-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Bw5uMyHq1faWhK9gjX4tULDeq2hw9A31kH5SJXXXIqzSJ2m0U3uFVHW7++mOPrAJ /hrjlc+kqacT0OQUlvMfmg== 0000931731-02-000239.txt : 20020628 0000931731-02-000239.hdr.sgml : 20020628 20020628113648 ACCESSION NUMBER: 0000931731-02-000239 CONFORMED SUBMISSION TYPE: 10QSB/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020131 FILED AS OF DATE: 20020628 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AQUA VIE BEVERAGE CORP CENTRAL INDEX KEY: 0001068104 STANDARD INDUSTRIAL CLASSIFICATION: BEVERAGES [2080] IRS NUMBER: 820506425 STATE OF INCORPORATION: WA FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: 10QSB/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-24801 FILM NUMBER: 02690536 BUSINESS ADDRESS: STREET 1: 333 SOUTH MAIN STREET STREET 2: PO BOX 6759 CITY: KETCHUM STATE: ID ZIP: 83340 BUSINESS PHONE: 2086227792 MAIL ADDRESS: STREET 1: PO BOX 6759 STREET 2: 333 SOUTH MAIN STREET CITY: KETCHUM STATE: ID ZIP: 83340 FORMER COMPANY: FORMER CONFORMED NAME: BARHILL ACQUISITION CORP DATE OF NAME CHANGE: 19980812 10QSB/A 1 avbc10qsb.txt 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 January 31, 2002 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 0-24801 Delaware 82-0506425 (State or other Jurisdiction of incorporation) (IRS Employer Identification No.) AQUA VIE BEVERAGE CORPORATION (Exact Name of Registrant as Specified in its Charter) P.O. Box 6759 333 South Main Street Ketchum, Idaho 83340 (Address of principal executive offices) 208/622-7792 (Registrant's telephone number) Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the last 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 [ ] NO [X] As of the quarter ending October 31, 2001 the Registrant has been subject to the filing requirements of the Securities Act of 1934 for less than 90 days. Indicate the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date. Class Outstanding at January 31, 2002 Common Stock, Par value $0.001 65,313,173 1 Item 1. Financial Statements:
AQUA VIE BEVERAGE CORPORATION Balance Sheet January 31, July 31, 2002 2001 (Unaudited) (Restated) ----------- ----------- ASSETS CURRENT ASSETS Cash $ 370 $ 3,608 Accounts receivable 128,346 82,776 Inventory 41,050 155,372 Prepaid and other assets 22,787 24,434 ----------- ----------- Total Current Assets 192,553 266,190 ----------- ----------- PROPERTY AND EQUIPMENT Equipment 201,608 201,608 Less accumulated depreciation (117,919) (85,615) ----------- ----------- Total Property and Equipment 83,689 115,993 ----------- ----------- OTHER ASSETS Intangibles 338,253 305,040 Less accumulated amortization (100,077) (58,159) ----------- ----------- Total Other Assets 238,176 246,881 ----------- ----------- TOTAL ASSETS $ 514,418 $ 629,064 =========== =========== LIABILITIES AND STOCKHOLDERS' DEFICIT CURRENT LIABILITIES Accounts payable $ 329,506 $ 362,312 Bank overdraft 16,687 52,412 Settlements payable 10,000 10,000 Notes payable - current 455,135 455,135 Accrued expenses 143,046 64,101 Loan from related party 168,238 128,520 ----------- ----------- Total Current Liabilities 1,122,612 1,072,480 ----------- ----------- LONG-TERM DEBT Notes payable - net of current portion 9,908 14,632 ----------- ----------- COMMITMENTS AND CONTINGENCIES -- -- ----------- ----------- STOCKHOLDERS' DEFICIT Preferred stock, Series A, B, C, D, E and F, $0.001 par value, 1,000,000 shares authorized,15,074 and 15,074 shares issued and outstanding, respectively 15 15 Common stock, $0.001 par value, 120,000,000 shares authorized, 65,313,173 and 58,253,173 shares issued and outstanding, respectively 65,313 58,253 Additional paid-in capital 5,933,607 5,562,162 Subscriptions receivable (176,977) (176,977) Accumulated deficit (6,440,060) (5,901,501) ----------- ----------- Total Stockholders' Deficit (618,102) (458,048) ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 514,418 $ 629,064 =========== ===========
See notes to interim financial statements. 2
AQUA VIE BEVERAGE CORPORATION Statement of Operations (Unaudited) Three Months Ended Six Months Ended January 31, January 31, -------------------------- -------------------------- 2002 2001 2002 2001 (Restated) (Restated) ----------- ----------- ----------- ----------- NET REVENUES $ 76,064 $ 563,133 $ 122,922 $ 725,361 COST OF GOODS SOLD 90,942 418,986 172,642 556,386 ----------- ----------- ----------- ----------- GROSS PROFIT (LOSS) (14,878) 144,147 (49,720) 168,975 ----------- ----------- ----------- ----------- GENERAL AND ADMINISTRATIVE EXPENSES Promotion and advertising 9,132 64,900 77,288 325,455 Legal and accounting 12,900 714,539 59,497 1,254,628 Other general and administrative expenses 85,504 18,590 331,517 38,426 ----------- ----------- ----------- ----------- Total expenses 107,536 798,029 468,302 1,618,509 ----------- ----------- ----------- ----------- LOSS FROM OPERATIONS (122,414) (653,882) (518,022) (1,449,534) OTHER EXPENSES Interest expense (9,881) (17,433) (20,537) (35,028) ----------- ----------- ----------- ----------- LOSS BEFORE EXTRAORDINARY ITEMS (132,295) (671,315) (538,559) (1,484,562) EXTRAORDINARY ITEMS Forgiveness of debt and accrued payroll -- 499,968 -- 499,968 ----------- ----------- ----------- ----------- LOSS BEFORE TAXES (132,295) (171,347) (538,559) (984,594) INCOME TAXES -- -- -- -- ----------- ----------- ----------- ----------- NET LOSS $ (132,295) $ (171,347) $ (538,559) $ (984,594) =========== =========== =========== =========== NET LOSS PER COMMON SHARE BASIC AND DILUTED $ Nil $ Nil $ (0.01) $ (0.03) =========== =========== =========== =========== WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING, BASIC AND DILUTED 65,313,173 35,441,851 64,500,456 33,948,836 =========== =========== =========== ===========
See notes to interim financial statements. 3
AQAU VIE BEVERAGE CORPORATION Statement of stockholders' Deficit (SPLIT TABLE) Preferred, series A,B,C, D, E and F Common Stock Additional Number Number Paid-in Subsctiption of shares Amount of shares Amount Capital Receivable ----------- ----------- ----------- ----------- ----------- ----------- Balance, July 31, 2000 7,410 $ 7 30,811,408 $ 30,811 $ 2,422,236 $ -- Issuance of common stock for services at prices ranging from $0.02 to $0.42 -- -- 5,335,000 5,335 640,783 -- Issuance of common stock for debt conversion at $0.40 per share -- -- 850,000 850 340,000 -- Conversion of preferred Series A to common stock (1,368) (2) 4,489,123 4,489 (4,487) -- Conversion of preferred Series B to common stock (4,608) (4) 16,567,642 16,568 (16,564) -- Conversion of preferred Series C to common stock (200) -- 200,000 200 (200) -- Issuance of preferred Series D for cash and receivable at $100 per share 12,000 12 -- -- 1,199,988 (176,952) Issuance of preferred Series E for cash at $100 per share 600 1 -- -- 59,999 (25) Issuance of preferred Series F for cash at $100 per share 1,240 1 -- -- 123,999 -- Forgiveness of debt and accrued payroll by officer -- -- -- -- 796,408 -- Net loss for the year ended July 31, 2001 -- -- -- -- -- -- ----------- ----------- ----------- ----------- ----------- ----------- Balance, July 31, 2001 15,074 15 58,253,173 58,253 5,562,162 (176,977) Issuance of common stock -- -- 6,250,000 6,250 247,645 -- for cash at $0.04 per share Stock issued for services at $0.08 per share -- -- 810,000 810 63,800 -- Forgiveness of payroll by officer -- -- -- -- 60,000 -- Net loss for the six months ended January 31, 2002 (Restated) -- -- -- -- -- -- ----------- ----------- ----------- ----------- ----------- ----------- Balance, January 31, 2002 (Unaudited) (Restated) 15,074 $ 15 65,313,173 $ 65,313 $ 5,933,607 $ (176,977) =========== =========== =========== =========== =========== ===========
Accumulated Deficit Total ----------- ----------- Balance, July 31, 2000 $(3,654,081) $(1,201,027) Issuance of common stock for services at prices ranging from $0.02 to $0.42 -- 646,118 Issuance of common stock for debt conversion at $0.40 per share -- 340,850 Conversion of preferred Series A to common stock -- -- Conversion of preferred Series B to common stock -- -- Conversion of preferred Series C to common stock -- -- Issuance of preferred Series D for cash and receivabl at $100 per share -- 1,023,048 Issuance of preferred Series E for cash at $100 per share -- 59,975 Issuance of preferred Series F for cash at $100 per share -- 124,000 Forgiveness of debt and accrued payroll by officer -- 796,408 Net loss for the year ended July 31, 2001 (2,247,420) (2,247,420) ----------- ----------- Balance, July 31, 2001 (5,901,501) (458,048) Issuance of common stock for cash at $0.04 per share -- 253,895 Stock issued for services at $0.08 per share -- 64,610 Forgiveness of payroll by officer -- 60,000 Net loss for the six months ended January 31, 2002 (Restated) (538,559) (538,559) ----------- ----------- Balance, January 31, 2002 (Unaudited) (Restated) $(6,440,060) $ (618,102) =========== =========== 4
AQUA VIE BEVERAGE CORPORATION Cash Flows (Unaudited) Six Months Ended January 31, ----------------------- 2002 2001 (Restated) --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $(538,559) $(984,594) Adjustments to reconcile net loss to net cash used by operating activities: Depreciation and amortization 74,222 59,286 Stock issued for services 64,610 344,578 Forgiveness of debt -- 499,998 Services charged to additional paid-in capital 60,000 -- Prior year expense in retained earnings -- 11,400 Changes in assets and liabilities: Accounts receivable (45,570) (73,923) Note receivable -- (442,938) Inventory 114,322 149,629 Prepaid expenses 1,647 69,392 Accounts payable (32,806) 187,658 Shareholder loans payable -- 324,000 Accrued expenses 78,945 (416,009) Loans from related parties 39,718 135,254 --------- --------- Net cash used by operating activities (183,471) (136,269) --------- --------- CASH USED BY INVESTING ACTIVITIES: Purchase of intangibles (33,213) (7,312) Increase in intangible assets for slotting -- (67,907) --------- --------- Net cash used by investing activities (33,213) (75,219) --------- --------- CASH PROVIDED BY FINANCING ACTIVITIES Sale of common stock 253,895 -- Sale of preferred stock -- 296,685 Debt converted to stock -- 340,850 Bank overdraft (35,725) 55,688 Net payments on long-term debt (4,724) (18,362) Payments to notes payable -- (474,500) --------- --------- Net cash provided by financing activities 213,446 200,361 --------- --------- INCREASE (DECREASE) IN CASH (3,238) (11,127) BEGINNING BALANCE 3,608 11,127 --------- --------- ENDING BALANCE $ 370 $ -- ========= ========= SUPPLEMENTAL CASH FLOW DISCLOSURES: Income taxes paid $ -- $ -- Interest paid $ 1,513 $ 35,028 NON-CASH INVESTING AND FINANCING ACTIVITIES: Debt converted to stock $ -- $ 340,850 Common stock issued for services $ 64,610 $ 344,578 Forgiveness of debt and accrued payroll $ 60,000 $ 499,998
5 CONDENSED NOTES TO FINANCIAL STATEMENTS (UNAUDITED) AQUA VIE BEVERAGE CORPORATION NOTES TO INTERIM FINANCIAL STATEMENTS (Restated) January 31, 2002 NOTE 1 - BASIS OF PRESENTATION The foregoing unaudited interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-QSB and Regulation S-B as promulgated by the Securities and Exchange Commission. Accordingly, these financial statements do not include all of the disclosures required by accounting principles generally accepted in the United States of America for complete financial statements. These unaudited interim financial statements should be read in conjunction with the audited financial statements for the period ended July 31, 2001. In the opinion of management, the unaudited interim financial statements furnished herein include all adjustments, all of which are of a normal recurring nature, necessary for a fair statement of the results for the interim period presented. The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities known to exist as of the date the financial statements are published, and the reported amounts of revenues and expenses during the reporting period. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of the Company's financial statements; accordingly, it is possible that the actual results could differ from these estimates and assumptions that could have a material effect on the reported amounts of the Company's financial position and results of operations. Operating results for the three-month and six-month periods ended January 31, 2002 are not necessarily indicative of the results that may be expected for the year ending July 31, 2002. NOTE 2 - RESTATEMENT AND CORRECTION OF AN ERROR The Company's financial statements for the year ended July 31, 2001 have been restated to reflect the correction of errors as follows. 1. Settlements payable have been accrued to reflect an expected settlement on a breach of contract claim for $10,000. 2. Forgiveness of advances and payroll by the Company's chief executive officer is shown as a capital contribution which increased additional paid-in capital by $796,408 and expenses by $120,000 for salary not recognized in the last six months of the Company's fiscal year. 6 AQUA VIE BEVERAGE CORPORATION NOTES TO INTERIM FINANCIAL STATEMENTS (Restated) January 31, 2002 NOTE 2 - RESTATEMENT AND CORRECTION OF AN ERROR The effect of these corrections was restated financial statements, which thereby increased net loss for the year ended July 31, 2001 by $806,408, and increased liabilities by $10,000. The Company's financial statements for the period ended January 31, 2002 have been restated to reflect a reduction in cash in the amount of $15,787, a reduction in inventory in the amount of $48,584, a reduction in prepaid and other assets of $7,053 an increase in net intangibles in the amount of $3,999, an increase in property and equipment in the amount of $16,152, a decrease in deposits in the amount of $22,737, accrual of $60,000 payroll during the quarter ended January 31, 2001 by the Company's chief executive officer, additional accounts payable in the amount of $30,785, an increase in notes payable in the amount of $3,469, a bank overdraft in the amount of $16,687 and forgiveness of payroll by the Company's chief executive officer in the amount of $60,000 as a capital contribution. The effect of these corrections was restated financial statements, which thereby increased net loss the six months ended January 31, 2002 by $45,490, decreased total assets by $74,012 and increased liabilities by $103,530. NOTE 3 - ADDITIONAL COMMENTS During March 2001, the Company entered into a shipping and security agreement with a central California contract manufacturer. The agreements provided the Company with production financing and inventory expansion of its beverage products, interest-free and without a factoring fee. Under the terms of the agreement, the Company granted to the contract manufacturer a security interest in the Company's inventory and receivables. Based on that agreement, the Company began an aggressive campaign to place its products in California-based supermarket chains by paying and/or incurring slotting fees, supporting sampling programs, and other marketing activities. In April 2001, the contract manufacturer commenced production under the terms of the shipping and security agreement and began shipping product to major grocery chain accounts in California, Arizona and Nevada. Subsequently, the Company increased its sales and marketing efforts, and slotting fee commitments intended to support an expanded sales program. The packer, which was experiencing quality assurance problems, failed to sustain production levels adequate to meet the sales levels projected by the Company notwithstanding the marketing expenses incurred by the Company, and the packer continued in its failure to resolve past account issues arising over defective products. This led to a demand by the Company for an accounting resulting in a refusal NOTE 3 - ADDITIONAL COMMENTS (Continued) by the packer of any further production or shipment of inventory already produced until the Company executed an indemnity in the packer's favor. Management held steadfast in its belief that its product quality and purity are critical and not subject to compromise. This dispute had a negative impact on the Company by creating uncertainty relative to the Company's ability to deliver product to fill pending and projected orders, for which the slotting payments and marketing efforts had already been undertaken. In an effort to resolve the dispute, the Company entered into a new production agreement, which provided for payments to be made directly to the Company in settlement of the claims and also effected a termination of the factoring agreement. 7 AQUA VIE BEVERAGE CORPORATION NOTES TO INTERIM FINANCIAL STATEMENTS (Restated) January 31, 2002 Subject to third-party quality assurance testing, shipping and production resumed in July under the new agreement. Management is confident that with certain modifications having been made to the manufacturing process and production line, and with strict adherence to the quality assurance, the aforementioned issues have been resolved and the packer is capable of maintaining production levels and consistent quality. Notwithstanding the impact on the Company's sales and marketing efforts by the packer's failure to perform as agreed, and the consequent loss of saleable inventory under the shipping and security agreement to satisfy orders and proposed orders during the period from June to August 2001 of the dispute, through additional slotting fee commitments and other arrangements made by the Company, the Company was able to place its products on the shelves of retail grocery chains, and to obtain additional approvals. Management believes that these placements and approvals provide a major foothold and a foundation for regional expansion into 2002 as the Company expects to begin a rapid expansion of its inventory production and its sales and marketing programs during the current fiscal year. 8 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS During its first three years of existence (from inception to July 31, 2001), the Company accumulated a deficit of $5,901,501. In the subsequent six months ended January 31, 2002, the Company's accumulated deficit grew to $6,440,060 as the Company's marketing and executive expenses increased, creating a quarterly operating loss of $132,295. At January 31, 2002, the Company's total assets of $514,418 were lower than the $629,064 reported at its July 31, 2001 year-end The Company's current liabilities increased slightly from $1,072,480 at July 31, 2001 to $1,122,612 at January 31, 2002. The Company entered into an aggressive marketing campaign in the Spring of 2001, which substantially increased its General and Administrative expenses for sales personnel and marketing expenses for slotting fees and related items based on the production financing agreement made with its contract packer in late February 2001 (see Note 3 to the Financials). These expenses were incurred in the anticipation of a rapid increase in sales and revenues to support the expenditures. The dispute which arose with the packer, although resolved in late July, 2001, did not provide compensation for the loss of revenues projected by management for that period, and also reduced the sales activity due to uncertainties over supply. Management had proposed to address these problems in early September 2001 but was unable to adequately redress the issue due to the September 11th event and its impact on retail sales. Aqua Vie continues to offer information about its products and a subscription service on its Internet site. Aqua Vie's revenue from Internet sales, a small portion of current revenue, is projected to be an important part of future revenue. Management intends to expand and develop marketing of Aqua Vie beverages through the Internet, and redesign of the Company's Internet site to support the Company's marketing plan is currently underway. Given Aqua Vie's market distribution presence and order interest by major customers, the funded slotting fee arrangements with major grocery and convenience store chains, its present relationship with its co-packer, and the present production and overhead cost structure, profitability is believed achievable in 2002, given adequate bridge financing. The immediate solution to profitability in this early growth scenario rests with the Company's ability to obtain bridge financing adequate to meet the increased product demand available within the account base with which the Company has already secured shelf space. At the same time, the company will continue to build brand awareness through immediate execution of consumer marketing programs postponed during 2001, including radio and newspaper advertising in select markets, which is expected to commence during the first half of the calendar year. 9 The Company began a program to seek production financing shortly before the September 11th event but was unable to finalize commitments with interested investors at that time due to the market uncertainties which arose. In late January, the company entered into an agreement in principle with a venture group to provide $1.2 million in bridge capital for the company's operations and inventory requirements for 2002; however, to date, arrangements have not been finalized. The aforementioned delay in finalization of financing resulted in lower production and inventory levels, and a postponement of additional new product shipments until early March 2002. In the future Aqua Vie expects to improve margins through economies of scale and by introducing new products that management believes will support higher gross margins even in today's competitive market environment. The first to be introduced will be a line of Hydrators especially designed for children. Subsequently, the Company plans to follow with a multi-flavor line of nonalcoholic wines made from spring water. These nonalcoholic wines have been designed to provide all of the sensual qualities of fine wines and champagnes, without the presence of alcohol or preservatives. Aqua Vie's product line contains no directly patented or patentable features or components. Copyrighting, trade marking and the use of trade secret techniques and formulations are employed extensively. Aqua Vie uses non-disclosure/non-compete agreements with employees, suppliers and co-packer bottlers. At present the Company has not issued any licenses, franchises, concessions, royalty agreements or labor contracts, though future development may include such actions being incorporated into the corporate strategy. FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES The Company's revenues of approximately $76,000 for the quarter ended January 31, 2002 were a decrease from the $563,133 of revenues in the corresponding second quarter of the prior fiscal year, due to the time lost in the resolution of the processor's quality assurance problem, the resultant temporary lack of inventory available for sale, the consequent delay of advertising and marketing programs, and a postponement of final arrangements for additional funding in September, delayed because of events of September 11th. Discussions are ongoing with the same third parties concerning this additional funding. Because it has sustained recurring losses from operations, the Company cannot assure that it will be able to fully carry out its plans as budgeted without additional operating capital. At January 31, 2002, the Company had negative working capital of $930,059, although this amount represents a decrease in liquidity and capital resources from its negative working capital position of $806,290 at July 31, 2001. The decrease is principally attributable to a decrease in current Assets. In the six months ended January 31, 2002, the Company funded a portion of its operations from the issuance of common stock, valued at $253,895. The Company anticipates a substantial use of cash for the foreseeable future. In particular, management of the Company intends substantial expenditures in connection with production of additional inventory for the planned increase in sales, expansion of the Company's marketing organization, payment of slotting fees to obtain shelf space with new retailers, and quality assurance and distribution management. 10 The availability of sufficient future funds for Aqua Vie will depend to a significant extent on the growth in market acceptance of the Company's primary product line by retail chains. The Company does not expect to incur any major capital expenditures in the next year. Aqua Vie's management expects that additional funding for operating expenditures will be available from the issuance of debt and/or equity securities, as needed. There can be no assurance whether or not such financing will be available on satisfactory terms. RESULTS OF OPERATIONS Aqua Vie commenced operations in 1998 and has a limited history of operations, which to date have not been profitable. Its operations are subject to the risks and competition inherent in the establishment of a relatively new business enterprise. Aqua Vie is currently operating at a loss. The Company's three month revenues of approximately $76,000 were less than the comparable three-month period of the prior fiscal year. Though sales to date have not been sufficient to cover the costs of operations, profitability is believed achievable assuming inventory levels are adequate to meet demand within the Company's existing customer base. For the three months ended January 31, 2002, the Company's sales produced negative gross profit of ($14,878) which compares with the gross profit of $144,147 for the comparable three months of the prior fiscal year. Operating expenses were $107,536 for the three months January 31, 2002 and were $798,029 for the comparable period of the prior year. The year-to-year change principally reflects a decrease in marketing expenses during the most recent quarter resulting from the Company's decision to postpone its advertising, marketing and promotional activities pending the development of higher inventory levels. During this same year-to-year time frame, the decrease in operating expenses during the quarter ended January 31, 2002 also reflects reduction in legal and professional expenses. While Aqua Vie continued to operate at a loss during the most recent quarter, given inventories adequate to support its marketing efforts, the Company's ability to generate higher revenue and realize a net profit from operations remains primarily dependent upon the effectiveness of its marketing efforts in generating sales of its line of flavored spring water products. In the quarter ending January 31, 2002, the Company's net loss of ($132,295) for the three months ended January 31, 2002 resulted in a net loss per share of ($0.002) for the quarter. This contrasts with a net loss of ($171,347) for the three months ended January 31, 2001, which posted a per share loss of ($0.004). 11 PART II - - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS There are no substantial legal proceedings against the Company and the Company is unaware of any such meaningful proceedings contemplated against it. The Company anticipates that in the future it will have conflicts as regards certain Accounts Payable for services invoiced but not adequately performed and for the use of selected names for products and product lines in selected market places. ITEM 2. CHANGES IN SECURITIES Recent Sales of unregistered securities. Sales of unregistered securities were pursuant to the exemption from registration under the Securities Act of 1933 contained in Section 4(2) and Regulations promulgated thereunder. During the three months ended January 31, 2001, the Company issued 824,000 shares of common stock for services valued at $29,000. ITEM 3. DEFAULTS ON SENIOR SECURITIES Not applicable. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. 12 ITEM 5. OTHER INFORMATION Not applicable. CAUTIONARY STATEMENT FOR PURPOSES OF THE SAFE HARBOR PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 Statements in this discussion which are not historical facts may be considered forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. The words "believe", "expect", "anticipate", "estimate" and similar expressions identify forward looking statements. Any forward looking statements involve risks and uncertainties that could cause actual events or results to differ, perhaps materially, from the events or results described in forward looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates. The Company undertakes no obligation to publicly update or revise any forward looking statements, whether as a result of new information, future events or otherwise. Risks associated with the Company's forward looking statements include, but are not limited to, risks associated with the Company's history of losses and uncertain profitability, need for market acceptance of the HYDRATROR(TM) product line, the Company's reliance at this time on a single product line, reliance on the market distribution and retail system and risks associated with the Company's international operations, currency fluctuations, the risk of new and different legal and regulatory requirements, governmental approvals, tariffs and trade barriers, risks associated with competition and technological and product innovation by competitors, dependence on proprietary formulas, general economic conditions and conditions in the beverage industry, reliance on key management, limited manufacturing production history with respect to the aseptic bottling system, maintenance of quality control by the contract bottler, dependence on key suppliers, future capital needs and uncertainty of additional financing, potential recalls and product liability, dilution, effects of outstanding convertible debentures and preferred stock, limited public market, liquidity, possible volatility of stock price, recently adopted new listing standards for NASDAQ securities and environmental matters. 13 AQUA VIE BEVERAGE CORPORATION (Registrant) Date June 27, 2002 By: /s/ Thomas J. Gillespie --------------------------- Thomas J. Gillespie Chief Executive Officer & President 14 -----END PRIVACY-ENHANCED MESSAGE-----