-----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, HgbIz3qyUOHXtRB1qXkTMhIDIyu2eBmApNp9n1zqCQyLfPWEceVuL+6qe9mWQOVU jo04OLNdUWz3e0T1KqkEow== 0000931731-02-000409.txt : 20021119 0000931731-02-000409.hdr.sgml : 20021119 20021119172715 ACCESSION NUMBER: 0000931731-02-000409 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20020731 FILED AS OF DATE: 20021119 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: 10KSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-24801 FILM NUMBER: 02833830 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 10KSB 1 aqvb-10ksb.txt AQUA VIE 10KSB 09302002 U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-KSB (Mark One) [X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended July 31, 2002 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition period from____________________ to _____________________ Commission file number 0-24801 AQUA VIE BEVERAGE CORPORATION (Name of small business issuer in its charter) Delaware 82-056425 - -------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) P.O. Box 6759 333 South Main Street Ketchum, Idaho 83340 - -------------------------------------------------- ----- (Address of principal executive offices) (Zip Code) Issuer's telephone number (208) 622-7792 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered - ---------------------------- ------------------------------------------- Securities registered pursuant to Section 12(g) of the act: - -------------------------------------------------------------------------------- (Title of class) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 [X] No [ ] Check if disclosure of delinquent filers in response to Item 405 of regulation S-B is not contained in this form, and incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB ( ) State issuer's revenues for Its most recent fiscal year $162,809.00 State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked price of such common equity, as of a specified date within the past 60 days. On October 24, 2002 the aggregate market was approximately $ 2,400,000.00. Note: If determining whether a person is an affiliate will involve an unreasonable effort and expense, the issuer may calculate the aggregate market value of the common equity held by non-affiliated on the basis of reasonable assumptions, if the assumptions are stated. (ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YE ARS) check whether the issuer has filed all documents and reports required to be filed by Section 12, 13, or 5(d) of the Exchange Act after the distribution of securities under a plan confirm by a court. Yes [ ] No [ ] (APPLICABLE ONLY TO CORPORATE REGISTRANTS) State the number of shares outstanding of each of issuer's classes of common equity, as of the latest practicable date. Approximately 7,107,065 million shares outstanding on October 31, 2002. 1 DOCUMENTS INCORPORATED BY REFERENCE: IF THE FOLLOWING DOCUMENTS ARE INCORPORATED BY REFERENCE, BRIEFLY DESCRIBE THEM AND IDENTIFY THE PART OF THE FORM 10-KSB (e.g., Part I, Part II, etc.) into which the documents incorporated: (1) any annual report to security holders; (2) any proxy or information statement; and (3) any prospectus filed pursuant to Rule 424(b) or (c) of the Securities Act of 1933 ("Securities Act"). The listed documents should be clearly described for identification Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X] PART I ITEM 1. DESCRIPTION OF BUSINESS. The Company Aqua Vie Beverage Corporation, a Delaware Corporation, ("Aqua Vie") was incorporated on July 29, 1998 and was initially a wholly owned subsidiary of BEVA ("BEVA") Corporation, which had been incorporated in Delaware in 1990. A merger procedure under Section 251(g) of the Delaware Corporate Code in October 1998 resulted in Aqua Vie becoming the parent, and BEVA becoming the wholly owned subsidiary, with the former shareholders of BEVA becoming by action of law the shareholders of Aqua Vie. BEVA retained certain liabilities it had prior to this procedure, but is now inactive. BEVA had been originally acquired in a Chapter 11 Bankruptcy proceeding. BARHILL EXCHANGE: Pursuant to an agreement and plan of merger dated August 31, 1999 between Barhill Acquisition Corporation (Barhill), a Delaware corporation, and Aqua Vie Beverage Corporation, all outstanding shares of common stock of Barhill were exchanged for 250,000 shares of common stock of Aqua Vie in a transaction in which Aqua Vie was the surviving company. Barhill had no assets, liabilities, or history of operations. This transaction is more fully described in Form 8-K/A dated October 28, 1999. BUSINESS OF ISSUER: PRODUCTS: Aqua Vie Beverage Corporation is a development-stage company that develops, manufactures, and markets all-natural beverages. The Company has developed a category of beverages called "water beverages", that includes Hydrators(TM), a line of spring water beverages that encourages personal hydration, "Eau Vin"(TM) a line of non-alcoholic wines and champagne made from spring water, and PurePlay(TM) a line of spring water beverages for children. Of these, seven flavors are currently in production of its Hydrator line. 2 PROCESS: Aqua Vie presently enters into long term contracts with specialized beverage co-packing companies, to produce all of its product lines, utilizing a bottling filler technology that provides for all-natural beverage ingredients to be bottled in Polyethylene Terephthlate (PET) plastic bottles, a universally accepted container/vehicle for bottled water. This aseptic filling technology protects the desired attributes of the all-natural ingredients, resulting in the exclusive, all-natural product lines that have been developed by Aqua Vie, all without preservatives. All Aqua Vie production is currently outsourced to a commercial bottler in Fresno, CA, Lyons Magnus Company. Spring water is cold filtered with micron filtration so fine that it can remove bacteria from water, and is then combined with crystalline fructose, and all-natural flavors and fragrances that undergo the same filtration process. No artificial ingredients or preservatives are used, and the entire process is reviewed for Kosher certification. The products are then aseptically bottled into distinctive shrink wrapped PET plastic bottles. They are sealed for freshness, capped with a sports cap and then sealed with a tamper-proof outer seal. Although a more expensive process than non-aseptic bottling which requires a higher wholesale price for the same profit than non-aseptic bottling, aseptic PET bottling provides for the complete sterilization of a PET bottle and its contents, without the addition of preservatives. Traditional bottling processes, that utilize preservatives, are believed to destroy a substantial amount of the natural attributes of spring waters and all-natural ingredients 2 and all-natural beverages during the bottling process and can affect the quality of color, taste, and aroma, as well as many nutritional elements including vitamins and minerals. Aqua Vie's PET aseptic process retains natural nutrients of spring water. When Aqua Vie's aseptic research began in the early 1990's, there was one aseptic/PET beta test site in the United States capable of processing Aqua Vie's new "water beverages", which Aqua Vie employed as its first domestic co-packer, Lyons Magnus, Fresno California, which is still the domestic co-packer for the Company. Presently, numerous PET/aseptic production facilities are starting up in the US and Europe with equipment manufactured by several large manufacturing companies. Aqua Vie has designed all facets of the retail packaging systems for its product lines to accommodate high-speed production in bottling facilities in the U. S. as well as Europe, for both the co-packer and company owned equipment. Aqua Vie is believed to be the first company to introduce the use of a poly-shrink, full-body label on a PET plastic bottle, and in doing so created a system that can be applied by readily available commercial labelers onto a consumer-acceptable, generic PET bottle. Production has been in cases of 24 bottles, but acquisition of new bottling machinery is intended to permit production of 12 bottle cases as well. The smaller cases are required for certain new markets the Company is presently shipping new product too. Aqua Vie has developed a comprehensive quality assurance system for use in the bottling process. Aqua Vie currently utilizes quality control consultants for production runs with its bottler in Fresno, CA. The Bottler is required to adhere to the quality assurance manual as part of its bottling contract. Bottler adherence to Aqua Vies' QA manual, when strictly followed, is intended to assure exceptional product quality. Aqua Vie maintains a small administrative staff, and relies on outsourcing of production, labeling and shipping, and utilization of sales and marketing consultants. Aqua Vie has a total of 19 employees, consultants, and sales agents, 5 of which work full time. DISTRIBUTION OF THE PRODUCT: The Company utilizes sales and marketing consultants, and food brokers in its target markets that focus their efforts on a pre-determined network of chain retail grocery such as Safeway supermarkets and Shaws Markets that have well defined all-natural departments within their stores (frequently called store-within-a-store. Independent distributors who sell to, and service stores within the all-natural food industry, distribute the product at store level. Aqua Vie offers information about its products and a product purchasing and a subscription service on its Internet site. 4 AQUA VIE'S Distribution and PLACE IN THE MARKET: Aqua Vie Hydrators product line bridges two primary market categories in the beverage industry: soft drinks and bottled water. Standard & Poor's Foods & Nonalcoholic Beverages Industry Survey, May 2000, reports, "U.S. retail sales of the five major nonalcoholic refreshment beverage categories totaled approximately $81.7 billion in 1998 (latest available), up 2.8% from 1997's level, according to Beverage World magazine. These categories are soft drinks ($54.3 billion), fruit beverages ($17.5 billion), bottled water ($5.2 billion), ready-to-drink tea ($2.5 billion), and sports drinks ($2.3 billion)." Aqua Vie has entered the market with what is believed a unique packaging and product to establish a new market segment for all-natural flavored water that does not use preservatives or artificial sweeteners. Seven flavors of Hydrators beverages are currently produced and available for sale. Two new product lines are presently under development and expected to be available in 2003. Fees and promotions are often required to be paid to induce a store or chain to reserve shelf space for a new product. Other devices may also be required, such as provision of free promotional product. There are no long-term agreements with any distributor or purchaser at this time. COMPETITION: The Company believes its products do not have any direct competition in the natural foods market. However, several large and well-financed beverage companies compete in the over-all beverage market, including Coke and Pepsi which offer carbonated, as well as non-carbonated beverages (Coke, Pepsi, Sobe, Gatorade). Suppiers: The company's principal suppliers include Danisco-Coulter (flavors and fragrances), and Seal-It, New York (shrink labels for bottles). GOVERNMENT APPROVAL: Other than normal corporate registration and licensing the Company does not need any additional and/or unique government license or permit. The food and beverage industries are highly regulated and subject to many federal and state government rules, regulations and oversight but compliance is usually part of the service furnished by the bottler under the bottling production contract. As to any future possible government regulations it is believed that if any are ever imposed that they will be broad market pervasive and of general application to all members of the beverage industry. Government regulations in the food industry are significant due to the possibility of recall if non-compliant, which can damage the product reputation and severely affect revenues. 5 The Company is constantly considering new flavors, revision of existing flavors, and new products but has not maintained an R&D budget dedicated to that purpose. The Company relies on trade secret protection, copyright and trademark, and does not relay on any licenses, franchises, or concessions, and pays no royalties. It is not a party to any labor agreements. ITEM 2. DESCRIPTION OF PROPERTY. Aqua Vie leases approximately 2,828 square feet of office space in Ketchum,Idaho for its corporate headquarters. The lease runs until November 30, 2002. Lease payments for the past year totaled $37,896.00. The renewal lease is expected to be approximately $4,892.00 per month. The company maintains three automobile loans, outsources all production costs for its beverage products, and ships finished goods from the packer to independent distribution warehouses servicing accounts in 17 states. ITEM 3. LEGAL PROCEEDINGS. There are a number of routine litigations involving claims against the company for past-due accounts payable, which are considered normal for a company at this stage of development and not of any consequence in the opinion of the registrant. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. The Company submitted two Information Statements with respect to consent actions proposed to be taken during the last quarter of the fiscal year. Consent actions do not require a vote of the shareholders aside from the consent of the majority shareholders under Delaware law. One consent action referred to an increase in authorized capital, the other to authorization to amend the Articles of Incorporation to combine common shares. Both actions were undertaken subsequent to the end of the fiscal year by filing the appropriate amendments with the State of Delaware. The increase in capital was taken as proposed in the Information Statement. The combination selected was 20 common shares to one common share. Please see the SEC web site, twww.sec.gov for the Company definitive information statement filings on this topic, and the shareholders, which may have voted therefore. 6 PART II ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. (a) Market for Common Equity: Aqua Vie's common stock is traded in the over-the counter market and prices are quoted on the NASDAQ Bulletin Board. The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not represent actual transactions. Year Ended July 31, 2002 High Low - ------------------------------------------------------ First quarter .095 .04 Second quarter .064 .02 Third quarter .06 .096 Fourth quarter .021 .003 Year Ended July 31, 2001 High Low - ------------------------------------------------------ First quarter .572 .312 Second quarter .36 .065 Third quarter .155 .063 Fourth quarter .175 .065 There is one class of common stock and approximately 600 shareholders plus an estimated 18,500 beneficial holders in street name. No dividends have been declared and none are planned. (b) Sales of Unregistered Securities: (b) Sales of Unregistered Securities: 7 Year Ending July 31, 2000: During the fiscal year ending July 31, 2000 the Company issued unregistered securities as follows: In September 1999 under Rule 701, to a group of 7 employees, consultants and for professional services, the Company issued a total of 896,500 shares of common stock. Also in that month the Company issued 250,000 shares as part of the merger transaction with the Barhill Company. During the fiscal year accredited investor E. Hamlin was issued at total of 1,261,000 shares for various cash investments totaling and consulting services; accredited investor R. Schneiderman received 1,115,000 shares for various cash investments and for consulting services (please see Financial Statement). Also during the fiscal year another 12 accredited investors for services and cash totaling $148,900 received 1,042,400 shares. The President of the Company in July 2000 received 300,000 shares for services. Two pre-incorporation accredited investors received 179,000 shares for their previous involvement. The Company issued 200 shares of Series C preferred to an accredited investor for the investment of $100,000 that that preferred was convertible into 200,000 shares of the Company. The five holders of Series A preferred stock converted during the a year portion of their preferred holdings for 2,580,851 shares and the holder of the Series B preferred stock converted a portion of their holding for 644,000 shares. The company relied on regulation D for the above transactions. Year Ending July 31, 2001: During the fiscal year ending July 31, 2001 the Company issued unregistered securities as follows: The President of the Company received 300,000 shares of common for services; in August and October a product broker received a total of 150,000 shares as part of his broker agreement with the Company; in April 2001 two individuals received 230,000 shares as settlement for pre-incorporation assistance; in May an advertising agency received 1,500,000 shares and accredited investor R. Schneiderman received 500,000 shares in July 2001 for consulting services the total value received was $321,600. Accredited investor R. Schneiderman received 850,000 shares in October for conversion of debt owed to him in the amount of $340,850. The five holders of Series A preferred stock converted during the year a portion of their preferred holdings for 4,614,123 shares of common and the holder of the Series B preferred stock converted a portion of their holding for 16,442,642. In February 2001 the holder of the Series C preferred converted his position for 200,000 shares of common. In November 2000 the Company issued to the Brace Trust, holders of the Series B preferred, 12,000 Series D preferred for the investment of $1,200,000 which preferred carried certain provision including a conversion rate adjustment dependent upon future common stock issuances below a certain value and a increase conversion based on market success of the Company and 600 Series E preferred to a former employee for the investment of $60,000 which preferred could be converted for 1,000,000 shares of the common stock of the Company. In July 2001 the Company issued 1,240 shares of the Series F preferred for the investment of $124,000 that could be converted into 2,480,000 shares of the common stock of the Company. The company relied on regulation D for the above transactions. 8 Year Ending July 31, 2002: During the fiscal year ending July 31, 2002 the Company issued unregistered securities as follows: Accredited investors E. Hamlin and R. Schneiderman received in January and April a total of 5,300,000 for conversion of debt owed in the amount of $237,000 plus interest. In August and September 2001 three individuals received a total of 425,000 shares for services, one individual received 20,000 shares as settlement for pre-incorporation assistance and an employee was issued 25,000 shares for services the total value for these 470,000 shares was $11,750. Also during the year three individuals were issued a total of 240,000 shares for a prior existing claim and to settle their lawsuit. During the year the four holders of Series A preferred stock converted a portion of their preferred holdings for 1,601,611 shares of common and the holder of the Series B preferred stock converted their remaining portion of their holding for 191,236 shares April. In May and June the holder of the Series E preferred converted their position for 1,000,000 shares of the common stock of the Company. In July 2002 the Company issued to the President the Series G preferred as part of the transaction where he forgave a total of $800,000 in past debt and accrued compensation owed to him by the Company. The Series G preferred is, initially convertible into 80,000,000 shares of the company and the terms of this preferred include certain provisions including a conversion rate adjustment dependent upon future common stock issuances below a certain value and an increase conversion based on market success of the company and in addition a super voting position of 320,000,000 common shares based on the maximum allowable conversion of this series of preferred based on certain market increase in stock price. The company relied on regulation D for the above transactions. ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION Matters discussed herein, contain forward-looking statements that involve risk and uncertainties. This is particularly true as it relates to comments about the development and funding of Aqua Vie's future production capability, expectations about profitability, and new product introduction. Results may differ significantly from results indicated by forward-looking statements. Factors that might cause some differences, include, but are not limited to: (1) changes in general economic conditions, including but not limited to increases in interest rates; (2) government regulations affecting customers and the bottling process for products; (3) the potential for product recall and related non-compliance issues by third parties;(4) similar products competing for shelf space and market share in the bottled water industry; (5) the ability of Aqua 9 Vie to successfully bring new products from their development stage into full and profitable production and sales; (6) Aqua Vie's ability to raise sufficient debt and/or equity capital to implement its business plans; (7) the occurrences of incidents that could subject Aqua Vie to liability or fines; (8) the ability of Aqua Vie to attract the needed networks for product distribution, and secure the shelf space in stores necessary to achieve sales forecasts. INTRODUCTION In fiscal year 2001, the Company initiated a targeted supermarket sales program with the Albertsons divisions of Northern and Southern California, Arizona, and Nevada. These arrangements required substantial slotting fees (one time fees to stores), to be paid in order to secure shelf space and provided for the company's products being featured in approximately 1,200 Albertsons stores in California and adjacent States. The Company also negotiated supermarket sales in the Raleys, Knob Hill, Savemart and other chains in the same general regions. At that time the strategy was to specifically focus on mass markets and chain grocery sales in the limited geography of greater California, and later utilize these sales to penetrate additional regions, such as Texas, where Albertsons also had a strong presence. As the Company's available capital was limited, and the public capital markets continued their steep decline, the Company also attempted to secure additional financing for working capital, inventory and production. In March, 2001, the Company secured a financing arrangement with their co-packer, Lyons Magnus of Fresno CA., whereby the cost of the bottling production would be secured by the finished inventory. This financing of new inventory was to be further secured by a guarantee from one of the Company's larger shareholders (not affiliated with management), who had a close personal relationship with the Management of Lyons. The sales and marketing plan for supermarket penetration depended on the Lyons financing arrangement providing adequate growth production in advance, so that there would be sufficient inventory to meet the sales orders from the chain grocers (such sales orders often required short lead time before shipment). Supermarket sales of this type, were estimated, would produce a modest profit, but also had the advantage of producing higher gross revenues, and the consequent increased levels of marketing and advertising. The Lyons arrangement was only able to fund a limited amount of early production due to the inability of Lyons and the guaranteeing shareholder to come to terms over the scope and form of the guarantee. This difficulty was further aggravated by a declining business climate which it is believed affected Lyons willingness to take a credit risk, as well as a delayed submission of re-orders from Albertsons due to their internal system of forwarding reorders from stores to the central ordering facilities. 10 During the summer of 2001, as the seasonal demand for the company's products began to increase, the Company attempted to somewhat "restrain" large chain grocery sales opportunities because of the uncertainty over whether Lyons would honor the financing arrangements it had made. The Company was not willing to risk entering into a situation where its marketing efforts created increased demand, without the inventory being available to satisfy that demand. Management determined that if that risk occurred, it would have severe difficulty re-opening those sales outlets when quality production was secured, due to a loss of credibility with store management. Ultimately in late summer 2001, the Company reached a settlement with Lyons which provided for very limited additional production financing, with the balance on a "cash and carry" basis. These arrangements, which included a provision for an increased level of quality assurance to maintain preservative-free products, are still in place today. As it became evident that the Company could not count on additional production of inventory being financed, simultaneous with the general shock and economic spiral that the capital markets encountered following the tragedy of 9/11/01, management chose to maintain a "holding pattern" while attempting to secure new production financing and shifted the focus on the long term sales development of it's products within the natural foods retail markets, with particular emphasis on the newly emerging "all-natural, store within a store" divisions within major retail grocery chains. During the second half of 2002, the Company has continued to develop a unique sales niche within all-natural divisions of major retail grocery chains shipping products to over 500 grocery chain stores with "all-natural stores within stores" in 17 states, and is additionally entering the all-natural health food retail markets (health food stores), being distributed by the two largest all-natural food distributors in the U. S. The Company has further accelerated the development of two new lines of water beverages; a line of flavored water beverages for children called PurePlay, and a line of non-alcoholic wines made from spring water called Eau Vin, both are expected to be available at retail in 2003. The Company believes that higher profit margins attainable in specialty sections offset the lower general grocery revenues and substantial new product and slotting introduction costs. Because the products represent the first "all-natural", preservative-free flavored bottled spring water available, less initial marketing expense is needed to distinguish it from many generally competing products. Finally, it is also anticipated that when the capital markets improve it may be easier to secure funding from investors for an "all-natural" preservative-free company. With a proven sales execution in the natural foods sections of large stores, and with additional new distribution and continuous product availability through natural foods sales, Management believes that the caution exercised in promoting general retail sales during late 2001 into fiscal 2002, while it severely dampened overall sales, preserved those sales for the future while the company pursued a natural food strategy. 11 While transitioning through a re-orientation in sales strategy, the Company also considered means to improve overall gross profits on sales. The Company recorded revenues of $151,924 in fiscal 2000, $912,000 in fiscal 2001, and $162,809 in fiscal 2002. Gross profit on sales was respectively $(80,434), $107,936, and $ (19,204). Management believes that the improvement in profit relative to similar sales levels in 2000 and 2002 was due to the experience it gained in cost control and pricing during that period, and it is hoped that this experience will enable higher gross profit relative to sales in 2003 than the 12% that was achieved in 2001. While the Company's success in improving profits through improved cost control and higher profits margins through specialty sales strategies will only be determined by experience, Management believes that the parameters are in place for improved margins as the new sales strategy develops. While maintaining general sales and developing the introduction of the products into the all-natural chain market, the Company received a series of small production and working capital financings from a shareholder (not affiliated with management). The Company is in the process of seeking additional capital in the form of either secured debt, factoring, and/or equity funding. The Company seeks to secure an initial $2.2 million for immediate inventory growth support, working capital and marketing as it consistently develops the sales base within each targeted market. Management believes the relative costs for such capital may be high initially, however with consistent growth and a proven track record of sales within this new market, it is anticipated the costs of such financing will become commercially acceptable. While parties have shown interest in such financing arrangements the Company presently does not have a firm commitment for the $2.2 million that management believes will be required for the rest of 2003. PLAN OF OPERATION: During the last fiscal year Aqua Vie continued establishing a market presence for its line of Hydrators, the lightly flavored spring water beverages. Throughout calendar 2002, this effort has been concentrated exclusively through all-natural retailers and major retailers who exclusively maintain all-natural departments within their stores. Given Aqua Vie's market distribution presence, frequently based upon introductory fee and promotion arrangements with distributors or directly with major grocery and convenience store chains, its relationship with its co-packer, and the present production and overhead cost structure, adequate levels of profitability can be achieved in a timely fashion given adequate bridge financing. The immediate solution to profitability in this early growth scenario rests with Aqua Vie obtaining the adequate bridge financing to rapidly increase initial production to meet the increased product demand available within the account base the Company has presently secured shelf space, while building brand awareness through consumer marketing programs. 12 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 new product line expected to be introduced in 2003, is line of Hydrators especially designed for children. Subsequently, multi-flavor line of non-alcoholic wine made from spring water is planned. It has been designed to satisfy the desire for a glass or bottle of wine or champagne, 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 utilized 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. Aqua Vie continues to offer information about its products and a subscription service on its Internet site. Aqua Vies revenue from Internet sales remains a small portion of current revenue but it is projected to be an important part of future revenue. Management intends to expand and develop marketing of Aqua Vie beverages through the Internet. To date, the means and ability to obtain meaningful sales volume is in place, with product on the shelves in over 500 major chain retail grocery and convenience store outlets. The Company has recently engaged a Quality Assurance specialist and a comprehensive co-packer line and production inspection system and audit program. It is believed these inspections and oversight will ensure salable quality and assist the Company in maintaining delivery schedules. Subsequent to the fiscal year end, the Company obtained the services of parties that had been directly involved in the Hydrator product design and development, including the quality assurance standards, protocols and procedures. LIQUIDITY AND CAPITAL RESOURCES: Aqua Vie's current capitalization is not sufficient to meet the necessity of maintaining a company presence and to fund the production of the anticipated growth in orders and apparent market acceptance. Company capital resources have traditionally been used for promotion, sales support, slotting fees, inventory support and general administration as more particularly described in prior filings. The Company has devoted substantial resources in the past several years and during the current year to inventory support in the expectation that sales would in part offset other working capital requirements and would thus result in less dependence on additional capital resources. 13 The Company is currently engaged in seeking new sources of inventory and general working capital financing in the approximate amount of $2.2 million to support the sales which it believes it can effect in 2002 and 2003 in the outlets in which it has had product presence. The market for finance for developing companies has been difficult in the past several months particularly as a result of the September 11, 2001 Terrorist attack but management believes that climate has now begun to show some improvement and is cautiously optimistic about additional financing possibilities. In fiscal 2002 the Company realized $178,756 in financing activities compared with $1,368,473.00 in 2001. This reflected the extremely difficult capital markets in 2002. As previously discussed this was a major factor in Management decision to maintain a "hold fast" sales strategy to maintain market presence with minimum capital expenditure in 2002. Please see the statement of Cash Flows for additional information. RESULTS OF OPERATIONS: General and administrative, legal and accounting expenses were $1,476,287 in 2002 compared to $2,299,803 in 2001. All categories decreased except depreciation. remained proportionately unchanged from the previous year. 14 PART III "The Items contained in this Part III will be updated to the end of the current fiscal year by either a Definitive proxy or Information Statements, or and amendment to this Report made within 120 days of the end of the fiscal year, as provided in General Instruction E-3 to the Form." SIGNATURES In accordance with Section13 or 15(d) of the Exchange Act, the registrant causes this report to be signed on its behalf by the undersigned, thereunto duly authorized. Aqua Vie Beverage Corp. (Registrant) Date 11-13-01 By /s/ Thomas J. Gillespie -------- -------------------------- Thomas J. Gillespie, CEO and President CEO, President, Director Signature /s/ Thomas J. Gillespie Title Date - ----------------------- ------------------------ -------- Thomas J. Gillespie CEO, President, Director 11-13-01 15 CERTIFICATIONS I, Thomas Gillespie certify that: 1. I have reviewed this annual report on Form 10-KSB of Aqua Vie Beverage Corporation >; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and I have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. I have indicated in this report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 19, 2002 16 AQUA VIE BEVERAGE CORPORATION Financial Statements July 31, 2002 WILLIAMS & WEBSTER, P.S. Certified Public Accountants Bank of America Financial Center 601 W. Riverside, Suite 1940 Spokane, Washington 99201 (509) 838-5111 AQUA VIE BEVERAGE CORPORATION C O N T E N T S Independent Auditor's Report................................................F-1 Balance Sheets..............................................................F-2 Statements of Operations....................................................F-3 Statement of Stockholders' Deficit..........................................F-4 Statements of Cash Flows....................................................F-55 Notes to the Financial Statements...........................................F-6 Board of Directors and Stockholders Aqua Vie Beverage Corporation Ketchum, Idaho INDEPENDENT AUDITOR'S REPORT We have audited the accompanying balance sheets of Aqua Vie Beverage Corporation (a Delaware corporation) as of July 31, 2002 and 2001, and the related statements of operations, stockholders' deficit and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Aqua Vie Beverage Corporation as of July 31, 2002 and 2001, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2, the Company's significant operating losses raise substantial doubt about its ability to continue as a going concern. Management's plans regarding those matters also are described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. /s/ Williams & Webster, P.S. - ------------------------------ Williams & Webster, P.S. Certified Public Accountants Spokane, Washington November 7, 2002 F-1
AQUA VIE BEVERAGE CORPORATION BALANCE SHEETS July 31, --------------------------------- ASSETS 2002 2001 ----------- ----------- CURRENT ASSETS Cash $ 2,179 $ 3,608 Accounts receivable 6,471 82,776 Inventory 120,006 155,372 Prepaid and other assets 6,737 24,434 ----------- ----------- Total Current Assets 135,393 266,190 ----------- ----------- PROPERTY AND EQUIPMENT, net of depreciation 51,386 115,993 ----------- ----------- OTHER ASSETS Intangibles, net of accumulated amortization 175,731 246,881 ----------- ----------- TOTAL ASSETS $ 362,510 $ 629,064 =========== =========== LIABILITIES AND STOCKHOLDERS' DEFICIT CURRENT LIABILITIES Accounts payable $ 374,322 $ 362,312 Bank overdraft 16,388 52,412 Settlements payable 36,000 10,000 Accrued expenses 87,367 64,101 Accrued compensation - related party 180,000 -- Loan from related party 161,544 128,520 Notes payable - current 218,479 455,135 ----------- ----------- Total Current Liabilities 1,074,100 1,072,480 ----------- ----------- LONG-TERM DEBT Notes payable, net of current portion 5,651 14,632 ----------- ----------- COMMITMENTS AND CONTINGENCIES -- -- ----------- ----------- STOCKHOLDERS' DEFICIT Preferred stock, Series A, B, C, D, E, F and G, $0.001 par value; 5,000,000 shares authorized, 12,941 and 15,074 shares issued and outstanding, respectively 13 15 Common stock, $0.001 par value; 5,000,000,000 shares authorized, 106,749,217 and 58,253,173 shares issued and outstanding, respectively 106,749 58,253 Additional paid-in capital 6,907,173 5,562,162 Subscriptions receivable -- (176,977) Accumulated deficit (7,731,176) (5,901,501) ----------- ----------- Total Stockholders' Deficit (717,241) (458,048) ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 362,510 $ 629,064 =========== ===========
The accompanying notes are an integral part of these financial statements. F-2
AQUA VIE BEVERAGE CORPORATION STATEMENTS OF OPERATIONS Years Ended July 31, --------------------------------------- 2002 2001 ------------ ------------- NET REVENUES $ 162,809 $ 912,000 COST OF GOODS SOLD 182,013 804,064 ------------ ------------ GROSS PROFIT (LOSS) (19,204) 107,936 ------------ ------------ GENERAL AND ADMINISTRATIVE EXPENSES Promotion and advertising 157,064 544,815 Legal and accounting 141,234 165,614 Depreciation and amortization 149,111 100,427 Bad debts -- 92,175 Other general and administrative expenses 1,328,889 1,396,772 ------------ ------------ Total expenses 1,776,298 2,299,803 ------------ ------------ OPERATING LOSS (1,795,502) (2,191,867) OTHER EXPENSE Interest expense (34,173) (55,553) ------------ ------------ Total other expense (34,173) (55,553) ------------ ------------ LOSS BEFORE TAXES (1,829,675) (2,247,420) INCOME TAXES -- -- ------------ ------------ NET LOSS $ (1,829,675) $ (2,247,420) ============ ============ NET LOSS PER COMMON SHARE, BASIC AND DILUTED $ (0.03) $ (0.06) ============ ============ WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING, BASIC AND DILUTED 72,226,565 40,774,176 ============ ============
The accompanying notes are an integral part of these financial statements. F-3
Preferred Series A - G Common Stock Additional ----------------------- ---------------------- Number Number Paid-in SubscriptionsAccumulated of Shares Amount of Shares Amount Capital Receivable Deficit Total ----------- ----------- ------------ -------- ----------- ----------- ----------- ------------ Balance, July 31, 2000 7,410 $ 7 30,811,408 $ 30,811 $ 2,422,236 $ -- ($3,654,081) $(1,201,027) Issuance of common stock for services at an average of $0.13 per share -- -- 5,335,000 5,335 640,783 -- -- 646,118 Issuance of common stock for debt at $0.41 per share -- -- 850,000 850 340,000 -- -- 340,850 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) -- -- 1,023,048 Issuance of preferred Series E for cash and receivable at $100 per share 600 1 -- -- 59,999 (25) -- 59,975 Issuance of preferred Series F for cash and receivable at $100 per share 1,240 1 -- -- 123,999 -- -- 124,000 Forgiveness of debt and accrued payroll by officer -- -- -- -- 796,408 -- -- 796,408 Net loss for the year ended July 31, 2001 -- -- -- -- -- -- (2,247,420) (2,247,420) ----------- ----------- ------------ -------- ----------- ----------- ----------- ------------ Balance, July 31, 2001 15,074 15 58,253,173 58,253 5,562,162 (176,977) (5,901,501) (458,048) Issuance of common stock for cash at $0.04 per share -- -- 6,250,000 6,250 247,645 -- -- 253,895 Issuance of common stock for services at at an average of $0.04 per share -- -- 15,393,333 15,393 506,990 -- -- 522,383 Issuance of common stock for debt at $0.05 per share -- -- 5,300,000 5,300 270,727 -- -- 276,027 Issuance of common stock for settlement at $0.005 per share -- -- 240,000 240 960 -- -- 1,200 Conversion of preferred Series A to common stock (376) -- 1,601,611 1,602 (1,602) -- -- -- Conversion of preferred Series B to common stock (45) -- 191,236 191 (191) -- -- -- Conversion of preferred Series D to common stock (11,112) (11) 18,519,864 18,520 (18,509) -- -- -- Conversion of preferred Series E to common stock (600) (1) 1,000,000 1,000 (999) -- -- -- Forgiveness of payroll by officer -- -- -- -- 60,000 -- -- 60,000 Issuance of preferred Series G for waiver from officer 10,000 10 -- -- 279,990 -- -- 280,000 Payment of stock subscriptions receivable -- -- -- -- -- 176,977 -- 176,977 Net loss for the year ended July 31, 2002 -- -- -- -- -- -- (1,829,675) (1,829,675) ----------- ----------- ------------ -------- ----------- ----------- ----------- ------------ Balance, July 31, 2002 12,941 $ 13 106,749,217 $106,749 $ 6,907,173 $ -- $(7,731,176) $ (717,241) =========== =========== ============ ======== =========== =========== =========== ============
The accompanying notes are an integral part of these financial statements. F-4
AQUA VIE BEVERAGE CORPORATION STATEMENTS OF CASH FLOWS Years Ended July 31, ----------------------------------- 2002 2001 ---------------- ---------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $(1,829,675) $(2,247,420) Adjustments to reconcile net loss to net cash used by operating activities: Bad debts -- 92,175 Depreciation and amortization 149,111 100,427 Common stock issued for interest 276,027 850 Common stock issued for services 522,383 646,118 Common stock issued for settlement 1,200 -- Preferred stock issued for waiver from officer 280,000 -- Compensation of officer as additional paid-in capital 60,000 240,000 Expenses paid by the issuance of note payable -- 128,520 Changes in assets and liabilities: Accounts receivable 76,305 (57,538) Inventory 35,366 94,418 Prepaid expenses 17,697 69,042 Accounts payable 12,010 207,691 Settlements payable 26,000 10,000 Accrued expenses (13,620) (403,463) Accrued compensation 180,000 -- ----------- ----------- Net cash used by operating activities 444,196) (1,119,180) ----------- ----------- CASH USED BY INVESTING ACTIVITIES: Refund of intangible assets 57,088 (207,540) Purchase of intangible assets (33,212) -- Purchases of equipment -- (49,272) ----------- ----------- Net cash provided (used) by investing activities 23,876 (256,812) ----------- ----------- CASH PROVIDED BY FINANCING ACTIVITIES Sale of common stock 253,895 -- Sale of preferred stock, Series C, D, E and F -- 1,207,023 Payments on notes payable (8,981) (595) Receipts from stock subscription 176,977 -- Bank overdraft (36,024) 52,412 Loans - related parties 33,024 109,633 ----------- ----------- Net cash provided by financing activities 418,891 1,368,473 ----------- ----------- INCREASE (DECREASE) IN CASH (1,429) (7,519) BEGINNING BALANCE 3,608 11,127 ----------- ----------- ENDING BALANCE $ 2,179 $ 3,608 =========== =========== SUPPLEMENTAL CASH FLOW DISCLOSURES: Income taxes paid $ -- $ -- Interest paid $ -- $ -- NON-CASH INVESTING AND FINANCING ACTIVITIES: Issuance of common stock for debt $ 276,027 $ 340,850 Issuance of common stock for services $ 522,383 $ 646,118 Issuance of common stock for settlement $ 1,200 $ -- Issuance of preferred stock for waiver from officer $ 280,000 $ -- Forgiveness of debt and accrued payroll by officer $ 60,000 $ 796,408
The accompanying notes are an integral part of these financial statements. F-5 AQUA VIE BEVERAGE CORPORATION NOTES TO THE FINANCIAL STATEMENTS July 31, 2002 DRAFT NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS Aqua Vie Beverage Corporation was incorporated on July 31, 1998 in the State of Delaware. The Company's principal assets were acquired through a bankruptcy court ordered liquidation of a predecessor company and included the trade name, beverage formula and the predecessor's public status. These assets were acquired by the issuance of Series B preferred stock. The Company's business activities have been financed primarily through the issuance of equity securities, outside loans, and loans from officers and stockholders. The Company's principal products include low calorie, non-preservative, lightly flavored bottled water. Management plans include the marketing and distribution of the Company's products nationally and internationally. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This summary of significant accounting policies of Aqua Vie Beverage Corporation is presented to assist in understanding the Company's financial statements. The financial statements and notes are representations of the Company's management, which is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the financial statements. Accounting Method - ----------------- The Company's financial statements are prepared using the accrual method of accounting. Advertising Costs - ----------------- The Company expenses all advertising expenditures as incurred. Principles of Consolidation - --------------------------- The accompanying financial statements are not deemed to be consolidated because the Company's wholly owned subsidiary, BEVA Corporation is dormant. Cash and Cash Equivalents - ------------------------- For purposes of the statement of cash flows, the Company considers all short-term debt securities purchased with maturity of three months or less to be cash equivalents. Allowance for Doubtful Accounts - ------------------------------- Provision for losses on trade accounts receivable is made in amounts required to maintain an adequate allowance to cover anticipated bad debts. Accounts receivable are charged against the allowance when it is determined by the Company that payment will not be received. Inventories - ----------- Inventories consist primarily of raw materials and finished product and are valued at the lower of cost (first in, first out) or market. F-6 AQUA VIE BEVERAGE CORPORATION NOTES TO THE FINANCIAL STATEMENTS July 31, 2002 DRAFT NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Inventories (continued) Inventory is comprised of the following at July 31: 2002 2001 ------------- ------------ Finished goods $ 72,006 $ 113,013 Raw materials 48,000 42,359 ------------- ------------ Total $ 120,006 $ 155,372 ============= ============ Property and Equipment - ---------------------- Property, plant and equipment are stated at cost. All expenditures for improvements, replacements and additions are added to the asset accounts at cost. Expenditures for normal repairs and maintenance are charged against earnings as incurred. The cost and related accumulated depreciation are eliminated from the accounts and the resulting gain or loss is reflected in the statements of operations when depreciable assets are retired or otherwise disposed. Depreciation is provided for by the use of straight-line and accelerated methods over the estimated useful lives of the assets. Depreciation expense for the years ended July 31, 2002 and 2001 was $64,608 and $60,768, respectively. The following is a summary of property and equipment at July 31: 2002 2001 -------------- -------------- Total property and equipment $ 201,608 $ 201,608 Less accumulated depreciation (150,222) (85,615) -------------- -------------- Net property and equipment $ 51,386 $ 115,993 ============== ============== Intangible Assets - ----------------- Most intangible assets are amortized over their estimated useful lives of 3 to 10 years on a straight-line basis. Amortization expense for the years ending July 31, 2002 and 2001 was $93,676 and $38,659, respectively. In the year ended July 31, 2002, the Company received $52,089 from a customer, which represents a refund of slotting fees paid and was recorded as a reduction of intangibles. Income Taxes Income taxes are provided based upon the liability method of accounting pursuant to SFAS No. 109 "Accounting for Income Taxes." Under this approach, deferred income taxes are recorded to reflect the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each year-end. A valuation allowance is recorded against deferred tax assets if management does not believe the Company has met the "more likely than not" standard imposed by SFAS No. 109 to allow recognition of such an asset. F-7 AQUA VIE BEVERAGE CORPORATION NOTES TO THE FINANCIAL STATEMENTS July 31, 2002 DRAFT At July 31, 2002, the Company had net deferred tax assets of approximately $1,900,000, principally arising from net operating loss carryforwards for income tax purposes. As management of the Company cannot determine that it is more likely than not that the Company NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Income Taxes (continued) - ------------------------ will realize the benefit of the net deferred tax asset, a valuation allowance equal to the net deferred tax asset has been established at July 31, 2002. See Note 3. At July 31, 2002, the Company has net operating loss carryforwards of approximately $13,100,000, which expire in the fiscal years ending July 31, 2002 through July 31, 2022. Basic and Diluted Loss Per Share - -------------------------------- Loss per share was computed by dividing the net loss by the weighted average number of common shares and common share equivalents outstanding during the year. The weighted average number of shares was calculated by taking the number of shares outstanding and weighting them by the amount of time they were outstanding. Basic and diluted loss per share were the same because the inclusion of outstanding warrants and other convertible instruments would be considered antidilutive. Revenue Recognition and Slotting Fees - ------------------------------------- Revenues from sales of product are recognized when the product is shipped and collectibility is reasonably assured with title passing at the shipping point. Sales terms for distributors and retail customers are 2%, net 30. At July 31, 2002, the Company was not selling to or through distributors. Sales terms generally do not allow a right of return. Products are drop shipped from the bottler to the customer and the customer pays all shipping charges. Sales of products directly to customers through e-commerce and traditional channels are recognized when shipped. In these transactions, the Company acts as merchant-of-record. Accordingly, the Company records as revenue the full sales price of the product sold and records the full cost of the product to the Company as cost of revenues, upon shipment of the product. All internet sales are paid via credit card and are considered immediately collectible. The Company pays slotting or shelving fees to retailers. In past years, these costs were deferred and expensed over an estimated time frame of 3 years. Slotting fees paid during the year ended July 31, 2001 were $207,540. This amount is included in intangibles. Effective with its April 30, 2002 financial statements, the Company has changed its accounting policy to record slotting fees as a reduction of revenue. This new policy is in accord with the consensus of EITF 01-09 "Accounting for Consideration Given by a Vendor to a Customer or a Reseller of the Vendor's Products," which affirms that the payment of consideration by a vendor to a customer should not be recognized as an asset of the vendor and further affirms that slotting fees should be accounted for as a reduction of revenues. If the Company had implemented this new policy in the year ended July 31, 2001, then the Company's net loss would have increased by $168,881. Compensated Absences - -------------------- Employees of the Company are entitled to paid vacation, paid sick days and personal days off, depending on job classification, length of service, and other factors. The Company's policy is to recognize the costs of compensated absences when actually paid to employees. The related liability, due to immateriality, has not been recorded. F-8 AQUA VIE BEVERAGE CORPORATION NOTES TO THE FINANCIAL STATEMENTS July 31, 2002 DRAFT NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Estimates - --------- The preparation of financial statements, in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. Impaired Asset Policy - --------------------- The Company reviews its long-lived assets quarterly to determine if any events or changes in circumstances have transpired which indicate that the carrying value of its assets may not be recoverable. The Company does not believe any adjustments are needed to the carrying value of its assets at July 31, 2002. Derivative Instruments - ---------------------- The Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended by SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of SFAS No. 133," and SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities," which is effective for the Company as of January 1, 2001. These standards establish accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. They require that an entity recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value. If certain conditions are met, a derivative may be specifically designated as a hedge, the objective of which is to match the timing of gain or loss recognition on the hedging derivative with the recognition of (i) the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk or (ii) the earnings effect of the hedged forecasted transaction. For a derivative not designated as a hedging instrument, the gain or loss is recognized in income in the period of change. Historically, the Company has not entered into derivative contracts to hedge existing risks or for speculative purposes. At July 31, 2002 and 2001, the Company has not engaged in any transactions that would be considered derivative instruments or hedging activities. Fair Value of Financial Instruments - ----------------------------------- The Company's financial instruments as defined by SFAS No. 107, "Disclosures about Fair Value of Financial Instruments," include cash, trade accounts receivable, accounts payable, accrued expenses and short-term borrowings. All instruments are accounted for on a historical cost basis, which, due to the short maturity of these financial instruments, approximates fair value. F-9 AQUA VIE BEVERAGE CORPORATION NOTES TO THE FINANCIAL STATEMENTS July 31, 2002 DRAFT NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Recent Accounting Pronouncements - -------------------------------- In June 2001, the FASB issued SFAS No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 provides for the elimination of the pooling-of-interests method of accounting for business combinations with an acquisition date of July 1, 2001 or later. SFAS No. 142 prohibits the amortization of goodwill and other intangible assets with indefinite lives and requires periodic reassessment of the underlying value of such assets for impairment. SFAS No. 142 is effective for fiscal years beginning after December 15, 2001. An early adoption provision exists for companies with fiscal years beginning after March 15, 2001. The Company has adopted SFAS No. 142. Application of the nonamortization provision of SFAS No. 142 will have no effect on the Company's financial statements as the Company does not currently have assets with indefinite lives. In October 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations." SFAS No. 143 establishes guidelines related to the retirement of tangible long-lived assets of the Company and the associated retirement costs. This statement requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived assets. This statement is effective for financial statements issued for the fiscal years beginning after June 15, 2002 and with earlier application encouraged. The Company adopted SFAS No. 143 and the adoption has no effect on the financial statements of the Company at July 31, 2002. In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No. 144 replaces SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." This new standard establishes a single accounting model for long-lived assets to be disposed of by sale, including discontinued operations. SFAS No. 144 requires that these long-lived assets be measured at the lower of carrying amount or fair value less cost to sell, whether reported in continuing operations or discontinued operations. This statement is effective beginning for fiscal years after December 15, 2001, with earlier application encouraged. The Company adopted SFAS No. 144 and the adoption has no effect on the financial statements of the Company at July 31, 2002. In April 2002, the FASB issued SFAS No. 145, "Rescission of SFAS Statements No. 4, and 64, Amendment of SFAS No. 13, and Technical Corrections," which updates, clarifies and simplifies existing accounting pronouncements. SFAS No. 4, which required all gains and losses from the extinguishment of debt to be aggregated and, if material, classified as an extraordinary item, net of related tax effect F-10 AQUA VIE BEVERAGE CORPORATION NOTES TO THE FINANCIAL STATEMENTS July 31, 2002 DRAFT NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Recent Accounting Pronouncements (continued) - -------------------------------------------- was escinded, and as a result, SFAS No. 64, which amended SFAS No. 4, was rescinded as it was no longer necessary. SFAS No. 145 amended SFAS No. 13 to eliminate an inconsistency between the required accounting for sale-leaseback transactions and the required accounting for certain lease modifications which have economic effects similar to those of sale-leaseback transactions. The pronouncement will not affect the Company as it has not entered into any of the aforementioned transactions. In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." SFAS No. 146 addresses significant issues regarding the recognition, measurement, and reporting of costs associated with exit and disposal activities, including restructuring activities. SFAS No. 146 also addresses recognition of certain costs related to terminating a contract that is not a capital lease, costs to consolidate facilities or relocate employees, and termination benefits provided to employees that are involuntarily terminated under the terms of a one-time benefit arrangement that is not an ongoing benefit arrangement or an individual deferred-compensation contract. SFAS No. 146 was issued in June 2002. The impact on the Company's financial position or results of operations from adopting SFAS No. 146 has not been determined. Going Concern - ------------- As shown in the financial statements, the Company incurred a net loss of $1,829,675 for the year ended July 31, 2002 and has an accumulated deficit of $7,731,176. The Company has negative equity, negative working capital and limited cash resources. These factors indicate that the Company may be unable to continue in existence. The financial statements do not include any adjustments related to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event the Company cannot continue existence. Management plans to sell new stock issuances, which are expected to raise the capital needed to operate the Company. Management is also actively pursuing the distribution of the Company's products nationally and internationally. Shipping and Handling Costs - --------------------------- The Company includes all shipping and handling costs in cost of sales. Stock Based Compensation - ------------------------ The Company accounts for non-cash issuances of stock and warrants under the fair-value method in accordance with SFAS No. 123, "Accounting for Stock-Based Compensation." Compensation cost is recognized over the service period. Reclassification - ---------------- Certain amounts from prior periods have been reclassified to conform to the current period presentation. This reclassification has resulted in no changes to the Company's accumulated deficit or net losses presented. F-11 AQUA VIE BEVERAGE CORPORATION NOTES TO THE FINANCIAL STATEMENTS July 31, 2002 DRAFT NOTE 3 - NET OPERATING LOSS CARRYFORWARD The Company acquired, as part of the assets purchased in the bankruptcy liquidation sale, the predecessor company's net operating loss carryforward (NOL) in the approximate amount of $15,000,000. A valuation allowance has been established so that no value is reflected at the balance sheet dates for any deferred tax benefit. The value, if any, of the NOL will depend upon a number of unknowns, including attaining profitable operations and other tax law issues related to the acquisition of the NOL from the Company's predecessor. These issues include the change in ownership limitations and any adjustments from the relief of debts from prior operations. The aggregate net operating loss carryforwards began to expire during the year ended July 31, 2001. NOTE 4 - RELATED PARTY TRANSACTIONS Advances from Officer - --------------------- At July 31, 2002 and 2001, the Company owed $95,121 and $128,520, respectively, to its CEO. These amounts are payable on demand and carry no interest. During the year ended July 31, 2001, the Company's CEO forgave $176,440 of the previously accumulated obligation. This amount was recorded in the financial statements as a capital contribution. The Company's chief executive officer has the majority of the Company's common stock voting rights. Forgiveness of Accrued Payroll - ------------------------------ Capital contributions for the year ended July 31, 2001 were $499,968 of forgiven accrued compensation and $120,000 of forgiven current period compensation. For the year ended July 31, 2002, $60,000 of compensation was forgiven as a capital contribution. Issuance of Series G Preferred Shares - ------------------------------------- In June 2002, the Company issued to its chief executive officer 10,000 shares of a newly created class of preferred stock in a transaction valued at $280,000. The shares were issued as consideration for the CEO's waiver of prior year loans made and earned compensation forgiven and for the CEO's agreeing not to withdraw his waiver. The features of the new stock, Series G preferred shares, are detailed in Note 7. F-12 AQUA VIE BEVERAGE CORPORATION NOTES TO THE FINANCIAL STATEMENTS July 31, 2002 DRAFT NOTE 5 - STOCK WARRANTS At July 31, 2002 and 2001, there were warrants outstanding to purchase 250,000 shares of the Company's common. During the fiscal year ended July 31, 2001, warrants to purchase 172,800 shares of the Company's common stock expired unused. At July 31, 2001 and 2002, the Company's outstanding warrants consisted of the following: Common Common Date Expiration Price Number of Shares per Shares Issued Date per Share Warrants Warrant Issuable - ------- ---------- --------- --------- ---------- -------- 8/31/00 8/31/04 $1.00 1 250,000 250,000 NOTE 6 - COMMON STOCK The Company is authorized to issue a total of 5,000,000,000 shares of $0.001 par value common stock. During the year ended July 31, 2002, the Company issued 5,300,000 shares of its common stock in exchange for notes payable valued at $276,027, 15,393,333 shares of its common stock for services valued at $522,383, 6,250,000 shares of its common stock for cash of $253,895 and 240,000 shares of its common stock valued at $1,200 for the settlement of a dispute. The shares issued for services were valued at their fair market values on the dates of issuance. Other issuances resulted from the conversion of 376 shares of preferred Series A stock, 45 shares of preferred Series B stock, 11,112 shares of preferred Series D stock and 600 shares of preferred Series E stock to 1,601,611, 191,236, 18,519,864 and 1,000,000 shares, respectively, of the Company's common stock. During the year ended July 31, 2001, the Company issued 850,000 shares of its common stock in exchange for a convertible note payable valued at $340,850 and 5,335,000 shares of its common stock for services valued at $646,118. The shares were valued at their fair market value on the date of issuance. Other issuances resulted from the conversion of 1,368 shares of preferred Series A stock, 4,608 shares of preferred Series B stock and 200 shares of preferred Series C stock to 4,489,123, 16,567,642 and 200,000 shares, respectively, of the Company's common stock. NOTE 7 - PREFERRED STOCK The Company is authorized to issue a total of 5,000,000 shares of preferred stock, par value at $0.001. At July 31, 2002, the Company had seven classes of preferred stock outstanding with an aggregate of 465,000 shares authorized. The Company has been authorized to issue 200,000 shares of $0.001 par value Series A preferred stock, 200,000 shares of $0.001 par value Series B preferred stock, 10,000 shares of $0.001 par value Series C preferred stock, 20,000 shares of $0.001 par value Series D preferred stock, 5,000 shares of $0.001 par value Series E preferred stock, 5,000 shares of $0.001 par value Series F preferred stock and 25,000 shares of $0.001 par value Series G preferred stock. The board of directors of the Company has the authority to issue shares of preferred stock from time to time in one or more classes or series, which may have such voting power, full or limited as fixed by the board of directors. The board of directors may also determine the terms of any such series or class, including dividend rights, dividend rates, conversion, exchange, voting rights and terms of redemption, the redemption price and the liquidation preference of such class or series. F-13 AQUA VIE BEVERAGE CORPORATION NOTES TO THE FINANCIAL STATEMENTS July 31, 2002 DRAFT NOTE 7 - PREFERRED STOCK (continued) The number of shares outstanding of preferred stock, Series A, B, C, D, E, F and G and amounts were as follows: July 31, 2002 ----------------------------------------- Number of Shares Amount ------------------------ ------------ Series A 813 $ 1 Series B -- -- Series C -- -- Series D 888 1 Series E -- -- Series F 1,240 1 Series G 10,000 10 ------------------------ ------------ Total 12,941 $ 13 ======================== ============ July 31, 2001 ----------------------------------------- Number of Shares Amount ------------------------ ------------ Series A 1,189 $ 1 Series B 45 -- Series C -- -- Series D 12,000 12 Series E 600 1 Series F 1,240 1 Series G -- -- ------------------------ ------------ Total 15,074 $ 15 ======================== ============ General Terms All Series A, B, C, D, E, F and G preferred stock shares contain standard terms relative to adjustment for stock splits and combinations, reorganizations, mergers, and consolidations or sales of assets, registration of stock issued upon conversion, and registration rights. For dividend, liquidation, mergers and consolidations, the respective rights of each series are different. Series A preferred stock is limited to $300 per share in non-cumulative preferential dividends before common stock. Each Series A preferred share has liquidation rights and merger or consolidation rights before common stock. Series B preferred stock is limited to $6 per share in non-cumulative preferential dividends before common stock. Each Series B preferred share has liquidation rights and merger or consolidation rights before common stock. Series C preferred stock is limited to $0.25 per share in non-cumulative preferential dividends before common stock. Each Series C preferred share has liquidation rights and merger or consolidation rights before common stock. Series D preferred stock is limited to $100 per share in non-cumulative preferential dividends before common stock. Each Series D preferred share has liquidation rights and merger or consolidation rights before common stock. Series E preferred stock is limited to $100 per share in non-cumulative preferential dividends before common stock. Each Series E preferred share has liquidation rights and merger or consolidation rights before common stock. Series F preferred stock is limited to $100 per share in non-cumulative preferential dividends before common stock. Each Series F preferred share has liquidation rights and merger or consolidation rights before common stock. Series G preferred stock is limited to F-14 AQUA VIE BEVERAGE CORPORATION NOTES TO THE FINANCIAL STATEMENTS July 31, 2002 DRAFT NOTE 7 - PREFERRED STOCK (continued) General Terms (continued) $80 per share in non-cumulative preferential dividends before common stock. Each Series G preferred share has liquidation rights and merger or consolidation rights before common stock. As of the date of these financial statements, no dividends have been declared due to the Company's accumulated deficit. Voting Rights All Series A, B, C, D, E, and F preferred shares have the right to vote based on their conversion rights to common shares. Series D preferred shares have the right to vote based on five and a half times their conversion rights to common shares. Series G preferred shares have the right to vote based on four times their conversion rights to common shares. Conversion to Common Shares Preferred stock is convertible to shares of common stock and common stock equivalent voting rights as of July 31, 2002 and 2001 as follows.
July 31, 2002 Voting Right Preferred Preferred Shares Conversion Common Shares Ratio of Equivalent Outstanding Ratio Issuable on Conversion Preferred Voting Rights ----------------- ----------- ---------------------- ------------ ------------- A 813 1:4,259 3,462,567 4,259 3,462,567 D 888 1:l,667 1,480,296 9,167 8,140,296 F 1,240 1:2,000 2,480,000 2,000 2,480,000 G 10,000 1:8,000 80,000,000 32,000 320,000,000 ---------------------- ------------- 87,422,863 334,082,863 ---------------------- -------------
July 31, 2001 Voting Right Preferred Preferred Shares Conversion Common Shares Ratio of Equivalent Outstanding Ratio Issuable on Conversion Preferred Voting Rights ----------------- ----------- ---------------------- ------------ ------------- A 1,189 1:3,721 4,424,269 3,721 4,424,269 B 45 1:3,721 167,445 6,000 270,000 D 12,000 1:1,667 20,000,000 9,167 110,004,000 E 600 1:1,667 1,000,000 1,667 1,000,000 F 1,240 1:2,000 2,480,000 2,000 2,480,000 ---------------------- ------------- 28,071,714 118,178,269 ---------------------- -------------
The Series A and B preferred provide that each share is entitled to an additional conversion share to common stock based on a formula that reflects increased market value of the common stock when the common shares have a market price in excess of $2 but not greater than $12 per share. F-15 AQUA VIE BEVERAGE CORPORATION NOTES TO THE FINANCIAL STATEMENTS July 31, 2002 DRAFT NOTE 7 - PREFERRED STOCK (continued) Conversion to Common Shares (continued) Preferred Series A, B, and C stock have a basic conversion rate of 1,000 shares of common stock for every share of preferred stock. The conversion ratio to common for Series A and B preferred stock is adjusted upwards depending on any future issue of common shares at below $1.65 per share. The conversion rates for Series A and B preferred stock were 1:4,259 and 1:3,721 preferred to common as of July 31, 2002 and 2001, respectively. Preferred Series D and E have a basic conversion rate of 1,667 shares of common stock for every share of preferred stock. Preferred Series F have a basic conversion rate of 2,000 shares of common stock for every share of preferred stock. Preferred Series G have a basic conversion rate of 8,000 shares of common stock for every share of preferred stock. F-16 AQUA VIE BEVERAGE CORPORATION NOTES TO THE FINANCIAL STATEMENTS July 31, 2002 DRAFT NOTE 8 - NOTES PAYABLE Current notes payable at July 31, 2002 and 2001 consisted of the following:
Creditor and Conditions 2002 2001 -------------------------------- Note payable to GMAC, interest at 13.99%, secured by 2000 Plymouth Voyager, payable in monthly installments of $452.07 through April 28, 2006 $ 9,130 $ 17,767 Bruce Butcher, unsecured, interest at 8%, convertible to one share of common stock per $0.80 of debt, due on September 1, 2001 75,000 75,000 Joe Wozniak, unsecured, interest at 8%, convertible to one share of common stock per $0.80 of debt, due on demand. See Note 11. 80,000 80,000 Keely Smith, secured by product inventory of subsidiary, interest at 24%, due on September 25, 1998. Delinquent 60,000 60,000 Roy Schneiderman, unsecured, interest at 8%, due on March 15, 2000. -- 237,000 Total notes payable 224,130 469,767 Less current portion 218,479 455,135 Net long-term debt $ 5,651 $ 14,632
NOTE 9 - COMMITMENTS AND CONTINGENCIES Officer's Salary The Company has a compensation agreement to pay its CEO a salary of $20,000 per month. During the years ended July 31, 2002 and 2001, the Company's CEO forgave $60,000 and $499,968 of accrued compensation, respectively, which were recorded as capital contributions. See Note 4. F-17 AQUA VIE BEVERAGE CORPORATION NOTES TO THE FINANCIAL STATEMENTS July 31, 2002 DRAFT NOTE 9 - COMMITMENTS AND CONTINGENCIES (continued) Office Lease - ------------ The Company maintains its administrative offices in Ketchum, Idaho under a lease which expires in November 2002 and is personally guaranteed by the Company's CEO. Lease payments for the years ended July 31, 2002 and 2001 totaled $70,903 and $96,880 respectively. The Company plans to renew the lease for one year on a reduced level in the amount of $3,906 per month. Equipment Leases - ---------------- The Company leases two autos with monthly lease payments, which total $1,130. The leases on the automobiles are for five years and are set to expire in May 2003. Distribution Agreements - ----------------------- The Company has several agreements with distributors for the selling of product with no ongoing commitment on the part of either party. Merchant Service Agreement - -------------------------- The Company has an ongoing month-to-month merchant service agreement with Yahoo! Store for internet sales of its products. The agreement calls for a hosting fee in the amount of $50 per month, a monthly insertion fee in the amount of $0.10 for every product available from the Merchant's Store, a monthly transaction fee equal to 0.5% of total revenue and a monthly revenue share fee equal to 3.5% of network revenue. At July 31, 2002, there were no amounts owed under this agreement. Litigation - ---------- Certain vendors of the Company are pursuing legal action for payment of overdue amounts. The Company is working to resolve these issues. In management's opinion, all reasonable amounts relating to these past due and disputed liabilities have been accrued in the accompanying financial statements. F-18 AQUA VIE BEVERAGE CORPORATION NOTES TO THE FINANCIAL STATEMENTS July 31, 2002 DRAFT NOTE 10 - CONCENTRATIONS During the year ended July 31, 2002, 63% of the Company's revenues were derived from sales to one customer, a national supermarket chain. NOTE 11 - SUBSEQUENT EVENTS Stock Symbol Change The symbol changed from AVBC to AQVB on September 3, 2002. Reverse Stock Split On September 3, 2002, the Company's common stock reverse split 1:20. F-19 19 NOTE 11 - SUBSEQUENT EVENTS (continued) Conversion of Note Payable In September 2002, an $80,000 note payable together with accrued interest in the amount of $16,000 was converted to 1,920,000 shares of common stock in the Company. See Note 8. Common Stock Issuance A disputed liability was settled in September 2002 by the Company's issuance of 150,000 shares of common stock to a vendor. The fair value of this issuance has been estimated at $36,000, and is accrued in the accompanying financial statements under settlements payable. 20 ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K No reports on Form 8-K were filed since the third quarter. Aqua Vie Beverage Corporation FORM 10KSB Exhibit List 2.1 Auditor's letter April 10, 2001 4.1 Designation Series D November 15, 2000 4.2 Designation Series E November 15, 2000 4.3 Designation Series F July 27, 2001 SIGNATURES In accordance with Section13 or 15(d) of the Exchange Act, the registrant causes this report to be signed on its behalf by the undersigned, thereunto duly authorized. Aqua Vie Beverage Corp. (Registrant) Date 11-13-01 By /s/ Thomas J. Gillespie -------- -------------------------- Thomas J. Gillespie, CEO and President Signature Title Date /s/ Thomas J. Gillespie 11-13-01 - ----------------------- ------------------------ -------- Thomas J. Gillespie CEO, President, Director 21 CERTIFICATIONS I, Thomas Gillespie certify that: 1. I have reviewed this annual report on Form 10-KSB of Aqua Vie Beverage Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and I have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. I have indicated in this report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 19, 2002 22 EX-99 3 ex99.txt CERT-GILLESPIE EXHIBIT 99 CERTIFICATION OF CHIEF FINANCIAL OFFICER and CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Report of Aqua Vie Beverage Corporation (the "Company") on Form 10-KSB for the year ended July 31, 2002, as filed with the Securities and Exchange Commission on the date hereof (the "Periodic Report"), I, Thomas Gillespie>, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: 1. the Periodic Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. the information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Dated: November 19, 2002 -----END PRIVACY-ENHANCED MESSAGE-----