Aquasearch lists debt
of $4.5 million in
bankruptcy court filing

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By Lyn Danninger
ldanninger@starbulletin.com

Big Island biotech firm Aquasearch Inc. yesterday held its first creditors meeting after filing a statement detailing its financial condition with the U.S. Bankruptcy Court.

The company filed for Chapter 11 reorganization on Nov. 30.

The statement listed Aquasearch's total debts at $4.5 million, largely unsecured, and assets at $4.3 million. Aquasearch's financial condition had not been reported on publicly since the company filed its second-quarter earnings report with the Securities and Exchange Commission.

In the July 31 filing, Aquasearch had listed total debts of $5 million and assets of $4.5 million.

Only a small number of creditors attended yesterday's meeting and will still need a chance to review the filing. Another creditors meeting is set for Jan. 18, said Jerrold K. Guben, Aquasearch's attorney.

"We met for well over an hour, but it will be continued to give creditors the opportunity to go beyond the generalities discussed today," he said.

Guben said yesterday's filing contained approximately 30 pages of unsecured creditors. But between creditors, investors and shareholders, the list would likely contain over 1,000 names, he said.

Aquasearch will have until April 1 to file its plan for reorganization with the court. Guben said he would like to have both a disclosure statement and the proposed plan presented to the court before that date.

The company must also file a monthly operating report with the court. The first report, covering December 2001, is due Jan. 20, Guben said.

Aquasearch's voluntary bankruptcy came about after the company struck a deal with a group of creditors who sued on Oct. 30 to force the company into involuntary Chapter 11 bankruptcy. The creditors had wanted to oust co-founder of the firm, chairman and Chief Executive Officer Mark E. Huntley and Earl Fusato, Aquasearch's chief financial officer, saying the two had mismanaged the firm.

Huntley opposed the creditors, saying the move was a thinly-disguised attempt to use the bankruptcy system to take over the company.

Instead, Huntley agreed to step down as president and CEO but assumed the title of chief technology officer. He also remains on the board. Under the agreement, Fusato will keep his post as CFO and remain on the Aquasearch board. David Tarnas, a former state representative who has served on the board since February 1999, has become chairman.

Harry "Doc" Dougherty, an Aquasearch marketing consultant, stepped in as interim president and CEO.