Aquasearch gets
date to contest
bankruptcy

Investors also seek to oust
2 top officers and to appoint
a trustee to take over

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By Russ Lynch
rlynch@starbulletin.com

Kona-based health and diet supplement producer Aquasearch Inc. has a date in court, Dec., 7, when it will get to say why it should not be declared bankrupt.

Meanwhile a new motion by some investors seeks to get rid of Mark Huntley, president and chief executive officer; and Earl Fusato, chief financial officer, and appoint a trustee of the creditors' choice to run the company.

"At this point, it's allegations which we consider to be without merit," Huntley said yesterday. "Under due process, which we still have in this country, we have an opportunity to respond and we will," he said.

The court files so far show no response from the company but Aquasearch does not have to respond until late November.

Aquasearch was founded in 1988 by scientists from the Scripps Institution of Oceanography in San Diego and it went public in 1989.

Its plan has been to develop high-return products made from microalgae grown in ponds on the Kona Coast of the Big Island.

It has only recently begun to show sales, after mounting losses of more than $19 million since its inception, spending the money on research and development, plant construction and, more recently, on marketing its AstaFactor product, a pill that has antioxidant and anti-inflammatory properties that may ease the symptoms of a wide variety of human ailments.

Gregory F. Kowal, chairman of First Securities, a local investment firm that says it helped raise $625,000 earlier this year when Aquasearch needed money, filed suit in bankruptcy court in Honolulu Oct. 30, seeking to place Aquasearch into an involuntary Chapter 11 reorganization.

Kowal says he is personally owed $75,000 by Aquasearch.

"The continued operation and management of debtor by Huntley and Fusato is not in the best interest of investor's," Kowal's lawsuit claims.

He alleges the two have "grossly mismanaged" the company's operations and have "continuously made blatant misrepresentations" to creditors and investors.

Now Kowal wants Honolulu attorney John Paul Moon to be named trustee to run the company for the bankruptcy court. Bankruptcy Judge Lloyd King has made no decision on whether the company is bankrupt and won't do so until after the Dec. 7 hearing.

Huntley has said he doesn't believe the creditors that include Kowal are acting in good faith and that they seem to be attempting to take over the company.

Since the filings started, Aquasearch shares have dwindled in price on over-the-counter bulletin board where they are traded.

The stock was at 16.5 cents when the first bankruptcy action was filed Oct. 30.

It fell to 15.5 cents the next day and closed steadily lower, to end yesterday at 7.5 cents.

The stock is down 67.4 percent year to date.

In the last financial period for which it reported, the third quarter ending July 31, Aquasearch had a loss of $833,234, down 37.5 percent from a loss of $1.3 million in the year-earlier quarter.