Aquasearch delaying
By Russ Lynch
Kau expansion deal
Star-BulletinAquasearch Inc., a developing microalgae firm on the Big Island, has not yet made the shares-for-land swap with C. Brewer & Co. that it agreed to 18 months ago.
But that's not bad news, according to consultant David Watumull, a securities analyst who first brought Aquasearch and C. Brewer together.
Rather, he said, it reflects efficiency and productivity improvements at Aquasearch's Keahole Point facility outside Kona that made the expansion to C. Brewer's land at Kau not yet necessary.
Watumull, who was senior vice president of First Honolulu Securities Ltd. when the Aquasearch-Brewer agreement was signed in 1996, will join the Aquasearch executive team on July 1.
Explaining an item in the latest Aquasearch earnings report, which was filed at the Securities & Exchange Commission this week, Watumull said Aquasearch right now doesn't need the 80 to 90 acres of Kau land.
"Productivity increases have allowed us to use the Keahole site for the terms of our current Cultor contract," he said. He was referring to the Aquasearch contract to supply astaxanthin -- a coloring pigment that is produced from microalgae grown in Kona ponds and used in salmon and trout feed -- to Cultor Ltd.
Helsinki, Finland-based Cultor is the world's second-largest producer of salmon and trout feed. Under the contract, Aquasearch is the exclusive supplier of astaxanthin to Cultor until next May.
With C. Brewer agreement, Aquasearch in 1996 signed a letter of intent in which the start-up company said it would issue between 2.6 million and 2.9 million shares of common stock and trade them to C. Brewer in return for Kau land valued at between $900,000 and $1 million. A final deal never was concluded but is still a possibility in the future.
"We needed a much larger site before (for expanded production)," Watumull said. "Now we've been able to do it on a much smaller site. That does not preclude an expansion out to the Brewer property once this phase is completed."
For the three months ended April 30, Aquasearch reported a loss of $554,870, compared with a loss of $293,689 in the equivalent period of last year.
The company reported no sales in the latest quarter and sales of only $361 in the 1997 quarter. Aquasearch said it has been supplying Cultor with enough astaxanthin for testing and evaluation.
The company said it is building for the future, however. Since its start in 1995, Aquasearch has been concentrating on research and development, accumulating a deficit of about $5.8 million.
This year Aquasearch will pursue more patents, improve productivity, finish a five-fold increase in its production capacity and pursue new developments in the pharmaceutical drugs area, the company said in its SEC filing. The first commercial shipment of astaxanthin is due in September.
Aquasearch said it expects to lose money in the next two years, during which it will need about $2 million in operating capital.
