fiscal 2001 feed
needs at approximately $200 to $210 per ton, although it has not as of the end
of September 2000.

         OXYGEN LEVELS. Catfish are sensitive to water oxygen levels which
fluctuate on a more or less predictable cycle during a 24-hour period. Oxygen
levels are supplemented by algae growth during the daylight hours, and are
depleted during the dark hours as algae are dormant. Because the fish remain
active during both daylight and dark hours, the ponds must be constantly
monitored and aerated as necessary in order to maintain acceptable oxygen
levels.

         DISEASE. Diseases affecting catfish are a constant risk. A vaccine is
presently available to treat enteric septicemia, which is currently the leading
cause of mortality among catfish (approximately 40% of all catfish disease is a
form of enteric septicemia). The most efficient safeguard against this disease
is constant monitoring and removing the fish from feed for a few days. Once the
disease is detected, medicated feed may be provided to the infected fish to
prevent a serious outbreak. Those diseases which cannot be successfully treated
can often be contained in the infected pond, since the Farm ponds, as is typical
with catfish ponds, are separated by levees, and water from one pond does not
normally cross over into another pond. Frequent monitoring is also necessary in
order to maintain proper water chemistry.

         Catfish Parasite. According to the National Coordinator of the Thad
Cochran National Warmwater Aquaculture Center at Stonevill, Mississippi,
increasing numbers of catfish farmers have experienced increased mortalitity in
small fish and reduced feeding and growth levels in bigger fish. The cause has
been traced to a trematode, Bolbophlorus confusus. The infection is transmitted
from the white pelican, which feeds on catfish ponds during its migration. The
pelican transmits the parasite to the ram's horn snail and from there to
catfish. There are no treatments for fish infected with the trematode and
pelicans cannot be eradicated. Therefore, the farmer must eradicate the snail.
Catfish farmers, including the Company, have begun treating the pond levies with
lime powder that kills the snail and breaks the cycle. The Company has treated
with apparent success the ponds that have tested positive for the trematode
infected snails. However, some minor reduction of feeding and growth was
experienced. If the infection can not be controlled in the future, sales and
cash flow could be reduced.

         HARVESTING AND RESTOCKING. When Management determines that the catfish
of a particular pond are ready for market, the pond is seined using a net of
appropriate size, which will allow the smaller catfish to escape while trapping
the larger catfish in the net. The catfish will then be loaded live on trucks
and transported to the processor where the fish are cleaned, processed, and
chilled or frozen in less than five to ten



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<PAGE>   8
minutes. The processing plants pay an agreed upon price per pound for the
delivered fish. The Company transports some of it fish directly to processors.
Those not carried by AquaPro's own trucks are deliveried by trucks hired by the
processing company that is buying that particular load of fish. The customary
fee for hauling is one and one half cents per pound. The Company maintains one
seining crew for movement of fish between its own ponds and farms. In past years
the company maintained up to two more seining crews and the trucks and equipment
to support them. At the request of management, the board of directors approved
eliminating the two extra crews and outsourcing this work by the hiring of Grice
Seining, Inc. to perform the majority of seining services for sales to
processors. James Grice, one of AquaPro's directors is the owner and president
of that company. Grice Seining charges the industry standard three cents ($.03)
per pound for its services. For the fiscal year 2000, the company paid Grice
Seining, Inc. $83,816.66.

         Processing Plants. The Company has purchased as an investment five
percent (5%) ownership of a non-operating processing plant in Sunflower, MS.,
five miles from the Company's headquarters. Ninety five percent (95%) ownership
is controled by Farmland Industries. Farmland Industries is one of the largest
cooperatives in the United States with over 600,000 members and over 12 billion
in annual sales. In 1999 it was beef processor of the year in the United States
and its revenue from its hog processing plants alone was greater than the
revenue of all the catfish processors in the United States. It entered the
catfish business two years ago with its merger with Southern Farmers
cooperative. Southern Farmers owned Springwater Farms a catfish processing plant
in Eudora, AK, where the Company holds processing rights and sells some of its
fish. Farmland has announced the formation of a new catfish processing company,
Southern Farm Fresh Aquaculture, LLC. (SFFA) This company is the combination of
the Springwater processing plant and the three other processing plants
heretofore operated under the name Farm Fresh Processing. This combination of
existing plants immediately becomes the second largest processing group in the
United States with the capacity to process 100 million pounds of fish per year.
Negotiation are underway between the Company and SFFA to allow AquaPro to
purchase ten percent (10%) ownership of SFFA. Additionally, the ongoing
negotiations center around Farmland and AquaPro contributing their jointly owned
non-operating processing plant to SFFA for renovation and processing of catfish.
If the Sunflower plant were to reach its potential capacity of 30 to 50 million
pounds of live fish processed per year, SFFA would be the largest processor in
the United States with approximately twenty five percent (25%) of the entire
catfish market. There is no guarantee that the negotiations will result in
AquaPro becoming an owner of SFFA or that the now idle processing plant will
ever be opened, or that SFFA would produce profits for AquaPro.

         The Company seeks to restock its ponds annually in order to maintain
the optimum population within each pond. At any time, each pond will have fish
at various stages of growth. The cycle from fingerling to ideal processing size
(1.0 lbs. to 1.5 lbs.) generally takes 18 months.

         INVENTORY CONTROL PROCEDURES. Husbandry of its live fish inventories is
probably the most important aspect of the Company's Aquaculture business.
Ongoing knowledge of live fish inventories is critical to management's ability
to make accurate and timely decisions regarding their feeding, care and
harvesting. For instance, accurate estimates of the number of fish and their
respective size are used in determining the amount and timing of feedings and
necessary aeration, restocking and harvesting. Live fish inventory control and
estimation procedures have historically employed both quantitative and more
subjective, qualitative procedures. Current industry estimation practices employ
the simultaneous use of two general estimation techniques: physical inventory
sampling (counting techniques) and quantitative models. Typically, farmers will
use both techniques and cross-check the results to determine consistent
estimates.

         The following provides additional information and background of the
Company's method of accounting for live fish inventories. Mississippi State
University - Extension Service ("MSUES"), formerly Cooperative Extension Service
- - Mississippi State University, and the Mississippi Agriculture and Forestry
Experiment Station - Mississippi State University ("MAFES") have published
conversion rates as determined by aquaculture research performed at Mississippi
State University and other research facilities. MSUES is funded by the United
States Department of Agriculture, the State of Mississippi, and the Counties
within Mississippi. MAFES is funded by the United States Department of
Agriculture and the State of Mississippi. The Company has not performed
procedures to specifically substantiate the conversion rates published by MSUES
or MAFES because management believes actual grow-out conditions on the farms are
not as favorable as in the research facilities. Thus, the Company uses lower
feed conversion rates than the published rates based on its actual experience
and the experience of other growers that management participates with in Catfish
Farmers of America and Catfish Farmers of Mississippi, both of which are
industry trade associations, and Delta Pride Catfish, Inc., a farmer-owned
catfish processor.

         The Company maintains a perpetual record of live fish inventories for
each of the Company's 209 production ponds. The perpetual live fish inventory
records are used to account for the pounds of fish fingerlings purchased,
grow-out based on feed fed, observed mortality and sales. Management believes
this is consistent with the methodology used by other growers in the industry in
maintaining perpetual live fish inventory records.

         The Company's actual feed conversion is determined by monitoring the
feed fed daily to each of the ponds, observing the live fish feeding and
monitoring mortality in each of the ponds by personnel with substantial
experience in aquaculture. Catfish feed is pelletized and is blown onto the
surface of the water using calibrated feed trucks or trailers to ensure the
appropriate amount of feed is fed to fish based on their body weight and to
ensure that excess feed is not fed. The pelletized feed floats, therefore the
fish can be observed feeding. Under normal conditions, the fish are generally
fed daily, during the feeding season from March through October, as much feed as
they will consume without adversely affecting water quality (oxygen, pH,
ammonia, etc.). A fish's feed consumption is directly related to its body
weight, thus certain fish will not consume a

                                       -6-
<PAGE>   9

disproportionate amount of feed. Published industry data from MSUES and MAFES
provide the percentage of their body weight catfish eat at each feeding
depending on the size of fish. The feeding may also be affected by water
temperature, water quality, disease, and frequency of feeding. Based on the
factors described above, the pounds of live fish in a pond can be determined by
the quantity of feed the fish consume.

         Management assesses the accuracy of the perpetual inventory records by
analyzing the trend of pounds of feed fed to each pond relative to the pounds of
fish in the pond (i.e. feed consumption increases in quantity as the fish
increase in size, but decreases as a percentage of the fish's body weight) and
observing the feeding of the fish in each pond monthly to estimate the pounds of
live fish. To analyze the trend of feed fed relative to the pounds of catfish in
each pond per the perpetual inventory records, management compares feed
consumption as a percentage of body weight with published industry data from
MSUES and MAFES. Management also considers its prior experience in analyzing
such trends. Management's observation of the actual feeding of the fish not only
includes consideration of the amount of feed fed relative to the body weight of
the fish in a pond but management also considers other factors which affect
feeding rates including size of fish, water temperature, water quality, disease,
and frequency of feeding. Management also utilizes the perpetual inventory
records and observation of the actual feeding of the fish to determine which
ponds are ready to be harvested.

         The perpetual inventory records are updated daily by pond for the
pounds of feed fed to each pond and is converted to live weight by the feed
conversion and is reduced by any observed mortality. Mortality tends to be
higher during periods of severe winter weather, which may not be completely
observed until the feeding resumes in the spring. Revisions are made to the
perpetual inventory records, on a pond by pond basis, when observations of the
actual feeding or seinings of the fish indicate the quantity of fish in a pond
differ from the perpetual inventory record.

         Actual harvests of fish are also utilized in assessing the accuracy of
the perpetual inventory records. Although only fish which have reached a
marketable weight are harvested, management observes the initial seining of fish
prior to the pond being harvested and compares such observations with the
perpetual inventory records. Because such seining includes substantially all of
the fish in a pond except for the small "fingerling" fish, (the "fingerlings" do
not represent a significant portion of the total fish weight in a production
pond), management can estimate the total fish weight in a pond. The holding
nets, which are of a size to retain the fish which have reached a marketable
weight and release the smaller fish, are then used to harvest the fish to be
taken to the processor.

         Individual ponds are closed approximately every 8 to 10 years by
seining substantially all the fish in the pond being closed. Ponds are closed in
connection with refurbishing of the pond levees and removing the buildup of silt
from the bottom of the ponds. After a pond is closed, the Company compares its
perpetual inventory records to the results of seining such closed pond, and any
revisions necessary are made to the perpetual inventory records.

         EMPLOYEES. The Company currently employs 32 full-time persons and 17
part-time persons.


                                       -7-

<PAGE>   10

RECENT DEVELOPMENTS

         PURCHASE OF ADDITIONAL FARM LOCATION. Effective April 25, 2000, the
Company closed on a contract to acquire real property and equipment from two
unrelated individuals for a total price of $917,250. The price and terms of the
purchase were negotiated by the parties. The purchase price included
approximately 672 land acres containing 525 water acres divided into 36 ponds
(thereby increasing the Company's total water acres to 2,651), a manager's
house, a worker's house, shop and office for $861,250; thirty seven (37)
electric aerators for $40,000; and $16,000 of Federal Land Bank Stock. The
Company paid $25,000 in cash as ernest money. At closing, the Company paid
$16,000 for the Federal Land Bank stock and the balance with its promissory note
to the sellers for $76,250, which is payable in monthly amortized payments over
two years at eight (8%) percent interest. The Company assumed the sellers'
$800,000 twenty-year loan from the Federal Land Bank Association, which bears a
variable interest rate (8.55%) and has an annual payment of $84,844.80. The note
to the sellers is secured by a second deed of trust on the real property and by
a purchase money first priority security interest in the aerators. The Federal
Land Bank Association note is secured by a first mortgage on the real property
acquired, comprised of one parcel located in Boliver county, Mississippi. The
farm is three miles from the Company's Crystal waters farm. Management believes
the farm will be immediately and efficiently intregated into the Company's
existing farming operations. Management has stocked the new farm (Indian Lakes)
with large fingerlings and expects to be able to sell food fish from this farm
in the late spring and early summer of 2001.

         COMMUNITY BANK CREDIT LINE. Effective April 20, 2000 the Company
obtained two revolving lines of credit in an amount totaling $1,700,000 from
Community Bank, Indianola, Mississippi. One credit line of $900,000 is to
provide financing for catfish feed purchases from Delta Western and the other
for $800,000 is to be used for catfish production. Borrowings under both lines
of credit bear interest at prime plus 165 basis points (1.65%) and mature on
March 15, 2001. The Company paid a commitment fee of 1% ($17,000) to obtain
these lines of credit. Under the lines of credit, the Company has an operating
deposit account at the bank into which the Company must deposit proceeds from
all inventory sales and accounts receivable. From these deposit amounts, 50
percent is applied to the feed line of credit, and the remaining 50 percent is
applied to the production line. Borrowings under the lines of credit are under
promissory notes, which are secured by a first lien on all inventory, accounts
receivable, certain stock in processing cooperatives owned by the Company, a
first lien on 553 acres of land, a second lien on 647 acres of land, a blanket
lien on all equipment, and an assignment of $1,000,000 of cash value of life
insurance policies on two of the Company's officers. Mr. George S. Hastings has
personally guaranteed repayment of the lines of credit.

         The Company has a balloon note payable with a bank that matures in
September 2000, at which time the principal balance will be approximately
$948,000. Management has begun negotiations to refinance this note, which was
obtained to finance the purchase of the Company's Hidden Lakes farm.


                                       -8-

<PAGE>   11
         ASSESSMENTS BY DELTA PRIDE COOPERATIVE. In fiscal 1999, Delta Pride
Catfish, Inc. ("Delta Pride") assessed the Company and its other members on a
'per pound' basis for fish processed by Delta Pride pursuant to each member's
delivery rights during the year ended June 30, 1999. The assessment was
approximately 9.3 cents ($0.093) per pound processed, and was payable in monthly
installments during the months of September 1999 through February 2000 with a
final payment due in March 2000. The assessment was necessary to cover operating
and other financial losses incurred by Delta Pride during the year ended June
30, 1999. The Company's share of Delta Pride's losses of $339,838 ($0.093 per
pound of fish sold to Delta Pride) was recorded as a charge to earnings during
the year ended June 30, 1999 and reflected as a liability in the Company's
balance sheet as of June 30, 1999. The Company was among the ten largest member
shareholders of Delta Pride and Delta Pride was the Company's largest customer.

         In addition to the $339,838 assessment for the Company's share of Delta
Pride's losses, the appraised value of Delta Pride dropped to $123 per share
causing the Company to reduce the carrying value of its investment in Delta
Pride and take an impairment loss of $628,000. The Company made $85,808 in
payments on the assessment by borrowing the sum from AgSmart, an agriculture
lender. In November of 1999, the Company's President, George Hastings, resigned
from the Board of Directors of Delta Pride, citing an inability to influence
that company's direction. At the same time the Company surrendered its shares of
stock in Delta Pride as payment in kind for Delta Pride's losses allocated to
the Company for the year ended June 30, 1999. The carrying amount of the
Company's investment in Delta Pride was $242,216, which approximated the
liability to Delta Pride for the losses allocated to the Company at the time of
the exchange. The Company continued to sell fish to Delta Pride during fiscal
2000 and as a non-shareholder is not subject to that Company's continuing
losses. In September 2000, Delta Pride initiated a one and one half cent ($.015)
charge per pound to non stockholders to process their fish. The Company's major
customer, Farm Fresh Catfish Processor also charges a processing fee of one and
one half cent ($.015). The Company currently sells approximately twenty percent
(20%) of its fish to Delta Pride.

         ADDITION OF OFFICERS. Mr. Mike Horton was hired in October 1999 as the
Company's Chief Financial Officer and Secretary. He replaced Mr. Mike Jackson,
who resigned at that time.

         RELOCATION OF OFFICE. In May of 2000 the Company's two year-lease of
office space in Nashville, Tennessee expired. The investor relations office was
moved to facilities rented on a month - to - month basis for $500 per month. Mr.
Reid Davis the Company's head of investor relations, is the Company's only
full-time employee at this location.

         EXECUTIVE COMPENSATION. The Company has outstanding seven-year options
to purchase stock at $.5625 to $3.25 per share that were issued from fiscal 1995
through fiscal 2000. As of June 30, 2000, the Company has outstanding 1,197,000
of such options.

         RISK FACTORS

         The Company and its securities are subject to a number of risks. Set
forth below is a description of the risks that the Company considers to be of a
significant nature.

         RISKS ASSOCIATED WITH THE AQUACULTURE BUSINESS

                  General Risks of Catfish Farming. The Company faces three
general types of risk in connection with its catfish farming business.

         -        Risks involving the price and availability of equipment and
                  supplies,

         -        Climatic, environmental and biological risks such as weather,
                  natural catastrophes and disease, and

         -        Market risks regarding the price and strength of the consumer
                  market for the Company's catfish production.



                                       -9-

<PAGE>   12

         The risk exposure in each of these categories is amplified by
competition between the Company and other catfish producers, particularly those
located within the Mississippi Delta. If the Company is unable to maintain its
operating costs at levels which allow it to realize a profit in its catfish
sales, the Company will not be profitable and, if this condition persists, it
would fail and the shareholders would lose some or all of their investment.

         Certain risks, such as adverse climatic conditions, natural disasters,
disease, consumer demand and competition, are outside the Management's control
and, to a varying extent, cannot be planned for or avoided. The occurrence of
one or more of these events could deplete the Company's operating reserves and
resources and thereby result in the need for additional capital.

                  Availability and Price of Stock Fish and Supplies. The price
of stock fish, supplies such as feed and labor is subject to fluctuations due to
availability and varying demands. Increased competition for supplies and
services within the catfish farming industry in general, and the Mississippi
Delta in particular, could cause temporary or prolonged price increases for
feed, labor or other items necessary to the Company's farming operations. While
Management will attempt to obtain lower supply and labor costs through
cooperative purchasing, there is no assurance that it will be able to do so or
that future price increases will not occur. Prolonged increases in one or more
of these categories would negatively affect the Company's profitability and
ability to remain in business.

                  Consumer Demand. The Company's profitability will depend
substantially on the price at which it can sell its catfish. In the past years,
prices have fluctuated substantially and will likely continue to do so in the
future. Prices are dependent upon the demand for catfish by consumers and the
supply of catfish available at any given time. While catfish consumption is in
general increasing, there continues to be substantial consumer reluctance to eat
catfish. Also, catfish continues to incur substantial competition from other
seafood, beef, pork and chicken. While foreign-produced catfish currently
accounts for less than one percent of the total catfish consumed in the United
States, increased foreign competition could negatively impact the price at which
the Company can sell its catfish production. Any continued depression of the
price the Company can receive for its catfish will negatively affect the
Company's profitability and its ability to remain in business.

                  Loss Due to Disease. The single highest cause of loss in
catfish farming is disease. Disease has accounted for more than sixty percent of
catfish loss each year since 1990. The Company attempts to control the more
common catfish diseases through the purchase of disease resistant or vaccinated
fingerlings, and monitors its fish for disease so that a diseased pond can be
quickly quarantined. Nevertheless, catfish are susceptible to a number of viral
and bacterial diseases, many of which cannot be effectively treated, even if
diagnosed early. A number of these diseases cannot be prevented. Also, it is
possible that new diseases may occur in the future for which effective treatment
does not exist. There is no assurance that the Company will be able to limit
disease. A loss of a substantial amount of the Company's inventory due to
disease will negatively affect its profitability and its ability to remain in
business.

                  Water Oxygenation. Catfish survival is dependent upon the
maintenance of adequate oxygen levels in the catfish ponds on a 24-hour basis.
Typically, oxygen levels will fluctuate throughout a 24-hour period. Oxygen
levels are enhanced by photo synthetic bacteria during the daylight hours and
depleted during the nighttime hours by catfish activity. In order to maintain
adequate oxygen levels, catfish ponds must be aerated mechanically during times
of low oxygen levels. If oxygen levels are not monitored regularly or if low
levels are not discovered in time, the catfish will be lost. The Company will
maintain a regular oxygen


                                      -10-

<PAGE>   13

monitoring schedule and will have on its premises sufficient electric aerators
to maintain pond oxygen levels under anticipated conditions. Nevertheless,
unanticipated conditions such as prolonged loss of electric power may render
unavailable the electric aerating equipment. A substantial loss of the Company
catfish inventory due to a failure to maintain oxygen levels would negatively
impact the Company's profitability and its ability to remain in business.

                  Price of Catfish Feed. Catfish feed, which is the greatest
single production cost in catfish farming operations, is subject to large
fluctuations. Industry groups report in recent years fluctuations between $180
and $300 per ton. Currently, catfish feed is produced by a small number of
producers, some of which are cooperatives. The Company owns shares in Delta
Western, a cooperative catfish food producer, which allows the Company a limited
preferential right to purchase feed. These shares, however, do not ensure the
availability of feed or the price at which feed can be purchased. While the
Company attempts to budget for anticipated feed costs in its operations, such
costs are not predictable with certainty and the Company has no control over the
market price of feed. However, the Company has contracted with Delta Western to
purchase 10,000 tons at a price of $209 per ton for its budgeted feed
consumption for calendar year 2000. Feed under this contract is still available
as of September 2000. Management anticipates carry over into 2001 of one to two
thousand (1,000-2,000) tons under this contract. In addition, the Company booked
five thousand (5,000) tons at $202 for use in 2001. In the middle of September
2000, the market price was $211 per ton.

         Management expects to contract for its remaining fiscal 2001 feed needs
at approximately $190 to $200 per ton, although it has not yet done so as of
September 2000. There is no assurance that the Company will be able to purchase
feed in the future as needed at a cost that will allow it to operate profitably
or remain in business.

                  Climatic Conditions. While channel catfish are tolerant to a
wide range of climatic and temperature conditions, these catfish become immobile
below 32(degree) Fahrenheit. Catfish ponds cannot economically be heated.
Accordingly, prolonged cold weather conditions could lower pond temperatures to
below 32(degree) and result in a substantial loss of the Company's catfish
inventory, thereby negatively impacting its profitability and its ability to
remain in business.

                  Water Contamination. Non-catfish farming operations in the
Mississippi Delta have in the past used and continue to use chemical fertilizers
and pesticides in their crop production. Even small concentrations of certain
chemicals and pesticides can significantly affect catfish production and can
result in loss of the entire catfish population in the pond affected. While
Management has from time to time tested the ponds and found no dangerous levels
of any chemical or pesticide present, there is no assurance that contamination
from these chemicals may not occur in the future, either through penetration of
ground water or surface application. Management will continue to monitor and
test the ponds for possible contamination. Additionally, in order to reduce the
risk of contamination, the Company has adopted a policy whereby it will not
purchase land where certain crops have been grown.

                  Natural Hazards. Excessive amounts of aquatic weeds reduce
catfish production. The only method of aquatic weed control is chemical control,
which can result in oxygen depletion and accompanying loss of catfish in the
treated pond. Further, the chemicals used to destroy weeds are expensive to
purchase and are not always completely effective. Catfish population loss can
also occur as a result of predators, including naturally occurring birds, snakes
and turtles. The occurrence of such predators is common in the Mississippi



                                      -11-

<PAGE>   14

Delta area and Management will limit the damage caused by such predators by
continuing its policy of early detection and removal.

                  Catfish Parasite. Increasing numbers of catfish farmers have
experienced increased mortalitity in small fish and reduced feeding and growth
levels in bigger fish caused by a trematode, Bolbophlorus confusus. There are no
treatments for fish infected with the trematode. The Company must successfully
eradicate the ram's horn snail the only unprotected carrier of this parasite by
treating pond levies with lime powder. If the infection can not be controlled,
in the Company's future sales, revenue, and cash flow could be materially
reduced.

                  Water Availability. Catfish production requires large,
reliable sources of water. In general, the Mississippi Delta is supplied by a
large and readily accessible ground water source. The Partnerships' farms are
served by wells, capable of producing sufficient water to meet the anticipated
needs of the Company's catfish farming operations. Nevertheless, the water
available to the Company may be limited by natural courses or by chemical or
fertilizer contamination as described above. Further, there is no assurance that
the State of Mississippi, the U.S. Army Corps of Engineers or other governmental
authority will not in the future place limitations on the amount of water which
may be withdrawn by well. Nonavailability of sufficient water would
substantially and negatively impact the Company's profitability and ability to
remain in business.

                  Quality of Catfish. Management intends to follow farming
procedures which have been shown to result in the palatable, clean tasting,
"non-fishy" catfish demanded by the consumer market. Nevertheless, for reasons
which usually cannot be controlled before they are discovered, catfish in any
particular pond may acquire an "off-flavor" taste. A number of factors, many of
which often work together, may cause this result. A common cause is certain
types of algae which are difficult to control in catfish ponds, particularly in
late summer and early fall. Fortunately, a catfish pond will become "off-flavor"
only for a limited period of time, even if no affirmative corrective action is
taken. However, there may be several months during which one or more of the
Company's ponds may be "off-flavor," thereby preventing the Company from selling
catfish from that pond but requiring the Company to continue to incur expenses
in feeding and maintaining the catfish population. Catfish industry groups are
currently conducting studies to determine the cause and treatment of
"off-flavor" conditions. The state of Mississippi has received permission for a
second calendar year to use the algecide diuron to control blue-green algae.

                  Uninsured Losses. Management maintains liability and casualty
coverage for its farms and its major equipment in amounts it deems appropriate.
However, certain losses from significant risks, such as disease, chemical
contamination, climatic conditions or natural disasters, such as ice storms,
floods, droughts or hurricanes, are either uninsurable or are not economically
feasible to insure. Should the Company incur a loss from such an uninsured
event, the Company could sustain a loss of its catfish farming business. In such
event, the shareholders would lose all or substantially all of their investment
in the Company.

                  Ability to Sell its Fish Production. The Company does not have
the capability to process its own fish. The Company sells its catfish to one
cooperative processor of which it is a member. The Company has processing rights
with a second processor that entitles it to sell fish to that processor. The
Company also has an agreement with a third processor (the Company is not a
member of this processor) to sell 3.5 million pounds of fish annually.
Additionally, the Company continues to sell fish to Delta Pride under an
unwritten agreement. The Company is currently scheduled to sell 40,000 pounds of
fish per week to Delta Pride through the first of 2001, when the amount is
scheduled to increase to 77,000 pounds per week. Until the first of 2001, Delta
will charge a one and one half cent ($.015) per pound processing fee, after then
charge a variable rate between zero and three cents ($.000-$.03). Since the
Company is no longer a shareholder of Delta Pride, it can not be charged a loss
allocation. Members of cooperative processors are allocated fish delivery rights
or sale allocations requiring the cooperative to purchase an amount of fish in
proportion to the number of shares owned. The price received depends on the
price paid by the processor at the time of delivery. Cooperatives are managed by
boards of directors elected by their members. To the extent the cooperative
processors operate profitably, the members are benefitted through price
concessions, rebates and/or distributions. To the extent cooperatives operate
unprofitably, members are subject to assessments to fund such losses. The
failure to pay assessments generally results in a loss of delivery rights and
sometimes in the loss of membership interests. Accordingly, the Company's
ability to market its catfish in volumes and at prices necessary for profitable
operations substantially depends on the ability of management of the cooperative
processors of which the Company is a member to operate their processors in an
efficient manner. Moreover, fish the Company cannot sell to its cooperative
processors must be sold to other processors on a negotiated basis in competition
with other catfish producers. While there are a number of processors located in
the Mississippi Delta, management


                                      -12-

<PAGE>   15

does not believe there is sufficient competition among processors to provide any
substantial leverage to the catfish producers in negotiating prices. These
circumstances do not allow the Company to depend on stable catfish prices for
its future production. Thus, there is no assurance that the Company will be able
to sell its catfish production at a price which will allow it to realize a
profit.

                  Availability and Price of Stock Fish and Supplies. The price
of stock fish, supplies such as feed, and labor is subject to fluctuations due
to availability and varying demands. Increased competition for supplies and
services within the catfish farming industry in general, and the Mississippi
Delta in particular, could cause temporary or prolonged price increases for
feed, labor or other items necessary to the Company's farming operations. While
management will attempt to obtain lower supply and labor costs through
cooperative purchasing, there is no assurance that it will be able to do so or
that future price increases will not occur. Prolonged increases in one or more
of these categories would negatively affect the Company's profitability and
ability to remain in business.

                  Effect of Competition. The catfish farming industry is
intensely competitive, particularly in terms of costs of production and price,
and to a lesser extent in terms of quality and marketing. Many of the Company's
competitors are better established, have substantially greater financial,
marketing and other resources than the Company, and some may have more
efficiencies in cost of production. The existence of any of these facts could
give such competitors an advantage over the Company. Additionally, none of the
other farms incur the costs of being a publicly-held company. Moreover, one or
more competitors may develop and successfully commercialize catfish farming
techniques or procedures that provide them with an advantage over the Company in
terms of costs of production, price and quality of catfish production. As a
consequence, such



                                      -13-

<PAGE>   16

competition may result in the Company's inability to compete with such farming
operations on a continuing basis.

                  Increasing Foreign Competition. Imports of catfish from
Vietnam totaled a record 648,000 pounds in June 2000. Imports of Vietnamese
catfish have increased steadily from 1999. Imports have averaged 382,000 pounds
of processed product monthly for the past seven months. Imported under the names
Basa, Pacific Dory or White Roghy, the catfish has been marketed extensively to
foodservice companies and restaruant chains, with mixed success. According to
the Catfish Institute, some restaurants are selling Vietnamese catfish as
farm-raised catfish without informing customers of its orgin. Vietnamese catfish
are raised in floating cages on the Mekong River. The Catfish Farmers of America
has contacted regulatory agencies which have provided assurances that they will
work to see that Vietnamese catfish is labeled properly throughout the
importation, distribution and marketing chain. However, the Vietnamese catfish
is currently selling for approximately one dollar ($1.00) per pound less than
domestic catfish. Acceptance of the Vietnamese catfish as a replacement for
domestic catfish could put downward pressure on the price of the Company's
catfish product making it difficult or impossible to make a profit or stay in
business. The crawfish industry in the United States faced a similar problem
with crawfish imported from China. The U.S. crawfish industry was successful in
having a tariff placed on the China crawfish. However, the U.S. catfish industry
is only starting to review its options and strategy for competing with imported
catfish.

                  Impact of Environmental Laws and Regulations. As a food,
catfish is subject to federal and state laws and regulations regulating the
cultivating and growing of edible products and the content of regulated or
restricted substances therein. For example, various herbicides, algaecides,
fungicides and other mineral and chemical supplements and treatments which the
Company may otherwise use in controlling algae, fungi and other pests, are
restricted or prohibited under prevailing federal and state laws and
regulations. The chemical content of catfish is subject to federal standards and
the Company is susceptible to inclusions of restricted or prohibited substances
in its catfish through means beyond its control. For instance, such substances
may be included by feed or ground water utilized by the Company in cultivating
its catfish. In the event restricted or prohibited substances or chemicals are
discovered to be present in the Company's ponds or catfish in amounts exceeding
permissible levels, the Company could be prohibited from selling all or a
significant portion of its catfish for an extended period of time, and may be
required to destroy all or a substantial portion of its then-current catfish
production. Also, under certain circumstances, the Company could be required to
pay monetary damages and/or take remedial measures to remove or prevent
occurrence contamination by the restricted or prohibited substance or chemical.
In July 1997, the FDA advised the catfish industry that excessive levels of
dioxin had been detected. Dioxin is a toxic industrial byproduct thought to
affect the human immune system and to cause human reproductive disorders and
cancer in the catfish and poultry feed manufactured and distributed by one
producer. The FDA proposed to immediately ban all further shipments of catfish,
eggs and poultry on a nationwide basis that may have been contaminated by the
trace levels of dioxin. The catfish industry was able to delay FDA action until
catfish producers had an opportunity to test their catfish for dioxin levels.
The Company, among other catfish producers, had sufficient time to receive
negative test results for dioxin levels in their catfish production and avoid
delaying shipment and sales of their catfish after the ban implementation date.
However, had the FDA not delayed imposition of the ban, the Company and other
catfish producers would have experienced a delay in the sale and shipment of
their catfish production until such time as they could produce negative test
results.

         Also, under various federal, state and local laws, ordinances and
regulations, the owner of real estate generally is liable for the costs of
removal or amelioration of certain hazardous or toxic substances located on or
in, or emanating from, such property, as well as related costs of investigation
and property damage. Such laws often impose such liability without regard to
whether the owner knew of, or was responsible for, the presence of such
hazardous or toxic substances. Further, the presence of such substances, or the
failure to properly ameliorate such substances, may adversely affect the
Company's ability to operate or sell or rent a property or its catfish, or to
borrow funds using the property as collateral. Noncompliance with environmental,
health or safety requirements may result in the need to cease or alter the
Company's operations. Also, certain environmental laws impose liability on a
previous owner of property to the extent that hazardous or toxic substances were
present during the prior ownership period. Transfer of the property will not
relieve a prior owner of this liability. Thus, the Company could have liability
with respect to a property after it is sold.

         The Company will not obtain its own environmental inspection of the
Company's properties. Based on management's previous inspections, general
familiarity with the Company's properties and its knowledge of the area,
Management believes that the properties are in compliance in all material
respects with all applicable federal, state and local ordinances and regulations
regarding hazardous or toxic substances. Nevertheless, there is no assurance or
guarantee that hazardous or toxic substances will not later be found on a
property or that a property will not subsequently be found in violation of any
federal, state or local environmental law or regulation.


                                      -14-

<PAGE>   17

         The Company may find it difficult or impossible to sell a property
prior to or following any such cleanup. If such substances are discovered after
the Company sells a property, the Company could be liable to the purchaser
thereof if the Company knew or had reason to know that such substances or
sources existed. In such case, the Company could also be subject to the costs
described above. Environmental Protection Agency Involvement in Regulating
Aquaculture Effluents. In February 1999, the EPA Office of Water announced its
decision to conduct a preliminary study of the aquaculture industry to evaluate
the current state of wastewater controls and the opportunity for environmental
gain. At that time the intent was to make an in-depth study of aquaculture to
determine the need for federal rulemaking. Last summer and fall, considerable
effort went into developing a multi-disciplinary, multi-institutional process by
which science-based information could be provided to EPA to aid in decision
making. However, with no notice or explanation, EPA abandoned the preliminary
study on January 21, 2000, and announced that it would undertake formal
rulemaking for aquaculture. The announcement read: "EPA expands Focus on
Nutrient Pollution. EPA's Office of Water is focusing new efforts to help reduce
nutrient loadings from commercial agricultural and industrial operations
nationwide. Among those efforts is a new activity to develop pollutant controls
in the form of nationally applicable discharge standards (known as effluent
limitations guidelines and standards) for commercial and public aquaculture
operations." The draft guidelines will be published by June, 30, 2002 and final
rules will be published by June 30, 2004. It is the position of the United
States catfish industry officials that the industry is not a polluter. This
position is based on the fact that during the spring, summer and fall, water
does not flow out of producers' ponds. Rather, because of evaporation, water is
pumped into the ponds. Further, during the winter months fish are not fed, so as
water is released there is little to no environmental load to the discharged
water. However, actions by the EPA may require catfish farmers to develop and
install holding or treatment ponds for water runoff. Potentially, the costs of
newly mandated treatments could range from being allowed only a small amount of
runoff per day to being so cost prohibitive as to make obtaining a profit
impossible. The Company will continue to monitor the process and lend its voice
to support a reasonable compromise with the EPA.

         RISKS ASSOCIATED WITH THE COMPANY AND THE SECURITIES

                  Ability to Achieve Profitable Operations. The Company has not
been profitable since its inception, except for the first quarter of fiscal
2000. It reported a net loss for fiscal 2000 of $148,829. The Company had
retained earnings deficit of $9,045,900 at June 30,2000. Based on current and
historical industry data, management believes the Company's ability to achieve
profitable operations will require it to maximize production on its farms and to
achieve more efficient and cost-effective farming operations so that its costs
of production as a percentage of gross revenues are minimized. Management
believes this strategy is necessary to meet the demands of the farm grown
catfish industry where profit margins are expected to narrow because wholesale
fish prices are expected to remain flat and inventory costs, particularly feed
and fuel costs, are expected to continue to fluctuate and competition is
expected to intensify. However, there is no assurance that Management will be
able to implement this strategy, or if implemented that it will prove
successful; and there is no assurance that the Company will be able to operate
at a profit in the future.

                  No Assurance of Proposed or Future Acquisitions. Effective
April 25, 2000 the Company acquired the property and equipment of an existing
farm consisting of approximately 525 water acres. Also, effective June 30, 1999,
the Company acquired the property, inventory and equipment of an existing farm
consisting of approximately 320 water acres. The Company believed the
acquisitions of these additional properties was necessary for it to achieve
efficiencies of scale of operations and facilitate its ability to achieve
profitable operations. However, this has not yet occurred but, the Company has
reduced its loss from, fiscal 1999 of $1,543,185 to a loss of $148,829 for
fiscal 2000. The Company's inability to acquire additional properties and/or to
expand its operations could adversely affect the Company's ability to achieve
necessary economies of scale of operations.

                  Adequacy of Capital. There is no assurance that the Company
has capital resources sufficient to meet its operating expenses and general and
administrative expenses in the future if anticipated revenues from fish
inventory sales are not realized. During the next twelve months, the Company
anticipates that it will incur substantial costs in its restocking and
rehabilitation of certain farms as it endeavors to maximize production on those
farms. In the event anticipated operating revenues realized during this period,
when added to current cash reserves, are not sufficient to pay these costs, the
Company may need to defer some or all of these expenditures. In such event, it
is unlikely such additional farms can be operated profitably. Even if the
Company, in the future, realizes a positive cash flow from its operations, as to
which there can be no assurance, it may still require substantial capital to
acquire additional farming properties and further expand its farming operations.
Such additional capital may not be available when needed or on terms acceptable
to the Company. The Company anticipates seeking additional capital through
public or private sales of its securities, including equity securities. Future
financings may result in the issuance of equity securities and dilution to
current shareholders. There are no assurances that any additional debt or equity
capital will be available to the Company, or that, if such additional debt or
capital is available, that the terms would be favorable or acceptable to the
Company. Insufficient funds may require the Company to delay, reduce or
eliminate certain or all of its operations and development activities.



                                      -15-

<PAGE>   18

                  Dependence on Management. The feasibility and profitability of
the Company will depend significantly upon the continued participation of Mr.
Hastings. He is expected to continue in his position with the Company. However,
Mr. Hastings may in the future be unable or unwilling to continue with the
Company. The unavailability of Mr. Hastings would likely have significant
adverse effect on the Company and its business. The success of the Company's
future operations depends in large part on the Company's ability to recruit and
retain qualified personnel over time, and there can be no assurance that the
Company will be able to retain its existing personnel or attract additional
qualified employees in the future.

                  Effect of Anti-Takeover Measures. The Company's Restated
Certificate of Incorporation includes certain notice and meeting procedures and
super-majority voting rights of stockholders regarding approval of certain
merger, consolidation and other business combination transactions. These
provisions could have the effect of making it more difficult for a third party
to acquire, or of discouraging a third party from attempting to acquire, control
of the Company by deferring certain mergers, tender offers or future takeover
attempts. Also, such provisions could limit the price that certain investors
might be willing to pay in the future for the Company's securities. Certain of
such provisions allow the Board of Directors to impose various procedural and
other requirements that could make it more difficult for stockholders to effect
certain corporate actions.

                  No Dividends on Common Stock. The Company has adopted a policy
of reinvesting its cash flow, if any, to expand its catfish farming operations
and expects to follow this policy in the future. Accordingly, stockholders
should anticipate not receiving regular dividends or distributions with respect
to their shares.

                  Risks of Leverage. The use of leverage to purchase property
and/or operate a business involves substantial risks. While the effects of
leveraging are to increase the number of properties purchased or number or
amount of operations conducted by the Company, thereby increasing the potential
for gain to the Company's stockholders, the financial risk to the Company and
thus the Shareholder's investment is substantially increased. One reason for
this is because the Company will be required to pay fixed payments to retire the
debt, irrespective of the success of its operations. To the extent that the
Company does not have funds available to repay its debt, holders of the debt may
call a default and, if the debt is secured by the assets of the Company, such
debt holders may foreclose on such assets. Nonsecured debt holders may seek
repayment from the Company's assets through legal process. In any event, a
default on its debt could result in the Company's loss of all or a material
portion of its assets which could, in turn, result in the loss of all or a
substantial portion of the Shareholder's investment in the Company.

                  Inability to pay off or refinance loans. The Company's balloon
mortgage of approximately $950,000 on its Hidden Lakes farm matured in April of
2000. The mortgage holder as granted extensions to September 2000 to allow the
Company to find substitute financing, such as the USDA guaranteed loan discussed
above. If the UDSA guaranteed loan does not materialize, or if other substitute
financing can not be obtained, the lender could forclose on the property causing
the Company to sell this farm or even seek bankruptcy protection.

         The Company has used significant financing to acquire its farming
properties and assets and may incur additional financing to expand its
operations and/or to acquire additional farming properties. The use of such
financing ("leveraging") will allow the Company to expand its operations and
acquire additional property with a smaller cash investment by the stockholders,
and thereby provides the stockholders with the opportunity of participating in
correspondingly greater proceeds from the operations. However, leveraging will
also expose the Company (and thus the Shareholders) to correspondingly larger
potential losses. In the event a farm is operated at a loss or sold for an
amount less than the principal amount of such financing, plus accrued interest
payable thereon, a stockholder could lose all or part of his or her investment.



                                      -16-

<PAGE>   19

         The Company has substantial obligations with respect to its 10.35%
notes payable due in 2002 and its institutional credit agreements. Leverage has
significant consequences including the following: (i) dedication of a portion of
the Company's cash flow from operations to the payment of interest in respect of
its debt obligations, which reduces the funds available to the Company for its
operations and future business opportunities; (ii) potential impairment of the
Company's ability to obtain additional financing in the future; and (iii)
potential vulnerability of the Company to a downturn in its business or the
United States economy generally. A high degree of leverage would also make it
difficult for the Company to generate sufficient working capital which could
adversely affect the Company's ability to fund its continuing operations at
necessary levels.

                  Risks of Balloon Payments. Generally, the Company's debt
obligations require balloon payments at the end of their terms. The Company's
credit lines with Community Bank are due in March 2001, and another note used
to finance the purchase of the Company's Hidden Lakes location is due in
September 2000. Other significant debt is due through fiscal 2004. In the event
the Company is unable to refinance these obligations or is otherwise unable to
raise funds sufficient to repay these obligations as scheduled, the Company
would be in default of these obligations. The Company's ability to repay these
obligations when they mature will be dependent upon its ability to obtain
adequate refinancing or to negotiate an extension. The Company's ability to
obtain replacement financing for these obligations will be dependent on, among
other things, its financial condition at the time and the economic conditions in
general. Accordingly, there is no assurance that, if necessary, the Company will
be able to obtain replacement financing for any of these obligations upon their
maturity.



                                      -17-

<PAGE>   20

ITEM 2. DESCRIPTION OF PROPERTY

         REAL PROPERTY. The Company owns nine non-contiguous farms having a
total of 209 ponds comprising 2,651 water acres situated on a total of 3513 land
acres. The farms are located in the Mississippi Delta area of Mississippi. The
table below sets forth information regarding these properties.

                INFORMATION REGARDING THE COMPANY'S REAL PROPERTY

<TABLE>
<CAPTION>

      NAME                                                     UNPAID BALANCE OF
  (LOCATION OF               TOTAL ACRES        NUMBER          MORTGAGE LOAN AT
    PROPERTY)               (WATER ACRES)      OF PONDS          JUNE 30, 2000
    ---------               -------------      --------          -------------
<S>                         <C>                <C>             <C>
Circle Creek                  275 (210)           15           Pledged under two
(Sunflower County, MS)                                         lines of credit(1)

Panther Run                   278 (211)           15           Pledged under two
(LeFlore County, MS)                                           lines of credit(1)

Balmoral                      318 (234)           21           Pledged under the
(Sunflower County, MS)                                       Farm Bank of Texas(2)

Cypress Lake                  254 (191)           13           Pledged under the
(LeFlore County, MS)                                         Farm Bank of Texas(2)

Hidden Lakes                  668 (443)           46              $925,875(3)
(Bolivar County, MS)

Stillwater                    170 (140)            8           Pledged under the
(Sunflower County, MS)                                       Farm Bank of Texas(2)

Crystal Waters                454 (377)           11           Pledged under the
(Bolivar County, MS)                                         Farm Bank of Texas(2)

Kroeker Farm                  424 (320)           28             $1,801,908(4)
(Sunflower & Leflore
County, MS)

Indian Lakes                  672 (525)           37           Pledged under Farm
(Bolivar County, MS)                                            Bank of Texas(5)

</TABLE>

--------------------
(1)   Two notes payable to a bank under $1,700,000 revolving lines of credit
      used to fund purchases of feed and production of fish; combined
      outstanding balance of $752,870 at June 30, 2000. Interest accrues at the
      prime rate plus 1.65% and the lines of credit expire March 15, 2001.
      Interest and principal are paid from collections of accounts Receivable
      and sales of inventory.

(2)   Note payable to Farm Credit Bank of Texas with annual principal and
      interest payments of approximately $142,000 due through 2018; interest
      accrues at a variable rate (9.45% at June 30, 2000).

(3)   Note payable to a bank, monthly principal and interest payments of $11,754
      and a final payment of approximately $915,000 due September 2000 with
      interest at prime plus 2 1/2% (12% at June 30, 2000).

(4)   Seller-financed note payable. Annual principal and interest payments of
      $200,000 due through April 2014. Interest accrues at prime less 1.75%.



                                      -18-

<PAGE>   21

         The Mississippi Delta is an approximately 10,000 square mile area lying
predominately on the east side of the Mississippi River, beginning in the
vicinity of Memphis, Tennessee and extending into Mississippi. The portion of
the Delta where the Company's farms are located is approximately 44 feet above
sea level and is located approximately 5-1/2 hours by car from the Gulf of
Mexico and 1-1/2 hours by car from the Mississippi River. Accordingly, the farms
are not likely to be susceptible to flooding. The farms are located within
approximately 45 minutes of each other.

         EQUIPMENT. The Company owns certain equipment; including tractors,
implements (including portable aerator attachments), utility trucks and electric
aerators. It also owns various lesser pieces of equipment, including electric
pumps and power units, and miscellaneous equipment.

         COOPERATIVE MEMBERSHIPS. The Company belongs to the following
cooperatives:

                  Processing Cooperatives. AquaPro is a member of and owns stock
in the catfish cooperative Fishco, Inc. ("Fishco"). Membership in this
cooperative provides the Company with delivery rights for its catfish in amounts
proportionate to its share ownership. Prices paid by the cooperatives are not
fixed in advance and are determined at the time of delivery.

                  Feed Mill Cooperative. The Company is a member of and owns
stock in Indi-Bell (Delta Western) Feed Mill Cooperative. The Delta Western
Cooperative is one of the oldest and largest feed mill cooperatives with over
250 members. As a member of this cooperative, the Company is able to buy feed at
prices lower than are generally available from feed retailers. Also, for a
nominal charge, the Company is able to reserve or "lock-in" specified amounts at
set prices. This cooperative hedges against price fluctuations for its members
through the purchase of futures option contracts on the Chicago Board of Trade
Futures Exchange. As a member of this cooperative, the Company can purchase feed
on an "as needed" basis with two days' prior notice. Thus it is not necessary
for the Company to purchase and store large amounts of catfish feed.

ITEM 3. LEGAL PROCEEDINGS

         The Company is not currently a party to any legal proceeding, the
adverse outcome of which, individually or in the aggregate, Management believes
would have a material adverse effect on the consolidated financial position or
results of operations of the Company. Additionally, the Company was not a party
to any material legal proceeding during the period covered by this report.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         No matters were submitted to a vote of security holders during the
fourth quarter of the fiscal year ended June 30, 2000.



                                      -19-

<PAGE>   22

                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         MARKET FOR THE COMPANY'S COMMON EQUITY: The Company's common stock
began trading on the Nasdaq Over the Counter Bulletin Board on February 24,
1998. The high and low sales prices for the Company's common stock, as reported
on the Bulletin Board were $5.13 and $1.88 during the period from February 24,
1998 through March 31, 1998, $3.25 and $2.00 for the period from April 1, 1998
through June 30, 1998 and $2.00 and $0.38 for the period from July 1, 1998
through June 1, 1999. From July 1, 1999 to June 30, 2000 the high price was
$1.50 and the low price $.18.

         STOCKHOLDERS: As of September 18, 2000, there were approximately 1,700
stockholders of record of the 4,905,273 outstanding shares of Common Stock. The
Company believes there are approximately 1,500 beneficial owners of the
Company's common stock.

         DIVIDENDS: The Company has not paid any cash dividends to holders of
its common stock since its inception and does not plan to pay cash dividends in
the foreseeable future. The Company currently intends to retain earnings, if
any, to finance the growth of the Company. In addition, the Company's bank
agreements prohibit the payment of dividends without prior bank approval.

         RECENT SALES OF UNREGISTERED SECURITIES: Set forth below is information
for all securities that the Company has sold in the past three (3) years without
registering said securities under the Securities Act of 1933 (the "1933 Act").
Share numbers and prices have not been adjusted to reflect the September 18
dividend.

         During the fiscal year ended June 30, 2000 the Company issued to
numbers of its Board of Directors as compensation, options to purchase a total
of 72,000 shares of common stock. These options had exercise prices ranging from
$.5625 to $1.25 per share, the bid price of the stock on the date of grant.
These options have a term of seven years from the date of grant.

         During the fiscal year ended June 30, 1999, the Company issued to
numbers of its Board of Directors as compensation, options to purchase a total
of 36,000 shares of common stock. These options had exercise prices ranging from
$0.6875 to $1.00 per share, the bid price of the stock on the date of grant.
These options have a term of seven years from the date of grant. During the
fiscal year ended June 30, 2000 the Company issued a total of 360,000 seven-year
stock options to its officers to purchase stock at prices from $.5625 to $1.25,
the market price at the date of the grant of the options. Also during this
period, the Company granted its executive officers 12,000 shares of common
stock. On the dates of issuance these shares had market values ranging from
$.5625 to $1.25. During the Company's fiscal year ended June 30, 1999, the
Company issued to its executive officers options to purchase a total of 305,000
shares of the Company's common stock at prices ranging from $0.6875 to $1.875
per share, the bid price of the stock on the date of grant. These options have a
term of seven years from the date of grant. Also during the period, the Company
granted its executive officers a total of 13,000 shares of common stock. On the
dates of issuance, these shares had market values ranging from $0.6875 to $1.875
per share. In issuing the foregoing shares and options, the Company relied on
the exemptions under Section 4(2) of the 1933 Act and Rule 701, promulgated
thereunder. Each transaction affected in reliance upon the exemption under
Section 4(2) shares or options were issued either to an officer or director of
the Company.

         On May 10, 1999, the Company issued to an unrelated party in
consideration for consulting services, warrants for the purchase of 22,200
shares at a price of $0.625. These warrants have a term of six years from the
date of grant. These securities were issued upon reliance on the exemption under
Section 4(2) of the 1933 Act.


                                      -20-

<PAGE>   23

         During the fiscal year ended June 30, 1998, the Company realized net
proceeds of $1,763,286 from the sale of 227,194 shares of Series A Preferred
Stock through its Preferred Stock Rights Offering.

         During the quarter ended September 30, 1998, the holders of the 10.35%
convertible notes payable due in 1999 and 2000 were offered 1.3 shares of the
Company's Series A Preferred Stock for each $10 of principal in an exchange
offer (see notes 4 and 7 to the financial statements below). In the aggregate,
approximately $984,014 of these notes were exchanged for 127,922 shares of
preferred stock.

         On May 29, 1998, all of the Company's preferred stock was, under its
terms, converted to common stock under a mandatory exchange provision at a value
equal to its liquidation preference plus declared and udpaid dividends (see
notes 5 and 7 to the financial statements below). The conversion ratio was the
average closing price of the Company's common stock during its first 65 days of
trading (which commenced February 24, 1998). The average closing price of the
Company's stock during this period was $2.837. Accordingly, 3.52485 shares of
common stock were issued for each share of $10 Series A Preferred Stock
outstanding or a total of 2,065,438 common shares in exchange for 590,623
preferred shares. Additionally, the Company paid the Series A Preferred Stock
dividends for the period from January 1, 1998 through May 28, 1998 with shares
of common stock. The same exchange ratio used in the mandatory conversion
discussed above was used to determine the number of common shares issued as
payment of the dividend. Accordingly, a total of 58,886 shares was issued as
payment of $167,061 in Series A Preferred Stock dividends.

         During the fiscal year ended June 30, 1998, a holder of the Company's
7.15% convertible notes converted his note to 7,930 shares of the Company's
common stock.

         During August and September 1998, four individual investors loaned the
Company a total of $155,000 to purchase catfish feed. The Company issued
$155,000 in short-term notes to these investors. Interest accrues on these notes
at an annual rate of 12% and is payable monthly. Principal is payable in full on
April 1, 1999. At the noteholders' option, principal and/or interest may be paid
in Common Stock of the Company at a price of $2.00 per share.

         On December 31, 1998, holders of the Company's outstanding warrants for
the purchase of 235,296 shares exchanged their warrants in accordance with their
terms for a total of 70,589 shares of common stock.



                                      -21-

<PAGE>   24

         The Company relied on the exemption from registration under Section
4(2) of the 1933 Act in making these sales.

ITEM 6. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

         This report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. The actual performance of the Company could differ
materially from that indicated by the forward-looking statements because of
various risks and uncertainties including, without limitation, cost and
availability of feed, market price received for the Company's fish, mortality of
fish from disease or low oxygen levels, inability to acquire fry and fingerlings
at reasonable costs, changes in consumer demand for catfish, difficult climatic
conditions, the extent to which the number of "off flavor" fish occur and delay
fish sales to processors, the availability of adequate financing for AquaPro and
its terms as well as the impact that credit limitations would have on
competitors to force them to sell fish at or below market or cost, inability to
acquire more farms at competitive prices, the catfish industry's ability to gain
increased market acceptance for its existing product line, the ability for the
Company to scale up its production and reduce costs per pound, the potential of
quarterly variations in demand, production and sales, the impact of new and
changes in government regulations on food products and general economic
conditions. These risks and uncertainties cannot be controlled by the Company.
When used in this report, the words "believe", "estimate", "plans", "goals",
"expects", "should", "outlook", "anticipates", and similar expressions as they
relate to the Company or its management are intended to identify forward-looking
statements. The Registrant has attempted to identify forward-looking statements
in this report by placing an asterisk (*) following each sentence containing
such statements.

RESULTS OF OPERATIONS YEAR ENDED JUNE 30, 2000 COMPARED TO YEAR ENDED JUNE 30,
1999

         NET SALES. Net sales during the year ended June 30, 2000 totaled
$6,993,856 compared to $5,614,284 for the year ended June 30, 1999. Volume
increased 1,663,360 pounds to 9,332,125 pounds of fish sold during the year
ended June 30, 2000 compared to 7,668,765 pounds sold during the year ended June
30, 1999.


                                      -22-

<PAGE>   25

Accordingly, the increase in volume represented 21.7% of the 24.6% increase in
net sales. The remainder of the increase in sales was due a higher average
selling price received from the Company's major customers. The average price of
fish sold was 74.9 cents per pound during the year ended June 30, 2000 compared
to 73.2 cents per pound during the year ended June 30, 1999. A shortage in fish
supply during the spring of fiscal 2000 caused an increase in the average price.
Prices decreased from July 1999 through February 2000, at which time they began
to rise until reaching 80.0 cents per pound in June 2000. The Company cannot
predict the future trend of fish prices.*

         Management expects the assets of the additional farm location purchased
in April 2000 to increase the Company's volume of sales beginning in fiscal
2001.* Based on the Company's average stocking rates, management expects the
additional ponds to increase sales volume by approximately 10 to 15 percent
annually.* Due to the grow-out time required for product, the full potential for
increase in sales volume from the additional location will probably not be
realized until after the fiscal 2001.*

         Sales for the first fiscal quarter ending September 30, 2000 are
expected to total approximately 1,725,000 pounds which compares to 2,735,205
pounds sold during the quarter ended September 30, 1999.* Management expects to
sell approximately 11.2 million pounds of fish during the year ending June 30,
2001 which would exceed the 9.3 million pounds sold during the year ended June
30, 2000.*

         COST OF PRODUCTS SOLD AND GROSS PROFIT. Cost of products sold was
$5,033, 679, or 53.9 cents per pound sold, for the year ended June 30, 2000
compared to $4,422,616, or 57.7 cents per pound sold, for the year ended June
30, 1999. Gross profit from fish sales was 28.0% during the year ended June 30,
2000 compared to 21.2% for the year ended June 30, 1999. Cost of products sold
is largely dependent on the Company's cost structure in the previous year due to
the 12 to 18 month grow out period required for fish to mature. The largest
component of cost of products sold is feed, which decreased in price from fiscal
1999 to 2000. The Company's average cost of feed was $209 per ton in the fiscal
2000, compared to $220 in the fiscal 1999. Feed costs are largely dependent on
grain prices, which can vary greatly from year to year because of crop yields,
and cannot be predicted with certainty.* Management expects that margins will
improve and cost of products sold will decrease as a percentage of net sales
during the year ending June 30, 2001 due to stable feed costs and higher
inventory turnover.* However, there is no assurance that increases in other
charges, such as utilities, fuel and mortality, will not offset this lower
stable cost of feed.*

         SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and
administrative expenses during the year ended June 30, 2000 were $1,696,391
compared to $1,633,693 during the year ended June 30, 1999. Accordingly,
selling, general and administrative expenses were 18.2 cents per pound sold for
the year ended June 30, 2000 compared to 21.3 cents per pound sold for the year
ended June 30, 1999. While selling, general and administrative expenses
increased 3.8% on a per-pound basis there was a 3.1 cents decrease.


                                      -23-

<PAGE>   26

         INTEREST EXPENSE. Interest expense was $644,558 for the year ended June
30, 2000 compared to $493,172 for the year ended June 30, 1999. Both long-term
debt and average borrowings on the Company's lines of credit increased during
the year ended June 30, 2000 compared to the year ended June 30, 1999.
Management anticipates higher levels of debt and interest expense during the
year ending June 30, 2001 due in part to the April 2000 purchase of the
additional farm location (see Liquidity and Capital Resources discussion
below).*

         INCOME TAXES AS OF JUNE 30, 2000. The Company has net operating loss
carry-forwards of approximately $11,600,000, which expire at various dates
through 2020, available to reduce taxable income.

         SEASONALITY OF OPERATING RESULTS. In prior fiscal years, the revenues
of AquaPro have fluctuated from quarter to quarter depending on stocking levels
and results of feeding. Also, prices for live fish have tended to rise during
the first part of the year and drift downward during the summer, only to rise
again in September and October and fall in November and December before
beginning the annual price cycle again. Accordingly, quarterly operating results
of the Company may vary from quarter to quarter and year to year and cannot be
predicted with certainty.*

         LIQUIDITY AND CAPITAL RESOURCES

         As of June 30, 2000, the Company had a current ratio of 1.88 to 1.00
compared to 1.89 to 1.00 at June 30, 1999. Working capital at June 30, 2000
totaled $3,104,052 compared to $3,159,751 at June 30, 1999.

         The Company's net cash provided by (used in) operating activities was
$903,816 and $(117,348) for the years ended June 30, 2000 and June 30, 1999,
respectively. The Company funded the losses and uses of cash for operating
activities in fiscal 1999 through short-and long-term borrowings. Proceeds
received from long-term debt were $526,654 and $116,240 during the years ended
June 30, 2000 and June 30, 1999.

         During the years ended June 30, 2000 and June 30, 1999, the Company
purchased $793,048 and $466,078, respectively, in property and equipment. These
capital expenditures consisted primarily of trucks and other farm related
equipment and improvements and were primarily funded by the long-term debt
discussed above. During the year ended June 30, 2000, the Company purchased an
additional farm location and certain equipment for $876,250, which was financed
by a seller note payable.


                                      -24-

<PAGE>   27
         Effective April 20, 2000 the Company obtained two revolving lines of
credit totaling $1,700,000 from Community Bank in Indianola, Mississippi (the
"Bank"). The Company intends to fund its operations primarily through fish
sales, working capital, and the $1,700,000 lines of credit with the Bank. One
credit line of $900,000 is to provide financing for catfish feed purchases from
Delta Western and the other for $800,000 is to be used for catfish production.
Borrowings under both lines of credit bear interest at prime plus 165 basis
points (1.65%) and mature on March 15, 2001. The Company paid a commitment fee
of 1% ($17,000) to obtain these lines of credit. Under the lines of credit, the
Company has an account with the Bank into which the Company must deposit
proceeds from all inventory sales and accounts receivable. From these deposit
amounts, 50 percent is applied to the feed line of credit, and the remaining 50
percent is applied to the production line. Borrowing under the lines of credit
are represented by the Company's promissory notes, which are secured by a first
lien on all inventory, accounts receivable, and certain stock in cooperatives
owned by the Company, a first lien on 553 acres of land, a second lien on 647
acres of land, a blanket lien on all equipment, and an assignment of $1,000,000
of cash value life of insurance policies on two of the Company's officers. Mr.
George S. Hastings, President, has also personally guaranteed repayment of the
lines of credit.

         The Company has a balloon note payable with a bank that matures in
September 2000, at which time the principal balance will be approximately
$948,000. Management has begun negotiations to refinance this note, which was
obtained to finance the purchase of the Company's Hidden Lakes farm.

         Through the middle of September 2000, the Company continued to feed the
fish at normal levels through its peak feeding season and as a result has
experienced a cash flow shortage. The Company is current on all of its notes
payable and long-term debt, payroll, and payroll tax obligations. However,
unsecured vendor accounts payable of approximately $255,000 relating to
purchases in July and August 2000 are past due. As discussed above, the
Company's feed and production lines of credit require that 50 percent of all
collections of accounts receivable be applied to the outstanding balance of each
until paid. The Company has almost reached the credit limit on its $800,000
production line of credit and has available borrowings under its feed line of
credit of less than $100,000. The Company anticipates



                                      -25-

<PAGE>   28


it will take approximately two to three months to become current with its
unsecured vendor accounts payable. *

         The Company has obtained a $230,000 unsecured credit facility from a
creditor that manages short-term loans to businesses. Loan proceeds are paid
directly to the Company's vendors, and the Company repays proceeds and loan fees
of 2 1/2% to the creditor over a period of six months. Borrowings bear interest
at 12% per annum. During May through August 1999, the Company utilized the
credit facility from this creditor for purposes of land improvements, stocking
of ponds, and purchases of feed in addition to those funded by the Company's
bank line of credit. As of June 30, 2000, the Company had no borrowings
outstanding with the short-term creditor.

         Notwithstanding the above, management believes that additional capital
will be necessary to support the Company's growth. Management believes that
current cash on hand combined with cash proceeds from sales of fish will be
adequate to fund its planned existing operations through June 30, 2001. *
However, additional capital will be needed to finance any future acquisitions.
Moreover, the Company may require additional capital for operations and capital
expenditures, which it may seek through equity or debt financing, collaborative
arrangements with corporate partners, equipment lease financing or funds from
other sources. No assurance can be given that these funds will be available to
the Company on acceptable terms, if at all. In addition, because of the
Company's possible need for funds to support future operations, it may seek to
obtain funds when conditions are favorable, even if it does not have an
immediate need for additional capital at such time.

         OFFAL RECOVERY ALLIANCE. On June 24, 1998, AquaPro announced the
formation of a strategic alliance to scientifically engineer and reclaim high
quality minced fish protein, for the global market, by employing advanced
techniques recently developed by the Alaskan fishing industry. Redbow Industries
(formerly Flohr



                                      -27-

<PAGE>   29

Metal Fabricators Inc.), Teknotherm Inc., Ocean's Edge Inc., and AquaPro have
combined their respective talents to form the Strategic Alliance (the
"Alliance").

         The Alliance offers catfish processors the ability to reclaim a
significant portion of the catfish offal currently being sold to rendering
plants at one-half cent per pound ($.005/lb.) into high quality blocked minced
fish protein with a global market supporting forty to seventy cents per pound
($.40-.70/lb.) The Alliance offers to processors a turnkey system to design,
install, coordinate operations, and market offal recovery products within 90 to
120 days of the agreement with the catfish processor.

         The Alliance intends to offer its services first to the catfish
industry which produces approximately 265 million pounds of offal per year. The
process has the ability to recover premium meat from what machines now leave on
the fish's frame and other trimmings. Potentially 60 million pounds of high
quality minced product can be recovered for the catfish industry. Processors
will be invited to enter into a profit sharing agreement with AquaPro in which
the processor provides the offal and AquaPro's alliance provides the expertise
to capture the minced product for sale.

         Redbow Industries (formerly Flohr Metal Fabricators Inc.), is a
57-year-old company in Seattle, Washington. Its key employees pioneered the
involvement of U.S. design and building of Surimi processing in the mid 1980's.
Highly experienced in fish processing, it has completed more than 25 shore bases
and on vessel Surimi processing lines, some with finished product capacity of
over 440,000 pounds per day. Flohr's experience with minced product includes the
largest pollock plants in Alaska, factory trawlers for pollock and cod, shore
salmon plants in Alaska and Russia as well as Russian factory trawlers. It
prides itself on its ability to customize technology to the processing
facilities and other applications.

         Teknotherm Inc., located in Seattle, is a subsidiary of Teknotherm A/S,
a Norwegian company founded in 1926. Today the company designs and manufactures
refrigeration systems for the fishing, marine, and industrial refrigeration
market. Since early 1980, Teknotherm has been one of the major suppliers of
plate freezer systems for the fishing industry in Alaska, Norway, Ireland, and
Scotland.

         Ocean's Edge, Inc., formed in 1993, is headquartered in South
Dartmouth, Massachusetts. In the mid 1980's its principals were among the first
to use American technology to produce imitation crab, using a pollock surimi as
the base. They have conducted extensive research into the application of fish
protein into other types of food applications. On the marketing side, they were
instrumental in reintroducing Korean hair crab back into the Japanese market.
Ocean's Edge is in the process of developing a marketing agreement between
AquaPro and the end users of the minced product, including the leader in private
label seafood sales with more than 65% of the U.S. market.


                                      -28-

<PAGE>   30


ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

          The financial statements are attached hereto.

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

          None.


                                      -29-

<PAGE>   31

                                    PART III

ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS,
        COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.

        Set forth below are the Directors and Executive Officers of AquaPro and
their ages, positions held and length of service.


<TABLE>
<CAPTION>

                                                           An Officer of the
                                                             Company (or a            Director of the
                                                          Predecessor of the            Company (or
      NAME AND AGE                 Position                 Company) Since           Predecessor) Since
      ------------                 --------                 --------------           ------------------

<S>                       <C>                             <C>                        <C>
George S. Hastings, Jr.   Chairman of the Board                  1983                      1983
Age 53                    Chief Executive Officer
                          President

Randle Willoughby         Vice-President of                      1997                        --
Age 36                    Production

W. Mike Horton            Chief Financial Officer                1999                        --
Age 58                    Secretary


Kenneth Ostebo*           Director                               1998                      1998
Age 43


Joseph Duncan, Sr.*       Director                               1995                      1995
Age 73

Donald Moore*             Director                               1999                        --
Age 50

Charles Porter*           Director                               1999                        --
Age 58

James Grice*              Director                               1999                        --

</TABLE>

-------------------
* Independent director, i.e. director who is not an officer or employee of
  the Company.

         None of the persons named are directors of any Reporting Companies.
"Reporting Companies" include companies with a class of securities registered
pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the
"1934 Act"), or subject to the requirements of Section 15(d) of the 1934 Act, or
any company registered as an investment company under the Investment Company Act
of 1940, as amended (the "1940 Act").

         Set forth below is a description of the business and employment
background of the Company's Directors and Executive Officers.

         George S. Hastings, Jr. received his Bachelor of Science Degree in
Finance with a minor in Accounting from the University of Tennessee in 1973 and
a Doctor of Jurisprudence Degree from the University of Tennessee College of Law
in 1975. He has been a member of the State Bar of Tennessee and the United
States Tax Court since 1976. Mr. Hastings has been involved in the catfish
aquacultural industry since 1986 and has substantial experience in all levels of
catfish farm management. Prior to his acquisition of AquaPro, Mr. Hastings owned
and managed his own financial planning consulting firm, providing financial
advice to the owners of closely held business in the Southeast. Prior to turning
his attention to the catfish industry, he owned and operate his own NASD
securities broker/dealer firm and his own insurance brokerage company. Mr.
Hastings served two years on the board of directors and audit committee at Delta
Pride, and is actively involved with an alliance of companies seeking to bring
the process of recovering high quality minced catfish protein to the industry.



                                      -30-

<PAGE>   32

         Randle Willoughby, Vice-President of Production has been involved in
the management of catfish farming since 1983. Until 1992, Mr. Willoughby was
with a 4,000 acre operation where he began as an oxygen checker and was
eventually promoted to overall general manager. In this position, Mr. Willoughby
worked directly with the Production Credit Association in obtaining a
satisfiable inventory analysis. From 1992 until 1996, he was general manager a
500 acre farm where he raised the farm's average sales from 3,500 to 6,200
pounds of product per acre. This represented a 75% increase in sales while costs
increased only 50%. Mr. Willoughby joined the Company in 1997, and has assembled
management team with over 68 years of combined experience in aquacultural
management. He recently initiated a performance bonus program giving the farm
management team the incentive to strive towards improved production. Jimmy
Grice, age 62, currently serves as Chairman of the Board and Chief Executive
Officer of Grice Seining, Inc., a position he has held for more than 10 years.
Grice Seining is one of the United State's largest custom Seining companies
handling between 20 and 30 million pounds per year, which is approximately one
out every twenty catfish seined in the United States. He has served on the
Boards of The Catfish Farmers of Mississippi and Arkansas, as well as the
Catfish Farmers of America. Mr. Grice's experience in the catfish farming
industry spans its birth to the present. In 1968, he constructed one of the
industry's first commercial farms of over 100 acres selling 150,000 pounds of
fish per year.

         W. Mike Horton, Chief Financial Officer, joined the Company in October
of 1999. Before then he was Division CFO/Controller of the Lewis Grocer Division
of Supervalue, Inc. since 1987. Lewis Grocer served over 400 retail grocery
customers, governmental agencies and military installations in a four-state area
in the southern U.S. He was responsible for all aspects of finance and
accounting.

         Kenneth Ostebo was appointed a Director of the Company effective May 4,
1998. From 1994 to the present, Mr. Ostebo has been Chief Executive Officer for
Ocean's Edge, Inc. a commercial fishing and marketing company. Mr. Ostebo has 21
years experience in the seafood industry and has developed expertise in
introducing lesser known products into the marketplace. In 1982, he established
new markets for secondary seafood items and brought them to a national level.
Mr. Ostebo then started a company using the same processing principles and
product development and spent two years on research and development of a new
seafood product which ultimately gained national acceptance. Mr. Ostebo has
expertise in taking a new product from its inception to target markets to
consumer awareness and selling these products on both domestic and international
levels.

         Joseph Duncan, Sr. has been elected and has served as a Director since
December 30, 1995. Mr. Duncan previously served as Chairman of the Board of
Security Alarms & Services Inc. ("SAS") until it was acquired by National
Guardian Services Corporation. Prior to that time, SAS was the largest
independently-owned, full-line security company in the Central South United
States, specializing in burglar and fire alarm systems, access control and
security guard services. Mr. Duncan is past president of the National Burglar &
Fire Alarm Association, and served as a member of the board of directors of that
trade association for fourteen years. In addition, Mr. Duncan served as a board
member or advisor to a number of national and regional trade associations
including the National Council of Investigation & Security Services, the Central
Station Alarm Association, and the Tennessee Burglar & First Alarm Association.

         Charles Don Moore, Director, has been in the retail and wholesale
pharmacy industry to the present. From 1975 through 1985, Mr. Moore was
President and Chairman of the Board of four corporations operating drug stores
in the East Tennessee region. Mr. Moore also has experience in housing
construction, automobile retail and freight reclamation. Mr. Moore received a
Pharmacy BS Degree from Auburn University in 1965.

         Charles E. Porter, Director, served as president of Captain D's and
Shoney's, Inc., until his retirement in May 1996. Shoney's Inc. operates a chain
of family style restaurants based in the South Eastern region of the United
States with approximately 600 and 1,000 units, respectively, and approximate
sales volume of $450 million and $1.2 billion, respectively, peaking during his
tenure. Mr. Porter started his career in the restaurant industry in 1973 as a
Shoney's manager trainee while attending night classes at the University of
Tennessee at Nashville. After stints as unit manager of Shoney's and Captain
D's, Mr. Porter was promoted to the purchasing department where he became
Director and later Vice-President of purchasing, manufacturing and distribution.
He next became Chairman and President of manufacturing and distributions for
Mike Rose Foods, a subsidiary of Shoney's, Inc. Mr. Porter held this position
until his promotion to President of Captain D's and later Shoney's in 1994.


                                      -31-

<PAGE>   33

         Based upon a review on the Forms 4 and 5 furnished to the Company with
respect to its most recent fiscal year, each of the Company's Directors,
Executive Officers, Promoters and Control Persons failed to timely file his or
her initial Form 3 under Section 16(a) of the Securities and Exchange Act of
1934.

ITEM 10. EXECUTIVE COMPENSATION

         The following table sets forth remuneration to be paid by the Company
and/or its subsidiaries to its Chief Executive Officer and to its other highly
compensated executive officers of which there are none whose annual salary and
bonus exceeds $100,000.

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>

                                        ANNUAL COMPENSATION             LONG-TERM COMPENSATION
                                        -------------------             ----------------------
                                                                       VALUE OF      SECURITIES
    NAME AND                                                          RESTRICTED     UNDERLYING
PRINCIPAL POSITION                 YEAR      SALARY       BONUS        STOCK(1)      OPTIONS(2)
------------------                 ----      -------     -------      ----------     ----------
<S>                                <C>       <C>         <C>           <C>            <C>
George S. Hastings, Jr.            2000     $ 87,000     $     0       $ 9,939        348,000
                                   1999     $ 87,000     $     0       $ 8,391        303,000
Chief Executive Officer            1998       70,558      15,616       $19,500        223,000
</TABLE>

-------------------


(1)   Shares issuable on April 1 through 1998, quarterly beginning July 1, 1998.
      Stock is subject to 2-year vesting whereby shares will be lost if employee
      voluntarily terminates employment or is terminated for cause before the
      vesting period ends. Shares were valued at $3.13 per Share, which is 50%
      of the value of $6.25 for 1997 and 1996; shares valued at $1.63 which is
      50% of the April 1, 1998 value of $3.25. Shares valued at a weighted
      average of $1.08 for 1999.

(2)   The options issued in 1998 are exercisable for 7-year periods commencing
      on April 1, 1998 at $3.25 per common share (39,000 shares), May 15, 1998
      at $3.13 per common share (84,000 shares), and May 27, 1998 at $2.84 per
      common share (100,000 shares). The options issued in the fiscal year ended
      June 30, 1999 are also exercisable for 7-year periods commencing on July
      1, 1998 at $1.875 per common share (42,000 shares), October 1, 1998 at
      $0.75 per common share (87,000 shares), January 1, 1999 at $0.6875 per
      common share (87,000 shares), and April 1, 1999 at $1.00 per common share
      (87,000 shares). See discussion below. The options issued in the fiscal
      year ended June 30, 2000 are also exercisable for 7-year periods
      commencing on July 1, 1999 at $1.25 per common share (87,000 shares),
      October 1, 1999 at $.875 per common share (87,000 shares), January 1, 2000
      at $.625 per common share (87,000 shares), and April 1, 2000 at $.563 per
      common share (87,000 shares).




                                      -32-

<PAGE>   34

         The following table sets forth certain information regarding stock
options and warrants granted to each named Executive Officer by reason of their
employment during the Company's 1999 fiscal year.

                        OPTION/WARRANT GRANTS IN 2000(A)

<TABLE>
<CAPTION>

                                                           INDIVIDUAL GRANTS
                         ------------------------------------------------------------------------------
                                                    % OF TOTAL             EXERCISE OR
                         NUMBER OF SECURITIES      OPTIONS/WARRANTS       BASE PRICE PER     EXPIRATION
 EMPLOYEES NAME            OPTIONS/WARRANTS            GRANTED                 SHARE            DATE
---------------            ----------------            -------                 -----            ----
<S>                         <C>                     <C>                   <C>                <C>
George S. Hastings, Jr.         348,000                  96%              $0.563 to $1.25     3/31/2007
</TABLE>

         The following table sets forth the value of all unexercised employee
stock options and Director Options held by the Named Executive Officers as of
June 30, 2000.

                    AGGREGATED OPTION AND WARRANT VALUE TABLE

<TABLE>
<CAPTION>

                                     NUMBER OF SECURITIES                  VALUE OF UNEXERCISED
                                UNDERLYING UNEXERCISED OPTIONS             IN-THE-MONEY OPTIONS
                                ------------------------------          -------------------------
NAME                             EXERCISABLE/UNEXERCISABLE(1)           EXERCISABLE/UNEXERCISABLE
----                             ----------------------------           -------------------------
<S>                             <C>                                     <C>
George S. Hastings, Jr.                  1,027,000/None                        $39,062 /None(1)
</TABLE>

---------
     (1) Options in-the-money are based on the value of the Company's Common
         Stock which, as of September 19, 2000, is $.75 per Common Share based
         on the closing price reported on the NASD Bulletin Board.

         EMPLOYMENT CONTRACTS. The Company has a written employment agreement
with Mr. George Hastings. Pursuant to this agreement, he receives a base salary
of $87,000 per annum. In addition, Mr. Hastings is entitled to awards of
restricted stock, stock options, medical insurance coverage and to such annual
bonus compensation as determined by the Board of Directors. The award of any
bonus compensation, however, is dependent on the achievement of certain
performance levels by the Company, including growth in funds from operations
and/or water acres under management. The stock options awarded pursuant to such
employment contract is exercisable for a term of seven years at an exercise
price equal to the fair market value on such date and are exercisable upon
issuance. The employment agreement has an initial three-year term and is
automatically extended for an additional year at the end of each year of the
agreement, subject to the right of the Company to terminate the contract for
cause upon notice or voluntarily by giving at least three months' prior written
notice and the payment of severance payment equal to three years of
compensation.

         EXECUTIVE COMPENSATION. On August 18, 1998, the compensation committee
recommended and the Board of Directors approved that all of the options
(171,000) previously issued at $6.25 per share be repriced at $2.00 per share.

         EXPLANATION OF LONG-TERM COMPENSATION. Under Mr. Hastings employment
contract, he is entitled to receive issuances of Restricted Stock in the amounts
stated. Total stock of up to approximately 3% of the


                                      -33-

<PAGE>   35

total outstanding may be issued each year. Also, under his employment contract,
Mr. Hastings is awarded stock options in the amount stated entitling the holder
to purchase shares at a price equal to the fair market value at the date which
the options are issued. These options are for a term of seven years.

         COMPENSATION OF DIRECTORS. The Company pays its outside Directors an
annual retainer of $1,000 each September; $500 for each meeting attended in
person and $250 for each telephonic meeting. The Company also reimburses each
outside Director for his or her out-of-pocket expenses incurred in connection
with attending meetings. Since June 30, 1998, the Company annually awarded each
Director (including Directors who are officers of the Company) options for the
purchase of 3,000 common shares (the "Director Options"). The Director Options
have a term of seven years and are exercisable at a price equal to the fair
market value of the Common Shares on the date of issuance. These options have a
term of seven years. In August 1998, the Board of Directors voted to award each
Director (including Directors who are officers of the Company) options for the
purchase of 3,000 common shares each quarter at an option price equal to the
closing stock price on the first day following each calendar quarter.

         STOCK OPTION PLAN. The stockholders have approved and authorized a
stock option plan for officers, directors, employees and consultants to the
Company. The Plan is designed to comply with Rule 16b-3 under the 1934 Act. The
purpose of the stock option plan is to encourage stock ownership by current and
future officers, directors, employees and consultants to the Company, and
certain other persons judged by the committee who would administer the plan to
be instrumental to the success of the Company, and to give such persons a
greater personal interest in the Company achieving continued growth and success.
The stock option plan would be administered by persons who are "disinterested
persons" within the meaning of paragraph (c)(2) of Rule 16b-3. The Plan has not
yet been approved by the Board and has not yet been implemented.

         DIRECTOR LIABILITY. The Tennessee Business Corporation Act permits a
Tennessee corporation to limit or eliminate a director's liability to the
corporation or its shareholders for monetary damages for certain breaches of
fiduciary duty. The statute provides, however, that a Tennessee corporation may
not eliminate or limit liability for breaches of the duty of loyalty, acts or
omissions not in good faith or involving intentional misconduct or knowing
violation of the law, the unlawful purchase or redemption of stock, or the
payment of unlawful dividends. Although the Tennessee courts have not tested the
validity and scope of that statutory provision, the provision clearly applies
only to breaches of duty by directors as directors and not in their capacity as
officers, employees or agents of the corporation.



                                      -34-

<PAGE>   36

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth certain information as of June 30, 2000,
by each person or entity who is known to the Company to be the beneficial owner
of more than 5% of the Company's common stock, the beneficial ownership by each
Officer, Director, and the beneficial ownership of all Directors and Officers as
a group:

<TABLE>
<CAPTION>

                                                       AMOUNT AND NATURE OF
NAME & POSITION                                        BENEFICIAL OWNERSHIP
OFFICERS AND DIRECTORS                             NUMBER OF COMMON SHARES(%)(1)
----------------------                             -----------------------------
<S>                                               <C>                  <C>
George S. Hastings, Jr.                           1,272,322(2)           (20.85%)
President, Chief Executive Officer and
Chairman of the Board

Randle Willoughby                                    31,000(6)            (0.51%)
Vice-President of Production

Mike Horton                                           2,000(5)            (0.01%)
Chief Financial Officer & Secretary

Donald Moore                                         89,710(3)            (1.47%)
Director

Kenneth Ostebo                                       21,000(7)            (0.34%)
Director

Joseph F. Duncan, Sr.                                56,933(4)            (0.94%)
Director

Charles Porter                                       12,000(8)            (0.20%)
Director

James Grice                                          12,000(9)            (0.20%)
Director

All officers and directors as a group
(seven persons)                                   1,496,965              (24.53%)
</TABLE>

------------------------

(1)   In accordance with Rule 13d-3 promulgated under the Securities Exchange
      Act of 1934 (the "Exchange Act"), Common Shares which are not outstanding
      but which are subject to vested options, warrants, rights or conversion
      privileges have been deemed to be outstanding for the purpose of computing
      the percentage of outstanding Common Shares owned by the individual having
      such right, but have not been deemed outstanding for the purpose of
      computing the percentage for any other person.

      The number of Common Shares owned by each person equals the Common Shares
      outstanding beneficially owned plus Common Shares issuable to the
      beneficial holder upon the exercise of the rights, warrants and/or options
      deemed to be outstanding.

      The total number of Common Shares outstanding is 4,905,273 as of June 30,
      2000. The total number of options outstanding is 1,197,000 as of such
      date. Accordingly, the total number of outstanding Common Shares
      considered outstanding for purposes of computing the above percentages is
      6,102,273.

(2)   Includes the following Common Shares, warrants and options held of record
      by Mr. Hastings: 245,322 Common Shares and 1,027,000 Common Shares
      issuable upon the exercise of 994,000 Compensatory Options and 33,000
      Director Options.

(3)   Includes 77,710 Common Shares held of record and 12,000 Common Shares
      issuable upon the exercise of Director Options.

(4)   Includes 23,933 Common Shares held of record and 33,000 Common Shares
      issuable upon the exercise of Director Options.



                                      -35-

<PAGE>   37

(5)   Includes 2,000 shares held of record.

(6)   Includes 4,088 Common Shares held of record and 27,000 Common Shares
      issuable upon the exercise of Compensatory Options.

(7)   21,000 Common Shares issuable upon the exercise of Director Options.

(8)   12,000 Common Shares issuable upon the exercise of Directors Options.

(9)   12,000 Common Shares issuable upon the exercise of Director Options.

---------------

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         None

                                     PART IV

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

         A List of Exhibits is included with this Report and is attached hereto.
One Report on Form 8-K was filed by the Company during the last quarter covered
by this Report. This report, dated June 30, 1999 addressed the acquisition by
the Company of certain real property, equipment and fish inventory.



                                      -36-

<PAGE>   38

                                LIST OF EXHIBITS
                               AQUAPRO CORPORATION

<TABLE>
<CAPTION>

                    ITEM                                               EXHIBIT NO.
<S>                                                                    <C>
AquaPro's Charter (1)                                                      3.1

AquaPro's Amended and Restated Charter (1)                                 3.2

AquaPro's Articles of Correction to Charter (1)                            3.3

AquaPro's Articles of Amendment to Charter (1)                             3.4

AquaPro's First Amended and Restated Bylaws (1)                            3.5

Plan and Agreement of Consolidation for CCA I - IV (1)                     3.6

Plan and Agreement of Consolidation for CCA V - VIII (1)                   3.7

Articles of Merger of CCA I - IV and AquaPro Corporation (1)               3.8

Amended Plan and Agreement of Merger of CCA V - VIII and
AquaPro Corporation (2)                                                    3.9

Articles of Merger of CCA V - VIII and AquaPro Corporation (2)             3.10

Form of Common Stock Certificate (1)                                       4.1

Form of $10.50 Common Stock Warrant (1)                                    4.2

Form of $10.50 Warrant Agreement (1)                                       4.3

Form of 10.35% Debenture (1)                                               4.4

Form of 10.35% Loan Note Agreement (1)                                     4.5

Form of Series A Preferred Stock Certificate (1)                           4.6

Form of $7.50 Common Stock Warrant (1)                                     4.7

Form of $9.50 Stock Right (2)                                              4.8

Form of $9.50 Stock Rights Agreement (2)                                   4.9

Exchange Form for Investor Notes (2)                                       4.10

Form of 10.35% Collateralized Convertible Note (2)                         4.11
</TABLE>

                                      -37-

<PAGE>   39

<TABLE>

<S>                                                                       <C>

Form of Agency Agreement 10.35% Collateralized
Convertible Notes (2)                                                      4.12

Form of Security Agreement 10.35% Collateralized
Convertible Notes (2)                                                      4.13

Marketing Agreement with Delta Pride (1)                                   10.1

Agreements with Delta Western ("Indi Bell") (1)                            10.2

Security Agreement, Guaranty, Note with Community Bank (1)                 10.3

Note, Deed of Trust, Security Agreement with Met Life
(Balmoral) (1)                                                             10.4

Note and Deed of Trust with Met Life (Cypress Lake) (1)                    10.5

Employment Agreement with George S. Hastings, Jr. (1)                      10.6

Employment Agreement with Patricia G. Hastings (1)                         10.7

Note and Deed of Trust with Sunburst Bank (CCA V) (2)                      10.8

Note, Deed of Trust, Loan Agreements, and Finance Charge
Agreement with Metropolitan Life (CCA VI) (2)                              10.9

Deed of Trust, Assumption Agreements, Modification and
Loan Agreements and other communications with Federal
Land Bank (CCA VII and VIII) (2)                                           10.10

Four Agreements with Delta Western ("Indi Bell") (3)                       10.11

Commitment Letter, Guaranty, Note Agreement, Security
Agreement with Community Bank dated May 14, 1998 (4)                       10.12

Promissory Note, Interest Rate Disclosure, Settlement Statements,
Deed of Trust and Security Agreement with Farm Credit Bank
of Texas dated June 9, 1998 (4)                                            10.13

Contract of Purchase and Sale (5)                                          10.1

Supplemental Agreement dated June 29, 1999 (5)                             10.2

Commitment Letter & Note Agreements with Community
Bank dated April 26, 1999 (6)                                              10.14

Commitment Letter & Note Agreements with Community
Bank dated April 20, 2000                                                  10.15

Financial Data Schedule                                                    27

</TABLE>

                                      -38-

<PAGE>   40

(1) Incorporated by reference to the corresponding Exhibit previously filed as
an Exhibit to Registrant's Form 10-SB (File # 000-29258).

(2) Incorporated by reference to the corresponding Exhibit previously filed as
an Exhibit to Registrant's Form 10-KSB filed September 29, 1997 (File #
000-29258).

(3) Incorporated by reference to the corresponding Exhibit previously filed as
an Exhibit to Registrant's Form 10-QSB filed May 15, 1998 (File # 000-29258).

(4) Incorporated by reference to the corresponding Exhibit previously filed as
an Exhibit to Registrant's Form 10-KSB filed September 25, 1998 (File #
000-29258).

(5) Incorporated by reference to the corresponding Exhibit previously filed as
an Exhibit to Registrant's Form 8-K filed June 29, 1999 (File # 000-29258).

(6) Incorporated by reference to the corresponding Exhibit previously filed as
an Exhibit to Registrant's Form 10-KSB filed September 28, 1999 (File #
000-29258).


                                      -39-

<PAGE>   41

                               AquaPro Corporation

                        Consolidated Financial Statements

                       Years ended June 30, 2000 and 1999

                                    CONTENTS

<TABLE>
<S>                                                                           <C>
Report of Independent Auditors.................................................1

Audited Consolidated Financial Statements

Consolidated Balance Sheets....................................................2
Consolidated Statements of Operations..........................................4
Consolidated Statements of Changes in Stockholders' Equity.....................5
Consolidated Statements of Cash Flows..........................................6
Notes to Consolidated Financial Statements.....................................7
</TABLE>


<PAGE>   42


                         Report of Independent Auditors

The Board of Directors and Stockholders
AquaPro Corporation

We have audited the accompanying consolidated balance sheets of AquaPro
Corporation and subsidiaries as of June 30, 2000 and 1999 and the related
consolidated statements of operations, changes in stockholders' equity, and cash
flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
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 AquaPro
Corporation and subsidiaries at June 30, 2000 and 1999, and the consolidated
results of their operations and their cash flows for the years then ended in
conformity with accounting principles generally accepted in the United States.

As discussed in Note 2 to the financial statements, the Company's recurring
losses from operations raise substantial doubt about its ability to continue as
a going concern. Management's plans as to these matters are also described in
Note 2. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.


                                                 /s/ Ernst & Young LLP


Jackson, Mississippi
August 11, 2000

<PAGE>   43


                               AquaPro Corporation

                           Consolidated Balance Sheets

<TABLE>
<CAPTION>

                                                                   JUNE 30
                                                            2000            1999
                                                       ----------------------------
<S>                                                    <C>              <C>
ASSETS
Current assets:
   Cash and cash equivalents                           $    46,604      $    86,264
   Trade accounts receivable                               487,987          243,136
   Other receivables                                        87,090          104,000
   Live fish inventories                                 5,939,966        6,264,923
   Prepaid expenses                                         52,443           21,038
                                                       ----------------------------
Total current assets                                     6,614,090        6,719,361

Property, buildings and equipment:
   Land                                                  2,550,314        2,005,829
   Ponds and improvements                                4,285,565        4,012,719
   Buildings                                               600,387          468,330
   Machinery and equipment                               4,246,534        3,580,312
                                                       ----------------------------
                                                        11,682,800       10,067,190
   Accumulated depreciation                              3,810,231        3,032,124
                                                       ----------------------------
                                                         7,872,569        7,035,066

Investments in cooperatives                                169,240          411,456
Other assets                                               160,961          170,205

                                                       ----------------------------
Total assets                                           $14,816,860      $14,336,088
                                                       ============================

</TABLE>

<PAGE>   44

<TABLE>
<CAPTION>
                                                                          JUNE 30
                                                                  2000               1999
                                                             ------------------------------
<S>                                                          <C>                <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Notes payable:
     Bank                                                    $    752,870       $    890,052
     Others                                                       595,808            498,441
   Accounts payable                                               398,063            548,768
   Accrued expenses                                               145,449             99,002
   Current maturities of long-term debt                         1,617,848          1,523,347
                                                             -------------------------------
Total current liabilities                                       3,510,038          3,559,610


Long-term debt, less current maturities                         4,977,708          4,334,081

Stockholders' equity:
   Series A Preferred Stock, no par value - authorized
       900,000 shares, cumulative, convertible, 590,623
       issued, none outstanding                                        --                 --
   Preferred stock, par value to be determined by the
       Board of Directors - authorized 100,000 shares,
       none Issued                                                     --                 --
   Common stock, no par value - authorized 100,000,000
     shares, issued and outstanding 4,905,273 and
     4,890,381 shares at June 30, 2000 and 1999                15,383,334         15,371,912
   Unearned compensation                                           (8,320)           (32,444)
   Retained earnings (deficit)                                 (9,045,900)        (8,897,071)
                                                             --------------------------------
Total stockholders' equity                                      6,329,114          6,442,397
                                                             -------------------------------
Total liabilities and stockholders' equity                   $ 14,816,860       $ 14,336,088
                                                             ================================
</TABLE>



See accompanying notes.

<PAGE>   45


                               AquaPro Corporation

                      Consolidated Statements of Operations

<TABLE>
<CAPTION>

                                                              YEAR ENDED JUNE 30
                                                           2000                1999
                                                       -------------------------------
<S>                                                    <C>               <C>
Net sales                                               $ 6,993,856       $ 5,614,284
Cost of products sold                                     5,033,679         4,422,616
                                                        ------------------------------
Gross profit                                              1,960,177         1,191,668
Selling, general and administrative                       1,696,391         1,633,693
                                                        ------------------------------
Operating income (loss)                                     263,786          (442,025)

Other income (expense):
   Equity in losses on investments in cooperatives               --          (339,838)
   Impairment loss on investment in cooperative                  --          (628,000)
   Interest expense                                        (644,558)         (493,172)
   Patronage dividends                                      209,780           305,701
   Other, net                                                22,163            54,149
                                                        ------------------------------
                                                           (412,615)       (1,101,160)
                                                        ------------------------------
Net loss                                                $  (148,829)      $(1,543,185)
                                                        ==============================
Basic and diluted net loss per common share             $      (.03)      $      (.32)
                                                        ==============================
Weighted average basic and diluted
   common shares outstanding                              4,875,812         4,821,232
                                                        ==============================
</TABLE>


See accompanying notes.
<PAGE>   46


                               AquaPro Corporation

           Consolidated Statements of Changes in Stockholders' Equity

<TABLE>
<CAPTION>

                                                                                          Retained         Total
                                                   Common Stock            Unearned       Earnings     Stockholders'
                                                Shares        Amount      Compensation    (Deficit)        Equity
                                            --------------------------------------------------------------------------
<S>                                          <C>           <C>            <C>           <C>            <C>
Balance at July 1, 1998                       4,818,354    $15,405,803    $(101,906)    $(7,353,886)     $ 7,950,011
Net loss for the year ended June 30, 1999                                                (1,543,185)      (1,543,185)
Common stock issued to employees
   for future services                           13,000         13,781      (13,781)                              --
Cancellation of common stock
   granted to former employees                  (12,000)       (48,000)      48,000                               --
Amortization of unearned compensation                                        35,243                           35,243
Conversion of preferred stock
   warrants to common stock                      70,589                                                           --
Issuance of common stock                            438            328                                           328
                                            --------------------------------------------------------------------------
Balance at June 30, 1999                      4,890,381     15,371,912      (32,444)     (8,897,071)       6,442,397
Net loss for the year ended June 30, 2000                                                  (148,829)        (148,829)
Common stock issued to employees
   for future services                           12,500         10,563      (10,563)                              --
Cancellation of common stock
   granted to former employees                   (1,500)        (1,198)       1,198                               --
Amortization of unearned compensation                                        33,489                           33,489
Issuance of common stock                          3,892          2,057                                         2,057
                                            --------------------------------------------------------------------------
Balance at June 30, 2000                      4,905,273    $15,383,334    $  (8,320)    $(9,045,900)     $ 6,329,114
                                            ==========================================================================
</TABLE>


See accompanying notes.
<PAGE>   47



                               AquaPro Corporation

                      Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>

                                                                                   YEAR ENDED JUNE 30
                                                                                 2000             1999
                                                                              ----------------------------
<S>                                                                           <C>             <C>
OPERATING ACTIVITIES
Net loss                                                                      $(148,829)      $(1,543,185)
Adjustments to reconcile net loss to net cash provided by (used in)
    operating activities:
     Depreciation and amortization                                              871,335           759,485
     Equity in losses on investments in cooperatives                                 --           339,838
     Impairment loss on investment in cooperative                                    --           628,000
     Gain on disposals of equipment                                             (10,082)          (32,598)
     Payments of loss allocations on investment in cooperative                       --          (205,558)
     Changes in operating assets and liabilities:
       (Increase) decrease in trade accounts receivable                        (244,851)          106,012
       (Increase) decrease in live fish inventories                             324,957          (103,036)
       Increase in prepaid expenses, other receivables, and other assets        (26,672)         (132,576)
       Increase in accounts payable and accrued expenses                        137,958            66,270
                                                                              ----------------------------
Net cash provided by (used in) operating activities                             903,816          (117,348)

INVESTING ACTIVITIES
Purchases of property and equipment                                            (793,048)         (466,078)
Proceeds from disposals of equipment                                             27,509            56,250
                                                                              ----------------------------
Net cash used in investing activities                                          (765,539)         (409,828)

FINANCING ACTIVITIES
Net increase (decrease) in notes payable                                        (39,815)          788,529
Principal payments on long-term borrowings                                     (664,776)         (403,960)
Proceeds from long-term borrowings                                              526,654           116,240
                                                                              ----------------------------
Net cash provided by (used in) financing activities                            (177,937)          500,809
                                                                              ----------------------------
Net decrease in cash and cash equivalents                                       (39,660)          (26,367)
Cash and cash equivalents at beginning of year                                   86,264           112,631
                                                                              ----------------------------
Cash and cash equivalents at end of year                                      $  46,604       $    86,264
                                                                              ============================

SUPPLEMENTAL CASH FLOW INFORMATION-

Interest paid                                                                 $ 621,000       $   454,000
                                                                              ============================

NON-CASH FINANCING ACTIVITIES

Common stock issued to employees for future services                          $  10,563       $    13,781
                                                                              ============================
Issuance or assumption of long-term debt:

   Live fish inventories                                                      $      --       $   628,611
                                                                              ============================
   Land and ponds and improvements                                            $ 836,250       $   714,032
                                                                              ============================
   Machinery and equipment                                                    $  40,000       $   545,950
                                                                              ============================
</TABLE>



See accompanying notes.
<PAGE>   48


                               AquaPro Corporation

                   Notes to Consolidated Financial Statements

                                  June 30, 2000

1.  SIGNIFICANT ACCOUNTING POLICIES

BUSINESS

AquaPro Corporation (the "Company") and its wholly owned subsidiaries American
Fisheries Corporation ("American") and Circle Creek Aquaculture, Inc. ("Circle
Creek") own and operate nine catfish farms located in the delta area of the
State of Mississippi. All material intercompany transactions and balances have
been eliminated in consolidation.

The Company conducts catfish farming activities on approximately 2,650 water
acres within the State of Mississippi. Catfish farming is concentrated in a few
southern states, principally Mississippi, Louisiana, Alabama and Arkansas.
Catfish are sold principally to retail grocery stores and restaurants by catfish
processors. The Company's sales are to a limited number of processors and
collateral is generally not required. Three processors represented 36%, 32% and
14% of the Company's net sales for the fiscal year ended June 30, 2000, and two
processors represented 51% and 34% of the Company's net sales for the fiscal
year ended June 30, 1999.

Fish prices are affected by changes in market demand and supply and may
fluctuate significantly from period to period.

USE OF ESTIMATES

Preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.

CASH EQUIVALENTS

The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.

1.  SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

LIVE FISH INVENTORIES

Live fish inventories are stated at the lower of average cost or market. Market
value is determined as estimated selling price less estimated costs to sell.
Revenue is recognized when catfish are delivered live to the processor.

Live fish inventories are purchased as "fingerlings" (generally, 5 to 6 inches
in length) and are grown to a marketable size over 9 to 18 months. Because the
production cycle generally exceeds one year, management anticipates certain live
fish inventories on hand at June 30, 2000 may not be sold during the year ending
June 30, 2001. Live fish inventories are classified as a current asset in the
accompanying balance sheets consistent with industry practice. The quantities of
live fish inventories are determined based upon estimated growth from feed fed
and are reduced for the actual quantities sold and observed mortality. The
Company estimates fish grow-out based upon 2.5 pounds of feed fed per one pound
of live fish growth. The estimated fish grow-out, which includes estimated
mortality based on the Company's experience, is based upon published industry
data and actual experience of the Company. In addition to the estimated
mortality, reductions in inventories for observed mortality are recorded as
observed. Management assesses the accuracy of the perpetual inventory records by
periodic comparisons with observations of the catfish feeding in each pond and
analysis of the trend of pounds of feed fed relative to the pounds of catfish
reflected in the perpetual inventory records by pond. Costs associated with live
fish production are accumulated during the growing period and consist
principally of feed, labor and overhead required to grow the live fish to a
marketable size. Each pond is closed approximately every 8 to 10 years and the
perpetual inventory records are adjusted to the actual harvest. Live catfish are
highly susceptible to disease, oxygen depletion and extreme temperatures which
could result in mortality higher than the Company's estimated mortality.

Management monitors each pond and takes appropriate actions to minimize the risk
of loss from mortality. Given the nature of the live fish inventories, it is
reasonably possible that the Company's actual mortality will vary significantly
from estimates. The cost of producing fish for harvest is subject to the cost of
grains which is susceptible to significant fluctuations in the commodity
markets. The Company establishes prices for a portion of its anticipated feed
purchases over specified periods of time through various feed purchase
agreements.

<PAGE>   49

1.  SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

PROPERTY, BUILDINGS AND EQUIPMENT

Property, buildings and equipment are stated at cost. Depreciation is provided
by the straight-line method over the assets' estimated useful lives (15 years
for ponds and improvements, 15 years for buildings, and 3 to 7 years for
machinery and equipment).

INVESTMENTS IN COOPERATIVES

Investments in cooperatives are stated at original cost adjusted for allocation
of earnings or losses, net of distributions.

INCOME TAXES

Income taxes are accounted for by the Company using the liability method in
accordance with FASB Statement No. 109, Accounting for Income Taxes. Deferred
income taxes relate to temporary differences between assets and liabilities
recognized differently for financial reporting and income tax purposes.

STOCK BASED COMPENSATION

The Company grants stock options for a fixed number of shares to employees with
an exercise price equal to estimated fair value of the shares at the date of
grant. The Company accounts for stock option grants in accordance with APB
Opinion No. 25, "Accounting for Stock Issued to Employees", and generally
recognizes no compensation expenses for the stock option grants.

BASIC AND DILUTED NET LOSS PER COMMON SHARE

Basic net loss per share is computed by dividing net loss by the weighted
average number of common shares outstanding. Common equivalent shares (stock
options and warrants) outstanding have not been included in the computation of
diluted net loss per common share due to their antidilutive effects for the
periods presented.

1.  SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

IMPAIRMENT OF LONG-LIVED ASSETS

In accordance with FASB statement No. 121, Accounting for The Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, the Company
continually reevaluates the carrying value of its long-lived assets for events
or changes in circumstances which indicate that the carrying value may not be
recoverable. As part of this reevaluation, the Company estimates the future cash
flows expected to result from the use of the asset and its eventual disposal. If
the sum of the expected future cash flows (undiscounted and without interest
charges) is less than the carrying amount of the asset, an impairment loss is
recognized through a charge to operations when the carrying value exceeds the
fair value of the asset.

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

In June 1998, the FASB issued Statement of Financial Accounting Standards No.
133, Accounting for Derivative Instruments and Hedging Activities. FASB
Statement No. 133 requires all derivatives to be recorded on the balance sheet
at fair value, and establishes "special accounting" for derivatives that are
hedges. Derivatives that are not hedges must be adjusted to fair value though
income. The effect of this statement is not expected to be material to the
earnings and financial position of the Company when it becomes effective for
fiscal 2001.

RECLASSIFICATIONS

Certain reclassifications have been made to the prior years' consolidated
financial statements to conform to fiscal 2000 presentation.

2.  GOING CONCERN

The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. During the years ended June 30,
2000 and 1999, the Company incurred net losses of $148,829 and $1,543,185,
respectively, and had aggregate accumulated deficits in operations at June 30,
2000 of $9,045,900. These factors create substantial doubt about the Company's
ability to continue as a going concern.

<PAGE>   50
2.  GOING CONCERN (CONTINUED)

The financial statements do not include any adjustments that might be necessary
should the Company be unable to continue as a going concern. The Company's
continuation as a going concern is dependent upon its ability to generate
sufficient cash flow to meet its obligations on a timely basis, to obtain
additional financing or refinancing as may be required, and ultimately attain
profitability.

Subsequent to June 30, 2000, the Company reached the limit on borrowings
available under the $800,000 revolving line of credit and had approximately
$200,000 remaining under the revolving line of credit used solely to fund
purchases of feed (see Note 4). Management attributed these additional
borrowings to increased catfish production, as compared to the prior fiscal
year, along with the end of the growing season approaching. Management also
borrowed approximately $230,000 under a $350,000 credit facility (see Note 4) to
fund other operating costs. The growing season, or months in which catfish are
fed, generally is from March through October. As described in Note 4, the
required principal and interest payments on borrowings under the revolving lines
of credit consist of collections on accounts receivable applied equally to each
line of credit.

Based upon management's projected sales volume at current sales prices for the
period July 1, 2000 through June 30, 2001, management anticipates the Company's
fish sales should be sufficient to repay borrowings under the revolving lines of
credit prior to the maturity dates of the lines of credit on March 15, 2001 and
to fund operating expenses through June 30, 2001. In addition management
anticipates there will be sufficient cash flows from operations to fund
principal and interest payments on other loans due through June 30, 2001 or that
the Company can obtain extensions or similar credit facilities from other
lenders. Based upon the anticipated repayment of the revolving lines of credit
and the collateral which would be available to secure additional borrowings,
management believes that the Company will be able to renew the present revolving
lines of credit for the same amounts or obtain credit agreements with similar
terms. The revolving lines of credit are collateralized by accounts receivable
(book value of $487,987 at June 30, 2000), live fish inventories (book value of
$5,939,966 at June 30, 2000), investment in certain cooperative stock (book
value of $112,000 at June 30, 2000), and certain property and buildings (book
value of $768,637 at June 30, 2000).

The Company has a note payable to a bank at prime plus 2 1/2% with a
balance of $925,875 at June 30, 2000 that matures in September 2000. The note is
collateralized by property, buildings and equipment with a book value of
$1,392,030 at June 30, 2000. Management believes that the Company will be able
to obtain borrowings collateralized by such property, buildings and equipment
from another lender. While management believes it can extend or refinance
current obligations as they become due, there are no assurances that such
extensions or refinancings will occur or at terms favorable to the Company.

3.  INVESTMENTS IN COOPERATIVES

Investments in cooperatives consist of the following:

<TABLE>
<CAPTION>
                                                    JUNE 30
                                              2000          1999
                                          ------------------------
<S>                                       <C>             <C>
Delta Pride Catfish, Inc.                 $      --       $242,216
Fishco, Inc.                                112,000        112,000
Indi-Bell, Inc.                              57,240         57,240
                                          ------------------------
                                          $ 169,240       $411,456
                                          ========================
</TABLE>

The ownership of Fishco, Inc. ("Fishco") stock provides the Company the right to
sell live catfish to Fishco. The previous ownership of Delta Pride Catfish, Inc.
("Delta Pride") had provided the Company the right to sell live catfish to Delta
Pride. Delta Pride was the Company's most significant customer in fiscal 2000
and fiscal 1999. Substantially all of the Company's catfish feed purchases are
from Indi-Bell, Inc.

Based upon Delta Pride's recurring operating losses, management determined that
there was an other-than-temporary impairment of the Company's investment in
Delta Pride at June 30, 1999. Accordingly, the carrying amount of the Company's
investment in Delta Pride was adjusted to an estimated fair value obtained by
management resulting in an impairment charge of $628,000 in fiscal 1999.

During the second quarter of fiscal 2000, the Company surrendered its shares of
stock in Delta Pride as payment in kind for Delta Pride's losses allocated to
the Company for the fiscal year ended June 30, 1999. The carrying amount of the
Company's investment in Delta Pride was $242,216 which approximated the
liability to Delta Pride for the losses allocated to the Company at the time of
the exchange.

4.  NOTES PAYABLE AND LONG-TERM DEBT

Notes payable-bank consist of borrowings under a $900,000 revolving line of
credit used solely to fund purchases of feed ($259,432 outstanding at June 30,
2000) and a $800,000 revolving line of credit ($493,438 outstanding at June 30,
2000). Interest accrues at the prime rate plus 1.65% and each line of credit
expires March 15, 2001. Interest and principal is paid with collections of
accounts receivable applied equally to each line of credit.
<PAGE>   51


4.  NOTES PAYABLE AND LONG-TERM DEBT (CONTINUED)

Included in notes payable-others is a $400,000 note payable to an individual
($200,000 at June 30, 1999). The note bears interest at 12% and is due in April
2001. Also included in notes payable-others are borrowings of $110,000 from an
officer and director of the Company with interest at 12% and no stated maturity
and borrowings under a $350,000 credit facility from a financial institution
(none outstanding at June 30, 2000 and $226,000 outstanding at June 30, 1999).
Borrowings under the credit facility are unsecured, have fees of 2 1/2% and bear
interest at 12%. Borrowings are due six months from the date of the advance. The
weighted average interest rate on short-term borrowings outstanding as of June
30, 2000 was 11.5%.

Long-term debt consists of the following:

<TABLE>
<CAPTION>
                                                                                      JUNE 30
                                                                                2000            1999
                                                                            ---------------------------
<S>                                                                         <C>              <C>
Note payable to a bank with annual principal and interest
payments of approximately $142,000 through 2018; interest
accrues at a variable rate (9.45% at June 30, 2000)                          $1,356,045      $1,389,702

Note payable to a bank with monthly principal and interest
payments of $11,754 and a final payment of approximately
$915,000 due September 2000 with interest at prime plus
2 1/2% (12% at June 30, 2000)                                                   925,875         997,140

Convertible notes payable with interest due quarterly at
10.35% and principal due December 2000                                          100,000         163,500

Convertible notes payable with interest due quarterly at
10.35% and principal due December 2002                                          363,593         363,593

Note payable to a bank with annual principal payments of
$43,610 through 2003; interest accrues at prime rate plus
one percent (10.5% at June 30, 2000) and is payable semi-annually               130,633         174,439

Convertible notes payable with interest due quarterly at
7.15% and principal due December 2003                                            25,212          25,212

Notes payable to various finance companies with annual
payments aggregating approximately $108,000 including
interest at rates ranging from 7.9% to 11.3%, maturing at
various dates through March 2005                                                226,682         223,845

Capital lease obligations with quarterly payments
aggregating $16,281 including interest at effective rates
of 8.5% to 12.5% through June 2004                                              117,517         109,471

Note payable to an officer and director of the Company
with monthly payments of $3,810 including interest at
8.75%, maturing April 2003                                                      114,354         148,407

Note payable to a former officer and director of the
Company with monthly payments of $4,000 including interest
at 8.75%, maturing January 2003                                                 112,808         149,172

Notes payable to various banks and finance companies
with monthly payments aggregating $12,353 including interest
at rates ranging from 5% to 14.5%, maturing at various dates
through July 2004                                                               227,596         224,354

Note payable to an individual with annual payments of $200,000
including interest at 6% in the first year and at a prime less
1.75% thereafter (7.75% at June 30, 2000), maturing April 2014                1,801,908       1,888,593

Note payable to bank with annual principal and interest payments of
$84,845 through 2020 with interest at 8.5%                                      800,000              --

Notes payable to individuals with monthly payments aggregating
$3,449 including interest at 8%, maturing May 2002                               73,310              --

Notes payable to various finance companies with quarterly
payments aggregating $14,134 including interest at rates ranging
from 7.6% to 8.19%, maturing at various dates through June 2005                 220,023              --
                                                                            ----------------------------
                                                                              6,595,556       5,857,428

Less current maturities                                                       1,617,848       1,523,347
                                                                            ----------------------------
                                                                             $4,977,708      $4,334,081
                                                                            ============================
</TABLE>

The 10.35% convertible notes payable due in 2002 are convertible into shares of
the Company's common stock at a price of $10.42 per share at the noteholders'
option at any time prior to maturity. The 7.15% convertible notes are
convertible into shares of the Company's stock at a price of $10 per share at
the noteholders' option at any time prior to maturity. The convertible notes may
be paid by the Company at any time without penalty.

Substantially all trade accounts receivable, live fish inventories, property,
buildings and equipment and cooperative stock are pledged as collateral to the
note payable to bank and long-term debt. The Company is required, by certain
provisions of the loan agreements, to maintain minimum net worth, current and
debt service coverage ratios.

<PAGE>   52

4.  NOTES PAYABLE AND LONG-TERM DEBT (CONTINUED)

The aggregate annual maturities of long-term debt at June 30, 2000 are as
follows:

<TABLE>
<CAPTION>

          <S>                        <C>
          2001                       $ 1,617,848
          2002                           918,161
          2003                           427,139
          2004                           285,466
          2005                           221,095
          Thereafter                   3,125,847
                                     -----------
                                     $ 6,595,556
                                     ===========
</TABLE>

5.  COMMON STOCK

In connection with the exercise of stock purchase rights in fiscal 1996, the
Company granted broker-dealers options to purchase 39,117 shares of the
Company's common stock at $9.38 per share. The options are exercisable at any
time through June 2001. During fiscal 1999, 235,507 stock purchase warrants
pertaining to preferred stock issued in fiscal 1997 and fiscal 1996 were
converted into 70,589 shares of the Company's common stock pursuant to the terms
of the warrants. No other stock purchase rights or warrants are outstanding at
June 30, 2000.

During the fiscal years ended June 30, 2000 and 1999, the Company granted to key
employees 12,500 shares of common stock at $.845 per share, and 13,000 shares of
common stock at $.995 per share, respectively. The shares generally vest after a
two-year period. Unearned compensation expense is amortized to selling, general
and administrative expenses in the accompanying consolidated statements of
operations over the vesting period. Common shares totaling 1,500 and 12,000
previously granted were canceled during the fiscal years ended June 30, 2000 and
1999, respectively.

6.  EMPLOYEE STOCK OPTIONS

The Company granted directors and certain key employees options to purchase
shares of common stock during the fiscal years ended June 30, 2000 and 1999 as
follows:

<TABLE>
<CAPTION>

                                                   Weighted Average
                                     Shares         Exercise Price
                                   ------------------------------------
<S>                                <C>             <C>
Outstanding at June 30, 1998           424,000            $4.32
Granted                                341,000              .94
                                   ---------------
Outstanding at June 30, 1999           765,000             1.87
Granted                                432,000              .84
                                   ---------------
Outstanding at June 30, 2000         1,197,000             1.50
                                   ===============

</TABLE>

Following is a summary of the status of options outstanding at June 30, 2000:

<TABLE>
<CAPTION>

                                       Weighted Average
     Exercise         Number of           Remaining            Weighted Average
   Price Range         Shares          Contractual Life         Exercise Price
--------------------------------------------------------------------------------
<S>                   <C>              <C>                     <C>
 $.56 - $1.25         432,000              6 years                   $.84
  .69 -  1.88         341,000              5 years                    .94
 2.84 -  3.25         250,000              5 years                   3.05
 2.00                 174,000              3 years                   2.00
</TABLE>


The options were granted for a seven-year period and are exercisable at anytime
prior to their expiration at various dates from March 31, 2002 to March 31,
2007. The weighted average remaining life of the options is 5.2 years.

Pro forma information regarding net income and earnings per share is required by
FASB Statement No. 123, Accounting for Stock-Based Compensation, and has been
determined as if the Company had accounted for its employee stock options under
the fair value method of the Statement. The fair value was estimated at the date
of the grant using a Black-Scholes option pricing model with the following
weighted-average assumptions: volatility factor of 1.852 and 2.377 for the
fiscal years ended June 30, 2000 and 1999, respectively; weighted-average
expected life of options of three years; risk-free interest rate of 6%; and no
dividend yield.

<PAGE>   53

6.  EMPLOYEE STOCK OPTIONS (CONTINUED)

The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.

For purposes of pro forma disclosures, the estimated fair value of the options
granted for the fiscal years ended June 30, 2000 and 1999 is amortized to
expense over the vesting period. The Company's pro forma net losses were
$472,829 and $1,853,495 for the fiscal years ended June 30, 2000 and 1999,
respectively, and the Company's pro forma basic and diluted loss per common
share was $.10 and $.38, respectively, for those same periods. The weighted
average fair value of options granted during the fiscal years ended June 30,
2000 and 1999 was $.75 and $0.91, respectively.

7.  INCOME TAXES

The Company has net operating loss carryforwards for income tax purposes of
approximately $11,600,000 at June 30, 2000, which expire at various dates
through 2020.

Components of the Company's deferred tax assets were as follows:

<TABLE>
<CAPTION>

                                                               JUNE 30
                                                       2000              1999
                                                    -----------------------------
<S>                                                 <C>              <C>
Deferred tax assets (liabilities) - noncurrent:
   Net operating loss carryforward                  $ 4,264,000      $ 3,362,000
   Goodwill for income tax purposes                     343,000          375,000
   Inventories                                               --          520,000
   Property, buildings and equipment                   (187,000)         (94,000)
   Other                                                 30,000          187,000
                                                    -----------------------------
                                                      4,450,000        4,350,000
Valuation allowance for deferred tax assets          (4,450,000)      (4,350,000)
                                                    -----------------------------
Net deferred tax assets                             $        --      $        --
                                                    =============================

</TABLE>

8.  FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts for cash and cash equivalents approximate their fair values
at June 30, 2000 and 1999. The carrying amount for investments in cooperatives
approximates their fair value at June 30, 2000 and 1999 based upon appraisals or
estimates of recent sales of stock of the cooperatives obtained by management.

Notes payable to banks were at variable rates which approximated fair value at
June 30, 2000 and 1999. The fair value of notes payable-others and long-term
debt, which was estimated using discounted cash flow analysis based upon the
Company's incremental borrowing rates for similar borrowings arrangements,
approximated their carrying amounts at June 30, 2000 and 1999.

<PAGE>   54

                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) 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, in Sunflower,
Mississippi on September 28, 2000.



                                     AQUAPRO CORPORATION


Dated: September 28, 2000             By: /s/ George S. Hastings, Jr.
                                          -----------------------------------
                                          George S. Hastings, Jr.
                                          Chief Executive Officer, President
                                          and Chairman of the Board

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated below and on the date indicated.


By: /s/ George S. Hastings, Jr.                           September 28, 2000
    -----------------------------------
George S. Hastings, Jr., Chief Executive Officer, President
and Chairman of the Board


By: /s/ Charles Porter                                    September 28, 2000
    -----------------------------------
Charles Porter, Director


By: /s/ Joseph F. Duncan, Sr.                             September 28, 2000
    -----------------------------------
Joseph F. Duncan, Sr., Director


By: /s/ Charles D. Moore                                  September 28, 2000
    -----------------------------------
Charles D. Moore, Director