SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10 QSB/A
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(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
January 31, 2001
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 0-24801
Delaware 82-0506425
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(State or other Jurisdiction (IRS Employer Identification No.)
of incorporation)
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 January 31, 2001
the Registrant has been subject to the
filing requirements of the Securities Act
of 1934 for less than 90 days.
Indicate the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.
Class Outstanding at January 31, 2001
Common Stock, Par value $0.001 39,229,285
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Item 1. Financial Statements:
Aqua Vie Beverage Corporation
BALANCE SHEET
Jan. 31, 2001 Jul. 31, 2000
(unaudited)
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ASSETS
CURRENT ASSETS
Cash and cash equivalents $ - $ 11,127
Accounts receivable (net of $0 allowance for doubtful accounts) 99,161 25,238
Note receivable 442,938 -
Inventories 100,161 249,790
Prepaid expenses and deposits 24,084 93,476
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Total current assets 666,344 379,631
Equipment (net of $53,311 and $6,212 accumulated depreciation) 148,297 127,489
Intangibles (net of $24,375 and $12,188 accumulated amortization) 73,123 77,998
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Total assets $ 887,764 $ 585,118
=============== ==============
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable $ 399,339 $ 154,621
Overdraft payable 55,688 -
Shareholder loans payable 324,000 -
Notes payable 317,500 792,000
Accrued expenses 51,555 467,564
Loans from related parties 488,854 353,600
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Total current liabilities 1,636,936 1,767,785
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Long-term debt - 18,362
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Total liabilities 1,636,936 1,786,147
Commitments and Contingencies - -
STOCKHOLDERS' DEFICIT
Preferred stock: $0.001 par value 1,000,000 shares authorized,
Issued and outstanding:
Series A (200,000), outstanding: 1,973 and 2,557 2 3
Series B (200,000), outstanding: 3,113 and 4,653 3 4
Series C (10,000), outstanding: 200 and 200 - -
Series D (20,000) outstanding: 0 and 0 - -
Common stock:
$0.001 par value, 120,000,000 shares authorized
Issued and outstanding: 39,229,285 and 30,811,408 39,229 30,811
Additional paid-in capital 4,299,246 2,422,234
Subscriptions receivable (460,377) -
Accumulated Deficit (4,627,275) (3,654,081)
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Total stockholders' deficit (749,172) (1,201,029)
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Total liabilities and stockholders' deficit $ 887,764 $ 585,118
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Aqua Vie Beverage Corporation
STATEMENTS OF OPERATIONS
Three Months Ended Six Months Ended
Jan. 31, 2001 Jan. 31, 2000 Jan. 31, 2001 Jan. 31, 2000
(unaudited) (unaudited) (unaudited) (unaudited)
------------ ------------ ------------ ------------
REVENUES $ 563,133 $ 17,126 $ 725,361 $ 30,250
Cost of Sales 418,986 -- 556,386 --
------------ ------------ ------------ ------------
GROSS PROFIT 144,147 17,126 168,975 30,250
OPERATING EXPENSES
Promotion and Advertising 64,900 65,825 325,455 130,785
General and Administrative 714,539 234,791 1,254,628 544,437
Depreciation and Amortization 18,590 8,650 38,426 17,299
------------ ------------ ------------ ------------
TOTAL OPERATING EXPENSES 798,029 309,266 1,618,509 692,521
------------ ------------ ------------ ------------
Loss from Operations (653,882) (292,140) (1,449,534) (662,271)
Interest Expense 17,433 10,127 35,028 49,182
------------ ------------ ------------ ------------
Net Loss Before Extraordinary Item (671,315) (302,267) (1,484,562) (711,453)
Extraordinary Item:
Forgiveness of Accrued Payroll,
Net of Income Tax 499,968 -- 499,968 --
------------ ------------ ------------ ------------
Net Loss $ (171,347) $ (302,267) $ (984,594) $ (711,453)
============ ============ ============ ============
Weighted average number of shares outstanding: 35,441,851 24,752,245 33,948,836 23,912,505
============ ============ ============ ============
Basic and diluted loss per share before
extraordinary item $ (0.019) $ (0.012) $ (0.044) $ (0.030)
============ ============ ============ ============
Basic and diluted income per share from
extraordinary item $ 0.014 $ -- $ 0.015 $ --
============ ============ ============ ============
Basic and diluted loss per share after
extraordinary item $ (0.005) $ (0.012) $ (0.029) $ (0.030)
============ ============ ============ ============
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Aqua Vie Beverage Corporation
STATEMENTS OF CASH FLOWS
Six Months Ended
January 31
2001 2000
(unaudited) (unaudited)
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OPERATING ACTIVITIES
Net loss $(984,594) $(711,453)
Adjustments to reconcile net loss
to net cash used by operating activity:
Depreciation and amortization 59,286 17,299
Accrued compensation -- 120,000
Forgiveness of debt 499,998 --
Prior year expense in retained earnings 11,400
Changes in operating assets and liabilities:
Issuance of shares for services 344,578 --
Advances to shareholder -- 139,281
Accounts receivable (73,923) --
Note receivable (442,938) --
Accounts payable 187,658 28,852
Shareholder loans payable 324,000 --
Overdraft payable 55,688
Accrued expenses (416,009) 11,487
Loans from related parties 135,254 --
Inventories 149,629 (195,569)
Prepaid expenses 69,392 105,482
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Net cash used by operating activities (80,581) (484,621)
INVESTING ACTIVITIES
Purchase of intangibles (7,312)
Purchases of equipment (67,907) --
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Net cash used by investing activities (75,219) --
FINANCING ACTIVITIES
Stock sales cash proceeds 296,685 317,228
Debt converted to stock 340,850
Long-term debt (18,362) --
Notes payable (474,500) 149,000
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Net cash provided by financing activities 144,673 466,228
Increase (Decrease) in cash (11,127) (18,393)
Cash - Beginning of period 11,127 27,298
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CASH - END OF PERIOD $ -- $ 8,905
========= =========
SUPPLEMENTAL CASHFLOW INFORMATION:
Corporate income taxes paid $ -- $ --
Interest paid $ 35,028 $ --
NON-CASH TRANSACTIONS:
Debt converted to stock $ 340,850 $ --
Notes payable and accrued interest forgiven $ 499,998 $ 37,000
Note payable converted to long-term debt $ -- $ 340,000
820,000 common shares were issued for services -
August & October 2000 $ 344,578 $ --
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Paid-In Capital Subscription Accum.Deficit Totals
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Balances at July 31, 1999 $ 1,294,125 $ (10,000) $ (1,806,859) $ (500,761)
Shares issued for cash $ 833,928 $ 836,524
Preferred shares for cash $ 100,000 $ 100,000
Shares issued for services $ 68,772 $ 10,000 $ 81,476
Shares issued for notes
payable $ 128,638 $ 128,960
Converted to common $ (2,582) $ (2)
Converted to common $ (645) $ (2)
Net Loss for year ended $ (1,847,222)$ (1,847,222)
----------- ------------- ------------ ------------
Balances at July 31, 2000 $ 2,422,236 $ - $ (3,654,081)$ (1,201,027)
----------- ------------- ------------ ------------
Shares issued for
convertible debt $ 340,000 $ 340,850
Shares issued for services $ 343,758 $ 344,578
Converted to common $ (1,308) $ (1)
Converted to common $ (5,440) $ (1)
Sale of Series D Preferred
Stock for cash & note $ 1,200,000 $ (460,377) $ 739,623
Net Loss for period ended
January 31, 2001 $ (984,594) $ (984,594)
----------- ------------- ------------ ------------
Balances at January 31, 2001 $ 4,299,246 $ (460,377) $ (4,638,675) $ (760,572)
=========== ============= ============ ============
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NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 - STATEMENT OF ACCOUNTING
The interim financial statements of Aqua Vie Beverage Corporation included
herein, have been prepared without audit, pursuant to the rules and regulations
of the Securities and Exchange Commission. Although certain information normally
included in financial statements prepared in accordance with generally accepted
accounting principles has been condensed or omitted, the Company believes that
the disclosures are adequate to make the information presented not misleading.
The accompanying interim financial statements should be read in conjunction with
the audited financial statements and notes thereto included in the Company's
annual report on Form 10-K for the fiscal year ended July 31, 2000.
The financial statements included herein reflect all normal recurring
adjustments that, in the opinion of management, are necessary for a fair
presentation of the results for interim periods. The results for interim periods
are not necessarily indicative of trends or of results to be expected for a full
year.
NOTE 2 - EXTRAORDINARY ITEM
During the quarter ended January 31, 2001, the Company recorded an extraordinary
gain of $499,998 attributable to income from a related party's forgiveness of
accrued compensation and accrued interest.
NOTE 3 - STOCK SUBSCRIPTION AGREEMENT
On November 21, 2000, the Company executed a stock subscription agreement for
the sale of 12,000 shares of $0.001 par value Series D preferred stock for an
aggregate purchase price of $1,200,000, the equivalent of $100 per share. At
January 31, 2001, the Company had received cash from this transaction of
$296,685, in addition to a short-term note of $442,938, and a subscription
receivable of $460,377. In the six weeks after its quarter-end, the Company
collected all $442,938 of the short-term note.
NOTE 4 - CONVERSION OF DEBT TO STOCK
In the quarter ended January 31, 2001, one of the Company's note holders elected
to convert $340,850 of short-term debt into 850,000 shares of common stock.
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NOTE 5 - SUBSEQUENT EVENT
Subsequent to the date (January 31, 2001) of these financial statements, the
Company negotiated an agreement with a central California-based packer-shipper
for the processing and packaging of its beverage products. Under the agreement,
the Company expects to outsource all of its manufacturing to this processor,
which will finance the production activity by factoring the related Company
receivables without interest or factoring fee. Under the terms of the contract,
the Company will grant a security interest in its inventory to the processor.
NOTE 6 - CORRECTION OF AN ERROR
The accompanying financial statements for January 31, 2001 have been restated to
correct an error in the amount of revenues and cost of goods sold reported and
interest expense accrued. The effect of the restatement of revenues was to
decrease the amount of revenues by $85,000, increase the cost of goods sold by
$10,000 and decrease the promotion and advertising expense by $95,000. This
correction had no effect on net income or earnings per share as previously
reported for October 31, 2000. The correction to the interest expense having
been over-accrued was to decrease total accrued expenses and to decrease
stockholders' deficit by $96,000 for the period ending January 31, 2001.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Aqua Vie Beverage Corporation, a Delaware corporation, was incorporated on
July 30, 1998 and was formed as a successor to another Delaware corporation
liquidated in bankruptcy in 1997. Throughout most of its fiscal year ending
July 31, 2000, Aqua Vie was a traditional development stage company whose
early efforts encompassed the development of a new category of beverages
called water beverages, and the sales and marketing of the first
all-natural, lightly flavored bottled spring waters, call Hydrators. In the
quarter ended October 31, 2000, the Company had appeared to have emerged
from the development stage and actively commenced the sale of its products.
In the quarter ended January 31, 2001, the Company's selling efforts,
including a major sales commitment from its contract bottler, pushed
year-to-date sales to just over the half-million-dollar threshold.
At January 31, 2001, the Company's total assets of $888,000 exceeded 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, the principal
change in the Company's total assets was the inclusion of a note receivable
from stock sold for $443,000. Similarly, total current assets at January
31, 2001 of $666,000 were higher than year-end current assets of $380,000
because of the aforementioned note receivable. The Company's current
liabilities decreased slightly from $1,768,000 at July 31 to $1,733,000 at
January 31 while the composition of this debt shifted somewhat from
short-term loans to increased accounts payable.
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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 six
months ended January 31, 2001, the Company's accumulated deficit grew to
$4,627,000 as the Company's marketing and executive expenses burgeoned,
creating a quarterly operating loss of $654,000 and a semi-annual operating
loss of $1,450,000.
LIQUIDITY AND CAPITAL RESOURCES
The Company's revenues of $563,000 for the quarter ended January 31, 2001
were a dramatic increase from the $17,000 of revenues in the corresponding
second quarter of the prior fiscal year. This sales volume included a sales
commitment of $478,000 from the contract bottler. Year-to-date revenues of
$725,361 for the six months ended January 31, 2001 also reflect successful
sales efforts in comparison with the incipient sales of $30,000 for the
prior year six-month period.
Because it has sustained recurring losses from operations, the Company
cannot assure that it will be able to fully carry out its plans as budgeted
without additional operating capital. At January 31, 2001, the Company had
negative working capital of $1,067,000, although this amount represents an
improvement in liquidity and capital resources from its negative working
capital position of $1,388,000 at July 31, 2000. The improvement is
principally attributable to sales of common stock and forgiveness of debt.
In the six months ended January 31, 2001, the Company funded a portion of
its operations from the sale of its common stock, which raised $297,000 in
cash and $443,000 in short-term notes. In addition, Aqua Vie financed its
operations by a combination of increasing trade payables, issuing shares
for services valued at $345,000, converting $341,000 of short-term debt
into stock, and negotiating the forgiveness of almost $500,000 in accrued
liabilities from a related party. This recent mix of diversified funding
sources contrasts with the corresponding six months of the prior year when
the primary source of funds was $317,000 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 January 31, 2001.
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, payment of slotting fees to obtain shelf space with new
retailers, and to a lesser degree, for quality assurance and distribution
management. The Company does not expect to incur major capital expenditures
in the next year.
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The Company has negotiated a recent arrangement with its major contract
manufacturer, whereby the Central California-based manufacturer will
finance the production and shipment of all of the Company's products for
the Company under a security agreement, without interest charges. Aqua
Vie's management expects that additional funding for operating expenditures
will be available from the issuance of equity and/or debt securities, as
needed.
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 by retail chains. Accordingly, the Company may be required to
issue 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 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 half
revenues of $725,000 were over twenty times as large as the first half
revenues of the prior fiscal year, 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 six months ended January 31, 2001, the Company's sales produced
gross profit of $168,975, which compares favorably with the smaller gross
profit of $30,000 for the first half of the prior fiscal year when the
Company's sales were minimal.
Operating expenses were $1,619,000 for the six months ended January 31,
2001 and were only $693,000 for the same period of the prior year. The
year-to-year change principally reflects an increase in marketing expenses
which directly correlates with increased revenues. During this same
year-to-year time frame, the increase in operating expenses also reflects
heightened expenditures for general and administrative expenses which were
substantially offset by reduced expenses for professional fees.
In the quarter ending January 31, 2001, the Company's statement of
operations reflects an extraordinary item, $500,000 (or $0.01 per share) of
gain from forgiveness of accrued compensation by a related party. There
were no similar extraordinary items in the corresponding or previous
periods presented.
9
The Company's net loss of $171,000 for the three months ended January 31,
2001 resulted in a net loss per share of $0.01 for the quarter. This
contrasts with a net loss of $302,000 for the three months ended January
31, 2000, which also posted a per share loss of $0.01. The Company's
year-to-date net loss of $1,069,000 is after the extraordinary gain of
$500,000 and equates to a year-to-date per share net loss of $0.03,
comparable to the prior year semi-annual per share net loss of $0.03.
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
Recent Sales of unregistered securities.
Pursuant to a stock purchase agreement dated November 21, 2001, the Company
agreed to sell 12,000 Series D Preferred Shares for $1,200,000 cash to an
accredited investor under Regulation D. Total purchase price was to be paid by
October 31, 2001; as of the date of this Report, all but $460, 377 had been paid
on said subscription. Proceeds are to be used for general working capital,
including slotting fees and marketing expenses. The Series D Preferred Shares
are to be designated and filed with the State of Delaware by April 15, 2001, and
said designation should be examined for the exact terms thereof, of which the
following is only a summary. The Series D Preferred Shares are convertible to
Common Shares under terms generally similar to Series B Preferred Shares (the
terms of which are incorporated by reference from the 10k S-B filing of the
Company on November 15, 2000, and which are also available also from the State
of Delaware) with the following principal differences: (1) The preferences were
set at $100 per share; (2) voting rights were 9,167 common share equivalent for
each preferred share, compared to 6,000 shares (adjustable) under Series B; (3)
Conversion to common was at 1,666.7 common share for each preferred share; (4)
the right to convert to common without consent of the Company commences June 30,
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2002; (5) the adjustment for Market success in Sec. 5(k) of the B Designation
was changed to provide for a 5% increase in stock under the conversion for each
$.05 that the common shares traded at $.25 or more to a maximum of trading at
$2.50 per common share; (6) the anti-dilution adjustment in 5(h) of the B
Designation was eliminated for the Series D Preferred Shares. As with the Series
B Shares, an irrevocable proxy for voting was given to Mr. Gillespie for so long
as the original holder held the Preferred Shares or as converted common shares.
A condition of the subscription was that remaining Series A Preferred Shares
would waive future anti-dilution rights thereunder, and that the conversion to
common for those shares would be fixed at 2,500 shares for those preferred
shares remaining outstanding. Subsequent to the filing of the original report
for the quarter ending January 31, 2001, this requirement was waived and the
Series A retained the same conversion ratio as applied to the Series B
Preferred, which as of that date was 3,533,430 of common for each preferred
share. Series B Preferred Shares retain anti-dilution rights as provided by the
designation for the transaction for those preferred shares remaining
outstanding.
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.
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
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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,
maintenance of quality control by the contract bottler, dependence on key
suppliers, future capital needs and uncertainty of additional financing,
potential recalls and product liability, dilution, effects of outstanding
convertible debentures and preferred stock , limited public market, liquidity,
possible volatility of stock price, recently adopted new listing standards for
NASDAQ securities and environmental matters.
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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: March 21, 2001 By: /s/ Thomas Gillespie
------------------------ -----------------------------------
Thomas Gillespie
Chief Executive Officer &
President
This amended Form 10QSB is being filed to correct the previously-reported
revenues, cost of goods sold and promotional and advertising expenses in the
Income Statement, some typographical errors and to effect changes under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" consisting of reflecting these conforming corrections. These
corrections did not have any impact on the reported income, per share earnings
or Assets and Liabilities for this period.
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