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

                                   FORM 10-KSB

(Mark One)

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

         For the fiscal year ended June 30, 2001

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

         For the transition period from

                         Commission File Number 0-29258

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

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

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

         Issuer's telephone number (662) 569-3331

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

         Title of each class           Name of each exchange on which
                                       registered

                 None                                   None

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

                           Common Stock, no par value
                                (Title of Class)

         Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]

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

         State issuer's revenues for its most recent fiscal year $4,787,464

         The aggregate market value of the voting stock held by non affiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock as of August 31, 2000 was $784,843, based on
the last sale price of $.16 as reported by the NASD Over the Counter Bulletin
Board.

         As of August 31, 2001, Registrant had outstanding 4,923,273 shares of
common stock, its only class of common equity outstanding.

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

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

PART II  ....................................................................................................     -20-
         Item 5   Market for Common Equity and Related Stockholder Matters...................................     -20-
         Item 6.  Management's Discussion and Analysis or Plan of Operation..................................     -21-
         Item 7.  Financial Statements.......................................................................     -27-
         Item 8.  Changes In and Disagreements With Accountants on Accounting and Financial Disclosure.......     -27-

PART III ....................................................................................................     -28-
         Item 9.  Directors, Executive Officers, Promoters and Control Persons, Compliance with
                  Section 16(a) of the Exchange Act..........................................................     -30-
         Item 10. Executive Compensation.....................................................................     -30-
         Item 11. Security Ownership of Certain Beneficial Owners and Management.............................     -33-
         Item 12. Certain Relationships and Related Transactions.............................................     -34-
         Item 13. Exhibits and Reports on Form 8-K...........................................................     -34-
         LIST OF EXHIBITS....................................................................................     -35-
         FINANCIAL STATEMENTS................................................................................     -38-
</TABLE>



<PAGE>
                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

GENERAL

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

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

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

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

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


                                      -1-
<PAGE>
the normal catfish Aquaculture business cycle and thus more accurately reflect
the Company's performance in its business segment.

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

THE CATFISH FARMING INDUSTRY

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

         According to the National Fisheries Institute, farm-raised catfish now
ranks as the fifth most popular seafood in America, with a per capita annual
consumption of one and one tenth pound. The National Agricultural Statistic
Service ("NASS") of the Agricultural Statistic Board, U.S. Department of
Agriculture, has released survey data for the catfish farming industry for 2000.
NASS reports that catfish growers in the fifteen (15) selected states had total
sales of $501 million during 2000, an increase of 2.6% over the $488 million
sold in 1999. NASS also reports that during January 1, 2001 through June 30,
2000, water acres used for catfish production totaled 190,320 acres, an increase
of .5% percent from the previous year.

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

                  HISTORIC AVERAGE PROCESSOR PRICE FOR CATFISH

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

                    1986                      66.8
                    1987                      61.8
                    1988                      76.4
                    1989                      71.5
                    1990                      77.3
                    1991                      63.1
                    1992                      60.0
                    1993                      71.0
                    1994                      78.9
                    1995                      78.8
                    1996                      77.0
                    1997                      71.2
                    1998                      74.2
                    1999                      73.7
                    2000                      75.1
                    2001  (through 6/30)      68.9
</TABLE>


                                      -2-
<PAGE>
         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, 2001, five processors represented 27%, 20%, 18%, 15%, and 10% respectively,
of the Company's net sales. For the year ended June 30, 2000, three processors
represented 36%, 32%, and 14%, respectively, of the Company's net sales. These
cooperatives sell processed catfish both to retail groceries and to the food
service industry.

THE COMPANY'S CATFISH FARMING OPERATIONS

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

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

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

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


                                      -3-
<PAGE>
price), catfish are most easily grown in a location where average daily water
temperatures are above 70(degree) for at least 180 days a year, with at least
120 days above 80(degree). Thus, climate is one reason for choosing the
Mississippi Delta region to grow the fish. When the water approaches 50(degree)
Fahrenheit, feeding activity slows, almost stopping as temperature drops
further. In the Mississippi Delta region, the heaviest feeding times are spring,
summer, and fall. (Channel catfish can survive, however, for long periods of
time at water temperatures ranging from just above freezing to about
104(degree)).

         The Company cultures its fry, fingerlings, and stockers until they
reach marketable size (or weight). Within the catfish farming industry, three
sizes of food-size fish are recognized. Large food-size catfish are 3 pounds and
above. Medium food-size catfish are 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 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. As catfish are sold,
additional fry and fingerlings will be purchased periodically to restock the
ponds. Generally, the Company would replace inventory with 5" to 6" fingerlings.
This is because, for production during a full growing season, it is generally
more efficient to purchase 5" to 6" fingerlings than to devote one or more of
the Company's ponds to catfish spawning. The price paid for fingerlings ranges
between .75(cent) and 1.50(cent) per inch. Management anticipates that this
price range will remain fairly constant. However, fry are much less costly than
larger stock-size fish, and where ponds are newly refurbished or reworked they
are sterile and ideal for growing fry-size fish.

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

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


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

         Feed prices can vary greatly from year to year. In 1995, feed prices
averaged $235 per ton plus $8.00 delivery costs. Increases in soybean, corn and
wheat prices in 1996 and early 1997 pushed feed prices to $287 per ton in early
1997. In 1999, decreases in soybean, corn and wheat prices had caused feed
prices to decrease to approximately $190 per ton. In early 2000, feed prices
started to rise again. The Company booked 10,000 tons (its approximate feed
needs from May 2000 through early 2001) at $209 per ton and an additional 5,000
tons for 2001 at $202 per ton Feed prices have a direct relationship with the
Company's costs of products sold. The price of feed is subject to crop yields,
which cannot be predicted with certainty. In order to help control its feed
costs, the Company owns shares in Indi-Bell Feed Mill Cooperative ("Delta
Western"). As a member of this Cooperative, the Company has the opportunity to
buy feed at wholesale prices and to purchase feed on an "as needed" basis on two
days' prior notice. Thus, the Company can avoid having to purchase and store
large amounts of catfish feed in order to lock in current prices. The Delta
Western Cooperative has over 250 members. This cooperative hedges against price
fluctuations for its members through the purchase of futures option contracts on
the Chicago Board of Trade Futures Exchange. Through the end of its feeding
season for fiscal 2001, the Company averaged $205 per ton plus $8 per ton
delivery costs.


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

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

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

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


                                      -5-
<PAGE>
minutes. The processing plants pay an agreed upon price per pound for the
delivered fish. The Company transports some of it fish directly to processors.
Those not carried by AquaPro's own trucks are delivered by trucks hired by the
processing company that is buying that particular load of fish. The customary
fee for hauling is one and one half cents per pound. The Company maintains one
seining crew for movement of fish between its own ponds and farms. In past years
the company maintained up to two more seining crews and the trucks and equipment
to support them. At the request of management, the board of directors approved
eliminating the two extra crews and outsourcing this work by the hiring of Grice
Seining, Inc. to perform the majority of seining services for sales to
processors. James Grice, one of AquaPro's directors is the owner and president
of that company.

Grice Seining charges the industry standard of the greater of three cents
($.03) per pound or $100 per hour for the services of his crew.  For fiscal
2001 the Company paid Grice Seining, Inc. $181,213.  In July of 2001 the
Company and Mr. Grice reached a new agreement whereby Mr. Grice would resign
from the Company's board of directors and provide contract fish selling
services for the Company.  Mr. Grice receives three quarters of one cent
($.0075) for each pound of fish sold by the Company.  Mr. Grice provides his
own transportation, phone, fuel, and all other expenses involved in the
selling of 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. The Company is
still interested in owning an interest in a processing plant and is in
discussions with other farmers concerning joint ownership of this or other
facilities. However, there is no assurance that the Company will be able to open
a processing plan or that it would be profitable.

         The Company seeks to restock its ponds annually in order to maintain
the optimum population within each pond. At any time, each pond will have fish
at various stages of growth. The cycle from fingerling to ideal processing size
(1.5 lbs. to 2.0 lbs.) generally takes 18-20 months.

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

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

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

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


                                      -6-
<PAGE>
disproportionate amount of feed. Published industry data from MSUES and MAFES
provide the percentage of their body weight catfish eat at each feeding
depending on the size of fish. The feeding may also be affected by water
temperature, water quality, disease, and frequency of feeding. Based on the
factors described above, the pounds of live fish in a pond can be determined by
the quantity of feed the fish consume.

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

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

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

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

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


                                      -7-
<PAGE>
RECENT DEVELOPMENTS


         COMMUNITY BANK CREDIT LINE. Effective April 2001 the Company obtained
two revolving lines of credit totaling $1,700,000 from Community Bank in
Indianola, Mississippi (the "Bank"). The Company intends to fund its operations
primarily through fish sales, working capital, and the $1,700,000 lines of
credit with the Bank. One line of credit of $900,000 is to provide financing for
catfish feed purchases from Delta Western and the other for $800,000 is to be
used for catfish production. Borrowings under both lines of credit bear interest
at 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 has an account with the
Bank into which the Company must deposit 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 is applied to the production line
of credit. Borrowings under the lines of credit are represented by the Company's
promissory notes, which are 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 policies 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 customers 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 mature October 15, 2001
and may be renewed in 30-day increments at the discretion of the Bank. As
discussed above, the Company's feed and production lines of credit require that
50 percent of all collections of accounts receivable be applied to the
outstanding balance of each until paid.

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. The Company
has utilized short-term debt to operate the farm.



The Company has been able to feed its live fish inventories throughout the 2001
feeding season. However, vendor debt has again increased and cash flow problems
continue.
The Company refinanced the mortgage on its Hidden Lakes farm in January 2001.
The land and ponds from that farm are pledged under a mortgage of $604,836 with
a private local lender. The mortgage bears interest at 13% and is repayable at
the rate of $11,750 per month. The equipment of the Hidden Lakes farm is pledged
on a $266,667 note to Union Planters Bank. The note bears interest at 11.75% and
is repayable at $6,542 per month.

As of late September 2001, the Company has reached the limit on its $990,000
production line of credit and had available borrowings under its feed line of
credit of approximately $200,000.

The Company has a $175,000 ($129,841 used at June 30, 2001) unsecured credit
facility from a creditor that manages short-term loans to businesses. Loan
proceeds are paid directly to the Company's vendors, and the Company repays
proceeds and loan fees of 2 1/2% to the creditor over a period of six months.
Borrowings bear interest at 12% per annum. During the year ending June 30, 2001
the Company used these funds to pay various vendors and for fish seining
services. It is not known whether the creditor will continue to provided this
facility. *

As of late September 2001, the Company is past due on certain accounts and notes
payable. The Company has been in contact with its creditors and management has
obtained agreements for extended terms where possible, and to its knowledge, is
not a party to any creditor lawsuits. * As of late September 2001 the feeding
season was drawing to a close. As the weather cools feeding stops as well as the
need for almost constant electric aeration. * Most production costs are expected
to drop to their lowest levels through the winter into early spring. *
Historically, the Company's greatest sales levels occur during the months of
October through March and the Company expects high sales in this period this
fiscal year. *

The Company attempted to raise additional capital in the spring and summer of
2001 through a private placement offering of preferred stock, but was
unsuccessful.

Notwithstanding the above, management believes that additional capital or
restructuring of the timing of payments of the Company's obligations will be
necessary to alleviate the operational difficulties from cash flows being
limited by collections on accounts receivable being applied to the Company's
lines of credit (see Note 4), high interest rate debt, and to fund the Company's
growth. The Company is seeking additional capital for operations and capital
expenditures through equity or debt financing, collaborative arrangements with
corporate partners, equipment lease financing or funds from other sources. No
assurance can be given that such funds will be available to the Company on
acceptable terms, if at all. While management believes it can extend or
refinance current obligations as they become due, there are no assurances that
such extensions or refinancings will occur or at terms favorable to the Company.


                                      -8-
<PAGE>
         EXECUTIVE COMPENSATION. The Company has outstanding seven-year options
to purchase stock at $.53 to $1.85 per share that were issued from fiscal 1995
through fiscal 2001. As of June 30, 2001, the Company has outstanding 1,327,000
of such options.

RISK FACTORS

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

         RISKS ASSOCIATED WITH THE AQUACULTURE BUSINESS

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

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

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

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

         -        Competition from fish imports.


                                      -9-
<PAGE>
         The risk exposure in each of these categories is amplified by
competition between the Company and other catfish producers, particularly those
located within the Mississippi Delta. If the Company is unable to maintain its
operating costs at levels which allow it to realize a profit in its catfish
sales, the Company will not be profitable and, if this condition persists, it
would fail and the shareholders would lose some or all of their investment.

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

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

                  Consumer Demand. The Company's profitability will depend
substantially on the price at which it can sell its catfish. In the past years,
prices have fluctuated substantially and will likely continue to do so in the
future. Prices are dependent upon the demand for catfish by consumers and the
supply of catfish available at any given time. While catfish consumption is in
general increasing, there continues to be substantial consumer reluctance to eat
catfish. Also, catfish continues to incur substantial competition from other
seafood, beef, pork and chicken. A year ago foreign produced basa fish accounted
for less than one percent of the total consumed in the United States. Vietnamese
basa fish currently account for over ten percent of the market. The fillets from
these fish sell for approximately $1.00 less per pound than U.S. farm raised
catfish. As a result, the price currently received by fish farmers is
approximately ten cents per pound less than for the same period last year. Any
continued depression of the price the Company can receive for its catfish will
negatively affect the Company's profitability and its ability to remain in
business.

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

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


                                      -10-
<PAGE>
monitoring schedule and will have on its premises sufficient electric aerators
to maintain pond oxygen levels under anticipated conditions. Nevertheless,
unanticipated conditions such as prolonged loss of electric power may render
unavailable the electric aerating equipment. A substantial loss of the Company
catfish inventory due to a failure to maintain oxygen levels would negatively
impact the Company's profitability and its ability to remain in business.

                  Price of Catfish Feed. Catfish feed, which is the greatest
single production cost in catfish farming operations, is subject to large
fluctuations. Industry groups report in recent years fluctuations between $180
and $300 per ton. Currently, catfish feed is produced by a small number of
producers, some of which are cooperatives. The Company owns shares in Delta
Western, a cooperative catfish food producer, which allows the Company a limited
preferential right to purchase feed. These shares, however, do not ensure the
availability of feed or the price at which feed can be purchased. While the
Company attempts to budget for anticipated feed costs in its operations, such
costs are not predictable with certainty and the Company has no control over the
market price of feed. For fiscal 2001, the Company purchased its feed for an
average of $205 per ton. The Company had booked the majority of its feed for the
feeding season. The Company has not booked its feed for the coming feeding
season believing that the price could move lower than the current $205 price.
However, the price could increase and stay higher before the Company purchases
its feed needs for the 2002 feeding season.

                  Climatic Conditions. While channel catfish are tolerant to a
wide range of climatic and temperature conditions, these catfish become immobile
below 32(degree) Fahrenheit. Catfish ponds cannot economically be heated.
Accordingly, prolonged cold weather conditions could lower pond temperatures to
below 32(degree) and result in a substantial loss of the Company's catfish
inventory, thereby negatively impacting its profitability and its ability to
remain in business. Extremely hot weather can also impact catfish production.
During the summer of 2000, record heat was recorded in the southern states.
Sixteen days had temperatures over 100 degrees. The average water temperature in
the ponds was also 100 degrees for three weeks. Fish, like most animals, begin
to lose their appetites when the surroundings become too warm. The fish eat less
during this time and therefore grow less. The delay in feeding can not only
reduce the weight of marketable sized fish, it can also delay the growth to
marketable size of fish in the next fish growing season. This delay reduces cash
flow and exposes the live inventories held over the winter to a longer holding
period and higher mortality risk. Record temperature extremes could occur in any
fiscal year.

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

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


                                      -11-
<PAGE>
Delta area and Management will limit the damage caused by such predators by
continuing its policy of early detection and removal.

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

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

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

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

                  Ability to Sell its Fish Production. The Company does not have
the capability to process its own fish. The Company sells its catfish to one
cooperative processor of which it is a member. The Company has processing rights
with a second processor that entitles it to sell fish to that processor. Fish
the Company cannot sell to its cooperative processors must be sold to other
processors on a negotiated basis in competition with other catfish producers.
While there are a number of processors located in the Mississippi Delta,
management


                                      -12-
<PAGE>
does not believe there is sufficient competition among processors to provide any
substantial leverage to the catfish producers in negotiating prices. Typically,
during the fall catfish farmers have the greatest number of marketable fish in
inventory of any time during the year, their credit lines are at their highest
amounts, and it is necessary for them to sell fish. These circumstances do not
allow the Company to depend on stable catfish prices for its future production.
Thus, there is no assurance that the Company will be able to sell its catfish
production at a price which will allow it to realize a profit.



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

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


                                      -13-
<PAGE>
competition may result in the Company's inability to compete with such farming
operations on a continuing basis.

Increasing Foreign Competition. Imports of basa fish from Vietnam labeled as
catfish totaled a record 648,000 pounds in June 2000 and 2,144,000 pounds in
June 2001. The majority of the fish sold from Vietnam are frozen fillets. Since
the fillet makes up approximately 33% of the weight of a whole fish, the
equivalent live weight of fish imported in June 2001 was 6,125,000 of live
weight, or 12.25% on an annual basis. Imported under the names Basa, Pacific
Dory or White Roghy, the catfish has been marketed extensively to foodservice
companies and restaurant chains, with mixed success. According to the Catfish
Institute, some restaurants are selling Vietnamese basa fish as farm-raised
catfish without informing customers of its origin. Vietnamese basa fish are
raised in floating cages on the Mekong River. The Catfish Farmers of America has
contacted regulatory agencies which have provided assurances that they will work
to see that Vietnamese basa fish is labeled properly throughout the importation,
distribution and marketing chain. However, the Vietnamese basa fish is currently
selling for approximately one dollar ($1.00) per pound less than domestic
catfish. Acceptance of the Vietnamese basa fish as a replacement for domestic
catfish could put continued downward pressure on the price of the Company's
catfish product making it difficult or impossible to make a profit or stay in
business. The crawfish industry in the United States faced a similar problem
with crawfish imported from China. The U.S. crawfish industry was successful in
having a tariff placed on the Chinese crawfish. However, the U.S. catfish
industry is only starting to review its options and strategy for competing with
the imported basa fish. These fish (Pangasius species) are neither the same
species nor family of fish as the U.S. farm-raised catfish (Ictalurus puncatus).

The U.S. farm-raised catfish industry represented by its Vietnamese Strategy &
Planning Committee (the "Committee") has disclosed in a letter to the industry's
membership on September 26, 2001 the results of its efforts to reduce the impact
of the basa fish on the operations of the Company and the Catfish industry:

-  Congressional leaders have introduced legislation that would prohibit the
   basa fish from being labeled as "catfish." *

-  An anti-dumping petition will be filed, as required by law, with the U.S.
   International Trade Commission (ITC) and the Department of Commerce (DC). The
   ITC will make the determination of injury from the basa fish imports and will
   make the determination with respect to dumping. An analysis of economic
   indicators of injury due to imports of basa fish from Vietnam has been
   completed. An update of this economic study is expected to be completed in
   October 2001.*

-  USDA's Agricultural Marketing Service is reviewing a request for catfish to
   be eligible for USDA purchases of domestic products under the Emergency Food
   Assistance Program. (Known as a Section 32 surplus commodity purchase)*

-  The Food and Drug Administration (FDA) has been asked to prohibit Vietnam
   from utilizing the common term "catfish" in the labeling and marketing of
   their basa fish products in the United States. Documentation and technical
   experts' opinions have been provided for justification of this action. The
   Committee has not received an affirmative response by the FDA to date. *

-  On September 19, 2001, the FDA issued a high priority import basa fish
   labeling assignment. The FDA's Center for Food Safety and Applied Nutrition
   will gather information and initiate regulatory and administrative actions
   due to complaints of imported basa fish that have been mislabeled as catfish.
   The assignment also applies to unacceptable and fictitious market names. *

-  The Committee has obtained DNA gels, with banding patterns, to be genetically
   examined to distinguish the basa fish from the U.S. farm-raised catfish using
   analytical techniques known as; isoelectric focusing electrophoresis. These
   gels may be used as supporting evidence in any enforcement actions relating
   to improper labeling. *

-  A national public relations firm has been hired by the Committee to develop
   an advertising campaign to increase public awareness, build Congressional
   support, and provide the media with information relating to the mislabeling
   of basa fish as catfish. *

The Company believes that American consumers, when given the choice, will chose
U.S. farm-raised catfish over the Vietnamese basa fish and that the prices
received by the Company and the industry will return to historic averages.
However, the Company can not predict the future price for fish. *


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

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

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


                                      -14-
<PAGE>
         The Company may find it difficult or impossible to sell a property
prior to or following any such cleanup. If such substances are discovered after
the Company sells a property, the Company could be liable to the purchaser
thereof if the Company knew or had reason to know that such substances or
sources existed. In such case, the Company could also be subject to the costs
described above.

Environmental Protection Agency Involvement in Regulating Aquaculture Effluents.
In February 1999, the EPA Office of Water announced its decision to conduct a
preliminary study of the aquaculture industry to evaluate the current state of
wastewater controls and the opportunity for environmental gain. At that time the
intent was to make an in-depth study of aquaculture to determine the need for
federal rulemaking. Last summer and fall, considerable effort went into
developing a multi-disciplinary, multi-institutional process by which
science-based information could be provided to EPA to aid in decision making.
However, with no notice or explanation, EPA abandoned the preliminary study on
January 21, 2000, and announced that it would undertake formal rulemaking for
aquaculture. The announcement read: "EPA expands Focus on Nutrient Pollution.
EPA's Office of Water is focusing new efforts to help reduce nutrient loadings
from commercial agricultural and industrial operations nationwide. Among those
efforts is a new activity to develop pollutant controls in the form of
nationally applicable discharge standards (known as effluent limitations
guidelines and standards) for commercial and public aquaculture operations." The
draft guidelines will be published by June, 30, 2002 and final rules will be
published by June 30, 2004.

It is the position of the United States catfish industry officials that the
industry is not a polluter. This position is based on the fact that during the
spring, summer and fall, water does not flow out of producers' ponds. Rather,
because of evaporation, water is pumped into the ponds. Further, during the
winter months fish are not fed, so as water is released there is little to no
environmental load to the discharged water. However, actions by the EPA may
require catfish farmers to develop and install holding or treatment ponds for
water runoff. Potentially, the costs of newly mandated treatments could range
from being allowed only a small amount of runoff per day to being so cost
prohibitive as to make obtaining a profit impossible. The Company will continue
to monitor the process and lend its voice to support a reasonable compromise
with the EPA.

         RISKS ASSOCIATED WITH THE COMPANY AND THE SECURITIES

                  Ability to Achieve Profitable Operations. The Company has not
been profitable since its inception, except for the first quarter of fiscal
2000. It reported a net loss for fiscal 2001 of $1,603,833. The Company had
retained earnings deficit of $10,649,733 at June 30,2001. Based on current and
historical industry data, management believes the Company's ability to achieve
profitable operations will require it to maximize production on its farms and to
achieve more efficient and cost-effective farming operations so that its costs
of production as a percentage of gross revenues are minimized. Management
believes this strategy is necessary to meet the demands of the farm grown
catfish industry where profit margins are expected to narrow because wholesale
fish prices are expected to remain flat and inventory costs, particularly feed
and fuel costs, are expected to continue to fluctuate and competition is
expected to intensify. However, there is no assurance that Management will be
able to implement this strategy, or if implemented that it will prove
successful; and there is no assurance that the Company will be able to operate
at a profit in the future.

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

                  Adequacy of Capital. There is no assurance that the Company
has capital resources sufficient to meet its operating expenses and general and
administrative expenses in the future if anticipated revenues from fish
inventory sales are not realized. The Company anticipates seeking additional
capital through public or private sales of its securities, including equity
securities. Future financings may result in the issuance of equity securities
and dilution to current shareholders. There are no assurances that any
additional debt or equity capital will be available to the Company, or that, if
such additional debt or capital is available, that the terms would be favorable
or acceptable to the Company. Insufficient funds may require the Company to
delay, reduce or eliminate certain or all of its operations and development
activities.

On August 29, 2001, the Company's $900,000 and $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% and both lines of
credit mature October 15, 2001. The lines of credit may be renewed in 30-day
increments, at the discretion of the bank. As of late September 2001, the
Company had reached the limit on its $990,000 production line of credit and had
available borrowings under its feed line of credit of approximately $200,000.

Management believes that additional capital or restructuring of the timing of
payments of the Company's obligations will be necessary to alleviate the
operational difficulties from cash flows being limited by collections on
accounts receivable being applied to the Company's lines of credit, high
interest rate debt, and to fund the Company's growth. The Company is seeking
additional capital for operations and capital expenditures through equity or
debt financing, collaborative arrangements with corporate partners, equipment
lease financing or funds from other sources. No assurance can be given that such
funds will be available to the Company on acceptable terms, if at all. While
management believes it can extend or refinance current obligations as they
become due, there are no assurances that such extensions or refinancings will
occur or at terms favorable to the Company.


                                      -15-
<PAGE>
                  Dependence on Management. The feasibility and profitability of
the Company will depend significantly upon the continued participation of Mr.
Hastings. He is expected to continue in his position with the Company. However,
Mr. Hastings may in the future be unable or unwilling to continue with the
Company. The unavailability of Mr. Hastings would likely have significant
adverse effect on the Company and its business. The success of the Company's
future operations depends in large part on the Company's ability to recruit and
retain qualified personnel over time, and there can be no assurance that the
Company will be able to retain its existing personnel or attract additional
qualified employees in the future.

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

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

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

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


                                      -16-
<PAGE>
         The Company has substantial obligations with respect to its 10.35%
notes payable due in 2002 and its institutional credit agreements. Leverage has
significant consequences including the following: (i) dedication of a portion of
the Company's cash flow from operations to the payment of interest in respect of
its debt obligations, which reduces the funds available to the Company for its
operations and future business opportunities; (ii) potential impairment of the
Company's ability to obtain additional financing in the future; and (iii)
potential vulnerability of the Company to a downturn in its business or the
United States economy generally. A high degree of leverage would also make it
difficult for the Company to generate sufficient working capital which could
adversely affect the Company's ability to fund its continuing operations at
necessary levels.

                  Risks of Balloon Payments. Generally, the Company's debt
obligations require balloon payments at the end of their terms. The Company's
credit lines with Community Bank are due October 15, 2001 and may be renewed in
30-day increments , at the discretion of the bank. Other significant debt is
due through fiscal 2005. In the event the Company is unable to refinance these
obligations or is otherwise unable to raise funds sufficient to repay these
obligations as scheduled, the Company would be in default of these obligations.
The Company's ability to repay these obligations when they mature will be
dependent upon its ability to obtain adequate refinancing or to negotiate an
extension. The Company's ability to obtain replacement financing for these
obligations will be dependent on, among other things, its financial condition at
the time and the economic conditions in general. Accordingly, there is no
assurance that, if necessary, the Company will be able to obtain replacement
financing for any of these obligations upon their maturity.


                                      -17-
<PAGE>
ITEM 2. DESCRIPTION OF PROPERTY

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

                INFORMATION REGARDING THE COMPANY'S REAL PROPERTY

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

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

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

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

Hidden Lakes                    668 (443)           46              $630,000(3)
(Bolivar County, MS)                                                $280,000

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

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

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

Indian Lakes                    672 (525)           37           Pledged under farm
(Bolivar County, MS)                                              Bank of Texas (5)
</TABLE>

----------------------------
(1)  Two notes payable to a bank under $2,540,000 revolving lines of credit used
     to fund purchases of feed and production of fish; combined outstanding
     balance of $1,549,961 at June 30, 2001. Interest accrues at the prime rate
     plus 1.65% and the lines of credit expire October 15, 2001. Interest and
     principal are paid from collections of accounts receivable and sales of
     inventory.

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

(3)  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.

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


                                      -18-
<PAGE>
         The Mississippi Delta is an approximately 10,000 square mile area lying
predominately on the east side of the Mississippi River, beginning in the
vicinity of Memphis, Tennessee and extending into Mississippi. The portion of
the Delta where the Company's farms are located is approximately 44 feet above
sea level and is located approximately 5-1/2 hours by car from the Gulf of
Mexico and 1-1/2 hours by car from the Mississippi River. Accordingly, the farms
are not likely to be susceptible to flooding. The farms are located within
approximately 45 minutes of each other.

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

         COOPERATIVE MEMBERSHIPS. The Company belongs to the following
cooperatives:

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

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

ITEM 3. LEGAL PROCEEDINGS

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

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

         No matters were submitted to a vote of security holders during the
fourth quarter of the fiscal year ended June 30, 2001.


                                      -19-
<PAGE>
                                     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.

         STOCKHOLDERS: As of September 18, 2001, there were approximately 1,700
stockholders of record of the 4,923,273 outstanding shares of Common Stock. The
Company believes there are approximately 1,500 beneficial owners of the
Company's common stock.

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

         RECENT SALES OF UNREGISTERED SECURITIES: Set forth below is information
for all securities that the Company has sold in the past three (3) years without
registering said securities under the Securities Act of 1933 (the "1933 Act").
Share numbers and prices have not been adjusted to reflect the September 18
dividend.
      During the fiscal year ended June 30, 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 seven years from the date of grant. During the
fiscal year ended June 30, 2001 the Company issued a total of 64,000 seven-year
stock options to its officers 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.

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


                                      -20-
<PAGE>
 MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
                                   OPERATIONS


This report contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. The actual performance of the Company could differ materially from that
indicated by the forward-looking statements because of various risks and
uncertainties including, without limitation, cost and availability of feed,
market price received for the Company's fish, 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, 2001 COMPARED TO YEAR ENDED JUNE
                                    30, 2000

NET SALES. Net sales during the year ended June 30, 2001 totaled $4,787,464
compared to $6,993,856 for the year ended June 30, 2000. Volume decreased
2,205,728 pounds to 7,126,397 pounds of fish sold during the year ended June 30,
2001 compared to 9,332,125 pounds sold during the year ended June 30, 2000.

The decrease in volume represented 23.7% of the 31.5% decrease in net sales. The
remainder of the decrease in sales was due a lower average selling price
received from the Company's major customers. The average price of fish sold was
67.3 cents per pound during the year ended June 30, 2001 compared to 74.9 cents
per pound during the year ended June 30, 2000.

Record high temperatures occurred during the summer feeding season of 2000. More
than sixteen days surpassed the 100 degree mark. The water in the Company's
ponds averaged approximately 100 degrees for upwards of three weeks. The fish in
the ponds reached the same body temperatures as the water. While some mortality
did occur, the greatest impact of the heat was to reduce the appetite of the
fish and slow their growth during the growing season, reducing the number of
marketable size fish in inventory for the remainder of the year. Additionally,
the Company's customers increased the minimum size for marketable fish during
the spring of 2001 from one pound to one and one quarter pound delaying the
availability of marketable fish for an additional sixty to seventy-five days.

By the spring of 2001, the Company had sold most of its marketable sized fish
from the previous growing season, and sales shrank to a small percentage of
normal weekly sales. With few marketable sized fish available in the fourth
quarter, sales were insignificant. Historically, fish prices tend to reach the
highest point of the year in the late spring as the available supply of
marketable sized fish


                                      -21-
<PAGE>
diminishes. With limited marketable sized fish to sell at a higher price during
this period, the Company's average price of fish for fiscal 2001 remained low.


Conversely, the Company's inventories increased 1,874,053 pounds (18.4%) from
10,200,907 pounds on June 30, 2000 to 12,074,960 pounds on June 30, 2001. Based
on the increased inventories at June 30, 2001 and assuming an average growing
season in fiscal 2002. The Company could have sufficient marketable sized fish
to increase the pounds of fish sales in 2002 by as much as 50% over fiscal 2001
sales. *

Fish Prices.  According to the U.S. Department of Census, by May of 2001 the
price received by catfish farmers was approximately ten cents (15%) less than
the same month in 2000.  Much of the decrease was the result of the increased
impact of inexpensive mislabeled basa fish imported into the United States
from the Mekong river in Vietnam being marketed as U.S. farm raised catfish.
The Census Bureau also estimated that U.S. farm-raised catfish had been
displaced at the rate of 70 million pounds annually.  The basa fish
(Pangasius species) are neither the same species nor family as U. S. farm
raised catfish (Ictalurus puncatus).

The U.S. farm-raised catfish industry represented by its Vietnamese Strategy &
Planning Committee (the "Committee") has disclosed in a letter to the industry's
membership on September 26, 2001 the results of its efforts to reduce the impact
of the basa fish on the operations of the Company and the Catfish industry:

-  Congressional leaders have introduced legislation that would prohibit the
   basa fish from being labeled as "catfish." *

-  An anti-dumping petition will be filed, as required by law, with the U.S.
   International Trade Commission (ITC) and the Department of Commerce (DC). The
   ITC will make the determination of injury from the basa fish imports and will
   make the determination with respect to dumping. An analysis of economic
   indicators of injury due to imports of basa fish from Vietnam has been
   completed. An update of this economic study is expected to be completed in
   October 2001.*

-  USDA's Agricultural Marketing Service is reviewing a request for catfish to
   be eligible for USDA purchases of domestic products under the Emergency Food
   Assistance Program. (Known as a Section 32 surplus commodity purchase)*

-  The Food and Drug Administration (FDA) has been asked to prohibit Vietnam
   from utilizing the common term "catfish" in the labeling and marketing of
   their basa fish products in the United States. Documentation and technical
   experts' opinions have been provided for justification of this action. The
   Committee has not received an affirmative response by the FDA to date. *

-  On September 19, 2001, the FDA issued a high priority import basa fish
   labeling assignment. The FDA's Center for Food Safety and Applied Nutrition
   will gather information and initiate regulatory and administrative actions
   due to complaints of imported basa fish that have been mislabeled as catfish.
   The assignment also applies to unacceptable and fictitious market names. *

-  The Committee has obtained DNA gels, with banding patterns, to be genetically
   examined to distinguish the basa fish from the U.S. farm-raised catfish using
   analytical techniques known as; isoelectric focusing electrophoresis. These
   gels may be used as


                                      -22-
<PAGE>
   supporting evidence in any enforcement actions relating to improper
   labeling.*

-  A national public relations firm in has been hired by the Committee to
   develop an advertising campaign to increase public awareness, build
   Congressional support, and provide the media with information relating to the
   mislabeling of basa fish as catfish. *

The Company believes that American consumers, when given the choice, will chose
U.S. farm-raised catfish over the Vietnamese basa fish and that the prices
received by the Company and the industry will return to historic averages.
However, the Company can not predict the future price for fish. *

Competition for fish sales. The Company and all catfish producers have been
required to increase fish inventories to increase the weight of marketable fish
by 25% with increase in the marketable size of catfish, the industry received
less per pound in fiscal 2001 than at any other time in the last nine years. The
combination of these factors has put great strains on the cash flow and
liquidity of almost all catfish farmers. * While the Company believes that it
currently has over 9,000,000 pounds of marketable fish, it also expects the
intense competition for fish sales from other fish farmers to continue, which
may slow the timing of its sales. *

COST OF PRODUCTS SOLD AND GROSS PROFIT. Cost of products sold was $4,515,331, or
63.4 cents per pound sold, for the year ended June 30, 2001 compared to
$5,033,679, or 53.9 cents per pound sold, for the year ended June 30, 2000.
Gross profit from fish sales was 5.7% during the year ended June 30, 2001
compared to 28.0% for the year ended June 30, 2000. 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 largest
component of cost of products sold is feed, which decreased in price from fiscal
2000 to 2001. The Company's average cost of feed was $205 per ton in fiscal
2001, compared to $209 in fiscal 2000. Feed costs are largely dependent on grain
prices, which can vary greatly from year to year, and cannot be predicted with
certainty.* Management expects that margins will improve and cost of products
sold will decrease as a percentage of net sales during the year ending June 30,
2002 due to stable feed costs and increased production.* However, there is no
assurance that there will not be increases in other costs, such as utilities,
fuel and mortality, to offset the higher margins from cost of products sold as a
percentage of net sales during fiscal 2002.*

SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses during the year ended June 30, 2001 were $1,361,249 compared to
$1,696,391 during the year ended June 30, 2000.


                                      -23-
<PAGE>
Accordingly, selling, general and administrative expenses were 19.1 cents per
pound sold for the year ended June 30, 2001 compared to 18.2 cents per pound
sold for the year ended June 30, 2000. Selling expenses decreased approximately
$100,000 with decreased sales volume. The remaining decline in selling and
administrative expenses was due primarily to reductions in salaries and related
expenses. The Company expects administrative expenses to remain constant even
with the anticipated increased pounds to be sold in fiscal 2002. * Seining and
hauling expenses are expected to increase approximately $.045 per pound from
anticipated additional pounds to be sold in fiscal 2002. *

INTEREST EXPENSE. Interest expense was $790,527 for the year ended June 30, 2001
compared to $644,558 for the year ended June 30, 2000. Both long-term debt and
average borrowings on the Company's lines of credit increased during the year
ended June 30, 2001 compared to the year ended June 30, 2000. Management
anticipates higher levels of debt and interest expense during the year ending
June 30, 2002 due in part to higher interest rate short term debt . (See
Liquidity and Capital Resources discussion below.)*

INCOME TAXES AS OF JUNE 30, 2000. The Company has net operating loss
carry-forwards of approximately $13,300,000, which expire at various dates
through fiscal 2021, available to reduce taxable income.

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

LIQUIDITY AND CAPITAL RESOURCES

As of June 30, 2001, the Company had a current ratio of 1.44 to 1.00 compared to
1.88 to 1.00 at June 30, 2000. Working capital at June 30, 2001 totaled
$2,173,001 compared to $3,104,052 at June 30, 2000.
The Company's net cash provided by (used in) operating activities was $(935,654)
and $903,816 for the years ended June 30, 2001 and June 30, 2000, respectively.
The Company funded the losses and uses of cash for operating activities in
fiscal 2001 through short-and long-term borrowings. The increase in notes
payable was $1,479,316 at June 30, 2001 as compared to June 30, 2000. Proceeds
received from long-term debt were $933,683 and $526,654 during the years ended
June 30, 2001 and June 30, 2000. During the years ended June 30, 2001 and June
30, 2000, the Company purchased $103,817 and $793,048, respectively, in property
and equipment. These capital expenditures consisted primarily of trucks, other
farm related


                                      -24-
<PAGE>
equipment and pond improvements and were primarily funded by short and long-term
debt. During the year ended June 30, 2000, the Company purchased an additional
farm location and certain equipment for $876,250, which was financed by a seller
note payable.

Effective April 2001 the Company obtained two revolving lines of credit totaling
$1,700,000 from Community Bank in Indianola, Mississippi (the "Bank"). The
Company intends to fund its operations primarily through fish sales, working
capital, and the $1,700,000 lines of credit with the Bank. One line of credit of
$900,000 is to provide financing for catfish feed purchases from Delta Western
and the other for $990,000 is 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 has an account with the Bank into which the Company must deposit
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 is applied to the production line of credit. Borrowings under the lines
of credit are represented by the Company's promissory notes, which are 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 policies 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 customers 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 mature October 15, 2001
and may be renewed in 30-day increments at the discretion of the Bank. As
discussed above, the Company's feed and production lines of credit require that
50 percent of all collections of accounts receivable be applied to the
outstanding balance of each until paid.

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. The Company
has utilized short-term debt to operate the farm.



The Company has been able to feed its live fish inventories throughout the 2001
feeding season. However, vendor debt has again increased and cash flow problems
continue.

The Company refinanced the mortgage on its Hidden Lakes farm in January 2001.
The land and ponds from that farm are pledged under a mortgage of $604,836 with
a private local lender. The mortgage bears interest at 13% and is repayable at
the rate of $11,750 per month. The equipment of the Hidden Lakes farm is pledged
on a $266,667 note to Union Planters


                                      -25-
<PAGE>
Bank. The note bears interest at 11.75% and is repayable at $6,542 per month.

As of late September 2001, the Company has reached the limit on its $990,000
production line of credit and had available borrowings under its feed line of
credit of approximately $200,000.

The Company has a $175,000 ($129,841 used at June 30, 2001) unsecured credit
facility from a creditor that manages short-term loans to businesses. Loan
proceeds are paid directly to the Company's vendors, and the Company repays
proceeds and loan fees of 2 -1/2% to the creditor over a period of six months.
Borrowings bear interest at 12% per annum. During the year ending June 30, 2001
the Company used these funds to pay various vendors and for fish seining
services. It is not known whether the creditor will continue to provided this
facility. *

As of late September 2001, the Company is past due on certain accounts and notes
payable. The Company has been in contact with its creditors and management has
obtained agreements for extended terms where possible, and to its knowledge, is
not a party to any creditor lawsuits. * As of late September 2001 the feeding
season was drawing to a close. As the weather cools feeding stops as well as the
need for almost constant electric aeration. * Most production costs are expected
to drop to their lowest levels through the winter into early spring. *
Historically, the Company's greatest sales levels occur during the months of
October through March and the Company expects high sales in this period this
fiscal year. *

The Company attempted to raise additional capital in the spring and summer of
2001 through a private placement offering of preferred stock, but was
unsuccessful.

Notwithstanding the above, management believes that additional capital or
restructuring of the timing of payments of the Company's obligations will be
necessary to alleviate the operational difficulties from cash flows being
limited by collections on accounts receivable being applied to the Company's
lines of credit (see Note 4), high interest rate debt, and to fund the Company's
growth. The Company is seeking additional capital for operations and capital
expenditures through equity or debt financing, collaborative arrangements with
corporate partners, equipment lease financing or funds from other sources. No
assurance can be given that such funds will be available to the Company on
acceptable terms, if at all. While management believes it can extend or
refinance current obligations as they become due, there are no assurances that
such extensions or refinancings will occur or at terms favorable to the Company.


                                      -26-
<PAGE>
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.


                                      -27-
<PAGE>
                                    PART III

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

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

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

<S>                       <C>                             <C>                        <C>
George S. Hastings, Jr.   Chairman of the Board                  1983                       1983
Age 54                    Chief Executive Officer
                          President

W. Mike Horton            Chief Financial Officer                1999
Age 59                    Secretary


Kenneth Ostebo*           Director                                                          1998
Age 44



Joseph Duncan, Sr.*       Director                                 --                       1995
Age 74


Charles Porter            Director                                 --                       1999
Age 59
</TABLE>

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

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

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

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

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


                                      -28-
<PAGE>
W. Mike Horton, Chief Financial Officer, joined the Company in October of
1999.  Before then he was Division CFO/Controller of the Lewis Grocer
Division of Supervalue, Inc. since 1987.  Lewis Grocer served over 400 retail
grocery customers, governmental agencies and military installations in a
four-state area in the southern U.S.  He was responsible for all aspects of
finance and accounting.

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

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

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


                                      -29-
<PAGE>
         Based upon a review on the Forms 4 and 5 furnished to the Company with
respect to its most recent fiscal year, each of the Company's Directors,
Executive Officers, Promoters and Control Persons failed to timely file his or
her initial Form 3 under Section 16(a) of the Securities and Exchange Act of
1934.

ITEM 10. EXECUTIVE COMPENSATION

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

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                        ANNUAL COMPENSATION             LONG-TERM COMPENSATION
                                        -------------------             ----------------------
                                                                       VALUE OF      SECURITIES
    NAME AND                                                          RESTRICTED     UNDERLYING
PRINCIPAL POSITION                 YEAR      SALARY       BONUS        STOCK(1)      OPTIONS(2)
------------------                 ----      ------       -----        --------      ----------
<S>                                <C>      <C>         <C>          <C>            <C>
George S. Hastings, Jr.            2001     $100,000     $    0       $  5,640         52,000
Chief Executive Officer            2000     $ 87,000     $    0       $  9,939        348,000
                                   1999     $ 87,000     $    0       $  8,391        303,000
</TABLE>

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

(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 $1.08 for 1999,
     $.82 for 2000, and $.47 for 2001.

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

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


                                      -30-
<PAGE>
         The following table sets forth certain information regarding stock
options and warrants granted to each named Executive Officer by reason of their
employment during the Company's 2001 fiscal year.

                        OPTION/WARRANT GRANTS IN 2001(A)

<TABLE>
<CAPTION>
                                           INDIVIDUAL GRANTS
                         -------------------------------------------------------
                           NUMBER OF SECURITIES      % OF TOTAL OPTIONS/WARRANTS
                                UNDERLYING               GRANTS TO EMPLOYEES          EXERCISE OR BASE     EXPIRATION
   NAME                  OPTIONS/WARRANTS GRANTED           IN FISCAL YEAR             PRICE ($/SHARE)        DATE
   ----                  ------------------------           --------------             ---------------        ----
<S>                      <C>                         <C>                              <C>                   <C>
George S. Hastings, Jr.          40,000                           69%                  $0.375 to $0.53      3/31/2007
Mike Horton                      18,000                           31%                  $0.375 to $0.53
</TABLE>

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

                    AGGREGATED OPTION AND WARRANT VALUE TABLE

<TABLE>
<CAPTION>
                                     NUMBER OF SECURITIES                  VALUE OF UNEXERCISED
                                UNDERLYING UNEXERCISED OPTIONS             IN-THE-MONEY OPTIONS
                                ------------------------------          -------------------------
NAME                             EXERCISABLE/UNEXERCISABLE(1)           EXERCISABLE/UNEXERCISABLE
----                             ----------------------------           -------------------------
<S>                             <C>                                     <C>
George S. Hastings, Jr.                  1,079,000/None                        $0.00/None(1)
</TABLE>

----------
(1)  Options in-the-money are based on the value of the Company's Common Stock
     which, as of September 19, 2001, is $.16 per Common Share based on the
     closing price reported on the NASD Bulletin Board.
----------

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


                                      -31-
<PAGE>
total outstanding may be issued each year. Also, under his employment contract,
Mr. Hastings is awarded stock options in the amount stated entitling the holder
to purchase shares at a price equal to the fair market value at the date which
the options are issued. These options are for a term of seven years.

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

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

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


                                      -32-
<PAGE>
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:

<TABLE>
<CAPTION>
                                                                       AMOUNT AND NATURE OF
NAME & POSITION                                                        BENEFICIAL OWNERSHIP
OFFICERS AND DIRECTORS                                             NUMBER OF COMMON SHARES(%)(1)
----------------------                                             -----------------------------
<S>                                                               <C>                    <C>
George S. Hastings, Jr.                                           1,324,322(2)           (21.12%)
President, Chief Executive Officer and Chairman of the Board

Mike Horton                                                          20,000(4)              (.3%)
Chief Financial Officer & Secretary

Kenneth Ostebo                                                       33,000(5)            (0.52%)
Director

Joseph F. Duncan, Sr.                                                45,000(3)            (0.71%)
Director

Charles Porter                                                       24,000(6)            (0.38%)
Director

All officers and directors as a group (seven persons)             1,446,322              (23.14%)
</TABLE>

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

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

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

     The total number of Common Shares outstanding is 4,923,273 as of June 30,
     2001. The total number of options outstanding is 1,327,000 as of such date.
     Accordingly, the total number of outstanding Common Shares considered
     outstanding for purposes of computing the above percentages is 6,250,273.

(2)  Includes the following Common Shares, warrants and options held of record
     by Mr. Hastings: 245,322 Common Shares and 1,079,000 Common Shares issuable
     upon the exercise of 1,034,000 Compensatory Options and 45,000 Director
     Options.

(3)  45,000 Common Shares issuable upon the exercise of Director Options.


                                      -33-
<PAGE>
(4)  Includes 2,000 shares held of record and 18,000 common shares issuable upon
     the exercise of compensatory options.

(5)  33,000 Common Shares issuable upon the exercise of Director Options.

(6)  24,000 Common Shares issuable upon the exercise of Directors Options

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

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         None

                                     PART IV

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

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


                                      -34-
<PAGE>
                                LIST OF EXHIBITS
                               AQUAPRO CORPORATION

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

AquaPro's Amended and Restated Charter (1)                                                       3.2

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

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

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

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

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

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

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

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

Form of Common Stock Certificate (1)                                                             4.1

Form of $10.50 Common Stock Warrant (1)                                                          4.2

Form of $10.50 Warrant Agreement (1)                                                             4.3

Form of 10.35% Debenture (1)                                                                     4.4

Form of 10.35% Loan Note Agreement (1)                                                           4.5

Form of Series A Preferred Stock Certificate (1)                                                 4.6

Form of $7.50 Common Stock Warrant (1)                                                           4.7

Form of $9.50 Stock Right (2)                                                                    4.8

Form of $9.50 Stock Rights Agreement (2)                                                         4.9

Exchange Form for Investor Notes (2)                                                             4.10

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


                                      -35-
<PAGE>
<TABLE>
<S>                                                                                           <C>
Form of Agency Agreement 10.35% Collateralized
Convertible Notes (2)                                                                            4.12

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

Marketing Agreement with Delta Pride (1)                                                         10.1

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

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

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

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

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

Employment Agreement with Patricia G. Hastings (1)                                               10.7

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

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

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

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

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

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

Contract of Purchase and Sale (5)                                                                10.1

Supplemental Agreement dated June 29, 1999 (5)                                                   10.2

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

Commitment Letter and Note Agreements with Community Bank dated August 29, 2001                  10.16

Promissory Note agreement with Secured Loans, Inc dated January 5, 2001                          10.17

Promissory Note with Union Planters Bank dated January 5, 2001                                   10.18

Balloon Promissory Note dated May 1, 2001                                                        10.19

Promissory Note with National Fulfillment, Inc. dated March 12, 2001                             10.20
</TABLE>


                                      -36-
<PAGE>
(1)  Incorporated by reference to the corresponding Exhibit previously filed as
     an Exhibit to Registrant's Form 10-SB (File # 000-29258).

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

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

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

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

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

(7)  Incorporated by reference to the corresponding Commitment Letter & Note
     Agreements with Community Bank dated April 20, 2000 filed September 28,
     2000.


                                      -37-
<PAGE>
                               AquaPro Corporation

                        Consolidated Financial Statements

                       Years ended June 30, 2000 and 1999

                                    CONTENTS

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

Audited Consolidated Financial Statements

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



                                       38
<PAGE>
                         Report of Independent Auditors


The Board of Directors and Stockholders
AquaPro Corporation

We have audited the accompanying consolidated balance sheets of AquaPro
Corporation and subsidiaries as of June 30, 2001 and 2000 and the related
consolidated statements of operations, changes in stockholders' equity, and cash
flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of AquaPro
Corporation and subsidiaries at June 30, 2001 and 2000, 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.



Jackson, Mississippi
October 11, 2001





                                                                               1
<PAGE>
                               AquaPro Corporation

                           Consolidated Balance Sheets

<TABLE>
<CAPTION>
                                                            JUNE 30
                                                     2001              2000
                                                  -----------      -----------
<S>                                               <C>              <C>
ASSETS
Current assets:
   Cash and cash equivalents                      $       810      $    46,604
   Trade accounts receivable                           85,625          487,987
   Other receivables                                   91,418           87,090
   Live fish inventories                            6,872,915        5,939,966
   Prepaid expenses                                    60,217           52,443
                                                  -----------      -----------
Total current assets                                7,110,985        6,614,090

Property, buildings and equipment:
   Land                                             2,550,314        2,550,314
   Ponds and improvements                           4,352,957        4,285,565
   Buildings                                          602,745          600,387
   Machinery and equipment                          4,186,171        4,246,534
                                                  -----------      -----------
                                                   11,692,187       11,682,800
   Accumulated depreciation                         4,666,525        3,810,231
                                                  -----------      -----------
                                                    7,025,662        7,872,569

Investments in cooperatives                           169,240          169,240
Other assets                                          178,272          160,961







                                                  -----------      -----------
Total assets                                      $14,484,159      $14,816,860
                                                  ===========      ===========
</TABLE>


2

<PAGE>



<TABLE>
<CAPTION>
                                                                             JUNE 30
                                                                     2001              2000
                                                                 ------------       ------------
<S>                                                              <C>                <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Notes payable:
     Bank                                                        $  1,548,961       $    752,870
     Others                                                         1,279,033            595,808
   Accounts payable                                                   740,503            398,063
   Accrued expenses                                                   159,240            145,449
   Current maturities of long-term debt                             1,210,247          1,617,848
                                                                 ------------       ------------
Total current liabilities                                           4,937,984          3,510,038



Long-term debt, less current maturities                             4,811,027          4,977,708

Stockholders' equity:
   Series A Preferred Stock, no par value - authorized
       900,000 shares, cumulative, convertible, 590,623
       issued, none outstanding                                            --                 --
   Preferred stock, par value to be determined by the
       Board of Directors - authorized 100,000 shares, none
       issued                                                              --                 --
   Common stock, no par value - authorized 100,000,000
     shares, issued and outstanding 4,923,273 and 4,905,273
     shares at June 30, 2001 and 2000                              15,392,064         15,383,334
   Unearned compensation                                               (7,183)            (8,320)
   Retained earnings (deficit)                                    (10,649,733)        (9,045,900)
                                                                 ------------       ------------
Total stockholders' equity                                          4,735,148          6,329,114
                                                                 ------------       ------------
Total liabilities and stockholders' equity                       $ 14,484,159       $ 14,816,860
                                                                 ============       ============
</TABLE>




See accompanying notes.



                                                                               3
<PAGE>
                               AquaPro Corporation

                      Consolidated Statements of Operations

<TABLE>
<CAPTION>
                                                       YEAR ENDED JUNE 30
                                                    2001               2000
                                                 -----------       -----------
<S>                                              <C>               <C>
Net sales                                        $ 4,787,464       $ 6,993,856
Cost of products sold                              4,515,331         5,033,679
                                                 -----------       -----------
Gross profit                                         272,133         1,960,177
Selling, general and administrative                1,361,249         1,696,391
                                                 -----------       -----------
Operating income (loss)                           (1,089,116)          263,786

Other income (expense):
   Interest expense                                 (790,527)         (644,558)
   Patronage dividends                               249,833           209,780
   Other, net                                         25,977            22,163
                                                 -----------       -----------
                                                    (514,717)         (412,615)
                                                 -----------       -----------
Net loss                                         $(1,603,833)      $  (148,829)
                                                 ===========       ===========
Basic and diluted net loss per common share      $      (.33)      $      (.03)
                                                 ===========       ===========
Weighted average basic and diluted
   common shares outstanding                       4,917,243         4,875,812
                                                 ===========       ===========
</TABLE>


See accompanying notes.


                                                                               4
<PAGE>
                               AquaPro Corporation

           Consolidated Statements of Changes in Stockholders' Equity


<TABLE>
<CAPTION>
                                                                                            Retained         Total
                                                    Common Stock             Unearned        Earnings      Stockholders'
                                               Shares         Amount       Compensation     (Deficit)         Equity
                                              ---------     -----------    ------------   ------------     -------------
<S>                                           <C>           <C>            <C>           <C>               <C>
Balance at July 1, 1999                       4,890,381     $15,371,912      $(32,444)   $ (8,897,071)       $6,442,397
Net loss for the year ended June 30, 2000                                                    (148,829)         (148,829)
Common stock issued to employees
   for future services                           12,500          10,563       (10,563)                               --
Cancellation of common stock
   granted to former employees                   (1,500)         (1,198)        1,198                                --
Amortization of unearned compensation                                          33,489                            33,489
Issuance of common stock                          3,892           2,057                                           2,057
                                              ---------     -----------      --------    ------------        ----------
Balance at June 30, 2000                      4,905,273      15,383,334        (8,320)     (9,045,900)        6,329,114
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
                                              ---------     -----------      --------    ------------        ----------
Balance at June 30, 2001                      4,923,273     $15,392,064      $ (7,183)   $(10,649,733)       $4,735,148
                                              =========     ===========      ========    ============        ==========
</TABLE>

See accompanying notes.


                                                                               5
<PAGE>
                               AquaPro Corporation

                      Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
                                                                                 YEAR ENDED JUNE 30
                                                                                 2001             2000
                                                                              -----------       ---------
OPERATING ACTIVITIES
<S>                                                                           <C>               <C>
Net loss                                                                      $(1,603,833)      $(148,829)
Adjustments to reconcile net loss to net cash provided by (used in)
    operating activities:
     Depreciation and amortization                                                902,040         871,335
     Gain on disposals of equipment                                               (30,092)        (10,082)
     Changes in operating assets and liabilities:
       (Increase) decrease in trade accounts receivable                           402,362        (244,851)
       (Increase) decrease in live fish inventories                              (932,949)        324,957
       Increase in prepaid expenses, other receivables, and other assets          (29,413)        (26,672)
       Increase in accounts payable and accrued expenses                          356,231         137,958
                                                                              -----------       ---------
Net cash provided by (used in) operating activities                              (935,654)        903,816

INVESTING ACTIVITIES
Purchases of property and equipment                                              (103,817)       (793,048)
Proceeds from disposals of equipment                                               88,643          27,509
                                                                              -----------       ---------
Net cash used in investing activities                                             (15,174)       (765,539)

FINANCING ACTIVITIES
Net increase (decrease) in notes payable                                        1,479,316         (39,815)
Principal payments on long-term borrowings                                     (1,507,965)       (664,776)
Proceeds from long-term borrowings                                                933,683         526,654
                                                                              -----------       ---------
Net cash provided by (used in) financing activities                               905,034        (177,937)
                                                                              -----------       ---------
Net decrease in cash and cash equivalents                                         (45,794)        (39,660)
Cash and cash equivalents at beginning of year                                     46,604          86,264
                                                                              -----------       ---------
Cash and cash equivalents at end of year                                      $       810       $  46,604
                                                                              ===========       =========

SUPPLEMENTAL CASH FLOW INFORMATION-
Interest paid                                                                 $   758,000       $ 621,000
                                                                              ===========       =========

NON-CASH FINANCING ACTIVITIES
Common stock issued to employees for future services                          $     8,730       $  10,563
                                                                              ===========       =========
Issuance or assumption of long-term debt:

   Land and ponds and improvements                                            $        --       $ 836,250
                                                                              ===========       =========
   Machinery and equipment                                                    $        --       $  40,000
                                                                              ===========       =========
</TABLE>



See accompanying notes.




                                                                               6
<PAGE>
                               AquaPro Corporation

                   Notes to Consolidated Financial Statements

                                  June 30, 2001

1.  SIGNIFICANT ACCOUNTING POLICIES

BUSINESS

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

The Company conducts catfish farming activities on approximately 2,650 water
acres within the State of Mississippi. Catfish farming is concentrated in a few
southern states, principally Mississippi, Louisiana, Alabama and Arkansas.
Catfish are sold principally to retail grocery stores and restaurants by catfish
processors. The Company's sales are to a limited number of processors and
collateral is generally not required. Five processors represented 27%, 20%, 18%,
15% and 10% of the Company's net sales for the fiscal year ended June 30, 2001,
and three processors represented 36%, 32% and 14% of the Company's net sales for
the fiscal year ended June 30, 2000.

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.



                                                                               7
<PAGE>


                               AquaPro Corporation

             Notes to Consolidated Financial Statements (continued)


1.  SIGNIFICANT ACCOUNTING POLICIES (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 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.

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).



                                                                               8
<PAGE>


                               AquaPro Corporation

             Notes to Consolidated Financial Statements (continued)


1.  SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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.

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.



                                                                               9
<PAGE>


                               AquaPro Corporation

             Notes to Consolidated Financial Statements (continued)


1.  SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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 of 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.

RECLASSIFICATIONS

Certain reclassifications have been made to the prior years' consolidated
financial statements to conform to the fiscal 2001 presentation.

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 2001 and 2000,
the Company incurred net losses of $1,603,833 and $148,829, respectively, and
had aggregate accumulated deficits in operations at June 30, 2001 of
$10,649,733. These factors create substantial doubt about the Company's ability
to continue as a going concern.





                                                                              10
<PAGE>


                               AquaPro Corporation

             Notes to Consolidated Financial Statements (continued)


2.  GOING CONCERN (CONTINUED)

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

Subsequent to June 30, 2001, the Company reached its limit on borrowings
available under the $990,000 revolving line of credit and had approximately
$200,000 remaining under the $1,550,000 revolving line of credit used solely to
fund purchases of feed (see Note 4). Management attributed these additional
borrowings to increased catfish production, along with the end of the growing
season approaching. The growing season, or months in which catfish are fed,
generally is from March through October. As described in Note 4, the required
principal and interest payments on borrowings under the revolving lines of
credit consist of collections on accounts receivable applied equally to each
line of credit.

The lines of credit mature October 15, 2001 at which time management anticipates
the lines will be renewed on a month-to-month basis at the discretion of the
bank. As of late September 2001, the Company was past due on certain accounts
and notes payable. The Company has been in contact with its creditors and
management has obtained agreements for extended terms where possible. The
Company is not, to its knowledge, a party to any creditor lawsuits.

Based upon management's projected sales volume at current sales prices for the
period July 1, 2001 through June 30, 2002, management anticipates the Company's
fish sales should be sufficient to repay borrowings under the revolving lines of
credit by March 2002 and to fund operating expenses through June 30, 2002. In
addition management anticipates there will be sufficient cash flows from
operations to fund principal and interest payments on other loans due through
June 30, 2002 or that the Company can obtain extensions or similar credit
facilities from other lenders. Based upon the anticipated repayment of the
revolving lines of credit and the collateral, which would be available to secure
additional borrowings, management believes that the Company will be able to
renew the present revolving lines of credit for the same amounts or obtain
credit agreements with similar terms. The revolving lines of credit are
collateralized by accounts receivable (book value of $85,625 at June 30, 2001),
live fish inventories (book value of $6,872,915 at June 30, 2001), investment in
certain cooperative stock (book value of $112,000 at June 30, 2001), and
property and buildings (book value of $7,025,662 at June 30, 2001).



                                                                              11
<PAGE>


                               AquaPro Corporation

             Notes to Consolidated Financial Statements (continued)


2.  GOING CONCERN (CONTINUED)

Notwithstanding the above, management believes that additional capital or
restructuring of the timing of payments of the Company's obligations will be
necessary to alleviate the operational difficulties from cash flows being
limited by collections on accounts receivable being applied to the Company's
lines of credit (see Note 4), high interest rate debt, and to fund the Company's
growth. The Company is seeking additional capital for operations and capital
expenditures through equity or debt financing, collaborative arrangements with
corporate partners, equipment lease financing or funds from other sources. No
assurance can be given that such funds will be available to the Company on
acceptable terms, if at all. While management believes it can extend or
refinance current obligations as they become due, there are no assurances that
such extensions or refinancings will occur or at terms favorable to the Company.

3.  INVESTMENTS IN COOPERATIVES

Investments in cooperatives consist of the following:

<TABLE>
<CAPTION>
                                                            JUNE 30
                                                       2001         2000
                                                     --------     --------
<S>                                                  <C>          <C>
       Fishco, Inc.                                  $112,000     $112,000
       Indi-Bell, Inc.                                 57,240       57,240
                                                     --------     --------
                                                     $169,240     $169,240
                                                     ========     ========
</TABLE>

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




                                                                              12
<PAGE>


                               AquaPro Corporation

             Notes to Consolidated Financial Statements (continued)


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

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% and both lines of credit
mature October 15, 2001. The lines of credit may be renewed in 30-day
increments, at the discretion of the bank.

Notes payable other consists of the following:

<TABLE>
<CAPTION>
                                                                       JUNE 30
                                                                  2001          2000
                                                               ----------      --------
<S>                                                            <C>             <C>
    Note payable to an individual with interest
        payable monthly at 12% and principal
        due in April 2002                                      $  600,000      $400,000
    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                                                129,841        85,808
    Note payable to a corporation with interest at
        18%, due on demand                                        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,
        2001)                                                     129,586            --
    Notes payable to an officer and director with
        interest at variable rates (12% at June 30,
        2001) and no stated maturity                              209,606            --
                                                               ----------      --------
                                                               $1,279,033      $595,808
                                                               ==========      ========
</TABLE>

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




                                                                              13
<PAGE>

                               AquaPro Corporation

             Notes to Consolidated Financial Statements (continued)


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

Long-term debt consists of the following:

<TABLE>
<CAPTION>
                                                                                             JUNE 30
                                                                                        2001            2000
                                                                                     ----------      ----------
<S>                                                                                  <C>             <C>
Note payable to a bank with annual principal and interest payments of
approximately $142,000 through 2018; interest accrues at a variable
rate (6.5% at June 30, 2001)                                                         $1,319,694      $1,356,045

Note  payable to a financial institution with monthly principal and
interest payments of $11,750 through 2008 with interest at 13%                          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, 2001)                                                                          266,667              --

Note payable to a bank paid in fiscal 2001                                                   --         925,875

Convertible notes payable with interest due quarterly at 10.35% and
principal due December 2001                                                             100,000         100,000

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

Note payable to a bank with annual principal payments of $43,610 through 2003;
interest accrues at prime rate plus one percent (7.75%
at June 30, 2001) and is payable semi-annually                                          130,829         130,633

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                             144,692         226,682

Capital lease obligations with quarterly payments aggregating $16,281 including
interest at effective rates of 8.5% to 12.5% through June 2004                           73,873         117,517

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         114,354
</TABLE>


                                                                              14

<PAGE>
                               AquaPro Corporation

             Notes to Consolidated Financial Statements (continued)


<TABLE>
<S>                                                                                  <C>             <C>
Note payable to a former officer and director of the Company with monthly
payments of $4,000 including interest at 8.75%, maturing
January 2003                                                                         $   73,102      $  112,808

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                              104,257         227,596

Note payable to an individual with annual payments of $200,000 including
interest at prime less 1.75% (5% at June 30, 2001), maturing
April 2014                                                                            1,710,023       1,801,908

Note payable to bank with annual principal and interest payments of
$84,845 through 2020 with interest at 8.5%                                              783,555         800,000

Notes payable to individuals with monthly payments aggregating
$3,449 including interest at 8%, maturing May 2002                                       42,808          73,310

Notes payable to various finance companies with quarterly payments aggregating
$14,134 including interest at rates ranging from 7.6% to
8.19%, maturing at various dates through June 2005                                      178,864         220,023
                                                                                     ----------      ----------
                                                                                      6,021,274       6,595,556
Less current maturities                                                               1,210,247       1,617,848
                                                                                     ----------      ----------
                                                                                     $4,811,027      $4,977,708
                                                                                     ==========      ==========
</TABLE>

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

Substantially all trade accounts receivable, live fish inventories, property,
buildings and equipment and cooperative stock are pledged as collateral to the
note payable to bank and long-term debt. The Company is required, by 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,
2001. The Company obtained a waiver of those covenants through June 30, 2002.



                                                                              15
<PAGE>
                               AquaPro Corporation

             Notes to Consolidated Financial Statements (continued)


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

The aggregate annual maturities of long-term debt at June 30, 2001 are as
follows:

<TABLE>
<S>                                                        <C>
         2002                                              $1,210,247
         2003                                                 539,932
         2004                                                 432,679
         2005                                                 390,685
         2006                                                 152,666
         Thereafter                                         3,295,064
                                                           ----------
                                                           $6,021,273
                                                           ==========
</TABLE>

5.  COMMON STOCK

During fiscal 2001 and 2000, the Company granted to key employees 18,000 shares
of common stock at $.49 per share and 12,500 shares of common stock at $.85 per
share, respectively. The shares generally vest after a two-year period. Unearned
compensation expense is amortized to selling, general and administrative
expenses in the accompanying consolidated statements of operations over the
vesting period. Common shares totaling 1,500 previously granted were canceled
during fiscal 2000.

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, 2001 and 2000 as
follows:

<TABLE>
<CAPTION>
                                                                Weighted Average
                                                  Shares         Exercise Price
                                                ---------       ----------------
<S>                                             <C>             <C>
         Outstanding at July 1, 1999              765,000             1.87
         Granted                                  432,000              .84
                                                ---------
         Outstanding at June 30, 2000           1,197,000             1.50
         Granted                                  130,000              .50
                                                ---------
         Outstanding at June 30, 2001           1,327,000             1.40
                                                =========
</TABLE>


                                                                              16
<PAGE>


                               AquaPro Corporation

             Notes to Consolidated Financial Statements (continued)


6.  EMPLOYEE STOCK OPTIONS (CONTINUED)

Following is a summary of the status of options outstanding at June 30, 2001:

<TABLE>
<CAPTION>
                                            Weighted Average
        Exercise          Number of            Remaining         Weighted Average
      Price Range           Shares          Contractual Life      Exercise Price
     -------------        ---------         ----------------     ----------------
<S>                       <C>               <C>                  <C>
     $ .38 - $ .63         130,000              6 years               $  .50
       .56 -  1.25         432,000              5 years                  .84
       .69 -  1.88         341,000              4 years                  .94
      2.84 -  3.25         250,000              3 years                 3.05
      2.00                 174,000              2 years                 2.00
</TABLE>

The options were granted for a seven-year period and are exercisable at anytime
prior to their expiration at various dates from March 31, 2002 to March 31,
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
2001 and 2000, 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, 2001 and 2000 is amortized to
expense over the vesting period. The Company's pro forma net losses were
$1,668,833 and $472,829 for the fiscal years ended June 30, 2001 and 2000,
respectively, and the Company's pro forma basic and diluted loss per common
share was $.34 and $.10, respectively, for those same periods. The weighted
average fair value of options granted during the fiscal years ended June 30,
2001 and 2000 was $.50 and $.75, respectively.


                                                                              17


<PAGE>
                               AquaPro Corporation

             Notes to Consolidated Financial Statements (continued)


7.  INCOME TAXES

The Company has consolidated net operating loss carryforwards for income tax
purposes of approximately $13,300,000 at June 30, 2001, which expire at various
dates through 2021.

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

<TABLE>
<CAPTION>
                                                                             JUNE 30
                                                                        2001             2000
                                                                    ------------      -----------
<S>                                                                 <C>               <C>
   Deferred tax assets (liabilities) - noncurrent:
     Net operating loss carryforward                                $  4,907,000      $ 4,264,000
     Goodwill for income tax purposes                                    310,000          343,000
     Property, buildings and equipment                                  (189,000)        (187,000)
     Other                                                                22,000           30,000
                                                                    ------------      -----------
                                                                       5,050,000        4,450,000
   Valuation allowance for deferred tax assets                        (5,050,000)      (4,450,000)
                                                                    ------------      -----------
   Net deferred tax assets                                          $         --      $        --
                                                                    ============      ===========
</TABLE>


8.  FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts for cash and cash equivalents approximate their fair values
at June 30, 2001 and 2000. The carrying amount for investments in cooperatives
approximates their fair value at June 30, 2001 and 2000 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, 2001 and 2000.




                                                                              18
<PAGE>
                                   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 15, 2001.

<TABLE>
                                         AQUAPRO CORPORATION
<S>                                     <C>
Dated: October 15, 2001                  By: /s/ George S. Hastings, Jr.
                                             -----------------------------------
                                             George S. Hastings, Jr.
                                             Chief Executive Officer, President
                                             and Chairman of the Board
</TABLE>



         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.

<TABLE>
<S>                                                       <C>
By: /s/ George S. Hastings, Jr.                           October 15, 2001
    -----------------------------------
George S. Hastings, Jr.,
Chief Executive Officer, President
(Principal Executive Officer and
Principal Accounting
Officer) and Chairman of the Board

By: /s/ Charles Porter                                    October 15, 2001
    -----------------------------------
Charles Porter, Director

By: /s/ Joseph F. Duncan, Sr.                             October 15, 2001
    -----------------------------------
Joseph F. Duncan, Sr., Director

By: /s/ Ken Ostebo                                        October 15, 2001
    -----------------------------------
Ken Ostebo, Director
</TABLE>