Aquasearch Reduces Workforce, Faces Possible Involuntary Bankruptcy

Aquasearch Reduces Workforce, Faces Possible Involuntary Bankruptcy

KAILUA-KONA, Hawaii--Aquasearch Inc. (OTCBB:AQSE) reported thatit had implemented some cost-reduction efforts, but that some of itsshareholders, unhappy with how the company was being run, filed a court petitionfor the company to file "involuntary" Chapter 11.

In a move to improve profitability, the company laid off 45 percent of itsworkforce, mainly in the realm of production, to bring its number of full-timeemployees to 16. Aquasearch (www.aquasearch.com)estimated that this cost-reduction move would cut operating expenses in half,from $4.8 million logged in fiscal 2001 to a projected $2.4 million for fiscal2002. This is one more move to expand the company's profitability, since thecompany expects to take in $1 million in revenue for fiscal 2001, a 500-percentincrease from revenue of $200,000 taken in for fiscal 2000.

"We intend to focus the company's efforts and resources on the continuedmarketing of AstaFactor in Hawaii and on the previously announced mainlandrollout [which includes Eastern expansion into Long's drugstores]," saidMark Huntley, Ph.D., chief executive officer of Aquasearch.

Despite these efforts, an involuntary bankruptcy petition was filed infederal court against the company. According to Nov. 2's Pacific BusinessNews, five people headed by an ex-employee (Edward Sun, former director ofglobal sales and marketing) are seeking Chapter 11 for the company.

Jennifer Pelczarski, a spokesperson for Aquasearch, speculated to INSIDERon the reason behind the push for involuntary bankruptcy. "When certainindividuals have invested in company A they think that it should be run acertain way and if it isn't, then [they feel that they have to do somethingabout it]," she said. She added that the expansion into Long's drugstoresis slated for later this year, but it may be pushed back due to the bankruptcypetition.

And according to a "source" who spoke to the News, a boardmeeting held in early September had a fraction of its shareholders trying toterminate Huntley. "About 97 percent of the shareholders voted in favor ofkeeping the current management," Huntley told the paper. He added that thepetition has no merit and that the petitioners have had no formal contact withthe company in recent weeks.

"You can't use bankruptcy as a way to throw out the current management,which is what is, in essence, the way that [this action] may be playingout," Pelczarski stated. She added that the company has secured counsel toaddress this issue and that "the company's management is unbelievablytop-notch."