-----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, Ubayungl3fLk6J/6negnTmCKgeNbl+TTdP589xENKjZh5GPrjLsSDO8DwJu0W+UJ eummTEL7P8eZZPR9Waw0nQ== 0000931731-03-000061.txt : 20030318 0000931731-03-000061.hdr.sgml : 20030318 20030317193810 ACCESSION NUMBER: 0000931731-03-000061 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20030131 FILED AS OF DATE: 20030318 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 SEC ACT: 1934 Act SEC FILE NUMBER: 000-24801 FILM NUMBER: 03606857 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 1 aqvb-10qsb013103.txt AQVB 10QSB 013103 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, 2003 [ ] 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 (IRS Employer of incorporation) 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 [X] NO [ ] 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 February 28, 2003 - ------------------------------ ------------------------------- Common Stock, Par value $0.001 11,276,823 1 Item 1. Financial Statements: AQUA VIE BEVERAGE CORPORATION CONDENSED FINANCIAL STATEMENTS AND NOTES FOR THE QUARTER ENDED JANUARY 31, 2003 2
AQUA VIE BEVERAGE CORPORATION BALANCE SHEETS January 31, 2003 July 31, (Unaudited) 2002 ---------------- ----------------- ASSETS Cash $ 11,990 $ 2,179 Accounts receivable 13,858 6,471 Inventory 100,321 120,006 Prepaid and other assets 6,737 6,737 ---------------- ----------------- Total Current Assets 132,906 135,393 ---------------- ----------------- PROPERTY AND EQUIPMENT Equipment 201,608 201,608 Less accumulated depreciation (180,374) (150,222) ---------------- ----------------- Total Property and Equipment 21,234 51,386 ---------------- ----------------- OTHER ASSETS Intangibles 281,164 281,164 Less accumulated amortization (145,732) (105,433) ---------------- ----------------- Total Other Assets 135,432 175,731 ---------------- ----------------- TOTAL ASSETS $ 289,572 $ 362,510 ================ ================= LIABILITIES AND STOCKHOLDERS' DEFICIT CURRENT LIABILITIES Accounts payable $ 325,161 $ 320,030 Accounts payable - related party 74,474 54,292 Bank overdraft 1,198 16,388 Settlements payable 36,000 36,000 Notes payable - current 460,579 218,422 Accrued expenses 66,076 87,367 Accrued compensation, related party 300,000 180,000 Loan from related party 94,786 156,325 ---------------- ----------------- Total Current Liabilities 1,354,274 1,068,824 ---------------- ----------------- LONG-TERM DEBT Notes payable - net of current portion 10,179 10,928 ---------------- ----------------- COMMITMENTS AND CONTINGENCIES -- -- ---------------- ----------------- STOCKHOLDERS' DEFICIT Preferred stock, Series A, B, C, D, E, F, G, H, I and J $0.001 par value, 5,000,000 shares authorized, 11,958 and 12,941 shares issued and outstanding, respectively 12 13 Common stock, $0.001 par value, 5,000,000,000 shares authorized, 9,722,023 and 5,337,551 shares issued and outstanding, respectively 9,722 5,337 Additional paid-in capital 7,815,340 7,008,584 Subscriptions receivable (20,329) - Accumulated deficit (8,879,626) (7,731,176) ---------------- ----------------- Total Stockholders' Deficit (1,074,881) (717,242) ---------------- ----------------- TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 289,572 $ 362,510 ================ =================
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AQUA VIE BEVERAGE CORPORATION STATEMENT OF OPERATIONS Three Months Ended Six Months Ended January 31, January 31, ---------------------------------- ---------------------------------- 2003 2002 2003 2002 ---------------- ---------------- ---------------- ---------------- NET REVENUES $ 15,976 $ 76,064 $ 42,396 $ 122,922 COST OF GOODS SOLD 14,585 90,942 40,665 172,642 ---------------- ---------------- ---------------- ---------------- GROSS PROFIT (LOSS) 1,391 (14,878) 1,731 (49,720) ---------------- ---------------- ---------------- ---------------- GENERAL AND ADMINISTRATIVE EXPENSES Promotion and advertising 454,500 9,132 579,668 77,288 Legal and accounting 65,112 12,900 104,657 59,497 Depreciation and amortization 30,091 33,863 70,450 74,222 Officer's compensation 60,000 - 120,000 60,000 Other general and administrative expenses 121,798 44,726 197,006 197,295 ---------------- ---------------- ---------------- ---------------- Total Expenses 731,501 100,621 1,071,781 468,302 ---------------- ---------------- ---------------- ---------------- LOSS FROM OPERATIONS (730,110) (115,499) (1,070,050) (518,022) OTHER EXPENSES Interest expense (10,596) (9,884) (78,400) (20,537) ---------------- ---------------- ---------------- ---------------- LOSS BEFORE TAXES (740,706) (125,383) (1,148,450) (538,559) INCOME TAXES - - - - ---------------- ---------------- ---------------- ---------------- NET LOSS $ (740,706) $ (125,383) $ (1,148,450) $ (538,559) ================ ================ ================ ================ NET LOSS PER COMMON SHARE BASIC AND DILUTED $ (0$09) (0.$4) (0.16) $ (0.01) ================ ================ ================ ================ WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING, BASIC AND DILUTED 8,303,903 3,265,659 7,110,367 3,225,023 ================ ================ ================ ================
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AQUA VIE BEVERAGE CORPORATION STATEMENT OF STOCKHOLDERS' DEFICIT Preferred Series A - J Common Stock ---------------------- --------------------- Additional Number Number Paid-in Subscriptions Accumulated of Shares Amount of Shares Amount Capital Receivable Deficit Total --------- ----------- ---------- ---------- ------------- ------------ ------------ ----------- Balance, August 1, 2001 15,074 $ 15 2,912,749 $ 2,912 $ 5,617,502 $ (176,977) $ (5,901,501) $ (458,049) Issuance of common stock for cash at $0.81 per share - - 312,500 312 253,583 - - 253,895 Issuance of common stock for services at an average of $0.68 per share - - 769,667 770 521,613 - - 522,383 Issuance of common stock for debt at $1.04 per share - - 265,000 265 275,762 - - 276,027 Issuance of common stock for settlement at $0.10 per share - - 12,000 12 1,188 - - 1,200 Conversion of preferred Series A to common stock (376) - 80,080 80 (80) - - - Conversion of preferred Series B to common stock (45) - 9,562 10 (10) - - - Conversion of preferred Series D to common stock (11,112) (11) 925,993 926 (915) - - - Conversion of preferred Series E to common stock (600) (1) 50,000 50 (49) - - - 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 5,337,551 5,337 7,008,584 - (7,731,176) (717,242) Conversion of preferred Series D to common stock (324 - 27,000 27 (27) - - - Issuance of common stock at $0.05 to $0.35 per share for debt conversion - - 2,267,124 2,268 216,040 - - 218,308 Issuance of common stock at $0.30 per ahare for settlements - - 15,800 16 4,824 - - 4,840 Issuance of common stock for fractional shares - - 14 - - - - - Issuance of common stock for services at $0.30 to $0.36 per share - - 79,000 79 27,913 27,992 - - Issuance of Series H preferred stock at $480.00 per share for loan incentive 125 - - - 60,000 - - 60,000 Conversion of Series A preferred stock to Series I preferred stock at 1:1:5 407 - - - - - - - Conversion of Series F preferred stock to Series I preferred stock at 1(1,116) (1 - - 1 - - - Conversion of Series I preferred stock to common stock (200 - 1,995,534 1,995 (1,995) - - - Issuance of Series J preferred stock for accounts payable - related party and receivables 125 - - - 500,000 (20,329) - 479,671 Net loss for the six months ended January 31, 2003 (unaudited) - - - - - - (1,148,450) 1,148,450) -------- ----------- ----------- ---------- ------------- ------------ ------------ ----------- Balance, January 31, 2003 (unaudited) 11,958 $ 12 9,722,023 $ 9,722 $ 7,815,340 $ (20,329) $ (8,879,626) $1,074,881) ======== =========== =========== ========== ============= ============ ============ ===========
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AQUA VIE BEVERAGE CORPORATION STATEMENTS OF CASH FLOWS (Unaudited) Six Months Ended January 31, -------------------------------- 2003 2002 --------------- --------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (1,148,450) $ (538,559) Adjustments to reconcile net loss to net cash used by operating activities: Depreciation and amortization 70,450 74,222 Stock issued for services 27,992 64,610 Stock issued for settlement 4,840 -- Stock issued for loan incentive 60,000 -- Stock issued for interest on debt 32,002 -- Services charged to additional paid-in capital -- 60,000 Changes in assets and liabilities: Accounts receivable (7,387) (45,570) Inventory 19,685 114,322 Prepaid expenses -- 1,647 Accounts payable 36,437 (84,474) Accounts payable - related party 495,853 -- Accrued expenses (21,291) 78,945 Accrued compensation 120,000 -- --------------- --------------- Net cash used by operating activities (309,869) (223,189) --------------- --------------- CASH USED BY INVESTING ACTIVITIES: Purchase of intangibles -- (33,213) --------------- --------------- Net cash used by investing activities -- (33,213) --------------- --------------- CASH PROVIDED BY FINANCING ACTIVITIES: Sale of common stock -- 253,895 Proceeds from notes payable 396,866 -- Net advances from (payments to) affiliate loan (61,538) 39,718 Bank overdraft (15,190) (35,725) Net payments on long-term debt (458) (4,724) --------------- --------------- Net cash provided by financing activities 319,680 253,164 --------------- --------------- INCREASE (DECREASE) IN CASH 9,811 (3,238) BEGINNING BALANCE 2,179 3,608 --------------- --------------- ENDING BALANCE $ 11,990 $ 370 =============== =============== SUPPLEMENTAL CASH FLOW DISCLOSURES: Income taxes paid $ -- $ -- Interest paid $ 4,000 $ 1,513 NON-CASH INVESTING AND FINANCING ACTIVITIES: Common stock issued for services $ 27,992 $ 64,610 Forgiveness of debt and accrued payroll $ -- $ 60,000 Issuance of common stock for debt and interest $ 218,308 $ -- Issuance of common stock for settlements $ 4,840 $ -- Issuance of preferred stock for loan incentive $ 60,000 $ -- Issuance of preferred stock for accounts payable - related party $ 479,671 $ --
6 AQUA VIE BEVERAGE CORPORATION NOTES TO INTERIM FINANCIAL STATEMENTS January 31, 2003 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 year ended July 31, 2002. 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 six months ended January 31, 2003 are not necessarily indicative of the results that may be expected for the year ending July 31, 2003. NOTE 2 - COMMON STOCK Reverse Stock Split On September 3, 2002, the Company's board of directors authorized a 1:20 reverse stock split of its $0.001 par value common stock. All references in the accompanying financial statements to the number of common shares outstanding and per share amounts have been restated to reflect the reverse stock split. Common Stock Issuances Disputed liabilities were settled during the six months ended January 31, 2003 by the Company's issuance of 15,800 shares of common stock to the related vendors. The stock was valued at $4,840 which represented the fair market value of the stock on the dates of issuance. No gain or loss was recognized from this transaction. 7 NOTE 2 - COMMON STOCK (Continued) Common Stock Issuances (Continued) During the six months ended January 31, 2003, the Company converted debt and accrued interest to 2,267,124 shares of common stock valued at $218,308. The stock was valued at its fair market value on the dates of issuance. No gain or loss was recognized on this transaction. During the six months ended January 31, 2003, the Company also issued 79,000 shares of common stock for services valued at $27,992, 27,000 shares of common stock for the conversion of 324 shares of the Company's preferred Series D stock and 1,995,534 shares of common stock for the conversion of 200 shares of the Company's preferred Series I stock. NOTE 3 - PREFERRED STOCK During the six months ended January 31, 2003, the Company converted 324 shares of its Series D preferred stock into 27,000 shares of common stock and 200 shares of its Series I preferred stock into 1,995,534 shares of common stock. In addition, the Company issued 125 shares of Series H preferred stock and 125 shares of Series J preferred stock. The Series H preferred stock was issued for loan incentive value at $60,000. The Series J stock was issued for payment of accounts payable-related party in the amount of $479,671 and a receivable in the amount of $20,329. Shareholders of 813 shares of Series A preferred stock converted to 1,220 shares of Series I preferred stock and shareholders of 1,240 shares of Series F preferred stock converted to 124 shares of Series I preferred stock. Other information regarding preferred Series H preferred stock, Series I preferred stock and Series J preferred stock follows: The Company is authorized to issue a total of 5,000,000 shares of preferred stock, par value at $0.001. At January 31, 2003, the Company had five 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, 25,000 shares of $0.001 par value Series G preferred stock, 1,000 shares of $0.001 par value Series H preferred stock, 5,000 shares of $0.001 par value Series I preferred stock and 1,000 shares of $0.001 par value Series J 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, 8 NOTE 3 - PREFERRED STOCK (Continued) dividend rates, conversion, exchange, voting rights and terms of redemption, the redemption price and the liquidation preference of such class or series. The number of shares outstanding of preferred stock, Series A, B, C, D, E, F, G, H, I, and J 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 ====== ====== January 31, 2003 ------------------------------------------- Number of Shares Amount -------------------------- -------------- Series A -- $ -- Series B -- -- Series C -- -- Series D 564 1 Series E -- -- Series F -- -- Series G 10,000 10 Series H 125 -- Series I 1,144 1 Series J 125 -- ------ ------ Total 11,958 $ 12 ====== ====== General Terms All Series A, B, C, D, E, F, G, H, I and J 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 9 NOTE 3 - PREFERRED STOCK (Continued) General Terms (Continued) 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 $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. Series H preferred stock is limited to $1.00 per share in non-cumulative preferential dividends before common stock Each Series H preferred share has liquidation rights and merger or consolidation rights before common stock. Series I preferred stock is limited to $80 per share in non-cumulative preferential dividends before common stock. Each Series I preferred share has liquidation rights and merger or consolidation rights before common stock. Series J preferred stock is limited to $500 per share in non-cumulative preferential dividends before common stock. Each series J 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, E, F, G, H, I and J 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 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. 10 NOTE 3 - PREFERRED STOCK (Continued) Conversion to Common Shares (Continued) Preferred Series A, B, and C stock have a basic conversion rate of 50 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 was 1:213 preferred to common as of July 31, 2002. Preferred Series D and E have a basic conversion rate of 83 shares of common stock for every share of preferred stock. Preferred Series F have a basic conversion rate of 100 shares of common stock for every share of preferred stock. Preferred Series G have a basic conversion rate of 400 shares of common stock for every share of preferred stock. Preferred Series H have a basic conversion rate of 5,000 shares of common stock for every share of preferred stock. Preferred Series I and J have a basic conversion rates of 10,000 shares of common stock for every share of preferred stock. Preferred Series I has a conversion cap until December 31, 2003 whereby the person converting the stock cannot hold more then 4.95% of the Company's common stock at any time. Preferred Series J has a conversion cap until December 31, 2003 whereby the person converting the stock cannot hold more then 4.99% of the Company's common stock at any time. NOTE 4 - NOTES PAYABLE Current notes payable at January 31, 2003 and July 31, 2002 consisted of the following:
January 31, July 31, Creditor and Conditions 2003 2002 - ----------------------------------------------------------------------- ----------------- ------------- Note payable to GMAC, interest at 13.99%, secured by 2000 Plymouth Voyager, payable in monthly installments of $452.07 through April 28, 2006. $ 13,892 $ 14,350 Bruce Butcher, unsecured, interest at 8%, convertible to one share of common stock per $0.80 of debt, due on demand. -- 75,000 Joe Wozniak, unsecured, interest at 8%, convertible to one share of common stock per $0.80 of debt, due on demand. -- 80,000 Keely Smith, secured by product inventory of subsidiary, interest at 24%, due on September 25, 1998. Delinquent. 60,000 60,000 ----------------- ------------- Subtotal - Carried Forward $ 73,892 $ 229,350
11 NOTE 4 - NOTES PAYABLE (Continued)
January 31, July 31, Creditor and Conditions 2003 2002 - ------------------------------------------------------------------------ ----------------- ------------ Subtotal - Brought Forward $ 73,892 $ 229,350 Joe Wozniak, secured by product inventory and accounts receivable, interest at 8%, due on June 30, 2003. 296,866 -- Edwin Hamlin, Sr., secured by product inventory, interest at 12%, due on February 24, 2003. 100,000 -- ----------------- ------------ Total $ 470,758 $ 229,350 Less current portion 460,579 218,422 ----------------- ------------ Net long-term debt $ 10,179 $ 10,928 ================= ============
NOTE 5 - RELATED PARTY The Company has a nonaffiliated shareholder who acts as a Company represeentative in certain transactions. During the six months ended January 31, 2003, this shareholder incurred $479,671 in promotional and other administrative expenses on behalf of the Company. This amount was recorded as accounts payable-related party. The accounts payable-related party was then paid through the issuance of Series J Preferred Stock on January 16, 2003. Accounts payable-related party to this shareholder was stated as $70,474 and $54,292 at January 31, 2003 and July 31, 2002 respectively. See note 3. NOTE 6 - 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. A portion of notes payable, $5,220, was reclassified as an affiliate loan. NOTE 7 - SUBSEQUENT EVENT Subsequent to the date of these financial statement, the Company issued an additional 187 shares of Series J preferred stock in payment of debt and expenses valued at $750,000. 12 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS INTRODUCTION Through 2002 and to the end of the current period, the company continued to develop and refine a new strategy incorporating greater brand and corporate awareness within newly acquired distribution channels, and directed toward broadening its portfolio of all-natural, very low/zero calorie water-beverages and new product introductions within the all-natural retail food markets. Development activities during the period were funded by approximately $800,000 in additional private capital funding, and has continued to the filing of this report with an additional $750,000 from private equity capital funding. During the period the company expanded the product and corporate identification programs, which it intends to continue and intensify concurrent with the current production and in conjunction with additional production runs. Aqua Vie products are currently distributed through two major distributors in the natural foods market--Tree of Life/Gourmet Award Foods and United Natural Foods. The products are being featured in all-natural "store within a store" concepts, through various grocery chains including Safeway, Vons, Dominick's, Pavilions, Randalls, Tom Thumb, Carr's Genuardi's, Shaw's Supermarkets and Wild Harvest. Greatest concentration of retail availability is in the Pacific Northwest, Southwest, Northeast and Southeast regions of the United States. During the most recent quarter, the company scheduled and prepaid for multi-regional advertising, marketing and product demonstration programs aimed at increasing retail demand and geographic distribution. The company continues to make product available direct to consumers through its website (www.aquavie.com). Sales were flat for the quarter ended January 31, 2003 compared to the previous quarter and the year ended July 31, 2002; however, a nationwide store demonstration program is scheduled to commence in mid-April 2003. Current assets were lower at the end of the most recent period, and our current liabilities had increased by about $300,000 over the comparable period in 2002. During the quarter, the Company began a program to settle or reduce our payables and other current liabilities aimed at strengthening our balance sheet and improving our credit in anticipation of a need for factoring capital and/or lines of credit to support increased production. In conjunction with these efforts, a current note due on June 30, 2003 in the amount of $296,865 was exchanged for restricted stock in March 2003, and we also recently reduced accounts payable at January 31, 2003 of $395,000 by approximately 25% through conversion into restricted stock. 13 Production Plans and New Product Introductions In addition to its all-natural Hydrators, Aqua Vie has developed PurePlay(TM), a new line of flavored spring water for children, which contains fewer than 15 calories per serving. Production of PurePlay is expected to commence during the latter part of the third fiscal quarter of 2003, with market introduction anticipated during the fourth fiscal quarter of 2003. Additional products in development include an all-natural nonalcoholic wine made from spring water, and a low-calorie or zero-calorie Hydrator. The company anticipates introducing these latter two products through existing distribution channels during its fourth fiscal quarter. Subsequent Events Following the end of the period, the company received approximately $750,000 in additional equity capital, which is being applied to new product development, including a children's beverage line, selected product and corporate identification marketing, and additional inventory production funding. In conjunction with efforts aimed at reducing our payables and other current liabilities, in March 2003, a current note due on June 30, 2003 in the amount of $296,865 was exchanged for restricted stock. Additionally, after the close of the period we reduced ccounts payable at January 31, 2003 of $395,000 by approximately 25% through conversion into restricted stock. The increase in inventory resulting from production runs following the close of the quarter, subsequent sales and reductions we have effected in our current liabilities will be reported in our financial statements for the period ending April 30, 2003. The foregoing discussion of these subsequent events is included here to afford more current information concerning our financial status and business prospects than would otherwise be contained within the report for the quarter ended January 31, 2003. Liquidity and Capital Resources In our Report for the period ending October 31, 2002, we stated that we were seeking approximately $2.2 million in additional capital for our plans for early 2003. Despite the difficult capital markets, which severely hindered our operations throughout 2000 and 2001, we were able to secure approximately $800,000 in additional equity capital during the period July 31, 2002-January 31, 2003. Subsequent to January 31, 2003, we have received approximately $750,000 in additional equity capital. As previously noted, we were able to convert approximately $295,000 in notes payable and $90,000 in accounts payable in restricted stock. The additional capital we have received has enabled us to fund current operations, pay for additional production runs, and engage in an aggressive marketing program. We believe that an additional $2,000,000 in capital over the next six months would be desirable to support additional production runs, marketing and new product development. Our preliminary goal is 14 to achieve sustainable current sales sufficient to support overhead, and to seek additional capital thereafter by factoring or through a line of credit to support growth. We have not yet secured this capital, but management has been reviewing various alternatives to effect these capital objectives. The capital markets remain difficult due to global uncertainties and weak short-term economic outlook. Our success in achieving sustainable production and sales and in the development of compelling new products, together with improvement in our current position and the overall market situation, will determine the extent we will be able to continue acquiring additional capital, and the dilution this may entail. Assuming increased revenue driven by higher demand and additional product available for sale, we expect, as a result of our efforts to strengthen our current position, to be able to present a better balance sheet when seeking receivables or inventory support financing. Results of Operations As we have noted in other Reports, we had planned in early 2001 to engage in a substantial sales program based on the inventory financing agreement we effected with our contract manufacturer/packager in March 2001. The disputes that arose over the manufacturer's performance under that agreement, and the resulting uncertainty in available inventory caused us to "bank" our sales to conserve the inventory we had on hand. Later in that year, we entered into a "pay as you go" arrangement that remains in effect currently. Due to the tight capital markets in the second half of 2001 and thereafter, we severely curtailed operations until additional funding could be secured. We also targeted a different marketing model, the natural foods segment, for which we were eligible due to our all-natural lines. We believed that this market venue would be more receptive and would require less capital for marketing and thereby provide higher profit margins. Our results for the current period and earlier periods reflect static losses and low sales while these new models are being effected. Recently scheduled production runs are the most significant in almost eighteen months. We are in the process of securing sales of this production. Our assets decreased in the current period, primarily due to depreciation and amortization. Relative to the same period in 2002, total assets decreased approximately $200,000, of which approximately $130,000 was in accounts receivable. We have almost no long-term debt. Our current liabilities increased approximately $300,000 during the period, and payables increased slightly; subsequent to the period-end, approximately $280,000 of our notes and $90,000 of our payables was converted to equity. If these conversions are taken into account, our current position as adjusted for January 31 would be about $100,000 less than at the beginning of the period, and slightly less than our current position as of January 31, 2001. 15 We had minimal sales during the period ended January 31, 2003; however, as a result of the sizable capital infusions, we anticipate additional production runs to support increasing sales. Expenses have continued however, and our deficit increased approximately $1.1 million during the period. Our accumulated deficit as of January 31, 2003 was $(8,879,626), compared to $(7,731,176) as of July 31, 2002 and $(5,204,837) as of January 31, 2002. Although we maintained modest payroll costs, we incurred a substantial increase for promotional expenses, our most significant cost item during the quarter. Given the nature of the beverage industry and our place in that industry as a "new" player, we expect promotional costs to continue to be a significant factor in solidifying our corporate identity in the industry and stimulating product sales. 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 has had, and anticipates in the future that it will have, conflicts as regards certain Accounts Payable for services invoiced but not adequately performed. 16 ITEM 2. CHANGE IN SECURITIES There were several exchanges of securities during the period for pre-existing debt that did not entail any new consideration. Please see the financial statements for details. During the period, a new class of shares, "J" Preferred Shares (See item 5) were subscribed to for a consideration of $500,000 for 125 of said shares. The securities were issued in reliance to the exemption provided under Regulation D, Rule 506 for accredited investors. ITEM 3 DEFAULTS ON SENIOR SECURITIES NA ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS None ITEM 5 OTHER INFORMATION 5.1. As previously noted in our Report filed for the Quarter ended October 31, 2002, after the end of said period, the Company effected the filing of a new Series I Preferred Stock. The new Series I was offered in exchange for all Series A and F Shares at a rate of 1.5 Series I shares for each Series A Share, and 1.5 Series I Shares for each 10 Series F Shares. The Series I Shares eliminate the anti-dilution provisions of Series A Shares ( Series A shares anti-dilution provisions caused their conversion rate to increase from 1000/1 to 10,000/1 from inception in 1998 based on the pre-combination conversion rate), and further reduce the preference to $80/Share from $300/Share for Series A, and $100/Share in Series F. The conversion rate is set at 10,000 to one to common; however a conversion cap of 4.95% is established until December 2003 or in the event of a sale or similar corporate event (extendable by agreement), total holdings including beneficial holdings at any one time; and the voting rights of the new Series is only to the extent they may be converted at any time. A provision for a conversion adjustment is provided in the event that the market for the Company's common stock drops below $.30/share for a period immediately prior to a conversion request, with the adjustment eliminated if a later request is received after the $.30 thresh hold is reached. The upward share adjustment is made proportionally to the decrease below $.30/share. It has been proposed to offer in exchange for no additional consideration approximately 350 I Shares for approximately 700 shares of a new class of preferred shares, tentatively "K" preferred, which would eliminate the $.30/adjustment, eliminate all voting rights and lower the preference. Exact terms have not negotiated and are expected to be completed after the filing of this Report. Series G Preferred (issued in May, 2002) has varying conversion rates depending upon market performance and other factors, and voting rights vary accordingly. In addition, in the event that the Company issues either common stock or instruments convertible into common stock in a transaction valued at over $200,000 where the effective price of common stock for the consideration given is less than $.40/share, the conversion rate of Series G preferred is adjusted 17 upward accordingly ($.40/share post-combination was the approximate market price of common underlying the Series G when issued). The recent Series I, J, and K share issuance would trigger this adjustment; however, a valuation has not been placed on these transactions for these purposes as yet by the Board of Directors. No Series G shares have been converted, and there have been no shareholder actions since the consent actions in June, 2002 (Please see the two Information Statements sent to shareholders and filed with the SEC in June 2002 for more information). Series J shares were authorized during the period, but the Designation of Rights and issuance thereof had not occurred by Quarter-end. Please see Note 3 to the financials for a discussion of the terms thereof. 99. Exhibit: Title 18 Certification 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 has undertaken 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 HYDRATOR(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 risks 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, availability of loan funds or other sources of capital, 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. 18 SIGNATURES ---------- AQUA VIE BEVERAGE CORPORATION (Registrant) By: /s/ Thomas Gillespie --------------------------------------- Thomas Gillespie Chief Executive Officer & President Date: March 17, 2003 19 CERTIFICATION I, Thomas Gillespie certify that: 1. I have reviewed this quarterly report on Form 10-QSB 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. Signature /s/ Thomas Gillespie Title Date - --------------------- ------------------------ ------------------ Thomas Gillespie CEO, President, Director March 17, 2003 20 EX-99 3 ex99.txt CERT - TGILLESPIE 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 January 31, 2003, 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. /s/ Thomas Gillespie -------------------------------------- Thomas Gillespie Chief Financial Officer Dated: March 17, 2003 -----END PRIVACY-ENHANCED MESSAGE-----