-----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, Q2LR60ldAapXzL8UYB+F/n9UWAXSKbUv/CYAdBNYeXvQ2+XzvzpRd2gHmacVVeUo VKafZkPNER1Hfoxi/K7wGw== 0000931731-03-000214.txt : 20030627 0000931731-03-000214.hdr.sgml : 20030627 20030627172819 ACCESSION NUMBER: 0000931731-03-000214 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20030430 FILED AS OF DATE: 20030627 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: 03762279 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-10qsb043003.txt AQVB-10QSB 043003 SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10 QSB ------------- (Mark One) [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended April 30, 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 April 30, 2003 - ------------------------------ ------------------------------- Common Stock, Par value $0.001 14,902,923 1 AQUA VIE BEVERAGE CORPORATION BALANCE SHEETS (Unaudited)
April 30 2003 July 31, (Unaudited) 2002 ------------ ------------ ASSETS CURRENT ASSETS Cash $ 365,676 $ 2,179 Accounts receivable 19,688 6,471 Inventory 244,457 120,006 Prepaid and other assets 20,022 6,737 ----------- ----------- Total Current Assets 649,843 135,393 ----------- ----------- PROPERTY AND EQUIPMENT Equipment 207,782 201,608 Less accumulated depreciation (190,316) (150,222) ----------- ----------- Total Property and Equipment 17,466 51,386 ----------- ----------- OTHER ASSETS Intangibles 281,164 281,164 Less accumulated amortization (165,881) (105,433) ----------- ----------- Total Other Assets 115,283 175,731 ----------- ----------- TOTAL ASSETS $ 782,592 $ 362,510 =========== =========== LIABILITIES AND STOCKHOLDERS' DEFICIT CURRENT LIABILITIES Accounts payable $ 148,512 $ 320,030 Accounts payable - related party 91,553 54,292 Bank overdraft -- 16,388 Settlements payable 36,000 36,000 Notes payable - current 163,851 218,422 Accrued expenses 67,276 87,367 Accrued compensation, related party 184,225 180,000 Loan from related party 91,423 156,325 ----------- ----------- Total Current Liabilities 782,840 1,068,824 ----------- ----------- LONG-TERM DEBT Notes payable - net of current portion 9,123 10,928 ----------- ----------- COMMITMENTS AND CONTINGENCIES -- -- ----------- ----------- STOCKHOLDERS' DEFICIT Preferred stock, Series A, B, C, D, E, F, G, H, I, J and K $0.001 par value; 5,000,000 shares authorized, 12,214 and 12,941 shares issued and outstanding, respectively 12 13 Common stock, $0.001 par value; 120,000,000 shares authorized, 14,902,923 and 5,337,551 shares issued and outstanding, respectively 14,903 5,337 Additional paid-in capital 10,329,355 7,008,584 Subscriptions receivable (388,309) -- Accumulated deficit (9,965,332) (7,731,176) ------------ ------------ Total Stockholders' Deficit (9,371) (717,242) ------------ ------------ TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 782,592 $ 362,510 ============ ============
The accompanying notes are an integral part of these financial statements. 2
Three Months Ended Nine Months Ended April 30, April 30, ---------------------------- ---------------------------- 2003 2002 2003 2002 ------------ ------------ ------------ ------------ NET REVENUES $ 30,421 $ 6,643 $ 72,817 $ 129,565 COST OF GOODS SOLD 11,077 11,301 51,742 183,943 ------------ ------------ ------------ ------------ GROSS PROFIT (LOSS) 19,344 (4,658) 21,075 (54,378) ------------ ------------ ------------ ------------ GENERAL AND ADMINISTRATIVE EXPENSES Promotion and advertising 912,699 9,444 1,492,367 86,732 Legal and accounting 70,582 25,145 175,239 84,642 Depreciation and amortization 30,091 38,156 100,541 112,377 Officer's compensation 60,000 60,000 180,000 180,000 Consulting 51,824 -- 75,806 8,800 Other general and administrative expenses 144,188 57,906 317,212 186,402 ------------ ------------ ------------ ------------ Total Expenses 1,269,384 190,651 2,341,165 658,953 ------------ ------------ ------------ ------------ LOSS FROM OPERATIONS (1,250,040) (195,309) (2,320,090) (713,331) OTHER INCOME (EXPENSES) Forgivements of related party payable 168,974 -- 168,974 -- Interest expense (4,640) (8,193) (83,040) (28,730) ------------ ------------ ------------ ------------ 164,334 85,934 LOSS BEFORE TAXES (1,085,706) (203,502) (2,234,156) (742,061) INCOME TAXES -- -- -- -- ------------ ------------ ------------ ------------ NET LOSS $ (1,085,706) $ (203,502) $ (2,234,156) $ (742,061) ============ ============ ============ ============ NET LOSS PER COMMON SHARE BASIC AND DILUTED $ (0.09) $ (0.05) $ (0.25) $ (0.22) ============ ============ ============ ============ WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING, BASIC AND DILUTED 12,341,579 3,801,553 8,825,428 3,421,437 ============ ============ ============ ============
See notes to interim financial statements. 3
AQUA VIE BEVERAGE CORPORATION STATEMENT OF STOCKHOLDERS' DEFICIT Preferred Series A - K Common Stock ---------------------- ----------------------- Additional Number Number Paid-in Subscriptions Accumulated of Shares Amount of Shares Amount Capital Receivable Deficit Total --------- ----------- ------------ ---------- ------------- ------------- ------------ --------- Balance, July 31, 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 (366) - 30,500 31 (31) - - - Issuance of common stock at $0.05 per share for debt conversion - - 2,267,124 2,268 216,040 - - 218,308 Issuance of common stock at $0.30 per share for settlement - - 54,700 55 25,523 - - 25,578 Issuance of common stock for for fractional shares - - 14 - - - - - Issuance of common stock for services at $0.30 to $0.71 per share - - 164,000 164 76,693 78,857 Issuance of common stock for services and receivable at $0.67 per share - - 543,500 543 362,052 (326,175) - 36,420 Issuance of Series H preferred stock at $480.00 per share for loan settleme 125 - - - 60,000 - - 60,000 Confersion of Series A preferred stock to Series I preferred stock at l:1.5 407 - - - - - - - Conversion of Series F preferred stock to Series I preferred at 10:1.5 (1,116) (1) - - 1 - - - Conversion of Series I preferred stock to common stock at 10:1 (398) - 3,972,876 3,972 (3,972) - - - Issuance of Series J preferred stock for accounts payable - related party and receivables 524 - - - 2,586,998 (62,134) - 2,524,864 Conversion of Series I preferred stock to Series K preferred stock at 1:2 350 - - - - - - - Conversion of Series K preferred stock to common stock at 10:1 (253) - 2,532,658 2,533 (2,533) - - - Net loss for the nine months ended April 30, 2003 (unaudited) - - - - - - (2,234,156) (2,234,156) --------- ----------- ------------ ---------- ------------- ----------- ------------ ------------ Balance, April 30, 2003 (unaudited) 12,214 $ 12 14,902,923 $ 14,903 $ 10,329,355 $ (388,309) $(9,965,332) $ (9,371) ========= =========== ============ ========== ============= =========== ============ ============
See notes to interim financial statements. 4
AQUA VIE BEVERAGE CORPORATION STATEMENT OF CASH FLOWS Nine Months Ended April 30, -------------------------- 2003 2002 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $(2,234,156) $ (742,061) Adjustments to reconcile net loss to net cash used by operating activities: Depreciation and amortization 100,541 112,377 Stock issued for services 113,277 64,610 Stock issued for settlement 25,578 -- Stock issued for loan incentive 60,000 -- Stock issued for interest on debt 32,002 39,027 Services charged to additional paid-in capital -- 60,000 Changes in assets and liabilities: Accounts receivable (13,217) (46,578) Receivable from related party (175,775) -- Inventory (124,451) 36,240 Prepaid expenses (13,285) 1,697 Accounts payable (171,518) (25,912) Accounts payable - related party 1,436,110 -- Accrued expenses (20,091) 108,197 Loans from related parties (64,902) (8,434) Accrued compensation 4,225 -- ----------- ----------- Net cash used by operating activities (869,887) (400,837) ----------- ----------- CASH USED BY INVESTING ACTIVITIES: Purchase of equipment (6,174) -- Purchase of intangibles -- (33,213) ----------- ----------- Net cash used by investing activities (6,174) (33,213) ----------- ----------- CASH PROVIDED BY FINANCING ACTIVITIES: Sale of common stock -- 253,895 Proceeds from notes payable 1,256,865 -- Receipts from stock subscriptions -- 176,977 Net payments of bank overdraft (16,388) -- Net proceeds from bank overdraft -- 2,251 Net payments on long-term debt (919) (2,309) ----------- ----------- Net cash provided by financing activities 1,239,558 430,814 ----------- ----------- INCREASE (DECREASE) IN CASH 363,497 (3,236) BEGINNING BALANCE 2,179 3,608 ----------- ----------- ENDING BALANCE $ 365,676 $ 372 =========== =========== SUPPLEMENTAL CASH FLOW DISCLOSURES: Income taxes paid $ -- $ -- Interest paid $ 4,435 $ 1,968 NON-CASH INVESTING AND FINANCING ACTIVITIES: Common stock issued for services $ 113,277 $ 64,610 Forgiveness of debt and accrued payroll $ -- $ 60,000 Issuance of common stock for debt and interest $ 218,308 $ 276,027 Issuance of common stock for settlements $ 25,578 $ -- Issuance of preferred stock for loan incentive $ 60,000 $ -- Issuance of preferred stock for accounts payable - related party and receivable $ 2,524,864 $ --
See notes to interim financial statements. 5 AQUA VIE BEVERAGE CORPORATION CONDENSED NOTES TO INTERIM FINANCIAL STATEMENTS April 30, 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 nine months ended April 30, 2003 are not necessarily indicative of the results that may be expected for the year ending July 31,2003. Going Concern As shown in the financial statements, the Company incurred a net loss of $2,234,156 for the nine month period ended April 30, 2003 and has an accumulated deficit of $9,965,332. The Company has negative equity, negative working capital and limited sales volume. 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. 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 nine months ended April 30, 2003 by the Company's issuance of 54,700 shares of common stock to the related vendors. The stock was valued at $25,578, which represented the fair market value of the stock on the dates of issuance. No gain or loss was recognized from this transaction. 6 During the nine months ended April 30, 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 nine months ended April 30, 2003, the Company also issued 164,000 shares of common stock for services valued at $76,824; 30,500 shares of common stock for the conversion of 366 shares of the Company's preferred Series D stock; and 3,972,876 shares of common stock for the conversion of 398 shares of the Company's preferred Series I stock; 2,532,658 shares of common stock for the conversion of 253 shares of the Company's preferred Series K stock; and 543,500 shares of common stock for stock subscription receivable valued at $362,595 prior to a reduction for services received of $36,420. NOTE 3 - PREFERRED STOCK During the nine months ended April 30, 2003, the Company converted 366 shares of its Series D preferred stock into 30,500 shares of common stock, 398 shares of its Series I preferred stock into 3,972,876 shares of common stock and 253 shares of its Series K preferred stock into 2,532,658 shares of common stock. In addition, the Company issued 125 shares of Series H preferred stock and 524 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 $2,586,999 and a receivable in the amount of $62,134. (See Note 5.) Shareholders of 813 shares of Series A preferred stock converted to 1,220 shares of Series I preferred stock and shareholders of 1,860 shares of Series F preferred stock converted to 186 shares of Series I preferred stock. Shareholders of 350 shares of Series I preferred stock converted to 700 shares of Series K preferred stock. Other information regarding preferred Series H preferred stock, Series I preferred stock, Series J preferred stock and Series K preferred stock as 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 six classes of preferred stock outstanding with an aggregate of 466,000 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, 1,000 shares of $0.001 par value Series J preferred stock and 1,000 shares of $0.001 par value Series K 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. 7 The number of shares outstanding of preferred stock, Series A, B, C, D, E, F, G, H, I, J and K 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 1,860 1 Series G 10,000 10 ------ ------ Total 12,941 $ 13 ====== ====== April 30, 2003 ----------------------------------------- Number of Shares Amount ---------------- ------------------- Series A -- $ -- Series B -- -- Series C -- -- Series D 522 1 Series E -- -- Series F -- -- Series G 10,000 10 Series H 125 -- Series I 596 1 Series J 524 1 Series K 447 -- ------ ------ Total 12,214 $ 13 ====== ====== General Terms All Series A, B, C, D, E, F, G, H, I, J, and K 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 8 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 $80 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. Series K preferred stock is limited to $100 per share in non-cumulative preferential dividends before common stock. Each Series K 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. Series K preferred shares shall have no voting rights unless required under Delaware law. 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. 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 , J and K 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. Preferred Series K has a conversion cap until September 30, 2004 whereby the person converting the stock cannot hold more then 4.99% of the Company's common stock at any time. 9 NOTE 4 - NOTES PAYABLE Current notes payable at April 30, 2003 and July 31, 2002 consisted of the Following: April 30, 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. $ 12,974 $ 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 ---------- ----------- $ 72,974 $ 229,350 Edwin Hamlin, Sr., secured by product inventory, Interest at 12%, due on February 24, 2003. 100,000 -- ---------- ----------- Total $ 172,974 $ 229,350 Less current portion 163,851 218,422 ---------- ----------- Net long-term debt $ 9,123 $ 10,928 ========== =========== NOTE 5 - RELATED PARTY The Company has a shareholder who acts as a Company representative in certain transactions. During the nine months ended April 30, 2003, this shareholder incurred $1,368,000 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. Accounts payable - related party to this shareholder is stated at $91,553 and $54, 292 at April 30, 2003 and July 31, 2002, respectively. See Note 3. NOTE 5 - RELATED PARTY TRANSACTION (Continued) Effective April 30, 2003, a shareholder offered to forgive $168,974 owed to his firm for legal services performed for Aqua Vie. This amount is recorded as forgiveness of related party payable in other income. 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 a related loan. 10 NOTE 7 - CONCENTRATION OF CREDIT RISK The Company maintains its cash in one commercial account at a major financial institution. Although the financial institution is considered creditworthy and has not experienced any losses on its deposits, at April 30, 2003 the Company's cash balance exceeded Federal Deposit Insurance Corporation (FDIC) limits by $265,676. NOTE 8-COMMITMENTS AND CONTINGENCIES On February 27, 2003, the Company entered into a consulting agreement with a related party whereby the Company will issue common stock in payment of consulting fees and for payment of subcontracting fees or other fees paid by the consultant to others. During the quarter ended April 30, 2003, the Company issued 543,500 shares of its common stock valued at $362,595. Because only a small portion of the consulting services were performed during the quarter, $326,175 has been recorded as subscription receivable at April 30, 2003. This receivable will be reduced as services are performed for the Company. Subsequent to the quarter ended April 30, 2003, the consultant has paid for approximately $275,000 of expenses for the benefit of the Company. NOTE 9-LEGAL PROCEEDINGS The Securities and Exchange Commission ("SEC") temporarily suspended trading in the securities of Aqua Vie from May 2, 2003 through May 15, 2003 because of questions raised regarding the accuracy and completeness of information about Aqua Vie in fax broadcasts and on the Internet. Subsequent to the trading suspension, the SEC commenced a formal investigatory proceeding of the aforementioned. 11 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS INTRODUCTION Beginning calendar 2002 and to the end of the current period, the company continued to develop and refine a new marketing strategy incorporating greater brand and corporate awareness within acquired distribution channels, and directed toward broadening its portfolio of water-beverages and new product introductions within the all-natural retail, and all-other retail food markets. The company's primary operating focus has been the development of its new Hydrator product line and product labels, for planned introduction this summer, additional production capacity, and the company's new corporate website. 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, Randall's, Tom Thumb, Carr's Genuardi's, Shaw's Supermarkets and Wild Harvest. The greatest concentration of retail availability is in the Pacific Northwest, Southwest, and Northeast regions of the United States. During the most recent quarter, the company began marketing and product demonstration programs within these regions, aimed at increasing retail demand and geographic distribution of its all-natural product line. The company continues to make its products available directly to consumers through its website (www.aquavie.com). Sales increased for the quarter ended April 30, 2003 compared to the previous quarter and the year ended April 30, 2002 as shipping of initial products for a nationwide store demonstration program commenced. Current assets were higher at the end of the most recent period, and our current liabilities decreased by about $285,984 from April, 2002. During the quarter, the Company continued 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, we also reduced accounts payable at April 30, 2003 to $148,512 from 320,030 at the beginning of the fiscal year. In addition to its all-natural Hydrators, Aqua Vie has finalized the development of a low calorie line of Hydrators for chain retail markets that do not specialize in all-natural products (the all-other markets), for introduction this summer. The company anticipates introducing the first of its new product lines through new, as well as existing distribution channels. Liquidity and Capital Resources Despite the difficult capital markets, which severely hindered our operations throughout 2000 and 2001, we were able to secure approximately $3,321,000 in additional equity capital during the period July 31, 2002 - April 30, 2003. Additional capital we have received has enabled us to fund current operations, pay for additional production runs, and engage in an aggressive marketing and development program. Our preliminary goal is to achieve sustainable current sales sufficient to support overhead, and as a function of the sales achieved, to seek additional capital thereafter as needed, to support growth. We have not yet secured this capital, but management has been reviewing various alternatives to affect 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 the development of these 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 revenues, driven by higher demand and additional product available for sale, we expect, as a result of our efforts to strengthen our current position, and to be able to present a better balance sheet when seeking support financing. 12 Results of Operations Our assets increased in the current period, primarily due to production of new inventory and equity infusion. Relative to July 31, 2002, total assets increased approximately $420,082 of which approximately $363,000 was in cash, $125,000 was in inventory, and $13,217 was in accounts receivable. These increases were offset by approximately $100,000 of additional accumulated depreciation and amortization. Our current liabilities decreased by approximately $285,900 during the period. We had increased but low sales during the period ended April 30, 2003; however, as a result of the 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 April 30, 2003 was $(9,965,332), compared to $(7,731,176) as of July 31, 2002 and $(6,643,561) as of April 30, 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, we expect advertising and promotional new product introduction costs to be a significant factor in the company's growth, through the remainder of this year and throughout fiscal 2004. ITEM 3. CONTROLS AND PROCEDURES In accordance with Item 307 of Regulation S-B promulgated under the Securities Act of 1933, as amended, and within 90 days of the date of this Quarterly Report on Form 10-QSB, the Chief Executive Officer and Chief Financial Officer of the Company (the "Certifying Officers") have conduct ed evaluations of the Company's disclosure controls and procedures. As defined under Rules 13a-14(c) and 15d-14(c) promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the term "disclosure controls and procedures" means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer's management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. The Certifying Officers have reviewed the Company's disclosure controls and procedures and have concluded that those disclosure controls and procedures are effective in causing information to be recorded, processed, summarized, and reported within the time periods specified in the Commission's rules and forms and communicated to management of the Company to allow timely decisions regarding the Company's public disclosures. In compliance with Section 302 of the Sarbanes-Oxley Act of 2002, (18 U.S.C 1350), each of the Certifying Officers executed an Officer's Certification included in this Quarterly Report on Form 10-QSB. As of the date of this Quarterly Report on Form 10-QSB, there have not been any significant changes in the Company's internal controls or in other factors that could significantly affect these internal controls subsequent to the date of the Certifying Officers' evaluation. PART II - OTHER INFORMATION 13 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. 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) was 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. (b) 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. There was also a new class of preferred shares, "Series K" designated, which does not have voting rights and eliminated the $.30 anti-dilution provision. Please see the financial statements for a complete description of terms and for a description of exchanges for a portion of the Series I shares. Exchanges were without additional consideration and the Company relied upon the Regulation D exemption as to accredited investors. ITEM 3 DEFAULTS ON SENIOR SECURITIES A subsidiary of Aqua Vie, Keely Smith, delinquent, has a credit of 60,000 with an interest rate of 24%. It was due on September 25, 1998. ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS NA ITEM 5 OTHER INFORMATION 5.1. The company's co-packer, Lyons Magnus, has determined that it wished to concentrate on a few larger accounts, and accordingly has notified the Company that it wished to forthwith terminate the co-packing relationship. A bottling run is currently scheduled for August, 2003, and thereafter the Company expects to utilize other co-packers. Discussions are underway with other packers; however, no definite arrangements have been made. As discussed in the last 10-Q, Item 5, a new series K Preferred shares were designated and offered in exchange for a portion of the Series I shares. Please see the Financial Statements and Notes for details. As previously noted in our Report filed for the Quarter ended October 31, 2002, after the end of said period, the Company affected 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 share 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 14 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. In our last report, it had 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. This has been effected, please see the Financial Statements for details. 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 $.40/share, the conversion rate of Series G preferred is adjusted upward accordingly ($.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. ITEM 6. EXHIBITS AND REPORTS 99. Exhibit: (a) Title 18 Certification (b) Designation of Rights of Preferred Series K (c) Designation of Rights of Preferred Series J (d) Employee Benefit Agreement for Valerie Gillespie 15 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, the need to transition to a new bottlerdependence 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. SIGNATURES ---------- AQUA VIE BEVERAGE CORPORATION (Registrant) By: /s/ Thomas Gillespie --------------------------------------- Thomas Gillespie Chief Executive Officer & President Date: June 26, 2003 16 CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002- 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 June 27, 2003 17 EX-4.1 3 ex4no1.txt SERIES J PFD Certificate of Designation of Rights of Series J Preferred Shares Of Aqua Vie Beverage Corporation Pursuant to Section 151 (g) of Title 8 of the General Corporate Law of the State of Delaware and Article V of the Articles of Incorporation, the Directors here by designate: The voting powers, designations, preferences, rights and qualifications, limitations and restrictions of: "Series J Preferred Shares" And there is authorized to be issued 1,000 shares thereof with the following rights, terms and preferences: 1. Dividends. Right to Preferential Dividends. Subject to the rights and preferences of other classes or series of Preferred Shares, the Holders of the then outstanding Series J Preferred Shares {except when there shall have been either a notification of election for conversion by the Holders under Section 5(a), hereunder, or the conditions shall have been fulfilled for a conversion by the Company as provided in Section 5(b) hereunder, whether or not notification thereof has been made by the Company, (unless the Company shall expressly give notice it elects not to require such conversion)} shall be entitled to receive, if, when, and as declared by the Board, out of any funds legally available therefor, a non-cumulative preference of 10% on cash dividends up to $80.00 maximum total accumulated dividends per Series J Preferred Share held thereby. These dividends shall be payable, when and as declared by the Board. Dividends on the Series J Preferred Shares shall be non-cumulative, there shall be no minimum dividends, and no rights shall accrue to the Holders of the Series J Preferred Shares in the event that the Company shall fail to declare or pay dividends on the Series J Preferred Shares, whether or not the earnings of the Company in that previous fiscal year were sufficient to pay such dividends in whole or in part. In the event that the number of outstanding Series J Preferred Shares is adjusted by stock split, reverse split, or other corporate action, the preference stated herein shall be adjusted accordingly. The balance of any such dividends so declared shall be allocated as between Series J Preferred Shares and Common Shares as if said Series J Preferred Shares had been converted to Common Shares based on the Conversion Ratio (as adjusted) provided herein, and as to any other classes or series of Preferred Shares in accordance with the rights and preferences thereof. 2. Liquidation Rights of Series J Preferred Shares. (a) Preference. Subject to the rights and preferences of other classes or series of Preferred Shares in the event of any liquidation, dissolution, or winding-up of the Company, whether voluntary or involuntary, {except when there shall have been either a notification of election for conversion by the Holders under Section 5(a), hereunder, or the conditions shall have been fulfilled for a conversion by the Company as provided in Section 5(b) hereunder, whether or not notification thereof has been made by the Company, (unless the Company shall expressly give notice it elects not to require such conversion)} the Holders of the Series J Preferred Shares then outstanding shall be entitled to be paid out of the assets of the Company available for distribution to its shareholders, whether such assets are capital, surplus, or earnings, before any payment or declaration and setting apart for payment of any amount shall be made in respect of the Common Stock, an amount equal to $80.00 per Series J Preferred Share held thereby plus an amount equal to all declared and unpaid dividends thereon, less 1 accumulated total dividends paid thereto (but not less than zero). If upon any liquidation, dissolution, or winding up of the Company, whether voluntary or involuntary, the assets to be distributed to the Holders of the Series J Preferred Shares shall be insufficient to permit the payment to such shareholders of the full preferential amount aforesaid, then all of the assets of the Company to be distributed shall be distributed ratably to the Holders of the Series J Preferred Shares, subject to any rights or preferences of any other classes or series of Preferred Shares, on the basis of the number of shares of Series J Preferred Shares so held. (b) Payments to Common Stock. After the preferred payment of $80.00 per Series J Preferred Share is made to Holders of the Series J Preferred Shares the Holders of the Series J Preferred Shares shall be entitled to share with Common Shares, based on the adjusted conversion ratio of Preferred Series J Shares to Common Shares as if converted, and as to other Classes or Series of Preferred Shares based on the conversion ratio of said Shares to Common as if converted or as otherwise provided in the rights and designations thereof as may from time to time be made by the Board of Directors, all remaining assets of the Company to be distributed. (c) Effect of Adjustments of Shares. In the event that the number of outstanding Series J Preferred Shares is adjusted by stock split, reverse split, or other corporate action, the preference stated herein shall be adjusted accordingly. 3. Merger, Consolidation. (a) Preference. Subject to the rights and preferences of other classes or series of Preferred Shares in the event of any merger or share exchange of the Company, or a sale or other disposition of all or substantially all of the assets of the Company {except when there shall have been either a notification of election for conversion by the Holders under Section 5(a), hereunder, or the conditions shall have been fulfilled for a conversion by the Company as provided in Section 5(b) hereunder, whether or not notification thereof has been made by the Company, (unless the Company shall expressly give notice it elects not to require such conversion)} the Holders of the Series J Preferred Shares then outstanding shall be entitled to receive, before any payment or declaration and setting apart for payment of any amount shall be made in respect of the Common Stock, for each share of such Series J Preferred Stock so held, in cash or in securities (including, without limitation, debt securities) received from the acquiring corporation, at the closing of any such transaction, an amount equal to $80.00 per Series J Preferred Share, plus an amount equal to all declared and unpaid dividends thereon, less total accumulated dividends paid thereto (but not less than zero). In the event that the number of outstanding Series J Preferred Shares is adjusted by stock split, reverse split, or other corporate action, the preference stated herein shall be adjusted accordingly (b) Remaining Proceeds. Subject to the rights and preferences of other classes or series of Preferred Shares after the payment or distribution to the Holders of the Series J Preferred Shares of the full preferential amount, the Holders of the Series J Preferred Shares, Holders of other Series or Classes of Preferred Shares according to the Rights and Designations thereof and Holders of Common Stock then outstanding shall be entitled to receive ratably, with all Series J Preferred Shares treated as if it had been converted into Common Stock pursuant to Section 5 hereof, all remaining proceeds of the Company to be distributed. 2 (c) Valuation of securities received pursuant to a merger, share exchange, sale of substantially all the assets or similar transaction. In the event that a transaction occurs pursuant to which non-cash assets are received and to which this Section applies, the assets received for the purposes of this Section shall be valued as follows: (I) If the assets received are securities that are listed on NASDAQ or an exchange, the value shall be deemed to be the 3-day high average closing price (or average between bid/ask if OTC) on such exchange or NASDAQ over the 30-day period prior to the closing of the transaction by which the securities are received. (ii) If the assets received are of readily ascertainable market value, then that value shall be used. (iii) If the assets are unlisted securities or other assets that do not have a readily ascertainable value, the Board of Directors in good faith will value said assets. (iv) The fact that assets exist which may require a valuation process as described herein shall not delay closing the transaction by which the assets are being received. (d) Notice. With respect to any transaction, which involves a merger or exchange of shares, or a sale of substantially all the assets not in the ordinary course of business, the Series J shareholders shall receive not less than ten days notice of the transaction and the terms and conditions thereof. 4. Voting Rights. (a) Each Holder of Series J Preferred Shares shall be entitled to vote on all matters including election of the Board of Directors and, except as otherwise expressly provided herein, shall be entitled to a vote equal to them number of votes that equal the number of Common Shares to which said Series J Preferred Shares could be converted at any given time. (b) Unless otherwise required by law, Series J Preferred shareholders and Common shareholders shall vote together on all matters upon which shareholders are permitted to vote and not as separate classes. In those cases where Series J Preferred Shareholders are required by law to vote as a separate class, the vote required by said class for approval of the proposed action shall be a simple majority of the class. (c) Voting rights shall be adjusted in the event of adjustments in the Conversion Ratio, except that increases or reductions that apply equally to Series J Preferred Shares and Common Shares shall not cause an adjustment to be made. 5. Conversion. The Company and the Holders of Series J Preferred Shares shall have the following conversion rights: (a) Right to Convert. Each share of Series J Preferred Shares shall be convertible, if there shall be sufficient Common Shares authorized and issuable therefore at the option of the Holder thereof, into fully paid and non assessable shares of Common Stock at the Conversion Rate set forth In Section 5(c) hereunder (as adjusted). In the event that Series J Preferred Shares subject thereto shall have been transferred, the time period for conversion shall be measured from the date of issuance to the initial Holder thereof. This right to convert shall be subject to the following terms and conditions: 3 (i) The registered Holder (or his or her successors by transfer, action of law or otherwise) (collectively, the "Holder") shall be immediately eligible to exchange his or her preferred shares, in whole or part, immediately or successively in common shares of the Company subject to any limitations contained in this subsection (a); (ii) Until December 31, 2003, the Holder may convert only to such Common Shares, when added to any other Common Shares directly or beneficially held by said person, such that said person would, in the aggregate directly or beneficially hold at any point of time not more than 4.99% of the Common stock of the Company, and is thus subject to a "Conversion Cap". "Beneficial Ownership" for the purpose of this subsection shall be interpreted to be those Common Shares that may be acquired in any manner by a Holder because of rights under these Series J Preferred Shares or any other rights or shares held thereby from time to time at any particular time, in exchange therefore with 60 days by the terms of any right therefore, and as more particularly defined by Regulation 240.13d-3, issued under the Securities Exchange Act of 1934, it being the intention hereof that this limitation hereof on conversion until December 31, 2003 (and as further qualified by subsection (iii) hereunder) shall be interpreted as a "Conversion Cap" consistent with the case, Levy v. Southbrook International Investments, Ltd. 263 F. 3d. 10 (2001, USCA, 2d Cir); it being the express intention hereof, that the Holder may make successive conversions hereunder of all or part of his or her Series J Preferred Shares to Common Shares so long as at any point of time this Conversion Cap of 4.99% is followed. (iii) The limitation contained in subsection (ii) above shall not apply in such cases as may arise prior to December 31, 2003, where there would be an exchange of securities or similar corporate event such as a sale, merger or consolidation, or an offer to purchase in conjunction with such a transaction or a similar event; after December 31, 2003, in any event the Conversion Cap shall not be applicable unless at least 61 days prior thereto the Holder shall be a writing directed to the Company agree to an extension of said Conversion Cap, in which case the date the conversion Cap shall extend to shall be such agreed date, subject to the exception to the Conversion Cap provided in this subsection. (iv) The right to convert to common shares shall be subject to the conversion rate set forth in subsection (c) hereunder, and any other adjustment provision that may be contained in this Section 5. (b) Automatic Conversion at Election of Company. -------------------------------------------- (i) Each share of Series J Preferred Shares shall automatically at the election of the Company be converted into shares of Common Stock based on the then effective Conversion Rate set forth in Section 5(c) hereunder (as adjusted) if any one of the following shall occur: (A) The Holders of 60% of the Series J Preferred Shares outstanding at a given time (it being the intention not to include successive conversions that may in the aggregate amount to more than 60% of said shares) have given notice of Election to convert as provided herein in Section 6; (B) The Board of Directors of the Company shall have approved a plan of reorganization, exchange, merger or consolidation to which the Company is a party, or an acquisition of the Company; (C) Immediately upon the closing of an underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, with respect to the Common Stock of the Company (including shares registered by selling Series J Preferred shareholders) where the amount of such securities sold is $10,000,000. or more; (D) When the Company shall have a net worth of $10,000,000 or more; (E) After the Common Shares shall have been listed on NASDAQ for a period of not less than three months. 4 (ii) Upon the occurrence of any of the events specified in paragraph 5(b)(i) and the election (if applicable) being so made by the Company, the outstanding shares of Series J Preferred Shares shall be converted automatically without any further action by the Holders of such Series J Preferred Shares and whether or not the certificates representing such Series J Preferred Shares are surrendered to the Company or its transfer agent; provided however, that the Company shall not be obligated to issue certificates evidencing the shares of Common Stock issuable upon the conversion unless the certificates evidencing such Series J Preferred Shares are either delivered to the Company or its transfer agent, or the Holder notifies the Company or its transfer agent that such certificates have been lost, stolen or destroyed and executes an agreement satisfactory to the Company to indemnify the Company from any loss incurred by it in connection with such certificates. The conversion shall be deemed to have occurred immediately prior to the business day on which the Series J certificates are to be surrendered, and the person entitled to receive the Common shares upon such a conversion shall be deemed a Common Shareholder of record as of that date. (c) Conversion Rate, adjustments. Except as provided elsewhere herein for adjustment of conversion based on share price, recapitalization or other factors, the Conversion Rate is 10,000 Common Shares for One Series J Preferred Share. The Conversion Rate shall be subject to adjustment from time to time as provided below; no adjustment shall apply after a Series J Preferred Share has been converted. (d) Mechanics of Conversion. Each Holder of Series J Preferred Shares who desires to convert the same into shares of Common Stock shall surrender the certificate, duly endorsed, at the office of the Company or of any transfer agent for the Series J Preferred Shares or Common Stock, and shall give written notice to the Company at such office that such Holder elects to convert the same and shall state therein the number of shares of Series J Preferred Shares being converted. Thereupon the Company shall promptly issue and deliver to such Holder a certificate or certificates for the number of shares of Common Stock to which such Holder is entitled. Such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of the certificate representing the Series J Preferred Shares to be converted, and the person entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record Holder of such shares of Common Stock on such date. (e) Adjustment for Stock Splits and Combinations. If the Company at any time or from time to time effects a subdivision of the outstanding Common Stock, the Conversion Rate then in effect immediately before that subdivision shall be proportionately increased, and conversely, if the Company at any time or from time to time combines the outstanding shares of Common Stock into a smaller number of shares, the Conversion Rate then in effect immediately before the combination shall be proportionately decreased. Any adjustment under this subsection (e) shall become effective at the close of business on the date the subdivision or combination becomes effective. Subdivisions or combinations of Series J Preferred Shares shall be similarly considered to compute the final adjustment to the Conversion Rate to reflect stock splits and combinations. 5 (f) Adjustments for Reclassification, Exchange and Substitution. In the event that at any time or from time to time, the Common Stock issuable upon the conversion of the Series J Preferred Shares is changed into the same or a different number of shares of any class or classes of stock, whether by recapitalization, reclassification or otherwise (other than a subdivision or combination of shares or stock dividend or a reorganization, merger, exchange of shares, or sale of assets, provided for elsewhere in this Section), then and in any such event each Holder of Series J Preferred Shares shall have the right thereafter to convert such stock into the kind and the maximum amount of stock and other securities and property receivable upon such recapitalization, reclassification or other change, by Holders of shares of Common Stock into which such shares of Series J Preferred Shares could have been converted immediately prior to such recapitalization, reclassification or change, all subject to further adjustment as provided herein. (g) Reorganizations, Mergers, Consolidations or Sales of Assets. If at any time or from time to time there is a capital reorganization of the Common Stock (other than a recapitalization, subdivision, combination, reclassification or exchange of shares provided for elsewhere in this Section) or a merger or exchange of shares of the Company with or into another corporation, or the sale of all or substantially all of the Company's properties and assets to any other person, then as a part of such reorganization, merger, consolidation or sale, provision shall be made so that the Holders of the Series J Preferred Shares shall have the right thereafter to convert such stock into the number of shares of stock or other securities or property to which a Holder of the number of shares of Common Stock deliverable upon conversion would have been entitled on such capital reorganization, merger, consolidation, or sale. In any such case, appropriate adjustment shall be made in the application of the provisions of this Section with respect to the right of the Holders of the Series J Preferred Shares after the reorganization, merger, consolidation or sale to the end that the provisions of this Section (including adjustment of the Conversion Rate then in effect and the number of shares receivable upon conversion of the Series J Preferred Shares) shall be applicable after that event and be as nearly equivalent as may be practicable. (h) Fractional Shares. Series J Preferred Shares may be issued in fractional amounts. (i) Reservation of Stock Issuable Upon Conversion. The Company shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of the shares of the Series J Shares, such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of the Series J Preferred Shares that shall be convertible at that time; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of the Series J Preferred Shares, the Company will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purpose. Should this action require the affirmative vote of the Holders of Series J Preferred Shares, whether as a Class or voted with Common Shares, said Holders of Series J Preferred Shares shall be deemed solely for this purpose to have consented thereto, and shall be deemed to irrevocably constituted management of the Company as their proxy and attorney in fact solely for this purpose to execute such documents as may be required to effect this consent. 6. Effect of Issuance of other Series of Preferred Shares (a) Nothing contained in this designation of rights shall limit the ability of the Company to authorize and issue other Series of Preferred Shares or other classes of Preferred Shares with rights or preferences that are senior 6 to these Series J Preferred Shares or that limit or reduce the rights or preferences of these Series J Preferred Shares. In the event that other Series or Classes of Preferred Shares are authorized and issued, unless otherwise provided in the designation of rights of said other Series or Classes, these Series J Preferred Shares shall vote on all matters based on the conversion rates adjusted into common shares provided herein, and said such other preferred shares shall have such voting rights as is provided in the designation thereof; thus, if there were 100 Series J Preferred Shares Issued, they would have the voting rights of 1,000,000 shares of Common Stock (unless adjusted as provided in Section 5), and if 1000 other preferred shares had voting rights of 100,000,000 shares of Common Stock, and there were 300,000,000 shares of Common Stock issued and outstanding, then in all votes for the Board of Directors, or any other matters in which shareholders may vote, all Common Shareholders, and all Preferred Shareholders shall vote together, and Preferred Shares would have the weight based on their conversion into common. There shall be no class votes of these Series J Preferred Shares unless said vote is non-waivable and is required by law. (b) Unless otherwise provided in the designation of rights and preferences of other preferred shares, any preferences of these Series J Preferred Shares shall be ratable with other series or classes of Preferred Shares that may have been or be hereafter designated. Dated this 27th day of June, 2003 By:/s/ Thomas Gillespie ------------------------------- Thomas Gillespie, President 7 EX-4.2 4 ex4no2.txt SERIES K PFD Certificate of Designation of Rights of Series K Preferred Shares Of Aqua Vie Beverage Corporation Pursuant to Section 151(g) of Title 8 of the General Corporate Law of the State of Delaware and Article V of the Articles of Incorporation, the Directors here by designate: The voting powers, designations, preferences, rights and qualifications, limitations and restrictions of: "Series K Preferred Shares" And there is authorized to be issued 1,000 shares thereof with the following rights, terms and preferences: 1. Dividends. Right to the Preferential Dividends. Subject to the rights and preferences of other classes or series of Preferred Shares, the Holders of the then outstanding Series K Preferred Shares {except when there shall have been either a notification of election for conversion by the Holders under Section 5(a), hereunder, or the conditions shall have been fulfilled for a conversion by the Company as provided in Section 5(b) hereunder, whether or not notification thereof has been made by the Company, (unless the Company shall expressively give notice it elects not to require such conversion)} shall be entitled to receive, if, when, and as declared by the Board, out of any funds legally available therefore, a non-cumulative preference of 10% on cash dividends up to available $100.00 maximum total accumulated dividends per Series K Preferred Shares held thereby. These dividends shall be payable, when and as declared by the Board. Dividends on the Series K Preferred Shares shall be non-cumulative, there shall be no minimum dividends, and no rights shall accrue to the Holders of the Series K Preferred Shares in the event that the Company shall fail to declare or pay dividends on the Series K Preferred Shares, whether or not the earnings of the Company in that previous fiscal year were sufficient to pay such dividends in whole or in part. In the event that the number of outstanding Series K Preferred Shares are adjusted by stock split, reverse split, or other corporate action, the preference stated herein shall be adjusted accordingly. The balance of any such dividends so declared shall be allocated as between Series K Preferred Shares and Common Shares as if said Series K Preferred Shares had been converted to Common Shares based on the Conversion Ratio (as adjusted) provided herein, and as to any other classes or series of Preferred Shares in accordance with the rights and preferences thereof. 2. Liquidation Rights of Series K Preferred Shares (a) Preference. Subject to the rights and preferences of other classes or series of Preferred Shares in the event of any liquidation, dissolution, or winding-up of the Company, whether voluntary or involuntary, {except when there shall have been either a notification of election for conversion by the Holders under Section 5(a), hereunder, or the conditions shall have been fulfilled for a conversion by the Company as provided in Section 5(b) hereunder, whether or not notification thereof has been made by the Company, (unless the Company shall expressly give notice it elects not to require such conversion)} the Holders of the Series K Preferred Shares then outstanding shall be entitled to be paid out of the assets of the Company available for distribution to its shareholders, whether such assets are capital, surplus, or earnings, before any payment or declaration and setting apart for payment of any amount shall be made in respect of the Common Stock, an amount equal to $100.00 per Series K Preferred Share held thereby plus an amount equal to all declared and unpaid dividends thereon, less accumulated total dividends paid thereto (but not less than zero). If upon any liquidation, dissolution, or winding up of the Company, whether voluntary or involuntary, the assets to be distributed to the Holders of the Series K Preferred Shares shall be insufficient to permit the payment to such shareholders of the full preferential amount aforesaid, then all of the assets of the Company to be distributed shall be distributed ratably to the Holders of the Series K Preferred Shares, subject to any other classes of series of Preferred Shares, on the basis of the number of shares of Series K Preferred Shares so held. (b) Payment to Common Stock. After the preferred payment of $100.00 per Series K Preferred Share is made to Holders of the Series K Preferred Shares the Holders of the Series K Preferred Shares shall be entitled to share with Common Shares, based on the adjusted conversion ration of Preferred Series K Shares to Common Shares as if converted, and as to other Classes of Series of Preferred Shares based on the conversion ratio of said Shares to Common as if converted or as otherwise provided in the rights and designations thereof as may from time to time be maid by the Board of Directors, all remaining assets of the company to be distributed. (c) Effect of Adjustments of Shares. In the event that the number of outstanding Series K preferred Shares are adjusted by stock split, reverse split, or other corporate action, the preference stated herein shall be adjusted accordingly. 3. Merger, Consolidation (a) Preference. Subject to the rights and preferences of other classes or series of Preferred Shares in the event of any merger or share exchange of the Company, or a sale or other disposition of all or substantially all of the assets of the Company {except when there shall have been either a notification of election for conversion by the Holders under Section 5(a), hereunder, or the conditions shall have been fulfilled for a conversion by the Company as provided in Section 5(b) hereunder, whether or not notification thereof has been made by the Company, (unless the Company shall expressly give notice it elects not to require such conversion)} the Holders of the Series K Preferred Shares then outstanding shall be entitled to receive, before any payment or declaration and setting apart for payment of any amount shall be made in respect of the Common Stock, for each share of such Series K Preferred Stock so held, in cash or in securities (including, without limitation, debt securities) received from the acquiring corporation, at the closing of any such transaction, an amount equal to $100.00 per Series K Preferred Share, plus an amount equal to all declared and unpaid dividends thereon, less total accumulated dividends paid thereto (but not less than zero). In the event that the number of outstanding Series K Preferred Shares is adjusted by stock split, reverse split, or other corporate action, the preference stated herein shall be adjusted accordingly. 2 (b) Remaining Proceeds. Subject to the rights and preferences of other classes or series of Preferred Shares after the payment or distribution to the Holders of the Series K preferred Shares of the full preferential amount, the Holders of the Series K Preferred Shares, Holders of other Series or Classes of preferred Shares according to the Rights and Designations thereof and Holders of Common Stock then outstanding shall be entitled to receive ratable, with all Series K Preferred Shares treated as if it has been converted into Common Stock pursuant to Section 5 hereof, all remaining proceeds of the Company to be distributed. (c) Valuation of securities received pursuant to a merger, share exchange, sale of substantially all the assets or similar transaction. In the event that a transaction occurs pursuant to which non-cash assets are received and to which this Section applies, the assets received for the purposes of this section shall be valued as follows: (i) If the assets received are securities that are listed on NASDAQ or an exchange, the value shall be deemed to be the 3 day high average closing price (or average between bid/ask if OTC) on such exchange or NASDAQ over the 30 day period prior to the closing of the transaction by which the securities are received. (ii) If the assets received are of readily ascertainable market value, then that value shall be used. (iii) If the assets are unlisted securities or other assets that do not have a readily, ascertainable value, the Board or Directors in good faith will value said assets. (iv)The fact that assets exist which may require a valuation process as described herein shall not delay closing the transaction by which the assets are being received. (d) Notice. With respect to any transaction which involves a merger or exchange of shares, or a sale of substantially all the assets not in the ordinary course of business, the Series K shareholders shall receive not less than ten days notice of the transaction and terms and conditions thereof. 4. Voting Rights. Series K Preferred Shares shall have no voting rights unless required under Delaware Law. 5. Conversion The Company and the Holders of Series K Preferred Shares shall have the following conversion rights: (a) Right to Convert. Each share of Series K Preferred Shares shall be convertible, if there shall be sufficient Common Shares authorized and issuable therefore at the option of the Holder thereof, into fully paid and non assessable shares of Common Stock at the Conversion Rate set forth in Section 5(c) hereunder (as adjusted). In the event that Series K Preferred Shares subject thereto shall have been transferred, the time period for conversion shall be measured from the date of issuance to the initial Holder thereof. This right to convert shall be subject to the following terms and conditions: 3 (i) The registered Holder (or his or her successors by transfer, action of law or otherwise) (collectively, the "Holder") shall be immediately eligible to exchange his or her preferred shares, in whole or part, immediately or successively in common shares of the Company at no additional consideration subject to any limitations contained in this subsection (a); (ii) Until September 30, 2004, the Holder may convert only to such Common Shares, when added to any other Common Shares directly or beneficially held by said person, such that said person would, in the aggregate directly or beneficially hold at any point of time not more that 4.99% of the Common stock of the Company, and is thus subject to a "Conversion Cap". "Beneficial Ownership" for the purpose of this manner by a Holder because of rights under these Series K Preferred Shares or any other rights or shares held thereby from time to time at any particular time, in exchange therefore with 60 days by the terms of any right therefore, and as more particularly defined by Regulation 240.13d-3, issued under the Securities Exchange Act of 1934, it being the intention hereof that this limitation hereof on conversion until September 30, 2004 (and as further qualified by subsection (iii) hereunder) shall be interpreted as a "Conversion Cap" consistent with the case, Levy v. Southbrook International Investments, Ltd. 263 F 3d. 10 (2001, USCA, 2d Cir); it being the express intention hereof, that the Holder may make successive conversions hereunder of all or part of his or her Series K Preferred Shares to Common Shares so long as at any point of time this Conversion Cap of 4.99% is followed. (iii) The limitation contained in subsection (ii) above shall not apply in such cases as may arise prior to September 30, 2004, where there would be an exchange of securities or similar corporate event such as a sale, merger or consolidation, or an offer to purchase in conjunction with such a transaction to a similar event; after June 30, 2004, in any event the Conversion Cap shall not be applicable unless at least 61 days prior thereto the Holder shall be a writing directed to the Company agree to an extension of said Conversion Cap, in which case the date the conversion Cap shall extend to shall be such agreed date, subject to the exception to the Conversion Cap provided in this subsection. (iv) The right to convert to common shares shall be subject to the conversion rate set forth in subsection (c) hereunder, and any other adjustment provision that may be contained in this Section 5. (b) Automatic Conversion at Election of Company. (i) Each share of Series K Preferred Shares shall automatically at the election of the Company be converted into shares of Common Stock based on the then effective Conversion Rate set forth in Section 5(c) hereunder (as adjusted) if any one of the following shall occur: (A) The Holders of 60% of the Series K Preferred Shares outstanding at a given time (it being the intention not to include successive conversions that may in the aggregate amount to more than 60% of said shares) have given notice of election to convert as provided herein Section 6; (B) The Board of Directors of the Company shall have approved a plan of reorganization, exchange, merger or consolidation to which the Company is a party, or an acquisition of the Company; (C) Immediately upon the closing of an underwritten public offering pursuant to an effective registration statement under the Securities Act of 19333, as amended, with respect to the Common Stock of the Company (including shares registered by selling Series K Preferred shareholders) where the amount of such securities sold is $10,000,000 or more; (D) When the Company shall have a net worth of $10,000,000 or more; (E) After the Common Shares shall have been listed on NASDAQ for a period of not less than three months. 4 (ii) Upon the occurrence of any of the events specified in paragraph 5(b)(i) and the election (if applicable) being so made by the Company, the outstanding shares of Series K Preferred Shares shall be converted automatically without any further action by the Holders of such Series K Preferred Shares and whether or not the certificates representing such Series K Preferred Shares are surrendered to the Company or its transfer agent; provided however, that the Company shall not be obligated to issue certificates evidencing the shares of Common Stock issuable upon the conversion unless the certificates evidencing such Series K Preferred Shares are either delivered to the Company or its transfer agent, or the Holder n0otifies the Company or its transfer agent that such certificates have been lost, stolen or destroyed and executes an agreement satisfactory to the Company to indemnify the Company from any loss incurred by it in connection with such certificates. The conversion shall be deemed to have occurred immediately prior to the business day on which the Series K certificates are to be surrendered, and the person entitled to receive the Common shares upon such a conversion shall be deemed a Common Shareholder of record as of that date. (c) Conversion Rate, adjustments. Except as provided elsewhere herein for adjustment of conversion based on share price, recapitalization or other factors, the Conversion Rate is 10,000 Common Shares for One Series K Preferred Share. The Conversion Rate shall be subject to adjustment from time to time as provided below; no adjustment shall apply after a Series K Preferred Share has been converted. (d) Mechanics of Conversion. Each Holder of Series K Preferred Shares who desires to convert the same into shares of Common Stock shall surrender the certificate, duly endorsed, at the office of the Company or any transfer agent for the Series K Preferred Shares or Common Stock, and shall give written notice to the Company at such office that such Holder elects to convert the same and shall state therein the number of shares of Series K Preferred Shares being converted. Thereupon the Company shall promptly issue and deliver to such Holder a certificate or certificates for the number of shares of Common Stock to which such Holder is entitled. Such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of the certificate representing the Series K Preferred Shares to be converted, and the person entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record Holder of such shares of Common Stock on such date. (e) Adjustment for Stock Splits and Combinations. If the Company at any time or from time to time effects a subdivision of the outstanding Common Stock, the Conversion Rate then in effect immediately before that subdivision shall be proportionately increased, and conversely, if the Company at any time of from time to time combines the outstanding shares of Common Stock into a smaller number of shares, the Conversion Rate then in effect immediately before the combination shall be proportionately decreased. Any adjustment under this subsection (e) shall become effective at the close of business on the date the subdivision or combination becomes effective. Subdivisions or combinations of Series K Preferred Shares shall be similarly considered to compute the final adjustment to the Conversion Rate to reflect stock splits and combinations. (f) Adjustments for Reclassification, Exchange, and Substitution. In the event that at any time or from time to time, the Common Stock issuable upon the conversion of the Series K Preferred Shares is changed into the same or a different number of shares of any class or classes of stock, whether by recapitalization, reclassification or otherwise (other than a subdivision or combination of shares or stock dividend or a reorganization, merger, exchange or shares, or sale of assets, provided for elsewhere in this Section), then and in any such event each Holder of Series K Preferred Shares shall have the right thereafter to convert such stock into the kind and the maximum amount of stock and other securities and property receivable upon such recapitalization, 5 reclassification or other change, by Holders of shares of Common Stock into which such shares of Series K Preferred Shares could have been converted immediately prior to such recapitalization, reclassification or change, all subject to further adjustment as provided herein. (g) Reorganization, Mergers, Consolidations or Sales of Assets. If at any time or from time to time there is a capital reorganization of the Common Stock (other than a recapitalization, subdivision, combination, reclassification or exchange of shares provided for elsewhere in this Section) or a merger or exchange of shares of the Company with or into another corporation, or the sale of all substantially all of the Company's properties and assets to any other person, then as a part of such reorganization, merger, consolidation or sale, provision shall be made so that the Holders of the Series K Preferred Shares shall have the right thereafter to convert such stock into the number of shares of stock or other securities or property to which a Holder of the number of shares of Common Stock deliverable upon conversion would have been entitled on such capital reorganization, merger, consolidation, or sale. In any such case, appropriate adjustment shall be made in the application of the provisions of this Section with respect to the right of the Holders of the Series K Preferred Shares after the reorganization, merger, consolidation or sale to the end that the provisions of this Section (including adjustment of the Conversion Rate then in effect and the number of shares receivable upon conversion of the Series K Preferred Shares) shall be applicable after that event and be as nearly equivalent as may be practicable. (h) Fractional Shares. Series K Preferred Shares may be issued in fractional amounts. (i) Reservation of Stock Issuable Upon Conversion. The Company shall at all time reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of the shares of the Series K Shares, such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of the Series K Preferred Shares that shall be convertible at that time; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of the Series K Preferred Shares, the Company will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purpose. Should this action require the affirmative vote of the Holders of Series K Preferred Shares, whether as a Class or voted with Common Shares, said Holders of Series K Preferred Shares shall be deemed solely for this purpose to have consented thereto and shall be deemed to irrevocably constituted management of the Company as their proxy and attorney in fact solely for this purpose to execute such documents as may be required to effect this consent. 6. Effect of Issuance of other Series of Preferred Shares (a) Nothing contained in this designation of rights shall limit the ability of the Company to authorize and issue other Series of preferred Shares or other classes of Preferred Shares with rights or preferences that are senior to these Series K Preferred Shares or that limit or reduce the rights or preferences of these Series K Preferred Shares. There shall be no class votes of these Series K Preferred Shares unless said vote is non-waivable and is required by law. 6 (b) Unless otherwise provided in the designation of rights and preferences of other preferred shares, any preferences of these Series K Preferred Shares shall be ratable with other series or classes of Preferred Shares that may have been or be hereafter designated. Dated this ____ day of April, 2003 By: /s/ Thomas Gillespie - ----------------------------------- Thomas Gillespie, President 7 EX-99.1 5 ex99no1.txt CERT - TGILLESPIE EXHIBIT 99.1 ------------ 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-QSB for the quarter ended April 30, 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. Dated: June 27, 2003 EX-99.2 6 ex99no2.txt DESC OF CONTRACT - VG Exhibit 99.2 ------------ Aqua Vie 10-QSB for period ending April 30, 2003 Aqua Vie Beverage Corporation Consulting Agreement entered into as of February 27, 2003 between Aqua Vie Beverage Corporation and Valerie Gillespie, Consultant Aqua Vie entered into a contract with Valerie Gillespie as of February 27, 2003 under the terms of which she was engaged to perform consulting services for the Company. The contract provides that any intellectual property created by her or any person working for her shall become the property of the Company. The contract contains confidentiality provisions, applicable to her and any person to whom she reveals any information. Under the terms of the contract, she is compensated on a per diem basis, plus expenses, and on a percentage of work she subcontracts or has performed by others. The contract provides for payment in S-8 stock. Under the terms of the contract, S-8 stock can be issued only for bona fide consulting services not related to stock promotion or financings. Any advance payments are required, at the request of the Company, to be kept in segregated accounts. -----END PRIVACY-ENHANCED MESSAGE-----