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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
October 31, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
to
Commission File Number 0-24801
Delaware 82-0506425
(State or other Jurisdiction of incorporation) (IRS Employer Identification No.)
AQUA VIE BEVERAGE CORPORATION
(Exact Name of Registrant as Specified in its Charter)
P.O. Box 6759 333 South Main Street Ketchum, Idaho 83340
(Address of principal executive offices)
208/622-7792
(Registrant's telephone number)
Indicate by check mark whether the registrant (1) filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the last 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
YES [ ] NO [X] As of the quarter ending October 31, 2000 the Registrant
has been subject to the filing requirements of the Securities Act of 1934 for
less than 90 days.
Indicate the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.
Class Outstanding at October 31, 2000
Common Stock, Par value $0.001 32,481,408
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ITEM 1. FINANCIAL STATEMENTS:
AQUA VIE BEVERAGE CORPORATION
BALANCE SHEETS
OCT. 31, 2000 JUL. 31, 2000
-------------- -------------
(UNAUDITED)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 95,900 $ 11,127
Accounts receivable (net of $0 allowance for doubtful accounts) 150,872 25,238
Inventories 97,853 249,790
Prepaid expenses and deposits 23,858 93,476
----------- -----------
TOTAL CURRENT ASSETS 368,483 379,631
Equipment (net of $37,159 and $6,212 accumulated depreciation) 118,342 127,489
Intangibles (net of $21,937 and $12,188 accumulated amortization) 75,563 78,000
----------- -----------
TOTAL ASSETS $ 562,388 $ 585,120
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LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable $ 364,508 $ 154,621
Overdraft payable 115,137 -
Notes payable 994,500 792,000
Accrued expenses 545,785 467,564
Loan from related party 459,210 353,600
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TOTAL CURRENT LIABILITIES 2,479,140 1,767,785
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Long-term debt - 18,362
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TOTAL LIABILITIES 2,479,140 1,786,147
Commitments and Contingencies - -
STOCKHOLDERS' DEFICIT
Preferred stock: $0.001 par value (authorized),
issued and outstanding:
Series A (200,000), outstanding: 2,557 and 2.557 3 3
Series B (200,000), outstanding: 4,653 and 4,653 4 4
Series C (10,000), outstanding: 200 and 200 2 2
Common stock:
$0.001 par value, 120,000,000 shares authorized
Issued and outstanding: 32,481,408 and 30,811,408 32,481 30,811
Additional paid in capital 2,498,908 2,422,234
Deficit accumulated during the development stage (4,448,150) (3,654,081)
----------- -----------
TOTAL STOCKHOLDERS' DEFICIT (1,916,752) (1,201,027)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 562,388 $ 585,120
=========== ===========
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AQUA VIE BEVERAGE CORPORATION
STATEMENTS OF OPERATIONS
THREE MONTHS ENDED
OCT. 31, 2000 OCT. 31, 1999
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(UNAUDITED) (UNAUDITED)
REVENUES $ 609,138 $ 13,124
COST OF SALES $ 402,697 $ -
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GROSS PROFIT $ 206,441 $ 13,124
OPERATING EXPENSES
Promotion and advertising 609,271 64,960
General and administrative 341,854 183,175
Legal and accounting 11,953 126,471
Depreciation and amortization 19,837 8,649
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TOTAL OPERATING EXPENSES 982,915 383,255
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Loss from operations (776,474) (370,131)
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Interest expense 17,595 39,055
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Net loss $ (794,069) $ (409,186)
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Basic and diluted loss per share $ (0.02) $ (0.02)
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Weighted average number of shares outstanding: 31,558,908 23,099,921
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AQUA VIE BEVERAGE CORPORATION
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED
OCTOBER 31,
2000 1999
----------- -----------
(unaudited) (unaudited)
OPERATING ACTIVITIES
Net loss $ (794,069) $ (409,186)
ADJUSTMENTS TO RECONCILE NET LOSS
TO NET CASH USED BY OPERATING ACTIVITY:
Depreciation and amortization 40,696 8,650
Accrued compensation 60,000 60,000
CHANGES IN OPERATING ASSETS AND LIABILITIES:
Advances to shareholder - (57,250)
Accounts receivable (125,634) (89,534)
Accounts payable 209,887 28,084
Overdrafts Payable 115,137 -
Accrued expenses 18,221 6,084
Loan from related party 105,610
Inventories 151,937 (47,085)
Prepaid expenses (69,618) 109,183
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NET CASH USED BY OPERATING ACTIVITIES (287,833) (391,054)
INVESTING ACTIVITIES
Purchases of equipment - -
---------- ----------
NET CASH USED BY INVESTING ACTIVITIES - -
FINANCING ACTIVITIES
Proceeds from sale of stock 188,468 280,028
Proceeds from notes payable 202,500 90,000
Long-term debt (18,362) -
NET CASH PROVIDED BY FINANCING ACTIVITIES 372,606 370,028
Increase (Decrease) in cash 84,773 (21,026)
Cash - Beginning of period 11,127 27,298
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CASH - END OF PERIOD $ 95,900 $ 6,272
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SUPPLEMENTAL CASHFLOW INFORMATION:
Corporate income taxes paid $ - $ -
Interest paid $ 17,595 $ -
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NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
(1) The accompanying financial statements are unaudited. The unaudited financial
statements and notes are presented as permitted by Form 10 QSB. Certain
information and footnote disclosures normally included with financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted, although the Registrant believes that the disclosures are
adequate to make the information presented not misleading. It is suggested that
these condensed financial statements be read in conjunction with the financial
statements and notes thereto included in the Registrant's annual report for the
fiscal year ending October 31, 2000 contained in the FORM 8 K/A filed on
November 15, 2000.
(2) In the opinion of management, the accompanying unaudited financial
statements contain all adjustments, consisting of only a normal and recurring
nature, necessary to present fairly the financial position of the Registrant as
of October 31, 2000 and the results of operations and cash flows for the interim
period presented. Operating results for the three months ended October 31, 2000
are not necessarily indicative of the results to be expected for the full year
ending July 31, 2001.
(3) The Company's ability to commence full and expanding operations for
production and distribution of its product line will depend upon its ability to
identify and raise the capital it will require to achieve the goals and
objectives of its business venture plan.
(4) STOCKHOLDERS' EQUITY
A. Preferred Stock: The Company is authorized to issue 1,000,000 shares of
preferred stock at $0.001 par value with such designations, voting, other rights
and preferences as may be determined from time to time by the Board of Directors
and the Consent of the Shareholders. Currently there are authorized 200,000
shares of Series A Preferred of which 2,557 are outstanding; 200,000 shares of
Series B Preferred of which 4,653 are outstanding and 10,000 Series C Preferred
of which 200 have been issued and are outstanding.
B. Common Stock: The Company is authorized to issue 120,000,000 shares of common
stock of which 32,481,408 were outstanding on October 31, 2000. As of October
31, 2000 the 2,557 shares of Series A Preferred and the 4,653 shares of Series B
Preferred were convertible to common stock at the rate of 1,924.7 common for
each A and B Preferred Share. If converted they represent 13,877,087 common
shares. The Series A and B Preferred are subject to restrictive covenants that
allow for the remainder to become fully convertible as of October 15, 2001.
Under certain circumstances these restrictions can be modified and waived. The
200 Series C Preferred Shares can be converted to 200,000 common shares.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
All references herein to the "Registrant" and to the "Company" refer to
Aqua Vie Beverage Corporation.
CAUTIONARY STATEMENT FOR PURPOSES OF THE SAFE HARBOR PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
Statements in this discussion which are not historical facts may be
considered forward-looking statements within the meaning of Section 21E of the
Securities Exchange Act of 1934, as amended. The words "believe", "expect",
"anticipate", "estimate" and similar expressions identify forward looking
statements. Any forward looking statements involve risks and uncertainties that
could cause actual events or results to differ, perhaps materially, from the
events or results described in forward looking statements. Readers are cautioned
not to place undue reliance on these forward-looking statements, which speak
only as of their dates. The Company undertakes no obligation to publicly update
or revise any forward looking statements, whether as a result of new
information, future events or otherwise. Risks associated with the Company's
forward looking statements include, but are not limited to, risks associated
with the Company's history of losses and uncertain profitability, need for
market acceptance of the HYDRATRORTM product line, the Company's reliance at
this time on a single product line, reliance on the market distribution and
retail system and risks associated with the Company's international operations,
currency fluctuations, the risk of new and different legal and regulatory
requirements, governmental approvals, tariffs and trade barriers, risks
associated with competition and technological and product innovation by
competitors, dependence on proprietary formulas, general economic conditions and
conditions in the beverage industry, reliance on key management, limited
manufacturing production history with respect to the aseptic bottling system,
dependence on key suppliers, future capital needs and uncertainty of additional
financing, potential recalls and product liability, dilution, effects of
outstanding convertible debentures and preferred stock , limited public market,
liquidity, possible volatility of stock price, recently adopted new listing
standards for NASDAQ securities and environmental matters.
The following discussion and analysis should be read in conjunction with the
Financial Statements, related notes and other information included in this
quarterly report on FORM 10QSB.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Aqua Vie Beverage Corporation, a Delaware corporation, was incorporated
on July 30, 2000 1998. For a more detailed description of corporate
structure,
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refer to the Company's Form 10-KSB. Throughout most of its fiscal year
ending July 31, 2000, Aqua Vie was a traditional development stage
company whose early efforts encompassed the development and marketing of
several flavors of bottled water. In the quarter ended October 31, 2000,
the Company had clearly emerged from the development stage and actively
commenced the sale of its products.
At October 31, 2000, the Company's total assets of $562,000 approximated
that of $585,000 at its July 31, 2000 year-end although the composition
of the assets changed during this interim period as most of the year-end
inventories were sold and converted to accounts receivable. While total
current assets at October 31, 2000 of $368,000 remained consistent with
year-end current assets of $380,000, the Company's current liabilities
climbed from $1,768,000 at July 31 to $2,479,000 at October 31 during
this same three month period as the Company funded larger operating
losses with increased short-term debt.
During its first two years of existence (from inception to July 31,
2000), the Company accumulated a deficit of $3,654,000. In the
subsequent three months ended October 31, 2000, the Company's
accumulated deficit grew to $4,448,000 as the Company's marketing and
executive expenses burgeoned, creating a quarterly operating loss of
$776,000.
LIQUIDITY AND CAPITAL RESOURCES
The Company's revenues of $609,000 for the quarter ended October 31,
2000 were a dramatic increase from the $152,000 of revenues in its prior
fiscal year and from the $13,000 of revenues in the corresponding first
quarter (10-31-99) of its prior fiscal year.
Because it has sustained recurring losses from operations, the Company
cannot assure that it will be able to fully carry out its plans as
budgeted without additional operating capital. At October 31, 2000, the
Company had negative working capital of $2,111,000. This amount
represents a further deterioration in liquidity and capital resources
from its negative working capital position of $1,388,000 at July 31,
2000 and represents increased deterioration from the Company's negative
working capital of $663,000 at July 31, 1999.
In the three months ended October 31, 2000, the Company funded a portion
of its operations from the sale of its common stock, which raised
$188,000 in cash. In addition, $288,000 of its quarterly operations were
financed by a combination of increasing trade payables and accrued
expenses, while an additional $202,000 was raised from short-term notes
and another $106,000 from short-term related party loans. This recent
mix of diversified funding sources contrasts with the corresponding
quarter of the prior year when the
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primary source of funds was $280,000 originating with the Company's sale
of its stock.
The Company recently paid off its only long-term debt, which was $18,000
at July 31, 2000, and now stands free of long-term debt at October 31,
2000.
The Company anticipates that its use of cash will be substantial for the
foreseeable future. In particular, management of the Company expects
substantial expenditures in connection with production of inventory for
the planned increase in sales, expansion of the Company's marketing
organization, and to a lesser degree, for quality assurance and
production and distribution management. The Company does not expect to
incur major capital expenditures in the next year. Aqua Vie's management
expects that funding for operating expenditures will be available from
the issuance of equity and/or debt securities.
The availability of sufficient future funds for Aqua Vie will depend to
a significant extent on the market acceptance of the Company's primary
product line. Accordingly, the Company may be required to issue
additional convertible debentures and/or equity securities to finance
such working capital requirements. There can be no assurance whether or
not such financing will be available on satisfactory terms.
RESULTS OF OPERATIONS
Aqua Vie commenced operations in 1998 and has only a limited history of
operations which to date have not been profitable. Its operations are
subject to the risks and competition inherent in the establishment of a
relatively new business enterprise.
Aqua Vie is currently operating at a loss. While the Company's first
quarter revenues of $609,000 were four times as large as the revenues of
the prior fiscal year ($152,000 for FYE 7-31-00), sales to date have not
been sufficient to cover the costs of operations. The Company's ability
to develop increasing revenues and profitable net income is dependent
upon the effectiveness of its marketing efforts in generating sales of
its line of flavored spring water products.
For the three months ended October 31, 2000, the Company's sales
produced gross profit of $206,000, which compares favorably with the
negative gross profit of $80,000 for the prior fiscal year (7-31-00)
when the Company's cost of sales exceeded the related revenues.
Operating expenses were $983,000 for the three months ended October 31,
2000 and were only $383,000 for the same quarterly period of the prior
year. The year-to-year change principally reflects an increase in
marketing
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expenses of $544,000, which is primarily from slotting fees (one time,
non-recurring fees charged by large chain stores for shelf space), and
which directly correlates with an increase in revenues of $596,000.
During this same year-to-year time frame, the increase in operating
expenses to a lesser extent reflects heightened expenditures for general
and administrative expenses which were substantially offset by reduced
expenses for professional fees.
The Company's net loss of $794,000 for the three months ended October
31, 2000 resulted in a net loss per share of $0.02 for the quarter. This
contrasts with a net loss of $409,000 for the three months ended October
31, 1999, which also posted a per share loss of $0.02.
PART II - - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no legal proceedings against the Company and the Company is unaware of
any such meaningful proceedings contemplated against it. The Company anticipates
that in the future it will have conflicts as regards certain Accounts Payable
for services invoiced but not adequately performed and for the use of selected
names for products and product lines in selected market places.
ITEM 2. CHANGES IN SECURITIES
There have not been any in this quarter.
ITEM 3. DEFAULTS ON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
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Pursuant to the Securities Exchange Act of 1934, the registrant has duly
caused this registration report to be signed on its behalf by the undersigned
thereunto duly authorized.
AQUA VIE BEVERAGE CORPORATION
(Registrant)
Date: December 15, 2000 By
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Thomas Gillespie
Chief Executive Officer &
President
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AQUA VIE BEVERAGE CORPORATION
INDEX TO EXHIBITS
Exhibit Description
- ------- -----------
27.1 Financial Data Schedule