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

FORM 10-KSB

|  |  |                                                                                     
|- |  | ------------------------------------------------------------------------------------
|x |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
| 
|  |  | For the fiscal year ended June 30, 2002                                             
| 
|o |  | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934  

Commission File Number 0-29258

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

|                                                                         |  |                                                   
|------------------------------------------------------------------------ |  | --------------------------------------------------
|Tennessee
(State or other jurisdiction of
incorporation or organization) |  | 62-1598919
(I.R.S. Employer
Identification Number)

1100 Highway 3, Sunflower, MS 38778
(Address of Principal Executive Offices)

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   o

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.   o

State issuers revenues for its most recent fiscal year $3,990,198

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, 2002 was $148,058, based on
the last sale price of $.03 as reported by the NASD Over the Counter Bulletin
Board.

As of August 31, 2002 Registrant had outstanding 4,935,273 shares of
common stock, its only class of common equity outstanding.

Transitional Small Business Disclosure Format (check one):
Yes   o   
No   x





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TABLE OF CONTENTS



|                                                |                                                                                                                             |  |  |  |  |  |  | 
|----------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I                                         
|                                                | ITEM 1. DESCRIPTION OF BUSINESS                                                                                            
|                                                | ITEM 2. DESCRIPTION OF PROPERTY                                                                                            
|                                                | ITEM 3. LEGAL PROCEEDINGS                                                                                                  
|                                                | ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                                                
|PART II                                        
|                                                | ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS                                                           
|                                                | ITEM 6. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION                                                          
|                                                | RESULTS OF OPERATIONS YEAR ENDED JUNE 30, 2002 COMPARED TO YEAR ENDED JUNE 30, 2001                                        
|                                                | ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                                                        
|                                                | ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE                               
|PART III                                       
|                                                | ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS, COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
|                                                | ITEM 10. EXECUTIVE COMPENSATION                                                                                            
|                                                | ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT                                                    
|                                                | ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                                                    
|                                                | ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K                                                                                  
|SIGNATURES                                     
|LIST OF EXHIBITS                               
|Consolidated Financial Statements              
|AGREEMENT WITH INTER. HOLDINGS AND JOSEPH HALE 
|RESTRUCTURING AGREEMENT WITH DEUTSCHE FINANCIAL
|LOAN AGREEMENT WITH FEDERAL LAND BANK          
|MEMORANDUM OF UNDERSTANDING                    



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TABLE OF CONTENTS

|                     |                                                                                                                         |  |      |      |  | 
|-------------------- | ----------------------------------------------------------------------------------------------------------------------- |  | ---- | ---- |  | 
|PART I               |                                                                                                                         |  | -2-  |     
|                     | Item 1. Description of Business                                                                                         |  |      | -2-  | 
|                     | Item 2. Description of Property                                                                                         |  |      | -10- | 
|                     | Item 3. Legal Proceedings                                                                                               |  |      | -11- | 
|                     | Item 4. Submission of Matters to a Vote of Security Holders                                                             |  |      | -12- | 
|PART II              |                                                                                                                         |  | -12- |     
|                     | Item 5. Market for Common Equity and Related Stockholder Matters                                                        |  |      | -12- | 
|                     | Item 6. Managements Discussion and Analysis or Plan of Operation                                                       |  |      | -13- | 
|                     | Item 7. Financial Statements                                                                                            |  |      | -16- | 
|                     | Item 8. Changes In and Disagreements With Accountants on
Accounting and Financial Disclosure                            |  |      | -16- | 
|PART III             |                                                                                                                         |  | -16- |     
|                     | Item 9. Directors, Executive Officers, Promoters and Control
Persons, Compliance with Section 16(a) of the Exchange
Act |  |      | -16- | 
|                     | Item 10. Executive Compensation                                                                                         |  |      | -17- | 
|                     | Item 11. Security Ownership of Certain Beneficial Owners and
Management                                                 |  |      | -20- | 
|                     | Item 12. Certain Relationships and Related Transactions                                                                 |  |      | -21- | 
|                     | Item 13. Exhibits and Reports on Form 8-K                                                                               |  |      | -21- | 
|LIST OF EXHIBITS     |                                                                                                                         |  | -23- |     
|FINANCIAL STATEMENTS |                                                                                                                         |  | -24- |     





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PART I




ITEM 1. DESCRIPTION OF BUSINESS

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 1,719 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. These ponds are leased to International Holdings, Inc. (IHI) of
Atlanta, Georgia. The Company has sold all of its catfish inventory to IHI.
Under an agreement with IHI, the Company custom farms IHIs catfish in its
ponds and splits the proceeds of the fish sales in accordance with the contract
attached in the exhibits to this report.

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.

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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 2001. NASS
reports that catfish growers in the fifteen (15) selected states had total
sales of $597 million during 2001, an increase of six tenths of one percent
over the $593 million sold in 2000. NASS also reports that from January 1, 2002
through June 30, 2002, water acres used for catfish production totaled 181,140
acres, a decrease of 4.8% 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

|                    |  |                         |      | 
|------------------- |  | ----------------------- | ---- | 
|Year                |  | Average Price Per Pound
|                    |  |                        
|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                |  |                         | 75.1 | 
|2001                |  |                         | 64.5 | 
|2002 (through 6/30) |  |                         | 56.5 | 

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, 2002, five processors represented 29%, 21%, 13%, 13%, and 7% respectively.
For the year ended June 30, 2001, five processors represented 27%, 20%, 18%,
15%, and 10% 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. 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 1 1/2 to 3 pounds, and
small food-size catfish are 3/4 to 1 1/2 pounds. While catfish of 3/4 of a
pound or more are considered

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market weight, Management intends to market the Companys catfish at a weight
of 1 1/4 to 1 1/2 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 1 1/2 pounds before any
will be ready to harvest and sell to a processor.

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. 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. Under the Companys agreement with IHI, the feed needs
of fish are provided by IHI. However, the cost of the feed provided is first
deducted from fish sale proceeds before the Company can share in those sales
proceeds. Therefore the cost of feed directly affects the Companys revenues
and cash flow.

Feed prices can vary greatly from year to year. In fiscal 2002 feed fluctuated
around $202 per ton. Subsequent to the fiscal yearend the price of feed has
fluctuated between $208 and $217 per ton. Each ten-dollar change in feed
prices equates to a one and a quarter cent change in the cost of growing a
pound of catfish.

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. 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 Stoneville, Mississippi, increasing
numbers of catfish farmers have experienced increased mortality in small fish
and reduced feeding and growth levels in bigger fish. The cause has been traced
to a trematode, Bolbophlorus confusus. There are no treatments for fish
infected with the trematode and pelicans (the host in the chain) cannot be
eradicated. Therefore, the farmer

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must eradicate the snail. If the infection cannot 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 minutes. The processing plants pay
an agreed upon price per pound for the delivered fish.

Processing Plants. In fiscal 2001, the Company purchased as an investment a
five
percent ownership of a non-operating processing plant in Sunflower, MS. The
ninety-five percent owner was Farmland Industries, owner of a processing
catfish
processing plant in Eudora, Arkansas and the largest farmers cooperative in
the
world. At that time, Farmland was in discussions with Farm Fresh Catfish
Company
and had announced a merger of the two catfish processing companies. The two
companies combined administrative functions and began operating as one under a
management agreement. At the time of the purchase of the Sunflower facility the
plans were for Farmland to complete its merger with Farm Fresh and then
renovate
and open the facility. In fiscal 2001, Farmland and Farm Fresh announced that
the merger had been terminated and each facility would be operated
independently. In the spring of 2001, Farmland informed the Company that it
would not use its own funds to renovate and operate the Sunflower facility.
Additionally, it would not guarantee Industrial revenue bonds that had been
committed by the State of Mississippi to the Company for the opening of this
facility. The Company was unable to obtain the capital or guarantee necessary
to renovate the plant. In September of 2001, AquaPro sold its five percent
ownership to Farmland for its original purchase price of $40,000. In May of
2002, Farmland Industries declared bankruptcy and is liquidating its non-core
business including its catfish processing plant in Eudora, Arkansas. While the
Company is not in a financial condition to bid on the plant, IHI is in
negotiations to acquire the plant for processing its and other farmers fish.

INVENTORY CONTROL PROCEDURES. While the Company no longer owns an inventory of
fish, it uses the techniques developed over the years in the close monitoring
of IHIs fish. Husbandry of 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.

The Company maintains a perpetual record of live fish inventories for each of
the 169 custom farming 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.

EMPLOYEES. In fiscal 2001, the Company employed 32 full-time persons and 17
part-time persons. By the end of fiscal 2002, the number of employees was cut
to 30 full-time and no part-time employees.

RECENT DEVELOPMENTS

COMMUNITY BANK CREDIT LINE. In April 2001 the Company obtained two revolving
lines of credit totaling $1,700,000 from Community Bank in Indianola,
Mississippi (the Bank). The Company intended to fund its operations primarily
through fish sales, working capital, and the $1,700,000 lines of credit with
the Bank. One line of

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credit of $900,000 was to provide financing for catfish feed purchases from
Delta Western and the other for $800,000 was to be used for catfish production.
Borrowings under both lines of credit bear interest at 9.65%. The Company paid
a commitment fee of 1% ($17,000) to obtain these lines of credit. Under the
lines of credit, the Company had an account with the Bank into which the
Company deposited proceeds from all inventory sales and accounts receivable.
From the deposit amounts, 50 percent is applied to the feed line of credit, and
the remaining 50 percent was applied to the production line of credit.
Borrowings under the lines of credit were represented by the Companys
promissory notes, which were secured by a first lien on all inventories,
accounts receivable, 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 life insurance on one
of the Companys officers. Mr. George S. Hastings, President, has also
personally guaranteed repayment of the lines of credit. In response to the
Companys customers requirement in fiscal 2001 that marketable fish be a
minimum of one and one quarter pound instead of one pound, the Company
negotiated increases in its lines of credit from the Bank as of September 24,
2001 to $990,000 for its production line of credit and $1,550,000 is for its
feed line of credit. The new lines of credit matured October 15, 2001 and were
renewed in 30-day increments at the discretion of the Bank. As discussed above,
the Companys feed and production lines of credit required that 50 percent of
all collections of accounts receivable be applied to the outstanding balance of
each until paid.

In the spring of 2000 the Company purchased a 525-water acre (Indian Lakes)
farm and equipment for $876,250, which was financed by a sellers note payable.
Management had anticipated the working capital for the operation of the new
farm would be obtained from the USDA, but the loan request was denied. In place
of the denied long term USDA loan, the Company utilized short-term debt and
increases in amounts owed to vendors, to operate the farm. The Company was able
to feed its live fish inventories throughout the 2001 feeding season. However,
vendor debt increased and cash flow problems continued. The fish from this
farm were expected to reach maturity during the spring of 2001, at which time
payments could be made to reduce the excess vendor debt.

COMPETITION FROM VIETNAM BASA FISH. In January of 2001 imports of basa fish
from Vietnam increased dramatically. The fish is not called catfish in Vietnam
and is not the same species as the American catfish. Basa is grown in cages in
the Mekong River, usually below the stilt houses occupied by families living
above. However, it was being marketed in the United States as grain fed
pond-raised catfish. The price for the imitation catfish was below the cost of
production of American catfish and according to Fisheries Information Services,
the price was also below the production costs in Vietnam. Quickly the basa had
approximately twenty percent of the frozen fillet market in the United States.
The price received by United States farmers and the Company quickly dropped to
the cost of growing the fish without a profit.

In response to the perceived dumping of basa fish, the United States
processors required the Company and other farmers to increase the minimum size
of marketable fish by twenty-five percent. The new size requirement worked
many hardships on the Company. Scheduled fish sales from the newly acquired
farm were delayed while the fish were grown to the larger size. Therefore cash
was not available to repay vendors. Fish sales from the other 2,125 water
acres of ponds were also delayed for an additional ninety days of feeding.
Cash outflow continued during this period but cash inflow stopped.

In response to the Companys customers requirement in fiscal 2001 that
marketable fish be a minimum of one and one quarter pound instead of one pound,
the Company negotiated increases in its 2002 lines of credit from the Bank to
$990,000 for its

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production line of credit and $1,550,000 is for its feed line of credit. The
new lines of credit matured October 15, 2001 and were renewed in 30-day
increments at the discretion of the Bank. As discussed above, the Companys
feed and production lines of credit required that 50 percent of all collections
of accounts receivable be applied to the outstanding balance of each until
paid. Approximately, twenty percent of the outstanding credit line balances
were scheduled for each of the five months of November through March. The
amount of the available borrowings under the credit lines had been increased,
but the time period for repayment had not been increased.

By the time the Companys inventory of fish had grown to the new marketable
size, the price received for the fish fell even further to approximately twenty
cents per pound less than the Company had received the previous winter. Gross
profit became a negative number and losses mounted rapidly. The scheduled
payments on the credit lines required sales to meet the obligations, no matter
what the price. At the lower prices, the Company was required to harvest
approximately thirty-six percent more fish to meet the payments. The higher
sales volume increased seining and hauling efforts and resulted in additional
inefficiencies and costs.

By January of 2002, it became evident that the Company was not going to be able
to completely pay off its seasonal credit line by the March deadline. The
number of marketable sized fish in the Companys ponds was being rapidly
depleted and the anticipated price for fish did not project the required cash
flow to meet obligations to the Bank. The Bank required weekly review of the
cash income from fish sales and the amounts of expenditures for operations.
The Company became in default in its scheduled payments. Under the terms of
the loan agreement, the Bank could have retained 100% of the fish sale proceeds
until the account became current. A forbearance agreement was signed whereby
the bank agreed to release some of the available fish sales proceeds for
operations. Approved expenses were payroll, seining and hauling expenses, and
fuel, i.e. the expenses essential to harvest and sell fish. Some secured
equipment payments (that maintained ownership of equipment necessary to harvest
fish) were also approved. Unsecured vendor payments were not made.

The Bank also provided assistance to the Company as it made a new application
for a USDA loan. After several months of application forms, appraisals, and
meetings, the Company was informed that it did not have the net worth to
qualify for the amount requested. Instead of calculating the net worth of the
Company as the assets less the liabilities, the USDA said that the net worth
was the trading price of the Companys shares multiplied by the number of
outstanding shares. The USDAs method resulted in a reduction of approximately
$2,500,000 from the net worth calculation performed by our auditors, Ernst &
Young, LLP, under the appropriate and SEC required Generally Accepted
Accounting Practices (GAAP). While it was believed that the Company could have
been successful in an appeal of the matter, the cost of the appeal, the length
of the appeal process, and the USDAs low opinion of the Catfish Industrys
current situation, made making the appeal unattractive.

By May 2002, the Companys had paid its credit lines down from the $2,540,00
limit to approximately $1,000,000. However, it was not able to obtain new
seasonal credit lines for the 2002 feeding season. No money had been available
to feed fish since just before the end of the feeding season in fall of 2001.
The health and lives of the fish were in jeopardy.

In an attempt to raise funds to pay off the 2001 credit lines and to then
acquire the 2002 credit lines, Management proposed, and the Board of Directors
approved, the sale of up to three of the Companys farms, fish inventory on
those farms, and related equipment. Unfortunately, the record low prices for
marketable sized fish

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cast a long shadow over the prices that other fish farmers were willing to pay
for fish inventory, ponds, and equipment. The available prices were far less
than the book value of the assets. To make matters worse, the long period
without feeding resulted in the length of the fish in the ponds being as
expected, but the weight of the fish was approximately a third of the normal
weight.

The sale of the Cypress Lake farm provided far less capital to the Company than
the amount needed to reduce the past due credit lines or to reduce them enough
to allow funding of a new seasonal credit line. When the results of the sales
price of that farm were projected over other farms and assets that could be
sold, it became evident that the potential sales proceeds would be insufficient
to both pay off the prior years credit line and leave enough acceptable assets
for the Bank to issue a new credit line for the remainder of the calendar 2002
feeding season.

During the months that the USDA loan was being pursued, the secured and
unsecured creditors had been kept informed of the Companys efforts and
progress. Restructuring of scheduled debt payments was agreed to by all of the
secured creditors. The unsecured creditors continued to wait for payments on
their accounts.

The situation faced by the Company was very grim. The previous years credit
line was not paid off, so the proceeds of any fish that were sold went to the
bank instead of the Company. The Company had no cash reserves to operate, make
payroll, or care for the fish. The weather had warmed up, but without money to
feed the fish, the fish would soon begin to die from starvation. The secured
creditors had reached their limits of patience. Two feed trucks had been
repossessed and the tractors and aeration equipment, necessary to keep the fish
alive, were about to be taken as well. The mortgage holder for the 325 water
acre Kroeker farm foreclosed upon that property and it was subsequently sold at
a foreclosure auction on the courthouse steps.

Two options remained for the Company. The first was to declare liquidation
bankruptcy. The second was to accept an offer to sell two additional farms and
all of our catfish inventory to an outside party, enter into a custom farming
arrangement, and split potential revenues from future fish sales.

Management reported to the Board of Directors that the current liquidation
prices already experienced by the Company and sales by other farmers in similar
distressed situations, indicated that the values that could be received for the
Companys fish, land, equipment, and other assets would be extremely low.
Based upon the valuations received in those sales, the Companys assets would
not bring enough proceeds to satisfy the secured creditors. The unsecured
creditors would receive nothing and the stockholders would also have no
remaining value from liquidation.

While the offer from the outside party did not involve any higher price for the
Companys assets, it did contain the advance of sufficient funds for the
Company to: remain in business; make the payments to secured creditors under
their workout agreements; feed the fish for maximum gain; meet payroll and
expenses of an ongoing operation; and, after the repayment for the fish
purchased and operating advances, a share in potential future profits.
The Board of Directors approved the sale of two additional farms and the entire
fish inventory from all of the Companys farms as well as the entry into the
proposed custom farming agreement. A copy of the agreement is attached in the
exhibits below. Generally the agreement provides for the following:

From International Holdings, Inc.:



| | 1. |  | Purchase all of the fish in AquaPros ponds for $.35 per pound.
| | -- |  | ---------------------------------------------------------------

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| | 2. |  | Calculate the number of pounds to be purchased by using the
experience obtained during the seining of the Kroeker ponds for
restocking with prawn, and the sale of the Cypress Lake fish to
Tackett Fish Farms which resulted in a weight count of 32.7% of the
weight shown on the perpetual inventory.
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 3. |  | Accept a promissory note in return for the sale with a maturity
date no later than November 30, 2002.                                                                                                                                                                                                   

From Joseph H. Hale:



| | 1. |  | The sale of the Circle Creek Farm and Panther Run Farm for a purchase price
$354,450
| | -- |  | ------------------------------------------------------------------------------------
|
| | 2. |  | The acceptance of a promissory note to be paid on or before December 31,
2002       

From IHI, Hale and related entities:



| |  |  | To enter into a custom farming arrangement providing the sharing of
net revenues after repayment of the investments by International
Holdings and Hale in fish, feed costs, and operating expenses.
| |  |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

SUBSEQUENT EVENTS. Subsequent to the signing of the contract with IHI and
Hale, the Company received advances from IHI and Hale for the feeding of fish
and general operations. Payments were made to the secured creditors under the
terms of the workouts previously arranged. The Company has fed the fish for
maximum weight gain. As of September 25, 2002, IHI purchased the Community
Bank loan to AquaPro for the remaining balance of $672,852. In addition, the
payment for purchase of the two farms has been completed for $354,450. Of the
fish inventory purchase price of $684,309, a total of $512,923 has been
received by the Company and the remaining amount to be received of $171,386 is
expected before November 30, 2002. Additionally, IHI has advanced $392,000 for
operations and $915,000 for the purchases of feed.

Also subsequent to the fiscal 2002 yearend, IHI purchased the fish inventory on
a 600-acre farm for its joint venture with the Company at a price of
approximately $.25 per pound. Additionally, IHI advanced the funds for the
Companys purchase of enough large fingerlings for the next two years crops.
The fingerlings were purchased at approximately half of the normal price.

It is hoped that the price for marketable fish will increase as farmers exit
the business and leave the supply short of the demand. Currently lenders are
reluctant to advance funds to catfish farmers for production and an increasing
number of farms are for sale.

However, if prices do not rebound, it will be difficult for the Company or
other farmers to stay in business. The Catfish Farmers of America have
instituted an anti-dumping suit against the Vietnam imports. Success in this
suit could help cause an increase in the selling price of American Catfish. On
the other hand, continued sales of fish, into the United States at below cost,
by any country, could cause the collapse of the American Catfish Industry and
the Company.

The Company faces an additional threat from the loss of the Kroeker farm. As
of September 25, 2002, the Company has lost the farm by foreclosure and has
voluntarily returned the farms equipment. The original amounts of the
mortgage and a related short-term debt in May 1999 were a total of $2,089,828.
The real estate of the farm was purchased for $714,032. That same real estate
sold for $270,000 on the courthouse steps in July of 2002. The Company has
received notice that the equipment that it has returned may be sold at any time
subsequent to October 27, 2002. The equipment was purchased used in 1999 for
$545,930. It is now three years

9



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older and can be expected to bring far less than the purchase price. The
mortgage covered additional assets such as prepaid feed and fish inventory.
The prepaid feed has been fed to the fish and no longer exists. The current
value of the fish inventory has not yet been determined. The mortgage holder
has the right to sue for the difference between the amounts left unpaid by the
foreclosure sale proceeds.

The Companys President, George Hastings, has been required by the majority of
the creditors of the Company to personally guarantee the debts of the Company.
Mr. Hastings has personally guaranteed the Kroeker mortgage as well as the
mortgages on the Circle Creek, Panther Run, Balmoral, Crystal Waters and Indian
Lakes farms. All mortgage holders with the exception of the Kroekers have
worked with the Company, to allow time for it to make and sell another crop of
fish. They have accepted partial payments and extended the terms of their
mortgages.

The Company has made offers to the Kroekers to make scheduled payments of a
percentage of its net income to repay the shortfall. These offers have not
been accepted. As of September 25, 2002, neither the Company nor Mr. Hastings
have been sued for the shortfall. Neither Mr. Hastings nor the Company could
pay a judgement approaching the size of the shortfall on the Kroeker mortgage.
In the event of a successful suit and judgment for this shortfall, Mr. Hastings
would have little option but personal bankruptcy. His bankruptcy would be an
event of default under the loan covenants of the other Companys other
mortgages. As of June 30, 2002 the Companys net worth was a negative
$3,399,519. Bankruptcy by the Company could most likely cause a total loss by
all shareholders.




ITEM 2. DESCRIPTION OF PROPERTY

REAL PROPERTY. The Company owns five non-contiguous farms having a total of 139
ponds comprising 1,719 water acres situated on a total of 2,282 land acres. The
farms are located in the Mississippi Delta area of Mississippi. The Company
farms two additional farms for a total of seven farms having a total of 169
ponds comprising 2,140 water acres. The table below sets forth information
regarding these properties.

INFORMATION REGARDING THE COMPANYS REAL PROPERTY

|                       |  |               |  |          |    |                  |  |                    |  |                        |  | 
|---------------------- |  | ------------- |  | -------- | -- | ---------------- |  | ------------------ |  | ---------------------- |  | 
|NAME                   |  |               |  |          |    |                  |  |                    |  | UNPAID BALANCE OF     
|(LOCATION OF           |  | TOTAL ACRES   |  | NUMBER   |    | MORTGAGE LOAN AT
|PROPERTY)              |  | (WATER ACRES) |  | OF PONDS |    | JUNE 30, 2002   
|                       |  |               |  |          |    |                 
|Balmoral               |  | 318 (234)     |  |          | 21 |                  |  | Pledged under the 
|(Sunflower County, MS) |  |               |  |          |    |                  |  |                    |  | Farm Bank of Texas (1)
|Hidden Lakes           |  | 668 (443)     |  |          | 46 |                  |  | $630,000 (2)      
|(Bolivar County, MS)   |  |               |  |          |    |                  |  |                    |  | $280,000              
|Stillwater             |  | 170 (140)     |  |          | 8  |                  |  | Pledged under the 
|(Sunflower County, MS) |  |               |  |          |    |                  |  |                    |  | Farm Bank of Texas (1)
|Crystal Waters         |  | 454 (377)     |  |          | 27 |                  |  | Pledged under the 
|(Bolivar County, MS)   |  |               |  |          |    |                  |  |                    |  | Farm Bank of Texas (1)
|Indian Lakes           |  | 672 (525)     |  |          | 37 |                  |  | Pledged under farm
|(Bolivar County, MS)   |  |               |  |          |    |                  |  |                    |  | Bank of Texas (3)     

10



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##### Table of Contents



Properties Farmed under a Custom Farming Agreement

|                                              |  |               |  |          |    |                  |  |                     |  |                   |  | 
|--------------------------------------------- |  | ------------- |  | -------- | -- | ---------------- |  | ------------------- |  | ----------------- |  | 
|NAME                                          |  |               |  |          |    |                  |  |                     |  | UNPAID BALANCE OF
|(LOCATION OF                                  |  | TOTAL ACRES   |  | NUMBER   |    | MORTGAGE LOAN AT
|PROPERTY)                                     |  | (WATER ACRES) |  | OF PONDS |    | JUNE 30, 2002   
|                                              |  |               |  |          |    |                 
|Circle Creek                                  |  | 275 (210)     |  |          | 15 |                  |  | Sold to J. Hale    
|(Sunflower County, MS)                        |  |               |  |          |    |                  |  |                     |  |                   |  | 
|Panther Run                                   |  | 278 (211)     |  |          | 15 |                  |  | Sold to J. Hale    
|(LeFlore County, MS)                          |  |               |  |          |    |                  |  |                     |  |                   |  | 
|                                             
|Properties Lost through
July 2002 Foreclosure
|                                             
|Kroeker Farm                                  |  | 424 (320)     |  |          | 28 |                  |  | Lost in Foreclosure
|(Sunflower & Leflore
County, MS)              |  |               |  |          |    |                  |  |                     |  |                   |  | 



---

|(1) |  | Note payable to Farm Credit Bank of Texas with annual principal and
interest payments of approximately $114,000 due through 2018; interest
accrues at a variable rate (5.25% at June 30, 2000).                                                                                                                                                
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | First mortgage payable to a private investment firm of $630,000, at 13%
interest with monthly principal and interest payments of $11,750. A second
mortgage on the real estate is held by a bank holding a first mortgage on
the farms equipment in the amount of $280,000 with 14% interest and
payments of principal and interest of $6,542.
|   
|(3) |  | Note payable to Farm Credit Bank of Texas with annual principal and
interest payments of approximately $70,000 due through 2020; interest
accrues at a variable rate (5.25% at June 30, 2000).                                                                                                                                                 

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. Shortly before the end of the fiscal
year, the Companys feed became supplied by Land O Lakes Feed, Greenville,
Mississippi, under a financing arrangement with IHI.




ITEM 3. LEGAL PROCEEDINGS

During the period covered by this report, a legal foreclosure action was
initiated which resulted in loss of the Kroeker farm, subsequent to the fiscal
yearend June 30, 2002. While the Company is not currently a party to any legal
proceeding, it has received notice that the equipment, returned with the
Kroeker real estate, may be sold at any time after October 27, 2002. It is
quite possible that after sale of this equipment that the Company and its
President and guarantor of the debts on the land and equipment, George
Hastings, could be sued for the deficiency. A judgement of this size would
more than likely force the Company into bankruptcy. The event of bankruptcy
could most likely cause the shareholders to lose all of their investment.

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Currently secured creditors are threatening lawsuits. Several unsecured
creditors have threatened lawsuits. However, management believes that
successful suits and judgments against the company could have a material
adverse effect on the consolidated financial position or results of operations
of the Company.




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, 2002.




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. For the period from July 1, 2000 to June 30, 2001
the high price was $.875 and the low price $.16. For the period from July 1,
2002 to June 30, 2002 the high price was $.23 and the low price was $.03.

STOCKHOLDERS: As of September 18, 2001, there were approximately 1,300
stockholders of record of the 4,935,273 outstanding shares of Common Stock. The
Company believes there are approximately 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.

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, 2002 the Company issued to members of its
Board of Directors as compensation, options to purchase a total of 48,000
shares. These options had exercise prices ranging from $.07 to $.25 per share,
the bid price on the date of the option. These options have a term of seven
years from the date of the grant. Also during this period the Company issued
granted its executive officers 12,000 shares of Common Stock. These shares had
market values ranging from $.07 to $.25 per share. During the fiscal year ended
June 30, 2001 the Company issued to members of its Board of Directors as
compensation, options to purchase a total of 66,000 shares of common stock.
These options had exercise prices ranging from $.375 to $.625 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 to members of
its Board of Directors as compensation, options to purchase a total of 78,000
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

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seven years from the date of grant. During 1991 the Company issued to its
officers options to purchase stock at prices from $.375 to $.625, the market
price at the date of the grant of the options. Also during this period, the
Company granted its executive officers 18,000 shares of common stock. On the
dates of issuance these shares had market values ranging from $375 to $625.
During the Companys fiscal year ended June 30, 2000, the Company issued to its
executive officers options to purchase a total of 348,000 shares of the
Companys common stock at 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. Also during the period, the Company granted its
executive officers a total of 12,000 shares of common stock. On the dates of
issuance, these shares had market values ranging from $.5625 to $1.25 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.

In April of 2002 the Company entered into a contract with a consultant to
provide business planning and structure among other services. The consultant
was to receive 500,000 shares as compensation for his services. The Company
has terminated the contract for non-performance and does not intend to issue
the 500,000 shares.




ITEM 6. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

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, competition from Vietnamese basa
fish being marketed as catfish, mortality of fish from disease or low oxygen
levels, inability to acquire fry and fingerlings at reasonable costs, lengthy
delays in fish sales caused by customers requirements for larger fish in
fiscal
2001, 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, 2002 COMPARED TO YEAR ENDED JUNE 30, 2001

NET SALES. Net sales during the year ended June 30, 2002 totaled $3,990,198
compared to $4,787,464 for the year ended June 30, 2001. Volume increased
429,513 pounds to 7,555,910 pounds of fish sold during the year ended June 30,
2002 compared to 7,126,397 pounds sold during the year ended June 30, 2001.

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The decrease in sales was due to a lower average selling price received from
the Companys major customers. The average price of fish sold was 52.8 cents
per pound during the year ended June 30, 2002 compared to 67.3 cents per pound
during the year ended June 30, 2001 and 74.9 cents during the year ended June
30, 2000. Management believes that the lower sales price occurred as a result
of processors lowering their prices in response to the Vietnam basa imports.

COST OF PRODUCTS SOLD AND GROSS PROFIT. Cost of products sold was $5,220,473,
or
69.1 cents per pound sold, for the year ended June 30, 2002 compared to
$4,515,331, or 63.4 cents per pound sold, for the year ended June 30, 2001.
Gross profit from fish sales was a negative 30.8% during the year ended June
30, 2002 compared to a positive 5.99% for the year ended June 30, 2001. 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 catfish to
mature. The cost of products sold increased even though the price of feed
remained relatively unchanged from the previous year. The amount of feed fed
to the Companys fish was limited because of cash flow constraints. Therefore,
fewer pounds were produced, resulting in a higher cost per pound in inventory.

SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses during the year ended June 30, 2002 were $1,357,444 compared to
$1,361,249 during the year ended June 30, 2001. Accordingly, selling, general
and administrative expenses were 18.0 cents per pound sold for the year ended
June 30, 2002 compared to 19.1 cents per pound sold for the year ended June 30,
2001. Selling expenses increased with increased sales volume and production
inefficiencies caused by repeatedly seining ponds containing fewer marketable
size fish. The decline in selling and administrative expenses was due primarily
to drastic reductions in salaries and related expenses.

INTEREST EXPENSE & NET LOSS. Interest expense was $1,512,461 for the year ended
June 30, 2002 compared to $790,525 for the year ended June 30, 2001. Borrowings
increased as a result of the Companys inability to pay off its seasonal credit
lines and other debts. Net loss for the year ended June 30, 2002 was $9,028,607
compared to a loss of $1,603,833 for the year ended June 30, 2001. Of the
$9,028,607 loss, $4,488,867 was extraordinary loss incurred from the sale of
three farms and the entire catfish inventory at prices below their cost, and
the impairment loss due to the foreclosure of the Kroeker farm.

INCOME TAXES AS OF JUNE 30, 2002. The Company has net operating loss
carry-forwards of approximately $22,000,000, which expire at various dates
through fiscal 2022, available to reduce taxable income.

LIQUIDITY AND CAPITAL RESOURCES. As of June 30, 2002, the Company had a current
ratio of .14 to 1.00 compared to 1.44 to 1.00 at June 30, 2001. Working capital
at June 30, 2002 totaled a negative $6,238,879 compared to $2,173,001 at June
30, 2001. The Companys net cash provided by (used in) operating activities
was $320,262 and ($935,654) for the years ended June 30, 2002 and June 30,
2001, respectively.

The Company funded its net loss by the liquidation sale of three of its farms
and all of its catfish inventory, and the return of the Kroeker farm and
assets. This drastic step was taken instead of complete bankruptcy. As
discussed more fully in the description of the Companys business above, the
reduced fish sales amount per pound left the Company with approximately
$1,000,000 outstanding on its seasonal credit line. No additional financing
was available to feed the fish inventory and any fish sales proceeds were
pledged to the bank. Secured creditors began repossessing the Companys
assets. Under the terms of the agreement with the purchaser of the catfish
inventory, the Company is to share in any available fish

14



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sales proceeds from the purchased catfish inventory, after the purchaser
receives the cost of the investment in fish, feed and other costs.

SUBSEQUENT EVENTS. Subsequent to the signing of the contract with IHI and
Hale, the Company received advances from IHI and Hale for the feeding of fish
and general operations. Payments were made to the secured creditors under the
terms of the workouts previously arranged. The Company has fed the fish for
maximum weight gain. As of September 25, 2002, IHI purchased the Community
Bank loan to AquaPro for the remaining balance of $672,852. In addition, the
payment for purchase of the two farms has been completed for $354,450. Of the
fish inventory purchase price of $684,309, a total of $512,923 has been
received by the Company and the remaining amount to be received of $171,386 is
expected before the end of the calendar year. Additionally, IHI has advanced
$392,000 for operations and $915,000 for the purchases of feed.

Also subsequent to the fiscal 2002 yearend, IHI purchased the fish inventory on
a 600-acre farm for its joint venture with the Company at a price of
approximately $.25 per pound. Additionally, IHI advanced the funds for the
Companys purchase of enough large fingerlings for the next two years crops.
The fingerlings were purchased at approximately half of the normal price.

It is hoped that the price for marketable fish will increase as farmers exit
the business and leave the supply short of the demand.* However, there can be
no assurance that the price will not increase. Currently lenders are reluctant
to advance funds to catfish farmers for production and an increasing number of
farms are for sale.

However, if prices do not rebound, it will be difficult for the Company or
other farmers to stay in business. The Catfish Farmers of America have
instituted an anti-dumping suit against the Vietnam imports. Success in this
suit could help cause an increase in the selling price of American Catfish. On
the other hand, continued sales of fish, into the United States at below cost,
by any country, could cause the collapse of the American Catfish Industry and
the Company. The Company faces an additional threat from the loss of the
Kroeker farm. As of September 25, 2002, the Company has lost the farm by
foreclosure and has voluntarily returned the farms equipment. The original
amounts of the mortgage and a related short-term debt in May 1999 was a total
of $2,089,828. The real estate of the farm was purchased for $714,032. That
same real estate sold for $270,000 on the courthouse steps in July of 2002.
The Company has received notice that the equipment that it has sold may be
returned at any time subsequent to October 27, 2002. The equipment was
purchased used in 1999 for $545,930. It is now three years older and can be
expected to bring far less than the purchase price.* The mortgage covered
additional assets such as prepaid feed and fish inventory. The prepaid feed
has been fed to the fish and no longer exists. The current value of the fish
inventory has not yet been determined. The mortgage holder has the right to sue
for the difference between the amounts left unpaid by the foreclosure sale
proceeds.

The Companys President, George Hastings, has been required by the majority of
the creditors of the Company to personally guarantee the debts of the Company.
Mr. Hastings has personally guaranteed the Kroeker mortgage as well as the
mortgages on the Circle Creek, Panther Run, Balmoral, Crystal Waters and Indian
Lakes farms. All mortgage holders with the exception of the Kroekers have
worked with the Company, to allow time for it to make and sell another crop of
fish. They have accepted partial payments and extended the terms of their
mortgages.

The Company has made offers to the Kroekers to make scheduled payments of a
percentage of its net income to repay the shortfall. This offer has not been

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accepted. As of September 25, 2002 neither the Company nor Mr. Hastings has
been sued for the shortfall. Neither Mr. Hastings nor the Company could pay a
judgement approaching the size of the shortfall on the Kroeker mortgage. In
the event of a successful suit and judgment for this shortfall, Mr. Hastings
would have little option but personal bankruptcy. His bankruptcy would be an
event of default under the loan covenants of the other Companys other
mortgages. As of June 30, 2002 the Companys net worth was a negative
$4,284,626. Bankruptcy by the Company could most likely cause a total loss by
all shareholders.*

The Company was unable to completely pay its previous accounting firm;
therefore, Ernst & Young, LLP terminated its relationship with the Company.
The Company had intended to use the Horne CPA Group but was unable to find the
funds necessary for its retainer. Just prior to the yearend, the Company
engaged the firm of Joe Craft, CPA as its independent auditors.




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.




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.

|                               |  |                                                         |  |                    |      |                 |  |  |                             | 
|------------------------------ |  | ------------------------------------------------------- |  | ------------------ | ---- | --------------- |  |  | --------------------------- | 
|                               |  |                                                         |  | An Officer of the  |      |                 |  | 
|                               |  |                                                         |  | Company (or a      |      | Director of the
|                               |  |                                                         |  | Predecessor of the |      | Company (or    
|NAME AND AGE                   |  | Position                                                |  | Company) Since     |      | Predecessor)   
|                               |  |                                                         |  |                    |      |                
|George S. Hastings, Jr.
Age 55 |  | Chairman of the Board
Chief Executive Officer
President |  |                    | 1983 |                 |  |  | 1983                        | 
|                              
|Kenneth Ostebo*
Age 45         |  | Director                                                |  |                    |     |                 |  |  | 1998                        | 
|                              
|Joseph Duncan, Sr.*
Age 75     |  | Director                                                |  |                    |     |                 |  |  | 1995
resigned June 30, 2002 | 
|                              
|Charles Porter*
Age 60         |  | Director                                                |  |                    |     |                 |  |  | 1999
resigned June 30, 2002 | 



---

|* |  | 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

16



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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 operated 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.

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
22 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 from December
30, 1995 to June 30, 2002.

Charles E. Porter served as a Director from 1999 to June 30, 2002.

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.

17



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SUMMARY COMPENSATION TABLE

|                        |  |                     |      |                        |  |       |         |          |  |            |   |  |  |            |       |            |  |  |         | 
|----------------------- |  | ------------------- | ---- | ---------------------- |  | ----- | ------- | -------- |  | ---------- | - |  |  | ---------- | ----- | ---------- |  |  | ------- | 
|                        |  | ANNUAL COMPENSATION |      | LONG-TERM COMPENSATION
|                        |  |                     |      |                       
|                        |  |                     |      |                        |  |       |         |          |  |            |   |  |  | VALUE OF   |       | SECURITIES
|NAME AND                |  |                     |      |                        |  |       |         |          |  |            |   |  |  | RESTRICTED |       | UNDERLYING
|PRINCIPAL POSITION      |  | YEAR                |      | SALARY                 |  | BONUS |         | STOCK(1) |  | OPTIONS(2)
|                        |  |                     |      |                        |  |       |         |          |  |           
|George S. Hastings, Jr. |  |                     | 2002 |                        |  | $     | 100,000 |          |  | $          | 0 |  |  | $          | 1,650 |            |  |  | 40,000  | 
|Chief Executive Officer |  |                     | 2001 |                        |  | $     | 100,000 |          |  | $          | 0 |  |  | $          | 5,640 |            |  |  | 52,000  | 
|                        |  |                     | 2000 |                        |  | $     | 87,000  |          |  | $          | 0 |  |  | $          | 9,939 |            |  |  | 348,000 | 



---

|(1) |  | 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 valued at a weighted average of $.82 for 2000,
$.47 for 2001, and $.13 for 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | The options issued in the fiscal year ended June 30, 2000 are 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). Options for year ended June 30, 2001 are also
exercisable for 7-year periods commencing on July 1, 2000 at $0.50 per
common share (10,000 shares), October 1, 2000 at $0.563 (10,000 shares),
June 1, 2001 at $0.375 (10,000 shares) and April 1, 2001 at $0.53 per share
(10,000 shares). Options for year ended 2002 are also: July 1 @ $.25, October 1
@ $.16, January 1 @ $.07, April 1 @ $.07.

The following table sets forth certain information regarding stock options and
warrants granted to each named Executive Officer by reason of his employment
during the Companys 2001 fiscal year.

OPTION/WARRANT GRANTS IN 2002(A)

|                        |  |                          |        |                             |  |                |     |   |  |                    |  | 
|----------------------- |  | ------------------------ | ------ | --------------------------- |  | -------------- | --- | - |  | ------------------ |  | 
|                        |  | INDIVIDUAL GRANTS       
|                        |  |                         
|                        |  | NUMBER OF SECURITIES     |        | % OF TOTAL OPTIONS/WARRANTS |  |                |     |  
|                        |  | UNDERLYING               |        | GRANTS TO EMPLOYEES         |  | EXERCISE OR   
|NAME                    |  | OPTIONS/WARRANTS GRANTED |        | IN FISCAL YEAR              |  | PRICE($/SHARE)
|                        |  |                          |        |                             |  |               
|George S. Hastings, Jr. |  |                          | 40,000 |                             |  |                | 100 | % |  | $0.07 to $0.25    
|                        |  |                          |        |                             |  |                |     |   |  | Expiring 3/31/2009

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, 2002.

AGGREGATED OPTION AND WARRANT VALUE TABLE

|                        |  |                                |  |                           |  |  |  | 
|----------------------- |  | ------------------------------ |  | ------------------------- |  |  |  | 
|                        |  | NUMBER OF SECURITIES           |  | VALUE OF UNEXERCISED     
|                        |  | UNDERLYING UNEXERCISED OPTIONS |  | IN-THE-MONEY OPTIONS     
|                        |  |                                |  |                          
|NAME                    |  | EXERCISABLE/UNEXERCISABLE(1)   |  | EXERCISABLE/UNEXERCISABLE
|                        |  |                                |  |                          
|George S. Hastings, Jr. |  | 1,110,000/None                 |  | $0.00/None(1)            



---

|(1) |  | Options in-the-money are based on the value of the Companys Common Stock
which, as of September 19, 2002, is $.03 per Common Share based on the
closing price reported on the NASD Bulletin Board.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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EMPLOYMENT CONTRACTS. The Company has a written employment agreement
with Mr. George Hastings. Pursuant to this agreement, he receives a base salary
of $100,000 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,
net income, 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 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

19



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##### Table of Contents



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.




ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information as of June 30, 2001,
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:

|                                                             |  |                               |           |     |  |  |       |   
|------------------------------------------------------------ |  | ----------------------------- | --------- | --- |  |  | ----- | --
|                                                             |  | AMOUNT AND NATURE OF         
|NAME & POSITION                                              |  | BENEFICIAL OWNERSHIP         
|OFFICERS AND DIRECTORS                                       |  | NUMBER OF COMMON SHARES(%)(1)
|                                                             |  |                              
|George S. Hastings, Jr.                                      |  |                               | 1,376,322 | (2) |  |  | (21.3 | %)
|President, Chief Executive Officer
and Chairman of the Board |  |                               |           |     |  |  |       |   
|Kenneth Ostebo                                               |  |                               | 45,000    | (4) |  |  | (0.7  | %)
|Director                                                     |  |                               |           |     |  |  |       |   
|Joseph F. Duncan, Sr.                                        |  |                               | 57,000    | (3) |  |  | (0.9  | %)
|Director                                                     |  |                               |           |     |  |  |       |   
|Charles Porter                                               |  |                               | 36,000    | (5) |  |  | (0.6  | %)
|Director                                                     |  |                               |           |     |  |  |       |   
|All officers and directors as a group                        |  |                               | 1,514,322 |     |  |  | (23.5 | %)



---

|(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 4,935,273 as of June 30,
2002. The total number of options outstanding is 1,397,000 as of such date.
Accordingly, the total number of outstanding Common Shares considered
outstanding for purposes of computing the above percentages is 6,449,595.                                                                                                                                                                                             

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##### Table of Contents



|(2) |  | Includes the following Common Shares, warrants and options held of record
by Mr. Hastings: 257,322 Common Shares and 1,131,000 Common Shares issuable
upon the exercise of 1,074,000 Compensatory Options and 57,000 Director
Options.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(3) |  | 57,000 Common Shares issuable upon the exercise of Director Options.                                                                                                                                                                  
|   
|(4) |  | 45,000 Common Shares issuable upon the exercise of Director Options.                                                                                                                                                                  
|   
|(5) |  | 36,000 Common Shares issuable upon the exercise of Director Options                                                                                                                                                                   




ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

None




ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

A List of Exhibits is included with this Report and is attached hereto.

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AquaPro Corporation




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 October 10, 2002.

|                        |  |                     |  |                                                                                     
|----------------------- |  | ------------------- |  | ------------------------------------------------------------------------------------
|                        |  | AQUAPRO CORPORATION
|                       
|Dated: October 10, 2002 |  | 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.George S. Hastings, Jr.,
Chief Executive Officer, President
(Principal Executive Officer and
Principal Accounting Officer)
and Chairman of the Board |  | October 10, 2002
|   
|By: |  | /s/ Ken OsteboKen Ostebo, Director                                                                                                                                              |  | October 10, 2002

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LIST OF EXHIBITS
AQUAPRO CORPORATION

|                                                                                                                           |  |             |       | 
|-------------------------------------------------------------------------------------------------------------------------- |  | ----------- | ----- | 
|ITEM                                                                                                                       |  | EXHIBIT NO.
|                                                                                                                           |  |            
|Balloon Promissory Note dated May 1, 2001 (8)                                                                              |  |             | 10.19 | 
|Agreement with International Holdings, Inc. and Joseph H. Hale for the
purchase of two farms and Fish Inventory of AquaPro |  |             | 10.21 | 
|Restructuring agreement with Deutsche Financial Services to extend the
payment terms of equipment loans                    |  |             | 10.22 | 
|Loan Amendment agreement with Federal Land Bank of North Mississippi to
extend payments on Land Loans                      |  |             | 10.23 | 
|Memorandum of Understanding with Secured Loans, Inc. to extend the
payment terms of the mortgage on the Hidden Lakes Farm  |  |             | 10.24 | 



|(8) |  | Incorporated by reference to the corresponding Exhibit previously filed
as An Exhibit to Registrants Form
10-KSB filed October 15, 2001.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------

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Consolidated Financial Statements

AquaPro Corporation

Years ended June 30, 2002 and 2001
with Report of Independent Auditors

Report of Independent Auditor

To the Board of Directors
AquaPro Corporation

I have audited the accompanying consolidated balance sheet of AquaPro
Corporation and subsidiaries as of June 30, 2002 and the related consolidated
statement of operations, changes in stockholders equity, and cash flows for
the year then ended. These financial statements are the responsibility of the
Companys management. My responsibility is to express an opinion on these
financial statements based on my audit. The consolidated financial statements
of AquaPro Corporation and subsidiaries as of June 30, 2001, were audited by
other auditors whose report dated October 11, 2001, expressed a going concern
issue on those statements.

I conducted my audits in accordance with auditing standards generally accepted
in the United States. Those standards require that I plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit 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. I believe that my audits provide a reasonable basis
for my opinion.

In my 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, 2002 and 2001, 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 consolidated 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 consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

Paducah, Kentucky
October 9, 20002

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AquaPro Corporation

Notes to Consolidated Financial Statements

June 30, 2002

1. SIGNIFICANT ACCOUNTING POLICIES

BUSINESS

AquaPro Corporation (the Company) and its wholly-owned subsidiaries Circle
Creek Aquaculture, Inc. (Circle Creek) and American Fisheries Corporation
(American) own and operate six 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 2,135 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. Five processors represented 29%,
21%, 13%, 13%, and 7% of the Companys net sales for the fiscal year ended June
30, 2002, and five processors represented 27%, 20%, 18%, 15% and 10% of the
Companys net sales for the fiscal year ended June 30, 2001.

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 accounting principles
generally accepted in the United States 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.

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.

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AquaPro Corporation

Notes to Consolidated Financial Statements (continued)

1. SIGNIFICANT ACCOUNTING POLICIES (continued)

LIVE FISH INVENTORIES (continued)

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, 2001 may not be sold during fiscal
year 2002. Live fish inventories are classified as a current asset in the
accompanying consolidated 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 and capitalized
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.

There were no live fish inventories on hand at June 30, 2002. The Company sold
all of its live fish inventories to International Holdings, Inc. so that the
Company could secure a
line of credit for feed and a line of credit for operations. The Company is
employed to cultivate, harvest, and sell as stated in Note 2.

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AquaPro Corporation

Notes to Consolidated Financial Statements (continued)

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 to 20 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 the consolidated 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 years presented.

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AquaPro Corporation

Notes to Consolidated Financial Statements (continued)

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.

The assets secured by the loan in default to Marvin and Marie Kroeker as
explained in Note 4 have been written down in accordance with FASB statement
No. 121 due to the impairment of expected future cash flows from these assets.

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 adopting this statement in fiscal 2001 was not material
to the consolidated net loss and financial position of the Company.

In June 2001, the FASB issued statements No. 141, Business Combinations, and
No. 142, Goodwill and Other Intangible Assets, effective for fiscal years
beginning after December 15, 2001. Under the new rules, goodwill and
intangible assets deemed to have indefinite lives will no longer be amortized
but will be subject to annual impairment tests in accordance with the
statements. Other intangible assets will continue to be amortized over their
useful lives.

The Company will apply the new rules on accounting for goodwill and other
intangible assets beginning in the first quarter of fiscal 2003. Management
does not anticipate the adoption of the new rules will have a material effect
on the consolidated earnings and financial position of the Company.

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AquaPro Corporation

Notes to Consolidated Financial Statements (continued)

2. GOING CONCERN

The accompanying consolidated 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 fiscal
2002 and 2001, the Company incurred net losses of $9,028,607 and $1,603,833,
respectively, and had aggregate accumulated deficits in operations at June 30,
2002 of $19,678,340. These factors create substantial doubt about the
Companys ability to continue as a going concern.

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.

In 2001 the Company was seeking additional capital for operations and capital
expenditures through collaborative arrangements with corporate partners and/or
individuals. The Company has sold three fish farms in its operations and
rights to options, explained below, to generate cash flow to satisfy creditors
and lenders until the market price for fish becomes more favorable. The
Company made the following transactions to help stabilize its financial
position and eliminate its going concern matter.

Circle Creek Farm and Panther Run Farm were sold for $354,450 to International
Holdings, Inc. on June 27, 2002. The book value less depreciation for these
two farms was $761,313 as of June 27, 2002. For various services provided by
International Holdings, Inc. to the Company, in return the Company has given
him a 3-year option to purchase five farms from the Company for $1,630,000.
These five farms have a book value less depreciation of $3,502,234 as of June
30, 2002.

The Company sold its live fish inventory in June 2002 to International
Holdings, Inc. for $684,309. The Company has employed International Holdings,
Inc. to cultivate, harvest and sell its catfish and International Holdings,
Inc. will provide, at its expense, the necessary feed for the fish.

The Company will pay to International Holdings, Inc. a monthly administrative
and consultant fee of $4,000 plus travel and related expenses until December
31, 2005, and in addition to the monthly fee, a five-year warrant to purchase
600,000 common shares at $.01 per share.

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AquaPro Corporation

Notes to Consolidated Financial Statements (continued)

2. GOING CONCERN (continued)

As fish are sold off of Circle Creek Farm, Panther Run Farm and Cypress Lake
Farm, the proceeds will be divided as follows: The first $785,352 plus
interest on feed line to International Holdings, Inc., plus any feed purchased
over $385,352 for these farms will go to International Holdings, Inc. The next
$548,636 will be divided 50/50 between the Company and International Holdings,
Inc. The next $448,518 will be divided 52% to the Company and 48% to
International Holdings, Inc. All remaining revenues will be divided 67% to
International Holdings, Inc. and 33% to the Company.

As prawns are sold, the proceeds will be allocated as follows:



|A) |  | Global Seafood Technology will receive from the proceeds the cost of the prawns.                                               
|-- |  | -------------------------------------------------------------------------------------------------------------------------------
|  
|B) |  | To the Company the cost of production and to International Holdings, Inc. the cost of
all feed will be taken from the proceeds.
|  
|C) |  | All remaining proceeds will be as follows:                                                                                     

| |  |                                    
| |  | -----------------------------------
| |  | 50% to Global Seafood Technology   
| |  | 25% to the Company                 
| |  | 25% to International Holdings, Inc.

As International Holdings, Inc. sells its live fish inventory from the
remaining farms the proceeds will be allocated as follows:



|A) |  | Reimbursement to International Holdings, Inc. for all fish costs, feed
costs, financing, and interest expense.
|-- |  | --------------------------------------------------------------------------------------------------------------
|  
|B) |  | All remaining proceeds will be allocated 50% to International Holdings,
Inc. and 50% to the Company.          

The Company at its own expense will purchase stockers, fingerlings, and fry, up
to $165,000, which will immediately become the property of International
Holdings, Inc., to be used in a future joint venture with the Company.

No assurance can be given that the market price for fish will be enough to pay
its costs and debt.

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AquaPro Corporation

Notes to Consolidated Financial Statements (continued)

3. INVESTMENTS IN COOPERATIVES

Investments in cooperatives consist of the following:

|                |  |         |         |      |  |   |         | 
|--------------- |  | ------- | ------- | ---- |  | - | ------- | 
|                |  | June 30
|                |  |        
|                |  | 2002    |         | 2001
|                |  |         |         |     
|Fishco, Inc.    |  | $       | 112,000 |      |  | $ | 112,000 | 
|Indi-Bell, Inc. |  |         | 57,240  |      |  |   | 57,240  | 
|                |  |         |         |      |  |   |         | 
|                |  | $       | 169,240 |      |  | $ | 169,240 | 
|                |  |         |         |      |  |   |         | 

The ownership of Fishco, Inc. (Fishco) stock provides the Company the right
to sell live catfish to Fishco. Substantially all of the Companys catfish
feed purchases are from Indi-Bell, Inc.

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 ($117,068 outstanding at June 30,
2002 and $801,414 outstanding at June 30, 2001) and an $800,000 revolving line
of credit ($671,078 outstanding at June 30, 2002 and $747,547 outstanding at
June 30, 2001). Interest accrues at 9.65%. Interest and principal are paid
from collections of accounts receivable applied equally to each line of credit.

On August 29, 2001, the $900,000 and the $800,000 revolving lines of credit
were replaced with a $1,550,000 line of credit to fund feed purchases and a
$990,000 revolving line of credit. Interest accrues at 9.65%. Both lines of
credit matured on October 15, 2001. The lines of credit may be renewed in
30-day increments, at the discretion of the bank.

The Company is in default on a note to Marvin & Marie Kroeker secured by
certain property. The outstanding debt as of 6/30/2002 was $1,710,023. The
property was auctioned on August 9, 2002, and was sold for $270,000. The net
book value of the property sold was $812,262 as of June 30, 2002.

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AquaPro Corporation

Notes to Consolidated Financial Statements (continued)

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

Notes payable-other consists of the following:

|                                                                                                                                                                                                     |  |         |           |      |  |   |           | 
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------- | --------- | ---- |  | - | --------- | 
|                                                                                                                                                                                                     |  | June 30
|                                                                                                                                                                                                     |  |        
|                                                                                                                                                                                                     |  | 2002    |           | 2001
|                                                                                                                                                                                                     |  |         |           |     
|Note payable to an individual with interest payable monthly at 12%
and principal due in April 2003                                                                                                   |  | $       | 600,000   |      |  | $ | 600,000   | 
|Borrowings under a $175,000 credit facility with a financial institution
with interest at 12% and borrowings due six months from the date
of advance                                                 |  |         | 116,012   |      |  |   | 129,841   | 
|Note payable to a corporation with interest at 18%, due on demand                                                                                                                                    |  |         | 100,000   |      |  |   | 100,000   | 
|Notes payable to an officer and director with interest at 12% and no
stated maturity                                                                                                                 |  |         | 110,000   |      |  |   | 110,000   | 
|Notes payable to various financial institutions with interest at variable
rates (12% at June 30, 2002)                                                                                               |  |         | 39,138    |      |  |   | 129,586   | 
|Notes payable to an officer and director with interest at variable rates
(12% at June 30, 2002) and no stated maturity                                                                               |  |         | 209,606   |      |  |   | 209,606   | 
|Note payable to an individual which was in default as of 2002 with
annual payments of $200,000 including interest at prime less 1.75%
(5% at June 30, 2002 and 6% June 30, 2001) maturing April 2014 |  |         | 1,710,023 |      |  |   | 0         | 
|                                                                                                                                                                                                     |  |         |           |      |  |   |           | 
|                                                                                                                                                                                                     |  | $       | 2,884,779 |      |  | $ | 1,279,033 | 
|                                                                                                                                                                                                     |  |         |           |      |  |   |           | 

The weighted average interest rate on short-term borrowings outstanding as of
June 30, 2002 was 13% and as of June 30, 2001 was 13%.

Long-term debt consists of the following:

|                                                                                                                                                                                                 |  |         |           |      |  |   |           | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------- | --------- | ---- |  | - | --------- | 
|                                                                                                                                                                                                 |  | June 30
|                                                                                                                                                                                                 |  |        
|                                                                                                                                                                                                 |  | 2002    |           | 2001
|                                                                                                                                                                                                 |  |         |           |     
|Note payable to a bank with annual principal and interest payments of
approximately $142,000 through 2018; interest accrues at a variable
rate (5.25% at June 30,2002 and 6.5% at June 30, 2001) |  | $       | 1,215,300 |      |  | $ | 1,319,694 | 
|Note payable to a financial institution with monthly principal and
interest payments of $11,750 through 2008 with interest at 13%                                                                |  |         | 596,758   |      |  |   | 604,836   | 
|Note payable to bank with monthly principal and interest payments of
$6,542 through January 2006 with interest at prime plus 5% (11.75%
at June 30, 2002)                                        |  |         | 290,818   |      |  |   | 266,667   | 

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AquaPro Corporation

Notes to Consolidated Financial Statements (continued)

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

|                                                                                                                                                                                                                |  |         |         |      |  |  |           | 
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------- | ------- | ---- |  |  | --------- | 
|                                                                                                                                                                                                                |  | June 30
|                                                                                                                                                                                                                |  |        
|                                                                                                                                                                                                                |  | 2002    |         | 2001
|                                                                                                                                                                                                                |  |         |         |     
|Convertible notes payable with interest due quarterly at 10.35% and
principal due December 2002                                                                                                                 |  |         | 100,000 |      |  |  | 100,000   | 
|Convertible notes payable with interest due quarterly at 10.35% and
principal due December 2003                                                                                                                 |  |         | 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 (8.75% at
June 30, 2002 and 7.75% at June 30, 2001) and is payable semi-annually |  |         | 87,219  |      |  |  | 130,829   | 
|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 $55,000 including interest at rates ranging
from 8.49% to 11.3%, maturing at various dates through 2005               |  |         | 248,659 |      |  |  | 144,692   | 
|Capital lease obligations with quarterly payments aggregating
$16,281 including interest at effective rates of 8.5% to 12.5%
through June 2004                                                                  |  |         | 69,893  |      |  |  | 73,873    | 
|Note payable to an officer and director of the Company with monthly
payments of $3,810 including interest at 8.75%, maturing April 2003                                                                         |  |         | 99,269  |      |  |  | 99,269    | 
|Note payable to a former officer and director for the Company with
monthly payments of $4,000 including interest at 8.75%, maturing
January 2003                                                                |  |         | 29,792  |      |  |  | 73,102    | 
|Notes payable to various banks and finance companies with monthly
payments aggregating $8,174 including interest at rates ranging from
7.6% to 11.5%, maturing at various dates through July 2004               |  |         | 62,731  |      |  |  | 104,257   | 
|Note payable to an individual which was in default as of 2002 with
annual payments of $200,000 including interest at prime less 1.75%
(5% at June 30, 2002 and 6% at June 30, 2001) maturing April 2014         |  |         | 0       |      |  |  | 1,710,023 | 

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AquaPro Corporation

Notes to Consolidated Financial Statements (continued)

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

|                                                                                                                                                                                           |  |         |           |      |  |   |           | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------- | --------- | ---- |  | - | --------- | 
|                                                                                                                                                                                           |  | June 30
|                                                                                                                                                                                           |  |        
|                                                                                                                                                                                           |  | 2002    |           | 2001
|                                                                                                                                                                                           |  |         |           |     
|Note payable to bank with annual principal and interest payments of
$84,845 through 2020 with interest at 4.75%                                                                            |  |         | 783,555   |      |  |   | 783,555   | 
|Notes payable to individuals with monthly payments aggregating
$3,449 including interest at 8%, maturing May 2002                                                                          |  |         | 44,384    |      |  |   | 42,808    | 
|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 |  |         | 118,509   |      |  |   | 178,864   | 
|                                                                                                                                                                                           |  |         |           |      |  |   |           | 
|                                                                                                                                                                                           |  |         | 4,135,692 |      |  |   | 6,021,274 | 
|Less current maturities                                                                                                                                                                    |  |         | 1,429,327 |      |  |   | 1,210,247 | 
|                                                                                                                                                                                           |  |         |           |      |  |   |           | 
|                                                                                                                                                                                           |  | $       | 2,706,365 |      |  | $ | 4,811,027 | 
|                                                                                                                                                                                           |  |         |           |      |  |   |           | 

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 on the
note payable to bank and long-term debt. The Company has sold its live
inventories in 2002 to International Holdings, Inc. as explained in Note 2, but
the live fish inventories still remain as collateral on the debt. The Company
is required, by provisions of certain of the loan agreements, to maintain
annually minimum net worth, current and debt service coverage ratios, which
were not met as of June 30, 2002. The Company obtained a waiver of those
covenants through June 30, 2003.

The aggregate annual maturities of long-term debt at June 30, 2002 are as
follows:

|           |      |   |           |           | 
|---------- | ---- | - | --------- | --------- | 
|           | 2003 |   | $         | 1,037,998 | 
|           | 2004 |   |           | 577,109   | 
|           | 2005 |   |           | 319,378   | 
|           | 2006 |   |           | 252,854   | 
|           | 2007 |   |           | 204,609   | 
|Thereafter |      |   | 1,743,744 |          
|           |      |   |           |          
|           |      | $ | 4,135,692 |          
|           |      |   |           |          

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AquaPro Corporation

Notes to Consolidated Financial Statements (continued)

5. COMMON STOCK

During fiscal 2002 and 2001, the Company granted to
key employees 12,000 shares
of common stock and 18,000 shares of common stock at $0.07 to $0.25 and $0.49
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.

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, 2002 and 2001 as
follows:

|                             |  |  |           |  |                |  |                  |  | 
|---------------------------- |  |  | --------- |  | -------------- |  | ---------------- |  | 
|                             |  |  |           |  |                |  | Weighted Average
|                             |  |  | Shares    |  | Exercise Price
|                             |  |  |           |  |               
|Outstanding at July 1, 2000  |  |  | 1,147,000 |  |                |  | 1.50             | 
|Granted                      |  |  | 130,000   |  |                |  | .50              | 
|                             |  |  |           |  |                |  |                  | 
|Outstanding at June 30, 2001 |  |  | 1,327,000 |  |                |  | 1.40             | 
|Granted                      |  |  | 88,000    |  |                |  | .11              | 
|                             |  |  |           |  |                |  |                  | 
|Outstanding at June 30, 2002 |  |  | 1,415,000 |  |                |  | 1.33             | 

Following is a summary of the status of options outstanding at June 30, 2002:

|            |              |           |  |                  |  |                  |                  |  |   |      |  |  | 
|----------- | ------------ | --------- |  | ---------------- |  | ---------------- | ---------------- |  | - | ---- |  |  | 
|            |              |           |  |                  |  |                  | Weighted Average |  |   |      | 
|Exercise    |              | Number of |  | Remaining        |  | Weighted Average
|Price Range |              | Shares    |  | Contractual Life |  | Exercise Price  
|            |              |           |  |                  |  |                 
|$           | .07 - $ .25  |           |  | 88,000           |  |                  | 6 years          |  | $ | .11  | 
|            | .38 -    .63 |           |  | 130,000          |  |                  | 5 years          |  |   | .50  | 
|            | .56 -  1.25  |           |  | 432,000          |  |                  | 4 years          |  |   | .84  | 
|            | .69 -  1.88  |           |  | 341,000          |  |                  | 3 years          |  |   | .94  | 
|            | 2.84 -  3.25 |           |  | 250,000          |  |                  | 2 years          |  |   | 3.05 | 
|            | 2.00         |           |  | 174,000          |  |                  | 1 year           |  |   | 2.00 | 

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AquaPro Corporation

Notes to Consolidated Financial Statements (continued)

6. EMPLOYEE STOCK OPTIONS (continued)

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,
2008. The weighted average remaining life of the options is 4.1 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 3.277 and 1.852 for fiscal
2002 and 2001, respectively; weighted-average expected life of options of three
years; risk-free interest rate of 6%; and no dividend yield.

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, 2002 and 2001 is amortized to
expense over the vesting period. The Companys pro forma net losses were
$9,038,287 and $1,668,833 for the fiscal years ended June 30, 2002 and 2001,
respectively, and the Companys pro forma basic and diluted loss per common
share was $1.83 and $.34, respectively, for those same periods. The weighted
average fair value of options granted during the fiscal years ended June 30,
2002 and 2001 was $.11 and $.50, respectively.

7. INCOME TAXES

The Company has consolidated net operating loss carryforwards for income tax
purposes of approximately $22,610,000 at June 30, 2002, which expire at various
dates through 2023.

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AquaPro Corporation

Notes to Consolidated Financial Statements (continued)

7. INCOME TAXES (continued)

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

|                                                |                                   |   |            |           |      |   |            |           |  
|----------------------------------------------- | --------------------------------- | - | ---------- | --------- | ---- | - | ---------- | --------- | -
|                                                |                                   |   | June 30   
|                                                |                                   |   |           
|                                                |                                   |   | 2002       |           | 2001
|                                                |                                   |   |            |           |     
|Deferred tax assets (liabilities)  noncurrent: |                                   |   |            |           |      |   |            |          
|                                                | Net operating loss carryforward   |   | $          | 9,310,000 |      |   | $          | 4,907,000 |  
|                                                | Goodwill for income tax purposes  |   |            | 278,000   |      |   |            | 310,000   |  
|                                                | Property, buildings and equipment |   |            | (191,000  | )    |   |            | (189,000  | )
|                                                | Other                             |   |            | 14,000    |      |   |            | 22,000    |  
|                                                |                                   |   |            |           |      |   |            |           |  
|                                                |                                   |   | 9,411,000  |           |      |   | 5,050,000  |          
|Valuation allowance for deferred tax assets     |                                   |   | (9,411,000 | )         |      |   | (5,050,000 | )        
|                                                |                                   |   |            |           |      |   |            |           |  
|Net deferred tax assets                         |                                   | $ |           |           |      | $ |           |          
|                                                |                                   |   |            |           |      |   |            |           |  

8. FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts for cash and cash equivalents approximate their fair
values at June 30, 2002 and 2001. The carrying amount for investments in
cooperatives approximates their fair value at June 30, 2002 and 2001 based upon
estimates of recent sales of stock of the cooperatives obtained by management.

The fair value of notes payable 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, 2002 and 2001.

9. EXTRAORDINARY LOSS

The sale of the live fish inventory as stated in Note 2 were sold so that a
feed line of credit and an operating line of credit could be established and
that the production costs might be recoverable as the fish inventories are sold
off in the future by International Holdings, Inc. The occurrence of this item
is infrequent and management has accounted it as such an item.

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AquaPro Corporation

Notes to Consolidated Financial Statements (continued)

9. EXTRAORDINARY LOSS (continued)

Sale of live fish inventory

|                               |  |   |            |  
|------------------------------ |  | - | ---------- | -
|Sales price                    |  | $ | 684,309    |  
|Live inventory                 |  |   | 4,624,083  |  
|                               |  |   |            |  
|Loss on sale of live inventory |  | $ | (3,939,774 | )
|                               |  |   |            |  

The sale of the three farms as stated in Note 2 has been accounted by
management as an infrequent item. Management is in the process of
restructuring its debt so that it may try to improve its cash flow to meet
current and future obligations.

Sale of Circle Creek & Panther Run Farms

|                      |  |   |          |  
|--------------------- |  | - | -------- | -
|Basis of farms sold   |  | $ | 761,313  |  
|Sales price           |  |   | 354,450  |  
|                      |  |   |          |  
|Loss on sale of farms |  | $ | (406,863 | )

Sale of Cypress Lake Farm

|                     |  |   |          |  
|-------------------- |  | - | -------- | -
|Basis of farm sold   |  | $ | 471,766  |  
|Sales price          |  |   | 329,536  |  
|                     |  |   |          |  
|Loss on sale of farm |  | $ | (142,230 | )
|                     |  |   |          |  

Extraordinary Item

|                          |  |   |            |  
|------------------------- |  | - | ---------- | -
|Loss on sale of inventory |  | $ | (3,939,774 | )
|Loss on sale of farms     |  |   | (549,093   | )
|                          |  |   |            |  
|Extraordinary loss        |  | $ | (4,488,867 | )
|                          |  |   |            |  

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AquaPro Corporation

Consolidated Balance Sheets

|                                   |                           |   |           |           |      |   |            |           | 
|---------------------------------- | ------------------------- | - | --------- | --------- | ---- | - | ---------- | --------- | 
|                                   |                           |   | JUNE 30  
|                                   |                           |   |          
|                                   |                           |   | 2002      |           | 2001
|                                   |                           |   |           |           |     
|ASSETS                             |                           |   |           |           |      |   |            |          
|Current assets:                    |                           |   |           |           |      |   |            |          
|                                   | Cash and cash equivalents |   | $         | 8,246     |      |   | $          | 810       | 
|                                   | Trade accounts receivable |   |           |          |      |   |            | 85,625    | 
|                                   | Other receivables         |   |           | 2,232     |      |   |            | 91,418    | 
|                                   | Live fish inventories     |   |           |          |      |   |            | 6,872,915 | 
|                                   | Notes receivable          |   |           | 1,037,309 |      |   |            |          | 
|                                   | Prepaid expenses          |   |           | 2,205     |      |   |            | 60,217    | 
|                                   |                           |   |           |           |      |   |            |          
|Total current assets               |                           |   | 1,049,992 |           |      |   | 7,110,985  |          
|Property, buildings and equipment: |                           |   |           |           |      |   |            |          
|                                   | Land                      |   |           | 1,852,387 |      |   |            | 2,550,314 | 
|                                   | Ponds and improvements    |   |           | 3,046,660 |      |   |            | 4,352,957 | 
|                                   | Buildings                 |   |           | 534,882   |      |   |            | 602,745   | 
|                                   | Machinery and equipment   |   |           | 3,443,817 |      |   |            | 4,186,171 | 
|                                   |                           |   |           |           |      |   |            |          
|                                   |                           |   | 8,877,746 |           |      |   | 11,692,187 |          
|                                   | Accumulated depreciation  |   |           | 4,511,969 |      |   |            | 4,666,525 | 
|                                   |                           |   |           |           |      |   |            |          
|                                   |                           |   | 4,365,777 |           |      |   | 7,025,662  |          
|Investments in cooperatives        |                           |   | 169,240   |           |      |   | 169,240    |          
|Other investments                  |                           |   | 44,440    |           |      |   |           |          
|Other assets                       |                           |   | 81,092    |           |      |   | 178,272    |          
|                                   |                           |   |           |           |      |   |            |          
|                                   |                           |   | 294,772   |           |      |   | 347,512    |          
|                                   |                           |   |           |           |      |   |            |          
|Total assets                       |                           | $ | 5,710,541 |           |      | $ | 14,484,159 |          
|                                   |                           |   |           |           |      |   |            |          

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|                                           |                                                                                                                                             |        |            |             |           |      |            |             |           | 
|------------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------------- | ------ | ---------- | ----------- | --------- | ---- | ---------- | ----------- | --------- | 
|                                           |                                                                                                                                             |        |            | JUNE 30    
|                                           |                                                                                                                                             |        |            |            
|                                           |                                                                                                                                             |        |            | 2002        |           | 2001
|                                           |                                                                                                                                             |        |            |             |           |     
|LIABILITIES AND STOCKHOLDERS EQUITY       |                                                                                                                                             |        |            |             |           |      |            |            
|Current liabilities:                       |                                                                                                                                             |        |            |             |           |      |            |            
|                                           | Notes payable:                                                                                                                              |        |            |             |           |      |            |             |          
|                                           |                                                                                                                                             | Bank   |            | $           | 788,146   |      |            | $           | 1,548,961 | 
|                                           |                                                                                                                                             | Others |            |             | 2,884,779 |      |            |             | 1,279,033 | 
|                                           | Accounts payable                                                                                                                            |        |            | 1,436,363   |           |      |            | 740,503     |          
|                                           | Accured expenses                                                                                                                            |        |            | 750,187     |           |      |            | 159,240     |          
|                                           | Current maturities of long-term debt                                                                                                        |        |            | 1,429,327   |           |      |            | 1,210,247   |          
|                                           |                                                                                                                                             |        |            |             |           |      |            |            
|Total current liabilities                  |                                                                                                                                             |        | 7,288,802  |             |           |      | 4,937,984  |            
|Long-term debt, less current maturities    |                                                                                                                                             |        | 2,706,365  |             |           |      | 4,811,027  |            
|Stockholders equity:                      |                                                                                                                                             |        |            |             |           |      |            |            
|                                           | Series A Preferred Stock, no par value -
authorized 900,000 shares, cumulative,
convertible, 590,623 issued, none
outstanding               |        |            |            |           |      |            |            |          
|                                           | Series B Preferred Stock, no par value -
authorized 12,500 shares, cumulative,
convertible, none 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 4,935,273 and 4,923,273
shares at June 30, 2002 and 2001 |        |            | 15,393,714  |           |      |            | 15,392,064  |          
|                                           | Unearned compensation                                                                                                                       |        |            |            |           |      |            | (7,183      | )        
|                                           | Retained earnings (deficit)                                                                                                                 |        |            | (19,678,340 | )         |      |            | (10,649,733 | )        
|                                           |                                                                                                                                             |        |            |             |           |      |            |            
|Total stockholders equity                 |                                                                                                                                             |        | (4,284,626 | )           |           |      | 4,735,148  |            
|                                           |                                                                                                                                             |        |            |             |           |      |            |            
|Total liabilities and stockholders equity |                                                                                                                                             | $      | 5,710,541  |             |           | $    | 14,484,159 |            
|                                           |                                                                                                                                             |        |            |             |           |      |            |            

See accompanying notes.

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AquaPro Corporation

Consolidated Statements of Changes in Stockholders Equity

|                                                                                |  |              |           |          |  |              |            |               |  |        |        |   |  |   |             |   |  |   |            |  
|------------------------------------------------------------------------------- |  | ------------ | --------- | -------- |  | ------------ | ---------- | ------------- |  | ------ | ------ | - |  | - | ----------- | - |  | - | ---------- | -
|                                                                                |  | Common Stock |           |          |  |              |            | Retained      |  | Total 
|                                                                                |  |              |           | Unearned |  | Earnings     |            | Stockholders
|                                                                                |  | Shares       |           | Amount   |  | Compensation |            | (Deficit)     |  | Equity
|                                                                                |  |              |           |          |  |              |            |               |  |       
|Balance at July 1, 2000                                                         |  |              | 4,905,273 |          |  | $            | 15,383,334 |               |  | $      | (8,320 | ) |  | $ | (9,045,900  | ) |  | $ | 6,329,114  |  
|Net loss for the year ended June 30, 2001                                       |  |              |           |          |  |              |            |               |  |        |        |   |  |   | (1,603,833  | ) |  |   | (1,603,833 | )
|Common stock issued to employees
for future services                            |  |              | 18,000    |          |  |              | 8,730      |               |  |        | (8,730 | ) |  |   |             |   |  |   |            |  
|Amortization of unearned compensation                                           |  |              |           |          |  |              |            |               |  |        | 9,867  |   |  |   |             |   |  |   | 9,867      |  
|Conversion of preferred stock
warrants to common stock
Issuance of common stock |  |              |           |          |  |              |            |               |  |        |        |   |  |   |             |   |  |   |            |  
|                                                                                |  |              |           |          |  |              |            |               |  |        |        |   |  |   |             |   |  |   |            |  
|Balance at June 30, 2001                                                        |  |              | 4,923,273 |          |  |              | 15,392,064 |               |  |        | (7,183 | ) |  |   | (10,649,733 | ) |  |   | 4,735,148  |  
|Net loss for the year ended June 30, 2002                                       |  |              |           |          |  |              |            |               |  |        |        |   |  |   | (9,028,607  | ) |  |   | (9,028,607 | )
|Common stock issued to employees
and directors for future services              |  |              | 12,000    |          |  |              | 1,650      |               |  |        |       |   |  |   |             |   |  |   | 1,650      |  
|Amortization of unearned compensation                                           |  |              |           |          |  |              |            |               |  |        | 7,183  |   |  |   |             |   |  |   | 7,183      |  
|                                                                                |  |              |           |          |  |              |            |               |  |        |        |   |  |   |             |   |  |   |            |  
|Balance at June 30, 2002                                                        |  |              | 4,935,273 |          |  | $            | 15,393,714 |               |  | $      |       |   |  | $ | (19,678,340 | ) |  | $ | (4,284,626 | )
|                                                                                |  |              |           |          |  |              |            |               |  |        |        |   |  |   |             |   |  |   |            |  

See accompanying notes.

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AquaPro Corporation

Consolidated Statements of Operations

|                                                             |                                   |   |                    |            |      |   |            |          |  
|------------------------------------------------------------ | --------------------------------- | - | ------------------ | ---------- | ---- | - | ---------- | -------- | -
|                                                             |                                   |   | YEAR ENDED JUNE 30
|                                                             |                                   |   |                   
|                                                             |                                   |   | 2002               |            | 2001
|                                                             |                                   |   |                    |            |     
|Net sales                                                    |                                   | $ | 3,990,198          |            |      | $ | 4,787,464  |         
|Cost of products sold                                        |                                   |   | 5,220,473          |            |      |   | 4,515,331  |         
|                                                             |                                   |   |                    |            |      |   |            |         
|Gross profit                                                 |                                   |   | (1,230,275         | )          |      |   | 272,133    |         
|Selling, general and administrative                          |                                   |   | 1,357,444          |            |      |   | 1,361,249  |         
|                                                             |                                   |   |                    |            |      |   |            |         
|Operating income (loss)                                      |                                   |   | (2,587,719         | )          |      |   | (1,089,116 | )       
|Other income (expense):                                      |                                   |   |                    |            |      |   |            |         
|                                                             | Interest expense                  |   |                    | (1,512,461 | )    |   |            | (790,527 | )
|                                                             | Patronage dividends               |   |                    |           |      |   |            | 249,833  |  
|                                                             | Other, net                        |   |                    | 102,702    |      |   |            | 25,977   |  
|                                                             |                                   |   |                    |            |      |   |            |         
|                                                             |                                   |   | (1,409,759         | )          |      |   | (514,717   | )       
|                                                             |                                   |   |                    |            |      |   |            |         
|Loss before loss on impairments
and extraordinary item       |                                   |   | (3,997,478         | )          |      |   | (1,603,833 | )       
|                                                             |                                   |   |                    |            |      |   |            |         
|                                                             | Loss on impairment                |   |                    | (542,262   | )    |   |            |         |  
|                                                             | Extraordinary item  loss on sale |   |                    | (4,488,867 | )    |   |            |         |  
|                                                             |                                   |   |                    |            |      |   |            |         
|                                                             |                                   |   | (5,031,129         | )          |      |   |           |         
|                                                             |                                   |   |                    |            |      |   |            |         
|Net loss                                                     |                                   | $ | (9,028,607         | )          |      | $ | (1,603,833 | )       
|                                                             |                                   |   |                    |            |      |   |            |         
|Basic and diluted net loss per common share                  |                                   | $ | (1.82              | )          |      | $ | (0.33      | )       
|                                                             |                                   |   |                    |            |      |   |            |         
|Weighted average basic and diluted
common shares outstanding |                                   |   | 4,930,752          |            |      |   | 4,917,243  |         
|                                                             |                                   |   |                    |            |      |   |            |         

See accompanying notes.

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AquaPro Corporation

Consolidated Statements of Cash Flows

|                                                                                          |                                              |                                                                              |            |                    |            |      |            |         |          |  
|----------------------------------------------------------------------------------------- | -------------------------------------------- | ---------------------------------------------------------------------------- | ---------- | ------------------ | ---------- | ---- | ---------- | ------- | -------- | -
|                                                                                          |                                              |                                                                              |            | YEAR ENDED JUNE 30
|                                                                                          |                                              |                                                                              |            |                   
|                                                                                          |                                              |                                                                              |            | 2002               |            | 2001
|                                                                                          |                                              |                                                                              |            |                    |            |     
|OPERATING ACTIVITIES                                                                      |                                              |                                                                              |            |                    |            |      |            |        
|Net loss                                                                                  |                                              | $                                                                            | (9,028,607 | )                  |            | $    | (1,603,833 | )      
|Adjustments to reconcile net loss to net cash provided by
(used in) operating activities: |                                              |                                                                              |            |                    |            |      |            |        
|                                                                                          | Depreciation and amortization                |                                                                              |            | 815,726            |            |      |            | 902,040 |         
|                                                                                          | Loss (gain) on disposal of assets            |                                                                              |            | 1,177,993          |            |      |            | (30,092 | )       
|                                                                                          | Changes in operating assets and liabilities: |                                                                              |            |                    |            |      |            |         |         
|                                                                                          |                                              | (Increase) decrease in trade accounts receivable                             |            |                    | 85,625     |      |            |         | 402,362  |  
|                                                                                          |                                              | (Increase) decrease in live fish inventories                                 |            |                    | 6,872,915  |      |            |         | (932,949 | )
|                                                                                          |                                              | (Increase) decrease in notes receivable                                      |            |                    | (1,037,309 | )    |            |         |         |  
|                                                                                          |                                              | (Increase) decrease in prepaid expenses,
other receivables, and other assets |            |                    | 147,113    |      |            |         | (29,413  | )
|                                                                                          |                                              | Increase in accounts payable and accrued expenses                            |            |                    | 1,286,806  |      |            |         | 356,231  |  
|                                                                                          |                                              |                                                                              |            |                    |            |      |            |        
|Net cash provided by (used in) operating activities                                       |                                              |                                                                              | 320,262    |                    |            |      | (935,654   | )      
|INVESTING ACTIVITIES                                                                      |                                              |                                                                              |            |                    |            |      |            |        
|Purchases of property and equipment                                                       |                                              |                                                                              | (995       | )                  |            |      | (103,817   | )      
|Proceeds from disposals of fixed assets                                                   |                                              |                                                                              | 683,986    |                    |            |      | 88,643     |        
|                                                                                          |                                              |                                                                              |            |                    |            |      |            |        
|Net cash used in investing activities                                                     |                                              |                                                                              | 682,991    |                    |            |      | (15,174    | )      
|FINANCING ACTIVITIES                                                                      |                                              |                                                                              |            |                    |            |      |            |        
|Net increase (decrease) in notes payable                                                  |                                              |                                                                              | (1,321,559 | )                  |            |      | 1,479,316  |        
|Principal payments on long-term borrowings                                                |                                              |                                                                              | 316,908    |                    |            |      | (1,507,965 | )      
|Proceeds from long-term borrowings                                                        |                                              |                                                                              |           |                    |            |      | 933,683    |        
|Net increase (decrease) in common stock and
unearned compensation and consulting fees     |                                              |                                                                              | 8,834      |                    |            |      |            |        
|                                                                                          |                                              |                                                                              |            |                    |            |      |            |        
|Net cash provided by (used in) financing activities                                       |                                              |                                                                              | (995,817   | )                  |            |      | 905,034    |        
|                                                                                          |                                              |                                                                              |            |                    |            |      |            |        
|Net decrease in cash and cash equivalents                                                 |                                              |                                                                              | 7,436      |                    |            |      | (45,794    | )      
|Cash and cash equivalents at beginning of year                                            |                                              |                                                                              | 810        |                    |            |      | 46,604     |        
|                                                                                          |                                              |                                                                              |            |                    |            |      |            |        
|Cash and cash equivalents at end of year                                                  |                                              | $                                                                            | 8,246      |                    |            | $    | 810        |        
|                                                                                          |                                              |                                                                              |            |                    |            |      |            |        
|SUPPLEMENTAL CASH FLOW INFORMATION-                                                       |                                              |                                                                              |            |                    |            |      |            |        
|Interest paid                                                                             |                                              | $                                                                            | 938,769    |                    |            | $    | 758,000    |        
|                                                                                          |                                              |                                                                              |            |                    |            |      |            |        
|NON-CASH FINANCING ACTIVITIES                                                             |                                              |                                                                              |            |                    |            |      |            |        
|Common stock issued to employees for future services                                      |                                              | $                                                                            | 1,650      |                    |            | $    | 8,730      |        
|                                                                                          |                                              |                                                                              |            |                    |            |      |            |        

See accompanying notes.

43