<PAGE>

                    U. S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                  FORM 10-QSB/A

    (Mark one)
         /X/ Quarterly Report Under Section 13 or 15(d) of the Securities
                              Exchange Act of 1934

                  For the quarterly period ended April 30, 1999
                                       or
         / / Transition Report Under Section 13 or 15(d) of the Securities
                              Exchange Act of 1934

                       Commission File Number: 33-23460-LA

                                AQUASEARCH, INC.
        (Exact name of small business issuer as specified in its charter)

              Colorado                               33-0034535
     (State or other jurisdiction of     (I.R.S. Employer Identification No.)
      incorporation or organization)

                   73-4460 Queen Ka'ahumanu Highway, Suite 110
                            Kailua-Kona, Hawaii 96740
                    (Address of principal executive offices)

                                 (808) 326-9301
                (Issuer's telephone number, including area code)

                                 NOT APPLICABLE
                 (Former name, former address and former fiscal
                       year, if changes since last report)

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
                                     ----     ----

As of April 30, 1999, the number of shares outstanding of issuer's Common
Stock, $0.0001 par value, was 76,401,020 shares.

<PAGE>

                                Aquasearch, Inc.

                               Form 10-QSB For The
                          Quarter Ended April 30, 1999

                                    Contents

PART I - FINANCIAL INFORMATION

<TABLE>
<CAPTION>
                                                                                           Page
    <S>                                                                                 <C>
     Item 1:  Financial Statements

         Condensed Balance Sheets                                                             3

         Condensed Statements of Operations                                                4, 5

         Condensed Statements of Cash Flows                                                   6

     Notes to Condensed Financial Statements                                                  7


     Item 2:  Management's Plan of Operation

         Overview                                                                             9

         Management's Plan of Operation for the Next Twelve Months                           18

         Management's Discussion and Analysis of Financial Condition
         and Results of Operations                                                           26

PART II - OTHER INFORMATION

         Item 1:  Legal Proceedings                                                          29

         Item 2:  Changes In Securities                                                      29

         Item 3.  Defaults Upon Senior Securities                                            30

         Item 4:  Submission of Matters to a Vote of Security Holders                        30

         Item 5:  Other Information                                                          30

         Item 6:  Exhibits And Reports on Form 8-K                                           30
</TABLE>


                                       2
<PAGE>

                                Aquasearch, Inc.
                        (A Development Stage Enterprise)

                            Condensed Balance Sheets

<TABLE>
<CAPTION>
                                                                    October 31,          April 30,
                                                                       1998                1999
                                                                   (as restated)       (as restated)
                                                                     (Audited)          (Unaudited)
                                                               -----------------------------------------
  <S>                                                         <C>                   <C>
   Assets
   Current assets:
      Cash                                                       $     151,473        $     164,301
      Accounts receivable                                                    -                    -
      Prepaid expenses                                                  48,703               23,088
      Refundable deposits                                                3,081                3,153
                                                               -----------------------------------------
   Total current assets                                                203,257              190,542
                                                               -----------------------------------------

   Note receivable from officer                                         50,000               50,000
   Plant and equipment:
      Plant                                                          2,519,044            3,641,027
      Equipment                                                        167,203              180,267
      Less accumulated depreciation                                   (201,292)            (282,269)
                                                               -----------------------------------------
   Net plant and equipment                                           2,484,955            3,539,025
                                                               -----------------------------------------
   Total assets                                                  $   2,738,212        $   3,779,567
                                                               =========================================

   Liabilities and stockholders' equity
   Current liabilities:
      Accounts payable                                           $     968,429        $   1,256,901
      Due to officer                                                   131,400              186,600
      Notes payable                                                    300,000            1,090,000
      Notes payable to officer                                         265,000              820,000
                                                               -----------------------------------------
   Total current liabilities                                         1,664,829            3,353,501
                                                               -----------------------------------------

   Stockholders' equity
      Preferred stock (5,000,000 shares authorized)                          -                    -
      Common stock ($0.0001 par value, 100,000,000 shares
        authorized, 68,564,013 and 76,401,020 shares
        outstanding at October 31, 1998 and April 30, 1999,
        respectively)                                                    7,979                8,762
      Additional paid-in capital                                     8,784,120           10,407,999
      Notes receivable                                                 (59,696)             (59,696)
      Deficit accumulated during the development stage              (7,659,020)          (9,930,999)
                                                               -----------------------------------------
   Total stockholders' equity                                        1,073,383              426,066
                                                               -----------------------------------------
   Total liabilities and stockholders' equity                    $   2,738,212        $   3,779,567
                                                               =========================================
</TABLE>

                                       3

<PAGE>

                                Aquasearch, Inc.
                        (A Development Stage Enterprise)


                       Condensed Statements of Operations

<TABLE>
<CAPTION>
                                               For the Period      For the Three       For the Three
                                               From Inception      Months Ended        Months Ended
                                                To April 30,         April 30,           April 30,
                                                    1999               1999                1998
                                               (as restated)       (as restated)       (as restated)
                                                (Unaudited)         (Unaudited)         (Unaudited)
                                              -----------------------------------------------------------
<S>                                          <C>                  <C>                 <C>
  Operations
  Sales                                         $       11,077      $            -     $            -
  Cost of sales                                         23,464                   -                  -
                                              -----------------------------------------------------------
  Gross loss from operations                           (12,387)                  -                  -
  Research and development costs                     3,778,775             365,110            319,677
  General and administrative expenses                4,807,585             734,539            218,361
                                              -----------------------------------------------------------
  Loss from operations                              (8,598,747)         (1,099,649)          (538,038)

  Other income (expense)
  Interest                                          (1,163,202)           (146,328)           (55,332)
  Other                                                 (7,452)               (151)              (324)
  Investment in joint venture                         (147,096)                  -                  -
                                              -----------------------------------------------------------
  Total other income (expense)                      (1,317,750)           (146,479)           (55,656)
                                              -----------------------------------------------------------
  Loss before income taxes and
     extraordinary item                             (9,916,497)         (1,246,128)          (593,694)
  Extraordinary item - loss on write down of
     assets to liquidation basis                       (14,502)                  -                  -
                                              -----------------------------------------------------------
  Net loss                                      $   (9,930,999)     $   (1,246,128)    $     (593,694)
                                              ===========================================================

  Loss per share                                $       (0.39)      $       (0.02)     $       (0.01)
                                              ===========================================================

  Weighted average shares outstanding               25,701,408          63,739,962         47,819,881
                                              ===========================================================
</TABLE>

                                       4
<PAGE>

                                Aquasearch, Inc.
                        (A Development Stage Enterprise)


                       Condensed Statements of Operations

<TABLE>
<CAPTION>
                                                For the Period       For the Six        For the Six
                                                From Inception       Months Ended       Months Ended
                                                 To April 30,          April 30,          April 30,
                                                     1999                1999               1998
                                                 (as restated)       (as restated)      (as restated)
                                                  (Unaudited)         (Unaudited)        (Unaudited)
                                              -----------------------------------------------------------
<S>                                          <C>                  <C>                 <C>
  Operations
  Sales                                         $       11,077      $            -     $            -
  Cost of sales                                         23,464                   -                  -
                                              -----------------------------------------------------------
  Gross loss from operations                           (12,387)                  -                  -
  Research and development costs                     3,778,775             691,205            545,690
  General and administrative expenses                4,807,585           1,138,217            415,884
                                              -----------------------------------------------------------
  Loss from operations                              (8,598,747)         (1,829,422)          (961,574)

  Other income (expense)
  Interest                                          (1,163,202)           (442,159)          (144,752)
  Other                                                 (7,452)               (398)              (324)
  Investment in joint venture                         (147,096)                  -                  -
                                              -----------------------------------------------------------
  Total other income (expense)                      (1,317,750)           (442,557)          (145,076)
                                              -----------------------------------------------------------
  Loss before income taxes and
     extraordinary item                             (9,916,497)         (2,271,979)        (1,106,650)
  Extraordinary item - loss on write down of
     assets to liquidation basis                       (14,502)                  -                  -
                                              -----------------------------------------------------------
  Net loss                                      $   (9,930,999)     $   (2,271,979)    $   (1,106,650)
                                              ===========================================================

  Loss per share                                $       (0.39)      $       (0.04)     $       (0.02)
                                              ===========================================================

  Weighted average shares outstanding               25,701,408          63,739,962         47,819,881
                                              ===========================================================
</TABLE>


                                       5
<PAGE>

                                Aquasearch, Inc.
                        (A Development Stage Enterprise)


                       Condensed Statements of Cash Flows

<TABLE>
<CAPTION>
                                                      For the Period       For the Six       For the Six
                                                      From Inception      Months Ended       Months Ended
                                                       To April 30,         April 30,         April 30,
                                                           1999               1999              1998
                                                       (as restated)      (as restated)     (as restated)
                                                        (Unaudited)        (Unaudited)       (Unaudited)
                                                   ---------------------------------------------------------
<S>                                               <C>                    <C>              <C>
   Cash Flows from operating activities
   Net loss                                         $   (9,930,999)       $  (2,271,979)   $  (1,106,650)
   Adjustments to reconcile net loss to net cash
      used in operating activities:
        Depreciation                                       282,269               80,977           41,067
        Expenses paid with common stock                    947,761               19,603                -
        Discount on convertible notes payable              959,965              365,259          109,412
        Changes in:
          Other current assets                             (26,241)              25,543           18,281
          Receivables                                            -                    -            1,219
          Accounts payable and due to officer            1,443,501              343,672           95,428
                                                   ---------------------------------------------------------
   Cash used in operating activities                    (6,323,744)          (1,436,925)        (841,243)

   Cash flows from investing activities
   Purchases of fixed assets                            (3,821,294)          (1,135,047)         (69,635)
                                                   ---------------------------------------------------------
   Cash used in investing activities                    (3,821,294)          (1,135,047)         (69,635)

   Cash flows from financing activities
   Increase in notes receivable                            (50,000)                   -                -
   Proceeds from issuance of common stock                5,191,458              500,000          500,000
   Proceeds from notes payable                           5,439,800            2,084,800          370,000
   Offering costs                                         (271,919)                   -                -
                                                   ---------------------------------------------------------
   Cash provided by financing activities                10,309,339            2,584,800          870,000
                                                   ---------------------------------------------------------

   Net increase (decrease) in cash                         164,301               12,828          (40,878)
   Cash, beginning of the period                                 -              151,473           47,006
                                                   ---------------------------------------------------------
   Cash, end of the period                           $     164,301        $     164,301    $       6,128
                                                   =========================================================

   Supplemental disclosure of cash flow
      information:
      Non-cash financing transactions:
        Conversion of convertible notes
          payable to common stock                    $   4,219,800        $   1,414,800    $           -
</TABLE>

                                       6

<PAGE>

                                Aquasearch, Inc.
                        (A Development Stage Enterprise)


                     Notes To Condensed Financial Statements
                                 April 30, 1999
                                   (Unaudited)

1.  General

         The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB. Accordingly, they do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring adjustments)
considered necessary for a fair presentation have been included.

         These financial statements should be read in conjunction with the
Financial Statements in the Company's Annual Report on Form 10-KSB for the
fiscal year ended October 31, 1998.

2.  Common Stock and Common Stock Purchase Warrants

         As of April 30, 1999, there were a total of 10,031,731 Common Stock
Purchase Warrants (the "Warrants") issued and outstanding, of which 5,347,244
Warrants had an exercise price of $1.00 per share, 25,974 Warrants had an
exercise price of $0.21 per share, and 4,658,513 Warrants had an exercise price
of $0.50 per share. No Warrants were exercised during the three months ended
April 30, 1999. Aquasearch can redeem the $1.00 per share Warrants at $.01 per
Warrant during their three-year exercise period upon 30 days' notice anytime
that the closing bid price per share of the Common Stock exceeds $1.50 per
share for 20 trading days out of 30 consecutive trading days ending on the
third day prior to the date of the notice of redemption. At April 30, 1999, we
had reserved a sufficient number of shares of our Common Stock to issue when
the Warrants are exercised.

         An analysis of the changes in stockholders' equity is as follows:

<TABLE>
<CAPTION>
                                  Shares of                 Additional                                        Total
                                   Common        Common       Paid-In         Notes        Accumulated    Stockholders'
                                    Stock        Stock        Capital       Receivable       Deficit          Equity
                                ----------------------------------------------------------------------------------------
<S>                            <C>            <C>          <C>            <C>           <C>               <C>
Balance, January 31, 1999          70,963,112  $   8,218     $9,447,121    $  (59,696)   $   (8,684,871)     $  710,772
Issuance of stock on
  conversion of convertible
  notes payable ($0.15 to
  $0.18 per share)                  5,437,908        544        860,290             -                 -         860,834
Discount on convertible notes
  payable                                   -          -        100,588             -                 -         100,588
Loss for the three months
  ended April 30, 1999                      -          -              -             -        (1,246,128)     (1,246,128)
                                ----------------------------------------------------------------------------------------
Balance, April 30, 1999            76,401,020  $   8,762    $10,407,999    $  (59,696)   $   (9,930,999)     $  426,066
                                ========================================================================================
</TABLE>
         In November 1996, we executed a Letter of Intent with C. Brewer and
Company, Limited ("C. Brewer"). Under the proposed agreement, we would acquire
between 80 and 90 acres of property in the


                                       7
<PAGE>

Ka'u region of the Big Island of Hawaii valued at between $900,000 and
$1,000,000. In return, C. Brewer would receive between 2,570,000 and 2,850,000
shares of our Common Stock at a purchase price of $0.35 per share. In addition,
C. Brewer acquired a three-year warrant to purchase up to 500,000 shares of our
Common Stock at a purchase price of $1.25 per share. The stockholders' equity
at April 30, 1999 does not reflect the issuance of the Common Stock or the
warrant to C. Brewer. We have not consummated the transaction with C. Brewer.
We have decided that we do not yet need 80 to 90 acres of land, because
production at our current facility has increased beyond expectation. We want to
delay any transaction with C. Brewer until we determine the best strategy and
location for future development.

3.  April 30, 1999 and 1998 Restatements

         The April 30, 1999 and 1998 financial statements have been restated to
recognize the discount and related expense resulting from the difference
between the conversion price and the fair value of the common stock underlying
the convertible notes on their issuance dates for convertible notes issued
during the respective periods. The impact of the aforementioned on the April
30, 1999 and 1998 financial statements was as follows:

<TABLE>
<CAPTION>
                                            For the Three Months Ended          For the Three Months Ended
                                                  April 30, 1999                      April 30, 1998
                                         -----------------------------------------------------------------------
                                           As originally                       As originally
                                             reported        As restated         reported          As restated
                                         -----------------------------------------------------------------------
<S>                                      <C>                <C>               <C>               <C>
   Balance sheet:
     Additional paid-in capital            $   9,448,034     $ 10,407,999      $   4,699,470     $  4,907,706
     Deficit accumulated during the
      development stage                       (8,971,334)      (9,930,999)        (5,809,159)      (6,017,395)
   Statement of operations:
     Interest expense                            (45,740)        (146,328)           (16,508)         (55,332)
     Net loss                                 (1,145,540)      (1,246,128)          (554,870)        (593,694)
     Loss per share                        $       (0.02)    $      (0.02)     $       (0.01)    $      (0.01)
</TABLE>
<TABLE>
<CAPTION>
                                              For the Six Months Ended              For the Six Months Ended
                                                  April 30, 1999                         April 30, 1998
                                         -----------------------------------------------------------------------
                                           As originally                       As originally
                                             reported        As restated         reported          As restated
                                         -----------------------------------------------------------------------
<S>                                      <C>                <C>               <C>               <C>
   Statement of operations:
     Interest expense                      $     (76,900)    $   (442,159)     $     (35,340)    $   (144,752)
     Net loss                                 (1,906,720)      (2,271,979)          (997,238)      (1,106,650)
     Loss per share                        $       (0.03)    $      (0.04)     $       (0.02)    $      (0.02)
</TABLE>
Item 2.  Management's Plan of Operation

THE FOLLOWING DISCUSSION OF MANAGEMENT'S PLAN OF OPERATION CONTAINS CERTAIN
FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 21E OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED, INCLUDING STATEMENTS THAT INDICATE WHAT THE
COMPANY "BELIEVES," "EXPECTS" AND "ANTICIPATES" OR SIMILAR EXPRESSIONS. THESE
STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS
WHICH MAY CAUSE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF THE COMPANY TO
DIFFER MATERIALLY FROM THOSE EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING
STATEMENTS. SUCH FACTORS INCLUDE, AMONG OTHERS, THE INFORMATION


                                       8
<PAGE>

CONTAINED UNDER THE CAPTION "FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS"
IN THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB FOR THE FISCAL YEAR ENDED OCTOBER
31, 1998 (THE "1998 FORM 10-KSB"). YOU ARE CAUTIONED NOT TO PLACE UNDUE
RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH REFLECT MANAGEMENT'S
ANALYSIS ONLY AS OF THE DATE OF THIS QUARTERLY REPORT ON FORM 10-QSB. WE
UNDERTAKE NO OBLIGATION TO PUBLICLY RELEASE THE RESULTS OF ANY REVISION OF
THESE FORWARD-LOOKING STATEMENTS. YOU ARE STRONGLY URGED TO READ THE
INFORMATION SET FORTH UNDER THE CAPTION "FACTORS THAT MAY AFFECT FUTURE
OPERATING RESULTS" IN THE 1998 FORM 10-KSB FOR A MORE DETAILED DESCRIPTION OF
THESE SIGNIFICANT RISKS AND UNCERTAINTIES.

OVERVIEW

We are a development stage company that develops and commercializes natural
products from microalgae using our proprietary photobioreactor technology known
as the Aquasearch Growth Module, or AGM.

Microalgae are a diverse group of over 30,000 species of microscopic plants
that have a wide range of physiological and biochemical characteristics.
Microalgae produce many different and unusual fats, sugars, proteins, amino
acids, vitamins, enzymes, pigments and other bioactive compounds that have
existing and potential commercial applications in such fields as animal and
human nutrition, food colorings, cosmetics, diagnostic products,
pharmaceuticals, research grade chemicals, pigments and dyes. Microalgae grow
ten times faster than the fastest growing land-based crops and represent a
largely unexploited and renewable natural resource with a biodiversity
comparable to that of land-based plants.

Although microalgae are believed to be a potential source for many valuable
commercial applications, less than 5,000 species of microalgae have ever been
isolated from nature, and fewer than 10 species of microalgae - less than
one-third of one percent of all such species - have ever been cultivated
commercially.

We believe that the development of a large biotechnology industry, based on
thousands of species of microalgae, has been impeded only by a lack of
technology. We anticipate that our commercial production technology will allow
us to create a market for new and valuable substances derived from microalgae.
Our company, since its inception, has been dedicated to this proposition.

Our key achievements in the past year include major advances in our platform
technology, the AGM, including:

                  -    Successful introduction of the "Ultra-AGM," which has
                       6-fold greater capacity than the previous AGM model

                  -    Capacity per unit capital cost of the AGM has tripled

                  -    Productivity per unit capacity of HAEMATOCOCCUS, the
                       microalgae from which our natural astaxanthin product
                       is derived, has tripled

                  -    Astaxanthin content of HAEMATOCOCCUS has more than
                       doubled - from 1.5% to greater than 3%

At the same time, we have:

                  -    Tripled our patents - from 3 to 9

                  -    Tripled our total production capacity

                  -    Initiated sales

                  -    Expanded our product pipeline to include nutraceuticals
                       and pharmaceuticals


                                       9
<PAGE>

                  -    Strengthened our management team in areas of strategic
                       development and marketing
                  -    Augmented our research team in natural products
                       chemistry and drug development

In the past year we focused primarily on technology and infrastructure. This
year we are focused on marketing, sales, and further expanding our product
pipeline.

HISTORY: KEY EVENTS

1984

         AQUASEARCH FOUNDED. Scientists from Scripps Institution of Oceanography
         in La Jolla, California founded Aquasearch, Inc. as a California
         corporation.

1988

         FEB:     We incorporated Aquasearch Inc. in Colorado.

         MAY:     Aquasearch (Colorado) acquired all the assets of Aquasearch
                  (California) in a stock-for-stock exchange.

         JUN:     OPERATIONS BEGIN in Borrego Springs, California.

1988-1993

         RESEARCH AND DEVELOPMENT. We developed our first prototype of the AGM.
         Over the next few years we refined certain details of engineering in
         the AGM. At the same time, we cultivated microalgal species of markedly
         different varieties.

1993

         MAR:     AQUASEARCH-CYANOTECH JOINT VENTURE FORMED. We formed a joint
                  venture company with Cyanotech Corporation ("Cyanotech"), an
                  unaffiliated producer of microalgae. Our goal was to develop
                  commercial systems for producing astaxanthin-rich microalgae.
                  We contributed approximately $147,000 in capital and licensed
                  our AGM technology to the joint venture. Cyanotech contributed
                  approximately $15,000 in capital to the joint venture and made
                  available its facilities and personnel at the Hawaii Ocean
                  Science and Technology (HOST) Business Park at Keahole Point,
                  Kailua-Kona, Hawaii.

1994

         JUN:     CULTOR NEGOTIATION BEGINS. We began discussions with Cultor,
                  Ltd. ("Cultor"), a Finnish food conglomerate, regarding the
                  purchase of astaxanthin-rich microalgae.

         JUL:     FIRST ASTAXANTHIN PRODUCED. We constructed AGMs that
                  demonstrated the economics of the production process. We also
                  produced samples of astaxanthin-rich microalgae for analysis
                  and trial applications. Samples were sent to Cultor for
                  testing.

         NOV:     AQUASEARCH-CYANOTECH JOINT VENTURE TERMINATED. We decided to
                  discontinue the joint venture with Cyanotech. Under our
                  dissolution agreement, all intellectual property rights


                                       10
<PAGE>

                  to AGM technology reverted to Aquasearch.

         DEC:     CULTOR STARTS FEEDING TRIALS on farmed salmon using
                  astaxanthin-rich microalgae we produced.

1995

         APR:     CONSTRUCTION BEGINS on our own half-acre facility in Hawaii,
                  leased from the HOST Business Park. We designed the facility
                  for research and development, and for production of small
                  amounts of astaxanthin-rich microalgae for marketing.

         JUN:     CONSTRUCTION COMPLETED. Our first facility was comprised of
                  AGMs and an operating laboratory.

         JUL:     SVENSKA FODER CONTRACT. We entered into a three-year Supply
                  Agreement with Svenska Foder, then a subsidiary of Cultor.
                  Svenska Foder agreed to act as the exclusive distributor of
                  our natural astaxanthin product for animal feed applications
                  in Sweden, Norway and Finland. In December 1996, Cultor sold
                  Svenska Foder to KKR, a Danish animal feeds company, and
                  assumed all of Svenska Foder's rights and obligations under
                  the Supply Agreement.

                  FACILITY EXPANSION BEGINS. We leased additional space in the
                  HOST Business Park to expand our half-acre research and
                  development facility to one acre.

         OCT:     ONE-ACRE EXPANSION COMPLETED. We expanded the facility to
                  include finishing ponds (the second stage of our production
                  process), and additional laboratory space.

1996

         MAY:     CULTOR AGREEMENT. We entered into a three-year Distribution
                  and Development Agreement with Cultor (recently extended to
                  four years). We agreed to act as the exclusive worldwide
                  supplier to Cultor of natural astaxanthin derived from
                  microalgae for animal feed applications. Cultor agreed to act
                  as the exclusive worldwide distributor of our natural
                  astaxanthin product for animal feed applications. Under our
                  agreement, Cultor and Aquasearch may, at Cultor's option,
                  create a new joint venture company for the sole purpose of
                  producing and selling natural astaxanthin derived from
                  microalgae for animal feed applications.

                  SCIENTIFIC ADVISORY BOARD FORMED. We created an active
                  Scientific Advisory Board consisting of Ph.D.s with expertise
                  in the fields of aquaculture; marine biology; fluid dynamics;
                  and the chemistry, photobiology, physiology, genetics and mass
                  culture of microalgae.

         JUL:     PROCESS PATENT IN THE U.S. We were awarded U.S. Patent Number
                  5,541,056 for a "Method of Control of Microorganism Growth
                  Process." This patent claims certain processes that operate in
                  our proprietary, closed-system photobioreactor, the AGM. Our
                  U.S. filing was made under the Patent Cooperation Treaty. We
                  began to pursue international patents in certain treaty-member
                  nations.

         OCT:     CULTOR ACQUIRES AQUASEARCH STOCK. Cultor acquired 400,000
                  shares of our Common


                                       11
<PAGE>

                  Stock at a purchase price of $0.50 per share.

         NOV:     C. BREWER AGREEMENT. We executed a Letter of Intent with C.
                  Brewer and Company, Limited ("C. Brewer"). Under the proposed
                  agreement we would acquire between 80 and 90 acres of C.
                  Brewer property in the Ka'u region of the Big Island of
                  Hawaii, valued at between $900,000 and $1,000,000. In return,
                  C. Brewer would acquire approximately 4% of our outstanding
                  Common Stock. In addition, C. Brewer acquired a three-year
                  warrant to purchase up to 500,000 shares of Aquasearch Common
                  Stock at $1.25 per share. To date, we have not consummated the
                  transaction with C. Brewer because production at our current
                  facility has increased beyond expectation.

1997

         APR:     EARL FUSATO NAMED CHIEF FINANCIAL OFFICER, JOINS BOARD. Mr.
                  Fusato brought considerable experience to our management team.
                  At VeriFone, Inc., global leader in the transaction automation
                  industry, he served as VP Finance (1983-87), Treasurer
                  (1987-90) and Director of Internal Audit and Manager of
                  Transaction Automation (1990-92). He served as CFO of RESCO
                  Inc., a residential real estate brokerage company (1992-94).
                  He also served in various key positions at Ernst and Young
                  (1978-83) and KPMG Peat Marwick (1971-77).

         JUN:     APPARATUS PATENT IN EUROPE. We were awarded European Patent
                  Number 0494887 for a "Process and Apparatus for the Production
                  of Photosynthetic Microbes." This patent not only claims
                  certain processes, but also certain features of our core
                  technology, the Aquasearch Growth Module. The European patent
                  complements, but does not supplant claims made in the U.S.
                  Patent awarded in 1996. Our European filing was made under the
                  Patent Cooperation Treaty. We are pursuing additional patents
                  in certain treaty-member nations.

         SEP:     DR. EDWARD DAVID JOINS BOARD. Dr. David has a long history of
                  management experience in the fields of science and technology.
                  During his career he has served as President of Exxon Research
                  and Engineering, Science Advisor to the President of the
                  United States, Executive Director of the Communications
                  Systems Division at Bell Laboratories, and Director of the
                  White House Office of Science and Technology Policy.

1998

         APR:     EXPANSION BEGINS TO TRIPLE OUR PRODUCTION FACILITY. We began
                  construction to expand our production facility in Kona, Hawaii
                  from one acre to three acres. At the same time, we began
                  upgrading every component of our production system hardware.

         JUN:     WE QUESTION CYANOTECH REGARDING INTELLECTUAL PROPERTY. We
                  formally notified Cyanotech of our concern that their use of
                  photobioreactor technology may violate one of our patents
                  (U.S. patent No. 5,541,056) relating to processes for
                  controlling microalgae growth. We also expressed concern
                  regarding possible trade secret misappropriation.

         JUL:     DAVID WATUMULL NAMED EXECUTIVE VP, CORPORATE FINANCE AND
                  STRATEGIC DEVELOPMENT. Mr. Watumull brought more strength to
                  our management team. He has been a respected biotechnology
                  industry analyst, investment banker and money manager for more
                  than 15 years, serving at both Paine Webber and First Honolulu
                  Securities.


                                       12
<PAGE>

                  WE TEST A NEW PHOTOBIOREACTOR - THE ULTRA-AGM. In previous
                  months we designed and engineered the Ultra-AGM. The Ultra-AGM
                  is more than six times larger than any standard production
                  growth module we have used. To our knowledge, the Ultra-AGM is
                  larger than any closed-system photobioreactor ever operated. A
                  six-month testing period begins.

                  CYANOTECH FILES LAWSUIT. Our former joint venture partner
                  filed a complaint in the United States District Court for the
                  District of Hawaii (Case No. CV98-00600ACK) against us. They
                  sought a declaratory judgment of:

                       -  invalidity of our U.S. patent (No. 5,541,056) for a
                          method to grow microalgae;

                       -  non-infringement (by Cyanotech) of our same patent;
                          and

                       -  non-misappropriation of our trade secrets regarding
                          the Aquasearch Growth Module.

         SEP:     WE COUNTER-SUE CYANOTECH. We asserted the validity of our U.S.
                  patent. We also alleged that Cyanotech:

                       -  infringed our U.S. patent;

                       -  misappropriated trade secrets related to our AGM
                          technology;

                       -  breached our joint venture dissolution agreement; and

                       -  engaged in unfair competition.

                  We requested a combination of damages, injunctive relief and
                  attorney's fees on each count.

                  APPARATUS PATENT IN HONG KONG. We were awarded patent number
                  HK1001232 for the "Process and Apparatus for the Production of
                  Photosynthetic Microbes." This patent was awarded under the
                  Patent Cooperation Treaty, based on the original filing
                  approved by the European Patent Office in 1997.

         NOV:     CHARTER MEMBERSHIP IN THE MARINE BIOPRODUCTS ENGINEERING
                  CENTER (MARBEC). MarBEC is a 10-year, $40 million Engineering
                  Research Center, funded by the U.S. National Science
                  Foundation. MarBEC is focused on developing new enzymes,
                  pigments and pharmaceuticals, primarily from microalgae. It is
                  based at the University of Hawaii and the University of
                  California, Berkeley. Aquasearch, Monsanto and Eastman
                  Chemical are among the charter industry members, which have
                  certain preferential rights to new products developed by
                  MarBEC. We are the only member of MarBEC that has developed
                  photobioreactor technology, which we believe is likely to be
                  required for the commercial exploitation of any new product
                  from microalgae.

         DEC:     ENZYMED AGREEMENT. We entered into a Compound Library
                  Agreement with EnzyMed, Inc. of Iowa, a privately-held
                  biotechnology company. Under the agreement, we will provide
                  extracts of microalgae that contain unexplored or unexploited
                  substances with biomedical value. EnzyMed agreed to generate
                  compounds from our microalgae extracts using their method of
                  "combinatorial biocatalysis." This method generally produces
                  several hundred compounds from a single extract. We expect
                  some of these compounds to be novel and proprietary. Both
                  companies intend to commercialize the resulting compound
                  "libraries." Compound libraries are typically screened for
                  possible medical applications by the pharmaceutical industry.
                  The pharmaceutical company typically pays


                                       13
<PAGE>

                  an "access fee" for the right to screen the library for a
                  limited time and for limited applications. Under our
                  agreement, Aquasearch and EnzyMed will share revenues from
                  commercialization, including access fees, licensing fees,
                  milestone payments, royalties, and commercial sales.

1999

         JAN:     MARTIN GUERIN NAMED VP, SALES AND MARKETING. Mr. Guerin has
                  international experience with world-leading groups in food and
                  feed industries. He held top management positions for
                  marketing and business development with Finfeeds International
                  (1996-98) and EWOS (1994-96), both Cultor companies. His
                  previous experience includes management positions with BP
                  Nutrition (now Nutreco) and Champagnes Cereales.

                  NEW EQUIPMENT INSTALLATION BEGINS. With construction nearly
                  complete on our expanded 3-acre facility, we began to install
                  new equipment for process control and for final processing of
                  raw products.

                  THE ULTRA-AGM GOES INTO OPERATION. After a successful 6-month
                  testing period, we installed and began to operate the new
                  Ultra-AGM. This new photobioreactor is much larger, more
                  efficient, and less costly than any previous AGM. It also
                  requires 75% less manpower to operate.

         FEB:     CONSTRUCTION COMPLETED ON 3-ACRE PHYSICAL PLANT. We completed
                  all new structures at our production facility. We tripled the
                  area for both AGMs and finishing ponds. We quadrupled the area
                  under roof to more than 8,000 square feet. We added a
                  multi-purpose building for product processing, packaging and
                  storage. The processing building can accommodate further
                  increases in production at our current site. We laid the
                  foundation for a 10,000 square-foot laboratory that will
                  accommodate expansion of our drug discovery program.

                  NEW PLANT BEGINS PRODUCTION AT FULL CAPACITY. While installing
                  our final processing equipment, we increased our production of
                  raw product to full capacity. We began to store raw product.
                  Final processing of the product will be done once equipment
                  installation is complete.

                  DAVID TARNAS JOINS BOARD. Mr. Tarnas brings political
                  experience to our Board of Directors. As a Hawaii State
                  Representative and Chairman of the House Committee on Ocean
                  Recreation and Marine Resources, he led many important policy
                  initiatives in Hawaii until 1998.

                  PROCESS PATENT IN EUROPE. We were awarded European Patent
                  Number 0772676 for a "Method of Control of Microorganism
                  Growth Process." This patent, originally granted in the U.S.,
                  was awarded in Europe under the Patent Cooperation Treaty. It
                  claims certain processes that operate in our proprietary,
                  closed-system photobioreactor, the AGM.

         MAR:     PROCESS PATENT IN U.S. We received U.S. Patent Number
                  5,882,849 for a "Method of Control of HAEMATOCOCCUS Species
                  Growth Process." This patent applies to proprietary techniques
                  we use to grow HAEMATOCOCCUS, our principal source of
                  astaxanthin. We are


                                       14
<PAGE>

                  pursuing international patents in certain member nations that
                  are signatories of the Patent Cooperation Treaty.

         APR:     APPARATUS PATENT IN NORWAY. We were awarded Norwegian Patent
                  Number 304556 for a "Process and Apparatus for the Production
                  of Photosynthetic Microbes." This patent not only claims
                  certain processes, but also certain features of our core
                  technology, the Aquasearch Growth Module. Originally granted
                  in Europe, this patent was awarded in Norway under the Patent
                  Cooperation Treaty.

                  PRODUCT FORMULATION BEGINS ON OUR FIRST NUTRACEUTICAL PRODUCT.
                  A large U.S. chemical company began collaborating with us -
                  under a confidentiality agreement - to formulate an
                  astaxanthin-rich nutraceutical product.

         MAY:     PROCESS PATENT IN AUSTRALIA. We were awarded Australian Patent
                  Number 698772 for a "Method of Control of Microorganism Growth
                  Process." This patent, originally granted in the U.S., was
                  awarded in Australia under the Patent Cooperation Treaty.

                  APPARATUS PATENT IN SOUTH KOREA. We received South Korea
                  Patent Number 700834 for a "Process and Apparatus for the
                  Production of Photosynthetic Microbes." Originally granted in
                  Europe, this patent was awarded in South Korea under the
                  Patent Cooperation Treaty.

                  MICROALGAE FOR OUR SECOND NUTRACEUTICAL PRODUCT APPROVED. The
                  State of Hawaii Department of Agriculture approved our permit
                  application to import a new microalgae species. This species
                  is the basis for our second nutraceutical product, planned for
                  product launch in 2000.

THE MARINE BIOTECHNOLOGY INDUSTRY

There are 30,000 species of microalgae. Many of these are known to contain
valuable substances, including pharmaceuticals, nutraceuticals, and certain
commodities. Fewer than one-tenth of one percent of these 30,000 species have
been produced commercially.

The total market for only three species of microalgae that are now produced
commercially (SPIRULINA, CHLORELLA and HAEMATOCOCCUS) is estimated to be in the
range of $200-300 million per year. We believe that the total market for all
products derived from microalgae could eventually range into the billions of
dollars, provided that: (1) the products are unique, valuable, and numerous;
and (2) production technology is reliable and cost-effective.

Scientific literature demonstrates that:

      -    microalgae contain unique substances;

      -    these unique substances are potentially valuable as pharmaceuticals
           and nutraceuticals; and

      -    these unique substances are numerous among the microalgae.

Until recently, however, there was no technology to provide for the
cost-effective production of microalgae in commercial quantities. We believe
that our AGM provides a reliable and cost-effective production technology that
will contribute to the development of a multi-billion dollar marine
biotechnology industry. However, there can be no assurance that such an
industry will develop.


                                       15

<PAGE>

OUR KEY ACHIEVEMENTS

(1) RELIABLE AND COST EFFECTIVE PRODUCTION TECHNOLOGY

The Aquasearch Growth Module is a novel, reliable and cost-effective production
technology. We have proven the efficacy of the AGM through a 10-year process of
engineering, development, and demonstration.

We continue to achieve targeted improvements in AGM technology and performance,
as this table shows:

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
                IMPROVEMENT                           PLANNED IN 1998                   ACHIEVED IN 1999
------------------------------------------------------------------------------------------------------------------
<S>                                               <C>                          <C>
Increase AGM size                                           6X                           Greater than 6X

Decrease capital cost                                       2X                                 3X
(per gallon capacity)

Increase AGM production cycle                             30 days                            60 days

HAEMATOCOCCUS production rate                           Increase 3X                      Greater than 3X

Astaxanthin content of product                      2.0% of dry weight           Greater than 3.0% of dry weight
------------------------------------------------------------------------------------------------------------------
</TABLE>
These improvements to the AGM have reduced costs and increased productivity. We
believe the AGM is the largest commercial photobioreactor in operation. To our
knowledge, our current HAEMATOCOCCUS production rate is higher than any reported
in the scientific literature.

(2) INTELLECTUAL PROPERTY

We now have issued patents relating to:

      -    the AGM apparatus (Europe, Australia, Norway, Hong Kong, South Korea)

      -    general processes for cultivating microalgae in photobioreactors
           (U.S., Europe, Australia)

      -    specific processes for cultivating HAEMATOCOCCUS (U.S.)

Five of these patents issued in the first 5 months of 1999 alone. Additional
patents are pending.

We continue to develop trade secrets. We believe that our trade secrets have
been critical to our recent improvements in production rates and product
quality.

(3) PRODUCTION CAPACITY

In the past year we expanded our physical plant by a factor of three. We now
have a completely new manufacturing plant. The plant includes new processing
equipment and an upgraded process-control system.

Our HAEMATOCOCCUS cultivation process is done in two steps. We use two types of
large-scale production systems: (1) Aquasearch Growth Modules, and (2)
"finishing" ponds. This table shows the key features of these two production
systems:


                                       16
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
        FEATURE                    AQUASEARCH GROWTH MODULE                           FINISHING POND
------------------------------------------------------------------------------------------------------------------
<S>                            <C>                                           <C>
Function                        Produce HAEMATOCOCCUS biomass                 Convert biomass to astaxanthin

Technology                               Proprietary                                  Public domain

Utilized capacity                            20%                                           100%
------------------------------------------------------------------------------------------------------------------
</TABLE>
We have achieved much greater improvements in AGM performance than anticipated.
As a result, we are now using only 20% of our AGM production capacity. If the
market demands, we could increase total production by 5X by increasing our
finishing pond capacity. Relative to AGMs, finishing ponds are less costly to
construct.

(4) SALES

In 1998 we projected sales to begin as soon as our expanded facility was
constructed, and our new processing equipment was installed.

We completed construction of the expanded facility in February 1999. New
processing equipment is expected to be installed in June 1999. Product sales
are projected to begin soon thereafter.

(5) PRODUCT PIPELINE

In 1998 our pipeline consisted of a single product: natural astaxanthin for use
in animal nutrition. We have now expanded our pipeline to include:

         1)   Nutraceuticals

              -     Natural astaxanthin

              -     A second microalgae-based product

         2)   Drug discovery

              -     Compound libraries

These products are all in active development. A large U.S. chemical company is
collaborating with us - under a confidentiality agreement - to formulate our
natural astaxanthin nutraceutical. However, we cannot guarantee that the
collaboration will extend beyond product formulation. The State of Hawaii
Department of Agriculture has just approved our import permit for a new species
of microalgae that is the basis of our second nutraceutical product. EnzyMed
has received our first microalgae extracts, and has begun work to produce our
first compound library.

(6) OUR TEAM

NEW MANAGEMENT. We believe our team is stronger than ever - at all levels.
Within the last year we added important experience and expertise at the
management level, including David Watumull, Martin Guerin and David Tarnas.
Together, these individuals bring us new experience and expertise in:

              -     international marketing and sales in food and feed
                    industries;

              -     strategic development in biotechnology and pharmaceutical
                    industries;

              -     public/private sector collaboration; and


                                       17
<PAGE>

              -     fund raising.

NEW RESEARCH SCIENTISTS. Dr. Walter Nordhausen, Dr. Mai Lopez, and Dr. Mia Unson
have joined our research team in the past six months. Together, they more than
double our research effort, and bring us proven experience in:

              -     biopharmaceutical product development;

              -     marine biology and biochemistry;

              -     natural products chemistry; and

              -     research program management.

EMPLOYEES. We believe our employees are strongly motivated for success. In 1998
we introduced a pay-for-performance compensation plan that includes both stock
options and cash bonus programs. We structured the compensation plan to reward
both teamwork and individual excellence. Rewards are generated by performance
on quarterly targets. We believe that our employees are directly responsible
for Aquasearch's recent achievements.

(7) RECENT FINANCING ACTIVITY

From June 1997 to September 1998, the Company raised $3,305,000 through the
private placement of convertible notes. Between July and September 1998, all of
the outstanding convertible notes (together with accrued interest), were
converted into 20,075,648 shares of Common Stock. We also issued 3,305,000
Warrants under the terms of the Notes. The Warrants have an exercise price of
$0.50 per share and have a term of three years.

Additionally, from September 1998 through April 1999, the Company raised
$2,870,000 through the private placement of convertible notes. These
convertible notes bear interest at 10 percent per annum, have a term of one
year and are convertible into shares of Common Stock. Upon conversion of the
notes, each note holder will receive warrants to purchase 1,000 shares of
Common Stock at $0.50 per share for each $1,000 aggregate principal amount of
convertible notes purchased. In the six months ended April 30, 1999, some of
these convertible note holders along with other outstanding convertible note
holders converted their notes into a total of 7,837,007 shares of the Company's
Common Stock and received an aggregate of 1,259,800 warrants.

MANAGEMENT'S PLAN OF OPERATION FOR THE NEXT TWELVE MONTHS

Last year we focused on technology and infrastructure. We strengthened our
intellectual property, expanded our physical plant, and augmented production
capacity. During the next twelve months we will focus on sales and product
development, specifically:

              -     Initiating sales of our first nutraceutical product,
                    natural astaxanthin

              -     Formulating our second nutraceutical product

              -     Growing sales of natural astaxanthin for animal feed

              -     Marketing and selling compound libraries for drug discovery

              -     Expanding our product pipeline

(1) NUTRACEUTICAL ASTAXANTHIN

THE PRODUCT. Our first major nutraceutical product is a dietary supplement rich
in astaxanthin.


                                       18
<PAGE>

Astaxanthin is a powerful, bioactive anti-oxidant (approximately 100 times more
potent than Vitamin E). Astaxanthin has demonstrated efficacy in animal or
human models of:

              -     ALZHEIMER'S AND PARKINSON'S DISEASE: major
                    neurodegenerative diseases

              -     MACULAR DEGENERATION: the leading cause of blindness in the
                    U.S.

              -     CHOLESTEROL DISEASE: ameliorates the effects of LDL (the
                    "bad" cholesterol)

              -     STROKE: repairs damage caused by lack of oxygen

              -     CANCER: protects against several types of cancer

THE MARKET. We believe a strong market could develop for our nutraceutical
astaxanthin product among persons afflicted with these ailments because of:

              -     LARGE SIZE OF POTENTIAL MARKET: millions of Americans are
                    affected

              -     POOR PROGNOSIS: some of these diseases have ineffective or
                    no approved treatments

              -     PROMISING DATA: quality of data in relevant human and
                    animal models to date is promising.

Our analysis of reasonable dosage and customary pricing in the nutraceutical
industry suggests that nutraceutical astaxanthin may command retail prices in
the range of $50,000 per kilogram, depending on various factors. If the
estimate of the retail market price for nutraceutical astaxanthin proves to be
accurate, then we would estimate the potential U.S. market to exceed $500
million per year. This estimate is based on just one of the six diseases
described above, and is derived from the number of persons affected by the
condition, as estimated by physicians providing treatment for the disease, and
the conventional price of an appropriate daily dosage. Certain consumers may be
highly motivated to use nutraceutical astaxanthin because:

              -     Treatment alternatives do not exist for some ailments

              -     Sufferers have used nutraceuticals with less demonstrated
                    efficacy than astaxanthin

PRODUCTION CAPACITY. Our current production capacity would satisfy
approximately 1% of the estimated U.S. market. We estimate this would generate
retail sales of more than $5 million per year. We can expand most
cost-effectively by adding only finishing ponds on adjacent property. We do
have space available for expansion. We estimate this would allow a 5-fold
expansion at a cost of approximately $1.8 million.

PRODUCT FORMULATION. We are collaborating in product formulation with a large
U.S. chemical company that has significant experience in nutraceutical
products. Our collaboration is being carried out under a confidentiality
agreement. However, we cannot guarantee that the collaboration will extend
beyond product formulation.

MARKETING STRATEGY. We intend to sell this product directly to consumers.
Several wholesale purchasers of nutraceutical products have also contacted us
regarding our product. We may or may not enter into supply agreements with one
or more wholesalers.

REGULATORY ISSUES. The U.S. Food and Drug Administration (FDA) has primary
regulatory responsibility in nutraceutical markets. Many regulations apply. The
DSHEA Act of 1994 governs certain conditions of sale of all nutraceutical
products or dietary supplements in the U.S. The FDA details certain procedures
that comprise "Good Manufacturing Practice" (GMP) with which we will have to
comply.


                                       19
<PAGE>

The State of Hawaii Department of Health imposes certain regulations on the
preparation of substances for human consumption. We are taking action to comply
with all relevant regulations and recommended procedures. We plan to achieve
compliance in 1999.

COMPETITION. AstaCarotene AB of Sweden produces and sells an astaxanthin-rich
nutraceutical product in Europe that, like ours, is based on HAEMATOCOCCUS
microalgae. AstaCarotene must produce their product in a controlled climate,
rather than in Sweden's natural climate. We believe their cost of production is
significantly higher than ours.

Cyanotech recently announced its intention to launch a HAEMATOCOCCUS-based
nutraceutical in the summer of 1999. Cyanotech advertises its natural
astaxanthin product to contain 1.5% astaxanthin. Our product contains 3%
--double that amount. To produce the same amount of astaxanthin, therefore,
Aquasearch requires only half the HAEMATOCOCCUS production capacity. We
therefore believe our cost of production may be less than Cyanotech's. We also
believe that customers may perceive our 3% product as superior to a 1.5%
product, which could confer a competitive advantage over Cyanotech's product.

Igene, a subsidiary of Archer Daniels Midland, produces astaxanthin from
genetically engineered yeast. The chemical form of astaxanthin in HAEMATOCOCCUS
is the one that prevails in nature, and is different from that in yeast. We
believe the nutraceutical market will view the prevailing natural form of
astaxanthin - from HAEMATOCOCCUS - as superior. We anticipate that consumers of
nutraceuticals will prefer the naturally-developed astaxanthin product over the
genetically-engineered one.

Itano of Japan produces an astaxanthin extract from Antarctic krill, a marine
microcrustacean. The product is distributed in the U.S. in very small amounts
and at very high prices (>$650,000 per kilogram). Krill fishing in Antarctica
is very expensive and highly regulated. Krill fishing vessels must travel for
more than two weeks, at a cost of approximately $50,000 per day to complete the
voyage between Japan and the Southern Ocean. Suitably equipped vessels cost
approximately $30 million and typically have a lifetime of only 20 years. The
krill fishery is regulated by the Committee for Conservation of Antarctic
Living Resources, an international body comprised of scientists from Antarctic
Treaty member nations. The krill fishery reached its peak in the mid-1980s and
has since declined.

BASF and Hoffman La-Roche both produce synthetic astaxanthin from
petrochemicals. Their compound is chemically different than natural
astaxanthin. The effect of the difference has not been studied. However, the
natural form of a closely related antioxidant, Vitamin E, was found by its
manufacturer (Eastman Chemical) to be four times more potent than the synthetic
form. We believe the nutraceutical market shows less interest in synthetic
products than in natural products, and will pay a premium for a natural product.

TIMING OF PRODUCT RELEASE. We plan to release our nutraceutical astaxanthin
product in 1999.

(2) OUR SECOND NUTRACEUTICAL PRODUCT

THE PRODUCT. Our second nutraceutical product is a dietary supplement rich in a
certain carotenoid pro-vitamin. The pro-vitamin is known to perform certain
vital functions in human physiology. Like astaxanthin, it is a potent
anti-oxidant. Like astaxanthin, which has very similar molecular properties, it
is present in trace quantities in certain common foods. Also like astaxanthin,
it is overproduced in certain microalgae.

THE MARKET. We believe the market for this product is similar to that for
nutraceutical astaxanthin. Animal and human models have demonstrated the
efficacy of this product in its effect on certain common


                                       20
<PAGE>

illnesses. We believe the potential market for this product could exceed $100
million per year.

PRODUCTION CAPACITY. In mid-1999 we received approval from the State of Hawaii
Department of Agriculture to import the microalgae that is the basis of our
second nutraceutical product. We plan to begin cultivation at AGM (commercial)
scale in late 1999. We intend to devote approximately six months to optimizing
production in AGMs. Based on our knowledge and observations of this microalgae,
we believe we have enough production capacity to sustain product introduction.
After approximately one year of production, we project that initial sales would
support the cost of expanding our physical plant.

PRODUCT FORMULATION. The pro-vitamin in this product has chemical properties
that are similar to astaxanthin, and therefore we believe the product
formulation would also be very similar. We have not yet conducted any studies
on product formulation.

MARKETING STRATEGY. We intend to market this product directly to consumers,
building on the experience we will have developed with nutraceutical
astaxanthin. We may also sell limited amounts to wholesalers.

REGULATORY ISSUES. We expect this product to be subject to the same regulatory
issues that govern nutraceutical astaxanthin.

COMPETITION. We know of no competition for this product, nor for the
pro-vitamin it contains.

TIMING OF PRODUCT RELEASE. We plan to release this product within the next 12
to 18 months.

(3) NATURAL ASTAXANTHIN FOR ANIMAL FEED

THE PRODUCT. We have spent several years developing this product in conjunction
with Cultor. Astaxanthin is proven to be a vital dietary component in salmon,
trout, red sea bream, and several other species of cultivated seafood products.
In salmon, the primary market, astaxanthin is important as the main source of
their pink flesh color. Recent studies have also demonstrated the importance of
astaxanthin in enhancing the growth rate, vision, and fertility of salmon.
Astaxanthin is routinely used as a feed additive in poultry feeds, for the
purpose of improving the coloration of eggs and reducing the incidence of
infections. Astaxanthin in the diet of swine has been shown to increase
fertility. Several feeding studies with our astaxanthin-rich microalgae in fish
diets have produced the desired results.

THE MARKET. The market for astaxanthin in aquaculture has grown at about 10%
per year over the past 15 years. The markets for astaxanthin in feeds for
poultry, swine, and other domestic animals are not yet well developed, and are
much smaller. The 1998 global market for astaxanthin was estimated at
approximately $185 million. The sales price for astaxanthin has remained at
about $2,500 per kilogram for the past decade. Consumers in certain niche
markets are willing to pay a premium price. Global annual consumption of
astaxanthin is in excess of 65,000 kilograms. Almost all astaxanthin is
consumed in five countries which are, in order of importance, Norway, Chile,
Scotland, Canada and Japan.

PRODUCTION CAPACITY. Our current production capacity amounts to less than 1.0%
of the global market. We plan to increase production capacity only in response
to demand. We have the option to increase capacity in two phases. The first
phase would involve constructing more finishing ponds, which would result in an
expansion of our current production capacity by a factor of five. We estimate
this first phase would cost less than $1.8 million, and could generate annual
sales approaching $2.0 million. The second phase would probably require a new
site, because adjacent space is limited at our current site. The modular nature
of the AGM-based production system lends itself well to expansion at any
foreseeable


                                       21
<PAGE>

scale. We believe that the experience gained in our recent plant expansion will
make it easier for us to expand our capacity at our existing site or at
adjacent or other sites.

PRODUCT FORMULATION. Any feed ingredient, including astaxanthin-rich
microalgae, requires careful formulation and testing prior to market. Our
primary goal has been to create a product that is at least equal, if not
superior to, competitive feed ingredients. We have focused on creating a
product with longer shelf life that is safer and easier to handle, and produces
a better result in the diet. We believe we have achieved these and other goals
to a great degree, some on our own, and some in collaboration with Cultor. We
also believe that further improvement is possible. If significant changes are
made in product formulation, then new regulatory approvals may have to be
obtained. Therefore, we have been very careful to develop our product to a high
standard before placing it on the market.

MARKETING STRATEGY. We believe that astaxanthin-rich microalgae will account
for a very significant share of the global astaxanthin market. We intend to be
a leader in this market for the following reasons:

         1)   A SUPERIOR PRODUCT. We believe a product that is safer, easier
              to handle, has a longer shelf life, and provides equal or
              greater efficacy per unit cost will eventually take
              significant market share.

         2)   CONSUMER AWARENESS. Farmed salmon now account for almost 40%
              of global salmon production. Consumers are generally not aware
              that the farmed salmon they eat contain a synthetic,
              petrochemical-based coloring. Recent studies by the U.S. FDA
              have shown that farmed salmon are easily distinguished from
              wild salmon because they do not contain the natural form of
              astaxanthin. All other factors being equal, we believe that
              informed consumers will generally prefer a natural astaxanthin
              product over a synthetic one.

We distribute our product through Cultor and other companies. The former lead
manager of sales and marketing of astaxanthin at Cultor, Martin Guerin, is now
our VP, Sales and Marketing.

REGULATORY ISSUES. All feed ingredients are regulated in the countries where
they are sold. Regulations differ among astaxanthin-consuming nations. Product
specifications may differ, the stringency of regulations may differ, and the
time required for the application process may differ. In Europe, for example,
we expect regulatory approval could take up to three years, whereas in Chile we
expect such approval should take substantially less time.

TIMING OF PRODUCT RELEASE. We project our first sales of astaxanthin-rich
microalgae for use in animal feeds in June 1999. Product formulations may
differ from country to country, depending on regulatory approval. We expect to
release products in countries as we obtain regulatory approval.

(4) DRUG DISCOVERY LIBRARIES

THE DRUG DISCOVERY PROCESS. A large number of modern medicines were originally
discovered in plants. The drug discovery process generally starts by
identifying a plant that has "bioactive" properties. The compound responsible
for bioactivity is identified through a sequence of chemical extraction,
testing, and purification. The pure compound is tested, first in animal models
and then in human clinical trials. If the entire process is completed, the
result is a new drug.

In conjunction with EnzyMed, we have developed a drug discovery process adapted
to microalgae. Our role in this process is to (1) identify and cultivate
bioactive microalgae species, and (2) chemically extract, test, and purify the
bioactive fractions. Our tests rely on cell cultures, human tissue cultures and


                                       22
<PAGE>

genomic screens, conducted in collaboration with certain university research
laboratories. Bioactive fractions are then subjected to Combinatorial
Biocatalysis, a process which creates, on average, hundreds of derivative
compounds from each pure bioactive compound using EnzyMed's proprietary
enzymatic methods. The resulting Microalgae Compound Libraries are then ready
to market.

THE PRODUCT. Compound libraries are a major source of drug discovery in today's
pharmaceutical industry. The "library" consists of pure compounds, commonly in
sets of 96, packaged in special containers designed for "High-Throughput
Screening." The screening process identifies new drug candidates by testing for
bioactivity, often targeted at certain diseases. Tests might be based on the
ability to kill certain types of cells (e.g. bacteria, cancer), or they might
be based on genetic pathways involved in specific diseases. Any positive result
from a screening test could eventually lead to a new medicine.

We believe the Aquasearch/EnzyMed Microalgae Compound Library is unique because
it has these features:

         1)   Unexplored resource

              -    Few microalgae have been screened by the pharmaceutical
                   industry

         2)   Quantity

              -    Species: 30,000

              -    Bioactive compounds: thousands

              -    Average derivatives of each bioactive compound: hundreds via
                   Combinatorial Biocatalysis

         3)   Possible Patentability

              -    Bioactive compounds in microalgae may be new to science

              -    Bioactive derivatives from Combinatorial Biocatalysis
                   may be new to science

THE MARKET. Consumers of compound libraries are biopharmaceutical companies.
These companies are strongly motivated to find new sources of drugs. According
to a 1997 study by Andersen Consulting, the pharmaceutical industry must
increase its rate of discovery of new drugs by a factor of 10 in five years in
order to maintain its historic growth rate.

Compound libraries are typically marketed as a package that includes the
following terms and conditions:

         1)   Library Access Fee

              -    $25,000 to $100,000 per customer

              -    access time: limited to 3-12 months

              -    application: limited to certain diseases or disease areas

              -    multiple customers allowed

         2)   Licensing Fee

              -    $3 million to $15 million per compound

              -    activated by decision to begin trials

         3)   Milestone Payments

              -    $500,000 to $25 million per event

              -    activated by the results of pre-clinical and clinical trials

         4)   Royalties


                                       23
<PAGE>

              -    activated by FDA approval and full commercialization

PRODUCTION CAPACITY. We are producing our first compound library in
collaboration with EnzyMed. We have provided EnzyMed with a purified extract of
a known bioactive compound, and they are now producing derivatives using
Combinatorial Biocatalysis.

We have demonstrated capability in identification, microalgae cultivation,
extraction, purification, and testing of bioactivity. Our research team
includes professional scientists with expertise in all these areas. However, we
have only limited facilities and equipment for chemistry (extraction,
purification) and biochemistry (testing). In these areas, we now rely on
collaborations with several universities and members of our Scientific Advisory
Board. We plan to expand capacity with a 6,000 sq. ft. laboratory dedicated to
drug discovery and appropriate equipment, at an estimated cost of $2.0 million.
Our ability to finance this expansion depends on funds we would have to raise
through revenues, debt or equity.

EnzyMed has demonstrated capability in Combinatorial Biocatalysis. Its contract
customers for this type of "lead optimization" currently include Merck, Lilly,
Roche, Novartis and other biopharmaceutical companies.

MARKETING STRATEGY. Both Aquasearch and EnzyMed have considerable marketing
know-how in the drug discovery market. A number of major pharmaceutical and
biotech companies have already expressed an interest in our first compound
library. Senior officers of both companies are responsible for marketing the
compound libraries.

TIMING OF PRODUCT RELEASE. We plan to release our first library for access
within six months.

(5) EXPANDING OUR PRODUCT PIPELINE

PRODUCT AREAS.  We have established two areas to expand our product pipeline:

                  -    Nutraceuticals

                  -    Pharmaceutical drug development

BASIC STRATEGY: NUTRACEUTICALS. We plan to expand our nutraceutical product
pipeline using a common process. A fundamental principle of this process is
that we rely on strategic collaborations and alliances whenever special
Aquasearch expertise and technology is not required. We have already identified
many potential nutraceutical products among the microalgae, mostly through the
published scientific literature. We are focused on markets for high-value
products that, like those for natural astaxanthin and our second nutraceutical
product, have potential sales of more than $100 million, and few or no known
competitors. At our recently completed facility, we can directly measure
economic feasibility from data gathered during a six-month production run in
our commercial-scale Ultra-AGM.

We are well aware that nutraceutical products, because they are not highly
regulated, have caused concern among some consumers. Our goal is to
self-regulate at a higher standard than required by law. We are implementing a
variety of testing procedures designed to maximize product safety and product
efficacy.

Our marketing approach may determine many aspects of product development. We
would prefer to sell products directly to the consumer. However, if a strategic
partner can contribute significantly to product development or marketing, then
we will consider an alliance that could accelerate or maximize the


                                       24

<PAGE>

process.

BASIC STRATEGY: PHARMACEUTICAL DRUG DEVELOPMENT. Our process for expanding the
pipeline in drug development is firmly founded on strategic collaborations and
alliances. We have leveraged our ability to identify, extract, test, and purify
novel bioactive substances from microalgae through partnerships with major
universities. We have enhanced our ability to produce Microalgae Compound
Libraries through our collaboration with EnzyMed.

We are focused in the next year on developing strategic license agreements with
biopharmaceutical companies. We expect many biopharmaceutical companies will be
interested to access our Compound Libraries for drug discovery. We believe our
management team has well-developed networks and relationships in the
biotechnology industry that bring credibility to our marketing approach.

PRODUCT DEVELOPMENT: MARBEC. The Marine Bioproducts Engineering is a 10-year,
$40 million Engineering Research Center ("ERC"), funded in 1998 by the U.S.
National Science Foundation. There are fewer than two dozen ERCs in the U.S. In
1998, more than 160 universities competed for only 5 ERCs awarded by the
National Science Foundation.

MarBEC combines the expertise of world-leading marine science and ocean
engineering programs at the School of Ocean and Earth Sciences and Technology
at University of Hawaii with the nationally-famous chemical engineering program
at the Department of Chemical Engineering at University of California, Berkeley.

      CORE RESEARCH: Discovery and development of new products from microalgae
      COST: Industrial Partnership, $20,000 annually
      BENEFITS TO AQUASEARCH:

              -    New research results prior to public disclosure

              -    Preferential rights to intellectual property

              -    Privilege to sponsor focused research, resulting in
                   exclusive intellectual property rights

              -    Preferred access to specialized and unique facilities and
                   equipment

              -    Preferred access to microalgae culture collections

              -    Membership on Industrial Advisory Board (current members:
                   Aquasearch, Monsanto, Eastman Chemical)

              -    Opportunity to influence specific research

              -    Preferential access to student interns

In the first ten years of the ERC program, two dozen centers generated more
than 1,000 patents. Industry members in other ERCs have cited the principal
benefits as (1) strategic relationships arising out of the academic/industry
network, (2) access to specialized equipment and facilities, and (3) better
educated ERC graduates.

PRODUCT DEVELOPMENT: OTHER UNIVERSITIES. We are currently negotiating research
agreements with medical schools at four universities. If consummated, these
agreements will strongly leverage our own product development efforts. Our
goals are as follows:

      CORE RESEARCH: Pre-clinical screening for drug candidates

              -    Purification of extracts from approximately 1,200 species of
                   microalgae in 3 years


                                       25
<PAGE>

              -    Tissue culture screening

              -    Genomic screening: allows extracts to be tested for effects
                   on specific diseases

              -    Genetic control of microalgae biochemistry

              -    Targets: skin cancer, breast cancer, antivirals, antifungals

      COST: Approximately $500,000 per year. Projects range from 1 to 3
      years. One project requires no funds.

      BENEFITS TO AQUASEARCH:

              -    Ownership of intellectual property

              -    Increases value of drug candidates to $3 to $15 million per
                   compound

We recognize that pre-clinical screening is costly. However, we believe it is a
very cost-effective investment. The industry-standard license fee for one
compound alone would more than double our anticipated investment.

If we are able to enter into agreements with all four universities, we expect
to generate and screen approximately 10,000 extracts over 3 years at a cost of
$1.5 million. If our pre-clinical trials yield only one bioactive compound, the
minimum license fee we expect would be $3 million.

We have three options for screening and pre-clinical trials. We can do them
ourselves, with a corporate partner, or with a university partner. The cost of
facilities, equipment and expertise dictates that we work with a partner. The
advantage of the university partners we have chosen is significant, because the
universities perform contract research and we retain ownership of the compounds.

TIMING OF PRODUCT RELEASE. Our pipeline expansion is a process designed to
yield many more products at minimal cost. Our goal is two products per year.
The result could be less, or it could be far greater.

GENERAL ASPECTS OF PLANNED OPERATIONS

We expect to steadily increase revenues from sales of our natural astaxanthin
for animal feed. However, we do not expect this product alone to be profitable,
because we intend to reserve significant production capacity for nutraceutical
astaxanthin.

We intend to launch our nutraceutical astaxanthin product in late 1999. We
anticipate that we will become profitable within one year of the launch if we
hit our targets - with no increase in production capacity. However, there can
be no assurance that this will occur.

Strategic relationships and collaborations will continue to be an important
part of our business strategy. We now have such relationships with EnzyMed,
MarBEC and Cultor. We expect collaborations will expand to include other
corporations and other universities. However, we cannot be certain to maintain
existing partner relationships, nor can we guarantee to develop other
successful relationships.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

Since inception, our primary operating activities have consisted of basic
research and development and production process development; recruiting
personnel; purchasing operating assets; and raising capital. From inception
through April 30, 1999, we had an accumulated deficit of approximately $9.9
million. Our losses to date have resulted primarily from costs incurred in
research and development and from


                                       26
<PAGE>

general and administrative costs associated with operations. We expect to
continue to incur operating losses for at least the next year as we increase
the expansion of our product pipeline. We expect to have quarter-to-quarter and
year-to-year fluctuations in revenues, expenses and losses, some of which could
be significant.

We do have a limited operating history. Your assessment of our prospects should
include the technology risks, market risks, expenses and other difficulties
frequently encountered by development stage companies, and particularly
companies attempting to enter competitive industries with significant
technology risks and barriers to entry. We have attempted to address these
risks by, among other things, hiring and retaining highly qualified persons and
forging strategic alliances with companies and universities that complement and
leverage our technical strengths. However, our best efforts cannot guarantee
that we will overcome these risks in a timely manner, if at all.

We are in the process of transition to a full-scale commercial producer of
microalgae products. These changes in our business have placed and will
continue to place significant demands on our management, working capital and
financial and management control systems.

RESULTS OF OPERATIONS

REVENUES. Since inception, our main activities have been basic research and
development and manufacture process development; recruiting personnel;
purchasing operating assets; and raising capital. We had no revenues for the
quarters ended April 30, 1999 and 1998. Most of the product we produced in 1997
and 1998 was used for product development and testing. All the product we have
produced in 1999 is in inventory, and most of this awaits final formulation
before it can be sold.

RESEARCH AND DEVELOPMENT COSTS. Research and development costs include
salaries, consulting fees, development materials, equipment depreciation and
costs associated with operating our three-acre research and
development/production facility. Research and development costs increased by
approximately $45,000, or 14%, during the quarter ended April 30, 1999 compared
to the quarter ended April 30, 1998. Most of these funds were expended to
develop the very large Ultra-AGM, to expand production capacity, to implement
improved computerized process control, and to reduce capital costs of the AGM
technology. From inception through April 30, 1999, our total research and
development costs were approximately $3.8 million. We expect to incur
significant additional research and development expenses in the future.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
consist principally of salaries and fees for professional services. General and
administrative costs increased approximately $516,000, or 236%, for the quarter
ended April 30, 1999 compared with the quarter ended April 30, 1998. The
increase in general and administrative expenses reflects additional costs
associated with personnel additions, legal fees incurred in connection with
developing and protecting the Company's intellectual property position and
raising capital, as well as other expenses. From inception through April 30,
1999, our total general and administrative expenses were approximately $4.8
million. We anticipate that general and administrative expenses will increase
over time as we expand production capacity, develop more new products, increase
our intellectual property protection, and raise additional capital.

LIQUIDITY AND CAPITAL RESOURCES

We have financed our operations until now through public and private sales of
equity securities. In the past six months, we raised approximately $2.1 million
from the private placement of convertible notes. In the fiscal years ended
October 31, 1998 and 1997, we raised approximately $3.4 million and $1.3


                                       27
<PAGE>

million (net), respectively, from the sale of shares of Common Stock and/or the
issuance of Convertible Notes in private placement transactions. From inception
through April 30, 1999, we had raised total net proceeds of approximately $10.6
million through public and private sales of equity and debt securities.

During the six months ended April 30, 1999, operating activities consumed
approximately $1.4 million compared with $841,000 for the six months ended
April 30, 1998. From inception through April 30, 1999, operating activities
have consumed approximately $6.3 million.

Capital expenditures for the quarters ended April 30, 1999 and 1998 were
$201,000 and $62,000, respectively. From inception through April 30, 1999,
total capital expenditures have been approximately $3.8 million.

As of April 30, 1999, our liquidity was approximately $164,000 in cash and cash
equivalents.

We estimate a need for approximately $3.0 million in operating capital over the
next twelve months. We need an additional $0.5 million to consummate strategic
research agreements with three university medical schools. Projected product
sales will begin to pay some operating costs. We now believe that product sales
could lead to profitability within twelve months after the start of product
sales, and that some future expansion could be financed out of profits. In the
near term, we believe that existing capital resources, funds to be raised
through public and/or private offerings of equity and/or debt securities and
bank financing will be sufficient for continued operations through the next
twelve months. We are now pursuing more sources of capital to maintain
operations and, more importantly, to expand our product pipeline. These capital
sources include government contracts and grants, product sales, license
agreements and equity or debt financing. We cannot guarantee success in raising
the additional capital necessary to sustain or expand operations, nor are we
certain that such capital will be available on terms that prevent substantial
dilution to existing investors. If we cannot raise sufficient capital, then we
might be forced to significantly curtail operations. Any reduction in operating
activity could have a material adverse effect on our business, financial
condition, results of operations, and relationships with corporate partners.
See "Factors That May Affect Future Operating Results--Substantial Near-Term
Capital Needs; Uncertainty of Additional Funding; Dilution" and "--Substantial
Long-Term Capital Needs; Uncertainty of Additional Funding; Dilution" in the
1998 Form 10-KSB.


                                       28
<PAGE>


Part II - Other Information

Item 1.  Legal Proceedings

         On July 13, 1998, Cyanotech filed a complaint (the "Complaint") in the
United States District Court for the District of Hawaii (Case No.
CV98-00600ACK) against our company. In the Complaint, Cyanotech seeks
declaratory judgment of noninfringement of our U.S. Letters Patent No.
5,541,056 (the "5,541,056 Patent"); invalidity of the 5,541,056 Patent; and
non-misappropriation of our trade secrets relating to closed culture production
of astaxanthin. Cyanotech filed the Complaint after we expressed to Cyanotech
our concern that Cyanotech infringed the 5,541,056 Patent and misappropriated
Aquasearch trade secrets. We do not believe that Cyanotech's Complaint is
meritorious. However, we may be required to dedicate significant management
time and incur significant legal fees and expenses to pursue this action, which
could have a material adverse effect on our business, financial condition,
results of operations and relationships with corporate partners. In addition,
in the event that Cyanotech were to prevail in this action, a finding of
noninfringement or declaration of invalidity of the 5,541,056 Patent could have
a material adverse effect on our business, financial condition, results of
operations and relationships with corporate partners.

         On September 11, 1998, we filed an answer denying all of Cyanotech's
allegations and a counter claim, alleging infringement of the 5,541,056 Patent;
misappropriation of trade secrets; unfair competition; and breach of contract
relative to our 1994 Dissolution Agreement with Cyanotech.

         On December 14, 1998, Cyanotech filed a motion for partial summary
judgment of noninfringement and invalidity of the 5,541,056 Patent. We do not
believe that this motion is meritorious.

         On March 1, 1999, we filed a motion for partial summary judgement
against Cyanotech for breach of contract and misappropriation of trade secrets.
On March 26, 1999, we filed a cross-motion for summary judgment of patent
infringement. Both parties' motions for summary judgment are currently
scheduled to be heard in the Fall of 1999.

         The court has set a hearing for late June 1999 in relation to our
motion to enforce a settlement reached between the parties in the spring of
1999.

         The trial in the lawsuit with Cyanotech is currently set to begin on
September 27, 1999.

Item 2.  Changes In Securities

         During the quarter ended April 30, 1999, we issued $1,070,000
aggregate principal amount of one-year convertible notes bearing interest at
10% per annum. The holders of the convertible notes have an option to convert
their convertible notes into our Common Stock. The convertible notes provide
that upon conversion, the holders would receive warrants to purchase shares of
our Common Stock. The warrants have an exercise price of $0.50 per share and a
term of three years. As of April 30, 1999, some of the holders of these
convertibles notes and other outstanding convertible note holders (amounting to
$846,000 aggregate principal amount) exercised their option to convert their
convertible notes into shares of Common Stock. Upon conversion of the
outstanding principal of, and interest on , the convertible notes, we issued
5,437,908 shares of Common Stock and also issued 866,000 warrants in connection
thereof. These transactions were exempt from registration under the Securities
Act of 1933 pursuant to Section 4(2). No underwriters were involved in these
transactions.


                                       29
<PAGE>

Item 3.  Defaults Upon Senior Securities -- None

Item 4.  Submission of Matters To A Vote of Security Holders -- None

Item 5.  Other Information -- None

Item 6.  Exhibits And Reports on Form 8-K

      (a)  Exhibits -- Exhibit 27.1 Financial Data Schedule

      (b)  Reports on Form 8-K  -- None




                                    SIGNATURE

         In accordance with the requirements of the Exchange Act, the registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.

                                           AQUASEARCH, INC.

Dated:  April 19, 2000                     By: /s/ Mark E. Huntley
                                               ---------------------------------
                                           Mark E. Huntley, Ph.D.
                                           President and Chief Executive Officer


                                       30